Invest in certificate in dr banks

fiocco

New member
Mar 26, 2016
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Hi guys! I would like to know if anyone of you that live in Las Terrenas,:cheeky: invested in Certificate. I know that the problem can be the inflation and the exchange rate in case in the future a person want to transfer back the money in the original currency but in case a person decide to live there and to consider DR as first home, this problem can have less importance.
Any comment about this matter is very appreciated . Any suggestion in which banking products to invest is welcome and of course in which bank.
 

Derfish

Gold
Jan 7, 2016
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Better to invest money in USA bank. The inflation here makes it a negative interest thing. One would have to get more than the ever sliding exchange rate difference to keep up.
I could maybe calculate it if I had to, but when I first arrove here about 4 years ago the exchange rate was about 34 to one, now it is at almost 47. So a dollar left in the USA would now be worth 47 pesos if converted, but if it had been put in the bank here at that point it would be worth a lot less.
Der Fish
 

Virgo

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Oct 26, 2013
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I could maybe calculate it if I had to, but when I first arrove here about 4 years ago the exchange rate was about 34 to one, now it is at almost 47. So a dollar left in the USA would now be worth 47 pesos if converted, but if it had been put in the bank here at that point it would be worth a lot less.

It's a fair point, but your exchange rate figures are wrong. In late April 2012, it was 39-1, and now is (nearly) 46-1, yielding an average devaluation (simplified calculation) of about 4.5% per calendar year.
 
Jan 9, 2004
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It's a fair point, but your exchange rate figures are wrong. In late April 2012, it was 39-1, and now is (nearly) 46-1, yielding an average devaluation (simplified calculation) of about 4.5% per calendar year.

Now subtract that 4.5% from the yield received on a 1 year certificate of deposit with banks in the DR....and the actual real yield is perhaps 1-1.5%.

Hardly enough of a yield.....when balanced against the risk.


Respectfully,
Playacaribe2
 

SantiagoDR

The "REAL" SantiagoDR
Jan 12, 2006
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... when I first arrove here about 4 years ago the exchange rate was about 34 to one, now it is at almost 47. So a dollar left in the USA would now be worth 47 pesos if converted, but if it had been put in the bank here at that point it would be worth a lot less.
Der Fish

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$1 = 38.90 pesos (April 15, 2012)
Actual reported exchange from the "Exchange Thread" was 38.90 on 4/15/2012.

CD value 9% interest 1st year = 42.40 pesos
CD value 9% interest 2nd year = 46.21 pesos
CD value 6% interest 3rd year = 49.98 pesos
CD value 6% interest 4th year = 51.92 pesos (Current Value of the $1 in pesos)

The interest rate is from BanReservas, Banco Popular had a much higher rate.

Current exchange rate is 45.80
 

Virgo

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Oct 26, 2013
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Now subtract that 4.5% from the yield received on a 1 year certificate of deposit with banks in the DR....and the actual real yield is perhaps 1-1.5%.
Other things being equal, what would be the yield with a decent traditional US or Canadian bank (excluding online banks and nontraditional arrangements) ?

If arranged through a Dominican bank, hard currency CD's yield about zero (not even enough to compensate for inflation)
 

Virgo

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Oct 26, 2013
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I was referring to the yield of a CD directly with a traditional (reputable) US/Canadian bank. I do not believe that info can be found following that link.

Based on superficial searching, it seems a 1-year CD with a Citibank-type bank yields very close to zero (0.15 %, NOT fifteen percent!)

Notice that the 4.5% devaluation is the average over 4 years.

Over the past 12 months, devaluation is only about 2.5%. CD yield over the same period would be about twice that, depending on terms and conditions.
 
Jan 9, 2004
10,898
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I was referring to the yield of a CD directly with a traditional (reputable) US/Canadian bank. I do not believe that info can be found following that link.

Based on superficial searching, it seems a 1-year CD with a Citibank-type bank yields very close to zero (0.15 %, NOT fifteen percent!)

Notice that the 4.5% devaluation is the average over 4 years.

