Superstructure: Bitcoin in El Salvador (NEW TRANSCRIPT!)

Ricardo Valencia joins co-hosts Andrés Bernal and Scott Ferguson to discuss recent protests against Bitcoin in El Salvador. Adopted as legal tender by the authoritarian President Nayib Bukele in September 2021, Bitcoin has become an emblem in El Salvador for U.S. corporate imperialism, public mismanagement, and anti-democratic rule. Whereas mainstream accounts of cryptocurrency tend to flatten stories in Latin America to matters of success and failure, Ricardo draws upon rich critical approaches in Cultural Studies developed by the likes of Stuart Hall and Paul Gilroy to situate current events in El Salvador within histories of global governance, political conflict, and cultural identity. During the conversation, Ricardo weighs the fraught legacy of left politics in and beyond El  Salvador. He analyses the conspicuous convergence of “tech-bro” boosterism coming from the U.S. with right-wing regimes in vulnerable countries across the Global South. He considers tensions between imperial domination and quotidian safety that attend El Salvador’s dollarization in 2001, including the large role that remittances play in the everyday lives of the Salvadoran people. Finally, Ricardo contemplates the future promise of left politics in El Salvador. This promise, he explains, hinges upon feminist, queer and environmental movements, which are now demanding democratic and just uses of public money. 

Dr. Ricardo Valencia is an assistant professor of public relations in the Department of Communications at California State University, Fullerton. Between 2010 and 2014, Dr. Valencia was the head of the communication section at the Embassy of El Salvador to the United States. He has also worked as a reporter covering international and domestic politics for Salvadoran and global media outlets such as La Prensa Gráfica, German Press Agency (DPA), and El Faro. Follow Ricardo on Twitter @ricardovalp.

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Transcript: Mike Lewis

Andrés Bernal: Hello Money On The Left listeners. This is Andrés Bernal, and as you may know, cryptocurrency has been a recent hot topic in our culture. Whether that be its presence across media, led most notably by celebrities, or the crisis that it has undergone given its major drop in dollar-denominated price. We recently provided a lens into the politics of crypto at the city-municipal level, more specifically, the resistance and the alternatives that have been cultivated in places like Austin, Texas. In this episode, Scott Ferguson and I take a look at an international case and speak to Professor and journalist Ricardo Valencia about crypto in El Salvador, given President Bukele’s adoption of Bitcoin as its national legal tender. There’s a few things that stood out to me personally that I think can help provide some context for our conversation and its connections to a broader set of political conditions. For one, Ricardo’s insights reflect a Latin American, or more Global South experience, that destabilizes political categories away from neat, conventional definitions of left and right, reminding us of the importance of values and ideas if we are to advance the project of a just democracy. Also, contrary to the cryptocurrency industry’s branding, which presents a technology driving liberty and freedom, we see its explicit association to colonial authoritarianism. Then there’s the vacuum created by a crisis in macro economic thought which has left fertile ground for agendas like cryptocurrency to move in and take hold of seemingly forward-thinking propositions. Lastly, we take a look at the protests against cryptocurrency and their alignment with a rising wave of heterogeneous and intersectional progressive politics in El Salvador and Latin America, more broadly. Without further ado, here’s our interview with Ricardo.

Scott Ferguson: Ricardo Valencia, welcome to the show.

Ricardo Valencia: Thank you. Thank you for having me. Greetings from sunny California.

Scott Ferguson: So I’m here with my colleague, Andrés Bernal, you should probably say hi, Andrés.

Andrés Bernal: How’s it going, everybody?

Scott Ferguson: And we reached out to you because we were seeing some reports about the political situation in El Salvador, and specifically, the way that an increasingly authoritarian government is backing and working with cryptocurrency and Bitcoin in particular, is that right?

Ricardo Valencia: Yes.

Scott Ferguson: And we were interested in what’s going on. And we did like anyone does nowadays, and we searched Twitter. And we found that you had what seemed to be the most informed, critical account that was tracking what’s going on, and providing important context and analysis. And that’s why we brought you on the show. So thanks so much for joining us.

Ricardo Valencia: Thank you very much. Thank you for those words.

Scott Ferguson: I guess maybe to begin, it would be helpful to start with you telling us and our listeners a little bit about yourself: Where do you come from? What’s your what’s your background? Where have you worked? Where have you trained? What’s your research all about?

