About Investments in the Dominican Republic
Airlines ~ Hotels ~ Resorts ~ Visas ~ Government & Culture ~ Car Rentals
Banking ~ Investments ~ The Stock Exchange ~ Real Estate & Homes
 
The Dominican Republic.Net
~
Just about the Dominican Republic.......
 
 
You are now in the Investment ~ Banking Section
To visit other topics in this section, Please use the Index Bar

 
Click Here
~
The Original Dominican Republic CookBook is Here!
Finally ~ A collection of all your Favorite Recipes
The First Easy to Use Dominican cookbook !
 
~
ORDER THE New DOMINICAN REPUBLIC REPORT ! 
Dominican Republic Real Estate & Apartments
Tax Free Banking & Investments - Where to Find the High Returns!
Company Incorporations & Residency
Cost of Living Information Plus Much More.......
 
 
~
INDEX
~
Investing and Securities in 
The Dominican Republic
Go Back to The Main Index &  Navigate the Rest of The Site  
You are currently in the general reference section.     To see the complete list of other topics and information  ~ use this link 
 

Geography, Size   
Climate and Location Where is the Dominican  
Republic ~ How many  
People live there ~  
What is the country like?  
  

Money & Currency 
About the Dominican 
Peso & The Central 
Bank of the Dominican 
Republic 
 

History and Culture  
Learn about Domincan  
History ~ Some facts and interesting things about 
the country's history ~ 
Did you know that 
Santo Domingo was 
the first European 
Settlement in the New 
World? 
  

Government & Politics  
Structure of the  
Government ~ The  
Legislature and other branches of the  
government 
 

The Legal System &   
Dominican Courts 
A review of the nation's 
legal and courts system 
 

Trade, Imports, Exports and Duty   
Information 
A quick reference guide 
regarding Imports & Exports information 
 

About Free Zone   
Manufacturing 
Some general information about setting up operations in one of the duty free trade or manufacturing zones 
 

The Regions, Cities and Towns 
A listing of the regions, cities and different towns in the country  
 

Go Back to The Main Index &  Navigate the Rest of The Site  
You are currently in the general reference section.     To see the complete list of other topics and information  ~ use this link 
 

Geography, Size   
Climate and Location Where is the Dominican  
Republic ~ How many  
People live there ~  
What is the country like?  
  

Money & Currency 
About the Dominican 
Peso & The Central 
Bank of the Dominican 
Republic 
 

History and Culture  
Learn about Domincan  
History ~ Some facts and interesting things about 
the country's history ~ 
Did you know that 
Santo Domingo was 
the first European 
Settlement in the New 
World? 
  

Government & Politics  
Structure of the  
Government ~ The  
Legislature and other branches of the  
government 
 

The Legal System &   
Dominican Courts 
A review of the nation's 
legal and courts system 
 

Trade, Imports, Exports and Duty   
Information 
A quick reference guide 
regarding Imports & Exports information 
 

About Free Zone   
Manufacturing 
Some general information about setting up operations in one of the duty free trade or manufacturing zones 

Many investors have come to us asking about Commercial Paper.  Naturally they are interested in the high yields we have spoken about, but often ask, What is Commercial Paper?  For those clients that are unclear about certain investment terms, I am providing an explanation that should make things somewhat easier.  
 
Bonds or Longer-Term Fixed Income Investments

For starters lets discuss what are known as fixed income investments.  Fixed income normally refers to things like bonds, certificates of deposit or any type of investment whereby you are basically putting your money on deposit for a fixed period of time and for a fixed rate of interest.  A bond is a type of fixed income investment and is in essence a loan.  When you purchase a US government bond, you are loaning the government your money for a fixed time period and for a fixed rate of interest.  When you purchase a corporate bond, from a company such as Pepsi or IBM, you are loaning that corporation your money in the same fashion.  The term Bond is used when talking about a loan that is greater than one or two years.  Most bonds are issued for five years, ten years, twenty-years and so on up to thirty years. When watching the financial news you will often hear the term US government long bond.  They are talking about 30 year US government bonds, which currently pays about 5.50% at the moment.   

Interest on a bond investment is normally paid every six months to the investor. At the end of the bond time period or when it matures, the principal amount is returned to the investor.  As an example, if you invest $100,000 in a five-year bond at 6%, you will receive two interest checks every year, for a total of $6,000 every year that you own the bond (one check every six months for $3000).  After five years, your $100,000 is returned to you.  Interest on a bond is normally paid out every six months, but there are some bonds that pay interest monthly.  It can be difficult to purchase long-term bonds in the Dominican Republic because many companies are fearful about borrowing money at a high rate for a long period of time.  Just like investors who are looking for a mortgage, they do not want to be locked into a high interest loan if rates should go down in the future.  Locking in a high rate over a long period of time is very good for the investor, but is not favorable for the entity borrowing the money. 
 

Commercial Paper or Shorter-Term Fixed Income Investments

Commercial paper is in effect a very short-term bond, usually for any period less than one year.  When talking about commercial paper investments, we are in fact discussing a type of short-term investment for 30 days, 90 days, 180 days or any time frame that is one year or less. Most investors that understand a bank certificate of deposit can relate that to a commercial paper investment.  The difference of course is that you are loaning your money directly to a company and not to the bank.  In essence it can be said that you are by-passing the bank because in reality banks that offer money market accounts or savings accounts are purchasing commercial paper with depositors funds and keeping the spread between what they really earn and what they pay the depositor.  

Most of the commercial paper issued in the Dominican Republic is for a minimum of 90 days.  Investors that make this investment are in effect loaning their money to a company for a short-term need.  Interest is usually paid monthly with a commercial paper investment and at the end of the 90 days, the principal or initial investment is returned to the investor.  When we work with our clients that are interested in the higher yields found in Dominican Peso Investments, we have made special arrangements with the brokers we work with so your monthly interest is automatically credited to your Dominican Peso Bank Savings Account.  This way this is no hassle cashing your monthly interest check and you always have access to your money via your ATM card (which can be used worldwide at any bank machine that is a member of PLUS or CIRRUS).  The commercial paper can also be registered in your name directly or if you prefer, in the name of your corporation, foundation or trust.  
 

Why are the Rates Higher in the Dominican Republic?

Money is a commodity, like oil, silver, bananas or coffee.  When it is in short supply, the price goes up.  The price of money is interest rates and when it is in short supply, interest rates are higher.  This is the situation in the Dominican Republic and elsewhere.  Many companies either need money for a short term need or they do not want to issue longer term bonds and would prefer to continuously re-borrow every 90 days at the prevailing rate.  The thinking behind this is that the company will not become locked into a very high rate on a long-term basis if the interest rates come down.  Part of this business philosophy has come about because rates in the Dominican Republic have in fact come down from a high of over 30% a few years back. 

Some companies do have a need for US dollars in order to trade with the United States.  Since there are often not enough dollars in the banking system, companies must attract individual investors by offering a better rate of return than can be found elsewhere.  

The interest rates of course will change weekly, depending upon the market and demand.  
 

This Information has been prepared and compiled by Mr. John Schroder as a service to his clients.  Mr. Schroder maintains an office in Santo Domingo and in Panama.  His firm provides assistance with company incorporations in the Dominican Republic, Offshore incorporations in other tax haven jurisdictions, Residency in the Dominican Republic and Panama, Assistance with Banking and Investments, Real Estate matters and company representation. To contact his firm, please click below: 
 
 

Click Here to Send an Email