Certificate of Deposit (CDT) -- 17 % annual return?

On an obscure Expat.com thread concerning

potential USA debt default, a poster suggested

investing in a Certificado de Depósito

de Término (CDT) at one of the Colombian

financial institutions.


According to a list e-published at rankia.co,

Banco de Occidente offers the highest CDT annual

rate of return in 2023 of the institutions listed, at

16.90 percent (holding for 90 days; theoretically,

holding for 360 days could produce a higher APY).


If you have invested in a CDT in Colombia, please

share your experience.


Questions for those in the know...


Is a Colombian cédula required to invest in a CDT?


Can an Expat with an Ecuadorian cédula invest in such

while living in Ecuador and visiting Colombia

for this purpose?


Apparently, an individual's investment is insured by

a government-designated agency up to the equivalent

of $11,049 USD per CDT. For instance, two CDTs can be

purchased for $22,098 total, possibly at two banks or

institutions, with full insurance. Any comments

on this concept?


cccmedia



The figure $11,049 was derived by visiting the

xe.com website and requesting the equivalent

of 50 million Colombian pesos, which apparently

is the automatically-insured maximum per CDT

at qualified institutions.

****


The only way to get 16% is with a CD and a major currency swing in your favor. Gambling on South American economies is...well gambling. Look at how quickly Venezuela, Argentina, Brazil,Peru and even Colombia have shifted politically but without strong economies. My hope is that the USA and Euros shift manufacturing to S America and away from China. This would create jobs for so many and be giving money to allied countries rather that an enemy (China) I really like the new Prez of El Salvador. He is a good role model.

Moderated by Bhavna 11 months ago
Reason : Off-topic not related to Colombia
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@drpeterjstanton

Best response I have seen in a long time

Thank you

Dont forget you are getting paid extra for the high currency risk


Just look what happened to Argentina in the last year.


If you took a one year CDT 8 months ago, you would be getting a good return on your dollar, as the peso has been relatively stable during this period, and there is only 4 months left in the year.


For long term, starting today, based on 10 year devaluation of the peso, and instability and uncertainty of the present Petro government, I woudnt risk mor then 5% of my life savings in it.


Like stocks, bonds, FX, crypto-currency, it all depends on timing

Putting a significant amout of your savings in a Colombian CDT because you re afraid of a US Debt default, is like giving up your SUV for a moto because you figure it will cost less to fix the moto in case of an accident in crazy Colombian traffic

@nico peligro


I am considering a CDT because of the high APY

and the fact that over 11,000 USD per CDT

is insured, not because I think the USA will default

on its debt; I don't.


The biggest obstacle I see so far is that it may

not be possible to invest in such a CDT as a

non-resident of Colombia.


I would not put more than about 10 percent of my

liquid assets into such a CDT if I determine it is a

feasible investment.


cccmedia, permanent resident of Ecuador

@cccmedia Is that up to $11,000 US is insured or OVER $11,000 is insured?


regards,


lpd

Up to 11,049 USD's equivalent in Pesos, per CDT,

as of the xe.com exchange rate yesterday.


cccmedia

You had to buy the Colombian CDT early this year to lock in the 17%. Now it has decreased to around 14%. Same thing happens in the USA. You have to buy at the right time.


@drpeterjstanton

Biden is not an idiot. Has more experience than any recent USA presidents, just as Petro has more experience than recent Colombian presidents.


The USA Congress mandated spending. Biden has a duty to execute what Congress decided according to the 14th amendment to the USA Constitution which plainly states the debt cannot be questioned.


Biden can ignore the debt ceiling and cannot be sued because no one has legal standing to go against the Constitution. What would a lawsuit ask for? That Biden should not do what Congress mandated, when even the 14th amendment to the Constitution says the debt cannot be questioned?


No debt ceiling negotiation with anyone. Biden needs to ignore the debt ceiling and keep making the Social Security payments. As Chief Executive that is his legal and constitutional duty.

This thread is about potential high-return

investing in Colombia CDTs, not Washington D.C.'s

current political hot potato, the debt-ceiling

political controversy.


