Overview of Bitcoin Development in Latin America

Latin America's economic outlook for 2016 is grim. With political instability in some of the region's largest economies and a general collapse in the prices of oil and other commodities, businesses and consumers are depressed, especially in Venezuela, where the economy is collapsing. China's stock market slump is severely hurting its own economy, and China is the number one commercial partner of several countries in the region.

Many Latin American countries are turning to Bitcoin as a solution, and the recent crisis only seems to accelerate its adoption.

Last year, digital currency adoption broke records in Latin America. According to a report by payment processing platform BitPay, commercial transactions in the region saw a 510% increase in mid-2015, but the most significant growth occurred at the end of last year. Commercial transactions in Latin America saw a staggering 1,747% increase in 2015 alone. Other key statistics in Brazil's Bitcoin ecosystem show that Bitcoin exchange transactions soared 322% and the number of Bitcoin wallets in use increased by 461.4%. Exchange transactions in Mexico increased by 600% in 2015.

In Latin America, the country with the most knowledge about Bitcoin is Argentina. Although Argentina has the largest number of Bitcoin enthusiasts per capita, this may be starting to change. Brazilians and Venezuelans also have good reasons to adopt Bitcoin - in 2015, Bitcoin holders gained 400% more than the Venezuelan Bolivar, 92% more than the Brazilian Real, 65% more than the Mexican Peso, and 41% more than the Argentine Peso (all in local fiat currencies).

Inflation and payments issues drive choices for consumers and businesses

Latin America’s economic crisis did not begin in 2016. Argentina, Venezuela, and Brazil ended 2015 with serious economic problems, including huge inflation rates—275% in Venezuela (63% in 2014), about 30% in Argentina (36.4% in 2014), and 10.4% in Brazil (6.3% in 2014).

The problem started in previous years and will continue to affect these economies. The International Monetary Fund (IMF) predicts that Venezuela's inflation rate will be 720% in 2016. According to the IMF report, Brazil's economy has entered its longest recession since 1930-1931. Argentina's finance minister expects Argentina's inflation rate to be at least 25%.

Therefore, Latin America will stand out as a land of opportunity for Bitcoin in 2016.

As the crisis deepens in Latin America, some governments are tightening capital controls. The Brazilian government has announced a new tax on state spending (including remittances, travel expenses and other services) that will increase costs by 25% (up to 33%). Businesses and consumers face other major problems in making cross-border and local payments: settlements can take weeks and cost more than 10%.

Seven Bitcoin Applications in Latin America

Bitcoin has proven to be a solution to many of the problems caused by inflation and subsequent capital controls. Workers and merchants have turned to Bitcoin as a hedge against the depreciation of their local currencies, while the technology is beginning to find some practical applications as a method of payment.

1. As a universal currency, Bitcoin has allowed consumers to shop and remit money internationally. From Apple to Walmart, these multinational companies may not accept local payment methods from Latin America, but can use Bitcoin to continue to implement online shopping business in the region.

2. Bitcoin can help the Latin American tourism industry survive the current economic crisis. Since Bitcoin can be used by anyone with an Internet connection, it can reduce foreign exchange costs for tourists and merchants. Because tourists from Latin America often do not carry credit cards, Bitcoin may be a way to attract more consumers outside of the region's popular tourist attractions.

3. Latin American companies can send salary payments to international workers faster, easier and without the cost and delay of wire transfers. ExxonMobil employs more than 1,500 people in Argentina, so Bitcoin can provide it and other international oil companies with a more easy way to send money to recipients in Latin American countries.

4. Online marketplaces like OPSkins have seen great success by using Bitcoin to send payments to international vendors. Selling platforms like eBay (which entered the region in 2014) and Amazon may find that Bitcoin will be the best solution for payments between buyers and sellers in Latin America.

5. Capital controls make it difficult for businesses to send money to suppliers and corporate offices outside of Latin America. Franchises like McDonald’s and KFC may find Bitcoin an ideal way to pay franchise fees and other supply costs during the ongoing economic crisis.

6. While Latin American importers can pay upon delivery, the longer delivery times expose them to the risk of currency value fluctuations. Multinational companies with subsidiaries in Argentina can significantly reduce these costs by using Bitcoin.

