S&P affirms Dominican Republic ratings

[Randall Bell]

GinzaGringo - Yes. And depending on the agency (moody's vs. S&P etc), they will give different value to different aspects of how the government operates to generate enough cashflow to service it's foreign debts. For example one agency may see domestic debt as something that chews up the governments ability to pay foreign debt holders, while another agency may rank it lower. All in all they analyze the government's budget, it's fiscal policies, and ultimately do a risk calculation to see how likely they are to pay their debts (bond holders) interest.

Bryan1258 - no actually there wasn't a meltdown. it was averted by the government stepping in. You didn't have a nightmare, but perhaps you didn't pay attention . But yah, total different than thing this conversation.

 

[playacaribe2]

Ya...........didn't something like that just happen to a really big country to the north of the DR.

Playacaribe2??????????

Along with, and adding to, the responses by Randall Bell, the US government, through the Federal Reserve, provided liquidity to certain private financial institutions that had sustained heavy losses, culminating in the bankruptcy of Lehman Brothers. The worry was not of a collapse of the government or its banking institutions, since the US can increase liquidity in a heartbeat (as RB pointed out)...the real worry was trying to stem what the US perceived as a possible worldwide panic....that could have done global damage to many other smaller countries banking systems....and that could have triggered an even worse recession than the world economy is currently experiencing.

To contrast that with the DR meltdown, the Dominican Republic Central Bank could do nothing for its banks....the reason being...the peso was in a freefall....and a further printing of more pesos and providing that kind of liquidity would have been adding more fuel to the fire. People were dumping pesos for Dollars/Euros and the Central Bank did not have enough foreign reserves on hand to meet the growing demand. The IMF stepped in and provided SDR's (Special Drawing Rights) to help stabilize the peso. Because the internal damage to the economy was done, the IMF has been providing large loans to the DR and closely monitoring its economy ever since.


Respectfully,
Playacaribe2

 

[GinzaGringo]

I am by no means financial wizard and in 2003 I was not paying attention to international economics. I am familliar with the DR and with the USA and what strikes me about the DR is the youth of the population, the burgeoning middle class, hungry for all the junk that middle class people in the US surround themselves with and slowly but surely the education level of the country seems to be improving. It just seems like there should be some opportunities to make money in the DR, based on those simple facts. Growth in the US seems to be slowing, whereas growth in the DR seems to be accelerating. It seems like there should be some opportunities to invest in the DR but based on these bond ratings it does not look like government bonds is the way to go.

 

[NALs]

The country's rating took a major hit (like everything else) during the 2003/04 crisis, but has been improving steadily since then. Anyway, you can get upwards of 17% ROI on government bonds, which is quite nice. The government will pay you back the principal plus interests. That's one thing you don't really need to worry about. Even if a crisis hit, they will simply print more money to meet their debt obligations. Sure, it wrecks havoc on other things, but you will get paid what was promised.

Chances of a major crisis that would lead to such drastic actions any time soon are quite slim, to say the least.

 

[GinzaGringo]

So any reccomendations on where to buy such debt?

 

[Criss Colon]

Banco Leon is giving that rate,but in 100,000 peso units,for 17 year bonds.
I'm tempted,but I'm a "Midwestener"!!!!!!
My father was getting 21% when "Little Jimmy Carter" was US president.
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