Banco Central Certificates

[sagfil]

I intend to invest some money in certificates issued by the Banco Central that in date 15th Feb 05 gave a net interest of 26% per year. I have tried to get information about how guaranteed they can be (in Argentina the same system failed quite a while ago and clients were not paied back!), but I could not hear a satisfactory reply. Actually I was surprised that many people I have asked to (ie italians living there, institutes for commerce, embassies,....) either did not know about it or did not give any suggetion about. IS THERE ANYONE OUT THERE WHO ALREADY HAVE INVESTED IN THESE CERTIFICATES, HAVE ACTUALLY RECEIVED THE INTEREST PUNCTUALLY ON THEIR CURRENT ACCOUNT, HAVE GONE THROUGH ANY SORT OF PROBLEMS...?
When I spoke to the official at the Banco Central he left me his mobile phone saying to me that probably there are other things I have to know.....what?
When I open some cuentas de ahorro (savings account) at the Banco Popular Dominicano, one person gave me an information another gave me a completely different information about the same subject. I was told that I could get access to the internet to my savings accounts the same day I have opened them but after 15 days I am calling them back to ask this accounts to be activated but nothing so far....Who am I going to give my money to? Could it be this is only the level of efficiency in Dominican Republic and all the other things are sure?
PLEASE HELP ME!
Filippo

 

[POP Bad Boy]

You've.......................

I intend to invest some money in certificates issued by the Banco Central that in date 15th Feb 05 gave a net interest of 26% per year. I have tried to get information about how guaranteed they can be (in Argentina the same system failed quite a while ago and clients were not paied back!), but I could not hear a satisfactory reply. Actually I was surprised that many people I have asked to (ie italians living there, institutes for commerce, embassies,....) either did not know about it or did not give any suggetion about. IS THERE ANYONE OUT THERE WHO ALREADY HAVE INVESTED IN THESE CERTIFICATES, HAVE ACTUALLY RECEIVED THE INTEREST PUNCTUALLY ON THEIR CURRENT ACCOUNT, HAVE GONE THROUGH ANY SORT OF PROBLEMS...?
When I spoke to the official at the Banco Central he left me his mobile phone saying to me that probably there are other things I have to know.....what?
When I open some cuentas de ahorro (savings account) at the Banco Popular Dominicano, one person gave me an information another gave me a completely different information about the same subject. I was told that I could get access to the internet to my savings accounts the same day I have opened them but after 15 days I am calling them back to ask this accounts to be activated but nothing so far....Who am I going to give my money to? Could it be this is only the level of efficiency in Dominican Republic and all the other things are sure?
PLEASE HELP ME!
Filippo

..........only just begun.................it doesn't get any better.

 

[Hillbilly]

Central Bank Certs from a non-investor

I do not have any of the certificates, but I have read enough to know that like any other investment they carry some risk.
Basically, I see the risk as a National Problem, one that will be solved, because of the huge debt load the government is taking on in order to stabilize the exchange rate and keep inflation in check.

The idea behind these certificates is to take money out of circulation. When the PRD government started the process, there were some short term certificates that reached 60% interest (APR). However, as a prominent poster has told us, they never missed a payment. The fact that they can now place certificates in the 25% range seems to say that their plan is working.

As an investor, your only worry is whether the DR government will "do an Argentina" or not, and most indicators seem to say that they will not do that.

As for the Banco Popular-where I do have some money-while they pay less interest, they have never missed an interest payment.

HB

 

[Riu]

When I open some cuentas de ahorro (savings account) at the Banco Popular Dominicano, one person gave me an information another gave me a completely different information about the same subject. I was told that I could get access to the internet to my savings accounts the same day I have opened them but after 15 days I am calling them back to ask this accounts to be activated but nothing so far....Who am I going to give my money to? Could it be this is only the level of efficiency in Dominican Republic and all the other things are sure?
PLEASE HELP ME!
Filippo

I opened an account at Banco Popular. I set up my internet access but I had to call in for the account to be activated, I guess for security purposes. I am in Argentina and I access my account with no problems so far. Maybe you are not going to the right department, If I were you I would ask to speak to an account executive directly. In my experience Banco Popular customer service is not all there, customer service personnel and cashiers need to be more customer friendly. Hope that helps.

 

[Dolores1]

I do not have any of the certificates, but I have read enough to know that like any other investment they carry some risk.
Basically, I see the risk as a National Problem, one that will be solved, because of the huge debt load the government is taking on in order to stabilize the exchange rate and keep inflation in check.

