| Daily News - Monday, 27 September 2004 |
A new penal code goes into effect today in the Dominican Republic. The new judicial framework replaces the 120-year-old code that was translated and adapted from French laws back in 1884. The new code, which was ratified on 19 July 2002, is inclined more to a US model of justice, even going steps beyond in regards to human rights. Various sectors have said the new code is too easy on criminals, in view of the numerous constitutional guarantees that have been instated. Defendants of the new code say it will expedite justice and cut through much red tape.
Supreme Court leader, Judge Jorge Subero Isa, last week called the new system "revolutionary" and says the magistrates are ready for the change.
Attorney General Francisco Dominguez Brito has similarly spoken out in support of the new penal code. On the Channel 11 program D'Agenda, produced by journalist Hector Herrera Cabral, the attorney general said the new code will dispense with the practice of arresting people who two weeks later may be released without any formal charges placed against them. He said that judges, prosecutors and lawyers have been receiving training on the laws' implementation over the past two years.
Diario Libre says that the most radical change involved is that the National Police will be a subordinate of the judicial system, i.e. judges and prosecutors. "The code requires that lawyers and judges study the law and it changes the rules of procedures. That inspires fear," writes the newspaper in an editorial today, while it encourages the country to bet on the success of the new code.
The Education Ministry of Education announced the re-initiation of the school breakfast program in public schools nationwide. The project provides a major incentive for low-income parents to send their children to school. Education Minister Alejandrina German said that to begin some 1.5 million rations will be distributed at a cost of RD$17 million a day.
The Public Works Ministry announced the start of the construction of the Santiago City Park on the centrally-located, former grounds of the Cibao Airport. The airport was relocated in 2002 to the outskirts of Santiago. The government said the park's design will be entrusted to the architectural firm of Gustavo More, the winner of the tender, for the RD$1.5 billion project. Public Works Minister Freddy Perez said that the park will be a prime location for artistic and cultural activities in the DR's second city, and will increase green spaces from 1% of the urban area to 4%. The construction of an amphitheater is part of the park facilities being planned.
The Senate has approved the final, second reading of the tax reform bill, thereby placing the burden of raising additional funds, needed to pay for the previous government's inefficiency and a hefty government bureaucracy that has not been reduced, squarely on the shoulders of the Dominican citizenry. The tax bill, which among other things raises the ITBIS (VAT) tax rate from 12% to 16% on most consumer items, must now be signed by the President and published for it to take effect. The government expects to receive RD$19 billion in additional revenues this year with the implementation of the reform.
President Fernandez had requested that the Senate exclude from the legislation a 25% tariff on US corn syrup imports that had been introduced by the Chamber of Deputies to reduce their appeal in favour of locally-produced sugar cane sweeteners. The US Trade Representative Office had lobbied intensely for the tariff to be abandoned, to the point of threatening to suspend the recently signed FTA with the DR. The Dominican free zone sector had argued that a suspension of the FTA would entail thousands of jobs lost in the DR.
Despite the corn syrup surcharge having been upheld in the Senate, President Fernandez said on Saturday that he would sign the bill into law. The IMF had conditioned the resumption of the standby agreement that was suspended when the previous administration defaulted on certain conditions to the current government's ability to secure additional resources. While he will ratify the fiscal reform as is, Fernandez has said he would subsequently submit a bill to Congress to eliminate the surcharge. As per the terms of the legislation, duty-free corn syrup imports would only become a reality several years from now, thereby allowing time for the present legislators, or those who succeed them in the 2006 Congressional elections, to revise these issues. Fernandez said he would thereafter support the sugar industry in its quest to receive a favorable ruling from the World Trade Organization in order to implement a mechanism that would protect the sugar industry from the more competitively priced corn syrup imports.
Franco Uccelli of Bear Stearns reports on the country's need to confront its fiscal deficit and secure preferential treatment from the US, the country's most important commercial partner. Uccelli says this supersedes the interests of any single group. "With US congressional ratification of the FTA expected in early 2005, President Fernandez will now face the challenge of striking a balance between the elimination of the [corn syrup] tariff, supporting efforts from Dominican sugar producers to take their case to the World Trade Organization for arbitration, and not upsetting the US," writes Ucelli in an update on the country.
The recently-appointed Foreign Relations Minister of the Dominican Republic, Carlos Morales Troncoso, is a major shareholder in the country's largest sugar producer, Central Romana. It was also this company that led the lobby movement to introduce the tax, arguing that the FTA as signed by the Mejia a opened the Dominican market to lower costing sweeteners affecting the local sugar industry.
El Caribe newspaper looks into what the newly-approved tax reform bill will mean for their budgets. The newspaper says that the increase in the ITBIS sales tax from 12% to 16% translates into a 2.71% increase in the price of basic goods, such as certain processed food items, clothing, furniture, appliances, entertainment, telecommunications, legal services and even funeral services.
