President Hipolito Mejia received four ships to be used to patrol the coastal waters of the Dominican Republic. The "Altair", a GC-11, is brand new and just delivered from the Swiftships boatyard in Morgan City, Louisiana. The patrol boats "Bellatrix" GC-106, "Canopus" GC-107 and "Procion" GC-103 were all rebuilt at Swiftboats, a major military contractor for the United States. The reconstructed ships had been in service since 1967. The Mejia government contracted a US$22-million US Eximbank loan to purchase the ships, whose aim is to reduce the number of illegal boat trips and drug trafficking operations to Puerto Rico.
The Listin Diario reports that the government is studying the feasibility of an increase to the ITBIS tax, from the current 12% to 15%. According to a report from the Ministry of Finance, the tax reform is "indispensable" and it lists four possible scenarios. The first would be one in which 15% is applied to everything currently covered by the tax. The second would be to apply the tax to non-educational books and personal-care products. The third option includes these two items, as well as domestic goods and services, non-motorized vehicles, cargo transport, and personal-care services. A fourth option would call for all of the above, as well as processed foods. In a breakdown of the relative impact on each segment of the population, the study indicates that the upper 20% of the people would provide as much as 46.45% of the ITBIS tax, while the bottom 20% would supply only 1.51%, or in the case of the fourth option, 2.08% of the total tax.
Last night the Senate approved a first reading on the 2% tax to be levied on all imports. During the reading, the Senate modified the tax bill to extend its application until 31 December 2004. The senators also voted to legalize the increase of the exit tax from US$10 to US$20. A second reading, however, must take place for the bill to pass to the Chamber of Deputies. The bill states that if the circumstances that brought about the taxes disappear, the President may dismantle the measures. The Listin Diario reports that at the same time, the Senate approved a motion to request the members of the Monetary Board and the economic team of the government to appear before the Senate to explain the latest economic measures adopted by the Central Bank. The 5% tax on exports was in turn sent to the Finance Committee. While approval was given, the reading was not passed without some controversy. Members of the PRD were against the measure, saying it would only result in another burden for the people to bear. Still other members of the majority party called the unwilling legislators "stupid" and "crazy old men", among other insults.
The government, represented by Finance Minister Rafael Calderon, has conditioned any further payments to Cogentrix, the generation facility in San Pedro de Macoris, to the renegotiation of the current contract. According to non-official sources, the Listin Diario reports that the debt owed amounts to US$18 million. Meanwhile, the president of the Senate commission on energy, Angel Perez Perez, told the Listin Diario that next week the Senate committee would meet with CDEEE chief, Cesar Sanchez, in order to study the state-held contract with Cogentrix. At that time, they would try to present some modifications, if necessary. Finance Minister Calderon told the press that the government paid Cogentrix US$41 million two months ago, and that the deal included an immediate revision of the contract terms, along with a study to determine if the facility's operations were viable from an economic and financial point of view. The report that the Commission on the Sustainability of the Electric Sector received was practically identical to that which had been sent to the CDEEE, repeating that there were points to be discussed and that no matter what, the government had to pay Cogentrix US$3.7 million every month, whether it was producing or not.
This week's column in El Caribe by leading economist Pedro Silverio refers to a business without a future. Silverio is talking about the government's recent purchase of Edenorte and Edesur. He opens by saying that the wave of privatization of state-run enterprises began in the 80s, as a result of the mounting evidence then of the government's ineptitude at managing the nation. Government-run businesses tended to become personal fiefdoms and it is this experience that causes many people to look askance at the purchase of the electric distributors, and few have faith in the management capacity of government to better the service. Until now, according to the head of the Cenantillas economic think-tank, there has been no reason to think that the government would act with an efficiency that has not been evident in any other facets of its administration. Within this context, says Silverio, the purchase of the distributors is based on certain suppositions that will be hard to fulfill. The first is that the government would improve the cash flow of the distributors by getting more people to pay their bills. Silverio, however, feels that political necessities will force the government to be "generous". If collections fall to pre-privatization levels, the monthly cash flow would drop by around RD$300 million. Another supposition is that expenses in salaries would be reduced under the new administration. Silverio says that this flies in the face of everything the current administration has done in relation to salaries. The third supposition has to do with the electricity rates. It is common knowledge that the charges are based on an exchange rate that is below what must be paid to the generators and this presents a negative cash flow of US$12 million per month. Government officials have had a hard time swaying public opinion that this was a good deal. "Nor have they convinced the IMF or the international agencies that have begun to give the DR financial moves bad grades," adds Silverio. Finally, the economist says that if the arguments that the government has made a good deal are so obvious, shouldn't it worry the government that nobody believes them?