7. While many Latin Americans do not have credit cards, services like Advanced Cash in Belize offer consumers debit cards and e-wallets that can be used with merchants that accept major credit cards. Bitcoin offers an affordable way for consumers to round up their accounts without bank transfers. Since Bitcoin top-up payments can be sent from anywhere in the world, it can also become an instant and practical way for Latin American consumers to receive remittances from outside the region.

The Roots of Bitcoin Adoption in Latin America: Mobile Revolution

While this may seem like an unlikely success, Bitcoin’s growth has precedent in Latin America’s rapid internet adoption. While Latin America’s web users are still a small percentage compared to developed countries, e-commerce volume in the region has climbed to nearly $50 billion (up about 24% year-over-year). Social media users in the region have nearly quadrupled as a percentage of web browser users, showing how important mobile commerce and social networking are becoming to the masses.

Although Bitcoin usage is growing rapidly in Latin America, it still faces some obstacles.

Facebook, Twitter and WhatsApp have been the main networks to benefit from the growth in Latin America since 2014. Latin American users make up 38% of WhatsApp’s user base and 20% of Facebook’s global user base. Argentinians and Brazilians are the groups that spend more time on social media networks than anyone else in the world.

As more Latin Americans become accustomed to the freedom and global connectivity of web technologies such as social media feeds, Bitcoin will continue to become an attractive alternative to a payment system built for the old digital world.

Governments begin exploring Bitcoin

The election of new Argentine President Mauricio Macri represents a political shift in Argentina since the Kirchner family ruled for 12 years. Macri’s government has shown signs of wanting to adopt Bitcoin. Due to his social media presence, Macri has been nicknamed the “Facebook President” in Argentina, and he has spoken about his meeting with BitPay investor Sir Richard Branson using his Facebook profile, claiming that Bitcoin is one of the most interesting activities for the billionaire.

Before becoming president, Macri was mayor of Buenos Aires, and during his tenure, the Buenos Aires government organized the first Bitcoin forum in the city in July 2015. The city also announced in the Banking Magazine that it endorsed Buenos Aires' move to welcome Bitcoin, stating that "due to our financial history and because we quickly adopted alternatives to the Argentine Peso, we have played an important role in the popularization of Bitcoin."

Rumors of Bitcoin in Argentina have not gone unnoticed by local politicians. The country’s youngest mayor in history, Martin Yeza, is rumored to include Bitcoin implementation and regulatory approval for the popular ride-hailing platform Uber on his midterm agenda.

Accepting Bitcoin would be a big step towards economic freedom for this government, which has already ended the “cepo” capital controls created by the previous government. The Macri government has also announced a softening of import and export restrictions, among other important liberalization efforts.

While it’s unclear whether the Brazilian and Venezuelan governments will treat Bitcoin in the same way, Bitcoin will be front and center in the changes the Argentine government is making in response to its economic crisis.

Barriers to Bitcoin Adoption

While Bitcoin adoption is growing rapidly in Latin America, it still faces some hurdles. E-commerce has yet to take off in Latin America as it has in larger markets like North America and Europe. While some Latin Americans don’t trust their own currency, they’re not ready to use Bitcoin in day-to-day transactions or rely on it as a store of value.

Another challenge to adoption is the friction consumers face when buying and selling Bitcoin. There are few large Bitcoin exchanges or Bitcoin wallets in the market to make Bitcoin mainstream, and it is difficult to transfer money to exchanges outside of Latin America. Although the user base in Mexico and Brazil has grown on exchanges such as Bitso, MexBT, Volabit (Mexico) and Mercado Bitcoin, FoxBit and Bitcointoyou (Brazil), exchanges in Argentina and Venezuela still have limited resources.

in conclusion

Latin America will stand out as the land of opportunity for Bitcoin in 2016. Bitcoin adoption will not be driven by interest but by real demand, and Brazil, Venezuela, Mexico, and Argentina may turn out to be the countries best suited to push Bitcoin into the mainstream.

Original article: http://techcrunch.com/2016/03/16/why-latin-american-economies-are-turning-to-bitcoin/
By: Sonny Singh, Alberto Vega
Translator: Peterhon
Reward address: 16V6PW9wu1pFVb1R3LiGJKEwZAFHu9MMtA
Editor: printemps
Source (translation): Babbitt Information (http://www.8btc.com/bitcoin-in-latin-america)