Ricardo Valencia: Yes, right now I’m an assistant professor of communication, Cal State Fullerton, California State University of Fullerton. I teach classes on global media, public relations writing, and multicultural communications. I mean, I teach a lot of those screens as I’m interested in looking at specifically the race and class globally, and the connections with globality, pretty influenced by Stuart Hall and the great work of I don’t remember his name, but the Black Atlantic, which is a great book about describing African heritage in the flat Lake and in the world, that will be very influential in me. And also, what to do, right? I’ve been trying to look at those, those theories. through examples of communications, public relations, public diplomacy, strategic communication. I’m trying to understand why those organizations, why movements use the type of strategy they use, and how that reflects larger trends in the economy, politics etc. I’ve been trying to use the tools of cultural studies, but a lot of history. I love history and I think it explains a lot; more than people give credit. And if you want to understand what’s happening now it’s super important to go to the past and understand it. And also I’ve been a journalist. I’m very involved in the world of journalism related to Latin American journalists, Central America journalism. I was a reporter for El Faro for many years, one of the first reporters they have, and then I was working for the La Prensa Gráfica, one of the most important newspapers in El Salvador. And it means, when I talk about crypto, money, and El Salvador and Bukele, I always look at it from the communication aesthetic; why that communication reflects, what are the larger trends that are reflected. I have a PhD in Communications from the University of Oregon where I had the pleasure to meet great political economists, especially political economists of the media, like Janet Wasko, who was my teacher. And, before that I was a diplomat for the El Salvadoran embassy, I was involved in public diplomacy between 2010 and 2014. And before that, I have a Master’s from the University of Hamburg, and I have always been writing about things, right? But I tried to look at the connection within politics, global issues and now the relations with the United States. And that’s what I came from. I was interested in crypto not because of crypto itself, but what it means, right? Especially for a poor country, like El Salvador, and especially why an authoritarian who comes from the left, we don’t have to have to forget that, right? Bukele comes from the left. He’s using a tool that is closer in ideals from cyber libertarian, right? Why does that make sense or doesn’t make sense, right? That’s why I encountered crypto and I started understanding it. And a lot of things happened, also. After the legalization, the making of Bitcoin as legal tender in El Salvador in 2021, in September, and after that, a lot of demonstrations and how Bitcoin has also become a symbol of, in a lot of ways, authoritarianism in El Salvador. And also a symbol of poverty, a symbol and inequality, a symbol of colonialism. And that’s why I think, I believe we have the first anti-crypto demonstrations and protests in El Salvador in 2021 in September to celebrate the independence of El Salvador from Spain. All the speeches are addressing activism, policy, public diplomacy, and especially for Bukele, who has a really global communication machine, right? And he doesn’t want to be only a president of a Third World country; he wants to be known globally as a hero.

Andrés Bernal: So before we kind of dive deep into the geopolitics of Bitcoin and President Bukele, can you tell us a little bit more about your connection with El Salvador and maybe situate and historicize El Salvador’s place in Central America and in Latin America, more generally? What is kind of leading up to this moment?

Ricardo Valencia: Perfect. At first, I was born and raised in El Salvador. I went to school in El Salvador. I got my bachelor’s in journalism from the Central American University, a Jesuit university, who, very contradictorily, are the ones fighting directly to Bukele, because the National University, that’s kind of been co-opted by Bukele. And then the Jesuits are fighting a new government again, in El Salvador, which, as you know, six Jesuits were killed in El Salvador in 1989 by the army. I was born during the war. All my childhood was happening during the war, the Civil War 1980-1992. But when I became a teenager, it happened through what we call the post-conflict. Then I was the first generation who got the police who weren’t militarized police. It was a civil national police, who I never really personally encountered violence from the police. They were very, in that time, heavily influenced by human rights. They were really training human rights, and part of the police at that time — a third came from the military, a third came from the civil side, and a third came from the FMLN, from the former guerillas. It means I was able to see how this very limited democracy improves daily life of people in terms of being able to say whatever they want, publish whatever they want, and have any political party they want, which is very contradictory. And I say it before: the left has always been trashing democracy until you have a government that is close to fascism, right? Then you kind of appreciate democracy because in El Salvador, that tiny small democracy was built by 12 years of war, but also years of oppression and political repression, right? And I think that is coming now is when I have this grandiloquent vision of trashing democracy, especially from the left, I always put it in context of El Salvador. Because sometimes when you focus when you are trying to dismantle democracy, what you find at the end is not democracy bad. Not a better democracy, as the left thinks, but fascism, right?

Scott Ferguson: It’s really fascinating, then. So your own career, your own interests in communication, and the politics and the cultures of communication seem to come out of your own experience of this burgeoning El Salvadoran democracy?

Ricardo Valencia: Yes, because in a civil war, you have family from both sides. I have family from close to the left. Guerrilla, very close, very militant, but I also have family who are close to the right wing, government and with the army, right? Then you find out, democracies are sort of the better way to deal with issues, rights and problems and instead of people killing each other. And that’s something for me very functional, and good. Of course, the reason that Bukele is in power is because that answer wasn’t enough after thirty years, right? The answer of just dealing with political peace wasn’t enough. And in a lot of ways, one of the ones who had to be blamed by the emergence of Bukele is the left, because they empower figures like this to win elections. And at the same time, people were expecting a lot from them, right. And in a lot of ways, we have to understand that the generation of people who got into power by the left wing party between 2009 and 2019, was a generation who was very cautious. And I think Andrés can know about what happened in Chile in 1973, which, I believe is a collective trauma for the Latin American left still. I think Boric is moving beyond that, but even Petro is part of that generation that they have to be so cautious and afraid of their army, that they prefer to agree on something practical, like political openness and democracy and they forget what people wanted to do is more economic reforms. And I think that’s what happened. That’s where we are here. That the answers that small democracy, limited democracy wasn’t enough for many people in El Salvador, and the system falls apart. The political system falls apart. It didn’t happen like in Brazil. Like, yes: Bolsanaro won, but the PT put up a big fight, right? I mean, they might win. Lulu might win again. It didn’t happen. The left imploded in El Salvador, which, that’s another thing if you want to talk for another show, but that’s why it’s happening now. Right? The small democracy that we have — talking small “d” democracy — very basic things, the beginning of any political discussion is in jeopardy and it cannot only be explained by the forces of reactionary right. It should be also understood as a consequence for one part of the left who was complicit, pleasing just electoral gains over values. And other things like I think, in the case of Chile, brings a new left that is trying to talk about human rights abuses in Cuba and Venezuela. You cannot ignore that. Maybe a generation before, you can be able to get away with it. But now, right, you have to have a position on that. Because beyond ideologies are basic things like protest. And that’s where we are.