Over the past 12 months, devaluation is only about 2.5%. CD yield over the same period would be about twice that, depending on terms and conditions.

Click on Inversiones and then look to the right. They are giving savings deposit rates on USD or EURO deposits.

1 year or four....really inconsequential. Even if you received an effective yield of 2.5% per year over the four years...it is not worth the risk IMHO. If you have no other choice, then 2.5% might look good. But, with rock solid companies paying that and more on their stocks and bonds....the DR is just not worth the risk.


Respectfully,
Playacaribe2
 

Virgo

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Oct 26, 2013
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Click on Inversiones and then look to the right. They are giving savings deposit rates on USD or EURO deposits.

1 year or four....really inconsequential. Even if you received an effective yield of 2.5% per year over the four years...it is not worth the risk IMHO. If you have no other choice, then 2.5% might look good. But, with rock solid companies paying that and more on their stocks and bonds....the DR is just not worth the risk.

I saw the rates. Those are a Dominican bank's rates for CD's in foreign currency. I have been talking about the yield of a CD with a reputable US/Canadian bank, which I found it to be ~0.15 % (one and a half TENTH of one percent).

Presumably a hard-currency CD with a Dominican bank would still have some of the "risk" you are advising against.

Of course it makes a difference whether devaluation is computed over the most recent year or averaged over 4 years, because the current CD rates are influenced by the most recent year.
If you are going to use avaerage devaluation over 4 years you also need to talk about average CD yield over the same period to compare apples to apples.
 

pauleast

*** I love DR1 ***
Jan 29, 2012
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Certificates of Deposits are not investments. They are a place to park your money "safely" until you need it. Hence U.S or Canadian banks depending on where you are from.
 

CNSIERRA

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Apr 11, 2016
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Fiocco, I will suggest for you to invest in Central Bank and Ministerio de Hacienda bons because they pay 9% per year and you don't pay taxes
on your earning. These two government institution are called country risk and your money will only be lost if the country collapse.
I am an investor in those two and I have good earning every year. If need a stock broker send me a PM so that I can put you in contact with one of their agent.
 
Jan 9, 2004
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I saw the rates. Those are a Dominican bank's rates for CD's in foreign currency. I have been talking about the yield of a CD with a reputable US/Canadian bank, which I found it to be ~0.15 % (one and a half TENTH of one percent).

Presumably a hard-currency CD with a Dominican bank would still have some of the "risk" you are advising against.

Of course it makes a difference whether devaluation is computed over the most recent year or averaged over 4 years, because the current CD rates are influenced by the most recent year.
If you are going to use avaerage devaluation over 4 years you also need to talk about average CD yield over the same period to compare apples to apples.

Of course there are lots more variables to consider.

I am not advising against "investing" in Certificates, but merely pointing out, as stated above, they are not worth the risk IMHO. Everyone needs to assess their own financial situation and their appetite for risk....and balance that against the return.

As to apples to apples comparisons, one cannot even begin to compare DR banks to US banks....for safety, soundness and overall strength. I say that with first hand knowledge of the banking system in both the DR and the US.

And to Pauleast's point above, he is correct. CD's are not investments.


Respectfully,
Playacaribe2
 

chic

Silver
Nov 20, 2013
4,305
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ha i looked and was interested...but declined... evan managed a r.e. investment in the u.s pays much better...
 

fiocco

New member
Mar 26, 2016
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Hi,
Really I am european so I was thinking to bring Euro so correct me if I am wrong:
In 2012 1 Euro was about Pesos 49.60 .
Invest in certificate for example capital Euro 100 = 4960 Pesos with average interest rate 7%
Beginning 2013 I have 5307 Pesos
Beginning 2014 I have 5678 Pesos
Beginning 2015 I have 6076 Pesos
Beginning 2016 I have 6501 Pesos
Exchange rate April 16 1 Euro = about 51.3 Pesos
I convert back in euro and I have 126 Euro (note exchange rate not correct 100% because they are from forex and not local banking rate)
Of course there is the risk of fluctuation. I need your opinion please. If I invest my money in Europe my interest is almost 0. The interest rate on deposit are below zero (in Italy right now) and also some state bond give negative interests. I have some money in a fund but not very big results in years.
Another important question:
If you invest a sum (for example 100.000 Euro) in local currency in a Bank in Dr and after a certain period you want to convert again in the original currency (because maybe you want to transfer back to Europe) or i want to change in Usd, can i do that without any big problem or delay ? Or the bank try to avoid to change in foreigner currency? And will the exchange rate be reasonable (same if I change in Europe for ex Euro in Usd or Eur in Gbp ) or in DR is much much worst (do they charge many and many pips)?
Any reply will be very welcome.
 
