The Honduras Bitcoin rumor was about more than just Bitcoin
The idea that Honduras might adopt Bitcoin means they could eventually adopt Bukele's populism too.
There were strong rumors swirling around Central America this week that Honduras might legalize Bitcoin is important for adoption. It seems that as of today, the Central Bank is going to pass on Bitcoin as legal tender and instead opt for the development of a CBDC. But the Honduras rumor was always about more than Bitcoin adoption.
Xiomara Castro, the country’s new president, took power in January after Juan Orlando Hernández’ term ended in scandal. JOH, as the former president is known, surrendered to DEA and police agents in February this year for conspiring with drug-traffickers. This is important because even though Xiomara Castro was elected partly in reaction to JOH’s stained reputation, years of rotten JOH politics also spurred Hondurans to worship the populist leader next door: Nayib Bukele.
It’s understood that Bukele has been pushing for Honduras to adopt Bitcoin as legal tender and Castro was close to accepting. Sources say that she backed out at the last minute and agreed to put the matter in the Central Bank’s hands. According to at least one source, Bukele canceled a trip with Castro last minute.
Bukele is immensely popular in Honduras and other parts of Central America. A recent poll showed his approval rating among Central Americans was 83%. His administration also maintains close ties to Banco Atlantida, a powerful Honduran banking group. The Honduran economist Dante Mossi, currently president of BCIE, is aligned with Bukele’s Bitcoin policy.
During the coronavirus pandemic, Bukele sent vaccines to Honduras. His Nuevas Ideas party is active in the neighborning country and registered in Guatemala last year. The Nuevas Ideas political party is headed by Bukele’s cousin Xavier Bukele. There is no doubt that the Bukele family is attempting to gain traction with its party in Guatemala and Honduras, both of which have suffered high levels of corruption charges at the presidency.
It seems that Bukele has taken advantage of that vacuum to peddle Nuevas Ideas as an alternative. I think it’s possible that there are two policies running parallel here that could have serious implications for the Northern Triangle countries (Guatemala, El Salvador and Honduras).
One, Bukele is likely trying to expand his power base behind El Salvador into Honduras and Guatemala. Sources in San Salvador are speculating that this is one of his possible end games too. If they are right, that could mean he plans to obtain influence in other presidencies while leaving the nation states untouched. Or it could mean a more radical attempt to unite the three countries into a single economic and political formation.
The second thing is that Bukele is likely trying to spread Bitcoin adoption throughout Central America. Indeed, there are already small experiments underway. Guatemala has an experiment at Lake Atitlan. The people behind Honduras’ Próspera project are a proponent of libertarianism and Bitcoin. It would be unsurprising if Bukele tries to capitalize on some of the libertarians’ frustrations over Prospera development.
The rumor that Honduras could eventually adopt Bitcoin as legal tender is interesting. What’s far more relevant is how Bukele is using Bitcoin evangelism in Central America to spread his Nuevas Ideas party populism. If Hondurans get sick of Xiomara Castro, Bukele’s political platform might come under increasing demand from El Salvador’s neighbors.