Andrés Bernal: Yeah, I think that’s really fascinating and really important because sometimes in the United States, people, especially either academics or activists have an idea of left and right politics that’s very neat. Neat categories. And the story of Latin America over the last 100 years kind of throws that into disarray. It’s not very neat. It’s very complicated and complex. Can you unpack that a little bit? Because I think, kind of working through what is complicated about this left then the critique that I think you’ve been, from a progressive perspective, and as somebody that is obviously very critical of reactionary forces in El Salvador, you nonetheless put a lens into a left that failed, in many ways, to meet what it was what he was proposing for the public. Can you briefly touch on some of that lineage of this left that you’re critiquing?

Ricardo Valencia: Yeah. First, I believe it was a left coming from too constrained by Leninist politics and ideas of the party of cameras. That means they never allow people to participate. But at the same time, it’s like a Vanguard party theory, right? There’s only one body who can advance everything, and then we have to kill all the competition. And they kill, and these bitter feuds between the left. Which I find fascinating because many of the people who were called the Social Democrats are the ones who are fighting for democracy and social justice. And while all these super radical revolutionaries are with Bukele, right? And I think that’s why it’s contradictory. That’s the left that inherited, that gave birth to Bukele, right. The left was trapped in the 70s. And that’s another thing that you realize is that the same people who in the 70s were super open, super advanced, they become bad when they turn 60 and 65. And we tend to think they become more conservative. I would love them to become more liberal, maybe more conservative than ultra blind authoritarianism, right? I think Pepe Mujica, the former President of Uruguay, used to say he prefers kids to be involved in conservative politics than not involved in politics at all. And that is the theme that we inherited. That kind of vision of only having one foreign policy vision of being completely aligned with being friends of Daniel Ortega, being friends, and saying yes to everything that happened in Cuba. The same is saying yes to everything that happens in China. And that is something that we inherited, like in El Salvador, and Bukele took advantage of that. That’s why he created a big division because he was able to criticize Venezuela. And criticize other countries, right? At the same time, criticize Peña Nieto in Mexico. The left in El Salvador wasn’t able to have a new breed of people or minds and ideas. And I’m not talking about ages. It’s more we change, reshape, transform our thinking and thinking beyond the party and just thinking that the party can solve everything and heal social movements because it can be critical of politics, electoral politics. I think that’s where we came from, exactly from that. But, good or bad, that was the time to discuss a lot of things right. Now is the time to be less constrained with that left and being able to say other things that were unable to be said. And also, the fear, I think there was a lot of fear from the Tankies we call it the Tankies Left.  Exactly. They stop basic weaning discourses like social democracy, like welfare state, all those basic things. Remember the Social Democrats in El Salvador, they believed social democracy was a revolutionary thing. Right? It was! Calling clean elections in the 70s, right? And calling for a welfare state and subsidies and unions, autonomy, and all those kinds of things were revolutionary in the 70s. But the whole point with the left is they weren’t able to transition from a social democratic message, for the big apprehension from the past, but at the same time, they get stuck in the past when the Soviet Union existed, right? And I agree with a strong criticism against social democracy, European social democracy failures, and social democracy as a movement, the Socialist International, but I mean, the left was unable to move beyond all statements that means nothing for a generation, and that don’t bring people’s daily life improvements, economic improvements, if you want to call it. Security, safety, all those kinds of things.

Andrés Bernal: The Tankies, yeah.

Scott Ferguson: Tankies, yeah. Stalinists. So we usually think of Bitcoin as this kind of high tech, Cyberlibertarian, Global North project. How does Bukele rise to power? He has an interesting story, right? I mean, he’s mayor and then he’s trying to run with certain parties, but then those parties are dissolved. So he’s taking this kind of zigzag pattern. And then at what point do the crypto folks get in touch with him? And how does he even frame or leverage that rhetoric for his political platform and political gain?

