Nayib Bukele just posted this thread about how El Salvador plans to buy back their own debt.

Right now El Salvador’s bonds are among the worst performing sovereign bonds, and are therefore trading at a steep discount.

If El Salvador has the funds to buy this debt back, they can do it at market price and save a lot of money.

Skeptics might say they could be bluffing to raise the price of their existing debt, and make it more likely they can raise more money in the future at lower rates.

Looks like El Salvador’s 7.75% Coupon Bond has really spiked, up 15% in the last week.

A few questions for SN users:

  • Where are they going to get the funds to do this?
  • Are Volcano bonds still a thing?
  • Is El Salvador’s economic situation as dire as mainstream press & bond markets believe it is?

In the distant future, I can see them using gains from their Bitcoin holdings to buy back their debt and even pay off their debt, but with them currently subsidizing oil prices in their country I think their country is obviously making poor financial decisions.

I'd love a more detailed analysis of El Salvador's finances, how funding certain things means a certain return on investment things like that though.

I definitely don't think they have the finances to buy their debt right now, if they did, they wouldn't need debt to finance their country in the first place.

145 sats \ 1 replies \ @kr OP 26 Jul

do you know how much they’re subsidizing their oil?

i recall seeing a while back that if you pay with chivo you get a discount on gas prices at the pump, is this the subsidy you’re referring to or something else?

+1 for someone who can share detailed financial data on El Salvador

Debt expiry jan 2023 $800M, total reserves $3,4B. The rest of the debt (future years) is about $17B-20B. The main problem is the debt/gdp which is now about 90%, but unlike the US (debt/gdp at 127%), El Salvador cannot print its main currency (dollars). So that 90% number is not so bad if you are the US, EU, JP or UK, but it's terrible if your currency is weak, or if you have a strong currency but you don't have control over it.

https://www.nasdaq.com/articles/will-el-salvador-default-on-its-sovereign-debt-in-2023

https://tradingeconomics.com/el-salvador/external-debt

https://tradingeconomics.com/el-salvador/government-debt-to-gdp#:~:text=Government%20Debt%20to%20GDP%20in,of%2036.23%20percent%20in%201998.

https://tradingeconomics.com/united-states/government-debt-to-gdp

Good reply (quote Tweet) by Nicolas Burtey:

Most traditional financial medias don’t understand the tremendous benefits this [Bitcoin legal tender] law has to the country in tourism, investment, positive coverage, etc

https://twitter.com/nicolasburtey/status/1551989154350759938 https://nitter.it/nicolasburtey/status/1551989154350759938 <-- Shows the thread in a single, easy-to-read, web page

The man has a point!! The media is entirely biased against Bukele.

It will be interesting to see if the media will publish hundreds of articles saying El Salvador is repurchasing its own debt, just as they published hundreds of articles saying (without substance) we were heading to a default.

https://twitter.com/nayibbukele/status/1551984301272621062 https://nitter.it/nayibbukele/status/1551984301272621062 <-- Shows the thread in a single, easy-to-read, web page

So far the bitcoin experiment success is largely only from the tourism side. We still have to wait and see the long term effects, but given they are struggling NOW, we don't know if they can hold on long enough to reap those positive effects.

The world is seeking safe assets, it's no surprise risk on assets and bonds are all struggling.

So far the bitcoin experiment success is largely only from the tourism side.

I suspect there are other benefits not apparent yet. Remittances sent in bitcoin directly to the recipient aren't tracked (and aren't able to be tracked), when the recipient is using their own wallet (e.g., BlueWallet). Even if that level is low so-far, it will increase as bitcoin is now the remittance method with the least friction for sending money back home for the Salvadoran diaspora.

How is greater remittances sent in bitcoin a success? Because some or most of those remittances are then spent domestically within El Salvador. And that inflow of bitcoin spent locally helps a circular economy form. Which has other benefits that will be hard to track, but will be evident as the participants in El Salvador's circular economy start to outperform their fiat brethren (in income, in savings, quality of life, etc.).

Knocks SV out of the top spot, that's for sure!

Countries with the Highest Default Risk in 2022 https://stacker.news/items/49913 https://www.visualcapitalist.com/countries-with-the-highest-default-risk-in-2022/

I would not put too much hope in El Salvador (in regards of bitcoin). Without education in this matter of ALL PEOPLE, is all in vain and only few will gain. Too much hype. Start educating simple people and empower them. Only like that we won.

I am also pretty sceptic, i've heard a few stories of people there that had a horrible experience with the chivo wallet and just gave up on it, no reflection on bitcoin, but there was always going to be teething problems. I think a lot of bitcoiners want to orange wash everything bukele does and don't want to see the obvious pain points here.

Sure they've made a move, and some people have benefitted from it, but it doesn't mean this government is any less corrupt and getting this so called "disagreeabe" bunch of people to defend it

I see El Salvador as a potential pie in the face moment for bitcoiners who shill it to no end

https://scrummers.co/students-from-el-salvador-receive-certificate-in-bitcoin/ They’re doing a bunch of education in El Salvador. It will pay off.

I don't think it's as dire as they make it out to be, but I don't think they're in the clear, all countries are getting rekt and since they can't print dollars to service their debt it must be a real dick punch with this interest rate hike.

We're seeing major liquidity issues around the world, people are scrambling for dollars so I don't see where they're just going to raise more money to roll it over, or where they're going to get this influx in GDP and revenue to cover this gap up.

Im still conflicted on the situation and news from the country isn't very detailed, just a bunch of puff pieces

According to a tweet by bitcoin magazine in which the president himself is tagged, the country has the liquidity to pay off all commitments thanks to bitcoin. Check here 👇

https://twitter.com/bitcoinmagazine/status/1551990899055271936?s=21&t=jCoxlL4RgXzmAYoL8s4Aug

El Salvador situation does not seem more dire than some european countries.. However, if they cannot sell bonds, because the market THINKS the situation is dire then it could become a self fulfilling prophecy