Calculating Investment in the US Vs Leaving Money Deposited in Bank. (Outcome)

To embark on this financial adventure, let’s dive into the nitty-gritty of currency chaos and real estate dreams in three countries where the phrase “economic stability” might be considered more of a punchline than policy. Keep in mind that I am not an expert in exchange rates and do not pretend to be. All the information presented is available online. I am however an expert in real estate. Shall we continue?

The following are scenarios for 3 separate countries and the potential for each of them looking backwards in this market and year of 2024.

Scenario 1: Keeping Money in Local Banks

Bolivia:

• Interest Rate: Let’s assume a conservative 3% annual interest rate.
• Currency Depreciation: Given Bolivia’s economic landscape, let’s say the Boliviano depreciated by about 15% against the USD over the year.
  Initial Investment in Boliviano: $100,000 * 6.86 (official rate) = 686,000 BOB After Interest: 686,000 BOB * 1.03 = 706,580 BOB Converting Back to USD: 706,580 BOB / (6.86 * 1.15) ≈ $89,453

Colombia:

• Interest Rate: Suppose a 4% interest rate in Colombian banks.
• Currency Depreciation: The Colombian peso depreciated by approximately 10% against the USD.
  Initial Investment in COP: $100,000 * 4300 (approx. COP/USD) = 430,000,000 COP After Interest: 430,000,000 COP * 1.04 = 447,200,000 COP Converting Back to USD: 447,200,000 COP / (4300 * 1.10) ≈ $94,074

Argentina:

• Interest Rate: Let’s use an optimistic 40% annual rate due to high inflation, but remember, this is Argentina where optimism in finance is often misplaced.
• Currency Depreciation: The Argentine Peso (ARS) has historically been on a wild ride; let’s assume a 100% depreciation for dramatic effect, though this is a simplified estimate.
  Initial Investment in ARS: $100,000 * 1000 (ARS/USD rate at the start) = 100,000,000 ARS After Interest: 100,000,000 ARS * 1.40 = 140,000,000 ARS Converting Back to USD: 140,000,000 ARS / (2000 * 2) ≈ $35,000

Scenario 2: Investing in South Florida Real Estate

• Annual Appreciation Rate: 6.9%
  Value After Appreciation: $100,000 * 1.069 = $106,900

Comparison in USD:

• Bolivia: Bank = $89,453 vs. Real Estate = $106,900. Benefit: $17,447
• Colombia: Bank = $94,074 vs. Real Estate = $106,900. Benefit: $12,826
• Argentina: Bank = $35,000 vs. Real Estate = $106,900. Benefit: $71,900

Analysis:

• Exchange Rate Fluctuations and Inflation: In these scenarios, the local currencies have taken a bit of a beating against the USD, which significantly impacts the real value of the bank deposits when converted back. Inflation, particularly in Argentina, erodes the purchasing power, making the high interest rates somewhat of a mirage when considering real returns in USD or stable currencies.
• Real Estate Advantage: Investing in South Florida real estate not only provides appreciation but also acts as a hedge against local currency devaluation. The steady appreciation in USD terms offers a clear advantage over banking in these countries, especially in high inflation or devaluation environments like Argentina.

In summary, for a foreign investor from these nations, parking money in South Florida real estate would have been like finding an economic oasis in a desert of currency instability. However, remember, real estate comes with its own set of risks and costs, like finding a good tenant who doesn’t play heavy metal at 3 AM or dealing with the occasional tropical storm. But compared to the financial rollercoaster of banking in these countries, it’s a relatively safer bet.