Ricardo Valencia: Perfect, we have to understand where he’s coming from. He’s a rich kid. Rich family. Went to a bilingual University, a school in El Salvador, who dropped out of college in second year. But his father was close to one of the members of the Communist Party. And then that’s why he was able, with these resources, to fund his first campaign as a Mayor of a small municipality in El Salvador, right. That’s why he tells you pretty much the importance of relations of ideas between the United States and El Salvador. All of this. The Crypto thing is a great example of how ideas what happened in United States happen in El Salvador. But also the relations between elites. Between economic elites in El Salvador and economic elites in the United States. And that’s why he came to power after he was moved to San Salvador, the largest municipality, by the left and he won. And then he wanted to become a President, but the left didn’t want him to become a President because he was always his own mind before, criticizing the left, the FMLN leadership, the Frente Farabundo Martí para la Liberación Nacional, Farabundo Martí National Liberation Front, the inheritors of the guerrilla. And then he had an issue with one of the councilwomen, and then he was expelled from the party. He tried to run with a different party and he was rejected, the party was indeed canceled. And then he ran for this right wing party who was founded by people from the right wing party ARENA; the conservative anti-communists. He never mentioned crypto in his platform, but he has been flirting with the idea since 2018. And what we know is that the one who was into crypto was his brothers, because the way Bukele governs is like a clan. His friends from high school, and his friends and his brothers are part of the small group of people who are close to Bukele. And I know his friends, one of his brothers, was got a BA in economics. Indeed, if you read his brother’s thesis, BA thesis, he talks plenty of Marxist economics. Then you see how complex it’s becoming. How contaminated the whole ideological concepts are becoming. And then what happened is that not only–because people think it’s only because Bukele is a cultist, that he’s into the cult. I think now he has to pretend or at least pretend. But I think it was a n accumulation of three things that makes crypto happen. One is his relationship with the United States. El Salvador relies on the United States: the largest income we got is from remittances from the United States. The major exporter to the United States and the major importer from the United States. I think the exports are going more to Central America than to the United States. But, in general, politics, culture, and EV technology depends on the United States. Right? Then he fights with the United States, he has a big strong feud with the Biden administration, as they’ve been super loyal to Trump. Well, said that Trump can sell the TPS, Temporary Protection Status, of Salvadorans. And also he can sell foreign aid. But for whatever reasons, Bukele feels himself reflected in Trump, right? Then after a deal with the IMF failed, Buekele started getting more worried about what to do. He can’t print dollars. He can’t print his own coins. Then, the only option, what I think was a Hail Mary, was seeing if this whole Bitcoin thing happens and works. And that’s when he adopts Bitcoin. And that’s why you see his Twitter account, when he tweets in English, it’s mostly to talk about crypto. And when he tweets in Spanish, it’s to talk about gangs and trashing people and against human rights organizations. And that’s what I think set the stage. Also the majority. He won the supermajority in Congress, and he can do whatever he wants. That is an accumulation of the things, I think. I don’t know if I’m answering your question. But yes, that’s what happened. That’s what allowed crypto…My argument is always that crypto adoption, mass adoption, can’t happen in democracy. It has to happen in authoritarian regimes. Weak states. Because in a healthy democracy, we will be able to discuss this. When authoritarianism, you just impose it right? And you fail! $425 Million at least spent on that failed Bitcoin adoption. People only focus on the coins he allegedly buys. But that’s only a quarter of what he has invested in a country with a national budget of $7.9 Billion, and GDP of $24-$27 Billion. It has been criminal.

Andrés Bernal: Ricardo, you mentioned that before this Hail Mary move to adopt Bitcoin as the official currency. Right? He couldn’t issue US dollars, and he couldn’t issue Salvadoran currency either. Can you say a little bit about the kind of macroeconomic conditions around their monetary system before Bitcoin? I mean, were they pegged to, for our viewers right, what was what was going on in El Salvador before, in terms of their currency?

Ricardo Valencia: 2001, at the beginning, was sold as a monetarism, a colón, are like the national currency and the dollar. But eventually, they take hold of the dollars. The dollar became the de facto national currency in 2001. The idea behind that was the relationship with the United States, but also prevents inflation and takes advantage of a free trade agreement that was later approved, and allows the possibility of increased revenues through Exports-Imports. But that has, for some, advantages of keeping inflation, which even Bukele has benefited from. I think El Salvador has one of the lowest inflation. But at the same time, it’s a big, complicated issue. It ties your hands. And they have been always discussing the benefits of dollarization. The left, in 2004, promised to banish the dollar and bring back the colón. Year by year, it’s becoming more complicated, right? And especially because there’s a cultural element with the dollar. Whatever we want to say about the United States, people prefer to have a dollar than having any other coin. And in a lot of ways, Bitcoin is like a shitcoin for many Salvadorans. Why do I have to have shitcoin? I don’t need an intermediary to have dollars because my family sends me dollars, I get dollars, and with dollars, you get the money in remittances in seconds. It’s a lie that it takes three days. I send money to my family and they have it in three seconds? And they don’t need to have a bank account. Yes, but Bukele sewed with Bitcoin an excuse to try to print money. Then, he created the Chivo Wallet. The Chivo Wallet was a token used that the goal was that everybody has Chivo Wallets, and then people don’t have to use anything more. And they can be only electronic payments and things like that. They say it was backed by Bitcoin. They were created at the same time…I don’t know how to say it in English. It’s a change box exchange mechanism, in which $150 million were used to exchange Bitcoins to dollars and dollars to Bitcoin. But the goal, and also the Bukele administration thought we were going to create, perhaps at the beginning, they were thinking of creating a stable coin. But I think stable coins are a complicated concept because of the reason I’m telling you. When you talk to people who are in the political economy in Venezuela and Argentina, they tell you, once you take the local currency out of the equation, it doesn’t make sense. Because all these people in Venezuela, in Argentina and high inflation countries, they want the dollar, right? Everybody’s fighting for the dollar. In Mexico, my family lives in Mexico, and they want dollars, right? They want an account in dollars because it’s more stable. And then what he thought was, well, we’re going to create this token called Chivo Wallet, which is a private company funded by public money. But they are not accountable for the procurement loss. Then, we will be able to print money by buying Chivo. Then the tokens become the de facto currency. What happened is nobody used it. But the goal was that eventually they will be able to pay wages, and they were able to pay contractors and people can pay pension through the printing tokens without any back. Backed by nothing. More than as Athena Bitcoin revealed in this SEC Form, they revealed that they were backed by just the word of the President. They weren’t even backed. Chivo Tokens weren’t even backed by dollars. Thankfully, for Bukele, nobody really cares. Then he didn’t have a bank run. It wouldn’t have happened, what he planned with a crypto crash, it would have broken the government completely because it would have been a bank run. Because every Salvadoran was entitled to get $30 bonuses that you can use in this wallet. Now that’s worth $11, right? But it didn’t work. People don’t care. They don’t really want and they never use it. What I can tell you is it’s trapped in this dilemma. And now you see how macroeconomics is connected with your politics. He doesn’t have a political back. You can say whatever you want about Ortega, but he has a political back. Maduro has a political back, a geopolitical back. He has a place to ask for help, economic help. Bukele is trapped by himself, isolated from the world, and he doesn’t know what to do and then they only Hail Mary was Bitcoin and crypto. But it doesn’t work now. The next step is short term loans to local banks, which eventually might break the banks. I think he’s in a bank conundrum that there’s no way to go out with an agreement with the IMF, who he doesn’t want to agree. But, eventually, that situation is so complicated. It’s like he built his self-fulfilling prophecy.