Jan 9, 2004
10,898
2,224
113
Hi,
Really I am european so I was thinking to bring Euro so correct me if I am wrong:
In 2012 1 Euro was about Pesos 49.60 .
Invest in certificate for example capital Euro 100 = 4960 Pesos with average interest rate 7%
Beginning 2013 I have 5307 Pesos
Beginning 2014 I have 5678 Pesos
Beginning 2015 I have 6076 Pesos
Beginning 2016 I have 6501 Pesos
Exchange rate April 16 1 Euro = about 51.3 Pesos
I convert back in euro and I have 126 Euro (note exchange rate not correct 100% because they are from forex and not local banking rate)
Of course there is the risk of fluctuation. I need your opinion please. If I invest my money in Europe my interest is almost 0. The interest rate on deposit are below zero (in Italy right now) and also some state bond give negative interests. I have some money in a fund but not very big results in years.
Another important question:
If you invest a sum (for example 100.000 Euro) in local currency in a Bank in Dr and after a certain period you want to convert again in the original currency (because maybe you want to transfer back to Europe) or i want to change in Usd, can i do that without any big problem or delay ? Or the bank try to avoid to change in foreigner currency? And will the exchange rate be reasonable (same if I change in Europe for ex Euro in Usd or Eur in Gbp ) or in DR is much much worst (do they charge many and many pips)?
Any reply will be very welcome.

Here is what can happen when things go wrong;

http://www.dominicantoday.com/dr/lo...83-files-charges-in-US341M-Peravia-bank-fraud


Respectfully,
Playacaribe2
 

Virgo

Bronze
Oct 26, 2013
824
0
0
If you invest a sum (for example 100.000 Euro) in local currency in a Bank in Dr and after a certain period you want to convert again in the original currency (because maybe you want to transfer back to Europe) or i want to change in Usd, can i do that without any big problem or delay ? Or the bank try to avoid to change in foreigner currency? And will the exchange rate be reasonable (same if I change in Europe for ex Euro in Usd or Eur in Gbp ) or in DR is much much worst (do they charge many and many pips)?
Any reply will be very welcome.
As of today (and for many years) Dominican banks are free to buy and sell Euros and US dollars at a floating exchange rate set by the market (not the government). A bank may have a rate and another bank a different one (although the difference is usually very small).

Of course, years from now it may be different. That is a risk. But not specific reason today to expect a change in the free-market currency policy.
 

Virgo

Bronze
Oct 26, 2013
824
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Yeah, the DR is *NOT* the ONE country in the world where bank failures are impossible.

OTOH, why should have a REASONABLE person trusted the people behind the Peravia Bank with her/his money? What was their track record?

Choosing a bank is no different from choosing anything else that may have a big impact on your life. You MUST do YOUR homework.

Give a list of people who have lost money because of a Banco Popular failure? I'd bet it's a very short list ( I think it has ZERO members).

The Vicini family is behind Banco del Progreso, and they once lost money because a corrupt officer cheated the bank, but the depositors lost NOTHING.

Find out who is behind Banco BHD-Leon. And so on.

It is the SPECIFIC BANK that matters.
 
Jan 9, 2004
10,898
2,224
113
As of today (and for many years) Dominican banks are free to buy and sell Euros and US dollars at a floating exchange rate set by the market (not the government).


Free market?

The government sets the exchange rate range, usually every 4-5 days.....not the market.



Respectfully,
Playacaribe2
 
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