Solar bitcoin mine plan divides villagers in El Salvador

Residents near the planned multimillion-dollar complex debate whether it will spread prosperity, as environmental groups warn of impact on natural resources.

Solar_El_Salvador
The government of El Salvador, one of the poorest countries in Latin America, has voiced support for the plans for a solar energy farm powering a bitcoin plant in El Gavilán village, within the rural municipality of Nueva Concepción. Image: alex lang, CC BY-SA 3.0, via Flickr.

When residents learned of plans for a $200-million solar energy plant to mine bitcoin in their village in northern El Salvador, some saw opportunities for jobs, infrastructure investment, or simply to get their homes connected to power.

As the country marks a bumpy year since it made the digital coin legal tender, some hope the complex offers a brighter future while others have raised environmental concerns and doubts over whether locals will benefit.

“When you’re a certain age, you see that no one ever gives anything away without later taking advantage of the people they give it to,” said Luis Alonzo Valle, a 66-year-old subsistence farmer.

El Salvador - one of the poorest countries in Latin America - last year became the first country in the world to adopt bitcoin as legal tender in an effort to boost the economy and help citizens save on remittance fee transfer charges.

The government has voiced support for the plans for a solar energy farm powering a bitcoin plant in El Gavilán village, within the rural municipality of Nueva Concepción.

Officials say it will bring investment into the poor farming community and fulfil one of the Bitcoin Law’s goals of lifting Salvadorans out of poverty, adding that the solar farm can also help produce power for the national grid.

Details remain scant: the project was announced in June by Milena Mayorga, the Salvadoran ambassador to the United States, who said Josué López - a Switzerland-based Salvadoran investor - was investing some $200 million.

This forest is a lung not just for the community, but for all the municipality. If we cut down the little that is left, in what state are we going to leave the municipality?

José Gilberto Salguero, president, Nueva Concepción’s Communal Development Association

“It is an honour to be able to direct this project … I owe myself to El Salvador, and all the investments of my fund will be for the purpose of benefiting our beautiful country,” López said in response on Twitter.

In separate posts, he said his companies and business partners were spending $15 million on proof-of-concept projects around renewables and bitcoin in El Salvador that, once proved successful, should open up access to $200 million in funding.

Raul Peña, the mayor of Nueva Concepción, supports the project as a way to make up for budget cuts. He said that López had got in touch with him and promised the area would get new roads and power connections to homes.

“If we saw it as something that would harm us, then we would be the first to oppose it,” Peña said.

“We see it as more of a benefit.”

Environmental impacts

Environmental groups in the area have expressed concerns.

The installation of the solar power plant could lead to the clearance of about 74 acres (30 hectares) of forest, according to calculations by local organisation the Intercommunal Association of Water and Sanitation of Nueva Concepción.

“This (forest) is a lung not just for the community, but for all the municipality,” said José Gilberto Salguero, president of Nueva Concepción’s Communal Development Association.

“If we cut down the little that is left, in what state are we going to leave the municipality?”

He voiced concern that the energy-intensive mining process could also draw water to keep the hardware cool. Salguero worried it could divert water that farmers need for irrigation systems, risking crop damage and loss.

The project requires approval from El Salvador’s Environment Ministry, which then sends the permits to the mayor’s office.

The ministry said it had no record of any application for a permit, and Mayor Peña said they were awaiting confirmation of permission before construction could begin.

But Salguero said trees had already been cut down at the site.

López did not respond to a request for comment. Bitcoin mining company Cowa and investment firm Lian Group, both affiliated with López, also did not respond to a request for comment.

Economic benefits?

The government of President Nayib Bukele says its bitcoin policy has attracted investment, reduced bank commissions, increased tourism and promoted financial inclusion.

However, in the year since El Salvador adopted bitcoin as legal tender in September 2021, cryptocurrency values have crashed, spooking investors and slashing the value of the country’s digital coin holdings.

The planned site of Bitcoin City – pitched as a metropolis and tax haven for crypto investors and miners, powered by an active volcano – is still dense jungle.

Statistics from the central bank showed less than 2 per cent of remittances were transferred with cryptocurrency wallets between September 2021 and June 2022.

The International Monetary Fund has called on El Salvador to reverse bitcoin’s status as legal tender, citing financial, economic and legal concerns.

The government has said it is sticking by the experiment.

Announcing the Nueva Concepción project, ambassador Mayorga said bitcoin “is giving the world confidence” in El Salvador.

“There is much more coming to the country. This doesn’t stop,” she said.

Mixed opinions

Most residents in Nueva Concepción live on subsistence farming, raising livestock, and running small businesses. Many supplement their income with remittances sent from family in the United States.

Fredis Escobar, 43, who runs a general store in the centre of Nueva Concepción, thought the investment would help small business owners.

“If there are more employed people in our municipality, there is more money circulating,” he said.

“We’ll all receive some of that.”

Mayra Portillo, 36, an El Gavilán resident who earns about $4 a day cleaning houses, said she had been eager to improve her family’s living conditions, but changed her mind when she found out the project could harm the environment.

“If it’s going to negatively affect us, better not,” she said.

Many residents said they had not heard from the project’s representatives, but were eager to learn more.

“If they help us with solar panels to have our own electricity, that would be a huge help,” said Alex Santamaria, a father of two whose home is not connected to the power grid.

“They need to come here and ask, ‘What do you need in the community?’” he added.

“If they help the community, the community will be happy.”

This story was published with permission from Thomson Reuters Foundation, the charitable arm of Thomson Reuters, that covers humanitarian news, climate change, resilience, women’s rights, trafficking and property rights. Visit http://news.trust.org/climate.

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