Bitcoin. A Serious Look Into Argentina. Past, Present and Future.

sobuka (49)in #bitcoin • 7 years ago (edited)

Hello everyone. My name is B, I am taking over for Nick on Steemit for the weekend. We have re-branded this series to “Weekend With B” where I will go deep into a specific country every weekend and perform our analysis. First off, I’d like to say... Thank you to current subscribers for hitting that Like/Upvote button, and for folks interested in finding more information relating to foreign Bitcoin and crypto currency news in Eastern and Southern parts of the globe, you can subscribe to our YouTube Channel or follow us on Steemit.

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This video goes back to the original series I started in the beginning talking about Bitcoin and crypto currencies in the southern hemisphere. My focus now takes a serious look into Argentina with respect to its economy, politics, and of course Bitcoin. But what I want to do is first talk about the uses of Bitcoin in Argentina. The New York Times back in 2015 wrote a long interesting article titled "Can Bitcoin Conquer Argentina". [1] The article did not focus heavily on inflation, as what we see is presently going on in Argentina. Instead, it talks about inefficiencies within the Argentinian momentary system. With respect to tourism, natives of the country were seen transacting in Bitcoin and the American dollar while trying to get around their own currency, their version of the Peso. Though tourism is a small part of Argentina's GDP, at about 7%, their exchange rates were either too high and transfers too low for foreigners to deal with. Today in Argentina, there is still an inflation problem, and it has not gotten any better since 2015. In addition, the latter issue of transacting has grown with more Bitcoin adoption. To add even more chaos and uncertainty to the Argentinean economy, the US hawkish stance towards trade via Trump's campaign to re-negotiate NAFTA, and the US planning to reduce its open-door policies among South American nations, it puts more anxiety, complexity, and strain towards this county’s leadership.

To first understand, how Argentina got this way, we must look at their past. And spoiler alert their past is not much different than what other 1st, 2nd and 3rd world countries go through.

The biggest problem that Argentina has always faced is the misallocation of resources including people, debt mismanagement, and a struggle with policies: deciding between a capitalistic & decentralized type of economy vs. socialistic & big government. And the last issue is with corruption. Try to fit all those items into a central planning meeting, and one can be stuck there for hours at a time.

So instead of hours, I will spend a few minutes summarizing these issues. Tom Jeffrey, writer and editor wrote an excellent piece capturing Argentina's past and Bitcoin's future. I will have a link to his article below. His article is titled "Can Bitcoin Save Argentina's Failing Economy?" [2] Here he gives examples of misallocation of physical resources and people. For example, the article mentions instances in the past where Argentina invested in tractors, but had no gas to fuel them. There were also instances in which the country went totally to the left by providing free education which led to an increase of doctors and lawyers, but a lack of engineers. And it seems like today, as it was in the 2015 article that I presented earlier, that the current misallocation is having a vibrant internal economy, but a monetary system that is making things inefficient so to not keep up with the pace of the 21st century digital economy. I will get into this by the end of my conclusion.

The next summarization I will talk about is with debt management. Argentina currently has a debt to GDP ratio of about 50% (which in comparison to the US is good as it’s half the size). However, its debt problem and past defaults has made foreign investors a bit hesitant to do business in the country on top of the country's unstable currency. The most popular and recent default for the region coined the "Vulture Funds" occurred in 2014. This is when a New York judge blocked Argentina's payment to 93% of its bonds unless it payed the value of defaulted bonds they bought after its 2001 default. At the end of all that, Argentina vowed boldly not to capitulate to what it considered the ransom tactics of the funds.

The last summarization I will make here quickly between its capitalist/decentralized past vs. socialist/big government past...well let's just say it's been a mixed bag. Argentina has always tried to balance a new administration and their policies to see what works. When problem occurs, the blame game and pointing fingers is usually between the administration for failing or the policies for failing which appears to be classic and normal for any country these days.

All the above problems that I have mentioned affects the people of Argentina as these issues have recurred many times in the past. Thus, dampening confidence over time. With a growing unemployment rate of about 9.2% [1] as of the time of writing this article (which surpasses that of its noisy neighbor Venezuela, and is the highest in the continent of South America), it is no surprise that the natives of Argentina are looking for an alternative form of currency to transact, hence Bitcoin. But before Bitcoin, precious coins were used by several of the native population to barter with until the government went into confiscation mode to shut down a supplier. And this all happened within the past decade. And to be fair, the government's reason like with all other nations that plan physical confiscation tactics, was to eradicate money laundering and fraud activities.

