#1064 – Bitcoin, Community, and Change in El Salvador

Automatically transcribed from the original recording; names and wording may contain errors.

[00:00] South of the border down Mexico way That's where I fell in love when the stars above came out to play and now as I wonder Hello there all you ex-pat wannabes I'm Johnny Mueller and you're listening to the expat files living in Latin America the show that tells you just what it's like to live Workplay and or retire down here in Latin America It's a mix of the good the bad the ugly and the great and it's all right here. So let's get started All right, last time we left off talking about Bitcoin being legalized in a little country of El Salvador Legalized as real money and legal tender first time first place in the whole world So why do you think that happened? What was the president of that country thinking?

[00:45] Well, don't believe the FUD you see out there in the lamestream media Their advertisers are big pharma and big finance and big finance Meaning big banking institutions just hate crypto and Bitcoin because it cuts out the middleman and they're the middleman and when I'm done Ranting today you're gonna know more than 99% of the rest of the world the uninformed world About what's really happening in the exploding crypto space now last show I mentioned it all started with a surfer dude named Mike Peterson Who went down to El Salvador about 15 years ago chasing the big waves now this guy and his buddies were surfing attics He'd been to 45 different countries and when he ended up in El Salvador He called up his wife back in the states and he said listen

[01:31] We never owned a house before but we're gonna buy one in El Salvador and she was shocked But she went with it. Remember we're talking 15 years ago now So for a couple of years, they lived half time in El Salvador and half time in the United States So over the years, I got to know their neighbors in and around the beach a lot of very poor folks Are they being so-called rich gringos? They helped their neighbors socially and economically as much as they could all the while Peterson was boning up on Bitcoin and then somehow through the worldwide Bitcoin community a Bitcoin whale who was a surfer You know what a Bitcoin whale is? It's a guy that's worth millions in Bitcoin usually because he was a first adopter bought in around 2011 or 2012 really cheap and now his Bitcoin is worth millions So most Bitcoin whales are young nerdy computer geeks

[02:17] So anyway, this unnamed Bitcoin whale donated some Bitcoin to Peterson to fund a few projects on the Salvadorian beach Which they now we're starting to call Bitcoin Beach, which actually consists of a couple of different towns and beaches So it all started with a Bitcoin donation But that wouldn't have been enough if someone just came in there You know like a do-gooder or all those NGOs or church groups that come down for a couple of weeks Spread some money around build a few things take off come back a couple years later and then everything is gone in reverse That happens all the time and it's not good. The thing is Peterson had a 15 year relationship with the community He knew everyone and they all knew him from the business owners to the poor of the poor who he was always given little Jobs and a helping hand to anyway So without his long-standing relationship with the local community the Bitcoin thing and the Bitcoin apps

[03:06] Would have never got off the ground He said when he first started explaining this magic internet money to people who didn't even have bank accounts He talked about how stores could accept it and how people would get it paid in it You can imagine they thought he was kind of nuts again 60% of the rural population in El Salvador don't even have bank accounts So they looked at him like he was kind of nuts But he was helping out in contact with lots of young adolescent kids because you know Salvador has a big gang problem and most of them end up in the big cities in the United States, right? And of course gangs in El Salvador are in the big cities too, especially the capital But not on the coast or where the beaches are. It's mostly in the capital city of El Salvador That's about two and a half hours by car and about four hours by chicken bus from the beach towns But rural kids kids living on the beach coast who haven't got any jobs or any

[03:53] Possibilities of advancing will often go to El Salvador the big city and get recruited by gangs because they've got no other options No jobs. No money. It's the age-old story of young kids with no hope going to the dark side So first thing Peterson did was start a cleanup program He started paying adolescent boys in Bitcoin to clean up the streets and the beaches and once they started using Bitcoin it only took a couple of days to click and they figured it out In fact Peterson was shocked how fast they adapted he thought oh no This is gonna take quite a while and lots of hand-holding But he said that wasn't the case at all They caught on right away and were so enthusiastic about this whole new Bitcoin and crypto economy That in fact after a couple days they came right out and said look this is so much better than using dollars

