President Leonel Fernandez yesterday guaranteed that the Free Trade Agreement with the United States would go through. As he spoke at the opening of the EXPO Cibao 2004 in La Barranquita, Santiago, the President told his audience of diplomats, politicians, and industrial and commercial leaders that no single sector of the nation's economy has the right to endanger the future of the Dominican Republic. As reported in La Informacion, the local Santiago newspaper, Fernandez said that the high fructose corn syrup surcharge represented an obstacle to progress in the country. The hotly-contended surcharge was included at the last minute in the fiscal legislation, in order to protect the sugar industry. The most vocal opponents of the surcharge are the representatives of the Santiago free zone manufacturer sector, who argue that abandoning the FTA would endanger that sector.
Fernandez agrees that the FTA signifies an opportunity for the DR to insert itself into the most important sectors of the US economy.
Fernandez spoke after US Ambassador Hans Hertell had given a keynote speech in which he reasserted the US position that the tax on HFCS symbolized the possible derailment of the FTA, as well as future job losses in local free trade zones and other industries.
Fernandez said that reasonable, democratic and legal means must be found to enter into the US free trade accords. To demonstrate the two nations' readiness to strike a co-operative deal, Fernandez pointed out to his listeners that Ambassador Hertell was sitting right there beside him.
As reported in the Listin Diario, the President said in Santiago: "I understand that in the hypothetical and remote event that Congress does not pass the amendment to remove the corn syrup tax, when the FTA signed with the USA is studied here, it will become law in the country."
Fernandez said that, according to the hierarchy of legal instruments, a treaty or agreement is above any other law. Thus, he implied that the FTA could override the corn syrup surcharge provision in the tax reform law that is now to be known as Law 288-04.
Manuel Garcia Arevalo, the spokesman for the bottlers of Pepsi in the Dominican Republic, told Hoy newspaper that local producers could circumvent any surcharge on corn syrup imports by producing in the border area provinces, under the lucrative provisions of Law 28-01. He explained that any company wishing to use tax-free sugar need merely install itself in any of the seven border provinces that benefit from the broad tax exemptions granted in Law 28-01 for development of the frontier region. He said that even sugar cane sweeteners could be imported duty-free under the terms of the legislation.
The Central Bank of the Dominican Republic (CB) has announced an ambitious plan to reduce the quasi-fiscal deficit that was produced by extremely high interest rates and bank bail-outs in 2003. The aim of the new programs will be to reduce the deficit by RD$16.3 billion in 2005 by applying the first of four steps that were approved by the Monetary Board at their last meeting. According to the Listin Diario, the Monetary Board wants to change the way that investment certificates are placed in the Central Bank, by extending the time periods and by offering slightly higher rates of interest. Designed to offset the losses suffered by the CB by guaranteeing the deposits of three distressed banks in 2003, the plan looks to lower the deficit that currently stands at 3.6% of the GDP to just 1.5% of the GDP by next year's end. CB Governor Hector Valdez Albizu told the press that those with dollars deposited outside of the country can bring them back to the DR, exchange them at the current rate, deposit them to the Central Bank and enjoy an interest rate that will be adjusted to the monthly rate in use by the financial system and set at three points higher. These rates will be accorded for a minimum of 18 months and a maximum of five years. Other steps in the process will include the creation of a contingency fund and another fund created from the confiscated assets of the collapsed banking institutions. Recently, the CB has managed to place deposits certificates at interest rates of 33.65% APR, a significantly lower rate than the 61% that broke an all-time historic high and the lofty rates that ranged in the 50s just a few months ago.
Central Bank Governor Valdez Albizu also forecast the economy would grow this year by 1%.
A team of government officials, including the finance minister and Central Bank governor, will travel to Europe this weekend in search of funding that will allow the country to meet some of its payment obligations. While there, the officials will also meet with the Paris Club and lay out the plans to comprise the new strategy for payment to the private sector banks and the bond holders. During the mid-September talks, the Dominican negotiators outlined plans to pay non-structured debts of US$40 million.
