• Thread starter "The Tourist Watcher"
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New Debate:Dollar Power VS Peso Power

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"The Tourist Watcher"

Guest
To our pop economists, here's a good one. Stephen Hadley and I have been arguing for some time as to the best management of your money in DR, posing the hypothesis that you have $1,000,000 pesos or more(no lesser amounts) disposable for investment in commercial paper or certificates of deposit and assuming that you depend on the interest rates to cover some of your monthly expenses or to subsidize your income.

1)Would you keep your pesos and invest at interest rates of 15% a year, knowing factors such as devaluation, buying power,government regulations, cost of living inflation, etc.

2)Or would you keep it in dollars where the interest rates are at best 5 1/4% to 6% knowing the same factors and other risks.

So that you know, Stephen is of the dollar school. I stick to my pesos, as I believe the dollar is overrated in the present Dominican circumstances.

Give us your analytical opinion. Please, if possible, do not suggest that the money be used for investment in a business, specially with employees, or investment outside the DR(like Wall St.). This is not the argument. It is simply an investment question in DR.

TW
 
L

Loren

Guest
Depends

Depends on

How much income you need from the interest

How far might the pesos devaluate? If the delta there would only bring your effective interest rates down to the 5-6 percent you would be making on the dollars then it would be a no-brainer.

How liquid is Dominican paper?

What do we expect Dominican inflation to be over the next year?
 
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Stephen Hadley

Guest
Minor correction on my opinion

I am of the opinion that the money should be in Dollar accounts currently while I believe the peso is in danger of losing value against the dollar.

If I felt the peso was in a stable state I would go for the peso account.

Also take into account if your expenses are likely to be local properties, goods and services vs imported...

Looking forward to hear the opinions of others...
 
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Stephen Hadley

Guest
Re: Depends

Also depends on the spread on the exchange rate.. That could be a real problem... Anybody have some estimates on that?
 
D

DOMINICAN PAPI

Guest
just do the math:

RD$1,000.000 = US$ 58,823 AT 17:1 (aproximate rate)

RD$1,000.000 X 15% = RD$150,000

US$58,823 X 6% = US$3,529 (RD$60,000)

as you can see you make about 2.5 x more money when you invest in pesos. when you add the macroeconomic variables into this equation, you might argue that the Dollar is a safer investment, but that would be overrated since the dollar and peso have reached a stable balance in the supply/demand curve. moreover, the first thing you should know when investing is that the higher the risk, the higher the return. this "higher risk" (which is not that much anyway) would pay for itself in a couple of years if you invest in pesos. it also depends on your age. i'm 24 years old, so i might use a more agressive investment strategy than what you would feel comfortable with if you are older or retired. if you want to achieve a balance of safety and growth, then you can always diversify your currency and split it between dollars and pesos. but i would definitely keep my currency in pesos and take advantage of the better rates. i would suggest you go to the link below and read a good DR related investment advice from a respected analyst.
 
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DOMINICAN PAPI

Guest
LINK

sorry i forgot to put the link in the previous post. click below.
 
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Keith R

Guest
Re: Oh, pleeese!!!

>>good DR related investment advice from a respected analyst<<

"respected"???? By whom? The "report" at the link you provide is less an analysis than a cross between rant, ramble, fantasy, wishful thinking & sales pitch.

"good" advice? How do you figure that?

Do you get a commission from Schroder, Papi? Or are you one and the same?
 
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Stephen Hadley

Guest
You are assuming the exchange rate remains the same... You have to convert currencies twice to do the calculation properly. Once at the beginning and once at the end at the final rate.

If the peso devalues against the dollar by and average of 7% per year your real gain it more like 15%-7% or 8%.

If the peso makes a quick move, you could actually lose "buying power"
 
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DOMINICAN PAPI

Guest
even when you account for the devaluation of the peso against the dollar(15% - 7% = 8%) , the 8% is still better than the 6% you are making on the dollars. besides it might not be advisable to keep too many dollars because it would be more likely for uncle sam to find out and he will want his cut.( which is about 30% on interest income? ) furthermore, the US is in a deep recession right now, so i dont think the devaluation expense will be 7 % for awhile. the fed just cut interest rates by 1/4 points a few minutes ago, so i dont expect the dollar to be that strong in this circumstances due to the current weakness in demand.
 