[04:39] I can send this crypto stuff to anyone any time to my friends my parents to a store anyone The money gets sent and received instantly on my phone I don't have to go to a streetside money changer who rips you off or go to a bank or use a debit card at An ATM which young adults and adolescent kids don't have anyway, and they can do it anytime anywhere because they've got their $50 smartphone on them You know in Salvador like most all of Latin America there are more cell phones than people So it really started with the teenagers and took off from there So then Peterson and his Bitcoin surfer guys started going around to the little shops, tienes and restaurants And kind of talked him into accepting Bitcoin or at least trying it out for a while by opening up a wallet for them and their smartphone And putting a little bit in their account

[05:26] So they all started out with 10 or 20 bucks worth in their wallet And really who wouldn't try something new if you gave them something of value for nothing just to give it a go and see how it works Sure at first everyone was skeptical but that's normal If you're old enough to remember when the internet first came out you had to use that dial up connection for your modem And stick your telephone in a special cradle that would couple it with a weird computerized sound You remember that it was a lot of trouble a big hassle and often disconnected in midstream And I'm sure if you're over 40 you remember how long it took just to get a picture to download on your computer screen Sometimes a half an hour just for one jpeg picture I remember sitting there watching it appear from top to bottom line by line Finally seeing the whole picture after who knows how long

[06:11] Well that's how technology gains mass acceptance But I remember at the time a lot of my non-engineering friends would say Nice toy Johnny but it'll never catch on Who's gonna wait a half an hour to get a picture on a screen Yeah right now 20 years later we can all download an ultra high definition movie Of a couple of gigabytes in less than a minute So anyway the teenagers jumped on board at Bitcoin beach in El Salvador first Of course they needed a tiny bit of hand holding so they didn't start buying all kinds of shit coins And do stupid things like a lot of newbies do by switching back and forth from Bitcoin To any number of scam coins that are out there And the secondary effect is that once they figured out that they could use it as money in their own neighborhoods They realized there was a worldwide market for this stuff and they could buy things online

[07:00] It's something they never would have or could have done before Because to buy anything online in the past anyway you needed a debit or credit card or paypal But now there are hundreds of ways to use Bitcoin, Ethereum and some of the major cryptos to buy practically anything online So things were rolling along at Bitcoin beach and a funny thing happened A couple of news stories went out online and in the newspapers and media in the capital of El Salvador San Salvador A city of about two million or so Anyway upscale people in the capital of San Salvador started reading about Bitcoin beach And they started driving there on weekends to buy Bitcoin from the teenagers using it How about that? Yep the educated classes knew about Bitcoin but they didn't know enough to dive in

[07:45] But they knew there are a bunch of little towns on the coast that had it all figured out Now as far as these beach town economies about 90% or more of all transactions are in cash And the other 10% go through bank accounts but they aren't used that much Just maybe the withdraw cash and then spend it But as mentioned they have a hundred percent smartphone penetration Of course we're not talking iPhones here they have the $50 cheap ones but they do everything Nothing wrong with that Hell I've got a $50 cheapie Actually my cell phone probably cost around $200 new but I bought it at a used cell phone store People are always trading up you know and you just put in a new chip and you're off to the races And those $50 cell phones are fully capable of having a crypto wallet on them Anyway in the early days back in those beach towns Most people didn't care a bit about Bitcoin they weren't interested in it

[08:32] But they were interested in the convenience of moving money Without having to trudge their way down to a bank intermediary Stand in line and let them take their cut It was the instantaneous nature of it all that sold them Now remember all this started about two years ago And during that time something miraculous happened People were realizing their Bitcoin assets on their little wallets Were appreciating like mad even the tiniest amount Worth maybe five ten or twenty bucks suddenly multiplied As we all know crypto did in the last couple years So all those Salvadorian kids and young adults that had a little bit of crypto in their wallet A year or two ago started wondering what was happening How could it be that their little bit of crypto suddenly was worth three four Even five times as much as they started out with Now remember El Salvador uses the US dollar

