This week, Google Cloud announced that it will enter a multi-year strategic partnership with the government of El Salvador and establish operations in the country.
Google Cloud plans to set up a legal entity and office in El Salvador; bringing digital infrastructure, providing Google Distributed Cloud services, and setting up a Cloud Center of Excellence to offer technical guidance to businesses and organizations. The parties intend to collaborate on healthcare, education and digital government. Google Cloud's AI technologies and Google Distributed Cloud (GDC) will be implemented. Thus, El Salvador will become the first Latin American government to benefit from Google Cloud technology. The 7-year agreement is currently pending legislative approval.
Nayib Bukele, President of the Republic of El Salvador and a well-known proponent of Bitcoin, said the following about this partnership:
"El Salvador is moving forward. We believe technology and foreign investment are key for development. We are quickly becoming a hub for innovation. This groundbreaking alliance with Google Cloud opens unprecedented avenues for innovation, economic growth, and enhanced public services."
Google Cloud CEO Thomas Kurian added that cloud computing can "truly transform Latin America, benefiting citizens and boosting economic development."
The technology leader's decision to collaborate with the Bitcoin-friendly country follows its dollar bond outperforming most emerging markets with a 70% return in 2023. According to Bloomberg, this has drawn interest from several institutional giants, including JP Morgan, Eaton Vance and PGIM Fixed. President Bukele couldn't help commenting:
I really, really want to say “I told you so” 🤐 https://t.co/dSkcKcgsMo
— Nayib Bukele (@nayibbukele) August 15, 2023
Paolo Ardoino, chief technology officer of Bitfinex and Tether, said that they are also "seeing significant interest in digital asset issuance and renewable energy investments, which the country has in abundance and is being used for Bitcoin mining and to provide more energy for the country's electrical grid."
It is worth mentioning that this summer, Tether invested in building "Volcano Energy", a 241 MW renewable energy generation park in El Salvador, which is to power one of the world's largest Bitcoin mining farms. Meanwhile, Tether is building specialized software Moria to optimize Bitcoin mining and renewable energy operations using data analytics. Apparently, the stablecoin issuer sees much potential in the Bitcoin-friendly country and is ready to bet on El Salvador, at least when it comes to mining.
The growing demand for El Salvador's debt security contrasts with its performance when it first adopted Bitcoin in 2021. Back then, several financial agencies expressed doubts over the country's future. In 2022, the American credit rating agency Fitch lowered the country's rating from B- to CCC, citing policy uncertainty, the Bitcoin adoption, and an $800-million debt payment due for January 2023. The debt was paid this year, and investors' confidence is growing alongside the bond rally, but notes maturing in 2027, 2029 and 2032 are still trading at distressed levels, and El Salvador remains a high-risk trade for many investors.
Do you believe in the Bitcoin-driven financial strategy of El Salvador? Do you think it could become the world's mining capital? Or is its financial system heading for imminent collapse? Share your thoughts, and we will continue to Observe.