The idea behind these certificates is to take money out of circulation. When the PRD government started the process, there were some short term certificates that reached 60% interest (APR). However, as a prominent poster has told us, they never missed a payment. The fact that they can now place certificates in the 25% range seems to say that their plan is working.

As an investor, your only worry is whether the DR government will "do an Argentina" or not, and most indicators seem to say that they will not do that.

As for the Banco Popular-where I do have some money-while they pay less interest, they have never missed an interest payment.

HB

To the best of my understanding, a large amount of the money deposited in savings certificates in commercial banks by people who did not trust the Central Bank certificates, ended up being deposited in the Central Bank. Turned out that the biggest buyers of Central Bank certificates -- at least in the past government -- were the commercial banks themselves. So you could have been taking in small yields, while the bank itself was making the bigger yields offered by the Central Bank. But the risk by both was the same.

 

[hugoke01]

Banco del Progreso

Live most of the time in Spain... Opened 2,5 years ago a saving account with the Banco del Progreso and also bought certificates at 20% with the same bank ..they have never missed one day in paying out the interest ; I follow and control my account via internet ,,

I opened an account at Banco Popular. I set up my internet access but I had to call in for the account to be activated, I guess for security purposes. I am in Argentina and I access my account with no problems so far. Maybe you are not going to the right department, If I were you I would ask to speak to an account executive directly. In my experience Banco Popular customer service is not all there, customer service personnel and cashiers need to be more customer friendly. Hope that helps.

 

[Voyager]

Pesos or Dollars? Certificates for non-Dominicans?

As usual, I guess I can find all answers in the archives, but things change so, here goes...

This 26% interest, is that paid on an account in pesos only? What about US dollar accounts?

And here is a really stupid (oh!) question: When I go to Santo Domingo next time, can I open an Certificate account and put in 20,000 US Dollars or 580,000 Dom Pesos and after a year collect 5000 US Dollars or 145,000 Dom Pesos?

(Rates as per www.oanda.com on 01 March, 2005)

One more question: Can I open an account in my name using a DR friend as "sponsor", but giving access to the account only for me? Or maybe I don't need a "sponsor"? I mean, by comparison, I can go to Hong Kong and open a bank account (I think) so can I do it in DR as well?

If the answer is yes to both above questions, then why doesn't everybody do this? Sure there is a risk involved but people already buy stocks, funds and even play in casinos, so many people are willing to take risks, if the tentative payoff is good enough.

Someone, please expound on this recondite matter!!

 

[sagfil]

Live most of the time in Spain... Opened 2,5 years ago a saving account with the Banco del Progreso and also bought certificates at 20% with the same bank ..they have never missed one day in paying out the interest ; I follow and control my account via internet ,,

Thanks to you and all of you who wrote me back about my issue! And also I apologize for my english (I am Italian).
What you said "hugokie01" is interesting as you said you can follow and control your account via internet....this is OK, but you mean also you can order via internet the expiration or the renewal of the certificate you bought?
I explain it better: the several commercial banks I have spoken to in SAnto Domingo told me it is mandatory that when the certificates bought are about to expire you, in person (so not via internet, phone or fax) or another person who you have authorized, have to go to the front desk and say if you want to renew the certificate or if you want it to be credited to your account. I have spoken to Banco Popular Dominicano, Banco Leon, Banca Reserva....
Question number 2, now that you know the Banco Central gives 6% more than what you get from Banco Progresso, wouldn't you consider to buy some?
(maybe this is not my business but it can be reassuring for me as, still, no one that wrote back has a single certificate of the Banco Central but some have decided to get the less remunerative one with a commercial bank....that make me crazy!!!! sorry guys....)

 

[sagfil]

As usual, I guess I can find all answers in the archives, but things change so, here goes...

This 26% interest, is that paid on an account in pesos only? What about US dollar accounts?

And here is a really stupid (oh!) question: When I go to Santo Domingo next time, can I open an Certificate account and put in 20,000 US Dollars or 580,000 Dom Pesos and after a year collect 5000 US Dollars or 145,000 Dom Pesos?

(Rates as per www.oanda.com on 01 March, 2005)

One more question: Can I open an account in my name using a DR friend as "sponsor", but giving access to the account only for me? Or maybe I don't need a "sponsor"? I mean, by comparison, I can go to Hong Kong and open a bank account (I think) so can I do it in DR as well?

