China is targeting El Salvador’s foreign debt

El Salvador’s Vice President Felix Ulloa said that China has offered to buy the country’s heavily distressed external debt.

El Salvador: Felix Ulloa reveals China’s offer to buy foreign debt

Felix Ulloa, vice president of El Salvador, has reportedly revealed that China has offered to buy the country’s severely distressed external debt. 

In essence, China would like to step in to help the Central American nation refinance its external debt. In this regard, Ulloa said:

“China has offered to buy all our debt, but we need to tread carefully. We are not going to sell to the first bidder, we need to see the conditions.”

However, no one from China seems to be there to confirm the statement. And in fact, Chinese Foreign Ministry spokesman Zhao Lijian said he was unaware of the issue when asked about it during a regular press briefing Tuesday in Beijing.

In any case, Ulloa did not clarify what terms were being offered and did not elaborate on the issue; rather, he apparently then spoke about the debt situation and the repurchase of bonds by the government of El Salvador. 

El Salvador: how to avoid the country’s debt default, China is on the doorstep

The country with Bitcoin as legal tender from September 2021, is looking for ways to avoid the country’s debt default. 

In addition to China’s possible offer, the government itself has taken steps to purchase its bond debt.

And indeed, El Salvador has already repurchased some of its bonds and is reportedly committed to doing so again. Ulloa said that the next repurchase will take place in January 2023, probably before the maturity of some $667 million of bonds in that month. 

The vice president also said that the nation could use so-called special drawing rights, or reserve assets held with the International Monetary Fund, to finance the buyback.

El Salvador and the benefits of the Bitcoin Law

More than a year after the Bitcoin Law, despite various criticisms, El Salvador seems to have achieved some pretty significant benefits for its citizens. 

Indeed, thanks to Bitcoin, it appears that 70% of the population who did not have access to the banking system now have the ability to make transactions and receive remittances from abroad. 

Not only that, other related benefits also affect other sectors such as tourism. Many investors, along with many curious people have landed in the Land of Surf precisely to see how the new system works.  

El Salvador’s Tourism Agency reported that in the first six months of 2022 alone, the sector saw a surge of 82%, with about 1.1 million tourists arriving in the country. 

Collaboration with the city of Lugano in the crypto ecosystem

While trying to address the debt, the Republic of El Salvador has partnered recently with the city of Lugano by signing a Memorandum of Understanding for economic cooperation. 

The common goal of the parties is to promote the adoption of Bitcoin (BTC), developing synergies with the country that has already been experiencing this for more than a year.

Lugano has made BTC, Tether (USDT) and LVGA legal currencies since March 2022. Not only that, the Memorandum of Understanding took place during the very Plan B event in Lugano that saw the city’s mayor Michele Foletti and El Salvador’s Ambassador in the US, Milena Mayorga formalize the cooperation. 

Spain’s lead on the installation of Bitcoin ATMs

Staying on the subject of Bitcoin, El Salvador recently has been overtaken by Spain in the ranking of the installation of the number of crypto ATMs, which saw the Central American country drop from the podium and place fourth globally. 

And indeed, in this long crypto winter year of 2022, El Salvador appears to have implemented no strategy to increase the number of its BTC ATMs in the country. 

So while El Salvador remains at 212 Bitcoin ATM installations, Spain, which has invested in installing 100 new crypto ATMs, now appears to have as many as 260.