By James Kwak
If I were Tyler Cowen or Paul Krugman, I would have original insights from my eight days in Bogota, Colombia. But I’m not. So here are just a few random observations:
- Apparently there was a financial crisis about ten years ago because of faulty mortgage products that led to a high number of defaults. To clean up the financial system, the government nationalized about 70% of the banking industry (by assets), and then sold the assets back into the private sector over the next several years. Colombia now has restrictive banking regulations that prevent capital from subsidiaries from being taken out of the country (except for repatriation of profits). As a result, the Colombian subsidiaries of U.S. banks (Citibank, that is) and Spanish banks seem to be doing better than their overseas parents.
- There was an indoor jungle gym in a mall a few blocks from our hotel that my daughter loved — trampolines, slides, climbing thingies, the works. Not only does the thing exist (we were wishing we had one where we live), but we didn’t even have to sign a release first.
- Colombia — or at least the area around our hotel — is able to sustain several times the number of hamburger chains that the United States can sustain. And they look better, too. Maybe Barry Lynn is onto something in Cornered. (Or maybe all those chains are really subsidiaries of the same company.)
Most importantly, I did a little first-hand testing of various ways to pay for stuff. The first weekend I was there, the exchange rate was 1,907 Colombian pesos to the dollar. The rate for exchanging dollars on the street was 1850 (well, in the shopping mall — it might have been a little better on the street itself), or about a 3% fee. The net rate for using an American Express card (that is, the price in pesos divided by the number that showed up on my bill) was about 1840 — about 3.5% (although that is partially offset by my 1.25% cash back). But when I used the debit card from my local bank (PeoplesBank), I got a rate of 1906-1907 — that is, no fee whatsoever — whether I stuck it in an ATM to get cash or used it like a credit card to buy something.
I used to use my Bank of America debit card to get cash out of foreign ATMs, and I recall that every time I used it I would see three lines on my bank statement — one for the cash and two for the fees. So that’s yet another reason to ditch your big bank.
The Baseline Scenario 
hi, james. i’m a regular reader of the blog and i’m from bogota.
i’m glad to hear you were here visiting and learning from our experience. and that you (apparently) had a good time
indeed, our policy to counter our financial crisis was very succesful. the regulations that were put in place were perhaps the main reason that the current world crisis had a much milder effect on colombia
i’m curious, who did you meet to discuss our sitauation and policies?
If you’d gone to Uruguay you could have drank Tequila with Eduardo Galeano at one of the cafes, where “they still have time to lose time” and can ignore the “pettiness of the big”. If I was in James Kwak’s tax bracket, no doubt I would do my best to arrange that. I guarantee Eduardo would be the best tour guide a person could dream of if he had the time to give you (and I bet he would).
No release? No lawsuits? Are they communists do there?
But how are the lawyers supposed to make their money? Lawyers kids need iPhones too!
James, check out the Schwab Bank credit card for an opposite experience with fees, and zero foreign exchange percentage.
Gasp! You mean they implemented a Swedish-style (temporary) nationalization of their big banks? What kind of freedom-hating Socialist hell-hole did you bring your family to?!
Ah, capital controls. I was reading the outrage over at Zero Hedge over the “capital controls” provision of the jobs bill that was recently enacted (HR 2847 Subtitle A). Of course, developing nations have a long history with foreign entities withdrawing wealth from their
coloniescountries.I spent the summer in Colombia about 10 years ago and I recall that much of the dinner table discussion among relatives and acquaintances was around the banking crisis and what to do with the money they had in various banks. I remember thinking that nothing like this could happen in the U.S. I was young and naive in those days.
It sounds as though there has been a proliferation of fast food joints in the intervening years. I hope this hasen’t come at the expense of places specializing in Colombia’s wonderful cuisine.
JA: don’t worry, it hasn’t
I noticed similar conversion costs when my son went to Germany for a summer college program. All my credit cards charged ~ 3% conversion fee, my Chase checking account charged a 3% fee, but my lowly local bank that doesn’t exist anywhere else didn’t charge for currency translation.
Go with Schwab. We traveled extensively through S. America and didn’t pay a single foreign exchange fee.