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T& T bank buys Mercantil The Monetary Board has approved the sale of Banco Mercantil (formerly the seventh largest bank in the Dominican Republic) to the Republic Bank of Trinidad and Tobago, which has bought up 94.16% of its new acquisition. All local investors in Mercantil lost their assets – totalling RD$1.5 billion - in the transaction, because the shares were rendered worthless when Banco Mercantil lost all its capital. Banking Superintendent Julio Cross explained that the case of Banco Mercantil differed from Baninter in that the shareholders were the victims, not the culprits. The sale was made public at a press conference by Central Bank Governor José Lois Malkum yesterday. The buyer will inject RD$1.25 billion into Banco Mercantil, which will be reinforced by a guarantee of RD$6 billion from the Central Bank to cover the bank’s so-called “defective assets.” Likewise, in 2003 the Central Bank had issued advances, rediscounts and other financial facilities for RD$3.1 billion to the bank. Founded in 1937, the Trinidadian Republic Bank operates in several Caribbean countries. Malkum hailed the sale as a step towards increased trading relations between the Dominican Republic and Trinidad and Tobago. The English-speaking island is an oil exporter, and imports certain products from the Dominican Republic. RBTT is the largest bank in Trinidad & Tobago. Malkum went on to defend the stability of the rest of the Dominican banking sector, reminding those present that a delegation of 40 more international auditors would be joining those already present in an evaluation aimed at strengthening the banking sector. “Once this is through we will have the most transparent and healthiest banking sector in the world,” said Malkum. Hoy newspaper reports that governmental assistance to failed banks has cost Dominican taxpayers RD$71.8 billion as of 8 August, up from RD$3.7 billion at the same time last year, according to official statistics. This includes the rescue of Baninter, Bancredito and Mercantil banks. |
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Bear, Stearns & Co. is positive on RBTT move The US brokerage firm, Bear, Stearns & Co., has issued a favorable report on the Republic Bank of Trinidad & Tobago’s acquisition of Banco Mercantil. In a report dated today, the Wall Street firm states: “Dominican government is three for three in terms of disposing of troubled banks. After dictating the liquidation of fraud-ridden Baninter, some of whose assets and liabilities are being acquired by Scotiabank, and the sale of ailing Bancredito to Banco Profesional, the Central Bank announced yesterday the sale of Banco Mercantil to Republic Bank of Trinidad and Tobago. “Mercantil had run into liquidity and solvency difficulties as a result of deficient management and suspect transactions. The Trinidadian bank agreed to pay some US$37 million for 94% of Mercantil's shares in exchange for a US$175 million Central Bank guarantee designed to cover Mercantil's "defective" assets. Republic's payment should suffice to cover Mercantil's current capital deficiency, and the current shareholders would forfeit their entire investment in Mercantil. The authorities believe that with the sale of Mercantil, a murky chapter in the history of the Dominican banking industry will be finally closed. A system-wide IMF audit set to begin next week should confirm that, as the government has reiterated time and again, no evidence of additional gross irregularities in the banking system has been identified. We view the sale of Mercantil as further confirmation that the authorities' efforts to cleanse the banking system of fraudulent activities and administrative deficiencies remain on track, and believe that it should help to restore credibility in a beleaguered system. All in all, good news for the Dominican Republic.” |
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Fait accompli Orlando Jorge Mera, the director of the Dominican Telecommunications Institute (Indotel), tells Hoy newspaper in an interview today that he feels one of the main objectives of his work at Indotel has been accomplished. He explained that the authorities closed more than 200 illegal broadcasting stations as part of the general reorganization of the system. “The radioelectric spectrum was saturated by frequencies that were neither licensed nor had due authorization to operate, and for the past three years we worked to eliminate those stations,” he said. Following the closures, the frequencies were realigned, said Mera, as he praised the Dominican Association of Radiostations (Adora) for its support to the effort. Jorge explained that the telecommunications sector contributes 9% to the Gross Domestic Product, and investment this year reached US$700 million, up from US$600 million last year. |
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5% tax to Chamber of Deputies President Hipólito Mejía has said the controversial new 5% tax on exports must through Congress, for it is to be “constitutional”. This decision comes in the wake of intense pressure from the business community, which has seen fit to take the issue to court. Other sectors, such as the hoteliers’ association Asonahores, have urged members to boycott the surcharge. The new tax was imposed by Presidential decree last month and was received with great dismay by exporters. Mejía met with the heads of the upper and lower chambers, Jesus Vásquez Martínez (PRD-María Trinidad Sánchez) and Alfredo Pacheco (PRD-Santo Domingo) and informing them that the proposal would be sent to the Chamber of Deputies in the next few hours. Meanwhile Supreme Court Chief Justice Jorge Subero Isa responded to the attack by Attorney General Victor Céspedes Martínez, saying that the issue required detailed examination and that a concrete decision had yet to be made. “We will reply to the Attorney General via the ruling we declare,” said Subero Isa. The Attorney General’s stance was criticized by Finjus (Foundation for Justice and Institutionalism), which also questions the legality of the 5% tax. Finjus executive director José Alfredo Rizek said the conflict was unnecessary and that his foundation is distressed by the threats directed at Subero Isa by the Attorney General. Rizek felt the process had been unduly delayed by the Attorney General’s office and that from his point of view the Supreme Court had been courteous in its dealings with the office. Miriam Díaz, coordinator of the civil society movement Participación Ciudadana, and another signatory in the effort to have the tax declared unconstitutional, agreed that the process should be swift, and that although Céspedes Martínez had the right to protest, the final decision lay with the Supreme Court. |
