The launch was rushed, and the Chivo wallet was nowhere near ready for handling on-chain bitcoin transactions. So that was one (minor) contributing factor for today's small usage.

The initial flurry of activity was people trying to withdraw their $30 airdrop. Now, the remaining use of Chivo is by far mostly for dollars, according to that paper.

That being said, why would a bitcoin circular economy form simply because it is legal to use bitcoin? Why would the few merchants that are paid a fraction of revenues in bitcoin then spend that bitcoin, rather than keep that (or a portion of that) for their "treasury" / savings? Gresham's law is universal!

But what if it is just a couple percent of the transaction activity occurring in bitcoin? That's more than most everywhere else. And from here it will be mostly organic growth, and it will be interesting to see pockets of adoption form and to learn why and then we can learn and try to replicate that globally.