El Salvador’s Bitcoin president heads for re-election — who is Nayib Bukele?

Nayib Bukele is enjoying a level of popularity most elected leaders can only dream about.

The 42-year-old president of El Salvador has a 68% lead in the polls over his opponents as the Central American nation heads toward a general election on February 4.

In crypto circles, Bukele is the hip politico who made Bitcoin legal tender in the nation of 6 million people. Since 2021, the Salvadoran Treasury has invested almost $130 million, a little over 0.4% of the country’s GDP, in the cryptocurrency.

Bukele’s embrace of Bitcoin also paved the way for other heads of state to consider crypto as a solution for their fiscal woes, including Argentina’s Javier Milei and the Central African Republic’s Faustin-Archange Touadéra.

But it’s been a bumpy ride.

Despite the government’s best efforts, nationwide adoption of the cryptocurrency remains low.

Bukele’s embrace of Bitcoin has also irked international organisations like the IMF, which warned that El Salvador was incurring “large risks associated with using Bitcoin as legal tender, especially given the high volatility of its price.”

However, for Salvadorans going to the polls, Bukele’s Bitcoin venture fades into the background.

“Anyone who lives here can see that things are better,” Erick Ochoa told DL News. “I’m not saying he’s a Super President or a Super Politician, but he has done things for El Salvador that the other politicians never did.”

Ochoa is a middle-aged dentist with a practice in San Salvador. His name was changed to protect his identity. He doesn’t own any crypto and doesn’t use Chivo, the government-backed Bitcoin wallet.

Bukele’s Bitcoin experiment, he says, is a failure. According to him, the only place where people use crypto regularly is in El Zonte, a surfing village.

But he doesn’t resent the president for trying. Compared to the fundamental questions facing Salvadorans this election, worrying about Bitcoin can seem quaint.

“At the political level, Bukele does look like a dictator,” Ochoa said. “And if we look back at history, it makes sense to think of him that way — he’s trying to stay in power, which is something that other dictators have done.”

“But if he doesn’t stay, there is a fear that things will go back to the way they were,” he said.

No mercy

Bukele’s soaring popularity largely stems from his rigorous crackdown on the country’s infamous criminal factions, Mara Salvatrucha 13 and Barrio 18, which held the nation in a vice for decades.

Despite a surge in narco violence that has overwhelmed Ecuador and inflicted deep trauma on Mexico, El Salvador is charting a different course.

Once dubbed the “homicide capital of the world,” El Salvador now has a murder rate on par with Canada’s, according to most recent government data.

But for some, the president’s aggressive consolidation of power casts a shadow over these achievements.

“Rash populist rhetoric and dangerous attempts to erode the country’s institutions have tarnished Bukele’s democratic rise to power,” non-profit organisation Human Rights Foundation wrote in 2022.

The report criticised Bukele for illegally ousting Supreme Court magistrates and seeking re-election despite the nation’s constitution prohibiting it.

“Debating whether or not El Salvador is a democracy makes no sense anymore,” Santiago Cantón, secretary general of International Commission of Jurists, told Salvadoran news outlet El Faro.

“El Salvador’s Legislative Assembly has been reduced to rubber-stamping Executive Branch orders, like a notary,” he said. “And the judicial branch, the main defender of the people, is totally controlled by the executive.”

His critics also include prominent Bitcoiners like Alex Gladstein, author of “Check Your Financial Privilege.”

“It’s puzzling to see Bitcoiners and self-proclaimed ‘freedom maximalists’ passionately cheer a literal statist who detains tens of thousands of people arbitrarily and puts himself above the law,” Gladstein said on social media.

Nevertheless, the success of Bukele’s war against gangs is giving him a pass with voters. And his less-than-perfect track record on Bitcoin won’t keep him from pursuing grander crypto projects in his second term — such as his fabled Bitcoin City.

Rise to presidency

Bukele was born in 1981 in the nation’s capital, San Salvador. Eldest son in a large family, he studied law at the Central American University before dropping out to work for his father’s multi-million dollar business conglomerate.

In 2012, Bukele secured the mayoral seat of Nuevo Cuscatlán, a small town with an approximate population of 8,000, situated just outside the capital, San Salvador. Merely three years subsequent to this victory, he ascended to the role of mayor of San Salvador itself.

His terms were shaped by initiatives to boost the local economy, reinforce public infrastructure, and improve access to education.

However, in October 2017 he was kicked out of his party Frente Farabundo Martí para la Liberación Nacional — commonly referred to as FMLN — after being accused of physically attacking another party member.

Being expelled made Bukele compete against the two main political parties, FMLN and ARENA, in the 2019 elections. His win was groundbreaking, as it was the first time a candidate not affiliated with these parties had become president since the Salvadoran civil war ended in 1992.

The ‘world’s coolest dictator’

Bukele is known for his good looks and proficiency with technology — rare traits in politics.

He often sports a backwards baseball cap during formal occasions, paired with a casually styled shirt and no tie. His distinctive style reflects his personal brand, but also signifies a break from traditional political norms, resonating with a younger, more modern audience.

Like Donald Trump or Javier Milei, he often posts on social media from his own account, either to promote El Salvador, give Bitcoin a shout-out, or fight back against accusations that his government is undemocratic.

