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What the crypto collapse means for El Salvador's economy – South Carolina Public Radio

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ADRIAN FLORIDO, HOST:

The recent collapse in the value of cryptocurrencies has left a lot of investors in those digital assets in a lot of pain. The collapse is also causing trouble in El Salvador, whose president, Nayib Bukele, last year adopted bitcoin as one of the country’s legal tenders alongside the U.S. dollar and has invested more than $100 million in bitcoin. To help us better understand what this could mean for El Salvador’s economy, we’re joined by Julio Sevilla. He’s an associate professor at the Terry College of Business at the University of Georgia. Julio Sevilla, welcome to ALL THINGS CONSIDERED.

JULIO SEVILLA: How are you, Adrian? Thanks for inviting me.

FLORIDO: Thanks for joining us. El Salvador was the first country to adopt bitcoin as an official currency. Can you remind us why President Nayib Bukele thought this was a good idea?

SEVILLA: Yes. So there were two reasons that the president provided often for this endeavor. One of them was that he wanted the people of El Salvador to have more access to technology and financing because many of them don’t have bank accounts, and he didn’t want them to only rely on cash. However, what has been seen is that these people are less likely to be using bitcoin. The other reason is that he thought it was an excellent investment for El Salvador because at the moment that he started with this plan last year, bitcoin and other cryptos were really booming, so he thought he was creating economic opportunities for El Salvador.

FLORIDO: Well, the president has invested more than $100 million in bitcoin. How much money does that represent for a country as small as El Salvador?

SEVILLA: So even for a country that is small for El Salvador, it’s not necessarily a large amount. The president took out $150 million from the reserves of the country to invest in these projects of bitcoin, and that represents around 4% of the reserves. So it is obviously not an amount that they can take for granted, but it’s not an amount that will necessarily, you know, bankrupt the country. The GDP is $25 billion right now. The debt of the country is more than $20 billion – so a very small amount. But still, you cannot really afford to make bad investments when your finances are precarious to start with.

FLORIDO: Do you have a sense of how everyday Salvadorans are feeling about the president’s investment in bitcoin?

SEVILLA: So it doesn’t seem to be a popular idea, but the plan of really popularizing bitcoin in the country hasn’t been successful. Just around two-thirds of the population downloaded the app. And even though they were offered $30 just for signing up – and based on some measures, just around 20% of those that signed up to the app are currently using it. So the idea of bitcoin doesn’t seem to be very popular among the majority of the people of El Salvador.

FLORIDO: Has Bukele faced any resistance from within his government to his decisions on bitcoin?

SEVILLA: The reality is that currently, the president doesn’t have a lot of checks in government. Interestingly, his popularity, at least until recently, continued to go up to a level of the 70s, 80%. So in Congress, basically, he can do anything he wants because, you know, his party has the qualified majority, and his legislators are very loyal to him. He actually swept the Supreme Court, the justices that were there before, you know, he was elected – he removed them with loyalists. So at this point, he controls the executive, the legislative and also the judicial power. So unfortunately, there’s no checks there. And that’s why he’s able to, you know, take these eccentric initiatives without much pushback.

FLORIDO: It sounds like the country’s economy is not going to collapse if bitcoin were totally to implode. But El Salvador has had a struggling economy for years. And I wonder if President Bukele’s devotion to bitcoin might have other consequences for the economy.

SEVILLA: It definitely does. But there are other repercussions from these decisions. For example, El Salvador is heavily in debt, and the president has been trying to negotiate with the International Monetary Fund to get this financing. But they have expressed that they are concerned with, in general, how the country is being managed with the fact that the president, you know, has no checks in the Supreme Court and that he is implementing these outlandish initiatives. But El Salvador has inflicted this damage on its own.

FLORIDO: I’ve been speaking with Julio Sevilla. He’s an associate professor at the University of Georgia’s Terry College of Business. Thank you so much for joining us.

SEVILLA: Thank you. Transcript provided by NPR, Copyright NPR.

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Canada’s unemployment rate holds steady at 6.5% in October, economy adds 15,000 jobs

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OTTAWA – Canada’s unemployment rate held steady at 6.5 per cent last month as hiring remained weak across the economy.

Statistics Canada’s labour force survey on Friday said employment rose by a modest 15,000 jobs in October.

Business, building and support services saw the largest gain in employment.

Meanwhile, finance, insurance, real estate, rental and leasing experienced the largest decline.

Many economists see weakness in the job market continuing in the short term, before the Bank of Canada’s interest rate cuts spark a rebound in economic growth next year.

Despite ongoing softness in the labour market, however, strong wage growth has raged on in Canada. Average hourly wages in October grew 4.9 per cent from a year ago, reaching $35.76.

Friday’s report also shed some light on the financial health of households.