Scott Ferguson: What is El Chivo? Is there a translation for El Chivo?

Ricardo Valencia: Chivo is Cool.

Scott Ferguson: Yeah, that’s what I thought. It’s just cool, right?

Ricardo Valencia: Chivo is equivalent to Chido in Mexico. Something chivo is something cool.

Scott Ferguson: And so it turned out not to be the least cool thing.

Ricardo Valencia: The least cool. Because Bukele thinks it’s cool, right? And now that’s what happens when he has bad press, and he’s not cool anymore in the United States. He suffered a lot. He’s very thin-skinned. But he wasn’t cool. Because if you are upper middle class Salvadoran with all these tech jargon, you think why is the solution. Like the Cyberlibertarians and crypto people in the United States, but people don’t want that. People don’t want tokens in general, they want money. They want dollars that they can spend. In El Salvador, it doesn’t make sense. But all of that was obvious, and he was warned. And that’s when you have all the power. You can do whatever he wants. He has that power center and a person and five more people around him.

Scott Ferguson: Who are some of the key players or companies that Bukele is attached to here?

Ricardo Valencia: Good question. First, Jack Maller’s from Lightning Network. He was, at the beginning, the one who’s supposed to work in the Chivo Wallet, to create a governmental wallet. But what happened is still a mystery, why they decided that the government should build instead of loan a network. Yes, and that they decided to make their own base created mostly for…the whole Chivo adoption is a constellation of companies. The one who has since created the app was Athena Bitcoin. And there’s a video about when they launched, and it’s known that Bukele never hired Salvadorans. They hired foreigners who have big NDA signed with them. The second part of that was the launch, the electronic part, but also the people who do people’s explanations. He hired teenagers to recruit people for Chivo. And that strategy was mostly driven by call centers. Many people who came, some of the people who work in crypto companies in Venezuela, and they moved to El Salvador to try to replicate the success that they have. There’s a constellation of people. Now with the Bitcoin bonds, a great idea — another Hail Mary — is Bitfinex. Bitfinex, through Blockstream. Samson Mao is involved with that, in the design of Bitfinex. Then, the people who are involved with Bukele are the Bitfinex people: [Max] Keiser, Stacy Herbert, and the guy Michael Peterson, who was the idea of Bitcoin Beach. An American from San Diego. He used to sell sausages here in the United States, who wanted to build a stable coin from Bitcoin Beach in El Salvador; he was more aligned with Jack Maller’s. But Jack Mallers went out from the project for reasons that we don’t know. And Bitso. It seems that Bitso is involved with crypto in El Salvador. I don’t know if they provide the service of buying the coins that Bukele says he buys. And Bukele is really upset with Biden but he loves American technology. And he loves American crypto people, which I find amaze, like a guy who seems very aware of geopolitics, builds all this infrastructure based in the United States that you just need a subpoena from the Department of Justice and all the things will be revealed. Because I don’t think these people will fight for Bukele. You know that right? If that affects the bottom line, Bukele is gone. Simple as that. And that is the constellation of people behind all the big experiments. And what’s happening is the Bitcoin experiment affects the traditional bond market for El Salvador. Since El Salvador approved making Bitcoin a legal tender, the risk went out. The default risk went up, exponentially. It’s the largest or second riskier country in Latin America that’s closer to the fold after Venezuela. And it’s completely correlated. And maybe there’s no even correlation is a causality that the Bitcoin approval caused the bond markets of El Salvador, the bonds are depreciated fastly. While he tries to solve with one hand what has been struggling for years is the yield they get from the bonds, right? And, that’s why we are in this conundrum. There was a good article in the Wall Street Journal that said that even the hedge funds are not given any hand to Bukele. I think he thinks Bukele is too crazy for them. Hedge funds! These are not human rights people who we all understand. That he’s too…And the ratings have been going down now. They’re lower than junk bonds. Right? And I don’t believe it’s only the microstructure of things. I think these agencies believe you have a little chip who’s unhitched, that they don’t have any freaking idea of running the country. And El Salvador is not Saudi Arabia or a country with more political, geopolitical power or oil. That means that they don’t, I don’t think they’re going to save anything. I mean, it’s very marginal what they can make out of El Salvador. It’s not like the relationship that they might have with Mexico, or even Colombia, or even Venezuela, which has the power of perfect consciousness, efficient in terms of energy. And I think that is, that is a constellation of people around El Salvador. Yeah, the weakness, geopolitical weakness of El Salvador doesn’t allow them to do more than at the end, getting us saved by the IMF. I don’t see any other option, right. The IMF, in the end, will do the same that they haven’t done until now.

Andrés Bernal: It almost sounds like what you’re saying is, amidst this kind of political, ideological crisis, this rich, spoiled kid from an elite family takes power and through his kind of connections with all the weird crypto bros in the United States tries to circumvent the complex macro and structural issues that El Salvador has

Ricardo Valencia: Exactly.

