A couple of years ago there was a lot of interest, or at least intrigue, in a couple of suspicious, online, mexican-based banks offering deposit rates comfortably above the 10 percent mark.
We spotted a bank called Capital Bank of Mexico (archived deal shown below) offering 12-15% APY to American deposit consumers which right off the bat seemed like a scam. And although this institution ended up not being a trustworthy one, there were and still are outlets for investing safely in Mexican bank CD’s.
Today, however, the interest rate environment in North America and around the globe is far different, and by ‘far different’ I mean drastically lower. While practically all of these Mexican based online banks have dried up, you can still invest in Mexican bank deposits with yields significantly higher than those found here in the US.
After stopping by EverBank, the leading US-based bank in serving foreign bank deposits to US consumers, we found a couple respectable short term deposits using the Mexican Peso. As of February 2013, consumers can lock in either 3 month or 6 month CDs featuring APY’s of 2.0%.
Read through the risks associated with investing in foreign currency CDs and if you decide to use EverBank read their foreign currency deposits terms and conditions carefully.
[Go to EverBank's Foreign Currency Deposit Center]
While these accounts are FDIC insured against losses stemming from insolvency from the bank, they do not protect you against currency devaluation during the duration of your deposit. I know it’s weird to think of a bank CD being FDIC insured AND having the potential to lose your principal, but that is the general risk associated with any foreign currency CD.
Here is a snapshot of the last 4 years average exchange rates (Peso to dollar):
As you may or may not be able to tell from the graph above, the Mexican Peso has been relatively stable against the dollar over the last 12 months (ranging from 0.07 to 0.796 pesos to the dollar).
Mexican CD’s may be a good play currently since they feature a solid rate of 2 percent and have such short maturities (3 to 6 months). And it’s certainly a good thing in terms of mitigating risk anytime you can combine a stable currency with a short-term deposit.
Here’s some interesting data from the World Bank chronicling the history of Mexican deposit rates from the late 1970′s to 2010 (latest published data from the World Bank).
Additional Economic Statistics to Consider:
Capital Bank of Mexico CD Review from Archive:
[The following deal is no longer available.]
Investors Be Ware!
2009 – Capital Bank of Mexico offers potential American customers CD rates yielding an APY of anywhere from 12-19%. Even when compared to other foreign currency CD rates these are still suspiciously high.
The catch? Well, for starters Mexico doesn’t have any sort of FDIC equivalent to protect your investment against an economic/bank collapse. They do, however, state that throughout their 75 years of existence no American (or non-American) investor has EVER lost their principle and/or interest accrued.
Needless to say, their has been much interest surrounding these certificates of deposits and their accompanying rates, so if anyone has any experience with the bank, please share!
