Future of the Peso?? Heed Goldman Sachs!!

gringosabroso

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Oct 16, 2004
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The recent DR1 news had a link to a Nov. 4, 2004, Goldman Sachs analysis of the DR ecomonmy & debt. [Credit to Geoff Gottleib, of Goldman Sachs].
Most of the piece is highly technical; I' m not an economist; reading it is tough lsedding; I'm from New England.
Well worth perusing! Part of the G S predictions - the future course of the Peso; according to the G S crystal ball: [all #s are DR Pesos to US$]:
2005 - 37.5; 2006 - 41.5; 2007 - 43.7; 2008 - 46.1; 2009 - 48.5.
Note to possible purists; this part of an G S extensive chart is entitled "Nominal Exchange Rate"; I assume that this is, in effect, "actual predicted exchange rate". Economists may possibly disagree; I welcome constructive criticism.
[U]The proverbial bottom line:[/U] - The Peso is presently trading @ 28 - 29. In 4 years, according to G S, it will be trading at 46.1. If G S is correct, or reasonably accurate, the Peso will lose 65% of its value in the next 4 years [18.1 / 28 = 64.6%].
Who wants to bet against G S? What annual interest rate is adequate to compensate a prudent investor for this risk? This probability? 20% 25% 30% 35%? Not a prudent investment at nearly any price or interest rate.
One American's opinion: keep your assets in US$ or Euros.
G S also curiously predicts that the COLA in the DR for the nest 4 years will average 8%? With 32% inflation & 65% Peso decline over 4 years, all DR Peso investments seem like losers.
ps. My sincere thanks to DR1 for making this quality of imporant info avialable to us. So readily! A real public service! Thank you! Please keep them coming.