[09:19] They have been for the last 20 years So when they go into their crypto wallets There's an instant conversion there telling them what their Bitcoin's worth in US dollars Their funny money currency So they saw instantly right in their faces That crypto was an ever appreciating asset Not an ever depreciating asset Like the US dollar and the previous currency Which completely failed because the government slugs in charge at the time Rolled the printing presses and devalued the hell out of it Hmm sound familiar? Yep suddenly these young kids and adults were getting a financial education They would have never gotten before They don't teach about money finance and the eventual government debasement of all fiat currencies Did you learn about that stuff in school? I didn't So in the end these young kids and adults in Salvador Realized they were much better off holding their money in their crypto wallet

[10:09] In Bitcoin than having US dollars They'd never had an asset that appreciated before The thing is you know these young Salvadorians Don't have to understand everything about Bitcoin or crypto You know it can be a complicated subject And there's lots of rabbit holes you can fall down into The thing is it's like a car or an airplane You don't need to know how they work to use them just like Bitcoin Anyway after a little while All the Salvadorians using it had that aha moment This is something special And that's when they wanted to learn all the different ins and outs For example online and hard wallets like Nano and Trezor And how to utilize different crypto exchanges So first all you have to do is get people to start using it And after that it's like a snowball rolling downhill

[10:54] Hmm bad analogy there Unless a Salvadorian snuck into the US he's never seen snow Anyway so now you've got young Salvadorians Who never had access to financial markets Who never even thought about financial markets They're training themselves up because they want to Not because some adults or some teachers telling them to Suddenly they've got a world view Not a tiny local view Talk about fantastic secondary effects So before Bitcoin came along When the local kids and adults got money They'd spend it right away Because they knew in time it would lose value But now they sit and look at their Bitcoin wallets And see it actually appreciates in value A total new concept for the average Latin American Instead of that continuous cycle of earning, spending, being broke Earning, spending, being broke

[11:40] They see the value of stashing a little bit of every salary It's not just about money either It's about thinking of the future Finally they can plan ahead Whereas before it was always about living for the moment So there is this little group of Bitcoin young people A new generation that's seeing life completely different than their parents Again that's one of the secondary effects no one could have imagined And honestly what my gringo and expat friends in Salvador are telling me Is that you see hope on these kids faces now Was never there before Previously their hope was to escape to the United States That was about all the hope they had I mean look there are over a million Salvadorians living illegally up in the States So these kids are now seeing how Bitcoin businesses work And they know now they can stay in their country And still make money with Bitcoin and other cryptocurrencies

[12:27] Working with and for American companies Or European or Canadian companies Because it's all online doesn't matter where you are So as much as a lot of the rest of the world Especially people who are in the mainstream media mindset Think the Bitcoin revolution in Salvador might be a gimmick Or something the president did to get more popularity or media attention Oh in fact I even heard a rumor Some people are saying he just did it to force the IMF To offer a gigantic loan as a bribe To get him to rescind the Bitcoin law Because banks in the IMF and all financial institutions pretty much hate Bitcoin You know why they lose power control And that big slice of the pie they always get for every transaction That's why I'm going over this today So if you hear naysayers and doubters You'll hear the real story and have some ammo

[13:14] To counter people who get their fake news from the mainstream media Of course they hate crypto Seems for every positive story you read 10 negative ones All of course coming out of thoroughly corrupt organizations Like the Fed, Morgan Stanley, Deutsche Bank, USBC Bank, etc Funny how they're the ones that have been caught And find billions for money laundering But you'll only read about that in the alternative media Isn't that funny? But I digress, where were we? Oh yeah Talking about the fact that the middle, lower middle and poor folks in Latin America Never invest in a thing They don't even know what investing is Not in a traditional sense anyway Though sometimes when a poor Latino comes into a little money Somebody dies or remisses come in Well sometimes, just sometimes When they've got a little extra cash They'd go to the hardware store and buy some cement blocks