Ipso facto, futuro's four paragraphs about

the possible debt-ceiling default are off topic

to this thread. There is a currently-active thread

on this Colombia forum about concern over

the debt ceiling, which futoro knows since

he has posted on it at least twice.


The fig leaf of the single first paragraph about

CDT does not grant blanket permission to

go off topic the rest of the way.


Please stay on topic to CDT/investing

if posting on this thread going forward.


cccmedia, OP for this thread

Expat.com designated expert for this Colombia forum

I just received this information from my bank, Bancolombia.


"Mira tus ahorros crecer con Inversión Virtual

(watch your savings grow)


Al invertir por más tiempo, recibes más plata. [hasta 14,5% E.A.]

(longer term, more money)


Recibe rentabilidad fija, la cual conocerás al momento de abrir la inversión.

(fixed earnings, with complete transparency)


Elige el plazo que quieras, desde 30 días.

(choose your term, minimum 30 days)


Invierte fácil, seguro y en pocos clics desde App Bancolombia o Sucursal Virtual Personas."

(easy to invest, safe, and doable from your bank app)


So, I guess I will be getting 14,5% [tasa Efectiva Anual] on my COP savings account of strong Colombian pesos.  1f604.svg

@futuroexpat


Facilitator Carolina on a recent Where's Wes? video said that although in general you need a cedula to open a bank account, there are reported cases of expats being able to open bank accounts with a passport, including by going branch to branch of the same bank.

You can get 14% in the USA with certain Etfs that contain higher quality "junk" bonds, The higher the rate in any market the more riskier the investment

The 14% (and sometimes higher) return in Colombia is for CDs, or savings (apparently).  Very, very little risk.

The 14% (and sometimes higher) return in Colombia is for CDs, or savings (apparently). Very, very little risk.
-@mtbe


The risk enters the picture if the investment exceeds

the protected or insurance limit.


Before acquiring a CD, find out the maximum amount

the government or an entity authorized by the

government .. will insure against potential loss.


cccmedia

@mtbe everything has risk especially 14% even in the US,

Backed by the full faith in Who?

Even the most secure creditor in the world is having trouble finding

buyers for the debt

@mtbe everything has risk especially 14% even in the US,
Backed by the full faith in Who?
Even the most secure creditor in the world is having trouble finding
buyers for the debt
-@lunamick

The risk relatively low, compared to junk bonds previously mentioned. 

Last week I got a Bancolombia CDT for 14.97% effective annual rate. To get that rate the CDT had to be opened virtually through my Bancolombia savings account and the term had to be 359 days.


I am a happy camper in “communist” (LOL) Petro's Colombia with the COP gaining 25% against the USD… because I have a Colombian pension paid in COP … with a CDT now gaining 15% interest. (I'm up 40% over a USD account.)


I don't know of any “capitalist” country USD account with 15% risk-free yield CDT… “Communist” (LOL) Petro's Colombian CDT yield rocks!

@futuroexpat I have a bancolombia account as well, and a Cedula Extranjería. Can I open same CDT?

@ChineduOpara … I would say yes you can. Sí se puede!


The only caveat is the bank took from me a small “retención de la fuente” … so the final interest payment was slightly less (maybe 0.5% to 1% less). Maybe that retention is because my monthly income is in COP? Still a great deal!


It also has to be for 359 days. More days less interest. Fewer days less interest. Most interest possible: 359 days.


The CDT also has to be opened virtually. I went to the bank and requested “asesoria” … so when they called my number a VERY NICE assesor helped me. She set it all up walking me step by step after I logged into my account using the Bancolombia app. Easy peasy! And fun! I love all the opportunities for human interaction offered by Colombian bureaucracy.

Last week I got a Bancolombia CDT for 14.97% effective annual rate. To get that rate the CDT had to be opened virtually through my Bancolombia savings account and the term had to be 359 days.
I am a happy camper in “communist” (LOL) Petro's Colombia with the COP gaining 25% against the USD… because I have a Colombian pension paid in COP … with a CDT now gaining 15% interest. (I'm up 40% over a USD account.)

