Dominican Peso

[NY-DR Commuter]

playacaribe2

Thanks for the insightful post, as always, appreciated and informative.

Something tells me that the rate at which the peso depreciates this year is going to accelerate beyond the three to four percent that it has maintained since the banking fiasco. It's already off to a bad start, only time will tell, but the horizon is ominous.

If people really want to see depreciation . . . in 1971 one ounce of gold cost $42 pesos and TODAY ?!?!?!?!?

$66,660 pesos Dominicanos. Some ride!!!!!

 

[porkman100]

AND, if your US dollars are in a "FDIC" account, and the money disappears, the US government insurance corp. gives it back.
In the DR????
"Not So Much!!!!!!!!!!!!!!!!!!!!!!!!!!!"
CCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCC

With the baniter fiasco, hipolito tried to protect every investor, and look what he got for it..a boot.

 

[playacaribe2]

i am getting less than 1/2 of 1 percent and the highest that i have seen is 1.8 percent for 5 years (who wants to tie up their money for that length of time)

I would not tie up money right now for longer than 1 year. Current 1 year rates, anemic as they are, offer the best bang for the buck.

Barclays Bank, Discover Bank, American Express FSB and ING Direct all currently offer, .90-1.04 on 1 year CD's. This is not an endorsement of any of these institutions, but info I receive updated several times a day.

Or, of course, you could buy a CD from the Banco Central.

Banco Central de la Repblica Dominicana


Respectfully,
Playacaribe2

 

[windeguy]

Or, of course, you could buy a CD from the Banco Central.

Banco Central de la Repblica Dominicana


Respectfully,
Playacaribe2

Did they change their policy again so private investors can directly purchase CDs from Banco Central?

 

[porkman100]

Playa; you are right..as always, but this time around, the i.m.f. may not be all that eager to prime the pump with mucho $$
and this chavez thing...may be all coming together, for a perfect storm. What is that sucking sound I hear??? russ perot

 

[playacaribe2]

Playa; you are right..as always, but this time around, the i.m.f. may not be all that eager to prime the pump with mucho $$
and this chavez thing...may be all coming together, for a perfect storm. What is that sucking sound I hear??? russ perot

Admittedly the IMF has been pre-occupied with the problems in Spain, Greece and elsewhere, but they will be coming back at the end of January or early February to provide much needed liquidity to the DR. Right now DR has less than three months of international reserves to pay external obligations....minimum necessary is usually 6 months worth of hard currency reserves.

Their is a quiet crisis of confidence in the DR economy and that is reflected in the recent quickening in the exchange rate. Throw in the possibility that Chavez is likely not going to survive the month, thus potentially throwing the Petrocaribe subsidized oil agreement into uncertain/unchartered waters, add in the huge arrearages....again....to the power generators and you have the makings of quite possibly some uncertain times ahead.

Add in the fact that President Medina has telegraphed that he wants to increase food exports, which needs a weaker peso, along with tourism which really is the one bright spot for the moment, and I see a very slow/sluggish economy with a peso weakening at a faster pace in 2013. I will stop short of making a prediction where it will end the year, but absent an economic epiphany by the government, another 2-3 points is probably a given.


Respectfully,
Playacaribe2

 

[Olly]

Many of you have picked up on the fact the peso is weakening agains the USD - in fact in the last year it weakened 4.75% or there abouts. It has been doing this for some years now as the charts show and there is no reason to assume it will change. THe USD is likely to weaken too as the dollar index has recently moved from 82 to 76 ish - quite a move really and with Ben printing money it is likely to weaken further. So you have a weakening DOP against a weakening US$ !
Perhaps those with Euros and Pounds will win!

Olly

 

[the gorgon]

Admittedly the IMF has been pre-occupied with the problems in Spain, Greece and elsewhere, but they will be coming back at the end of January or early February to provide much needed liquidity to the DR. Right now DR has less than three months of international reserves to pay external obligations....minimum necessary is usually 6 months worth of hard currency reserves.

Their is a quiet crisis of confidence in the DR economy and that is reflected in the recent quickening in the exchange rate. Throw in the possibility that Chavez is likely not going to survive the month, thus potentially throwing the Petrocaribe subsidized oil agreement into uncertain/unchartered waters, add in the huge arrearages....again....to the power generators and you have the makings of quite possibly some uncertain times ahead.

