banking

ed wooden

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I HEARD YOU CAN EARN A LOT INTEREST ON U.S. FUNDS IN D.R. BANKS. DOES ANYONE KNOW HOW MUCH AND CAN YOU OPEN A
BANK ACCOUNT SUCH AS A SAVINGS ACOUNT WITHOUT BEING A RESIDENT OF THE D.R.?

THNKS FOR THE HELP
:alien:
 

love da DR

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you will find the answers in the archives

Ed,

For the sake of saving time consult the archives you will find much information on this topic. I recently had a question very much the same as yours, the short answer is that if you have passport and
cash you are in business however consult the archives for the particulars ie types of account, fees, benefits, and of course risks.



Isaac
 

Escott

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You need a passport, money and it would help in some banks having a letter of recommendation from another bank.

Under 100k, paid about 6.5-7%, over 100k pays 8.5% when I was down in May in 3 month CD's in banks. 14% in USD for Certifcates from Finance House I do business with. Interest changes and I am going down tomorrow and will post back if you want me to the current rates as I will be investigating tomorrow or the day after.

Escott
 

Golo100

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Jan 5, 2002
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You should also check

As an alternative you can also invest in Dominican pesos. What is the difference? Well, while you get about 7-8%interest on dollars a year, for an equal amount in pesos you can get about 22% a year in pesos.(investments over US$50,000)

How does that stack up? Using the exchange rate of $19.50 to a dollar and considering fluctuations, let's say this is the "buying rate", using $100,000 dollars would give you about $675 a month or about $13,000 pesos a month. If you place the same amount in pesos you would obtain about $US1840.00 or about $36,000 pesos a month. Even if you consider inflation, peso devaluation and other risk factors, you would still be ahead investing in pesos.

However, to invest in pesos you may need to be present in DR to manage your investments properly. The market changes every day and for short term purposes, most people use 30-90 day certificates using brokers thru Bolsa de Valores(check Bolsard.com) or thru bank intermediaries such as COTISA. Banks will handle investment certificates in industry or fixed-bank certificates with lower yields, but still much higher than dollar investments. Companies such as Hache, Popular Leasing, Consorcio Moya, HizzPizza, and some Gymns issue certificates thru brokers and banks. Price Mart also has its own investment certificates paying about 20.75%.

TW
 

sjh

aka - shadley
Jan 1, 2002
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considering the peso devalued 18% against the USD (from 16.50 to 19.50) over the last 12 months, you have lost buying power comparing a 22% RD instrument to a USD investment paying 6% by 2%.

please note that it has been approximately one year since our last debate on this topic.... It ended with lets wait one year and see what happens....

PS the Peso is still tumbling. I am standing by my prediction from last august that the peso would be 20-22 to the dollar by january 2003
 

mainer

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Mar 22, 2002
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Golo,
Thanks for the update. I read the old thread regarding this topic with great interest. I was leading up to asking for an update. It will be interesting to continue to watch.

Mainer
 

Golo100

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Shadley

Check your calendar. I remember doing a transaction on July 2001 with the peso at $17 to the dollar. So over the next 12 months it went to $18 to the dollar. $19.50 to one is not yet cemented. Today you can get a dollar for $18.50.

You must also realize that the dollar goes up every fall and in the last 5 years at least it has only increased one peso more per dollar. Of course, if you spend every cent of your interest you lose.

I know someone who invested $1,000,000 at a modest 20% interest when the dollar was 17-1. When the dollar went up to 18-1 he still had a 13% gain. I have averaged over 23% in the last 7 years. This is much better than 6-7% invested in dollars, but even worse if you keep it in US banks at 1.5% a year and having to use that money there, which will buy you exactly a candy bar every month.

I know many people who earn over US$50,000 a year on interest alone in DR without having to pay taxes, or even worse having the necessity to show up at a job!! That alone is worth something.

By the way I have not worked a day in four years. Of course, the real magic is setting yourself up to get an equal or higher amount of dollar income from the United States over your DR income. It is impossible to lose. That is the golden basket. Everyone who plans to move to DR should have regular lifetime income from the US or Europe, plus DR investments.

