Bitcoin adoption blamed for El Salvador’s negative foreign investment balances

Reports indicate that in 2022, El Salvador recorded a negative balance in foreign direct investment (FDI). Some blamed bitcoin, while others blamed the political issues.

Negative FDI balance for El Salvador

A report by The Central Reserve Bank of El Salvador (BCR) indicates that in 2022, El Salvador reported a negative FDI balance for the first time in 10 years.

In fact, for three quarters in 2022, the FDI balances reported were in the negatives for most of the year. 

For instance, at the end of Q1 2022, its FDI balance of El Salvador was just about -$226.32 million. This negative balance dropped, with the second quarter reporting a negative value of $57.49 million. 

Things took a more positive turn in Q3 2022, when the FDI balance reported was $236.06 million. However, this positive balance for Q3 was short lived as the balance recorded in Q4 was a total negative balance of $51.35 million. 

Combining the four quarterly balances brings the total annual balance to a negative of $99 million based on a recent BCR report.

Further reports indicate that the drops reported recently began being seen in Q3 2021, where the balance was -$19.24 million, dropping even further to -$80.18 million. This was a massive drop from the $237.97 million positive balance reported in Q2. 

Bitcoin adoption and political unrest blamed

Based on reports, the recent negative annual balance is allegedly blamed on bitcoin’s adoption in the country. A journalist and Twitter user, Dr. Ricardo J. Valencia (@ricardovalp), alleged that negative balances have been reported since adopting bitcoin.

The journalist alleged that the problem is forcing Nayib Bukele to find ways to restart conversations with the IMF. Yesterday reports alleged that a former IMF official would advise El Salvador on a lending deal. 

Since El Salvador began its bitcoin journey, many parties have been trying to frustrate the country for their policies. The IMF allegedly warned El Salvador of the risks associated with adopting bitcoin. 

Others have alleged that the political unrest in the country could also be a significant driver of the recent FDI negative balances. For instance, analysts allege that an illegal ousting of judges caused some political instability.