The Economist Intelligence Unit, in its 7 October news analysis, writes that "given the deterioration of the country's economy, it appears inconceivable that Mr Mejia will win re-election in 2004." EIU says that the Mejia administration "has refused to trim the bloated state-sector payroll to curb spending, eyeing next year's presidential elections." Furthermore, the research arm of the weekly news magazine warns: "It will be left to his successor to pick up the pieces" (or "pagar los platos rotos"). The report focuses on the Dominican Republic's debt load, which it says "is becoming excessive and the government's spending reckless." The EIU also expresses the generalized concern that the composition of the debt has shifted under the Mejia administration from one that was primarily owed to multilateral and bilateral lenders to one that is predominantly owed to foreign commercial banks and other private lenders, with short-term external debt also on the rise. The EIU concurs with JP Morgan's recent report that with the President hoping to secure his party's presidential nomination to run for re-election in 2004, he is unlikely to change his course and impose austerity measures any time soon. As a consequence, it acknowledges that the government could have difficulties meeting commitments made to the IMF.
The seven PRD pre-candidates vying for the party's presidential nomination with the incumbent President Mejia have decided to postpone the nationwide plebiscite that had been scheduled for this Sunday. The new date for the party's national referendum on presidential re-election is now set for Saturday, 19 October. President Mejia praised the move as a step towards a solution to the possible division of the largest political party in the Dominican Republic. The "Big Seven", as they are popularly known, have also rescheduled a campaign caravan from Thursday to Saturday. The Listin Diario reports that the seven candidates agreed to the new dates at the request of the party's PPH faction that is promoting the re-election bid of Hipolito Mejia. Pilar Moreno writes that the Big Seven hope to convince the PPH faction that re-election would harm the party and its attempt to remain in power. According to a poll conducted by the seven, 87% of the country is against Mejia's re-election. As headlines in the El Caribe emphasize, the Big Seven is in turn looking for some flexibility from the PPH faction. Hoy newspaper reveals that while the candidates announced their postponement, they also disclosed that they would go to the Central Electoral Board (JCE) to oppose a motion made by the National Farm Front (aligned with the PPH group) which denies the legitimacy of the proposed plebiscite. The political group is headed by Agriculture Minister Eligio Jaquez, who also happens to be one of the leading guiding lights of the PPH program.
President Mejia rejected two rather negative recent reports yesterday, including that by JP Morgan reported here on Monday. The President first dismissed the poll published in Uruguay and conducted by the Cima Institute, which called his government the "worst-rated" in Latin America and awarded a ranking of "poor performance" to his administration. In reference to the Spanish polling firm, Mejia spoke to reporters. "Don't you remember that these are the same people that said that Medina [his PLD opponent] would get 50% of the vote in 2000? And he got 24%," said Mejia. Mejia next moved on to the JP Morgan report that said the government was giving more importance to the Mejia's re-election than to the IMF agreement. The President responded by saying that the two things were interlinked and that if that was not JP Morgan's interpretation then "so be it." Mejia reminded JP Morgan that in this country, sovereignty is his, not theirs.
Moody's Investor Service has lowered its risk assessment of the Dominican Republic from B1 to Ba2, according to the economic section of Hoy. Mario Mendez says that the persistent question regarding the government's capacity to institute a program of credit stabilization within a political context are what pushed the rating down. The Ba2 rating affects the sovereign bond issuances, as well as the hard-currency ceiling. Deposits in hard currency were downgraded from Ba2 to Ba3, but the outlook was stable, according to the international rating agency. The report reflects the general deterioration of the economic conditions that will have an impact on credit in the medium term. Moody's says that in spite of the international financial assistance, international liquidity is a tense situation. Moody's is the latest of a series of international capital market analysts to express concern regarding the performance of the Dominican economy. Bear Stearns, Standard & Poors, JP Morgan, and the Economist's Intelligence Unit have also published less than favorable assessments of the DR in the past two weeks.
A new HIV vaccine will be tested in the DR, according to a front-page story in today's Hoy newspaper. Yeycy Donastorg, a health specialist working for the Dermatological Institute, revealed the news at a workshop to prepare health workers from Latin America for the new trial. The vaccine will not be made from a live virus, but is rather a genetic replicate of the virus, with some additional proteins that are supposed to produce an immunogenic response. Health personnel from Peru, Jamaica, Trinidad and Tobago, the Dominican Republic and facilitators from the United States participated in the workshop.
Xarxa Teatre, the Valencian theater troupe that incorporates fireworks into their performances, is in Santo Domingo for two presentations in the Colonial City. On Thursday, 9 October at 7pm their free presentation of "Fuego del Mar" ("fire of the sea") at Plaza de Espana will mark the opening of the VI International Theater Festival. This is a show for the entire family, as the speechless players interact with music and the public gathered in the large plaza in front of the Alcazar de Colon, the Columbus palace at the end of Calle Las Damas. The scenography is inspired on the works of Spanish painter Joan Miro. The second free presentation of the Spanish group is titled "Noche Magica" ("magic night") and is set for Saturday, 11 October also in the Colonial City streets. This looks like an outstanding show for the entire family. The presentations are sponsored by the Communitat de Valencia. See http://www.xarxateatre.com/es/espect/inicio.html
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