Question About DR CDs

We have a CD there. At other banks you can withdraw your CD early and simply pay a penalty. At Central Bank you CAN NOT withdraw it early, for any reason. Once the cd matures you must withdraw it, you can NOT simply role it over. So out it comes and then back in, if you want to renew it. Also, when it matures and you withdraw it you pay .015 percent to the goverment. I would check on this info again, as it is about 5 months old.

John-467 can you direct me to the exact location on their website to view the rates for cd's. thanks Phil

Take a look at the rates being paid when Hipo was president, 50% looked good until the RD Peso went from 24 to 55!

Do a little research before you buy USD200,000 in RD Pesos.

I was thinking about doing the same thing. The rates are great but......... it's not insured. If the peso drops .... we're out of luck! If you can afford the loss no problem ... if you can't don't do it...

I want to investigate it further too.

The 15% rate is for pesos if I remember correctly. The 1% rate was for USD.

My understanding is that it has to be converted into pesos and then back into dollars.

Don't forget you have to pay the spread from USD>RD on the way in, and out, which is at least .75, maybe less on larger amounts. So as long as RD/USD stays below 36.80 you will not lose principle. You lose 10% @ 40, including interest.

I think I will stick to EURUSD and USDJPY swaps!

You do realize for every Peso fluctuation you make/lose USD$5970 based on today's tasa on a $200K trade?

Do your research before you invest. You get a better return on peso's, but like in the states, if the rate changes your interest remains the same was when you invested initially. Not sure what the cost to exchange USD for Peso's and back again. Also, we have ours deposited directly to our local DR bank, again in peso's. This is what we live off of so we do NOT change it into dollars. I suppose, you could have it deposited in a DR bank and set up an automatic wire transferr to the states monthly???????? But then there's that tax thing on the States side. Good luck, and let me know how that works out.

Tamborista said:

You do realize for every Peso fluctuation you make/lose USD$5970 based on today's tasa on a $200K trade?

Click to expand...

That my friend is impossible...
La tasa de inter?s no esta asumida al intercambio general monetario, mas aun esta restringida por el mismo, ya que el Banco Central controla la tasa en un 53% fuera de los par?metros financieros que ultimadamente es responsable por el estado fluctuante de la misma en un 2 a 3% constante.

Comprende que al final no solo tu como inversionista perder?as sino tambi?n el Banco al igual. Lo cual seria ciertamente improbable que la fluctuaci?n de la tasa respondiera en una perdida como la que describes aqu?...

How is this impossible?
If the OP converts USD200K to RD Pesos at a rate of 33.50 and the tasa goes to 34.50, how many Pesos does he lose, this assumes no spread?

200,000/33.50 = DO THE MATH!

Sorry! English->
The interest rate is not linked to the currency general exchange, but otherwise restricted by the same, since the Central Bank controls the rate about 53% out of the financial parameters that lastly is the reason of the fluctuating state of the same in about a 2 to 3% constancy.

You must understand that in the end not only you as the investor would lose but also the Bank equally. This makes it improbable that the fluctuation of the rate would result in a loss as the one that you described here...

You're incongruently transferring a balance fluctuation from Pesos to Dollars that won't affect the immediate returns as the investment is locked until it matures fully. Adjusting for the same fluctuation on the Tasa in a spread would be just about the same with or without the perceived loss...

Are we talking US $ CD's here or what?!
The Central Bank handles both currencies with the same market limits present in any investment.

You have all the answers, wanna trade my Fx swaps for me?

I would vision a loss at full maturity of just about 1 to 2% adjusting for immediate inflation. Anything over than that, and the Central Bank wouldn't have the certificates rated as well as they are today but rather junk or high risk.

Now, why will I do a thing like that?? LOL!!!!!
Enough people are stepping unto ledgers as we type! Why add a new one? LOL!!
I keep CDs both in US and DR, so far the returns are decent.
Once the Central Bank (rather the DR's Gov) allows the Peso to gain the strength against the US $ it has been robbed from to keep goods rather cheaper for exporters, then things will be more at level when taking risks with the DR$ and returns would be more ample than the actual meager the Central Bank allows to fall off their table.

The DR Peso$ is far undervalued to the US $ and it's this reason why the Central Bank keeps a 53% control over the Tasa as needed to keep inflation from growing as it did before. It sure sucks to have inflation reduced at the price of market incentives and returns...

Come on guys take it easy! The current rates are NOT 15% per year on 30 month peso CD! Banco Central does not currently issue USD or EURO CDs. All rates posted on BC's website are for RD pesos CDs. The current available terms for Plazo Fijo CDs are as follows:

180 d?as 8%
365 d?as 9%
18 meses 10%
24 meses 11%
30 meses 13%

source:
Banco Central de la Rep?blica Dominicana

My experience with BC CDs has been quite good. I invested US$60k in Feb. 11, 2006 at 23% for 24 months. The exchange rate at the time was RD$34.30 to US$ 1. My peso CD was for RD$2,058,000, it paid RD$473,340 per year for a grand total of RD$946,680 for the life of the CD. The CD matures Feb. 2008. Assuming I saved all my interest payments and I convert it to USD, I have earned US$ 28,216 in interest. If I decide not to reinvest my money again at the current exchange rate of RD$33.55 to US$1 my capital looks like this: (assuming the exchenge rate will be the same in Feb 2008)

RD$2,058,000 *.015 = 30,870 (if I have to pay this 1.5% ley when I withdraw)
2,058,000 - 30,870 = 2,027,130
2,027,130 / 33.55 = US$60,421

So, not only did earned US$28k and I got my US$60k back but I also made US$421 in the exchange; not bad at all!

Note: the current exchange rate and interest paid by BC are TOTALLY different today than when I invested in BC CD 2 years ago. You experience will most likely NOT be exactly as mine.

NotLurking

Beg to differ...
The Central Bank does handle corporate investment certificates in US currency as of right now. The only sticky point is that it doest it via the US bond market, just as the Centurion money market account works. The interest rate are not over the top but rather present a tax free environment if you allow the interest gains to be "floated" in the DR$ after maturity.

The first tier is over US$ 1 mil and builds atop of that.
So far I heard no complaints from anybody other than the narrow spread of the funds allowed.

BTW: They do have initial offerings from time to time to raise capital for gov expenditures even more than the stated by the poster at 15%...

You just have to be patient and have enough liquid at the ready...