[13:59] And some PVC plumbing tubes Because most of them want to remodel, add on or build a house They know construction materials like that not only hold their value But they get more costly in the local funny money as time goes by So for example once in a while when I'd visit my own maintenance guy In his own little tin roofed house I'd see cement blocks, plumbing pipes and an old sink or two Piled up under a lean-to in the backyard His way of fighting inflation and investing for the future So in the end it's not fair to say gringos and expats came down And magically gifted Bitcoin to the people of El Salvador It was the Salvadorians, the teenagers and the young adults That got excited enough about the prospect to make it happen They're the ones that figured out ways to make it work in their economy It was the gringo surfer expat Bitcoin guys that gave them the ball and laid down the rules

[14:46] And when the Salvadorians learned the game they ran with it One of the greatest things is we're talking about a society That the rest of the world is kind of written off Thinking they've just been unlucky to have been born in a shithole country With zero opportunity except to escape to the United States or join a gang Man the crypto and Bitcoin thing sets that assumption on its ear Now of course you might be asking right now What about the fact that in the last couple months Bitcoin took a dump As well as the rest of the coins How did the young Salvadorians used to see their Bitcoin go up and up and up Take to that Did it pop their bubble, take the wind out of their sails? Like it did for so many newbies Just getting into crypto up in the States and the rest of the world Well first let's talk about 15 or 20 Bitcoin mentors Local Salvadorians who've really studied up on Bitcoin since it first hit two years ago

[15:35] They're the go-to guys for any store, restaurant, tienda, supermarket They want us to start taking and transacting in Bitcoin But need to know how Kind of like a crack team of young Bitcoin people between the ages of 15 and 30 And that was bound to happen you know With any discipline there evolves kind of a club An excess of super excited people really in the know And these are all young Salvadorians None of them are gringos or expats They're just the ones that got hyper excited and caught the bug And now they're the local experts The go-to guys for everything and anything crypto Oh and by the way As far as Bitcoin social programs or do-gooder programs you might say Well there's a couple of community leaders that have integrated Bitcoin into that too In fact they've started 22 different Bitcoin funded social programs You know to help kids out get them into Bitcoin

[16:22] Keep them off the streets etc Everything from a professional lifeguard training program Remember we're talking about an Olympic surfing destination So people from all over the world are coming down And some of them party a little too hard and need to be saved Hey we're talking about surfer dudes remember So with this program they've got 62 professional lifeguards getting paid in Bitcoin And there's English classes that people pay for in Bitcoin And the teachers receive Bitcoin in payment The garbage men and the trash collection services are all paid in Bitcoin So they're not just given Bitcoin They're earning Bitcoin and all the stores are taking Bitcoin Funny thing is when expat gringos come down who know and use Bitcoin themselves When they see all the little businesses with Bitcoin stickers on their windows Instead of Visa and MasterCard stickers

[17:08] Bitcoin hats and t-shirts cars and trucks And even surfboards with Bitcoin logos on them They're shocked First thing they're thinking is this is completely different Than the way it is up in the states or Europe Where you kind of want to be secret about Bitcoin if you've got a lot of it You've heard of Bitcoin ransom stories and hacking and stuff But down here we're talking about people having ultra small quantities of Bitcoin You know the average person in the world who doesn't own Bitcoin Doesn't realize a single Bitcoin can be divided into a million pieces That's why a lot of people who haven't got any will buy other coins like Ethereum or Cardano Because buying one of those coins is so much cheaper than buying one Bitcoin The thing is you don't have to buy Bitcoins or any kind of cryptocurrencies In whole integer denominations 1, 2, 4, etc You can buy the tiniest little fraction of Bitcoin

[17:56] Or any of the other cryptos And that can be seen in full force in those beach communities in El Salvador In fact I'm certain there's not a single local Salvadorian who's got a whole Bitcoin He'd be rich and probably driving a brand new car But if you add up all the little crypto wallets there I'm sure it adds up to lots of Bitcoin By the way the Salvador experience kind of flips the idea that Bitcoiners are basically a wealthy craft Well that may be true with people up in the first world But in Salvador it's not the money of the rich It's the money of the poor, the money of the people Though as mentioned many wealthy Salvadoranos drive in from the big city To buy Bitcoin from these very people Who'd have thought? Poor Salvadoranos, most of them without even a high school education Living in shacks, some of them with dirt floors Know more about Bitcoin than the average first world American

