When it comes to investing in Costa Rica, foreigners are usually at a disadvantage: They are often targeted by dubious investment schemes involving real estate, precious metals, agricultural commodities, wagers, and other high-risk and downright shady proposals. What makes this situation even more deplorable is that those who perpetrate investment scams against expats are often their compatriots.

COOPENAE, a powerful credit union with branches across Costa Rica, has been attracting expats over the last few years with frank and plainspoken investment advice and superb customer service. This highly-rated financial institution draws strength on the basis of its roots as the premier credit union for teachers and government employees in Costa Rica.

Since COOPENAE primarily caters to Tico investors, it is easy to imagine that their investment offerings are conservative; and, for the most part, this is the case. However, this does not mean that their instruments are not profitable or well-managed. One of the secrets of plain-vanilla investing in Costa Rica is that these traditional financial instruments can actually make money here; in fact, a few expats here made quite a bit of money with COOPENAE’ during the dark days of the Great American Recession.

Here are three straightforward investment vehicles offered by COOPENAE (except the mutual funds). Expats can invest as long as they are able to open an account (meaning that they need a residency cedula to do so). As with any other investment, the three instruments below present certain advantages and disadvantages; it is up to the investor to find which adjusts to their expectations and lifestyle:

Savings Account in Costa Rica

Pros:

• Low initial deposit.
• Account may be kept in colones, dollars and even euros in some cases.
• No withdrawal restrictions.
• Funds can be access with an international debit card.
• Annual interest rates will vary according to the amount deposited and are paid periodically.

Cons:

• Interest rate paid is below the inflation rate.
• To obtain higher rates, account holders would need to increase their balance. This does not make sense when other instruments such as certificates of deposit can yield better earnings.
• Should the account become inactive, credit union managers may close it.
• Some accounts may be assessed a monthly fee if they are inactive.

Mutual Funds in Costa Rica (not offered by Coopenae, but important to note)

These instruments pool together many depositors who agree to mutually invest in a focused portfolio.

Pros:

• Easy to buy; easy to sell. These instruments are similar to equity securities (stock) or exchange-traded funds (ETFs).
• They do not require a major investment amount.
• Investors do not have to worry about making decisions since the funds are managed by professionals.
• Close scrutiny by financial regulators.

Cons:

• No fixed rate of return, only variable.
• Investors can buy and sell shares, but they cannot influence the decisions made by fund managers.
• These funds cannot make any guarantees as to their potential performance, which is solely dictated by the expertise of the managers and market conditions.
• These are not stable instruments; for example, if the portfolio is focused on real estate, lack of sales or non-payment of rent could affect performance from one day to the other.

Certificates of Deposit (CDs) in Costa Rica

These instruments are essentially physical or virtual contracts that allow payment of a fixed interest rate by the bank. Typical terms are set in 30-day increments.

Pros:

Fixed interest rate of payment.

• At the end of the term, interest rate can be compounded and reinvested to maximize performance.
• When available, virtual CD contracts in Costa Rica can pay more interest since they require less management expenses.
• Interest can be paid every 30 days, or every 90 days, or whenever the agreed term comes to an end.

Cons:

• Closing a CD account in Costa Rica may forfeit the interest paid and may even result in a loss after penalties for early withdrawal are assessed.
• The terms are firm. Should interest rates rise in the midst of a CD contract, account holders will not benefit unless they acquire a different CD.
• Investors must generally wait until the end of the term to see real profits.
• Interest rates paid tend to be lower for 30-day CDs. One-year CDs is where the money tends to be.

Author’s Note: The foregoing information has been provided by Mr. Asdrubal Zamora of COOPENAE. He is in charge of investments and routinely helps foreign investors all across Costa Rica with earning sound profits from their investment money. He can be reached at [email protected]