I don't know of any “capitalist” country USD account with 15% risk-free yield CDT… “Communist” (LOL) Petro's Colombian CDT yield rocks!
-@futuroexpat


This 15% rate doesn't help the common man, such as it is in a "communist" country, as you say.  While it may be good for those that already have money, it's not good for their economy.  It means the wealth gap increases that much more dramatically thanks to Petro, who promised to shrink it.  It means it's much harder for the common man to take out a loan to invest in a corner grocery store, or a mechanic's shop, or a panaderia, or purchase a sewing machine to start a clothing repair shop our of one's home.  The economy and country cannot grow with these rates.  Economical growth has proven to be the primary factor in getting people out of poverty...not any government, unless they get out of the way.


Communism is suppose to help everyone in the country, not just the already wealthy....but that's how it always ends up.


We also have some moneys in CDTs here, and other investments that gained 15% over 6 months.  It's hard to see someone bragging being a "happy camper" when the country's poverty rate, under Petro, is increasing so dramatically. 

@futuroexpat Right now I am unemployed.  Do I absolutely need to prove income before I can open the CDT?

@futuroexpat Right now I am unemployed. Do I absolutely need to prove income before I can open the CDT?
-@ChineduOpara


If you have the pesos, no need to prove income.  We didn't...

Nothing about income was ever mentioned. All I had was  money and a cédula.

@mtbe … bragging? More like celebrating. I am glad you are also getting 15% CDT with Petro as president. Poverty was not the creation of Petro. Presidents who minimized government by privatizing for profit perpetuated poverty. Those days are over.

@mtbe … bragging? More like celebrating. I am glad you are also getting 15% CDT with Petro as president. Poverty was not the creation of Petro. Presidents who minimized government by privatizing for profit perpetuated poverty. Those days are over.
-@futuroexpat

jajaja


Since you brought up politics (the forbidden subject) @futuroexpat , what will be over soon is Petros term, in 3 years, if not sooner. As it is , he is a "lame duck" president, and doesnt have a snowballs chance in Hades of getting his reforms through.


Lucky for you, otherwise your 17% CDT would be worth peanuts, with COP at 10,000 to the dollar with inflation like in Argentina, Venezuela


Socialism has been very trendy, off and on in Latin America, but the results have been horrific.



BTW it is not Petro that sets the interest rates, but the Banco de Republica, the Colombian Central Bank, who operate independently at arms length. If you would follow Colombian current events, it is Petro whao has been trying to interfere, and get them to drop the rates,just like previous presidents, of different political stripes, but it has fallen on deaf ears, as always . As it should, the central bank is supposed to be independent.


Like I said , your investment is far from "secure" as you say, and you just happened to luck out. Enjoy it while you can.


I also suggest you do some reading on basic economics,, espescially Monetary Policy, to see the function of central banks, interest rates, and how they effect the economy and inflation.


In Colombias case , higher interest rates do not make as much a difference to the economy as in North America or Europe, as because the personal debt rate is much lower, being a cash and underground economy, raising interest rates have much less leverage on the economy and inflation. That is why inflation is still stuck at 10 or 11%.

https://www.bloomberglinea.com/english/ … eso-rally/


I hope that if the mods are going to delete the posts , because they are covering politics, they go back and delete the posts  of the biggest perpertrator who started it all, who is in fact, posting a lot of mis-information that cant be backed up with links from reputabe sources.


In fact, reputable sources are saying just the opposite of what he is posting.


BTW it is not Petro that sets the interest rates, but the Banco de Republica, the Colombian Central Bank, who operate independently at arms length. If you would follow Colombian current events, it is Petro whao has been trying to interfere, and get them to drop the rates,just like previous presidents, of different political stripes, but it has fallen on deaf ears, as always . As it should, the central bank is supposed to be independent.

I also suggest you do some reading on basic economics,, espescially Monetary Policy, to see the function of central banks, interest rates, and how they effect the economy and inflation.

