Dollar or Peso Economy for Expats?

Danny W

Bronze
Mar 1, 2003
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The Central Bank cd rates are so attractive, and yet when I mention them to smart business people (I'm not one of them), they never seem to consider Domincan Central Bank cds a good investment. They just say that if the interest is that high, there's got to be an equal downside, a strong risk factor. The only 2 reasons I can come up with are 1. - stability of the DR banking system and 2. - devaluation of the peso.

I'm not worried about the stability issue. I think with the IMF watching, the large middle class and the lessons learned from the Banniter scandal that the system is on solid ground.

The fluctuation of the peso is another story, but since the Leonel administration the peso has been relatively stable. Besides, if we're in a peso economy, then the fluctuation is less of a problem, right?

Other than my international health insurance policy, my monthly community association payments, and airline tickets what else is in dollars? Maybe a car every 4 or 5 years (I can't remember if car ins. is in dollars).

Am I wrong? And if not, why shouldn't I take advantage of the rates being triple those in the US?

-D
 

sylindr

New member
Nov 29, 2007
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reason number 1 and number 2 in your own post! There is something called a premium when you invest. A country with a higher risk factor has to pay a higher premium, it is that simple, and obviously many investors choose not to take the risks for the chance of a higher rate!
 

sweetdbt

Bronze
Sep 17, 2004
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IMHO you should, but only a portion, not the "whole ball of wax". The primary risk is indeed a potential devaluation of the peso vs the dollar. In my case, I hedge this by investing in both currencies. If my pesos lose value, my dollars gain and vice versa.
 

DR Mpe

Banned
Mar 31, 2003
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IMHO you should, but only a portion, not the "whole ball of wax". The primary risk is indeed a potential devaluation of the peso vs the dollar. In my case, I hedge this by investing in both currencies. If my pesos lose value, my dollars gain and vice versa.


Why invest in two banana-currencies?
 
Oct 13, 2003
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IMHO you should, but only a portion, not the "whole ball of wax". The primary risk is indeed a potential devaluation of the peso vs the dollar. In my case, I hedge this by investing in both currencies. If my pesos lose value, my dollars gain and vice versa.

This would be the right thning to do, to hedge against peso and dollar fluctuations. However, it does not protect against systemic failure or against dollar+peso devaluation. Maybe a little Euro investment would help you there.
 

sweetdbt

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Sep 17, 2004
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Why invest in two banana-currencies?

Nothing wrong with diversifying further, but we're not talking about trading in the currency market here. Just getting a return on your money. The reason he would want dollars and pesos is that he works in the US and has a family in the DR, and any spending he does will be in those currencies.
 

swooperman

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Oct 10, 2007
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Putting a chunk in 3 different banks in pesos and keeping the rest in US dollars. $150,000USD at 18% is 2,515 pesos a day! At 16% it is 2,235 per day! I have a friend who has been doing this for over 10 years and he has never been burnt by the banks. He moves around and negotiates terms. At one time banks were paying 24%. The interest is paid monthly to his Lyon Bank account. When he is in Canada his card spits out dollars. When in Thailand it spits out Batts. 34 to the dollar.
In the DR he gets 75,000 pesos a month! Tax free!
He says "Even if the peso goes a bit sideways! You will be eatin' chicken and drinkin' Presidente." If you are planning to leave it in pesos why not I say? Invest every other way you can and cross your fingers.
Its like taking a moto concho to get there fast! Chances are you will make it.

I am tempted to follow his plan. Anyone with experience out there?
 
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Tamborista

hasta la tambora
Apr 4, 2005
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What did he eat when the RD Peso went from 17 to 54 under Hippolito's regime?
 

Danny W

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Mar 1, 2003
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clarification

I didn't make it clear that I would be living full time in the DR, and so I guess I would be living at about 5-1 pesos to dollars.

And Tamborista, I do think that during Hippo's term it would have been a bad idea. But given a stable administration (like now), what's wrong with Central Bank cds?

One morning I was in a livery cab going to EWR for my Continental flight to POP, and the driver was a Dominican who had been an accountant 30 years earlier in the DR. He has bought an 8 room apartment 25 years ago on 168th street, and between he and his wife they were worth about $800,000 on paper. When we started talking about how we planned to retire in the DR and I told him I thought I could earn about 6% between treasuries, bonds and mutual funds. Then he told me about his plan to earn 12% with Central bank cds - the first time I had heard about them.

So I'm the gringo in the back seat of this guy's Town Car, and he's obviously twice as hard working and much smarter about money than I am. But since I'm a gringo, I'm afraid of buying the Dominican cds, even though I'm planning to retire to there. He had no qualms about them. It made me think that if I was going to live there, own a house there and raise a family there, I migh as well commit to pesos. - D
 

amparocorp

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Aug 11, 2002
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at the start of hippos term as president i collected approx. 800US steady rent from an apt i owned in SD, i collected in pesos though. it wasn't long before i was collecting approx 180US because the terms of the lease said 10.000 pesos per month. it was a great deal for the renters, i got screwed. i had big money in a peso account paying 21% which was losing money if you wanted to buy dollars. in short i went from making equivalent, per month, 2000US down to less than 400. i saw the writing on the wall, closed the peso account when it hit 24, sold the apt at a loss quikly. took that money and bought a new penthouse apt that is now worth double what i paid. i was lucky to be in the dr when the *&#@ hit the fan. if you want to invest in pesos and be outside the country, check the rate everyday and have an airline ticket in your pocket.
 

Manzana

Member
Jan 23, 2007
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Other options

It is also possible to invest in the DR but with the investment in Dollars or Euros rather than DR Pesos. Check out ANOECA, there are references on DR1 and a website. In that case you have the risk of DR investment, but not the added speculation of doing it in Pesos. As you might expect, the returns are somewhere in between.
 

Danny W

Bronze
Mar 1, 2003
999
12
0
It is also possible to invest in the DR but with the investment in Dollars or Euros rather than DR Pesos. Check out ANOECA, there are references on DR1 and a website. In that case you have the risk of DR investment, but not the added speculation of doing it in Pesos. As you might expect, the returns are somewhere in between.

I have heard and read about this company over the years. Do you have personal experience with them?