Meetings are also scheduled with members of the US Treasury Department. Juan Temistocles Montas, the chief of the President's economic team, will lead the delegation, also scheduled to visit Spain in the hopes of securing US$230 million in generously-termed financing. This money would be used to pay part of the quasi-fiscal deficit and cover disbursements that have been pre-empted by the breakdown of the IMF StandBy Agreement under the Mejia administration. Sources said that talks in the United States would also touch on obtaining some financing.
The new changes in the tax code go into effect tomorrow. Law 288-04 calls for a 4% increase in the VAT and higher alcohol and cigarette taxes. Publicity will be taxed at a 6% rate until December of this year and in 2005 the accounts will be taxed at a 10% rate. Your phone bills will be going up with an increase to 10% on all calls. For every RD$1,000 written on any check, there will be a RD$1.50 tax. There are additional taxes on luxury housing and vacant lots in urban areas, as well as inheritances.
El Caribe and the Listin Diario published today the complete Tax Reform Law 288-04 of 28 September 2004. The law considerably increases taxes in the Dominican Republic in order to secure fresh resources for the Fernandez government.
Former governor of the Central Bank Guillermo Caram of the PRSC opposition party writes today in El Caribe of the inertia that seems to have taken hold of the Fernandez government. He expresses particular concern for the government's questionable ability to modify the most criticized aspects of the Mejia government. Caram points out that the present government is mimicking much of the modus operandi it inherited, to wit, he cites that the Fernandez administration has filled innumerable posts that extend well beyond the austerity it had promised and has even created new cabinets that triplicate the amount created by its predecessor.
A similar repeat performance can be seen in the way it begins by increasing taxes, under the poorly-named tax reform, emulating the action taken by the Mejia government in its first year in office. Furthermore, Caram criticizes that the government plans to clear its financial arrears with the power generators and propane gas suppliers by borrowing from the private sector and taking on international debt. Meanwhile, he says, it is issuing money not backed by reserves ("inorganicos") by way of the Banco de Reservas and acquiring new debt with Refidomsa, the Shell-Dominican government refinery.
Caram reflects on what he calls the relative success of the government given that the exchange rate has dropped considerably as a consequence of the economic contraction and monetary restrictions being implemented through the Central Bank auctions. He alerts that this could be temporary, however, as it reflects the confidence of the public in the face of the transfer of power that followed the period of authoritarianism under former President Mejia.
Caram is most disapproving, though, of yet another sign of the continued status quo: the fact that the government has invited back into its cabinet several officers who are tainted with the seal of corruption.
Prosecutors in the National District and elsewhere in the province of Santo Domingo told reporters from Diario Libre that the new Code of Penal Procedures was being implemented without any problems within the jurisdiction. Jose Manuel Hernandez Peguero and Perfecto Acosta said they were working together with police investigators and examining magistrates in using the new procedures. Hernandez Peguero said that they were being "effective" in their work. The prosecutor pointed out that incidents that occurred until midnight on 26 September would be processed in the temporary "liquidation" tribunals. Those events that took places after that time will be treated under the new code. Acosta pointed out that the application of the new penal process was being effected with highly collaborative efforts within the judicial system. He informed that he had held meetings with judges in order for the new cases to be handled quickly, as required by the new laws. And, he said, so far there have been no major difficulties in applying the law.
The National Housing Institute (INVI) was rocked yesterday by a scandal that involves its own staffers, as well as an Armed Forces captain. According to Felipe Abreu Roedan, the director of the INVI, a group of people working in the legal office of the institute allegedly falsified documents that permitted them to sell public housing to unsuspecting individuals. Abreu Roedan also said his people were scrutinizing an expenditure of RD$1.1 billion during the last six months of the previous administration. Abreu Roedan told reporters from the Listin Diario that "there was a network within the legal office that falsified everything from the approvals for the apartment, contracts, and the pay receipts giving authorization to take over the apartment." The scam was discovered when the new apartment owners went to the INVI to open their payment accounts and their names could not be found in the system. The defrauders operated primarily in the Los Alcarrizos area where 53 apartments were found to be illegally occupied. These people are now being submitted to the process of eviction. One lawyer is under investigation, accused of selling 40 apartments. Also under indictment is a captain of the Armed Forced accused of collecting between RD$5,000 and RD$6,000 for the right to occupy the apartments. Dwellings in Sabana Grande de Boya, San Luis, El Tamarindo, La Virgin, and Invivienda Santo Domingo are part of the scandal. The deals were done as follows: The sale of the apartment was not registered in the internal archives. The certificates to authorize the property were falsified and contracts bearing false seals, signatures and stamps were produced. The receipts of payment were also false. When the property buyer handed over the RD$52,000 needed as a down payment, the receiver stepped out of the office in order to "pay the cashier," and then return with a phony receipt. The individuals then went home thinking they had paid for their new apartment and that the certificates that authorized them to take possession were legal, as were the certifications that said they had fulfilled all the requisites for ownership of the property.