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Maria Obetsanov

Guest
Re: Money Matters

My best advice since I could do either, keep mpnies that you might need within a year in DR currency, and monies that you will keep for safety in dollars since it does not go downthat easily. When we retire there we will keep an American account to have as a safety against unforeseen events, such as political instability. Never put all your eggs in one basket, since it can be drop,FDIC is a bit more security. If there is a similar insurance against bank failure then the peso is the better investment.
 
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criss colon

Guest
I do the peso route! The US economy "Props-up" the peso to the extent that your final rate of return is greater! ie.,worth the risk! Criss
 
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DOMINICAN PAPI

Guest
Re: Oh, pleeese!!!

jajajaja.... i dont even know the guy. i just thought that his predictions make sense. dont you have any respect for him?
 
K

Keith R

Guest
Re: Oh, pleeese!!!

Papi,

Do an archive search on Ascot, and you'll see I'm not the only skeptical of them.
Regards,
Keith

Some samples:

http://dr1.com/2001/index.cgi?read=63919
http://dr1.com/2001/index.cgi?read=63912
http://dr1.com/2001/index.cgi?read=63225
http://dr1.com/2001/index.cgi?read=63163
 
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Stephen Hadley

Guest
Re: Money Matters

Nice to hear from you Maria, its been a while...

Actually we are debateing a USD nominated account in the DR vs a RDP account in the DR.

useful comment anyway
 
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Stephen Hadley

Guest
Excellent points, especailly for IRS avoiders.... Someone has also pointed out that USD accounts in the DR are also more likely to be subject to siezure.... More info on this would also be useful, if that person would care to repost.

However I would expect the opposite result of the recent economic situation. the decline of tourism, general economic decline and job losses leading to fewer family remittances (spelling?) should lead to a scarcity of dollars in the DR. This would cause the peso to devalue.

The difference between 6% and 8% is small in comparison to the greater risk of the peso..
 
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&quot;The Tourist Watcher&quot;

Guest
Re: Note of interest on Peso exchange

The dollar just went down against the peso and will continue on a downward spiral for the next couple of months due to the excess of dollars in the streets and projected to come from travellers over the holidays.
TW
 
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&quot;The Tourist Watcher&quot;

Guest
Re: So Far I Hear the Peso is "KING"

So far, what I hear is what I have known since I came from the United States in 1993. The Peso is the King, even after being massacred by the government reduction in interest rates.

The peso, after the dollar, is the most stable currency in Latin America and can compete with the top currencies of the world side by side, but few people know about it. Why? Dominicans are a force in their own right. We are excellent consumers, even in bad times. We like good things. We believe in our country in spite of being managed by some of the worst politicians in the world and our side of the island continues to produce even after September 11. How come armaggedom has not hit us yet? Why is Argentina near collapse, Venezuela with all its oil is in serious trouble, Brazil stinks and on and on. But Dominican Republic keeps building on. That is why the peso is still not a risk. The worst devaluation they could project it to go to by December of 2002 was $18.50. That is nothing considering you got 12 months to adjust, plus it happens gradually. And think about this, I believe sooner than later, the world will have to do something about Haiti or else the next Balkans will be in this Island. The world cannot afford a war here. So when they start pouring money into Haiti, that money will flow here, because Haitians will die of hunger without us.

I get rid of my dollars as soon as get my hands on them. They are useless here, unless you need it for travel and shopping abroad.

TW
 
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DOMINICAN PAPI

Guest
WAR WITH HAITI

why would we be going to war with Haiti?
do they have a capable army to go to war with DR?
 
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Stephen Hadley

Guest
Re: Note of interest on Peso exchange

good to know... whats the street rate on the peso now?
 
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Julia

Guest
Re: WAR WITH HAITI

Sure the DR is ready for war. They got lots of criminals, and
trash in the country ....Who can beat that ?

Regards,
Julia