- Thread starter Snuffy
- Start date
Central Bank..CD @ 34% interest
This would be the best DR Risk
Since the Central bank is usually backed by the full faith and credit of the Government of the DR, it about as good DR bank risk as you can get, since they make the pesos they won't be short of them to repay the CD.
That doesn't mean at maturity they won't introduce some delayed withdrawl scheme or roll it over etc., but I presume they wouldn't.
You realize the 34% would be per year, so in 3 months your actual return is 1/4 of 34% so about 8 1/2% on the amount deposited. E.g. RD$100,000 deposited, RD$108,500 paid at maturity in 3 months.
Snuffy said:
Since the Central bank is usually backed by the full faith and credit of the Government of the DR, it about as good DR bank risk as you can get, since they make the pesos they won't be short of them to repay the CD.
That doesn't mean at maturity they won't introduce some delayed withdrawl scheme or roll it over etc., but I presume they wouldn't.
You realize the 34% would be per year, so in 3 months your actual return is 1/4 of 34% so about 8 1/2% on the amount deposited. E.g. RD$100,000 deposited, RD$108,500 paid at maturity in 3 months.
One very important detail
Remember this is a peso CD, thus you are investing in not just the CD but also the future of the peso. If the peso depreciates the interest (8.5% for 90 days) is not a true measure of your earnings, example the peso is currently at about 32:1 depreciates to 34.7:1 in 90 days you would earn nothing. If the peso depreciates by more than 8.5% in 90 days you basically lose money.
However on the bright side the opposite is true as well, but people don?t pay 34% unless the bond is worse than junk status.
Remember this is a peso CD, thus you are investing in not just the CD but also the future of the peso. If the peso depreciates the interest (8.5% for 90 days) is not a true measure of your earnings, example the peso is currently at about 32:1 depreciates to 34.7:1 in 90 days you would earn nothing. If the peso depreciates by more than 8.5% in 90 days you basically lose money.
However on the bright side the opposite is true as well, but people don?t pay 34% unless the bond is worse than junk status.
People I have spoken to doubt that they will pay at the end. Who knows what they will do or where the peso will go. A great return if you have pesos and get paid though!
Risk vs Reward
A well known Dominican lawyer on the North coast advised me to stay away from the Central Bank. He stated that institutions such as Banco Popular or Banco Santa Cruz, while paying less interest, are much less risky. He told me that decisions at the Central Bank are strickly political and there's simply no recource if after taking your money they change the deal.
A well known Dominican lawyer on the North coast advised me to stay away from the Central Bank. He stated that institutions such as Banco Popular or Banco Santa Cruz, while paying less interest, are much less risky. He told me that decisions at the Central Bank are strickly political and there's simply no recource if after taking your money they change the deal.
Since its the Central Bank, I would not attach much risk to it. They can always print more money if they run out!
The worst that can happen, IMO, is that they change the interest rate on it.
The worst that can happen, IMO, is that they change the interest rate on it.
Conchman said:
Yeah, try telling that to the people of Argentina.
There is risk and it's considerable risk. That's why the interest rate is so high.
Print more money and the peso's value will fall even further. Add to that an increase in inflation and we're looking at an economy worse off than it already is.
The DR is mired in debt with too little income to cover the principal payments let alone repayment of principle. Eventually, the country will have to declare itself officially insolvent - bankrupt, and beg for a government bail out. However, when this day of reckoning will occur is anybody's guess. Just don't be holding a Central Bank CD when it happens. You may never see your money again.
Hmmm... if you have no other money besides pesos the Certificates in the Central Bank are not a bad investment.
When the time comes, which won't be for a year in my opinion because of the IMF and other sources of burying the DR in more debt you may be right in a sense that it will get worse but if these people have no other currencies what else are they to do other than spend the pesos NOW asap?
When the time comes, which won't be for a year in my opinion because of the IMF and other sources of burying the DR in more debt you may be right in a sense that it will get worse but if these people have no other currencies what else are they to do other than spend the pesos NOW asap?
DR Central Bank
Lurch is very right. I have friends in Argentina...some of them learned the hard way too.
The DR is awash in debt...and taking on more (just like Argentina did).
I was there (Bs. As.) recently, and I looked at a Condo on the edge of the Recoleta that sold two years ago for the equivalent of $125K U.S. A real nice place. The asking price was $75 U.S. in August. The agent said he could close the deal quickly for $40K U.S. if it was in cash. I still didn't buy. After two months, the asking price is now $50K U.S. This was an eye-opener for me...it should be for you also.
I plan to buy a place in the DR in a year or so. My money stays in the U.S. Dollars, Euros, and Gold. By the way, I'll bet you $ to the hole in a donut that I buy at a BIG discount to Dominican prices now.
If you want to loose your ass...invest in the central bank.
Lurch is very right. I have friends in Argentina...some of them learned the hard way too.
The DR is awash in debt...and taking on more (just like Argentina did).
I was there (Bs. As.) recently, and I looked at a Condo on the edge of the Recoleta that sold two years ago for the equivalent of $125K U.S. A real nice place. The asking price was $75 U.S. in August. The agent said he could close the deal quickly for $40K U.S. if it was in cash. I still didn't buy. After two months, the asking price is now $50K U.S. This was an eye-opener for me...it should be for you also.
I plan to buy a place in the DR in a year or so. My money stays in the U.S. Dollars, Euros, and Gold. By the way, I'll bet you $ to the hole in a donut that I buy at a BIG discount to Dominican prices now.
If you want to loose your ass...invest in the central bank.