Could Migrant Workers in Russian Force An El Salvador Moment
The amount of pressure placed on economies in the last week has been devasting not only for Russia but around the world. If you think COVID lockdowns were going to impact the economy, and we would have to rebuild, then this setback is going to cripple us even further.
Supply chains are still clogged up, inflation is raging, commodity markets are in a bull market and I'm pretty sure most countries will be in recession even with the inflated data we get these days.
While we all are going to get hit hard, there are obviously going to be countries that are hit relatively harder, like Russia and the countries most dependent on it.
The Russian sphere of influence
The financial sanctions on Russia are not only hurting Russian citizens but those who have moved to Russia for financial opportunities. Russia is the 11th biggest economy in the world and it's surrounded by countries filled with citizens who would give their left nut to get a better opportunity.
Working in another country to generate funds to send home is nothing new, it's a tale as old as time. So how do Russia's financial restrictions impact those who are tied to their economy but have no direct affiliation to the country?
There are around 10.13 million foreigners living and working in Russia, mainly from former soviet states,
- Ukraine
- Tajikistan
- Kazakhstan
- Armenia
- Uzbekistan
- Kyrgyzstan
- Azerbaijan
- Moldova
- Belarus
- Turkmenistan
Now like many who jump ship to the US from Latin America or the UK from commonwealth nations, they send money back to family back home in poorer nations.
If we look at the nations with the biggest relative impact from remittance it would be
- Tajikistan - 30%
- Kyrgyzstan - 28%
- Uzbekistan - 13%
Of the countries, GDP comes from the remittance. If we look at El Salvador according to the World Bank data remittance makes up 25% of their GDP, and switching over to Bitcoin has saved them millions. If these countries want to maintain capital outflows from Russia to their countries, they'll need to consider alternative payment rails not restricted by the West.
This is what bitcoin was made for, a blunt instrument that knows no political affiliation, if you're caught up in drama like this and you need to send money back to grandmummy in the old country, bitcoin will be there for you.
If we consider how quickly El Salvador was able to switch over then these countries could be a breeding ground for bitcoin adoption. The motivation should be there for these countries if the numbers are true according to Salvadorian President Bukele, who claims the switch to bitcoin will save their country $400 million per year
If I were to do some back-of-the-napkin math, we can assume that Bukele is referring to a 6.78% saving on the $5.9 billion that rolled into El Salvador in 2020.
So applying that to:
- Tajikistan - 30% - 8.194 billion USD in total GDP (2020)
- Kyrgyzstan - 28% - 7.736 billion USD in total GDP (2020)
- Uzbekistan - 13% - 57.71 billion USD in total GDP (2020)
Remittance income
- Tajikistan - 2.458 billion USD
- Kyrgyzstan - 2.166 billion USD
- Uzbekistan - 7.502 billion USD
Savings from switching to bitcoin
Then if we apply the average 6.78% savings claimed by El Salvador,
- Tajikistan - $166 million
- Kyrgyzstan - $146 million
- Uzbekistan - $508 million
Having an extra $150 million in the pockets of your citizens each year can only do wonders for your local economy. Is it only a matter of time before these incentives become far too lucrative for these countries to ignore? Perhaps, but with so many sanctions, it could become more of a necessity than anything else.
Have your say
What do you good people of HIVE think?
So have at it my Jessies! If you don't have something to comment, "I am a Jessie."
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No idea what a 'Jessie' is? Am I one, if I'm not aware of it? ;)
I really liked this perspective; it is so sobering to think how many people's lives are being turned upside down. I hadn't even considered foreign workers in Russia.
To ask an odd question, how are Ukranians in Russia being treated now by bosses or Russian locals?
I wouldn't know I am very far from these counties so I would not be able to gain a consensus for what is going on on the ground
As any foreigner I can only look on accept what information I can find and look at statistics
If I were to assume I am sure there's animosity on some individuals, while others also realize a job is a job and get it done
The Russian economy is still in a state of flux I've also seen reports of Russian locals moving to Finland already as some tend to side with the west and this situation encourages them to leave
Where it will settle I don't know
That is a good perspective. But for governments, crypto is a double edged sword. Today it might help Russia and its citizens, because they are on the receiving end, but it can go against them if they are on the other side of the table.
That's the thing governments don't need to permit it, the individual can do it themselves. Nothing is stoping a an Uzbek living in Russia from buying bitcoin and sending it back to family
It doesn't have to be a top down solution but a ground up.
Agree. It's not easiest of the solutions for crypto Noobs but definitely a way out in critical times like this.
Makes sense but I wonder how many of these ones know how to use Bitcoin...
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This is also my main concern. Who will teach them to use it? That´s also the downside of decentralication, there is no entitiy who would take care of that.
Not many, but you'll be surprised at how motivated people will be to learn when they need something and see others benefitting from the use of something. this idea we need to infantilise people that everyone needs to be coached just seems counter productive in my opinion
Dear @chekohler, Do most El Salvadorians depend on money sent from their families working abroad to make a living?
I first learned that the cost of remittance and currency exchange through Bitcoin has the advantage of being cheaper than fiat currency.
I have looked at several cryptocurrencies so far, but felt that Bitcoin would be suitable for a beginner like me.
Thank you for your advice!
Not most, I mentioned how big a part of the GDP is, there are obviously people who work not everyone lives on handouts from family members, but it is a big part of it
This, on top of what we resently saw happen in Canada with blocking bank accounts are some of the best adverts I have seen for Crypto. The behaviour of governments and financial regulators nearly seems like they want to push people to these solutions. It is kind of confusing, to be honest.
Its also going to expose which coins are actually what they say they are, bitcoin is clearly standing up to scrutiny