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Daily News - 5 June 2002

Senate passes money-laundering bill
The Senate passed the controversial money-laundering bill yesterday. It now goes to the Executive Branch to be signed into law.

Good economic prospects ahead
Minister of Finance Jose Lois Malkum is optimistic about the Dominican economy. He said that last month fiscal revenues surpassed the budgeted revenues by about RD$136 million. He attributed the increase in tax collections to the improvement in the local economy. The government customs department alone had a surplus of RD$114 million during May. 
He said the Gross Domestic Product grew 4% in the first quarter, after showing negative growth during the same period last year. “We are optimistic that the situation has been changing for the positive and if the price of petroleum keeps at the present level of US$26 a barrel, the situation will be good in economic terms,” he said. 
Malkum said the government would postpone until next year a new placement of sovereign bonds. The government placed US$500 million in October 2001. 
“Now we are working on other matters, basically the power issue and the monetary code.” He said the government had a RD$136 million surplus so far this year, which he attributed to an increase in tax and customs collections.

More government loans
President Hipolito Mejia has sent to Congress another US$25 million loan for housing construction. According to Diario Libre, the loan is with General Electric Capital Corporation and other unidentified commercial banks and financial companies. It will have an Eximbank guarantee. The resources will be used to build 4,657 houses. EMG Group of Florida, is listed as the builder. 
Last month, the Senate passed US$180 million in financing for the construction of another 12,000 dwellings. This loan was described by El Caribe newspaper as a discredit to the government, the state and congress.
Yesterday, the Senate also approved financing for the purchase of more vehicles as part of the questionable Plan Renove that distributes vehicles to members of influential cargo and passenger transport unions. For this program, the Senate passed loans for US$84 million for the purchase of vehicles, including 145 trucks, 10 cargo lifts, 884 mini-buses, 210 interurban buses.

Cenantillas warns about government borrowing
Economic group Cenantillas says the future solvency of the government is endangered. In a recent newsletter, the economic think tank of the Pontificia Universidad Catolica Madre y Maestra said that the government has chosen to borrow abroad to carry out its public projects instead of cutting excessive spending. As a result, the increased government spending has absorbed revenues from the significant tax increase that went into effect in January 2001. In the report, Cenantillas expresses concern that the government has lost its ability to generate savings for needed infrastructure, preferring to resort to borrowing abroad.

Business council raises red flag 
The National Council of Business (CONEP) criticizes the government for spending revenues that should have been used to build public works. CONEP says the government is borrowing abroad to meet its capital investment commitments at home. 
CONEP expressed its concern that despite tax revenues having increased significantly, the government continues to borrow extensively to meet its high spending levels.
“We are borrowing in dollars to pay debt in pesos, which leaves us with the problem of having to evaluate whether this policy can be justified from a fiscal point of view given the well-known external vulnerability of the Dominican economy and the limited elasticity of tax resources,” reports CONEP. 
The group also says that some of the tax revenues that should have been available for capital investments have been detoured to meet current expenditures, while the capital projects have been financed with borrowing over and above the sovereign bonds money. 
The report says that if the current spending in the first quarter of 2002 is compared with the same period in 2000 one can see that government spending increased more than capital spending, despite the government having received US$500 million in sovereign bonds money and having increased its borrowing abroad. CONEP qualifies this spending as partially non-productive, padded and superfluous. 
In its report, CONEP says government spending is increasing daily as the government increases wages and hires more employees. From January-March 2000 to January-March 2002 the government hired 42,000 new employees, most of them considered unnecessary.

On the power distributors’ privileges
The Mejia administration is focusing on renegotiating contracts signed by previous governments with power generators. But the government has not addressed the extraordinary concessions this administration gave to the power distributors. 
Former administrator of the Dominican Electricity Corporation (CDE), Radhames Segura had warned of the dangers ahead during the privatization negotiations. In an interview with Hoy newspaper, he is also critical of the Madrid Agreement signed by the Mejia government, saying it grants the distributors and generators enormous concessions, about seven US cents per kilowatt/hour. In his opinion, they should not receive more than 3.5 cents-4.2 cents per kilowatt/hour. 
Segura also criticized the government for authorizing a commission of 2.75% of gross sales as technical assistance. He said this percentage should be no more than 1.50-1.75% of net profits to encourage the distributors to become efficient. He said the 2.75% commission is a scam. 
He called the concessions the government granted to Spanish company Union Fenosa a “monstrosity.” 
Mario Mendez, economic editor of Hoy newspaper, writes that the power distributors are reaping US$215-US$307.2 million in excess billing as a result of the advantages given to them by the government. This translates into Dominican consumers paying one of the highest power rates in the world. 

Ban on used clothing imports
The director of customs, Vicente Sanchez Baret has announced that used clothing can no longer be imported into the DR. This comes after the government had approved the operation of two free zone companies, Worldwide Clothing and Globo, which were authorized to import packs of used clothes for export to Haiti. Sanchez says the suspension will be maintained until it can be determined how these companies are using the clothes that do not qualify for export. 
Local clothing manufacturers say that most of the clothes classified by the free zones find their way back to the DR through a long legal and illegal distribution network that they say involves customs agents, the military and hundreds of small-time Dominican and Haitian entrepreneurs. The Dominican market is already flooded by the illegal import of packs of clothes destined for donation to indigent Haitians.
A law dating back to 1945 prohibits the import of used clothing but this commerce has been going on for years and has been gaining in volume, as reported recently in El Caribe. The increase has led local manufacturers to complain about unfair competition. 
David Cortes of the Association of Jean Manufacturers said the competition has forced the closure of 90 companies that manufactured jeans. Of 150 companies in operation in 1998, only 60 are left and production is down 70% due to the used clothing coming across the border from Haiti.

Police captains jailed
Two police captains have been incarcerated, accused of torturing a young robbery suspect. Officers Luis Sanchez Mejia and Ramon Antonio Marte Reyes were sent to the civilian justice system after the Police Chief accepted a recommendation from an internal police commission that investigated the claim. The officers face a sentence of six months to two years in jail. Police Chief Jaime Marte Martinez has said that he would not tolerate police brutality.

One girl drowned, another missing
Torrential rains across the nation led to the drowning death of 11-year-old Sonia Chalas, in Fantino (Cotuí) in the northeastern province of Sanchez Ramirez. She was trying to cross a river and got swept away. A 12-year-old girl is also missing in the same area. In Santo Domingo, major street flooding occurred. 
The rains have been on and off for the past two weeks. 
Widespread cloudiness and scattered thunderstorms in the northwestern Caribbean. This activity is primarily associated with an upper-level low and a weak surface trough of low pressure.

Factory workers poisoned by fumes
Fifty women working in the BJ&B factory in Villa Altagracia were overcome by fumes from resin used to repair the roof. The laborers, mostly women, had to be hospitalized at the Villa Altagracia Social Security Hospital. Three of them were sent to the Salvador B. Gautier Social Security Hospital in Santo Domingo, where they were kept under observation until they recovered. The BJ&B factory employs some 1,800 workers, mostly women. The Ministry of Labor is investigating the case.
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