The Dominican Republic has been accepted into the Central American Integration System (SICA in Spanish) as an "extra-regional member." The heads of state of Belize, Guatemala, El Salvador, Honduras, Costa Rica and Panama praised President Hipolito Mejia for introducing the Dominican Republic into the group. The Belize Declaration promises to push forward the integration of the countries' economies and eventually create the "Central American Customs Union." President Mejia traveled to Belize on Friday, 19 December for the formal adherence of the country to SICA during the XXIII Central American Integration System Summit Conference. During the summit, President Mejia proposed that the Caribbean nations form an alliance to prohibit the transport of nuclear waste through the territorial waters of Central America and the Caribbean. As reported in the Listin Diario, the alliance was the central theme of a speech given by Mejia at the Mejia referred to the meeting as "undeniably promising" and emphasized the importance of preserving the environment and natural resources of the Caribbean. The need for such an alliance, said Mejia, "is the need to protect the resources of the seas, the principle source for developing a sustainable tourist industry."
Hoy newspaper acknowledged their mistake in publishing that the government had not met the US$15-million initial payment for the reacquisition of power distribution companies EdeSur and Edenorte, as agreed in October with Union Fenosa of Spain. The newspaper's economic editor, Mario Mendez, citing sources from the CDEEE, explained that he did not confirm the tip received from one of its most trustworthy sources. The CDEEE clarified that the payment of the US$15 million was made on 15 October by way of a Banco de Reservas transfer. CDEEE director of public relations, Luis Jose Chavez, clarified that the supposed post-dated check never existed. The news story appeared in Hoy and was covered in DR1 Daily News on Friday. In October the government agreed to pay US$362.5 million plus 12% annual interest over the next 12 years. The transaction, which came as a surprise to all, brought about the suspension of the stand-by agreement signed in August with the IMF.
The government-intervened Listin Diario reports that Union Fenosa is negotiating the sale of its Palamara (120mw) and La Vega (87.5mw) power plants with a buyer. Union Fenosa claims an investment of US$120 million in the plants, according to the Listin Diario. Reportedly, the power distributors owe Fenosa US$101 million for power supplied.
The government has not paid the subsidies to 150 public hospitals run by the Health Ministry, according to reports. Although basic pharmaceuticals are provided by the PROMESE programs, medicines for specialized care and food are very scarce. OMSA buses that cross the city for the lowest fares are also out of service because there is no fuel. Very few of the OMSA buses were on the road yesterday, and HOY reporter Llennis Jimenez said that service was near zero.
Emam Zade told Hoy newspaper in an interview today that the budget presented by the government will worsen the situation next year. The economist would have preferred a budget for the same amount as the one used this year, of about RD$82 billion. The government, however, submit to Congress a financial plan for 2004 of RD$121 billion. Emam Zade understands that by presenting the RD$121-billion budget, the government seeks to be compensated for the decline of the public sector's buying power owed to the depreciation of the peso. Emam Zade says the government should have done the opposite: acknowledge reality and admit it has been over-spending and taxing companies more than it should, which in turn has immersed the economy into a process of inflation, devaluation and recession. Emam Zade explains that the bloated budget will only worsen the recession and further stimulate inflation. "Why? Because that will generate more monetary emissions." He predicts that consumers will end up paying the taxes to fund the increased governmental budget. Emam Zade accuses the government of lacking any long-term vision of the economy.
Jose Antonio Martinez Rojas questions the fact that the government has set aside RD$5.2 billion for the Armed Forces in its 2004 financial plan. "Are we a country at war?" asks the writer. Will there be increases to our forces in Iraq? Will we continue to buy patrol yachts to police illegal marine travelers? Will we continue to build monuments such as the one in Constanza to applaud the patriotism and loyalty of our military? "A country as small as ours has 190 generals, more than Brazil," he points out. Martinez also criticizes the RD$9 billion assigned to the Ministry of Interior & Police. Other large components of the budget include a RD$39-billion allotment to service a government debt that has tripled since this administration took over. Meanwhile, the Education Ministry's budget stands at RD$12 billion. This year the administrative department of that ministry complained that it had only received RD$7 billion in funds, or about 70% of the allotted disbursements. Martinez criticized the government allotments to other government departments, including the sum of RD$775 million to the Tourism Ministry, RD$4 billion to the Agriculture Ministry and RD$514 million to the Industry & Commerce Ministry.