TW

TW
 

sjh

aka - shadley
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keep watching the peso TW

A. You picked the very best possible cases, I picked the worst cases.

B. the game isnt over yet, you may soon find yourself looking for a job when the peso really starts moving.. this depreciation has only just begun... the correct value for the peso was 20+ over a year ago, i dont want to think about what it is now.

I wonder if this works the same way as you using the your invertor to charge itself....
 

BushBaby

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TW,
Each time I try to help people with investments in this country, I have the same dilema - whether they should invest in Pesos or US $. IF the people are dwelling/resident in this country & need an income, I advise Pesos up to the 'Income' they need & any excess should be invested in US $. The organisation I deal with for my investments pay 14% p.a. (actually it is 1.1666% compounding monthly which equates to about 15.5% p.a.), & they have been most reliable over the last 4 years I have dealt with them.

My concern is two fold.
1. The Government has taken out (& continues to take out) loans with both the local banks AND International organisations. The Government is notoriously BAD at paying back on loans & other commitments NOW - WHAT is it going to be like in a years time when the loans start to become due for repayment), THEN there WILL be a serious devaluation taking place!!
Further, will the NEXT Government honour the contracts of THIS one?? So who can say what will happen in two years time? I think it fair to say that most of us HOPE there will be a change of Government in 2004. History does not bode well on this subject!!

2. We have seen over the last 2 years how tourism has depleted greatly against the 1995 - 1998 rapid increases, & as a result remittances have fallen off in this area. With the turmoil in the US (possible war with Iraq & general unrest in the Middle East Far East against America & Americans) what is likely to happen to the remittances from Dominicans in the US? If they drop too, the DR stock of US $ will deplete even further & Central Bank input to bolster up the Peso, will not be available from National Reserves any more!!

There is a 3rd point worth considering - How easy is it for the person investing to get their Pesos changed into US $ & taken from the country? A US $ cheque (sorry 'check' in American) or money order is easy to secrete on one's person & will be readily available from the person the investment is with (if you choose your 'Broker' or 'Finance House' correctly) when the time comes to draw your capital out. Should one leave it here & draw it out in another country via a debit card perhaps? Should the capital be left with the 'Broker' & the interest be paid into a bank account each month for this purpose?

Whilst your point is correct for those living in the country - & should be weighed into the decision to be made - I would caution those who do NOT live here to go the route of investments in US $ for long term security. We haven't had a Bank go down for at least 12 years to my knowledge, but ................... !!!

In a nutshell, I maintain that the decision is dependent on the individual circumstances & should only be made after long & careful consideration to those circumstances. I'll be happy to give my 'four pennarth' (English expression meaning thoughts/views) to anyone who wants it.

Yes Golo, in answer to your next question, I am running out of tobacco & chocolates!!! - Grahame
 

andy a

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Feb 23, 2002
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Bushbaby,

Your advice to keep "only" enough pesos to generate a desired income (using Golo's model) sounds great. It is certainly one reason that the rich can more easily survive. How nice it would be to have that much "spare" money.

That plan would seem to be a good compromise, except for the question as to why keep dollars in the DR at all. More about this later.

As for betting on a weak currency, the accepted wisdom among currency experts seems to be to go for the stronger one, not the weaker one. For awhile one may be able to beat creeping devaluation through high interest rates, but when the inevitable waterfall arrives, he gets wiped out. The risk of that currency free fall, not knowing when, is part of the "risk premium" that he gets from the high rates.

About keeping dollars in the DR - remember what happened to US dollar deposits in Mexico. The banker banditos simply converted the dollars to pesos, devalued the pesos, and informed the depositors the next day that they were the proud owners of nearly worthless pesos.

Mexico is not the only country to do that - any country's bankers would. Switzerland, the safest of the safe, did its own imitation of it during the dollar crisis of the 70's.

Whenever a currency is devalued, someone takes a loss. Bankers insure that it is their clients and not themselves.
 

Golo100

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Hey Shad

I never said my plan is fail-proof for everyone. I take the same risks people take playing Wall Street. Where is everybody today who had Enron stock? Are U.S. banks any safer than DR banks? Maybe.

Here is a question for you. Are you going to be able to afford to retire? Will you be able to retire early...let's say at 55? Or will you have to wait to retire at the mandatory age and do like an increasing amount of Americans who have to continue holding jobs after retirement?

