12 minute read
Finance & Investment .............. | P2-P6
2022
DOMINICAN REPUBLIC
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COLLAGE BY MARICRUZ ROJAS FELIX
A booming recovery for one of the region’s most powerful economies
Even during a pandemic, President Luis Abinader’s policies have brought unprecedented economic growth, reliable governance, legal security, a boost in investments and international trust.
“I am very proud to see that economic recovery is real and that substantial improvements in all areas are already being observed”, says president Luis Abinader, reflecting about his time in office so far. Taking over the country in the middle of a global pandemic has certainly not been easy, but the country’s impressive economic indicators show that the current Dominican government has been doing a remarkable job. The Central Bank’s economic growth projections have been revised upwards, reaching 11% in 2021; the best performance in nearly 30 years, according to IMF’s Latinvex analysis. Similarly, the IMF predicts the country’s GDP will expand by 5.5% next year — making it the highest in the region. “One of our main objectives has been to achieve economic recovery, to reactivate all productive sectors, and to recover and create new jobs, so these are forecasts that speak very accurately about the robustness of our economy”, assures president Abinader.
This has been felt in the manufacturing industry, which registered a growth of 14.3% during the first half of 2021, being the sector that has better managed to overcome the challenges of the pandemic and keep the country active. Part of this success is owed to the public-private strategic alliance which has been promoted by the government since its early days. As president Abinader explains, “the Dominican industrial sector is experiencing an awakening never seen before. Not only have production and exports increased, but jobs are recovering at a very good pace. To ensure that there is a good climate of stability that allows each Dominican to have a job, a strategic union with the business sector has been essential.”
Foreign direct investment has also benefited greatly from the government’s business-friendly mentality. At present, the Dominican Republic is the first destination country for FDI in the Caribbean, with US $3 billion in 2021 and an expected 25% increase this year. Interestingly, these numbers are related to the pandemic-induced change of paradigm regarding the ways in which goods and services are produced, distributed and consumed. Since global value chains have been shortened, bringing production centers closer to consumer markets, what is now known as “nearshoring” has become the preferred choice. In this context, the Dominican Republic represents a very attractive “nearshore” alternative to Asia for U.S. manufacturers, who are now seeking to restructure their logistics and supply chains. “In this sense, our country is in a privileged position, enjoying a geographic location in the center of the Caribbean, with very stable economic foundations and enviable comparative and competitive advantages”, states president Abinader. Furthermore, in order to implement this strategy and stay competitive, the Dominican government seeks to eliminate obstacles to investment and trade. That is why, in close collaboration with national and foreign private sectors, they have launched different mechanisms to ensure transparency and fight corruption. One of them, the Zero Bureaucracy Program’, aims to promote the efficiency of public administration through clear, timely and transparent regulatory frameworks for the simplification of procedures and services. Similarly, the ‘National Competitiveness Strategy’ ensures the reg-
A Regional Hub
The Dominican Republic is a major regional hub with 8 international airports connecting the Dominican Republic with 60 international destinations, 3 cruise ports and 12 cargo ports.
STAFF
Pablo Matosas International Director Gregoire Assellin Project Director, Economic Researcher Carlota Porta Project Coordinator, Creative and Marketing Director Maricruz Rojas Felix Creative Director and Designer Matias Godoy Chief Editor Giangina Orsini Writer Agustin Godoy Lead Analyst Judith Miguélez Díaz Online Content Manager Ayesha Alina Copy Editor Powered by Media Partners
The Dominican Republic has Multilateral Agreements with the United States, WTO members; free trade agreements with CARICOM, CARIFORUM - European Community, and Central America; a Preferential Trade Agreement with Panama; and Bilateral Investment Treaties with Chile, Finland, France, Italy, Korea, Morocco, Netherlands, Panama, Taiwan, Spain and Switzerland.