According to the agency, 28.8 per cent of Canadians aged 15 or older were living in a household that had difficulty meeting financial needs – like food and housing – in the previous four weeks.

That was down from 33.1 per cent in October 2023 and 35.5 per cent in October 2022, but still above the 20.4 per cent figure recorded in October 2020.

People living in a rented home were more likely to report difficulty meeting financial needs, with nearly four in 10 reporting that was the case.

That compares with just under a quarter of those living in an owned home by a household member.

Immigrants were also more likely to report facing financial strain last month, with about four out of 10 immigrants who landed in the last year doing so.

That compares with about three in 10 more established immigrants and one in four of people born in Canada.

This report by The Canadian Press was first published Nov. 8, 2024.

The Canadian Press. All rights reserved.

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Health-care spending expected to outpace economy and reach $372 billion in 2024: CIHI

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The Canadian Institute for Health Information says health-care spending in Canada is projected to reach a new high in 2024.

The annual report released Thursday says total health spending is expected to hit $372 billion, or $9,054 per Canadian.

CIHI’s national analysis predicts expenditures will rise by 5.7 per cent in 2024, compared to 4.5 per cent in 2023 and 1.7 per cent in 2022.

This year’s health spending is estimated to represent 12.4 per cent of Canada’s gross domestic product. Excluding two years of the pandemic, it would be the highest ratio in the country’s history.

While it’s not unusual for health expenditures to outpace economic growth, the report says this could be the case for the next several years due to Canada’s growing population and its aging demographic.

Canada’s per capita spending on health care in 2022 was among the highest in the world, but still less than countries such as the United States and Sweden.

The report notes that the Canadian dental and pharmacare plans could push health-care spending even further as more people who previously couldn’t afford these services start using them.

This report by The Canadian Press was first published Nov. 7, 2024.

Canadian Press health coverage receives support through a partnership with the Canadian Medical Association. CP is solely responsible for this content.

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Trump’s victory sparks concerns over ripple effect on Canadian economy

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As Canadians wake up to news that Donald Trump will return to the White House, the president-elect’s protectionist stance is casting a spotlight on what effect his second term will have on Canada-U.S. economic ties.

Some Canadian business leaders have expressed worry over Trump’s promise to introduce a universal 10 per cent tariff on all American imports.

A Canadian Chamber of Commerce report released last month suggested those tariffs would shrink the Canadian economy, resulting in around $30 billion per year in economic costs.

More than 77 per cent of Canadian exports go to the U.S.

Canada’s manufacturing sector faces the biggest risk should Trump push forward on imposing broad tariffs, said Canadian Manufacturers and Exporters president and CEO Dennis Darby. He said the sector is the “most trade-exposed” within Canada.

“It’s in the U.S.’s best interest, it’s in our best interest, but most importantly for consumers across North America, that we’re able to trade goods, materials, ingredients, as we have under the trade agreements,” Darby said in an interview.

“It’s a more complex or complicated outcome than it would have been with the Democrats, but we’ve had to deal with this before and we’re going to do our best to deal with it again.”

American economists have also warned Trump’s plan could cause inflation and possibly a recession, which could have ripple effects in Canada.

It’s consumers who will ultimately feel the burden of any inflationary effect caused by broad tariffs, said Darby.

“A tariff tends to raise costs, and it ultimately raises prices, so that’s something that we have to be prepared for,” he said.

“It could tilt production mandates. A tariff makes goods more expensive, but on the same token, it also will make inputs for the U.S. more expensive.”

A report last month by TD economist Marc Ercolao said research shows a full-scale implementation of Trump’s tariff plan could lead to a near-five per cent reduction in Canadian export volumes to the U.S. by early-2027, relative to current baseline forecasts.

Retaliation by Canada would also increase costs for domestic producers, and push import volumes lower in the process.

“Slowing import activity mitigates some of the negative net trade impact on total GDP enough to avoid a technical recession, but still produces a period of extended stagnation through 2025 and 2026,” Ercolao said.

Since the Canada-United States-Mexico Agreement came into effect in 2020, trade between Canada and the U.S. has surged by 46 per cent, according to the Toronto Region Board of Trade.

With that deal is up for review in 2026, Canadian Chamber of Commerce president and CEO Candace Laing said the Canadian government “must collaborate effectively with the Trump administration to preserve and strengthen our bilateral economic partnership.”

“With an impressive $3.6 billion in daily trade, Canada and the United States are each other’s closest international partners. The secure and efficient flow of goods and people across our border … remains essential for the economies of both countries,” she said in a statement.

“By resisting tariffs and trade barriers that will only raise prices and hurt consumers in both countries, Canada and the United States can strengthen resilient cross-border supply chains that enhance our shared economic security.”

This report by The Canadian Press was first published Nov. 6, 2024.

The Canadian Press. All rights reserved.

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