Deposit A/c's Abroad - Brazil/S.Africa/Turkey

Mr_Roger_Bongos

I was wondering if anyone had an experience of opening a term-deposit account abroad in a developing country?

The countries in the title have interest rates of 8.75%/ 7% / 8.25% respectively and from a quick google, these rates (or close to them) are offered through term deposit accounts with various banks.

I understand the risk arising from the country defaulting on payments and i think all 3 are in debt?, but my logic would be;

- Assuming i could get a reliable institution - this would be guaranteed, low risk, reasonable return for say 5-10% of my portfolio.

- This wouldn't be very long term (unless say Brazil returned to pre credit crunch strength) so i'd review in 12-18 months when the term was up.

- As an afterthought, has any country ever defaulted/collapsed financially before/after getting the world cup or olympics? I realise the Olympics isn't for 6 years but normally they finance to cover preparation costs.
I also know that only the city of Rio will host the games but from a report on the sydney games the post-games effect on the country is positive.

Thanks for any advice or opinions!

soddy1979

Apologies if I'm stating the obvious but have you thought about how changes in exchange rates will effect your return?

Mr_Roger_Bongos

soddy1979 wrote: »

Apologies if I'm stating the obvious but have you thought about how changes in exchange rates will effect your return?

Yeh i'd considered the changes, but depending what way i think it's going i'll probably hedge with futures. But i've also noticed that in certain institutions you can hold USD or EUR as the bank can use both in daily operations.

pirelli

Mr_Roger_Bongos wrote: »

I was wondering if anyone had an experience of opening a term-deposit account abroad in a developing country?

The countries in the title have interest rates of 8.75%/ 7% / 8.25% respectively and from a quick google, these rates (or close to them) are offered through term deposit accounts with various banks.

I understand the risk arising from the country defaulting on payments and i think all 3 are in debt?, but my logic would be;

- Assuming i could get a reliable institution - this would be guaranteed, low risk, reasonable return for say 5-10% of my portfolio.

- This wouldn't be very long term (unless say Brazil returned to pre credit crunch strength) so i'd review in 12-18 months when the term was up.

- As an afterthought, has any country ever defaulted/collapsed financially before/after getting the world cup or olympics? I realise the Olympics isn't for 6 years but normally they finance to cover preparation costs.
I also know that only the city of Rio will host the games but from a report on the sydney games the post-games effect on the country is positive.

Thanks for any advice or opinions!

Halifax offer 7% a year.

Mr_Roger_Bongos

pirelli wrote: »

Halifax offer 7% a year.

Had a look on their website there but couldn't see anything that good.

Do you have a link?

ixus

Mr_Roger_Bongos wrote: »

Yeh i'd considered the changes, but depending what way i think it's going i'll probably hedge with futures. But i've also noticed that in certain institutions you can hold USD or EUR as the bank can use both in daily operations.

You're looking at a carry trade IMHO, e.g. the japanese NZ carry trade. Your problem is you're dealing with volatile economies/countries. Better off using 5% of your deposit to "gamle" and preserve your wealth.

JTMan

pirelli wrote: »

Halifax offer 7% a year.

On up to 1,500 EUR in a current account, if certain conditions are meet.

This is not what the OP is looking for.

soddy1979

Hi OP,

I did a quick analysis of this and came up with the following:

Based on:
Cross EUR/ZAR exchange rate of 10.8704: 10.8821
Deposit of ZAR 93,283.58 for twelve months at 7.2%
Matures as ZAR 100,000

Deposit:
Original Outlay in Euro = 8572.20
Amount of Euro at maturity = 9199.29
Return = Euro 627.09

Hedge:
Cost of hedge = Euro 107.52
Margin required at 50:1 = Euro 183.99

Other costs:
Wire to South Africa = Euro 15
Wire to Ireland = Euro 15

Effective Rate = 5.71%

It will make you 1.99% or Euro 170.48 more than a 1 year fixed term deposit in Anglo Irish Bank. You also have a problem if your hedge gets stopped out because of exchange rate volatility. I took the FX rate from XFOREX and the deposit rate from Standard Bank of South Africa.

FortalezaOwner

you wont be able to open bank account in brazil unless you live there and have visa