High Interest of banks and cooperatives deposits. What are the risks?

Greetings to all!
My friend moved to Ecuador for a residence permanent and told about bank deposits. In some banks 8% per annum, and for example in a cooperativos - JEP Cooperariva 8,5%, in a Policía Nacional 9.25%.
I was very surprised by these %, because deposits in dollars USA!
But in the USA, there is no such %.
A friend says that deposits are guaranteed by the state (up to 30.000 USD).

Can you share your opinion on the account of the banking system and the economy of Ecuador as a whole?
Is there any trick/risc here? Should there be any risks once such a high percent on deposits? What are the reasons?
For example, a high risk of State Default or something else.

Best regards.

Somewhat risky:
https://tradingeconomics.com/ecuador/rating

"Ecuador has defaulted on every Global bond it has issued since debuting in the international markets in 1997 - but its US$650m 9.375% maturing in December could mark the turning point."

https://www.reuters.com/article/ecuador … DF20150206

Financial mismanagement by the government leads to high interest rates. Some see opportunity, others see a risk.

Agree with above comment, but it may be worth it to some.  For example, [email protected]% = a little more than $200 a month.  That basically covers my monthly living expenses (unless JEP and/or the government fails dramatically) without depleting my savings.  As long as you keep a reasonable amount of backup funds in a more secure account outside Ecuador, I think it can be a great deal if you are younger/not wealthy/more liquid.  Also important to note is the tax on funds leaving Ecuador, so it's only a great interest rate if you plan on staying in Ecuador.

About banks. My local says he can withdraw 500 dollars cash a day from his local bank using an ATM. Will a local bank do the same for me using a debit card from the US?

Depends on the bank and ATM.  Before I moved here I had the withdrawal limit raised (anticipated buying a house and car).  Using a Banco del Austro ATM I can withdraw up to my daily limit, but they only allow $300 per transaction, but you can take your card out, put it back in and make another withdrawal immediately.  Luckily, there's no fee using my CapitalOne Card, so other than taking a touch more time, it isn't a problem.  Now, whether there's money in the ATM... that's a whole other problem (usually only during holidays/festivals).

lebowski888 wrote:

Somewhat risky:
https://tradingeconomics.com/ecuador/rating

"Ecuador has defaulted on every Global bond it has issued since debuting in the international markets in 1997 - but its US$650m 9.375% maturing in December could mark the turning point."

https://www.reuters.com/article/ecuador … DF20150206

Financial mismanagement by the government leads to high interest rates. Some see opportunity, others see a risk.

I am reviving this 2019 thread because the opportunity for Expats to obtain 9-percent-plus interest on insured CD's at 'cooperativas' is a juicy subject worth exploring .. and I am learning more about such investments as I research online and contact Ecuadorians who manage or supervise such investments.  The subject is explored in some depth on the "Too Good To Be True?" thread that I initiated on this Ecuador forum this month (September 2021).

The defaults the Dude pointed out were not directly related to the performance of insured co-op funds.  The low credit rating was for the nation of Ecuador, which has defaulted on bonds, not for the co-ops and COSEDE, which have not defaulted on their insurance commitments to Expat and Ecuadorian investors.

High interest rates may largely be the result of shutting out foreign banks from offering accounts to depositors in Ecuador, not necessarily mismanagement by the Ecuadorian government.  Apples and oranges.

cccmedia in Quito

antialiased wrote:

Also important to note is the tax on funds leaving Ecuador, so it's only a great interest rate if you plan on staying in Ecuador.

This aspect has been changing.

According to press reports, Ecuador has cut in half the 10 percent previous tax on moving funds out of the country.

There are conflicting reports as to whether this tax is being totally eliminated as of 2023.  Please post if you have a reliable source al respecto.

As for "it's only a great interest rate if you plan on staying in Ecuador"... that's debatable.  One can leave Ecuador and still keep accessible funds in an Ecuadorian bank or financial institution.  Money can be obtained from abroad without 5% penalty via ATMs or by using debit cards associated with Ecuador-based accounts.  It's possible that no penalty is assessed on small to moderate individual charges and withdrawals of cash accessed in such manners.

A tricky wrinkle is whether an Ecuadorian bank or co-op will be able to get one a replacement debit card in another country in the era of The Situation and the failure of Correos del Ecuador postal service.

cccmedia in Quito

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