[18:43] Hard to believe Now I was talking about this crack group of 15 or 20 Salvadoranos Who really know Bitcoin, local guys Well about a year or so ago that Peterson guy You know the gringo Bitcoin surfer dude that got this all rolling He decided to get this Bitcoin moving in Salvador on steroids By taking a couple of the most enthusiastic young Bitcoin teenagers from Salvador On a trip to an international Bitcoin conference It was in Uruguay It was the first time these guys had ever been to another country On an airplane Even first time to ever visit an airport So he took them down for a couple of days in those Bitcoin conferences Especially the international ones are wild and crazy And since it was in Uruguay it was mostly in Spanish So they absorbed the info like a sponge And absorbed part of the mania too They just couldn't believe all the cool things being done with crypto and Bitcoin

[19:31] They had their come to Jesus moment And when they came back to Salvador They became Bitcoin evangelists on steroids That's one of the reasons Bitcoin's taken off there like wildfire And then came Covidiot Now these gringo surfer Bitcoiners in El Salvador Have made it a policy not to just give away Bitcoin for nothing They don't want to disincentivize people from working I mean we all know what's happening with the helicopter money up in the states People would rather sit home watch Netflix and eat Cheetos Well these surfer gringos were smart enough to figure out that didn't work They'd seen enough NGO action down here and giveaways That sort of backfired in the past Everyone loves free stuff And as the old saying goes and maybe it's my saying There's no surer way to piss off a person you've been giving freebies to Than to stop doing it

[20:18] Think about it So anyway during the Covidiot crisis Those Bitcoin surfer dudes made it a point to break that rule They decided to hand out 40 bucks worth of Bitcoin every couple of weeks To 500 families in need It kept the economy going The stores open And of course kept the people from going hungry And that kind of supercharged the whole Bitcoin thing Because now these 500 families Some of them who'd never used Bitcoin before Were up and running with it in a couple days And they found they could pay the stores online And the store would deliver food Because you know during the lockdown Sometimes you could not go out Now we have to talk about remittances Because that's where Bitcoin really shines Now remember there are over a million Salvadorians In the United States And they're sending back money every month By the Western Union and MoneyGram And paying 8 to 10 percent on every transaction

[21:05] And you know every Bitcoin transaction Costs a couple of bucks these days And that could add up But when people use that strike app I talked about on the last show Used concurrently with the standard Bitcoin beach wallet That's how they get around those fees That means when people send a remittance Not only is it instantaneous It only costs pennies not dollars Oh and fully one third of El Salvador's economy Comes from remittances From families up in the US In fact the strike app is so popular They have an office in El Salvador now And yes the salaries and rent are paid in Bitcoin So in the end Salvadorians have never been more excited Or more hopeful about their futures Now of course politics there and everywhere in the world is corrupt And the reason the new president's been able to push this through Is because he's got extremely high levels of popularity

[21:50] Upwards of 80 percent But how did the president and congress get on board With the Bitcoin thing When it was only happening out on the pacific beach coast Well as mentioned rumors got to the big city And articles started hitting the international press So with all that positive worldwide publicity The president invited the gringo Bitcoin surfer in his group To meet with his cabinet The minister of economy Minister of tourism Minister of education Etc etc To explain to him just what the hell was going on on Bitcoin beach Which by the way has become Salvador's number one tourism spot And if you're wondering why The president's popularity is so high Is because he's not from a traditional party He's from an outside third party Not part of the traditional ruling structure By the way of the last three Salvadoran presidents

[22:37] One is in jail One's under house arrest And one fled to Nicaragua for asylum All of them convicted of looting the treasury Oh and just last week The wife of the previous president was put in jail for 10 years For what else? Looting the treasury In other words the bar to becoming a political candidate in El Salvador Is pretty disgustingly low So in the last election The population embraced the new guy Who wasn't part of any of the previous administrations Though time will tell We'll see So the question still is How did the president get on the Bitcoin bandwagon? Well it all happened last year When Forbes wrote a big positive article about Bitcoin beach And since Salvador gets nothing but bad press It was kind of like the only article all year That spoke of positive things happening So in these meetings

