Re: Anny Mosity vs. Reality
MaxxJaxx,
True, North America may not be the investor's paradise some portray it to be, and certainly many have lost big in the last year or two -- but many of these were folks who gambled big on the high tech/dot.com bubble. If one was more diversified one was not so hard hit. Luckily I was (I had toyed with the idea of becoming more weighted in techs, but luckily hesitated), and even with significant losses in some investments in the last 1-2 yrs, I'm still ahead in the 5- 10-yr timeframes.
The DR does indeed pose a currency risk for any investment that requires investment in pesos, and it's not insignificant. For example, we invested in some property in a solid Santo Domingo neighborhood when we moved to the DR in 1995. Had to import dollars from the US to do so, and in the process were forced to covert them to pesos at about 12:1. When we left the DR in 1999 the exchange rate was about 16.5:1 and now it is 18:1 and worsening. No matter how much that property may have appreciated in the last six years, it had to overcome a 50% currency loss. I could have left that money in US-based mutual funds in 1995, and even with the losses of 2000-2001, I'd still have a better total return now.
Most folks' response to such risk is invest their money in a Dominican CD or commercial paper in US dollars. For the last few years that has looked okay. But I am still wary of doing so, unless perhaps it would be through Citibank or BanReserva, the two most likely to survive any future crisis of confidence in Dominican banking. You see, I've seen the Dominican banking scene since 1986. My suegra had her savings frozen during the wave of Dominican savings & loan collapses in the late 1980's. It took 10 years for the government to give it back to her. And during my time living in Santo Domingo (1995-99) I saw at least one bank declare bankruptcy (just try to claim your CD during such proceedings!) and stories circulated the banking community about the Central Bank quietly helping several big name Dominican banks to keep them from following suite.
Ascot & others disparage the FDIC, and perhaps Americans are too trusting of its assurances. Certainly I remember the S&L crisis here and the taxpayer-funded bailout called the Resolution Trust Corp.
But at least in the US -- I suspect in Canada as well -- the individual investor has a chance of recourse in the event of fraud, freezes, seizures and other troubles with their investment. Having seen the Dominican legal system in action over four years of living there, I have serious doubts I can say the same about protection for investors in the DR.
Also, folks, if you really believe that the US & Canadian markets are in trouble, then stop and think a moment about what this implies for the DR economy. The DR is heavily vulnerable to an economic downturn in these markets -- in terms of export earnings, sources of tourist spending, and sources of job-creating investments. If you think your DR-based investment -- of ANY sort -- will be relatively unaffected while a prolonged US recession draws the rest of the world into the doldrums, you're dreaming.
Best Regards,
Keith