Bitcoin Minute: Trump vs Bukele

The Trump-Bukele beef is silly. Its loudest promoter is Max Keiser, a very rich man who is fully bought into El Salvador, but he struggles particularly in his geopolitical framing. He has a powerful hatred for the US, despite El Salvador's dependence on its hemispheric neighbor.

I applaud Bukele's successes in El Salvador. I'm sure many there see it as a miracle. However, we must keep it in context.

Back in 2021, I wrote a geopolitical assessment of El Salvador immediately following making bitcoin legal tender. In it I concluded that Bitcoin and Bukele will double the GDP per capita in the country over the next decade. That is a fairly bold claim, but not to many bitcoiners. They claimed I was not bullish enough.

Let's check in after 3 years. GDP is up from $29 billion in 2021 to $34 billion in 2023, a rise of 17%. That is a very good start, but this trend did not begin under Bukele, their GDP has generally been rising since the end of the civil war.

El Salvador's per capita GDP, on the other hand, has only risen 5% in that same period. Up from $4,210 to $4,440. Despite this, we can say that 3 years after my initial piece, my call to double the GDP per capita is still possible, but does not appear to be overly pessimistic.

That is wonderful, but again, the context is El Salvador is still a very poor country. It remains far below neighbors Panama or Costa Rica's GDP per capita, but also embarrassingly below Guatemala.

The lowest US State GDP is Vermont at $40.8 billion, and the lowest per capita GDP is Mississippi of $39,000. El Salvador is, therefore, much smaller and poorer than the worst US State. With a size of 8,000 square miles, El Salvador is slightly larger than Massachusetts, with roughly the same amount of people, 6-7 million, but Massachusetts has a GDP of $691 billion, and a GDP per capital of $87,800.

The comparison of El Salvador to the United States as a whole is therefore improper. There simply is no comparison to be made. The US is vastly superior in every economic respect.

Max Keiser also tweeted that El Salvador is seeing "reverse" migration, meaning a positive net migration. However, the data does not agree with that. Net migration from El Salvador is slowly improving, but 2023 still saw -5 per 1000. This is in sharp contrast to the +2.7 per 1000 into the US. This is even after Bukele's reforms.

The type of migration also matters. El Salvador is simply not attracting the kind of immigrates we hoped initially. It is among the 10 worst countries affected by brain drain. Why would so many talented Salvadorans be fleeing?

The US also provides a massive subsidy to El Salvador, which received $8.1 billion in remittances in 2023, up from $5.7 billion when I wrote my geopolitical analysis. This still works out to 25% of El Salvador's GDP, with up to 94% of it coming from the US. Interestingly, the remittance subsidy for El Salvador causes many of their remaining citizens to not work. This creates upward pressure on wages, attracting Hondurans and other neighbors to El Salvador. Which boosts their migration numbers. They are effectively exchanging top talent for low income immigrants.

To conclude, Bukele has done great things and I'm glad he has gotten the recognition he has. However, it is inappropriate to compare El Salvador to the US in any economic respect. Governing the vastness of the US land, economy and people is a completely different thing compared to a relatively homogenous tiny country.

El Salvador is the size of a small US State with a fraction of the economic activity. It is still losing people, with brain drain being a significant problem. The US is responsible for the vast majority of remittances into El Salvador which total 25% of of their GDP, and also lead to wages being marginally higher than they otherwise would be for the rest of the population.

Stay humble and stack sats.

Hold strong and have a great day,

Ansel

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