| Daily News - 5 November 2003 |
Today's headlines report happy monetary news, principally the anticipated return of the International Monetary Fund (IMF) team. The Listin Diario's Jose Javier reports that Central Bank officials revealed that the IMF mission would arrive in the Dominican Republic Monday, 10 November, at which time the resumed discussions would focus on the economic stabilization program to be funded by the IMF. The return of the IMF was negotiated by the Dominican team that visited the IMF's headquarters in Washington last week. The Central Bank also reported that the panel of international experts designated by the IMF and the Inter-American Development Bank (IDB) to look into the purchase of EdeNorte and EdeSur has finished its work and presented a preliminary report to the government. The final report is expected to be handed in on Friday. A Central Bank spokesman said that these steps, in addition to the measures taken to raise the funds needed to fulfill the goals set by the IMF, are likely to normalize the disbursal of funds from the IMF and other multinational financial organizations.
The Inter-American Development Bank (IDB) will disburse as much as US$400 million over the next three to four months. According to Moises Pineda, the local IDB representative, these funds are destined to strengthen the financial sector and to assist with social programs and will become available now that some of the issues identified by the IMF agreements have been resolved. According to Pineda, this month will see a US$100-million disbursement as the result of successful talks between local authorities and delegates from the IMF, the World Bank and the IDB. Pineda says the chief reason for the delay was the purchase of the electrical distributors. As reported by the Listin Diario, the principle condition required by the IDB was maintenance of macro-economic stability. Pineda also said that by December there would be another US$100-million disbursal, which should complete the US$200-million amount that IDB president Enrique Iglesias referred to last week in Panama. Another US$200 million is expected to be injected into the Dominican economy in January.
Another top story in today's papers is the report that the National Private Business Council (CONEP) submitted its proposals to replace the 10% exchange commission to President Mejia last Monday. CONEP's proffered strategy suggests that Congress institute a temporary 10% tax on imports, to be lifted on 30 April, 2004. It also recommends the urgent implementation of the tax reform package by 15 December this year. CONEP also asked that the government stop legislative proceedings for the 5% tax on exports, which, coincidentally, was approved last night by the Senate, according to Hoy. CONEP urges an honest indexing of the gasoline tax, as required by the Hydrocarbon Law (112-00). Finally, the business association included a list of voluntary contributions that the hard-currency sectors of the economy would be making. These include RD$3.00 for every dollar exchanged by the free zone industries, RD$1.00 for every dollar (FOB) exported, as well as an 18% service tax on all-inclusive packages within the tourist sector.
The head of the European Development Fund office in Santo Domingo announced a donation of 54 million euros to assist basic education programs. Manuel Caceres Troncoso told the press that the resources would be channeled through the National Indicative Program for 2002-2007. The money is part of the effort to reduce poverty. Caceres said that European experts Jean Claude Buchet, Irene Lorisika and Oscar Amargos are currently in the Dominican Republic to begin consultations on how to provide better access to primary education in the poorest areas of the country. According to Caceres Troncoso, the programs will also include NGO participation as well as Civil Society groups with ties to education.
The Santiago business community has made itself explicitly clear: Either they find their own solution to the energy crisis, or they will continue "crossing Niagara Falls on a bicycle", as the saying goes. Apparently, the local business leaders have opted for Plan A. Alternatives could include the construction of a generating facility in the area or entering into the business of generation and distribution themselves and forgetting entirely about EdeNorte. A final option would be to become a partner in the EdeNorte operations, which members of the Development Association of Santiago and personnel from the Seaboard Corporation have shown interest for. Some of the free-zone companies, headed by free-zone sector president Carlos Sully Fondeur, are discussing generation, and, curiously, they include Seaboard in this. Felix Garcia, the head of the Santiago Development Association, told El Caribe yesterday that the business community is interested in generating electricity in Santiago. According to Armando Rodriguez, the manager for Seaboard, and Garcia, the recent announcement that the government would sell off 75% of its interest in the Edes presents an interesting opportunity for the business community. According to analysts, the cost for installation of a large generating facility is about US$1 million per megawatt.
According to the director of the Dominican Sugar Institute (INAZUCAR), Severo de Jesus Ovalle, the Dominican government is proposing to institute measures that would require a 22% alcohol content in local gasoline. This would form part of a program to diversify the sugar industry, now at one of its lowest points. The INAZUCAR official also mentioned that sub-products from the sugar cane could produce as much 130 megawatts of electricity, or 9.2% of local capacity. This, however, would require a harvest of 10 million tons of raw sugar - something that has never been seen in the Dominican Republic, or in Cuba, for that matter. In his discourse before an international audience, Ovalle said that the diversification project was focused in five areas: Alcohol, electricity, organic sugar, installation of small sugar mills and the use of sub-products for animal feed.
In today's El Caribe, Pedro Silverio, the head economist at the Cenantillas economic think tank, says there are some strange numbers floating around. The Economic Commission for Latin America and the Caribbean (CEPAL) has forecast that Latin American economies will grow by 1.5%, while the Dominican economy, according to the IMF, will shrink by 3%. Moreover, the DR will have higher inflation and devaluation rates than our neighbors in the area. According to the IMF, the Dominican economy suffered a US$2.3-billion hit in 2001 and 2002, but Silverio says that if we measure this external blow against the deficit in the balance of payments and the relation to the GDP, we will see that the external shocks in 2001 and 2002 were of less impact than the external blows in 2000. Silverio says that if the effects of the NYC World Trade attacks, oil prices and the deceleration of the industrialized economies wreaked havoc on the Dominican economy, the evidence of this should be seen in the balance of payments. The truth is, however, that during the period between 2001 and 2003, the deficit was improving and in January of 2003 showed a surplus. Furthermore, during the 1997-2000 period, the deficit grew until hitting its high in 2000. All external effects aside, however, recent internal blows have also contributed to the Dominican economy's suffering, namely the so-called "hole" created by the Baninter collapse. Silverio says that in reality this gap was the result of two factors whose responsibility rests squarely on the government. The first has to do with the supervision of the banking system. Monetary authorities were "Olympic" in their lack of supervision and tried to find a political solution to the case. This effort caused billions to be used without legal reason. The second factor is related to the way in which the government handled the collapse, which brought about greater inflation and further devaluation, and forced the hand of the Central Bank into making serious commitments in the present and future that will be hard to honor without deepening the crisis. For the first time in 10 years, the Dominican economy will grow at a lesser rate than the US economy, in spite of a slight recovery in the tourism and industrial sectors. Silverio closes his piece by saying that the responsibility for the crisis rests on the shoulders of the government, who managed to place the performance of the economy on a par with Venezuela's. Therefore, should there be an explosion within society and the government is interested in finding out who is to blame, they have only to find a mirror...and look into it.
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