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John Schroder of Ascot Advisory Services, as a service, has provided this information to clients and readers.  Ascot Advisory Services provides assistance with offshore company and related structures (Panama Foundations), tax-free offshore banking, plus residency and second passport matters.  For additional information, please telephone (Direct Dial from the US): 809-334-5387 or 809-756-1917. Additional Resources More on Offshore  More on the Dominican Rep  Visit the Ascot Website  Contact Ascot Advisory

US Dollar Interest Rates in the Dominican Republic Anyone with access to a television or newspaper already knows that the US Federal Reserve has been cutting interest rates in order to stimulate the US economy.  This means that home mortgage and car loan interest may be at seemingly rock bottom levels (of benefit to consumers), but it also means that interest earnings from US bank accounts have dropped even further (before you deduct income tax, that is).

To be sure, a domestic US interest rate decline will most certainly have a direct effect on US Dollar deposit rates worldwide.  However, interest rates for US Dollar deposits outside of the US are influenced by other factors, such as demand for US Dollars in that particular local economy.  So, while some banks outside the US have responded by offering lower CD rates to investors, such rates continue to be higher than domestic US rates in countries such as the Dominican Republic (and are free from local taxation as well for both residents and non-residents alike).  In other words, while the US economy is currently in recession (they call it weakness) the Dominican Republic continues to show positive economic growth (although growth at a lower level than existed in the past two years - about 3.5% currently vs. over 7% previously).

So consumer demand does still exist, as it does in France currently as well.  Money, therefore is a commodity, and interest rates are the price of money in a truly free market economy.  Not enough money to meet demand means higher rates, excess money (in the banking system) translates into lower rates.  Higher rates are typical in a growing economy, whereby there is more demand than supply.

We took a brief survey recently of some local banks and brokers in Santo Domingo in order to provide a table of current rates to our clients for US Dollar deposits (Rates in Pesos are higher and are also tax-free).
 

Rates are of course tiered in the Dominican Republic, which means that a bank certificate of deposit in the amount of US$ 10,000 will find a lower rate than US$ 50,000 or more.  As a result, the lower rates apply to balances less than US$ 50,000 (or perhaps less than US$ 25,000 depending upon the financial institution).  Current rates for bank CD's range from about 6% up to 10% for a 90-day deposit. One of the banks we work with does offer 30 day a CD as well .  US Dollar saving accounts offer about 4% interest at most banks we work with, and US Dollar Checking Accounts are now available as well.

Investors will find the highest yields investing in commercial paper, with following US Dollar rates for 90 days (interest paid monthly and 100% locally tax-free):

US$ 10,000 = 8%
US$ 25,000 to US$ 50,000 = 9%
US$ 50,000 to US$ 100,000 = 10.5%
US$ 100,000 and above = up to 12% (depending upon amount)
 

Higher Profits and Stock Market Portfolio Insurance with Managed Currency Trading There are many investment schemes being offered offshore to investors today. So many in fact, that it can be hard to tell which companies are for real and which are not.  It can also be hard to tell who are the crooks, and who are not, in an unregulated environment.  Because of this, Ascot Advisory Services looks for investment firms that have an established track record and truly are concerned about their clients.  That is to say, investment firms, which act as if they are regulated, even though they may not be by law or otherwise.  This includes things like audited account statements and transparency for clients. First, however, it is important to note that many investments offering what seem to be above average returns often provide above average risk as well.  That is to say investing in things which are highly speculative is not for everyone and should only be a place to park 10% or less of your overall investment money.  But for those clients that understand the risks, and are looking for higher yields, investments such as commodities can offer a hedge and boost returns to an overall portfolio.

In fact, investing just 10% of your overall portfolio can often offset loses in equities (stocks) because many commodities do not move in tandem with the stock markets and therefore can offer what we might call stock portfolio insurance or a hedge.  One specific investment area to possibly consider is currency trading, which is very liquid and offers perhaps more safety in some respects to other commodities (or other high yield investments) because of this liquidity.

In fact, the world currency trading markets overshadow stock markets in terms of volume, yet the media reports very little about this to the general public (the foreign exchange or currency markets often experience over 1 Trillion US Dollars worth of volume daily).  One possibility is because most of the previous investors were large banks and other institutions, as most individual investors did not have a way or the funds to access these markets.  This has changed today, as many investment firms or mutual funds have popped up to offer access to the small investor, yet it still remains somewhat of a secret or unheard of investment to many.

With that said, there are of course some firms that do a good job for investors, and believe it or not, are honest with clients.  Of all of the things that come across our desk, this one firm we are about to discuss stands out above all the rest we investigated and I will tell you why.

The first thing to be said is that this firm is very conservative and adverse to risk in an investment class known for risk.  That is to say, the firm only trades three or four basic currencies - the US Dollar, the Euro, the British Pound, Swiss Franc and occasionally Canadian or Australian Dollars.

As an example of one of the firm's key principals, founders told me, is that they stopped trading the Japanese Yen because it was too volatile and most other currencies do not offer sufficient liquidity to make them feel comfortable.  In addition, the firm only trades in the spot market, refusing to get involved with what are called futures (placing bets on which way a currency will go in the future).  In other words, they look for advantages or opportunities between the current exchange rates between two or three different currencies and look to move in and out quickly.  For those investors familiar with stock trading, this style of trading can be compared to what is known as arbitrage (which includes buying and selling the same stock at the same time on two different exchanges to take advantage of perhaps a ¼ point difference between the two).

How have they done?  Well, the firm offers different tiers of accounts (smaller investors which would include accounts between US$ 10,000 and US$ 50,000), and higher balance accounts get the opportunity for additional returns.  With that said, the average 5 year returns for smaller accounts has been 30.03% and for accounts over US$ 100,000 - 42.98%

The firms clearing account is carried with one of the largest banks in Singapore -- one that is rated AA by Moodys rating service.  A woman trader conducts the trading also out of Singapore, and she has consistently been correct 86% of the time.  That is to say, she makes money on 13 out every 15 trades and has consistently done so over the last 5-year period.

Account statements are audited quarterly and all trading activity is clearly provided.  In addition, clients may access account balances on-line via a secure server system, which also includes on-line access to account statements as well.  However, an important point is that the firm's operations office is located outside of the US or Europe, offering security for client records. The firm recently did have their office in the Bahamas, but decided in April of this year to move operations out of the Bahamas rather than give up the privacy or confidentiality of clients.

All things being said, we have met with principals of the company on a few occasions and can only say that in a world of dubious investments or dubious people, these are some of the good guys.  For more information about banking in the Dominican Republic, or additional information regarding a managed currency account application, please contact our office directly. 

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