During a luncheon of the Association of Puerto Plata Hotels, tourism entrepreneur Frank Rainieri said that the Dominican politicians do not understand the importance of tourism in this country, despite that sector generating 25% of the GDP and being the most dynamic sector of the economy in the past 30 years. Rainieri is president of the Punta Cana Group, the pioneer of the development of the today very successful east coast area. Rainieri urged that the Puerto Plata tourism community put the onus on itself to solve the problems within the sector, rather than depending on the authorities, as a way of reducing the excessive reliance on public investment that first gave the area its start. Rainieri explained that the hotel sector in the East had contributed RD$10 million to improve roads in Punta Cana in the East Coast and commented on the road to the Puerto Plata airport, that is also in need or urgent repaving. Rainieri pointed out that the Tourism Ministry does not has not had funds for advertising for the past six months. By contrast, in the East, he said the private sector has built 16 aqueducts, 40 of the 82 kilometers of highway, 14 water treatment plants, 2 private power companies and a private airport, in addition to donating RD$7.5 million to purchase a radar for that area's airport. Rainieri expressed his confidence in the recovery of the nation based on what he referred to as the two pillars of the economy - tourism and the free zones - which depend more on the international market than on the domestic economic climate. He said there exists a business class that knows how to adapt quickly to the changes and new circumstances. Commenting on the discourse, Hoy newspaper editor Bienvenido Alvarez Vega, says: "If our politicians have been incapable of understanding the worth and importance of caring for such an important economic activity, then the conclusion is simple: We need another kind of politician."
Diario Libre reports that of the 2004 budget's total, 25% (or $30.3 billion) will go to pay wages. The newspaper says that in 2000, there were 261,006 government workers, but in 2001 this number increased to 287,727. By 2002, this figure was up yet again to 303,275, to where it currently stands at 315,615 employees. These Central Bank numbers do not include all the fixed allotments to non-payroll employees assigned by the government, nor the so called "nominillas" or sub-payrolls of individual government departments that pay for supposed temporary workers.
Frederic Emam Zade writes in El Caribe today that the IMF's press release on the Dominican Republic issued last week is "a wonderful example of diplomatic double-talk." Emam Zade translates the language used in the formal document that can be read online as follows:
IMF says: An IMF mission left Santo Domingo today after reaching technical-level understandings on economic policies for the first review of the country's Stand-by Arrangement with the Fund.
Translation: They left without reaching an agreement at the higher ministerial and Presidential levels.
IMF says: Marcelo Figuerola, the IMF mission chief, said in Santo Domingo: "The mission has reached a broad agreement with the Dominican authorities on the main elements of the Letter of Intent for the upcoming review under the two-year Stand-By Arrangement with the Fund.
Translation: The mission could not produce a specific agreement with the DR's authorities regarding the details of the Letter of Intent in time for the next revision.
IMF says: In the coming weeks, the authorities plan to move ahead with a number of macroeconomic policy and structural measures of critical importance to the success of the program. These include the adoption of a strong budget for 2004, a plan to improve the financial position of the electrical sector, improved monetary control and steps to ensure the efficient and transparent function of the foreign exchange market. Once these key measures are implemented, and financing from official creditors secured, it is expected that the Letter of Intent can be finalized and circulated to the IMF's Executive Board for early consideration."
Translation: Since you tricked us with the first agreement and fooled us with the EDES affaire, we don't trust you anymore. Therefore, an austere budget must first be adopted, followed by an improvement in your collection of electricity bills, a halt on the printing of inorganic money and a liberalization of the foreign exchange market to make it more transparent. After you do that, and you also get credit assurances from the US treasury and other official creditors, then - and only then - will we sit down again to finalize the details of the letter of intent and forward it to our executive board for their consideration.
Emam Zade sums up "for those who still don't get it": There is not, nor will there be, an agreement with the IMF for the time being. The government does not have the political will to meet the agreements and the IMF does not agree with the details contained in the letter of intent. The IMF does not trust the government and before disbursing any more funds, it wants to see concrete undertakings, not idle promises. The IMF needs assurance that the funds released will not end up financing the Presidential candidate's campaign.
Economist Frederic Emam Zade writes today that the phenomena of "stagflation" has set in, describing the term as a recession accompanied by inflation. Stagflation is marked by a dangerous mix of high inflation (high and increasing prices) and low or negative growth. Emam Zade, in an interview with Hoy newspaper, said this is the worse scenario that can befall an economy and that it produces a difficult situation for the authorities because measures that could be taken via taxes to assuage recession would ultimately stimulate further inflation. On the other hand, monetary measures to control inflation cause recession. He explained furthermore that only part of the economy is in stagflation, not all sectors. While the manufacturing sector is hurting most, service exporters are doing well. Emam Zade says the formula should be to attack inflation reining in excess money in circulation, while taking measures to stimulate the sectors of the economy that are flagging.
