Nearly six months after El Salvador introduced bitcoin as legal tender in the country, tourism has exploded, rebounding from pandemic lows and providing a windfall for the country.
El Salvador was the first country to adopt the cryptocurrency as legal tender as the government "looked to achieve financial freedom for as many people as possible."
Since the decision, bitcoin prices have experienced their trademark volatility with the crypto currency starting September at nearly $49,000, peaking at $69,000 in November, before settling at about $37,000 currently.
Despite the volatility, El Salvador says that its decision has paid off in ways not related to the price of bitcoin.
"The implementation of bitcoin benefitted the sector. More tourists have come to see how cryptocurrency works," said Morena Valdes, the head of the Ministry of Tourism. "We did a poll to check the activity, according to the before and after of bitcoin. The tourism sector increased in November and December more than 30%."
Bitcoin's Impact on El Salvador's Economy
Interest from the outside world in El Salvador's economy now that bitcoin is featured has forced the government to begin a bitcoin trainer program for community leaders.
A technical team from Paxful, a New York-based crypto platform, is running the training program with a goal to "train them to be replicators in their communities and support them in continuing to break the digital divide" said Fabrizio Mena, Undersecretary of Innovation.
This outreach comes after One Central American University survey showed that the majority of citizens do not want Bitcoin, with 9 out of 10 Salvadorans not understanding what the cryptocurrency is, and eight out of 10 saying they have no confidence in bitcoin.
Earlier this week, El Salvador President Nayib Bukele took to Twitter to tout the country's 10.3% gross domestic product growth in 2021 while also saying that exports, which is a main economic growth driver, rose 13% in January.
While El Salvador has not released the final tourist data from 2021, the country did record a total of 707,000 tourists in 2020, ranking 113th in the world in absolute terms, according to WorldData Info.
On average each tourist spent about $2,350 during their visit to the country in 2020. The $1.66 billion generated through tourism corresponded to nearly 7% of the country's GDP.
And remember 2020 was a down year for tourism due to Covid.
El Salvador's Bitcoin Strategy
El Salvador is a true believer in bitcoin, seeing the cryptocurrency's recent struggles as an opportunity to buy more at a cheap price.
On January 22 El Salvador bought 410 bitcoin as prices dropped below $37,000, a price it had not seen since last July.
The purchase cost about $15 million, which President Bukele celebrated as a coup for the country of 6.5 million.
El Salvador has acquired more than 1,800 bitcoin during dips in prices over the last four months.
El Salvador is still drowning in distressed debt, and its sovereign debt is now valued at 36 cents instead of the 75 cents it was last year. The country is still seeking a $1.3 billion loan from the International Monetary Fund.
Since announcing the switch to bitcoin, the country's sovereign credit has worsened fourfold: “El Salvador now has the most distressed sovereign debt in the world, and it’s because of the bitcoin folly,” Steve Hanke, professor of applied economics at Johns Hopkins University, told Fortune. “The markets think that Bukele’s gone mad, and he has.”