Before jumping further, Nick posted an article earlier this week on how Argentina is trying to encourage their citizens to spend more with their Bitcoin and cryptocurrencies. And so, what that brings is a strong need or demand to use Bitcoin in commerce. Because of this and many other changes in the crypto space, Argentina is now letting a company open their first ever hybrid Bitcoin ATMs which I myself have never heard off. So, imagine you walking up to an ATM one day and try to decide if you want to withdraw cash from your checking account or bitcoin wallet. How amazing is that? I know here in the US we do not have that feature which surprises me because we are supposedly “advanced” next to Japan, well depending on who you ask anyways. But I don’t even think the Japanese have these types of ATMs either. One time in the US, I was trying to find a Bitcoin terminal. I was lucky to find one close to my location as normally these things are nowhere to be found... The only thing it would let me do is buy Bitcoins, which I wanted. But I avoided using the silly machine because it tried to charge me 15%. I do not know if any of you guys listening to this have experienced anything like this before. Quite frankly I don't even know or care if that machine still exists as shortly afterwards, I found out the Americans have Coinbase, which is just an online exchange that offers competitive rates. [4]

But anyway, this Argentine company that is trying to install the ATMs, their name is Profile. They plan to open up to 250 of these ATMs in the northern part of Argentina. Supposedly access to cash is a problem in Argentina, so allowing Bitcoin holders to cash out their Bitcoins, could solve this problem. But as the price of Bitcoin continues to go up, I think more people might be reluctant to just wait and see how high their Bitcoins will go up in Value. I also think what this company is doing is interesting on many angles, and we may see more companies try to mimic this model in Latin America. Profile is obviously solving a need in Argentina.

But at the same time if Profile can acquire more Bitcoins from people that need cash to spend, well then Profile has the option to cash out those Bitcoins later for more profit if Bitcoin continues to go up and up in value. Only time will tell. The company can as well set up a Bitcoin exchange and compete with other Bitcoin entities over in Argentina. So, at the end, this sounds like a great fit for the people and the company, assuming the people choose to withdraw cash. But I also want to emphasize another good thing about Bitcoin. The Bitcoin market has sufficient liquidity which gives Profile the ability to sell Bitcoin for cash at any time.

This all brings me to my final conclusion. And it’s not just go Bitcoin! My results are rather mixed. Bitcoin with its volatility still brings issues. And though recent Bitcoin exchanges are gaining traction in Argentina such as Xapo (pronounced ‘zappo’) and Luno which is a good thing, Argentina’s focus should be in technology. It should also try to diversify in metals whether copper, silver, and gold and let its people do so as it wills. But to be fair the government should have the right to implement KYC and AML procedures to protect the people and everyone’s boundaries. All I am saying is that monetary diversity is a good thing and should be praised. Speaking of good things, one good thing about Argentina is that it’s not Venezuela. Though it’s a country that suffers with high unemployment, the fact that it has a diversified economy mixed with technology, manufacturing, diverse trade, and agriculture gives it an upper hand as opposed to Venezuela.

Bitcoin’s superiority in Argentina is driven by the fact that it has increased in value relative to gold, and it’s a faster means of exchange as opposed to wasting time at an Argentine bank trying to wire money to different parties. Thus, that leaves me to the end of all this. The simplest competition for Bitcoin right now for Argentina is to come up with something better. I’d like to end this radio broadcast with a quote by George S. Patton, a senior officer during WWII. He says, “Battle is the most magnificent competition in which a human being can indulge. It brings out all that is best; it removes all that is base. The coward is the one who lets his fear overcome his sense of duty. Duty is the essence of manhood.”

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Relevant Sources:

[1]. “Can Bitcoin Conquer Argentina. Nathaniel Popper.”
https://www.nytimes.com/2015/05/03/magazine/how-bitcoin-is-disrupting-argentinas-economy.html

[2]. “Can Bitcoin Save Argentina’s Failing Economy”. Tom Jefferys.
http://digg.com/2016/argentina-bitcoin

[3]. Trading Economics. https://tradingeconomics.com/country-list/unemployment-rate?continent=america

[4]. “Cash Dispenses for Bitcoins.” http://www.perfil.com/economia/cajeros-para-bitcoins.phtml.

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