‘If we can be at the forefront of an economic revolution, why not try that?’

—  Nayib Bukele

Bukele jumped on the Bitcoin bandwagon at the height of the 2021 bull market, teasing the crypto world with a future where Bitcoin would be used as a means of exchange across an entire nation.

“Sometimes you have to take forward-thinking decisions, and try to — not to foresee the future, but to know where the world is going, and get there first, so your people will get some benefit out of it,” he told Peter McCormack, host of the What Bitcoin Did podcast, two weeks later.

“El Salvador has not been recognized as a country that is first in innovation. But why not this time?” Bukele asked. “If we can be at the forefront of an economic revolution, why not try that?”

Bitcoin dream

Immediately after El Salvador passed its Bitcoin Law in September 2021, Bukele rolled out a government-backed Bitcoin wallet called Chivo, offering every Salvadoran $30 in Bitcoin as an incentive to sign up.

Bitcoin ATMs were also plopped all across the country — they currently number 215, according to Coin ATM Radar.

These measures fueled hope that the Bitcoin experiment in El Zonte — a Salvadoran village where locals and small businesses use the cryptocurrency for everyday transactions — could take on a national scale.

In a country where 64% of the population was unbanked, it was an eye-opening prospect.

The government also ramped up Bitcoin projects in a bid to attract capital from abroad. Bukele has promised to issue $1 billion in Bitcoin-backed government bonds.

Half of the proceeds from the so-called Volcano Bond will go towards developing Salvadoran infrastructure — including geothermal Bitcoin mining — while the rest will be invested in Bitcoin.

Another initiative gives Bitcoin and Tether holders a path to Salvadoran citizenship through a $1 million investment in the country.

Bukele’s most ambitious project, however, is “Bitcoin City” — a futuristic, circular metropolis which he intends to build at the base of the Conchagua volcano.

Financed by the Volcano Bond and harnessing geothermal energy, Bitcoin City is envisioned to encompass residential zones, commercial districts, services, museums, entertainment venues, bars, restaurants, an airport, a port, and rail services, Bukele announced in November 2021.

Bear market

The IMF, however, was quick to sound the alarm on Bukele’s dream.

“The adoption of Bitcoin as legal tender is fully funded by public money, through a trust fund. If the price of Bitcoin was to plummet, the resources in the trust could be rapidly depleted,” it said in a February 2022 report.

The call was prescient. As the bear market hit, El Salvador’s Bitcoin purchases quickly went into the red. CoinDesk estimated that by November 2022 the country was nursing a $60 million loss on a $105 million investment.

Bukele, who had been an energetic evangelist for Bitcoin, stopped tweeting about the asset, only referencing it six times on X throughout 2023. The Volcano Bond, initially planned for March 2022, was delayed indefinitely. Same for Bitcoin City.

El Salvador took a hit abroad. Fitch Ratings downgraded the country’s issuer default rating.

“Weakening of institutions and concentration of power in the presidency have increased policy unpredictability, and the adoption of Bitcoin as legal tender has added uncertainty about the potential for an IMF program that would unlock financing for 2022-2023,” the Fitch report said.

To make matters worse, national adoption failed to take off. The Central American University, Bukele’s alma mater, found in January that 88% of surveyed Salvadorans hadn’t used Bitcoin in 2023.

And yet, Bukele has such a lead on his political opponents that his re-election on Sunday is all but guaranteed. Again, this overwhelming support is largely attributed to his aggressive — and successful — campaign against gangs.

Crackdown

Bukele has overseen a huge drop in drug violence from the moment he took office. His success was credited, in his first three years, to the Plan de Control Territorial, a security programme that increased police and army presence in gang-controlled neighbourhoods.

However, in 2021 the US Treasury Department accused Salvadoran government officials of cutting a deal with Mara Salvatrucha 13 and Barrio 18 — the two biggest criminal gangs in the nation — to keep homicides low and provide political support to Bukele’s party in the legislative elections.

Bukele denied these accusations.

Then, in 2022, following a particularly violent crime wave, El Salvador’s Legislative Assembly approved Bukele’s request to impose a state of emergency — allowing security forces to make warrantless arrests, access private communications, and deprive detained individuals of legal counsel.

The crackdown was fierce.

Over 75,000 people accused of having connections to gangs had been arrested as of January 3. New legislation also increased sentencing guidelines for convicted gang members from 20 to 45 years in prison, instead of three to nine.

As a result, the country’s murder rate fell 85% between 2018 and 2022, to 7.8 homicides per 100,000 inhabitants, according to Statista.

The government claims the number dropped another 70% in 2023.

That is why Bukele is still immensely popular, despite the fact that his administration has wrongfully arrested at least 7,000 people, and is facing criticism from Amnesty International for violating human rights.

“For the people for whom everything is better now, who are no longer victims of extortion, who are no longer being assaulted — these people are not interested in whether what Bukele is doing is legal or not,” Ochoa, the Salvadoran dentist, told DL News.

“They want to see this process continue.”

Tom Carreras writes from Latin America for DL News. Got a tip about El Salvador? Reach out at tcarreras@dlnews.com