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FTA and Artibonito project okayed President Hipolito Mejia and Canadian Prime Minister Jean Chretien met in Ottawa yesterday to discuss the pending free trade agreement with the Dominican Republic. Costa Rica already has a bilateral trade agreement with Canada and the plan is that talks advance quickly so that the Dominican agreement is ready before the summer of next year. As reported in El Caribe, Mejia announced that Canada and the Dominican Republic would appoint a commission to seek funding for the US$35-million Artibonito River reforestation project. The plan’s goal is the conservation of the most important water source of Haiti. | |||
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US$80-million IDB loan for education The Inter-American Development Bank announced the approval of a US$80-million loan to support the first phase of a program to improve equity in basic education in the Dominican Republic, with a special focus on schools and students in rural and marginally urban areas. During the four-year first phase of the program, the Dominican Republic’s Education Department will introduce new education models tailored to the needs of disadvantaged children in its rural and marginally urban areas, where school achievement indicators lag behind those of urban areas. The IDB plans to support a five-year second phase of the program with a $100-million loan to expand coverage of these new education models across the country with evaluations of the first phase’s results. One of the components of the new program will seek to improve education in rural areas, where grade repetition and dropout rates are higher than in urban areas, and will employ multi-grade schools, where children in different grade levels are taught by a single teacher in one classroom. During the past decade the IDB has supported the Dominican educational reforms with 2 loans totaling $81.3-million. The program succeeded in expanding the universality of basic education, raising the rate of graduation and reducing the overall dropout rate. The new loan has a 25-year term, with a 4-year grace period, at a variable annual interest rate, now at 5.39 percent. Funds from local counterparts will total US$9-million for the first phase of the program. For more on the program, see http://www.iadb.org/ | |||
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US$54-million for sports installations Hoy newspaper says the government sent to Congress a US$54.1-million loan project to build or remodel 115 sports courts, 10 track and field facilities and complete 11 court floors in already existing sports centers. Of the total amount, US$42.2-million would be used to purchase sporting equipment in the United States and US$7.2-million to purchase products in the local market. The government will pay US$4.7-million to secure the loan, which will be contracted at LIBOR + 0.85% with 14 biannual payments and a 3-year grace period. The funds will come from the All First Bank of Maryland with the backing of the US Eximbank. | |||
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The foreign debt mirage Andy Dauhajre, economic advisor to the President, recently stated in a newspaper article that the Dominican foreign debt, as of December 2001, stood at US$4.137-million and that the debt since then had settled at US$4.128-million as of September 2002. El Caribe editorializes today to explain why these numbers are lower than expected, speculating that the phenomenon is due to the high proportion of loans contracted by the Mejia administration. Essentially, if the Dominican government borrows from Citibank in New York, the loan is subject to congressional approval and the Central Bank will register it as foreign debt. But if the government secures the same loan with Citibank in Santo Domingo or a US-dollar loan with any Dominican commercial bank, the loan will not be tabulated in the Central Bank foreign debt total. El Caribe says this form of accounting is absurd. The newspaper says that the practice of borrowing dollars from local banks was never implemented by the late President Joaquin Balaguer, but began during the Fernandez government and has increased further since the inception of Mejia’s administration. El Caribe says that the second placement of the sovereign bonds now seeks to borrow millions of dollars in order to pay off the millions of dollars borrowed previously from Dominican commercial banks. It also criticizes the governments, although fiscal revenues have shown a surplus, for having borrowed in US currency from local commercial banks to pay for current spending - such as the Christmas bonus salary, power bills and unbudgeted public works – creating a consequential negative impact on future budgets. El Caribe urges new legislation be approved requiring governments to obtain congressional approval for domestic loans of foreign currency, thereby forcing the acknowledgement of these loans in the foreign debt calculation and avoiding what it calls the present “unpleasant financial illusion.” | |||
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Emam Zade on the new bonds Economist Frederic Emam-Zade writes today in El Caribe that the explanations provided by the government to justify the placement of US$600-million in sovereign bonds have no solid base. He focuses on three of the arguments: Firstly, US$215-million, or RD$4-billion pesos, would be used to correct the negative flow of capital that is expected for the year 2003. The argument for this strategy is that the new debt will cost less than the old. Emam Zade says the government does not explain why there is a negative cash flow nor how the bonds will solve this problem. Secondly, the government says it will use US$135-million to force interest rates downwards by paying off half the debt to the commercial banks, which stands at over RD$5.2-billion. However, it does not explain how this injection will reduce the interest rates. Emam Zade says that interest rates are determined by the markets and that reducing debt will have no effect. Nevertheless, he believes that if the government does not pay off its debt, an increase in interest rates can be expected. According to Emam Zade, the government should also explain why the interest rates are presently so high and argues that to borrow dollars to pay debt in pesos makes little economic sense, especially now that the dollar is climbing and the peso continues to weaken. But, he speculates, it may have political justification, given that 2003 is a pre-electoral year, with presidential elections slated for May 2004. Thirdly, Emam Zade says that the government claims it would use US$150-million to strengthen the exchange market, into which the Central Bank has had to inject US$550-million of its reserves so far this year. Emam Zade says, however, that the government does not explain how this injection will contribute to any stability of the exchange market. He says that exchange markets react to supply and demand and an increase in the stock of reserves will not increase the flow of dollars in the market itself unless these reserves are intended to be injected into the market directly. He doubts that the government wants to send out the message that it expects the peso to continue its downward spiral. | |||
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Dominican wins in NY judicial election Dominican-born Diccia Pineda-Kirwan has become the first Dominican woman ever to be elected judge in Queens, New York City, as well as the first Hispanic woman to be appointed. Pineda-Kirwan, 47, is presently a legal secretary for Supreme Court Justice William Glover. In the New York Judicial Election she won the countywide race on the Democratic ticket. In another first for Hispanics, Tom Perez (D), a Dominican American civil rights lawyer and educator, won the open seat in the Montgomery County Council at Large, District 5 (State of Maryland), becoming the first Hispanic ever to sit on the council. Perez said his victory was a victory for the Latino community and for the progressive movement in Montgomery County. He won with 77% of the vote, not 76% as reported yesterday. See http://www.washingtonpost.com | |||
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American Eagle selling Executive Air American Eagle president Gary Elmer announced the company’s intent to sell Executive Air back to its founder, Puerto Rican tourism industry businessman Joaquin Bolivar, by March 2003, as reported by John Collins in Caribbean Business. Executive Air operates as American Eagle and flies to several Dominican airports. Ellmer said that American Eagle flights to the Caribbean out of San Juan will be maintained. The deal includes a marketing partnership, under which Executive will continue to provide feed traffic to American. However, Executive will now use its own designator code, rather than American’s, to and from San Juan and the American hub of Miami. In Santo Domingo, American Eagle announced it would increase the frequency of its flights during the Christmas season to La Romana, Punta Cana and Puerto Plata airports originating from San Juan, Puerto Rico. | |||
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