Carlota Porta Researcher and storyteller. Always thrilled to discover the hidden traits that define a culture and a specific way of living in each place I get to visit. ulation and simplification of bureaucratic procedures. As president Abinader explains, with these programs they foresee “efficiency in all the processes with the consequent elimination of administrative obstacles, the increase of the productivity of the companies, the strengthening of the manufacturing sector and the safe generation of new jobs.” On the other hand, tourism has also started to recover at an impressive rate since president Abinader took over. In the first 11 months of 2021, the country received over 4.2 million tourists, with September to November having record high numbers compared to 2019. The sector received US $550 million in investments last year, and several projects were started or reactivated. Among them, it is worth highlighting the start, after four years of stagnation, of the second phase of the ‘Santo Domingo Colonial Zone Revitalization Project’ which was financed by the Inter-American Development Bank, and the additional restoration of historic areas of Santiago de los Caballeros and San Francisco de Macorís in the northern part of the island. This gradual improvement in tourism and tourism-related works has positively influenced the labor market, which in turn, had a faster
MAIN DATA
Capital: Santo Domingo Population: 11 million people (Worldometer 2021) Life expectancy: 74 years old (World Bank 2019) Gross Domestic Product (GDP): US$ 91.56 million (Central Bank of the RD 2021) 7th largest economy in Latam, Largest Economy in the Caribbean and Central American Region GDP Growth 2021: 10.7% (Central Bank of the DR 2021) or 9.5% according to the International Monetary Fund (IMF) Unemployment rate: 8% (International Labour Organization 2021) Foreign Direct Investment: +US$ 3 billion (ProDominicana 2021) Exports: US$ 11.9 billion (Adoexpo 2021) Currency: The Dominican Peso (DOP) Visitors’ arrival: Estimated at 4.8 million in 2021 (Ministry of Tourism)
Gregoire Asselin Business journalist. I am an adventurous person always on the lookout for a hidden paradise. LUIS ABINADER PRESIDENT OF THE DOMINICAN REPUBLIC
economic reactivation than expected. “Without a doubt, we are leading the growth of tourism in the region. But although I am happy to see the arrival of tourists, what gives me the most satisfaction is the recovery of Dominican jobs”, states president Abinader.
The Dominican Republic had to face unprecedented challenges in 2020 and 2021, but unlike many other countries its government’s timely and business-savvy economic policies have guaranteed that the country not only recovers but thrives. According to president Abinader, “Despite having experienced times of great stress, the Dominican Republic is one of the most powerful economies in the region. We live in a climate of enviable social peace and security and we work with the business sector in our public-private strategy to create the necessary conditions for foreign investment and sustainable economic growth.”
TABLE OF CONTENTS
1. Finance & Investment .............. | P2-P6 | 3. Agro-Industry ............................... | P7 | 4. Ports & Logistics ........................ | P8-P10 | 5. Construction ................................. | P10-12 | 6. Tourism ............................................ | P13-P15 | 7. Culture & Development ...........| P16 |
Pablo Matosas International Director. International relations specialist, journalist, negotiator, dreamer, father, husband and passionate entrepreneur with over 15 years of experience in worldwide markets.
A resilient institution leading the way to economic stability and growth
* Dominican peso coin With timely measures and strategic management, they have managed to turn the country into one of the region’s most attractive business destinations.
The fact that the Dominican Re-
public has one of the biggest, most resilient growing economies in Latin America has a lot to do with the leading role that its Central Bank has played in the last two
decades. Behind the country’s average 6% yearly growth, and its low and stable inflation, there is one person who stands out: Hector Valdez Albizu, Central Bank governor from 1994 to 2000 and again from 2004 until today. “I have been the Central Bank’s governor for 23 years, and in some way that has helped to create an environment of certainty for investors. The main achievement of this institution, during my mandates, has been the efforts oriented to preserve the macroeconomic stability”, says Valdez, noting nevertheless that it has been a long process with some rocky patches.
While in the 1994-2000 period the bank managed to overcome its liquidity management problems and bring economic stability to the country, the main challenges arrived later, between 2003-2004, when a series of bankruptcies translated into a major economic crisis that costed the country around 20% of its GDP. “When I assumed once again the governorate of the Central Bank in August 2004, we had to face the effects associated with the biggest bank fraud in the history of Dominican Republic. It derived into a systemic financial crisis causing capital outflows, inflation, the fall of GDP and negative international reserves”, recalls Valdez.
