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.