Take for instance 401(k)s plans. In the last 3 years their account balances have shrunk to incredible figures. The average asset per 401(k)s participant at year end in 1999 was US$45,681. That average went down to $40,918 in 2000 and $36,390 in 2001. Following the same trend and conservatibly, since I am discounting the present downturn in the U.S. economy, I would say for year end 2002 this average will drop to $US$32,751, perhaps more. Where does that leave retirees?

I know. Continue to work until you die trying it!!! So I would rather risk it all here in DR.

Tell me...what are your retirement plans and are they realistic? Can I survive in the U.S. with my annuity now? Certainly not. That would only be enough to pay a one-bedroom condo rent in your native Chatham, where we lived years ago. Where is the rest coming from?

However, that money here in DR is like golden eggs. If the dollar goes up, it gets better. If the dollar goes down, your peso investments will hold the fort.

TW
 

Golo100

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Grahame Chocolates

At least good news......my favorite chocolates Three Musketeers, Mars, Milky Ways and Babe Ruths are still $10 pesos. The price has remained stable for the last 12 months. Of course, some gas stations are selling them for $12(the venerable ITBIS added) but the same happens to candy bars at 7-Elevens in the U.S. American candy bars are cheaper than Dominican dulces!!!!

One of my measurements for the value of the dollar Vs the peso is the Breyer's Yogurt, which sells for about $18.50-$19.00. Since 1993 when I came to DR permanently it has always cost the exchange rate of a dollar.

Another item worth watching is the 20oz plastic bottle of Coke or Pepsi still holding at $9.95 pesos($10 cold in coin machines).Excellent value!!! Why don't they compute these items in the family basket? I drink more Coke than water.

Back in 1993 the cost of a Breyers in the U.S. was $US .57cents. Does anyone know the price today?
 

sjh

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Jan 1, 2002
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Re: Hey Shad

golo said:

I never said my plan is fail-proof for everyone. I take the same risks people take playing Wall Street. ....Where is everybody today who had Enron stock?

Here is a question for you. Are you going to be able to afford to retire? Will you be able to retire early...let's say at 55? Or will you have to wait to retire at the mandatory age and do like an increasing amount of Americans who have to continue holding jobs after retirement?
TW

yes, you are taking similar risks to those people investing in Enron stock.. VERY similar risks

I am 30 years old now. I will be able to retire to a minimal but comfortable income to my farm in the DR as of my 31 birthday in Feb. I may choose to work longer for some more iceing on my cake.

you are looking at inflation through tunnel vision. The markup on the items you are examining is SOOOO high that inflation is not so much a factor. Try checking the cost of gasoline, propane, housing, rice, and plantians instead.

for both our sakes i hope you are right though, but i am not going to bet my life on it....
 

Golo100

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Yes, let's take......

Housing: Those who own houses have few problems as long as they stay out of luxury condos and big house with increasing property taxes. The new luxury housing law limit goes up to $2,000,000 pesos which will exempt up to that amount from the tax. Consider also a new inheritance law that will reduce taxes from 17% to 3% for children.
Housing prices remain relatively stable in spite of construction material hikes. Why? Families adjust to increases by moving out a little further out to the suburbs. Expensive condos are begging for customers. With cash on hand you can get incredible buys.

Gasoline: So what if the price of gas goes up? Has it really gone up? I recall it was this high last year too. Then it went down, then it went up. But it also goes up all over the world. People adjust.

Plantains are a crazy commodity. I remember times in 1999 when a platano went as high as $5 pesos. I have seen platanos go for $7 each years ago. Today you can buy them anywhere from .50cents to $3. This commodity will never make a pinch in anyone's personal economy.

Rice: This is the first time in years we do not import rice. We have rice coming out of our ears. This is a political crop. It depends who is in power.

The mere fact that you are retireing in DR comfirms my theory.

TW
 

MikeKO

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Apr 12, 2002
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This leads back to my basic investigations of the past year. Invest in pesos the minimum you need to survive (rent, utilitities, etc.). These local tems tend to be unaffected by ups / downs in exchange rate. Keep the money needed byond the basics out of the country. I can get over 7% on good solid bonds in U.S., so the extra 1.5% in the DR is of minimal importance. Gamble a little with commercial paper in DR. REALLY GOOD thread!!!!!

