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Daily News - 18 November 2002

Official Bavaro Summit Statement
The Presidents of Latin American countries were in Bavaro-Punta Cana on Friday and Saturday for the XII Iberoamerican Summit. All statesmen attended, with the exception of Mireya Moscoso of Panama, Fidel Castro of Cuba and Alejandro Toledo of Peru. Puerto Rican Governor Sila Calderon also attended the summit as an observer. Press reports say the event went off without a hitch, as the visiting statesmen danced merengue and enjoyed Dominican cuisine and the respite of the lovely Bavaro beach. 
To read the Official Bavaro Statement (in Spanish), see http://www.listin.com.do/cumbre/cumbre41.htm

Uruguay and Ecuador presidential visits
Presidents Jorge Batlle, of Uruguay, and Gustavo Noboa, of Ecuador, remained in the Dominican Republic for official visits following the XII Iberoamerican Summit held in the beach resort area of Bavaro over the weekend. Batlle is scheduled to return to Uruguay on Thursday and Noboa will depart on Tuesday. Of the 21 visiting statesmen, 16 returned to their respective countries after the summitís close on Saturday, and 5 remained for short-term vacations in the Punta Cana-Bavaro area, including Batlle and Noboa, who traveled to Santo Domingo. 

Legislation to protect consumers?
Senator Jose Tomas Perez (PLD-Santo Domingo) said he would present to Congress a bill that would modify the General Electricity Law so that users may sue the distributors if they are billed in excess for power consumption. Perez said that the consumers would be able to file suits against the companies if their claims are not settled within a period of 15 days. 
At present consumers are obliged to suffer long hours spent in distributorsí offices, and invest many days of their time to successfully place a claim and see results. The only advantage is that the companies credit the undue billed power but are not penalized for the overbilling which happens all too frequently. The current tedious and time-consuming process to file a claim for overcharges drastically reduces the number of consumers who bother to seek restitution for any discrepancies.
Senator Ramon Alburquerque (PRD-Monte Plata) said that influential government officers are backing the power distributors and have impeded the efforts of the Superintendence of Power to lessen the abuse on consumers. He said that the government did not adequately fund the Superintendence of Power in order for it to develop effective consumer protection programs. Alburquerque says that the power companies work against the prosperity of the country.
Speaking on the Aeromundo TV program, Alburquerque said that all sectors should unite to take the power distributors to the courts, so that when there is an accumulation of verdicts against the companies these may prefer to leave the country. 
Despite his position today, Alburquerque voted earlier this year in favor of extending the power distributorsí contracts from 5 to 20 years.

Banco Reservas to handle bond money?
The Executive Branch bill sent to Congress for the approval of the sovereign bonds issuance proposes that the money be managed by the Banco de Reservas, the governmental commercial bank. Originally, it was said that the Central Bank would control the funds. The first US$500-million placement in 2001 was managed by the Central Bank. 
As reported in Hoy newspaper, former governor of the Central Bank, Guillermo Caram, said that it would be a major error to entrust the money to the Banco de Reservas, as the Central Bank is more likely to exercise greater restraint with the use of the money. 
Caram explained that involving the Banco de Reservas would create a rush of surplus liquidity that would send the exchange rate soaring. He said that given the lack of confidence, there would be a rush to convert pesos into dollars and the capitalized companies would be among the first in line to use the pesos to repatriate their earnings into hard currency. 
Caram believes that the ideal situation would be for the government to forgo making any bond placement, instead exercising fiscal discipline and reduce spending. 
The bill proposing the new placement of the bonds establishes that the government and the Banco de Reservas need to execute financial strategies that minimize the carry-cost that the operation will generate. The bill proposes that US$135-million be utilized to reduce the short-term debt of the central government with local banks, US$315-million allotted to make payments on the short-term foreign debt and that US$150-million be held in reserves by the Central Bank to protect against external shocks. 
Mario Mendez, economic editor of Hoy newspaper, writes that the sovereign bonds in the hands of the Banco de Reservas would mean a significant increase in the governmental commercial bankís capacity for indebtedness. The current bill practically grants the Banco de Reservas a free hand in the management of the money. 
Mario Mendez feels there is a contradiction in the touted use of the funds and the entity chosen to carry out the proposal. It is worthy noting that when the first sovereign bonds were slated to be distributed to specific projects, the Central Bank was chosen. Now that the bonds are to be used for Central Bank-related matters, such as the payment of foreign debt and the increase of international reserves, the Bank is put aside and the Banco de Reservas is chosen instead, writes Mendez.

The Monetary Code
El Caribeís editorial today says that the changes made by the senators to the Monetary Code diminish the original intent, which was that of modernizing the code itself. The editorial writer points out that the revisions made by the senators restore to the President the responsibility for choosing and removing the Central Bank governor. 
The bill passed in 2 readings, with the votes of 24 government party senators. Senators for the PRSC and PLD were absent. 
The bill has a 10 year-history in Congress, as the banking sectors have exercised, or not exercised, their influence. 
The government now seeks to have the bill passed by the Chamber of Deputies before 21 November, using the argument that the Interamerican Development Bank would grant the country a US$29-million loan for the restructure and modernization of financial institutions if passed by that date. 
But the El Caribe editorial points out that the loan would not be granted unless the leading monetary officer of the nation is granted independence from the Executive Branch.

Heritage Foundation gives DR low ranking
Standard & Poorís raised the long-term local and foreign currency sovereign credit ratings of 'B+' to 'BB-', as the country prepares to make a second sovereign bond placement of US$600-million before the yearís end. 
In the 14 November release, Standard & Poorís likewise affirmed the short-term local and foreign currency sovereign credit ratings at the 'B' level set on 5 September 2001, prior to the first placement of US$500-million.
Standard & Poorís also revealed that a long-term foreign currency sovereign credit rating of 'B+' has been affirmed and placed on positive outlook. Short-term foreign currency sovereign credit rating was raised to 'B' from 'C', long- and short-term local currency sovereign credit ratings changed to 'B+' and 'B', respectively, from 'SD' June 12, 2001. 

DR credit rating raised
The Dominican Republic received bad grades from the Heritage Foundationís Index of Economic Freedom published by The Heritage Foundation and The Wall Street Journal. The Dominican Republic was ranked 85th among 155 countries, however in the specific region of Latin America and the Caribbean, it found itself ranked 19th out of 26. Overall, the DR ranked below the Central American countries of El Salvador, Costa Rica, Panama, Belize, Guatemala, Nicaragua and Honduras.

The DRís general unfavorable standing is attributed to the countryís poor record in trade policy and below-average scores in monetary policy, foreign investment, banking/finance, wages/prices, property rights, regulation and its black market. The DR received the worst possible score in trade policy, which takes into account tariffs, non-tariff barriers to foreign trade, import quotas, and licensing. The country received above-average scores for fiscal burden and government intervention - ironically the two areas on which domestic analysts are most critical. 
The Index of Economic Freedom is a practical reference guide to the world's economies. It features country-by-country analyses and the most up-to-date data available on foreign investment codes, taxes, tariffs, banking regulations, monetary policy, black markets, and more. 

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