Tired of getting 5 1/4 percent on that Passbook accountor 7 1/4 percent on a four-year savings certificate? You can get 18.52 percent on a two-year certificate of deposit in Mexican banks.
And according to advertisements in the papers here, there have been "no bank defaults on this class of securities for approximately 45 years."
You get money back in pesos, which are fully convertible into dollars, the present rate being 22.5 pesos to the U.S. dollar. Thus what you gamble on is that the pesos will still be worth that much when you want to take you money out.
The problem is that despite a rigorous austerity program, the Mexican rate of inflation by official estimates is at least twice as high as U.S. inflation and, unless the rate of Mexican price increases is brought down, there is always the danger of a new devaluation.
But the government here is struggling mightily to recreate confidence and encourage foreign investment - and so far has been successful in that effort since the peso devaluation in 1976 from the old 12.5-to-1 rate.
Experts calculated for The Washington Post that, after paying an average tax of 20 percent on the gross compounded 18.52 percent interest, an American investor would have a net return of about 13 to 14 percent. The Mexican tax would be fully creditable against U.S. Taxes.
To its credit, American Observers note, Mexico never has used capital controls to prevent money from leaving the country, even during the 1976 panicky flight from pesos into dollars.