Mike
 

Jim Hinsch

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One cannot compare investing in pesos to investing in a US FDIC insured Savings or Moneymarket account. They carry different risks. Theoretically, the increase in return on investment is corret for the increase in risk.

Invest in pesos if you think you are a better judge of the risk/reward factor than the experts that set the ROI and you think they've overpriced the peso ROI.

There are consultants that can offer investment instruments of equal risk right in the USA that pay equal ROI. That is, the risk is equal according to the opinion of those who set the rates.

Putting money in anthing with a predicted ROI ahead of inflation includes a gamble.

Investing in Dominican commercial paper accounts have no advantage over any other investment of equal risk, save for the fact that it accepts pesos and pays back in pesos. Hence, it is a good investment if you are going to spend the RIO in the Dominican Republic and are looking for that level or risk/reward.

If you aren't living in the DR and will ultimately want Dollars back, you've already cost yourself about 10 - 20% in the conversion alone.
 

Golo100

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Jim

The commercial paper issued in DR is unlike anything in the U.S. Risky investments in the U.S. pay you on a yearly basis, or at redemption time.

DR paper pays you monthly and you can play the market 30 to 90 days at a time for returns equal to year long paper. In other words, you can get 22% as easy on a 30 day certificate as a 360 day note. The companies in whose name the certificates are issued are long stable outfits that would take more than 90 days to be in a default situation. For instance, Hache has been in business for 110 years. Are they going tpo go broke in 30 to 90 days. Very unlikely, specially if you are here to monitor the ground.

Take PriceMart. If you visit there at least once a week to do your shopping and deal with their commercial paper, would that be too risky for 90 days? They pay 20.75%.

How did you figure losing 10-20% in the conversion to dollars in less than 3 months? Of course, if you do not allow reinvestment for inflation you are a fool. But the returns cover for it.

Besides, what do you suggest people invest in? Real estate is no longer the answer in DR unless you live-in the property and purchase under $1,300,000 pesos or the luxury tax limit. Setting up a business is even riskier. Who the hell wants to deal with Dominican employees with the best labor protection in the world?

Did you take into consideration that you do not pay capital gain taxes in DR fixed certificates? How far do your dollars go in the U.S. when Uncle Sam has his day with you?

TW
 

mondongo

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Jim Hinsch said:
..Theoretically, the increase in return on investment is corret for the increase in risk.

Hey, J.H.....weren't you the same guy who told me that schooling is for losers?....That IS theoretically true...however, due to inefficiencies in the marketplace...and the divergent opinions on what constitututes risk and reward...it isn't necessarily so that risk/reward are perfectly balanced in all investment intruments...My belief is that for the return of 20+%, and the risk of devaluation and default, DR deposits are a reasonable attractive investment...especially if you live in the DR...


BTW, there are NONE instruments in the USA that yield 20+% at 30 day maturity!!!!! Please....prove me wrong...cause if you do....I'll send you a gift!!
 

Escott

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Jan 14, 2002
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I have been buying Mortgage Reits in the US for the last while as I have also stayed out of the market in general. My returns have equaled Dominican investments fwiw.

AXM and TMA are the stocks I have been buying for the last year if anyone wants to check it out. I think that they will be good for at least a year from today but I watch everything and read all I can so I don't get caught with my pants down. Nice dividends and appreciation to boot while waiting out the Markets decisions about which way it is going to go.

I have invested in Pesos at 23% compounded. I have invested in US dollars at 14% in the DR. I am about 90% in dollars because I don't want to take the chance on a quick devaluation albeit the smart money bet over the last 10 years has been the Peso.

I take a hit trying to get my pesos back to dollars when I want to scram. Right there a couple percent fly out the door.

I like this conversation about money and here is my magic theory... Pesos, enough income to live on. Dollars, earn as much in Dollars as you are in Pesos. Then keep 90% of your money out of the DR for complete safety! If you can afford to do this you have nothing to worry about and will be comfortable living in the DR. If you move to the DR and have to work, may God take a liking to you because you will be a broke dope in no time.

For what its worth I found a bank in the DR that gives 10% on Dollars min of 50K US. Baninter in San Francisco and you need to speak to a Dutch fellow that works there, 22% is an easy figure to get these days in Pesos. This is from my trip last week.

Escott