In Colombias case , higher interest rates do not make as much a difference to the economy as in North America or Europe, as because the personal debt rate is much lower, being a cash and underground economy, raising interest rates have much less leverage on the economy and inflation. That is why inflation is still stuck at 10 or 11%.
-@nico peligro


Beat me to it....


Interest rates are set high by the treasury, not the administration, to help tame inflation.  Majority of inflation comes from the government spending more than it earns (printing money or spending frivolously with no ROI).  Some of that spending was due to COVID.  But that's been over for almost 2 years now and inflation is still on the rise.

@mtbe If by "Treasury" you meanthe Central Bank-the Banco de La Republica, you are correct.


And yes , thier constitution like any central bank, says they are 100% independent from the goverment administration


With inflation still at 10% to 11%, I imagine interst rates will stay hig for a while.


But what happens to the exchange rate, with or without Petro, is an unknown. In the long run.10 years, the peso has been losing value. The  high interest rates , and knowledge that the Petro regime has no power to damage the economy further, are only thing propping it up recently-

@drpeterjstanton

I don't understand what you're worried about a currency swing if you live in that economy who gives a *** what the dollar does ig  live in Columbia . The gamble is here in the United States. You might not lose your money, but inflation will take it  anytime ***

Moderated by Bhavna 5 months ago
Reason : Political
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@newberce Inflation in Colombia is much higher tahn in the US. 10 to11 %

Year over year decade over decade inflation in Colombia is about 10%, you just have to live with it and make allowances for it.


lpd

Ecuador alternative.


A long-established cooperativa in Ecuador,

23 de Julio, is offering a 10.25 annual return on

CD investments.  Minimum to qualify for this return

is 20,000 US, according to what their Cuenca-based

representative told me in an email.


cccmedia in Quito

@cccmedia That's a pretty steep minimum. I recently opened a CDT with Bancolombia for only 50 million COP. It's locked in at 11% interest.

I took out a CDT last year with Bancolombia for$40m COP, it's due in December for $45m, I'm not greedy, I'm happy enough with that!

@nico peligro 🤣🤣🤣🤣 that was a clever response. 🤣🤣🤣🤣

@cccmedia

       Roll the dice .

I've been living in Colombia since 2021, and during my time here, I've chosen to invest in Certificates of Deposit (CDTs). Like any investment, there are inherent risks such as political instability, foreign exchange fluctuations, or even unexpected bank issues. However, when it comes to CDTs, the risk is comparatively minimal, and I can delve into several reasons to support this claim.


What concerns me more is the prospect of letting my money sit idly in a savings account with a mere 5% interest rate. Given that the (official) inflation rate is a staggering 12% (the real inflation is 30% or more), it translates to a loss of 7% in purchasing power. In contrast, by opting for CDTs, I've managed to secure a substantial 16.2% return. It's a strategic move not just to preserve but to enhance my financial standing amid economic fluctuations. 


Should you have any doubts about the legitimacy of CDTs, I'm more than willing to provide you with the certificate and a detailed breakdown of how the funds are consistently deposited into my bank account each month. I firmly believe in the principle of not working for money but rather having money work for me—a philosophy that has served me well. If you're curious or want more insights, feel free to ask!

Miguel, thank you for posting this. Now you have me curious.  How are these different from a CD or CDs (certificate of deposit), or are they the same type of vehicle?  17% is a phenomenal rate of return, depending on your risk exposure of course. 


Thank you guys for sharing!

Hey Michael,


Absolutely, glad to provide more details.


CDs (Certificate of Deposit) work like this: you lend a set amount to a bank for a specific period (usally an year), and in return, you get a digital certificate with  guaranteed return. The bank, in turn, uses these funds for various loans, supporting businesses and households.


Colombian CDs are government-guaranteed. – and are managed by an independent Agency (called  Deceval).


About the rates, a year ago, I was able to negotiate a 16.2% interest rate. My most recent CD in August 2023 was at 15.57%, since the interest's rate have been decreasing. Interest are paid monthly to my bank account. You don't have to open a bank account with the bank you have the CD.


That said, you may think this impressive, however when you factor in inflation, the real gain is more in the ballpark of 5-6%.


Happy to share more details if needed

***

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