If the answer is yes to both above questions, then why doesn't everybody do this? Sure there is a risk involved but people already buy stocks, funds and even play in casinos, so many people are willing to take risks, if the tentative payoff is good enough.

Someone, please expound on this recondite matter!!

I am not a lawyer and also English is not my first language. I can tell you my experience and what I was told by the banks about these certificates.
Certificates issued by the Banco Central are issued only in pesos. Certificates expirations vary: 1 year, 6 months, 3 months, 1 month (of course at different interest rates). You can ask the interests to be paid monthly or yearly on your account in pesos, meaning than you have to have a savings or current account in pesos in any commercial bank. How can you open an account in pesos if you are not a resident? This is what I was told and what I did: as you are a non-resident you will hardly find a bank intended to open a current account for you, so the solution is to open a saving account (cuenta de ahorro). You need to fill in a simple form but, important, they want you to give a local address and phone number of a person your friend or relative living there meaning officialy resident in Santo Domingo. Some friends or mine suggested me to even invent one address and name saying is a friend of yours and you stay there when you visit the island. But, Banco Leon for example wanted that this person I knew write a reference letter where he attested the right address and phone number and a few lines about your person, where you live, what you do....Banco Popular Dominicano instead did not ask for this letter and opened the savings account without problems.
I was told that they would not in any occasion write to that address I gave or call the phone number I gave (that, in in any case, was of an Italian person I have met there). Instead when I left DR for Italy they called several times to the phone number in DR in order to activate the internet account and so far I do not have access to the internet acc. even I called back and changed the phone number with the one I have access here in Italy.
You can open a savings account together with the name of another person but this person must be very loyal has he/she may go to the bank and get all the money out of the account without your signature or permission.As far as I was told by the banks you cannot use this person just for being "sponsor" and you just the beneficiary.
This is something I would never do!
As said before certificates are issued only in pesos and interests are paid only in pesos and only in accounts in pesos. Then, if you want them in Dollares or Euro, or you open another saving account in Usd or Euro (with the possibility of having an internet account) or you just take the pesos out of your account at the front desk and you change them.
For non-resident people I find it is strategically important to: ask the certificates to be paid in pesos monthly, having two savings account one in pesos and another one in USD (in your case) and having the internet access.
So when you find that the exchange rate varies a lot, you can with just a click transfer money from pesos to dollares or the other way round.
So yes, if you buy a 1 year-certificate of Banco Central for 5000 usd at 26% you will get after 1 year 5200 usd of interests net!
Sorry if I detailed too much what I went through but it could be helpfull for other people to know.

 

[mondongo]

Someone, please expound on this recondite matter!!

OMG, I have never read such abstruse vocabulary .... nicely done, Voyager!
....
....
....

Back on topic, I have not bought the certificates, but these 2 PDF files from the Central Bank attempt to answer some of the questions:

http://www.bancentral.gov.do/instrumentos_inversion/certificados_datos.pdf

http://www.bancentral.gov.do/instrumentos_inversion/certificados_condiciones.pdf

 

[sagfil]

sorry !!!!
thanks for the files, very helpful.

OMG, I have never read such abstruse vocabulary .... nicely done, Voyager!
....
....
....

Back on topic, I have not bought the certificates, but these 2 PDF files from the Central Bank attempt to answer some of the questions:

http://www.bancentral.gov.do/instrumentos_inversion/certificados_datos.pdf

http://www.bancentral.gov.do/instrumentos_inversion/certificados_condiciones.pdf

 

[duhtree]

!q

Guys. You are missing something! No one is going to pay you either/or with peso/dollar.
True: if you buy a certificate of deposit with $20,000.00 U.S. you will be paid the prevailing rate of interest---IN PESOS !!!.. That might be the same, in your mind, as being paid in dollars. But, it is not. You then must go thru the conversion process, etc. which may or may not hurt you. Recently, I was informed that for a fee of 1% pesos could become dollars. Maybe.

 

[Voyager]

Guys. You are missing something! No one is going to pay you either/or with peso/dollar.
True: if you buy a certificate of deposit with $20,000.00 U.S. you will be paid the prevailing rate of interest---IN PESOS !!!.. That might be the same, in your mind, as being paid in dollars. But, it is not. You then must go thru the conversion process, etc. which may or may not hurt you. Recently, I was informed that for a fee of 1% pesos could become dollars. Maybe.

Okey, sure, point taken! However... an interest rate of 26% is unheard of in Europe, so if I would "lose" 1% as conversion fee, it is still hugely better than back home!

There's gotta be a catch somewhere... Hm!?

