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Daily News - 14 August 2002

President Mejia address slated for 15 August
President Hipolito Mejia will speak to the nation tomorrow regarding his first two years in government. The Presidential Palace announced that Mejia would review the first two years in government and outline plans for the next two years. The speech is scheduled for 8 pm.

RD$90 billion budget for 2003?
Listin Diario reports on the government budget for next year increasing 22%, from RD$74 billion to RD$90 billion. Luis Ernesto Perez Cuevas, director of the National Budget Office, said the government had estimated revenues would be RD$73.9 billion this year, but they have revised the forecast to RD$74.5 billion. A source told the Listin Diario that the budget includes RD$5 billion in foreign fund sources.

The deteriorating exchange rate
Central Bank Governor Frank Guerrero Prats confirmed that the peso has been declining steadily over the past weeks, losing 20 points to the US dollar. But he said that while the exchange rate continues to erode, it has kept itself within acceptable ranges. 
El Caribe reports that during the first eight months of the year, the Dominican peso has devaluated 7% in the exchange house market and 6% in the commercial banking market. Meaning that from December 2001 to now, it costs about RD$1.20 more to buy a US dollar. 
The pace of the depreciation is faster than in 2001, when the peso declined 3.8% in exchange houses and 3.3% in the commercial banks. 
Guerrero Prats said that the exchange rate is a true reflection of the peso’s value in the market. 
The dollar recently climbed to a rate of about RD$18.40 in exchange house currency markets. 
The deteriorating exchange rate makes Dominican holidays and free zone labor costs more attractive to foreign buyers. But it also means the government needs to find more pesos to pay for its increasing foreign debt.

Dominicans believe government is corrupt
According to the Hamilton-Hoy newspaper poll, 83% of Dominicans say there is corruption in government. The same recent poll showed that 67% of those who voted for the PRD say there is corruption in government.

Calderon: Ventura is my friend
Presidency Technical Secretary Rafael Calderon came to the defense of Jose Miguel Ventura Asilis, president of the Haina-Santiago train company. Ventura was recently found guilty by a Federal Court in San Juan, Puerto Rico of paying Puerto Rican government officers to be favored with government contracts. 
Calderon said that the decision of the Puerto Rican court would have no effect on the train project because Ventura was not the owner of the project but just a partner in the company.
“I do not see anything wrong in that,” said Calderon when asked about the Puerto Rican court decision. Calderon had earlier described Ventura as a “serious man” when his credibility was questioned by El Caribe journalists prior to the passing of the train concession. 
“He is and will always be my friend, even if he has committed a mistake,” said Calderon. He told the Dominican press “there are others that have done worse things, and nothing has happened to them.”
Ventura Asilis’ company, Consorcio para el Desarrollo Ferroviario Nacional was awarded the US$120 million concession despite having no previous experience in this type of project. The 50-year concession calls for tax exemptions for 15 years, and the state needs to clear the way for the train, which could cost taxpayers nearly RD$1 billion. The head of the governmental commission in charge of preparing the concessions bill, Pedro Delgado Malagon called the construction of the train an impossible dream.
Calderon and Minister of Public Works Miguel Vargas Maldonado signed the train concession for the Dominican government in April 2001. It subsequently passed in Congress despite protests from deputy Pelegrin Castillo who denounced close ties of Ventura with US Ambassador Hans Hertell, a Puerto Rican lawyer. 
El Caribe reports that US Ambassador Hans Hertell had no further comments on his alleged ties with Ventura. Prior to the passing of the train concession, deputy Pelegrin Castillo had said that Hertell was the diplomat to whom President of the Chamber of Deputies Rafaela Alburquerque had referred to as having insistently called to lobby for the passing of the train concession. At the time, the US Embassy issued a note saying that the activities of the ambassador are not only to benefit US companies, but also to promote Dominican economic development.

US$248 million more in loans
Congressmen voted favorably to pass US$248 million more in loans yesterday. This total includes a US$180 million loan for the construction of 13,500 dwellings by the Instituto Nacional de la Vivienda. El Caribe reports that the US$180 million loan had been rejected earlier after the government was notified by Italian authorities of the lack of credibility of the participating Italian companies, AGS and Edi.Mer. El Caribe reports that the contract stipulates that the Central Bank will guarantee the operation, and AGS will receive 2% of the total of the loan as fees and legal expenses, regardless of whether the loan is disbursed or not. 
Yesterday, the Senate signed off on another US$30.2 million loan for the purchase of farming equipment for border provinces. This loan is underwritten with the US government-lending program Eximbank. 
The Senate also passed another loan for US$38.7 million for the construction of a trauma hospital in the Cibao region. El Caribe explains that it’s the same loan underwritten with the US government-lending program Eximbank and the Bank of Miami. The loan originally would have been used to build a hospital for legislators.

