Squeezing Colossal Returns from Your Retirement Kitty in Costa Rica

Update: It has been almost a year since we opened our Costa Rica CDs. After nearly perfect stability in the U$D exchange rate for a couple of years, the Costa Rica Colon depreciated this year about 3%. Given that our CDs average approx. 11% return, we are still 8% ahead this year and expect to renew the shorter term certificates. 

Our confidence has also been increased in CoopeNae after a recent meeting for investors that we attended (or maybe it was the delicious shrimp, shishkebab and Argentinian wine served afterwards? :) ). For example, they have the highest growth rate among credit unions here and better liquidity than the national banks!

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I've been aware of the enormous interest rates on savings in Costa Rica since we moved here, but until recently was unable to take full advantage of them because spare cash was tied up in other things and, I must admit, the big returns made me gun shy. I mean, there has to be a catch right? Yes, there is a catch, but looking back over our 7 years residing here, with the absolute clarity that 20-20 hindsight provides, I wish we'd taken the plunge sooner.
Typical CD Rates in Costa Rica for Colones Deposits

As you can see from the chart at the right, phenomenal rates can be had on Certificates of Deposit denominated in Colones. Rates for U$D deposits are dramatically less, but much higher than in the U.S., up to 3.5%.

For deposit amounts in five figures or higher, you can actually negotiate slightly higher rates as well. We were able to get 12% with a quarterly payout of interest on one CD.

The highest rates are not universal. These quoted at the right are from a local credit union. Bank CDs yield 2 or 3 points lower and National Banks even lower. The latter provide something like the FDIC insurance coverage enjoyed in the States however.

Which brings us to why you might not want to invest in such CDs:



  • Your deposit is not insured, so you have the (somewhat remote) possibility of losing your principal if it is not made with one of the biggest national banks, e.g. Banco Nacional
  • Colones have in the past been more volatile than the U.S. dollar. However, in the 7 years we have lived here, the Colón has actually risen against the Dollar overall by about 10 percent. The Colón was the #1 most stable currency in all of Latin America last year.
  • Depositing money in Costa Rica financial institutions will in no way relieve you of the U.S. tracking that money thanks to FBAR.
In our case, thanks to re-inspiration from a blog post in Retire for Less in Costa Rica, we decided it was time to try out CD investing here.

We chose to deposit our money in Costa Rica's largest credit union, Coopenae, which provides financial services to the education sector. In other words, they are mostly accepting deposits from and loaning to teachers and education administrators. This sector is in good shape and receives a lot of support from the government obviously, so we feel it is stable. Fitch Ratings shares that assessment by giving Coopenae a Stable/AA- rating.

If, like us, the money you are depositing came from the sale of foreign assets and it is over $10,000, you have to back it up with documentation showing the source of the funds to the satisfaction of the clerk and management. Our documentation gave them a 95% satisfaction rate, but we augmented it with what is known as a Declaración Jurada de Ingresos. This is nothing more than a sworn statement as to the funds' origination done in front of a lawyer for a relatively small fee. With that in hand, the somewhat tedious application process went much more smoothly.

We chose to have the interest paid every three months, which garners a slightly higher interest rate. You can also withdraw it monthly or leave it in for the full term. They deposit the interest to a debit card for which we had to pay a one-time, lifetime fee of 10mil Colones ($19). There are no withdrawal or use fees on that card.

We still consider this financial foray something of an experiment, since no one can predict the direction of the Costa Rica Colón versus the dollar, but things look pretty good for at least the next year. Obviously, we didn't put everything we own into this, so our risk is spread out.

By the way, anyone with a valid passport can open one of these CDs, though I'm pretty sure you would have to show up in person. Could be another great way, in addition to the benefits of medical/dental tourism, to pay for your next trip to the land of Perpetual Spring.

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