 

[Bartolomeo67]

Okey, sure, point taken! However... an interest rate of 26% is unheard of in Europe, so if I would "lose" 1% as conversion fee, it is still hugely better than back home!

There's gotta be a catch somewhere... Hm!?

26% and even 20% is surely a great return but there are a lot of 'but's and 'if's and exchange rate risks.
What are everyone's reasons to prefer this risky investment with some inconvenient practicalities over the stockmarket which is doing really well?
Just made +10% return in the first 2 months of the year myself.
Bartolomeo

 

[Voyager]

26% and even 20% is surely a great return but there are a lot of 'but's and 'if's and exchange rate risks.
What are everyone's reasons to prefer this risky investment with some inconvenient practicalities over the stockmarket which is doing really well?
Just made +10% return in the first 2 months of the year myself.
Bartolomeo

Wish I had your knack for the stock market! In 1997, I invested in "mutual funds" by recommendation from my bank in Sweden. Today, they are worth 90% of what I paid for them. I hope to break even before I pass on to a better world...

I guess I have better keep doing what I do, which is to SPEND money on travelling all over the world, enjoying dinners in Paris and buying expensive gifts to my girlfriend (-s?).

Experiences and memories can never devaluate, they are the safest investments of all!

 

[duhtree]

As the ad says " memories...priceless ".
Correct me if I am wrong but since 1998 or there abouts the peso has gone from 15 to the dollar to 60 pesos to the dollar and then back from 60 to 1 to 28 to 1 in the last 6 months.
In a time spectrum you have clearly lost 50% of your money. And that assumes everything else stays the same. Since August of '04 the price of just about everything has increased over 100%. The D.R. is one of the few places where you can buy a used car and it's value could double in a short time. The cost of electricity has quadrupled for one. And so on and so forth.
If you are going to live in this country then pesos are needed but most outlanders find that it's more prudent to keep their $ in the form of their own country and convert as needed.
So that 20-30% return on cd's can disappear very quickly when stacked up against the powers that be. However, there are a number of " offshore " facilities where one can acheive better than standard rates of returns with very little risk, in my opinion.
Hope this helps to get things in perspective. John
Bare in mind that, collectively, we're at the bottom of the pyramid in terms of
usefull economic ploys. If things were as they first appear there wouldn't be room at the feeding trough for us.

 

[Escott]

26% and even 20% is surely a great return but there are a lot of 'but's and 'if's and exchange rate risks.
What are everyone's reasons to prefer this risky investment with some inconvenient practicalities over the stockmarket which is doing really well?
Just made +10% return in the first 2 months of the year myself.
Bartolomeo

I have been successful in just about everything other than the stock market. Sure for periods of time I made paper money but in the end I was a loser. I wouldn't go back in the Stock Market ever. I never had enough insider info to be successful longterm.

I wouldn't invest in Pesos but you can invest safely in dollars here and get higher rates than in the states. Real Estate has been great in the DR for the last 2 years also.

Highest I remember the peso was about 54. I have people telling me they got 56 but it was in their dreams and certainly not 60 fwiw.

 

[Bartolomeo67]

I have been successful in just about everything other than the stock market. Sure for periods of time I made paper money but in the end I was a loser. I wouldn't go back in the Stock Market ever. I never had enough insider info to be successful longterm.

Well I had to learn my lesson the hard way as well but imo returns are too good not to consider it especially given the poor returns on alternatives here in Europe.
- There are times to be 'in' the stockmarket and others to stay away from it
- Never be greedy and don't think the sky is the limit
- Be patient especially when waiting for the right moment to buy
just my 2 eurocent
Bartolomeo

 

[Texas Bill]

To all of you!!

In order to get the 23-26% interest, the Certificate MUST be in PESOS!!!
The Central Bank WILL accept CD's for dollars, but will only pay something like 5-8%!
Don't be mislead by "guard-house lawyers" in the matter of investing in this country. Go to the Central Bank in StoDgo and check for yourself!!!
If it is required that you be a resident and you're not, don't touch it with a 10-foot pole. You'll only lose what you invest.

The 23-26% is good income; in pesos OR the 5-8% in dollars. You can't get that kind of money out of any bank in the States. Just beware and do everything legally.

Texas Bill

 

[Lurch]

5%-8% in USD is much more safely earned in the US or EU markets. Perhaps you should employ a certified advisor and an accountant before even considering the RD bonds.

23% in pesos simply isn't enough to justify the risk IMHO.