Lobbying to change Electricity Ruling?
Hoy newspaper reports that executives of Union Fenosa visited President Hipolito Mejia to lobby for changes in the recently passed Electricity Ruling. Reportedly, the distributors already had secured an agreement for the government to reinstate the power subsidy of RD$40 million a month. The intention behind the privatization was that foreign companies would be more efficient in charging for the service than the government had been. Three years after privatization, the power companies still want to piggyback on the government and have lobbied for the reinstatement of the subsidy. 
Now Hoy newspaper says they want to eliminate provisions that favor the category of non-regulated clients, or large buyers that could purchase power directly from generators, at considerable savings.
Hoy newspaper economics section article says that with the move the power distributors want to consolidate their oligopoly in the power market, enabling them to keep the surcharges that make the cost of power in the Dominican Republic one of the highest in the Americas, if not the highest. The plan is for the power distributors to continue purchasing services and goods from their own affiliates and bill these to the state at inflated costs. 
The new Superintendent of Power, engineer Julio Cross has announced he would not renew the 85% toll penalizing the non-regulated clients that sought to buy directly from the power generators. The toll, irregularly approved by his predecessor, expires in December 2002.

Tax proposal to be studied by next legislature
The government did not reach an agreement with the business sector regarding its proposal to revise the tax laws. The businessmen have held firm in their opposition to the extending of the 1.5% tax on gross sales and the eliminating of ITBIS or value-added tax service deductions. 
The Senate agreed to postpone the studying of the proposal, and would leave the decision up to the new legislature that is sworn in on 16 August. 

New bills pass in Chamber of Deputies
El Caribe reports that the Chamber of Deputies passed a bill that modifies Law 158-01 on the promotion of new tourism poles. 
The Chamber of Deputies also passed a bill whereby the government guarantees it would pay all debts owed to York Caribbean Wind Power Company for installation of a wind powered generation project in Puerto Plata.

More jobs in free zone companies
Jeannette Dominguez, executive director of the National Council of Export Free Zones (CNZFE) said that 5,000 new jobs were created in the first six months of the year. In the first trimester of the year, 15 free zone companies closed, for a reduction of 3,000 jobs. As of December 2001, 175,000 people were employed in the export free zones. 
Dominguez forecasts export volume to decline 7% by the end of the year, as a result of the slowdown in the US economy. Exports for the first six months were US$2.1 billion, compared to US$2.2 billion last year.

Banco Global merges with Banco Mercantil
Banco Mercantil announced the merger with the smaller Banco Global. The Monetary Board of the Central Bank approved the merger in June 2002.

AA announces restructuring efforts
American Airlines, the leading carrier to the Dominican Republic, announced today a series of structural changes to strengthen the company’s position. The announcement comes on the heels of US Airways’s announcement on 11 August that it was filing for Chapter 11 protection. Chairman and CEO Donald Carty said the company must get their costs down in order to compete and must focus on the products their customers want and are willing to pay for. The announced changes include further simplifying its fleet of planes, increased implementation of automation programs, reduction of jobs, hub restructurings and adjusting capacity for the fall and winter. 
Bernardo Then, operational director for the airline in the Dominican Republic, said that the personnel cuts would not affect the Dominican Republic.

France honors Dominican painter
The Ministry of Culture of France announced it would honor Dominican painter Ramon Oviedo with the insignia of the Order of Arts and Letters in the rank of Chevalier. The Ordre des Arts et des Lettres was established in 1957 specifically to recognize outstanding artistic work and the cultural influence of artists and writers in France and throughout the world. The Order of Arts and Letters consists of three ranks (Chevalier, Officier, Commandeur), and is governed by certain age and promotion restrictions.

New basketball record
Jack Michael Martinez set a new Santo Domingo Superior Basketball Championship rebounding record in San Lazaro’s 104-76 victory of over Los Prados last night. Martinez grabbed 32 boards in addition to his 29 points.
Martinez had 20 rebounds at the half, with San Lazaro leading 55-30. He added another 12 to break the previous record of 30 set by US import, Ed Johnson. The 6’8 22-year old would like to be drafted to play with the NBA. He leads the Dominican league with a 25-point and 18 rebound average.
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