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I’m considering buying a CD at BN. Anyone have any words of wisdom. It appears the interest rate is 8% in colones but I spoke with a rep and it seemed more complicated than that. My spanish is only so so. gracias
If your Spanish is “only so so” I would suggest that you either deal with someone who speaks perfect English at Banco Nacional – and that person may not be easy to find – or, you don’t invest with them at all…
There are too many misunderstandings in the financial/investment world when both people speak the same language, please don’t invest your hard earned money with anyone or in any institution when you don’t understand EXACTLY what they are going to be doing with your money.
Scott Oliver
WeLoveCostaRica.com8% sounds good but then there is deflation/inflation/devaluation, so your net yield isn’t going to be 8% but more like 4% net. take Scott’s advice and bring along a translator or find someone at BN who speaks good English. There is usually someone in every branch that is behind the scenes who deals with these situations involving non-spanish speaking gringos.
Now Maravilla, let’s get it straight.If DEFLATION is in the cards, then the net value of currency increases (money worth more, assets worth less). The 8% is bonus growth. If INFLATION explodes, 8% interest may not keep the purchasing power of his original deposit.
My money is betting on asset deflation. Less money in fewer pockets means less purchasing demand: asset prices fall. Good for the guy (gal) with a fat CD @ 8%!
I doubt seriously that there is any such thing as a net 8% CD. Certainly not when you factor in the market fluctuation and other factors. But you can prove me wrong.
Guess someone needs to read “la impresión fina”. I wouldn’t be surprised if the 8% was true. Corporations have been forced to dish out higher interest for their short term debt, due not to their credit un-worthiness, just lack of available lending capital.That drives the money market upon which CD’s are based.
Hi
Thanks for such a nice information. I, seems quite interesting to have CD at Banco nacional. I just need some more info. in this regard.CSK
Edited on Dec 26, 2008 05:13
Wouldn’t this only work if they lock in the exchange rate, too? Forget which book it was about Costa Rica that was lauding the high interest (as in double digit) rates some banks were paying for colon accounts, but in the end, after adjustments, the true interest rate was really only about 3 – 4%. Gee, Madoff was only offering 10%!
Inflation…Deflation… Currency swings… Exchange rates… all a big game that the average person is caught up in but will not win! Best advice in these times is to have you money SAFE and AVAILABLE. That is if having “cash” is the best move at all! Perhaps canned tuna and hard assets are a better move, you have to be the judge! LOL I’m not sure putting your money into a CD in a CR bank where you’re not sure of the terms, don’t speak spanish, and can’t be sure of what protections are in place should the worse happen is the best move at the moment.
I’m sure 8% seems like a lot of money…. but like insurance companies… banks aren’t “giving away” anything! Even with the need to raise lending capital they’re not a charity. They’ve already prices all the factors into their offering. And in the end… THEY make money… your “return” doesn’t matter to them.
Best move is to be secure and liquid….
Edited on Dec 26, 2008 08:36
One definition of liquid is “clear, transparent or bright.” Cash is the most liquid mode of storing assets and the most convenient. And while it may not be the most profitable place to store your wealth, currently it seems to the the least risky.
Players who have a goal of increasing or preserving wealth will look to all the many financial instruments available. They have to be thoroughly understanding of what the risk to reward ratios are with these things. I am NOT a player. I just want to survive this current mess and I fear it may be quite a while until the skies are “liquid” again. And then, of course, there is the possibility that things get very ugly and even cash will not do.
I’m a big fan of canned Tuna… the perfect form of barter! LOL Should things get real ugly and “cash” is discovered to be what we all know it is… nothing more than another empty promise of government… then we’re all going to have to come up with another way of conducting our way of lives. There was that fellow (a bit crazy) that was talking about the “Amero”… and lots others with their own ideas… but seeing how the US Federal Reserve has “created” over 4 trillion dollars for all these bailouts and schemes…. I’m thinking a lot of people will be waking up to this new economic reality. But then again… TRILLIONS in home equity and stock value have gone missing too…. so who knows what’s going on!!
Back to the question… I’d be careful making any major investment in any bank in CR right now. The Oscar and the boys seem to think CR is isolated from the world and will not be impacted by what’s going on in the world. They’re VERY wrong. While the CR people are in a better position to ride out a rough time. I’m not as sure about the banking system.
Edited on Dec 26, 2008 13:53
I haven’t got a clue as to the Costa Rican economic situation. It may be less complicated than other economies but it is still beyond my level of comprehension. Stick to what you know because doing otherwise is nothing more than a crap shoot. Let’s ask Scott what he is doing right now. I’ll bet you he is not putting all his eggs in any one spot, least of all Costa Rica.
I am playing three scenarios. Number one; We come out of this deep recession sometime between 2010 and 2015. In that event, keeping one third of your wealth in stocks or some other instrument, one third in real estate and one third in cash might work.
Number two; the recession becomes a depression which lasts another ten years. Even with inflation, cash would still be king and stocks, real estate or any other refuge for wealth would be extremely risky.
Number three: The depression becomes epic. Even cash is useless. Here is where you want to have that cabin on at least three acres of farm land way up in the mountains of the Osa Peninsula or the Central Valley. Hopefully, before this happens, you have turned your cash in for arms and ammo and some big dogs and a tall cement block wall with concertina wire.
Real good points Sprite. And as much as the folks in the US think they can handle this problem… american society has change too much from the days of the great depression and WWII to deal with a REAL depression. People are not like generations past, and they don’t have the stomach to fend for themselves. California and New York will fall first. They’ve already started to prepare the public with the current budget reports. Both states are looking at needing $20 billion to stay afloat. And they will need the money soon. And the larger cities are facing hugh problems too. One by one each level of government will be looking to the next for financial help. But since the states don’t have the ability to just start the printing press (not that we really print money… we just create it electronically these days) they’ll be looking to the Feds to bail them out! It doesn’t end well.
Option #2 sounds about right… but I did buy an 8 acre farm out on the Osa… off the Sierpe river just in case it #3 becomes a reality! I’ll work on the guns and dogs next if things really start to head south! LOL
Edited on Dec 26, 2008 13:51
I am betting an agriculture economy like Costa Rica will fare a bit better than the United States in an extreme economic melt down. However, I am not sure just how well gringo interlopers will be tolerated in a Costa Rica which is suffering from harsher deprivation than it has ever experienced. Planning is confounded by so many variables and unknowns. Which is the larger risk in an extreme world situation; trying to make a stand as a foreigner in Costa Rica or in the United States where, no matter how bad things get, they have to accept you?
My husband always tells me about how his family survived in Italy during the war — they had a farm in the countryside, an hour or so from Milan. They grew their own vegetables, had a cow that provided milk for cheese and yogurt, which they traded for pork, salami, etc. My father-in-law made and bottled wine which they also used for barter. Every few days the rich from the big city would show up with gold, diamonds, furs, basically useless stuff that you can’t eat, and would trade those things for a box of vegetables, prosciutto, wine, etc. Many of the city dwellers had to eat rats, while those who lived in the countryside were basically self-sufficient and did reasonably well during the worst of times. It’s one of the reasons I bought land in Costa Rica; at least I can grown food there. Colorado has an 80 day growing season!!
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