[23:22] The Bitcoin beach guys had with the cabinet ministers They talked about how for example Puerto Rico A Latin place that's also embraced crypto and Bitcoin Though not as legal tender Has brought in hundreds of wealthy Bitcoiners and tech businesses And the thing is because the US dollar is Salvador's currency They've got nothing to lose By making Bitcoin legal tender too Because they don't have their own funny money Doubloon, peso, quetzal, whatever That could be affected by running a parallel currency That means what Salvador does economically Will have no effect on the value of the dollar worldwide Now one of the amazing things for me anyway Is you'll see people using Bitcoin in El Salvador And they don't even have electricity in their homes There are many people in Salvador Who charge their cheap smartphones at their neighbor's houses Or one of the local cafe internet places

[24:08] That has a charge station And yet they know more about Bitcoin and cryptocurrency Than the average American But what about when Bitcoin hits the skids for a while Like it's done in the last couple months Well in Salvador and with the rest of the world They kind of freaked out people who just got in In the last couple of months But for people who've been in the game more than six months They understand crypto is volatile And in fact it's a little bit more worrisome With a poor population When Bitcoin goes up and up and up and up Because a lot of the people then who just first get in Feel like selling their cows, goats, and farms To get in on the big Bitcoin run-up Which is not a smart thing to do It's not recommended So this pullback we've had in the last couple of weeks anyway Kind of puts the damper on people thinking They better sell all their driveway chickens And get into Bitcoin because there's a better return

[24:53] So that volatility thing is good It keeps people from leveraging and selling stuff And going overboard In fact the volatility thing with cryptocurrencies Is a good lesson for newbies getting in It helps instill a little discipline and patience So in the end Salvador is really the model Of how Bitcoin can roll out in the third world Meanwhile all eyes are on Salvador right now And you're probably reading negative things Coming out from the IMF and the World Bank Of course they don't like it It cuts into their game And you know all that World Bank and IMF money Comes with strings attached And as we all know the skim and a lot of corruption And they want to keep it that way You know there's going to be a lot of government And non-governmental forces trying to thwart this So the president and the government of Salvador Had to go all in on Bitcoin

[25:39] Again what have they got to lose? Like for example USAID The NGO-like agency of the US government That's tied to the CIA They just announced yesterday They want to give El Salvador $115 million in aid To stem migration Some coincidence huh? Dangle that carrot and maybe They can get the president to drop that crazy Bitcoin idea And what about all the talk about this huge Bitcoin carbon footprint Well Salvador's got an ace in a hole on that one too You may have heard President Buke said Wednesday That he instructed state-owned geothermal electric firm La Gio to develop a plan to offer Bitcoin mining facilities Using renewable energy from the country's volcanoes He said at a press conference this week

[26:25] My engineers have informed me That they've dug a new geothermal well That will provide approximately 95 megawatts of 100% clean Zero emissions geothermal energy From our most active volcano Adding the excessive energy production That the local economy cannot use Will just be wasted unless they design A full Bitcoin mining hub around it In other words contrary to what the lame street media has been reporting Bitcoin's not robbing the world of energy In fact 60% of Bitcoin electricity use is renewable You can look it up Better yet Bitcoin mining can solve a huge problem Most natural and geothermal energy resources Pour energy into the atmosphere 24-7 it's just lost And unfortunately those sources are far far away From the big cities that need to use that energy

[27:11] But setting up a power plant at the source and mining cryptocurrency Can capture all that energy Without having to construct extensive power lines Transformers and substations To bring that energy to a distant site But you knew that already One last thing If you're coming down to my next expat insider seminar We'll be visiting Bitcoin beach You won't want to miss that To get a 2 to 5 year head start on your plan B Send me an email to expatfiles at gmail.com

[27:57] Nos vamos