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5% tax reveals weaknesses Hoy newspaper’s main editorial comments that the imposition of the export tax reveals the “deplorable weak side” of the country’s institutionalism. The legal process has been undermined by the President’s arguments in favor of the tax, and this has forced the business sector to attack the government where it is most vulnerable – by taking it to the Supreme Court. Other weaknesses come to light when it arises that the Attorney General is doing his utmost to hinder the process. This is not the only case in which the Attorney General has shown partiality, continues the editorial, and mentions PRD deputy Radhamés García Ramos, accused of trafficking illegal Chinese immigrants and whose case has also been held up by the Attorney General’s office. In the past the business sector has kept quiet about similarly “unconstitutional” Presidential decrees when it has suited them. Lastly, says the writer, “There should be no suggestion that this tax is a requirement of the IMF. Such a tax would never be imposed in the United States, so how can an international institution in which the US is a prime mover impose something they themselves would never stand for?” |
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Government considers alternative to 5% tax Diario Libre reports that the government is contemplating an alternative to the much debated 5% tax on exports. The newspaper reports that Central Bank Governor José Lois Malkum said the government could replace it with another one that would tax the yield of savings certificates issued to private banking in the Central Bank. A source at the Central Bank told Diario Libre that the rationale would be to penalize speculative financial activities instead of production. The newspaper estimates that the tax on the yield could produce RD$3.6 billion, which is RD$600 million more than the tax on exports would have generated.This option is being contemplated in the event the Supreme Court rules that the export tax must go to Congress to be endorsed, and Congress subsequently rejects its implementation. Recently, the PPH faction of the PRD lost its battle to secure the re-election of Rafaela (Lila) Alburquerque (PRSC-San Pedro de Macorís) in the Chamber of Deputies. Alburquerque had been one of the Mejía government’s strongest supporters, passing almost all bills sent to the Chamber by the Executive Branch. Without her at the helm, it is yet to be seen whether the Chamber of Deputies continues to vote in favor of Mejía’s proposals, such as the controversial 5% tax on exports that has met with such widespread rejection from economists and business sectors alike. |
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A matter of interests Federico Cuello, one of the country’s leading trade negotiators until early this year when he was removed to appease US trade negotiators, writes today in El Caribe about what trade talks are all about today. “Developed countries preach free trade but practice protectionism,” he states, explaining that their interests are clearly to foster international trade and investment while guarding their own vulnerable sectors by implementing subsidies, tariffs, farm quotas, and antidumping measures, among others. Cuello asks why the DR cannot replicate this reality. “Our industry needs to export in competitive conditions,” writes Cuello, who when referring to FTA talks with the US says it looks like tariffs will be increased to be gradually dismantled over a period of five years, and that rules of origin will be modified so that Dominican exports will be required to have higher levels of aggregate value obligatorily produced with US-made materials. Cuello wonders whether our exporters will thus be able to compete, now that China will not have the constraint of quotas. Regarding the pharmaceutical industry, he says that administratively local manufacturers have been prevented from sourcing inputs from the most competitive suppliers, despite being legally able to do so, all in the name of pleasing US trade negotiators. Who benefits? Ailing Dominicans or the multinationals? he asks. Cuello closes with this conclusion: “To emulate developed countries would oblige our negotiating team to promote the above, as well as other interests, in a balanced way. But can representation of a country that includes lawyers of pharmaceutical multinationals, foreign citizens, officers with conflicts of interests between their private business and public functions, and persons with well-known corruption track records be able to do so?” |
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Tourism guarantees DR development Hoteliers’ association Asonahores president Johnny Bernal has said that the tourist industry should be managed as a “national project” because it represents the “shortest route to the economic development we strive for.” He was speaking at the opening of the XVII Asonahores Trade Show at the Hotel Dominican Fiesta in Santo Domingo. Citing the encouraging statistics on income generated by the tourist industry, Bernal remarked that what tourists spend in the Dominican Republic had amounted to RD$80 billion over the last year, despite it having been “a lean year” for the economy in general. The trade show was launched last night and will be open to the public until Sunday 31 August. |
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Chamber of Deputies multi-million peso phone bill In the latest stage of his swoop on overspending in the lower chamber, new Chamber of Deputies president Alfredo Pacheco has cancelled 224 cellular phone accounts apparently being used by private individuals and paid for out of the official budget. Pacheco also demanded that users return all handsets. Former president Rafaela Alburquerque had been assigned no less than 31 phones, many of which were being used by family members and other individuals such as her security guards with no relation to the Chamber of Deputies. Other users include the widow of late PRD leader José Francisco Peña Gómez, Peggy Cabral, and former PRD deputy, Fausto Liz. The total phone bill, which includes cell-phones and land lines, totals RD$6.5 million, and a payment agreement will have to be sought to prevent Codetel from cutting the service. Pacheco discovered debts of RD$25 million when he took up his post as president of the Chamber of Deputies last week, with only RD$287 million in the coffers. A final report on the recovery of assets is due next week. |