Andrés Bernal: And kind of forced this new approach. I was gonna ask, how was cryptocurrency marketed to the public? And you kind of answered that when you mentioned, right? Like, they tried to make it like a cool thing. On one hand, on the other hand, it seems as though they really didn’t try to win public appeal, they just forced it. Is that correct?

Ricardo Valencia: They forced it, and they will run it like a bad company, like a marketing company. They started giving vouchers, discount vouchers for gasoline. They couldn’t get people over. The whole point is, there were a lot of transactions at the beginning because people wanted to get the money out of Chivo, right? And there was a big…it was a haven for scammers. I have never even used a Chivo Wallet, even though I’m Salvadoran. I am entitled for the $30, which are now $11. But I wouldn’t be surprised that somebody else took the money from me. And there has been a lot of fraud that has taken the money from people. They tried to get the money, and there’s nothing there. And they tried to do that, like use it by giving you a $30–you can use it and pay things. But it didn’t work. Because people don’t want to have it. People love cash. And they want to have it in their hands. And that’s why in a country where people love cash, they didn’t see anything useful. Why do they use it? Why do they have to use it? Very basic questions, even from the business perspective, right? Is it sustainable or not? He wants to build a whole infrastructure in three months. The transformation of our society in three months, that won’t work. I think I heard that it took two years to change from the European national currency to the Euro. Three years! I mean, it was a cheap effort. And I think they didn’t see the point. I always try to understand the view of Salvadorans from how my grandmother, who’s now deceased, would see it. Like my mother. Why would she use her cell phone instead of getting the money out of the bank? When everything they can buy in the public markets is in cash. Happening in cash. Doesn’t make sense. I think that’s why it’s never appealing. It was at the end, used as a reward card, not as a payment system. I don’t know if that answers your question.

Scott Ferguson: Can we talk a little bit more about the details of Bukele’s authoritarianism, and what shape is it taking? And how is it related to the history of El Salvador? But then specifically, contemporary issues around gangs, I know, and also Bitcoin?

Ricardo Valencia: Well, the shape is a personal authoritarian. Which, aiming at what I think political scientists call authoritarian electoralism. Pretty much what is closer to Bukele, I think, is Fujimori. In Peru, in the 90s. Power is based on one person in which surveillance increases and the harassment of journalists. But at the same time, as Fujimori used terrorism in the 90s as a scape goat. The Shining Path, Sendero Luminoso, and MRTA, the other Peruvian rebel organization, Bukele is using the gangs as a scapegoat for things. Losing the battle of Bitcoin, he is focusing on that. The whole contradiction again, as you know, you love contradictions, as I love because it explains everything. The big contradiction is: for this authoritarian government to work and reduce the numbers of homicide, it has to arrest as many people as possible, but at the same time, they have to negotiate a deal with the gangs. And that’s what he’s working on now. These big contradictions between arresting people without any judge order. But at the same time, negotiating under the table with gangs. And that’s what I think the shape is happening. It’s a heavily authoritarian government that has increased internet and electronic surveillance, but at the same time, using the regular controls of political repression, which is arresting as many people as possible, and sending a lot of people into exile. And I think that’s the shape it’s going to take. And every time, I believe, the electronic jargon is a way to just show you are a typically authoritarian government, which is pretty similar to what happened in Peru. An increasing public relations and propaganda machine, right? And, that’s increasing, but also at the same time, Bukele is getting more paranoid because people might be finding him popular, when you ask them if they like the President. But if you look at his policies, some of them are very unpopular, right? And eventually, it will go down because nothing stays forever up. And that is the big fight, he has to keep popularity up. And the big first way to do it is to, perhaps, get reelected illegally because the Constitution prohibits re-elections by his people around wanting to run again. But I don’t know. That is a poison candy, because he’s gonna face a lot of issues after 2024. The experts said that they might be able to pay the debt by 2023, but they are way more skeptical about El Salvador paying the debt by 2024 or 2025. That’s the shape that has a very strong popular, but at the same time with interest of an international actor which has now privileged their relations with the hardcore right wing politicians in Washington DC because he doesn’t have any connection. But the thing is that even Breitbart has been critical of Bukele. He loves Brietbart now. What else does he have? Even Cuba has more friends in Congress. Yeah, even Russia. But that is the shape, the political shape there, and also shows you that authoritarianism makes things worse economically. It doesn’t solve anything. Now he’s been exploiting the pay that people have to traditional political parties. But eventually, that fades, right? You can forget things.

Andrés Bernal: A lot of people in the United States, a lot of the public hear in the media about the gangs and, you know, crime in Central America right now. And this led to mass migration. Can you spell out where the formation of many of these gangs and whatnot, kind of all originate from in El Salvador, and maybe tie that back to what you were mentioning earlier about some of the war that was experienced in the late 80s, early 90s?

