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Daily News - 5 April 2001
Central Bank Governor: "The worst is over"
The Governor of the Central Bank, Frank Guerrero Prats, said yesterday at the American Chamber of Commerce monthly luncheon that "the worst is over." He said that now efforts are needed to maintain the economic growth the nation has sustained for the past several years. He said in the first trimester of the year the international reserves were US$373 million - a level that he says allows for sufficient liquidity in a time of low inflation and a stable exchange rate.
Guerrero also predicted that foreign investments to the tune of US$1,100 million will be made in the DR this year. He broke this investment down into: Energy, US$351 million; Communications, US$300; Commerce & Industry, US$179 million; Tourism, US$117 million; Finances, US$88 million; Free Zones, US$51 million; and Others, US$15 million.
He said the Central Bank is working gradually towards unifying the money exchange markets. Sectors have complained that the exchange rate does not reflect the lesser value of the peso. Guerrero said that preliminary GDP data shows the economy has absorbed the shock of the fiscal adjustments made at the start of the year and is now in a process of recovery.
"Ladies and gentlemen, the worst is over," said Guerrero. "Now what we have to do is design and implement consistent monetary and fiscal policies that guarantee an attractive climate for domestic and foreign investment and stimulate growth and job creation," he said.
Guerrero pointed out that the current debt at US$586.3 million, or 17.5% of the National Budget, is a heavy burden on the economy. He said the government is paying on its foreign debt almost as much as it is spending on education and much more than for public health.
He said the authorities are studying several solutions to the problem. They include issuing sovereign bonds or issuing a global bond to replace the restructured debt that dates back to 1994. The idea behind the latter is to reduce interest rates and achieve better payment terms. A third option is to restructure the debt with the Club of Paris.
Guerrero said, "The principal objective of the monetary policy in 2001 is to inject the economy with the necessary liquidity, promote a drop in interest rates and keep inflation under 8%."
President says economy is on track
President Hipolito Mejia said yesterday the Dominican economy is on track. He said that since the start of his administration, the economy has undergone significant changes and is on target. He commented that the performance of the economy in the first months of the year is normally sluggish, but later it picks up. Regarding complaints from businessmen, he said that they do not know about the economy. "They only know about selling things," he said.
Senate passes Electricity Bill
The Senate passed the second reading of the Electricity Bill. The Bill had been in the Senate for seven years. It was sent to Congress during the last Balaguer administration and stalled there due to the many interest groups involved. The bill would regulate the operations of distribution companies and the power generators. It also creates a new enterprise, the CDEEE, or Corporación Dominicana de Empresa Electrica Estatal, which will encompass the government's 50% share in the distributors and generators, plus the hydroelectric and electricity transmission operations. The bill was passed by 17 senators during yesterday's session. It now passes on to the Chamber of Deputies for study.
The Senators also voted to extend the contract of the private distributors from 10 years to 17 years, despite general complaints about the service delivered by these companies.
Two foreign companies to explore new mines
Miguel Peña de los Santos, executive director of the governmental Corporate Mining Unit, announced yesterday that following a tender, Newmont Mining Corporation and Mali Mining Company were chosen for two new mining explorations. Newmont Mining will be in charge of an area in Pueblo Viejo, Cotui for which it bid US$9.4 million. And Mali Mining will take over the exploration of an area in Neita, Restauracion for which it bid US$1.5 million.
Tio removed for scandal at Bienes Nacionales
Legal advisor to the President, Guido Gomez Mazara, announced the firing of Victor Tio Fernandez for a scam involving his department in an alleged irregular sale of government property at the Avenida Charles De Gaulle. Also fired were: Jose Manuel Peña, in charge of auctions; Sandino Grullon, head of the Region II of the Land Deeds Plan; and Freddy Vargas, supervisor of Bienes Nacionales.
Gomez said they will be brought to justice for falsification and destruction of official documents and other charges. The Attorney General's office published an advertisement today in the press listing the irregularities found at the department. The report confirms the lack of internal controls at Bienes Nacionales.
New employees impede department's true work
The director of the Programa de Medicamentos Esenciales (Promese), Dr. Juan Francisco Benoit, told Hoy newspaper that the large numbers of people the government appointed to that institution, without consultations regarding the need for that personnel, has generated a financial crisis. Promese is in charge of distributing generic and low cost medicine to government-run pharmacies at public health centers throughout the country. The director of Promese says his budget is RD$20 million, of which RD$11 million now has to go towards paying the new employees.
Itabo promises power at a lower cost
Kevin Manning, general manager of Generadora Itabo, has announced a US$125 million expansion to their generating capacity using charcoal in the steam-powered units located in Haina. This is expected to enable the company to produce power at a lower cost. Generadora Itabo is the Gener/Chile and Coastal Power Generaton/USA consortium that won a US$177.8 million bid for the Itabo power plants. AES/USA recently took over Gener/Chile. AES is the second largest power distributor in the DR.
Builders say high interest rates are killing their business
Spokesmen for the Dominican Chamber of Construction warned of layoffs and shutdowns in the construction business as the industry reacts to the new rules of the game. Diego de Moya, president of the organization, told Hoy newspaper that the high interest rates and the new tax structure is hurting business.
He said the government forces "involuntary financing" on its public works contractors by delaying payments and that also hurts the sector.
De Moya said the increase in the prime lending rate from 16 to 32% over a period of less than a year is unmanageable. He said the high interest rates on home loans make buying a home off limits for most. He said that home mortgages have gone up from 18 to 24-26%. "With interest rates like that, only a very few can buy a home," he said.
De Moya attributed the past bonanza in the sector to the macroeconomic stability, cost of labor, controlled inflation and prime rates of 16-22%.
Adozona alerts against duplication of pension plans
The Dominican Association of Free Zones alerted Congress that there is a duplication in pension plan income for employees. Adozona says it backs the proposed Social Security Bill, but warns that if Congress passes it without modifying the severance pay stipulations included in the Labor Code, there would be a duplication of employee benefits. The association said that would penalize the competitiveness of free zone operations. It warns that the double burden on companies could be detrimental for workers as some companies would be forced to layoff staff and others would close.
Who should be in charge of trade negotiations?
El Caribe newspaper dedicated the front page of its economics section today to the debate over who should be in charge of trade negotiations. The Mejia administration took this responsibility away from the Ministry of Foreign Relations and assigned it to the Ministry of Industry & Commerce. The newspaper complains that the Ministry of Industry & Commerce is excluding the private sector and others who participated in past negotiations. It says all such dealings are now being handled exclusively by Minister Angel Lockward.
El Caribe newspaper would prefer the Ministry of Industry and Commerce to administer trade agreements and promote commerce and investments while negotiations should be left to the team at the Ministry of Foreign Relations because of the political implications.
"Trade negotiations are not exclusively a technical issue, rather they are a political issue with a high technical component," says the newspaper.
AIDS increases in the Caribbean
A report in El Caribe newspaper says there have been 11,079 new AIDS cases reported in the DR so far this year. The article says the high numbers make it imperative that the DR secures favored nation status as some African nations and Brazil have done. The favored nation agreement would allow for the local manufacture of generic medicine to treat the virus as well as for discounts in the price of brand name medicines. At present, it costs US$12,000 a year to treat an AIDS patient.
Ernesto Guerrero, the nation's leading AIDS expert, says 2% of the population of the Dominican Republic, Bahamas and Guyana are infected by the disease. The infection rate increases to 6% in Haiti. He feels the high rate of infection in the Caribbean merits special treatment similar to what Africa and Brazil have received. Official statistics show a total of 117,140 reported cases of AIDS in the DR as of 2000.
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