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21,500 have more than one cédula The Central Electoral Board (JCE) elections director, Gilberto Cruz Herasme, has revealed that 21,500 Dominicans have been found to be in possession of more than one cédula (official identity and voting card), and that 175,000 more do not appear on the JCE electoral list, despite being in possession of one. Cruz Herasme said that such a number of voters with duplicate cards “posed a threat to electoral security.” Of the 175,000 missing from the rosters, 75,000 are deceased; the rest include those who have no voting rights, such as members of the armed forces and foreign residents. Meanwhile, Listín Diario reports that the JCE’s computer network has suffered a virus attack, forcing them to disconnect the board’s official website. Last month the JCE site was hacked to display scathing messages critical of Hipólito Mejía. |
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President inaugurates public housing Despite yesterday's torrential downpour, President Hipólito Mejía inaugurated a public housing complex – Residencial Mauricio Báez – in Santo Domingo’s Villa Juana neighborhood. The project includes 19 five-storey blocks with 141 apartments and 101 commercial units. Some of the people housed there will include those evicted from the slum areas in the district. There is also an apartment block for teachers who work in the area. One of the beneficiaries was weightlifter Wanda Rijo who won a gold medal at the recent Pan American Games. The total cost of the housing project was given at RD$205.7 million of state funds. |
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School year begins Monday The new school year begins on Monday, but many state-run primary and secondary schools have not yet completed the registration process. Hoy reporters visited schools in several Santo Domingo neighbourhoods and were met with scenes of inefficiency and repeated delays. In many cases there are simply not enough places for pupils wishing to register, and teachers and principals interviewed stated that there was an urgent need for more schools. One teacher explained that many parents were transferring their children from the private schooling system into state schools as a result of the economic situation. In some cases the delays in preparations had arisen because the school premises had been used for the Pan American Games. On a more positive note, Listín Diario reports that the Education Ministry has provided 8 million school textbooks for disadvantaged school children. IMF agreement on the table The International Monetary Fund’s board of directors will today be studying the Dominican proposals for an agreement, announced Central Bank Governor José Lois Malkum. The governor hopes the board will grant the final stamp of approval on the agreement by tomorrow. The IMF directors were originally due to have sealed the deal last Wednesday, but lengthy discussions about the situation in Argentina reportedly bumped the Dominican proposal off the agenda, postponing it until today. The government hopes to receive a loan of US$1 billion aimed at compensating for the effects of the Baninter collapse earlier this year. |
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PRD hopefuls press for plebiscite option The seven PRD presidential pre-candidates opposed to President Hipólito Mejía’s re-election ambitions have rejected the President’s proposal that the party’s official candidate be selected at a convention. The seven, Rafael Abinader, Hatuey de Camps, Milagros Ortiz Bosch, Rafael Suberví Bonilla, Enmanuel Esquea Guerrero, Ramón Alburquerque and Rafael Flores Estrella, are persisting in their call that the party decide whether to support the principle of re-election through a series of three plebiscites of the party membership. |
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Buyers of illusions? The main editorial in El Caribe describes the surge of optimism shared by most Dominicans in the run up to every presidential election. “In political terms, we Dominicans are buyers of illusions,” which is invariably followed by disappointment. The expectations people have of their government, says the writer, will go on being unfulfilled as long as interest groups continue to prioritize short-term interests at the expense of the stability of state institutions. Some pessimists, the piece continues, believe these weaknesses to be inherent and insoluble. “We at El Caribe,” however, “think that this pattern can be broken and that with political will we can build a long-term development plan, backed by substantive laws… no matter which political party is the current tenant of the Presidential Palace.” The writer denies that they seek any form of homogenous thinking, but rather for more common ground to be found. In conclusion, “A long-term development plan combined with a social commitment will mean that we no longer have to wait for a political messiah, who comes offering us paradise. This will probably prevent us from having to go to the Wailing Wall on a regular basis.” |
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Dominican soldiers arrive in Iraq The Dominican army’s contingent sent to work on reconstruction projects in Iraq has moved into its new base in the central-southern city of Diwaniya, where they will replace 200 US marines who had served there since the end of the war. The newspapers carry reports from Spanish news agency EFE, which quotes one of the Dominican soldiers, a Second Lieutenant Pimentel: “It’s hot, but we are happy to be here to help the Iraqi people. The troops are highly motivated, it is a great experience and a great honor for us to relieve the American troops.” The 299 Dominican soldiers are serving in Iraq as part of an international brigade from Central American countries and Spain. The central-southern region has so far been the most peaceful part of Iraq, with hardly any attacks on coalition forces, despite the fact that it shares the same problems as the rest of the country: insecurity, water and power shortages and other deficiencies. Another Dominican soldier, Private Santana, told the reporter that “the difficult thing is not the heat [45 degree centigrade temperatures], it’s being so far from our families.” |
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