Add in the fact that President Medina has telegraphed that he wants to increase food exports, which needs a weaker peso, along with tourism which really is the one bright spot for the moment, and I see a very slow/sluggish economy with a peso weakening at a faster pace in 2013. I will stop short of making a prediction where it will end the year, but absent an economic epiphany by the government, another 2-3 points is probably a given.


Respectfully,
Playacaribe2

great analysis, Playa, but you seem to have couched it in rather euphemistic terms.

 

[cobraboy]

Add in the fact that President Medina has telegraphed that he wants to increase food exports, which needs a weaker peso, along with tourism which really is the one bright spot for the moment, and I see a very slow/sluggish economy with a peso weakening at a faster pace in 2013. I will stop short of making a prediction where it will end the year, but absent an economic epiphany by the government, another 2-3 points is probably a given.


Respectfully,
Playacaribe2

All of my resort vendors ahve announced rate increases for the first time ever, all in the last two days, roughly 10-11%

I don't think it's a coincidence.

Medina may want a softer peso for the reasons you outline, but it doesn't look like it's going that way in terms of buying power.

 

[curious29]

don't be so sure about weakening USD....

Many of you have picked up on the fact the peso is weakening agains the USD - in fact in the last year it weakened 4.75% or there abouts. It has been doing this for some years now as the charts show and there is no reason to assume it will change. THe USD is likely to weaken too as the dollar index has recently moved from 82 to 76 ish - quite a move really and with Ben printing money it is likely to weaken further. So you have a weakening DOP against a weakening US$ !
Perhaps those with Euros and Pounds will win!

Olly

 

[playacaribe2]

Many of you have picked up on the fact the peso is weakening agains the USD - in fact in the last year it weakened 4.75% or there abouts. It has been doing this for some years now as the charts show and there is no reason to assume it will change.

Except that the pace will likely quicken.

THe USD is likely to weaken too as the dollar index has recently moved from 82 to 76 ish - quite a move really and with Ben printing money it is likely to weaken further. So you have a weakening DOP against a weakening US$ !
Perhaps those with Euros and Pounds will win!

The USD is still the best house in a bad neighborhood. I expect the dollar to stay weak against most currencies as the US tries to maintain its exports and grow the economy that way.

Respectfully,
Playacaribe2

 

[playacaribe2]

no, it has not changed back to what it was several years ago when you could walk in and buy a cd with 20 plus interest rate

Thanks for the clarification. I was under the impression that CD's could still be purchased directly from the Central Bank. That would be the least riskiest scenario, as the IMF has fairly regularly stepped in and provided liquidity (read loans) to the Central Bank.

Not so for some of the other banks that have merged or gone under.

I suppose now that purchasing CD's (for those so inclined) would best be done through BanReservas (if possible), as I believe they are a quasi governmental institution.


Respectfully,
Playacaribe2

 

[pollogringo]

The USD is still the best house in a bad neighborhood.

Nicely put.

 

[playacaribe2]

All of my resort vendors ahve announced rate increases for the first time ever, all in the last two days, roughly 10-11%

I don't think it's a coincidence.

Medina may want a softer peso for the reasons you outline, but it doesn't look like it's going that way in terms of buying power.

Sadly, inflation may now be taking root. Tax increases coupled with the usual January food price increases, coupled with businesses raising prices to compensate for the new taxes and increased ITBIS, coupled with the pesos quickening decline, coupled with the new tax and austerity measures that will be demanded by the IMF before they loan any more money to the DR, coupled with the likelihood of Chavez's demise are creating unfavorable headwinds for the economy.

The bright spot continues to be tourism, but is that enough to offset the potential headwinds? I don't see it, but if Pichardo were around I am sure he would have a contra opinion....or at least a new photo of a mall or two.

Speaking of which, I visited Agora and Bella Terra on my recent trip. Both malls were fairly active (afterall it was pre-christmas by a few days), but while there was a fair amount of traffic in those malls, what I observed was that a large majority of the people did not have any shopping bags.....but the food courts were fairly busy.


