I've been told that many ex-pats invest and live off the monthy interest paid on this CD. Is this true, and if so, is it recommended given the inherent risks?
This is pretty dicey, particularly if it is your only source of income.
I bought a CD when I moved here in 2001 at Banco Popular for 16%. I put the "bearer certificate" in a safe and promptly forgot about it. It was pretty big, about RD$500,000, but I was building my house and simply spaced it.
Went to cash it in the other day and discovered the interest rates had changed over the years. I made some money anyhow, but not near as much as if I had the same money in a US savings account.
I also remember a lady who put USD $2,000,000 into CDs when she started building a home in Cabrera. The peso was 25:1 at the time (roughly). Then it went to 50:1 for a little while. Pretty much wiped her out because she needed the cash for something she was doing. Ouch! It was real sad.
Be careful...anything that looks too good to be true simply means you are not seeing the whole picture.