Ricardo Valencia: Yeah, I think gangs are really a great product of the, in a lot of ways, from the American culture. All these people who left this country in the 80s, went to very disadvantaged, low income communities in LA, in Washington DC. And then they enter a culture that was a gang culture here in California. And then they form the first gangs here in the United States. Eventually, the United States started deporting people back to El Salvador, and they began to flourish after the Civil War, because of the situations of inequality, lack of opportunities. And also the United States conducted a high level of deportations. For El Salvadorans, many of them were in gangs. I mean, that is also producing mass immigration to the north now, right? That is like a circle happening again. The United States, these kids in the 80s came to the United States, they joined gangs, they enrolled in gangs, they participated in gangs. They are deported out of the United States, they are destabilizing the situation in El Salvador, and now all mass immigration, in large part, is due to gangs in El Salvador. I mean, it’s a circular situation that is happening again. And the problem is, it has a solution, but politicians don’t want to deal with long term solutions, right? And also, there’s a big resentment from the population against gangs and the ability of the extortions they are having, and they extort small business, but there’s no solution. And the only solution that Bukele is selling them is pretty much wiping them out from existence. The problem is they are taking a lot of people who are civilians, right? And also, they are vulnerable, like they are breaking human rights. Human rights were important in El Salvador because it prevented people from finding violent solutions, right? And that’s what happened this time. How do you solve a long term issue when politicians are only looking to win elections in three years. And Bukele started with this speech that was based more on prevention, but after the spiking homicides, he went back to stress in highlighting his strategies; an iron fist strategy that depends on a secret deal with the gangs. But in the United States it’s pretty important to understand El Savador, you cannot understand El Salvador without the United States, for better or for worse. And what you see in macroeconomics, and the debt issue in El Salvador is the same that happened in terms of safety. Mass migrations, increase in immigration. In the 80s, also, the diminishing of many…I think a lot of the things are also inherited from the 80s when all this political violence indeed destroyed a lot of social institutions and created a society where there is very little safety net. And that is something that has to be in a way responsible for the United States. The United States has some responsibility for what happens. Not all the responsibility, but a strong responsibility to what happens with El Salvador and Central America, generally.

Scott Ferguson: So you’re also tracking the geopolitics of crypto and Bitcoin elsewhere, and making connections not only from El Salvador to the United States, but all around the world. Can you talk about the role that crypto is playing in other countries right now?

Ricardo Valencia: I believe that crypto is playing a role in the way that they are. I think in terms of Latin America, they’re focusing on countries with high inflation: Venezuela, Mexico, perhaps Argentina. I think that Latin America would be the most important country to provide upper middle class people that ability or middle class people the ability to think they have money in dollars. Remember that’s the most important. They won’t change. They want to give the impression that money’s in dollars. But at the same time, I believe crypto has given authoritarian governments the ability to bypass sanctions. And also it’s becoming the usual Hail Mary that they are doing. In the case of Russia. In the case of Cuba, for example, in Cuba you can use crypto, but at the same time, you have to register in a database. The same is happening with Venezuela. And now in countries in Africa, it means because I think, they’re trying to achieve two things, geopolitical and global, to be used by authoritarians, and weak states, as a way to provide money for the states and getting money and liquidity. And at the same time, provide a service for upper middle class rich kids and people in those countries, right. That, I think, is the goal. And the third goal is producing a larger number of customers in the global north, that can help to replace the users they have lost in the United States, right? I think it’s about finding, in short, it’s finding globally new money, fresh money, that keeps the world running. And that’s why El Salvador is an example. You’re gonna see all the same people who are working in El Salvador working in other places like Samson Mao, the Mallers, Bitfiniex. All these people want cash. $30 Fiat, that’s what they want. But it’s not enough in the United States, because I believe they see the regulations that are coming. But you cannot go through El Salvador where people make only $300 a month. You need the states because the states are what Bukele shows, the state can invest half a billion dollars in whatever scam. And then these keep the wheel running and running and running.

Scott Ferguson: It reminds me as a kind of second time as farce version of the Chicago Boys, the economists out of University of Chicago, coming in and advising the Pinochet regime, right? You can only do neoclassical, neoliberal free markets with dictators backing them.

Ricardo Valencia: Exactly.

Scott Ferguson: But in this case, it’s not even using the powerful tools of the state, but rather it’s about, you know, startups and private enterprise. Yeah.

Ricardo Valencia: Exactly. Which, in a lot of ways, reduces the scope and makes it so weak. The Chicago Boys have the United States, right. And their geology and their theory, but I believe the whole crypto thing is that a lot of people want to make money fast. Not the dedicated neoliberals of the 80s, because I don’t think those authoritarians, the authoritarians of the 70s were not per se neoliberal, right? They were authoritarians, and close to fascist, but they were not neoliberals. Right? Velasco in Peru was a kind of social democrat, economically. Authoritarian as hell, but I think when they convinced Pinochet, it ruined a lot of things. But in this case, the scope is smaller. It’s pretty much cash. In that way, what’s happening now is the crisis with Ukraine makes everything be read through the eyes of geopolitics, and crypto is in a very difficult position. Binance is not judged by how many people are losing the money, but because they’re making deals with Iran, and Russia, and that’s why Bukele got trapped with the Bitcoin bonds, right? He thought, oh, man, I’m gonna have Bitfinex, who’s not allowed to make business in the United States, then maybe we can have some money from Russia and the Ukrainian crisis came! Where are you going to sell the Bitcoin bonds? You can’t sell it in the United States, with the largest market being three times larger than any other market. Then you’re going to sell it to Russia? Then you’re going to get sanctioned? That’s from the state perspective. From the startups, crypto companies, they just want the money that Bukele gives them. They provide an exchange scheme to exchange crypto to dollars, which I think, at the end, is one of the goals of these companies. Having a pile of cash, and places they can exchange what they have for the currency. And El Salvador is precious because it’s the dollar. But that amount of dollars that Bitcoin is costing, that crypto is costing El Salvador is making the whole public healthcare system falling apart like this education system.

Andrés Bernal: So in a way, what’s making El Salvador particularly vulnerable to this culture of crypto vultures is its dollarization in the first place.

