The global economy in 2015 was marked by a significant drop in oil prices. For Latin American economies that derive the vast majority of their income by exporting their oil, the impact was catastrophic.
In addition to falling oil prices, the top commerical parnter of many Latin America countries is China. Facing economic problems of its own – including a crashing stock market – trading with China has shrunk as well.
This one-two punch of falling oil revenues and subdued trading with China, has placed many countries in South America in dire financial straights, besieged by more money printing and higher inflation.
It is within this realm of financial chaos that some economies are weighing an alternative, namely, turning to Bitcoin.
Tech Crunch reports:
The economic prospects for Latin America in 2016 are grim. With political instability in some of the region’s largest economies, as well as a general slump in prices in oil and other commodities, businesses and consumers are facing a depression and, in the case of Venezuela, economic collapse. The crash of the Chinese stock market has severely hurt the economy, as well — China is the No. 1 commercial partner for several countries in the region.
Many Latin Americans are turning to bitcoin as a solution, and the recent crises seem only to have accelerated adoption.
Last year, adoption of the digital currency broke records in Latin America. Payment processor BitPay reported a 510 percent gain in merchant transactions in mid-2015, but the most notable growth took place toward the end of last year. Latin American merchant transactions finished the year having grown by a staggering 1,747 percent from the beginning of 2015. Other key figures from Brazil’s bitcoin ecosystem showed bitcoinexchange trades surging by 322 percent and bitcoin wallet adoption growing 461.4 percent. Exchange trading in Mexico grew by 600 percent in 2015.
In Latin America, the country most known for bitcoin is Argentina. And while Argentina has had the most bitcoin enthusiasts per capita, that may be starting to change. Brazilians and Venezuelans also have good reasons to adopt bitcoin — bitcoin holders in 2015 enjoyed earnings during 2015 that performed more than 400 percent better than the Venezuelan Bolivar, more than 92 percent over the Brazilian Real, more than 65 percent over the Mexican Peso and more than 41 percent over the Argentine Peso.
Inflation and payment problems drive consumers and businesses to alternatives
The crisis facing Latin American economies did not begin in 2016. Argentina, Venezuela and Brazil ended 2015 with serious economic problems, including huge inflation rates — as high as 275 percent for Venezuela (63 percent for 2014), ~30 percent for Argentina (36.4 percent for 2014) and 10.4 percent for Brazil (6.3 percent for 2014).
There is simply no denying that adoption of Bitcoin by a sovereign Latin American country would propel the Bitcoin price tremendously higher versus that country’s formal currency.
The ripple effects will be felt worldwide.
>>Read the full article at techcrunch.com