Central Bank Certificates, is now a good time to invest?

ecarignan

New member
Jan 9, 2003
302
0
0
www.commtech.ca
To all of you investors,

With the issuance of 32-36% certificates fromthe Central Bank, is now a good time for a north american with extra US$ to invest or are we expecting more decline of the peso between now and the next future.

Can one convert a sum of money to pesos, buy a certificate, cash back at the end of the term and convert back to US$? Does that make any sense.

Anybody think that they will issue another one because this one is pretty much gone or will be by friday or monday?

Thanks,

ecarignan
 

sjh

aka - shadley
Jan 1, 2002
969
2
0
52
www.geocities.com
there are only two reasons the bank is borrowing at those rates:

A: they desperately need money (true) and are unstable
B: They know the peso will devalue faster than the interest rate in the near future...

If either of those are good signs to you go for it...
 

ecarignan

New member
Jan 9, 2003
302
0
0
www.commtech.ca
Thanks sjh,

If it's A, I don't care as long as I make a good return and can convert back at a decent rate.

If it's B, then I am concerned since I would have to leave my investment in pesos.

Anyone else going for these certificates or just the dominicans. Any expats going for them or staying away?
 

Formosano2000

New member
Mar 5, 2003
398
0
0
Not for those who need US dollar liquidity !!

ecarignan said:
To all of you investors,

With the issuance of 32-36% certificates fromthe Central Bank, is now a good time for a north american with extra US$ to invest or are we expecting more decline of the peso between now and the next future.

Can one convert a sum of money to pesos, buy a certificate, cash back at the end of the term and convert back to US$? Does that make any sense.

Anybody think that they will issue another one because this one is pretty much gone or will be by friday or monday?

Thanks,

ecarignan

Before you even think about exchaning your hard-earned US$,
let's do some number-crunching here.

Fact: Banco Central rates are 32% for 30-days, 34% for 60-days and 36% for 90-day CD's.

Fact: US$1=RD$35 (today)

For ease of comparison, let's say you put in RD$10,000 (today's US$285.71) into each CD category
so:

31 days from now, you'll have $10,000 x (1 + 32% x (30/365) ) = RD$10,263 on your 30-day CD.

(you are basically getting a 2.67% return)

61 days from now, you'll have $10,000 x (1 + 34% x (60/365))
= RD$10,559 on your 60-day CD

(you are basically getting a 5.60% return)

91 days from now, you'll have $10,000 x (1 + 36% x (90/365))
= RD$10,888 on your 90-day CD

(you are basically getting a 8.88% return)

Let's take the 90-day 8.88% as a bench mark.

If peso slides 8.88% 91 days from now, it will be at US$1= RD$38.08

This means that if the exchange rate on October/24/2003 is US$1 > RD$38.08, you are basically losing money when you convert back to US$. And if US$1= RD$50 by then, you will have actually lost almost 25% of your US$ principal upon conversion.

(at US$1=RD$50, the RD$10,888 you get back are worth only US$217,76, which is only 76% of the US$285.71 you originally started with)

For anybody who earns in RD$, spends in RD$ and have no access to US$, these CD's might prove to be a good idea as a 8.88% hedge against inflation. But in the long run, if the RD$ keeps depreciating, that 8.88% will easily be wiped out and some by rampant inflation because DR is overly reliant on imports.
 
Last edited:

roca

New member
Jun 23, 2003
60
0
0
While the interest offered by the Central Bank are indeed, attractive (had me thinking for a minute or two, vs my 25% at a private bank) the question is not of wether to deposit or not but will I be able to take my money out when the cd's matture. Unfortunately I have lost all trust in this gov't so I have no idea as to why they are doing this. Ask any Baninter customer who had to place their money on the central bank and who's cd's have mature and they will respond saying they have not been able to take their money back. The central bank is asking them to hold them for a year.
Then my next question comes to mind. Have you paid all your taxes? Chances are once you want to retrieve your money, they could ask you to prove where you made your money from and if you have not paid any taxes on that, then they will deduct those taxes from what you deposited. At least for local people. The way I see it, the less the gov't knows about my finances the better off I am, and that includes Banco del Reservas. Not that I've done anything illegal, it's just that one never knows what these ass**** can think of next.
 

ecarignan

New member
Jan 9, 2003
302
0
0
www.commtech.ca
I agree with all and it is risky that the peso will still slide. I dropped the idea and keep HOPING to get 6-8% return before income taxes with my local Canadian RBC Dominion Securities.

Thanks,

Eric Carignan