However, as a testament to its resilience, the Central Bank managed not only to recover, but to achieve some benefits from that crisis. Firstly, 18 regulations of the Monetary and Financial Law were approved, strengthening the prudential norms in the financial system. Those standards allowed the country to reestablish its financial position, and from 2004 onward the regulation and supervision of the Dominican financial system was strengthened significantly. The economy returned to a path of growth and stability, and the trust in the economic agents and international investors were key in that process.
Subsequently, the Central Bank created one of the most efficient and dynamic payment systems in the region, the ‘Payment Interconnection System of Central America and Dominican Republic’ (SIPA), of which has been the institutional manager since 2011. Later, in January 2012, the Central Bank implemented the Inflation Targeting scheme, which has allowed the Central Bank to reduce both the level and volatility of inflation, providing certainty to the private sector.
Likewise, in 2019 the Central Bank implemented a ‘Foreign Exchange Trading Platform’ that has allowed efficient and transparent management of its foreign exchange operations and other financial intermediaries. Currently the Central Bank is strengthening its cybersecurity, and that of the financial system as a whole, by creating a modern Sectorial Center of Cybersecurity Incidents Response (CSIRT) that is already in operation and counts the support of the International Monetary
HÉCTOR VALDEZ ALBIZU CENTRAL BANK GOVERNOR Fund, the Federal Reserve, the State Department of the United States, as well as the State of Israel.
Extraordinary measures for extraordinary times
In order to mitigate the effects of the COVID-19 crisis over households and productive sectors, especially the micro-enterprises and other businesses, the Central Bank responded quickly with monetary flexibilization measures that have proven to be quite effective. The monetary policy rate was reduced 150 basis points, reaching a historic minimum of 3.00% yearly, thus lowering the active interest rate from 13.28% in March 2021 «I have been the Central Bank’s governor for to 9.69% in October 2021. Also, a liquidity provision program of approximately 5.0% of the GDP was almost 24 years, and implemented, which allowed them in some way that to channel about 92 thousand loans has helped to create and debt restructuring through fian environment of certainty for investors. The main nancial intermediaries. Likewise, the Monetary Board arranged a temporary regulatory measure to moderate the impact accomplishment of this over the financial system and institution, during my incentivize access to financing, mandates, has been including to keep the risk classifithe effort to preserve the macroeconomic stability» cations for debtors and provisions in levels prior to the pandemic unchanged. Similarly, the Central Bank managed the disbursement of US$650 million through the VALDEZ ALBIZU International Monetary Fund’s ‘Rapid Credit Facility’ to mitigate the impact of the pandemic over the most vulnerable «In 2019 the Central Bank implemented a Foreign Exchange Trading Platform that has allowed an efficient and transparent management of its foreign exchange operations and of other financial intermediaries»
sectors and to preserve the greatest number of company and independent jobs possible.
As a result of the accelerated recovery of the economy, supported by these monetary and fiscal measures, since August 2021 a gradual return of the resources provided through the liquidity programs is taking place as businesses and households pay their loans at maturity. Now in a second stage, the Central Bank has increased its monetary policy rate by 50 basis points in November 2021; this ensures that inflation converges to its target range in the monetary policy horizon and that inflation expectations remain anchored.
Overall, despite the challenges posed by the pandemic, the Dominican financial institutions have shown their capacity for resilience against adverse shocks. The multiple banks that represent more than the 85% of the assets of the financial system continue to present high levels of solvency (19.6%), and a high profitability (over capital, ROE of 21.2% and over assets, ROA of 2.3% until October), as well as low non-performing loans coefficients (1.4% until October 2021). Such data shows that this sector has actually outgrown its numbers during the pandemic. “We have succeeded in getting banks to reinvest their profits to strengthen the capital base”, says Valdez proudly. Additionally, the private loans have kept their dynamism by growing at around 10%, one of the highest expansions of the region. On the other hand, the deposits are growing at around 12% year-on-year, as a reflection of the liquidity expansion and increase of private savings, which provides enough resources to the financial system to continue satisfying the credit demand in the presence of the economic reactivation process.
3.50%
«After lowering the monetary policy rate by 150 basis points at the start of the pandemic, reaching a historic minimum of 3.00%, the Central Bank recently increased the rate by 50 basis points to maintain expectations anchored»
85%