Respectfully,
Playacaribe2

 

[porkman100]

Yes playa, and with all this "new" taxes that are being impose, in part due to I.M.F. requirements, sovereignty lost.
Dominicans are not yet adjusted to this new phenomenon, and huge adjustments will have to be made, is going to hurt.
That money will just go into "tax" coffers away from the real economy.
I had a neo-con frend that once said "you can not tax your way into prosperity"
But D.R, never had any taxes before, other than customs and little things, that money is going to be taken away from rice and beans budget.
Still, i see lots of money...but in very few hands..and if we know a thing or two about the laws of physics.. trickle down don't work

 

[BostonMary]

I appreciate all the responses on thus subject. I have decided to take all my pesos, over 25 years I have had nothing but trouble when dealing with Dominican banks. For example. I have loss money, both in pesos and USD, due to inactivity. I am currently in the US. I have met with representatives from Fidelity Investments. a well know and respected firm in the US. If I put money in a fully managed account which includes US stocks, International stocks, US Treasury Notes and bonds. The purpose being to preserve the funds invested and to grow with an average return of 10%. Due to all the uncertainity in the Dominican economy and the expected death of Chavez I beleive this is the proudent action for me to take. Thanks for your help.

 

[Criss Colon]

"Pork" I don't know which DR you are talking about when you say, "The DR never had any taxes before", Before WHEN???
I have lived here for 17 years, and there are taxes on most aspects of Dominican life.
I agree that they never reached 18% on orange juice befor now, but TAXES were ineffect for as long as I have lived here.
Maybe you are talking about when "Christopher Colombus",CCCCCCCCCCCCCCCCCCCC, put "Hillbilly" ashore in 1492 ??????
Better ask him!
CCCCCCCCCCCCCCCCCCCCCCCCCCCCCC

 

[jimmythegreek]

Many of you have picked up on the fact the peso is weakening agains the USD - in fact in the last year it weakened 4.75% or there abouts. It has been doing this for some years now as the charts show and there is no reason to assume it will change. THe USD is likely to weaken too as the dollar index has recently moved from 82 to 76 ish - quite a move really and with Ben printing money it is likely to weaken further. So you have a weakening DOP against a weakening US$ !
Perhaps those with Euros and Pounds will win!

Olly

As of Friday, the DX is at 80.61. The USD has a bottoming bowl formation and a number of factors are coming together that may cause a large move higher in the currency. The main reason is the fact that both Europe and Japan have debt totals that far outsize the United States. Europe is at about 450-1 and Japan 650-1. The U.S. is in the 300-1 range. Japan has voted in a new government there that is fanatical about devaluing the yen and Europe still faces a massive debt fiasco that has only temporarily been met by the ECB taking on additional balance sheet risk. I wouldn't be surprised if the DX goes to 90 and even 100 might be a possibility.

 

[jimmythegreek]

Sadly, inflation may now be taking root. Tax increases coupled with the usual January food price increases, coupled with businesses raising prices to compensate for the new taxes and increased ITBIS, coupled with the pesos quickening decline, coupled with the new tax and austerity measures that will be demanded by the IMF before they loan any more money to the DR, coupled with the likelihood of Chavez's demise are creating unfavorable headwinds for the economy.

The bright spot continues to be tourism, but is that enough to offset the potential headwinds? I don't see it, but if Pichardo were around I am sure he would have a contra opinion....or at least a new photo of a mall or two.

Speaking of which, I visited Agora and Bella Terra on my recent trip. Both malls were fairly active (afterall it was pre-christmas by a few days), but while there was a fair amount of traffic in those malls, what I observed was that a large majority of the people did not have any shopping bags.....but the food courts were fairly busy.


Respectfully,
Playacaribe2

Playa-We go to Agora to get some exercise and then hit the food court afterwards. I am sure there a number of others that do the same.

 

[pelaut]

....I have CDs in pesos at Banco Leon .....

I guess you weren't here 10 years ago. The Peso went from 18 to the dollar down to 55 to the dollar in less than two years, then got brought back up to 28 to the dollar three years later. It has since diminished steadily at 5-6% per year compounded.


I'm no economist, but I can suggest you at least use this rough formula before using a Dominican bank:
I-T-D-C-L = profit(loss).


I= Interest you gain in one year.
T= Tax on that interest
D= Depreciation of your capital because of peso depreciation against your original (home) currency.
C= Conversion charges to the peso (and back to home currency, if you plan that).
L= Lost opportunity on the capital (peso value of interest on a CD at home, securities, hard assets, etc.).


I think you will find a Dominican CD, if not a clear loss, at least within an unacceptable risk zone given the world economic situation and the Dominican economic history.
Think about keeping your money foreign and writing monthly checks to a friendly Cambista.