Questions & Answers About Living in The Dominican Republic

Question. Are Dominican Banks insured by government insurance? Is the banking system safe in the Dominican Republic? How is it possible the banks can pay such a high rate of interest for deposits?
.
Answer. Taking the last question first, the Dominican Republic is great place to invest money in terms of banking deposits, but certainly not a place to borrow money. In terms of US Dollar loans from a bank, one can probably expect to pay anywhere from 12 to 15 percent interest. A loan in Pesos (car loan, home mortgage, etc.) can fetch anywhere from a bargain rate of 32 percent up to 40 percent or more. And even with these rates, most banks will not loan money on a home mortgage for more than 10 years, so you can imagine what the monthly payments are like. Interestingly enough, the saving grace for the country is that most people cannot or will not pay these kinds of rates. So, it is true that many Dominicans do own their own home free and clear, or in the least, there is a much, much higher percentage of people in the Dominican Republic (in comparison to North Americans or Europeans) that truly own a home free from any bank debt or mortgage. How is this possible? Dominicans save their money and pay cash, or buy a building lot for cash, save some more money, then start constructing a home (and if they run out of money, then stop and wait until they can get started again with more cash in hand). So, as a result, it may take longer for a Dominican to realize their dream of home ownership, but once they reach that goal, it is one they have accomplished without the bank on their back - and they truly do own their own home. In comparison to the US or Europe, there are many people who say they own their own homes, but in fact they do not. The bank owns it and it is the person living in the home that is really making monthly mortgage payments for 20 or 30 years.
.
Getting back to banking interest rates, if a bank is charging 35 percent for a loan in Pesos, it is very easy to understand how they can afford to payout 15, 18 or 20 percent or more in interest (in Pesos) to depositors (and make a very healthy spread in the process). On the subject of US Dollar interest rates for depositors, interest rates certainly have come way down (in part because the banks are now flush with US Dollar deposits as many, many Dominican ran out to convert Pesos to US Dollars when the exchange rates were falling in 2003 and 2004). However, interest rates to loan US Dollars out have not, so this is why we are still seeing the interest rates for US Dollar commercial paper investments in the 7, 8 and 9 percent ranges. Meaning, it is still cheaper for a local company to issue a US Dollar commercial paper certificate paying 8 percent, than to borrow US Dollars from the bank at say 12 or 15 percent.
.
On the subject of banking safety, many foreigners do not understand that the Dominican Republic has a Central Bank and a government department that supervises the banking industry. If you think it is easy to get a banking license in the Dominican Republic, you had better think again. Do not be confused with some other English speaking jurisdictions that were giving banking licenses to almost anyone that showed up with US$50,000 (or whatever amount). This is not the case in the Dominican Republic. In addition, we often hear the question - Does the Dominican Republic having government banking insurance like FDIC in the United States? The short version of the answer is YES, and in fact if you review the numbers, the government banking deposit insurance fund in the Dominican Republic seems to be even that much more solvent than the US FDIC. Not only that, it works. Not one depositor lost money in the latest government takeover (2002 - 2003) of Banco Intercontinental or BANINTER. Some will say the takeover was politically motivated by the last political party in power from 2000 - 2004, but that is another kettle of fish to discuss another day, as they say. In any event, every depositor with an account at Baninter, be they foreigners or locals, that bothered to communicate with the Superintendent of Banking and complete the required form, got a check for their account balance. In fact, some people that went in person actually walked out the same day with a check in hand. So, there is a government banking insurance fund (that the local banks pay into), which is administered by the Central Bank, and it does do what it is supposed to do - protect bank depositors in the event of a bank failure.
.
Question. Is the Dominican Republic a safe place to visit or live?
.