El Caribe says that Dominicans already fork over more than 25% of their present wages directly to taxes and estimates that the basic wage needed to live in the DR is now more than RD$16,000. As of October 2003, however, more than 2.7 million people (89.5% of all employees) were receiving wages that did not meet the cost of living, which at that time was estimated at RD$8,015, according to data from the Central Bank and the 1998 Home Budgets poll.
Following the recent appreciation of the peso on the exchange markets, some companies did not lower their prices accordingly, and now they may decide not to increase prices and absorb the ITBIS increase to compensate.
El Caribe says that if the new sales tax scheme is implemented, a beer sold in colmados would go from its present price of RD$45 to RD$49, and a pack of 20 cigarettes that sells for RD$20 would cost RD$24.
The legislation also mandates that residential, commercial and industrial properties now pay a 1% tax over a duty-free RD$5-million assessment. The fiscal package also establishes that real-estate rentals be taxed 10%. Telecommunications taxes are also increased by 10%, in addition to the 16% ITBIS tax assessed.
Check transactions are to be hit with a RD$1.50 fee for every RD$1,000 of their value issued to a third person. Electronic transfers will be taxed, but ATM withdrawals and credit card purchases will not.
A technical mission from the International Monetary Fund arrived in the DR today to resume talks with the Dominican government that could lead to the resumption of the standby agreement. The Listin Diario reports that the economic advisor to the Executive Branch, Julio Ortega, says the plan is to extend the accord for a two-year period. A renewed agreement would also entail the disbursement of more than US$1 billion in fresh resources, as contained in the terms. The IMF mission will meet this afternoon with Central Bank technicians and the Fernandez government's economic authorities. A meeting has also been scheduled with President Fernandez.
Geoffrey Gottlieb, associate economist of Goldman, Sachs & Co. writes on the implications of the passing of the tax reform and the problems still ahead. In his emerging markets daily economic comment published today, Gottlieb writes that the problem is that an IMF program that is needed to prevent a substantial default to the official and private sector in 2005 is still weeks away. See http://www.dr1.com/news/2004/092704_gs.pdf
At the point where the bridge over the Chavon dam once stood, the government and the private sector have facilitated a pedestrian crossing to be used while the bridge is being restored.
The government has said that a temporary bridge over the Chavon dam will be in place within 10 days, while the permanent structure will not be ready until December. Public Works Minister Manuel de Jesus Perez announced over the weekend that it will take three months to restore the permanent bridge over the collapsed Chavon River dam.
The ministry is working on opening several other access roads to permit transport between La Romana-Higuey, El Seibo-Higuey and Miches-Nisibon-Higuey, said Perez.
The government was able to open a landlink through Sabana el Cuey to reconnect the East Coast provinces to Santo Domingo. The route obliges travelers to head north to Hato Mayor from San Pedro de Macoris, then east to El Seibo, and crossing the Chavon River at that northern point. From there, one must continue on to Higuey and Punta Cana. A schedule has been established for the route, with cargo trucks slated to use the crossing at night and in the early morning hours. El Caribe newspaper reports on how the chaos caused there by an excess number of vehicles attempting to make the crossing caused it to be closed again. Petroleum refinery president, Aristides Fernandez Zucco, said that 12 tank trucks were able to deliver 60,000 gallons of fuel to La Altagracia province by that route. He said that a steel cable has been anchored to transport fuel exclusively. The recent fuel scarcities have doubled the price of fuel in the eastern provinces cut off from normal supplies.
Spokesmen for the Chamber of Dominican Insurance and Reinsurance Companies (CADOAR) told Hoy newspaper that the country stands to receive around US$700 million in insurance claim reimbursements following Hurricane Jeanne. Juan Garrigo, president of the CADOAR, said that more than RD$1 billion in claims were filed, however. On the positive side, he said the claims will generate a considerable flow of fresh cash receipts over the next three to four months, as hotels work to restore their properties. He said that major claims are being submitted by hotels in Bavaro and Punta Cana, some of which had two to three feet of sand deposited in their first-floor rooms. According to Garrigo, it is still too early to quantify the totality of the damages, but inspectors have been sent out to ascertain the damages and reconcile the claims. Nevertheless, he confirmed that damages caused by Hurricane Georges in 1998 were far greater than those caused by Jeanne last week. He said that most of those who sustained damages were insured.
A positive outcome of the destruction is that tourists arriving for the winter season will benefit from brand new installations at many of the properties. On the negative side, Garrigo said that insurance premiums for 2005 will rise to reflect the higher cost of insuring properties.
Rafael Molina Morillo, the current editor of El Dia newspaper and a long-standing advocate for freedom of the press issues through the InterAmerican Press Association, has requested that the Ministry of Interior & Police, the government body that oversees the National Police in the Dominican Republic, release the names of National Police agents who benefited from the illicit use of stolen vehicles that were recovered but not returned to their owners. Molina Morillo says that the new law on access to public information requires the government to divulge this information on request. In his commentary in Hoy newspaper today, he expressed his appreciation for the support received in this endeavor from Fabiola Medina, the new director of the Foundation for Institutionalism and Justice (FINJUS).
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