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Latin American economies turning to Bitcoin 17 Jul 2016, midnight

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Latin American economies turning to Bitcoin

Originally posted 19 Mar 2016 by

A number of economies in Latin America are turning towards bitcoin as a solution and this adoption has been accelerated by recent crises. Last year, the adoption of bitcoin broke records in the Latin America. Gain of 510% in merchant transactions in the mid of 2015 was reported by BitPay the payment processor. And the most notable growth was seen at the end of the previous year. The merchant transactions in Latin America finished the year 2015 after a staggering growth of 1,747% from the beginning of the year. Other important figures from the bitcoin ecosystem of Brazil showed the exchange trades of bitcoin surging by 322% and the adoption of bitcoin wallet growing by 461.4%. In Mexico the exchange trading saw a growth of 600% in 2015.

Argentina is the country in Latin America that is most known for the bitcoin. In the recent years the number of bitcoin enthusiasts per capita has been the most in Argentina. However, this is changing quickly and Venezuelans and Brazilians are adopting bitcoin very quickly. The bitcoin holders during the year 2015 enjoyed earnings that performed 400% better than Venezuelan Bolivar, 92% better than Brazilian Real, 65% better than Mexican Peso and 41% better than Argentine Peso.

Payment problems and Inflation is driving the businesses and consumers to alternatives Current crises faced by the economies in Latin America didn’t start in 2016. Brazil, Venezuela and Argentina ended the year 2015 with some serious economic problems that included huge rates of inflation. The inflation rates were as high as 10.4% for Brazil, 30% for Argentina and a staggering 275% for Venezuela. In 2014 these rates were 6.3% for Brazil, 36.4% for Argentina and 63% for Venezuela.

The problems started in the previous years. According to the predictions of IMF (International Monetary Fund) in 2016, inflation rate is expected to be 720% in Venezuela. The economy of Brazil has entered a recession which according to the projections of IMF, will be longest since the 1930-31. The Minister of Finance of Argentina predicts an inflation rate of minimum 25% and according to the projections of the analysts the inflation rate in 2016 can be as high as 38% with 30% devaluation of Argentine Peso against U.S. dollar.

Capital controls are being tightened by some governments, as the crisis is becoming deeper day by day. The Government of Brazil has announced new tax on the payments sent out of country. These include tourism expenses, remittances and other services). This tax increases the costs by 25% to 33%. Consumers and businesses face other major problems as well in making the local as well as cross border payments. The settlements can cost more than 10% and can take weeks. 7 Applications of bitcoin in the Latin America

Bitcoin has emerged as a good solution for a number of problems that are cause by inflation and resulting capital controls. While the merchants and workers have turned towards bitcoin as hedge against the devalued local currencies, bitcoin is beginning to find many practical applications as payment method.

  1. Being a universal currency, consumers can send money and shop internationally with bitcoin. From Walmart to Apple, the international companies that may not accept the local options of payment from the Latin American countries can use bitcoin in order to continue reaching the online shoppers in this region.

  2. The companies based in Latin America who need to send the payroll payments to the international workers may benefit from simpler, faster payments without the delays and costs of wire transfers. More than 1500 people are employed by Exon Mobil in Argentina and bitcoin can offer Exon Mobil as well as other international oil companies a way of easily sending money to the payees in the Latin American countries.

  3. Bitcoin might help the Latin American countries boost tourism and help in dealing with the present economic crises. As anyone having an Internet connection can use bitcoin, it can reduce the foreign exchange costs for merchants as well as tourists. As the tourists in the Latin American countries often do not carry any credit cards, bitcoin can be a way for the popular tourist destinations outside Latin America to get more customers.

  4. Different online marketplaces such as OPSkins have seen huge success with bitcoin for sending payouts to the international vendors. Large marketplaces like Amazon and eBay might find bitcoin as the best payment option for the Latin American sellers and buyers.

  5. Although the importers in Latin American can pay for the shipments on delivery, longer delivery periods might expose them to risk of fluctuations in the value of currencies. Multinational companies having subsidiaries in Argentina may use bitcoin for dramatically reducing these costs.

  6. With the capital controls, businesses are finding it difficult to pay money to corporate offices and suppliers outside Latin American Region. Franchise businesses such as KFC and McDonald’s might find bitcoin to be ideal way of paying the franchise fee and other supply costs in the current economic crises.

  7. While most of the Latin Americans don’t have access to the credit cards, consumers are offered e-wallets and debit cards from different services such as Belize’s Advanced Cash. These can be used with merchants who accept the major credit cards. A very affordable way of putting money in these accounts is offered by bitcoin with the need of bank transfers. As the top-up payments via bitcoin can be sent from anywhere in world, they can also be an immediate way for the consumers in Latin America to receive the remittances from outside Latin America.

The background of bitcoin adoption in the Latin American Region: the mobile revolution It might seem like unlikely success, the growth of bitcoin has a precedent in the rapid Internet adoption of Latin America. The share of the web users in the Latin American countries is still small as compared to that of the developed countries; e-commerce volume of the region has climbed to about $50 billion (24% year-over-year growth). Social media users in the region have nearly quadrupled its share of the web browser users. This shows the growing importance of social networks and e-commerce for general population.

The major networks which have benefitted from this growth have been WhatsApp, Twitter and Facebook since 2014. About 38% of WhatsApp users in the world are Latin American and 20% of Facebook users in the world Latin American. Brazilian and Argentinian users spend more time on various social media sites compared to other countries of the world.



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