Ricardo Valencia: The dollarization and having a President who has a pile of money, public money, available. Yeah, dollarization. Yeah, but I think why now the whole situation is making it more difficult even for crypto influencers to deal with Bukele because Bukele is in a big problem and crypto won’t solve it. But I think it’s so attractive, having a country with the dollar as a legal tender, because it provides you an automatic exchange without question asked. And that goal, the goal of the Bitcoin adoption law in the US Congress, right? The, again, the Salvadoran Bitcoin adoption law in the US Congress, which is gonna focus pretty much on money laundering. But that’s what happened. You can ask who wins in this deal? The people of El Salvador? No. The national state? No. Bukele paid $425 million in a PR campaign that made him popular among cultists about the Bitcoin cult. But that won’t solve…The deal, as you were mentioning before, the deal is systemic issues. They won’t because they are not made for that. They don’t, I mean, you’re asking crypto too much. Even if you believe that crypto has a utility, you’re asking too much. Yeah.

Andrés Bernal: So to kind of wrap it all up, so many critical insights. Tell us about the protests that are going on right now in El Salvador, and where you see pathways leading and what the potential of these protests presents both for El Salvador and then also for a kind of a resistance to private money or crypto politics in general?

Ricardo Valencia: Well, crypto provides a symbol for a very large number of grievances. Right? Bitocin summarizes the position of authoritarianism and also using scarce public money to fund something that people find exotic and strange. And that’s why it was the perfect example to, in a lot of ways, exert and call for a more nationalist tone of those protests, right? Before, for the people in the 2000s, it was against the dollar. Now, the protest is against Bitcoin. Like this foreign money that tries to own the country and impose an authoritarian regime. And it has a symbol and a logo. That’s amazing, right? What else do you need? That creates the possibility to frame the discussion, annoy the precedent and build a coalition between people. Why social movements go from people who are environmentally, women’s rights, LGBTQ rights…LGBTQ has been one of the most militant elements of El Salvador, right? They have been fighting for democracy since the beginning. Womens, too. The feminist organizations. But at the same time, maybe the more traditional unions, and more traditional social justice in El Salvador, and along with Catholics, and progressive Christians. That was the ability, the symbol that we’re able to find was the anti-Bitcoin. And that’s why they crystallize it. It allows us the interaction between young people with all people to change repertoire of strategies and tactics. Yes, and that’s why it became so important: the symbol of anti-Bitcoin was a symbol of pro-public money. We need the money to be for the public. You cannot invest the money in something that is not for that. You cannot privatize money. That’s the symbol. The dollar was not. We cannot rely only on America, on the United States policy. The script is we don’t have to rely, we don’t want our money to get privatized. And that is a powerful symbol, that there’s a lot of meaning behind. Yes, it’s a diverse coalition. Contradictory as always. But it was very symbolic that the protests happened exactly during Independence Day in El Salvador, September 15. Independence from crypto. Independence from Bitcoin. And the power of the state. Then, what do I think the demonstrations, the first demonstration against crypto in the world, perhaps? I think there have been more people doing that. But on a national scale, perhaps. What it’s showing you is the uncomfortable reality that any democratic movement in El Salvador needs to go beyond going back to the past. You can’t go back. Bukele destroyed the past already, right? Anything that needs to be built is in the future. And that’s the question that hasn’t been answered. And it will be complicated. And it wouldn’t be easy, it would be contradictory. And that is what is happening now. Some people are worried that the parties, they are very weak parties that can fight for democracy in El Salvador. And some of us, like myself, think it’s very healthy that this starts as a movement. Because many things that become parties later start as a movement. And also it has begun to think, a kind of a national message beyond polarization. And I think there’s a lot of people in both conservative circles and lefty circles in El Salvador, progressive circles, to think that the country is more important than our ideological difference. And that is something that has been really found in the last years and reevaluation of the word democracy, but at the same time, the word of unity. And that’s difficult for many in very extreme positions in both left and right. Like how you can build a national movement that goes beyond those differences and deals with a new reality. That’s a lot to ask. Right? And I don’t know if even the United States has it, but that’s the thing, how you move forward in the future. You cannot be stuck. You cannot be stuck with the past. You cannot be stuck with a generation who did the work and you have to move forward in a way that people in El Salvador have a solution until now they find there’s no other alternative than Bukele. And that is the reality. But I believe El Salvador always surprises me, and there will be a way that we will build a more democratic future with more inclusion, and sometimes you don’t see it until you see it. And you think sometimes that you’re going to lose the game, and in the ninth inning, you hit a homerun, you never know.

Scott Ferguson: Oh, Ricardo, thank you so much. This has been so illuminating. We hope to keep in contact with you and have you back on and keep us informed. 

Ricardo Valencia: Yes, thank you very much. If people want to follow me, I’m on Twitter, too. @ricardovalp is my Twitter handle, if you want to follow me. Thank you very much. I really appreciate this time. For trying to complicate the situation because I believe the whole discussion of Bitcoin and crypto in El Salvador has been focused on if the people are using crypto, or if the people are not using crypto and the default, economic default. But nobody is trying to arrange that crypto is just a byproduct of authoritarianism. That the only way that Bitcoin could be established there is through authoritarianism. It couldn’t happen in a functional democracy. And because they don’t want public legitimacy. They want power legitimacy to allow them to do whatever they want.

Scott Ferguson: Great. Awesome. That was fantastic.

Andrés Bernal: Great.

Ricardo Valencia: Thank you very much.

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