Answer. We have often heard some rumors or comments to the effect that the Dominican Republic has some sort of rampant crime problem or that tourists especially have had been targets. Where this information comes from is beyond our scope of understanding simply because it is not true, or better said, the Dominican Republic is certainly no worse off than many, many other destinations for vacation or retirement (in many regards, it is better off). In terms of the nations capital, Santo Domingo, if you think there is absolutely no crime in a city with close to 4 Million people, you are unrealistic. There is crime. There are robberies. But it is worse than Miami, Florida? Is it worse than Cancun, Mexico? Is it worse than Aruba or New York City, or is it maybe even better? Many, many foreigners have come to the Dominican Republic, have been living in the country for a number of years, and have never had a problem. It is probably safe to say that trouble is the one thing you will always find anywhere in the world, if you take the time to go look for it. Meaning, if your conduct yourself or do some foolish things, like go into a area 3:00AM in the morning that you probably should not, you are asking for the opportunity to have an unpleasant experience. On the other hand, you could have your wallet lifted just as easily (tourist or not) on the New York City Subway as you could on the Subway system in London, Buenos Aires, and a number of other places that tourists might consider to be safe or safer than the Dominican Republic. But enough of rumors and opinion - let us have some facts:
.
SOME STATISTICS REGARDING THE DOMINICAN REPUBLIC IN COMPARISON TO OTHER COUNTRIES:
.
The most recent statistics for the number of people incarcerated (in jail) for every 100,000 inhabitants in the following countries is as follows:
.
714 - UNITED STATES (USA)
532 - BERMUDA
487 - CUBA
386 - PUERTO RICO
354 - PANAMA
182 - MEXICO
177 - COSTA RICA
157 - DOMINICAN REPUBLIC
142 - ENGLAND
116 - CANADA
100 - NICARAGUA
91 - FRANCE
83 - VENEZUELA
75 - SWEDEN
Source of Information:
.
http://www.kcl.ac.uk/depsta/rel/icps/worldbrief/world_brief.html
.
EDITORS NOTE: And it is official, the US wins again with .007 percent of the entire US population behind bars, which is one of the highest rates in the world. Based on these findings we can possibly conclude that: There are more criminals in the Unites States on average than in almost any other place on earth. There are a very high number of criminals in Bermuda - with respect to the amount of crooks in the Dominican Republic. There are actually less people in jail, per capita, in Communist Cuba, than in the United States. There are more crooks in Puerto Rica or Mexico, on a per capita basis than the Dominican Republic. In conclusion, many people have cited rumors or comments that the Dominican Republic is a more dangerous place to visit (in terms of criminality) than somewhere else. However, these statistics would lend one to believe that the US is actually the most crime-ridden country on the planet. Very interesting, but there is more:
.
Since the definition of HOMICIDE is similar in most countries, absolute comparisons of rates are possible (murder is murder in any language, although the Pan American Health Organization does include murder AND injuries purposely inflicted by another person as part of their definition). From the most recently available statistics, the average rate (the number of homicides per 100,000 population) in the following countries on a national level was as follows:
.
24.8 - US VIRGIN ISLANDS
22.1 - RUSSIA
18.8 - PUERTO RICO
16.2 - BAHAMAS
13.5 - PANAMA
11.3 - MEXICO
10.6 - UK VIRGIN ISLANDS (BVI)
10.6 - ESTONIA
10.3 - BELIZE
9.7 - DOMINICAN REPUBLIC
9.6 - BARBADOS
6.7 - COSTA RICA
6.5 - UNITED STATES
5.8 - CUBA
2.9 - FINLAND
1.5 - CANADA
.
Sources: Pan American Health Organization (PAHO), International Comparisons of Criminal Justice Statistics 2001-Home Office Bulletin 12/03
.
http://www.paho.org/english/sha/coredata/
.
EDITORS NOTES: Oh those Canadians - must be something in that Molson Beer that keeps them all calm and collected. In any event, it would seem that in comparison to visiting the Dominican Republic versus some other places: You are twice as likely to be murdered in Puerto Rico than you are in the Dominican Republic, you are at higher risk to be murdered in the Bahamas than in the DR, and incredibly enough - you are 3 times more likely to be murdered in the US Virgin Islands. Who knew? The guy from the accounting department at work who you usually chat with at the water cooler told you he heard from the neighbor of his cousin (who heard from his proctologist) that the Dominican Republic was a dangerous place and that you are better off going to Puerto Rico or the US Virgin Islands. Hmmm, do not forget to pack your bulletproof vest.