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Thread: interest rates

  1. #1
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    Question interest rates

    I read on this forum that the interest rate on peso deposits is now 14 percent. Is there a rule of thumb, or common wisdom, regarding how much you should feel safe depositing? Or what percentage of your nest egg?

    I realize everything depends on your personal circumstance, but it would be interesting to hear how comfortable others feel about utilizing this opprortunity.
    Mark

  2. #2
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    i would stick to a dolar certificate, although lower interest, you minimize exchange risk...consider that a 4 pesos increase on ER, is over 10% less interest on your time deposit...ahhh...and always short of 180 days
    but...you could split your eggs, and invest a part in pesos and another in US$...common rule... diverisfy you investments to minimize risk....

  3. #3
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    Quote Originally Posted by faer View Post
    i would stick to a dolar certificate, although lower interest, you minimize exchange risk...consider that a 4 pesos increase on ER, is over 10% less interest on your time deposit...ahhh...and always short of 180 days
    but...you could split your eggs, and invest a part in pesos and another in US$...common rule... diverisfy you investments to minimize risk....
    what's the intrest on dollar certificats?

  4. #4
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    If you invest a large percentage of your assets in peso certificates you are exposed to exchange rate risk.

    In the summer of 2002 the exchange rate was 17 pesos to the dollar. In the economic crisis of 2003-2004 the exchange rate went to 50 to the dollar. Yesterday it was 33.3 to the dollar.

    10,000 dollars converted to pesos at 17 to 1 would today be worth 5105 dollars at 33.3 to 1. Even if you consider compounding the Central Bank certificates pay the interest into a DR bank account you specify and bank accounts generally pay less interest than the certificates.

    Political stability is important. The current PLD administration stabilized the currency but the PLD is split and could very well lose the next election to the party that was in power when the economy tanked.

    If the PRD returns to power will there be another economic disaster? Who knows but I'm not comfortable ignoring the risks.

    To me the high interest rates paid on pesos certificates are an illusion like too much make-up on a red light district tart.

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