The INVI is also investigating what designation was given to RD$1.1 billion that was spent in the last eight months of the PRD administration. Abreu Roedan said that he also wants to know where the RD$50-million loan taken out by INVI from the Banco de Reservas was spent. This loan was paid by letters of credit from three suppliers of wood and tin sheeting for roofs. The INVI, through a program of prefabrication, built nearly 2,700 houses of the 5,000 that were supposed to be built. Abreu says he does not know, however, where these houses are located.
The former chief of the National Police, retired Major General Jaime Marte Martinez, was visibly upset when reporters asked him about the 15 vehicles that were supposedly recovered from thieves and found to have been in his possession at one time or another. "I have not taken a tricycle, much less a vehicle," said Marte Martinez, who was shaken by the line of questioning. Yesterday, the district attorney for the National District released a list of high-ranking officials with recovered vehicles assigned to them, of which Marte Martinez is only one. Other names mentioned are retired Colonel Fausto Tiburcio Batista, with 20 vehicles, and retired Brigadier General Pedro Hernandez Reynoso, who had 10.
According to the report, District Attorney Jose Manuel Hernandez said that others on the list included brigadier generals Yuri Ruiz Villalona (4 vehicles), Osvaldo Hernandez de la Cruz (7 vehicles) and Ernesto Ovalles Concepcion (2 vehicles). These men are or were colonels in the National Police organization. There are 18 vehicles in the hands of people whose names the DA has not yet revealed, however, although he promised to divulge these identities shortly.
At least nine shots were fired at a vehicle belonging to commentator and television journalist Euri Cabral as he drove along Carmen Mendoza de Cornielle Street last night. Three of the shots hit the front windshield but missed Cabral, the driver, and his passenger friends. Another three shots went through the rear windshield and exited through the front windshield, also missing the occupants.
El Caribe says the car has ten impacts from a weapon. Cabral, who is the owner of local TV's Channel 23, said his group raced away from the attackers and reached a gas station located on Av. Nunez de Caceres near Gustavo Mejia Ricart where he called the police. Law enforcement agents carried out an initial investigation right there at the gas station. Police Chief Manuel de Jesus Perez Sanchez and Attorney General Francisco Dominguez Brito, as well as the Santo Domingo DA, all began their investigations last night. Cabral attributed his escape to his experiences at the UASD university, where there were various shooting incidents during the student protests of the 70s and 80s.
The Reformist Party (PRSC), the smallest of the major political parties in the Dominican Republic, currently employs 148 people in the Chamber of Deputies, a largesse that costs the government RD$1.465 million each month in salaries alone. There are 54 "advisors," 25 auxiliary personnel, 21 assistants, 17 secretaries, 8 drivers, 6 messengers, 5 "security" staff, and 5 journalists. According to the Diario Libre, the PRSC deputies perform their work with just 20 of the 148 staffers listed on the payrolls. A sort of face-off within the party occurred when some of the PRSC deputies requested that Chamber president Alfredo Pacheco eliminate 100 of the jobs on their list. Reformist deputies met with party leader Federico Antun Batlle and agreed to remove all but those who actually work in the Chamber of Deputies. Sources at the Chamber revealed that former Chamber president Rafaela (Lila) Alburquerque had sent a letter to Pacheco voicing her opposition to such a move.
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