Frederic Emam Zade explains in Hoy newspaper today that the Central Bank errs when it does not include the number of dollars currently in circulation in the Dominican Republic in its statements. "In dollarized countries like the Dominican Republic, money in circulation is not only the pesos in circulation, plus pesos deposited in banks, but also the dollars in circulation, plus dollars in deposits," he said. The economist expressed that the amount of money the Central Bank calculates should be the quantity of pesos and dollars in circulation in cash and the quantity of pesos and dollars in the local banks and foreign bank accounts of residents of the Dominican Republic used to write checks locally. He said that currently the Central Bank only considers pesos in circulation, but if they took the dollars that circulate in the DR into account also, then money in circulation would double or triple the amounts used by the Central Bank.
In a comparison of the Dominican Republic to China, Hoy's Rafael Molina Morillo tells of a Chinese official convicted of corruption and executed. "Just like here!" according to Molina, with a few exceptions. In the first place, there is no death penalty in the Dominican Republic, no matter what the crime. Another small difference is that here, the misuse of state funds is something so common that it is hardly considered a crime. On the contrary, "The majority of those who take public office do it with the purpose of 'making it' or in other words, 'getting mine', after all that is why we are in power!" What is unpardonable in this marvelous country is to rob too little. Morillo says that if you rob too little, the full weight of the law will fall upon you. He cites the case of the man who got ten years for stealing a sausage or the woman who was shot dead for stealing a papaya while her killer is walking around free. Therefore, if you are going to rob or fool the people, Molina says, "Do it big," because that guarantees a soft sentence, bail and permission to leave the country. That is why, with only a few little differences, we are just like China with regards to how we treat corruption. (The Chinese that started this editorial had asked for clemency, which the judge denied.)
Ramon Baez Figueroa and his cousin Marcos Baez Cocco, the former president and vice-president of the Banco Intercontinental (Baninter), were granted bail on Friday and are expected to be released to their families today. The Qualification Chamber of the National District courts set bail at RD$100 million. The pair is accused of pilfering RD$55 billion from Baninter. Their bail was supplied by a pool of insurance companies that received guarantees in real estate representing "50% more than the bail amount itself," according to defence lawyer Marino Vinicio (Vincho) Castillo. The bail agreement, as mentioned in El Caribe, specifies that neither of the men is to leave the country. Nevertheless, once the bail sentence was read, the prosecutors announced they would appeal the sentence, based on the fact that Law 72-02 that covers money laundering, one of the charges pending against the accused, prohibits the privilege of bail. In her decision, Judge Miriam German Brito stated that Article 115, Paragraph III of Law 341; Article 30 of Law 72-02 and Article 66 of Law 2859 are contradictory to the Constitution. These articles require preventive detention in prison with no bail for the accused. The judge called the articles "arbitrary and irrational" because they violate the principle of presumed innocence.
Saturday's Diario Libre carried Anibal de Castro's most acerbic editorial in memory, bearing the title "The Economist's blame party". Calling The Economist a temple of liberalism and particular English humor, De Castro looks at their most recent advice: that the IMF should not lend any money to the Dominican Republic because "Any money that the Fund might give to the Dominican Republic in the next few months is likely to be wasted on pre-election spending." De Castro says: "Strong language, no?" But, he added, not as strong as a long list of other realities, such as the promises made to track and field star Felix Sanchez, or to the engineers who built the Pan American Games sites. The Economist continued, "Until the politicians show signs of taking responsibility for their actions, it is hard to see why they deserve any help from the Fund." De Castro ends his editorial with a play on words: "And for having taken us to the bottom (fondo), as well as to the Fund (Fondo), the Economist asks that one guilty person be recognized: Mr. Mejia."
El Caribe newspaper asks Dominican politicians to give Dominicans the ultimate Christmas gift: a 10-day political hiatus so the holidays can be celebrated in peace. The editorial writer says the truce would also enable the politicians to take a vacation, thus giving the people and the media a chance to dedicate more time and space to the really important matters of daily living. "The gift of a break for 10 days a year is not too much to ask," concludes the writer.
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