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El Salvador faces default due to Bitcoin, highlights Spanish newspaper

El País highlights on its front page the risk of non-payment that El Salvador runs as the date to pay its debts approaches.

El Salvador is in the news at the international level, but not exactly for the good. This May 10, El País, the most important newspaper in Spain, highlights on its front page that El Salvador faces default after allying with Bitcoin as legal tender.

The article, written by journalist Isabella Cota, reiterates that the fall in the price of the cryptocurrency has translated into losses for the Government of Nayib Bukelewhich faces a maturity of $800 million in January.

“The Salvadoran experiment to make bitcoin legal currency has hit a wall,” says Cota in his article. This is because this Monday, the crypto asset lost 50% of its value. “With it, the government bonds of El Salvador have also plummeted, which are trading at 40% of their original value, reflecting the doubts on the part of investors that the country can meet the next payment of its debt. “, he points out.

Bukele buys 500 Bitcoin and spends $15 million of public funds, in the midst of a collapse in the value of the cryptoactive

In addition, its adoption has been an obstacle in the negotiations with the International Monetary Fund (IMF), which could provide financing for Bukele to meet his external debt payment in January. “Bukele’s insistence on keeping it complicated the negotiations with the Fund.” “The IMF urged El Salvador to eliminate Bitcoin as legal currency, as it exposes public finances to the ups and downs of the digital asset in the global market,” he adds.

It has also affected the credit rating, which has been downgraded by Fitch Ratings and recently Moody’s not only due to the ups and downs of the market, but also due to the weakening of Salvadoran institutions, which have been in the hands of the ruling party since May 1, 2021. .

“A low rating translates into higher interest that the government has to pay to creditors. Also a rating considered “garbage”, as is the case of El Salvador, prevents the country from accessing global markets to issue more debt” , explains Cota in his article.

“They haven’t attracted a single buyer,” says Bloomberg of El Salvador’s Bitcoin bonds

And even if the Bukele government manages to manage the financing pressures, “Moody’s opinion is that the sovereign will continue to face financing pressures that would compromise its ability to meet its debt commitments in full.”

The savings of the workers is again one of the issues that is put on the table of the possibilities for the government to finance itself. However, no one knows to date if the government would take them to get money.

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