| Daily News - Wednesday, 17 November 2004 |
A preliminary draft of the letter of intent to resume the stand-by arrangement with the International Monetary Fund commits the government to perform a second fiscal reform in June 2005, which would require congressional approval by October 2005. The reform would encompass a gradual elimination of the exchange surcharge, a reduction of taxes on financial transactions, a lesser number of items exempt from the ITBIS sales tax, an expansion of the tax base for income tax to disallow claims of interest earned by individuals and the elimination of the special tax regimes and tax exemptions for free zones, hotels and the border provinces.
The IMF is also asking that a bill be submitted to modify the government's spending habits, the way the budget is prepared and other matters to do with the management of the government's finances. Further measures to control government spending will also be implemented.
The Department of Customs announced that, in coordination with the new authorities at the Dominican Institute of Telecommunications (Indotel), they will implement certain mechanisms to assess taxes owed for the irregular import of mobile phones in the past. Miguel Cocco, as the Customs director, said that millions of pesos in official revenue were evaded with the improper import of the cell phones units. Cocco said that given the small size of a cell phone, smuggling them in to the country was an easy matter.
President Leonel Fernandez said yesterday that the 25% tax on corn syrup imports should be eliminated to avoid becoming an obstacle to the free trade agreement with the United States. Fernandez was speaking at the Dialogue Work Shop for the Preparation of the Strategy and Agenda of the Electronic Government 2005-2008 that is taking place today at the Hotel Jaragua. The conference aims to consider the use of the Internet in making the state more efficient, productive and transparent.
The corn syrup surcharge was introduced as part of the tax reform approved by Congress in September.
At the same event, Foreign Relations Minister Carlos Morales Troncoso reaffirmed the notion that the tax is creating a tempest in a teapot. "Corn syrup is a small business worth US$10 million [annually], but the country buys more than US$200 million in corn," said Morales Troncoso. As reported in Diario Libre, President Fernandez sent the Senate a proposal to modify the tax reform bill to eliminate the corn syrup tax, but legislators have yet to study the bill.
Assistant Secretary of State for Western Hemisphere Affairs Roger Noriega, in a 15 November interview with the Washington File distributed by the United States government news agency, says that the approval of the DR-CAFTA is being "sorely complicated" by the Dominican Republic's decision to impose a tax on US products made with high-fructose corn syrup. He indicates in the interview that the United States is trying to rectify the issue and predicted that once it is resolved, the accord will likely be presented to the US Congress for consideration in early 2005. The prospects for approval of the accord, he said, are "probably pretty good."
The Chamber of Deputies yesterday approved the second reading of the bill that would increase the wages of public employees by 30% and bring the minimum wage on the government payroll to RD$4,000 per month. While the wage increase in the private sector will benefit only those who earn less than RD$20,000 a month, the legislators announced that government employees earning monthly salaries of up to RD$90,000 would also get an increase. By raising the ceiling to RD$90,000, the legislators ensured their own wage increase. The legislators make well beyond that amount, especially when factoring in their perks, such as the right to two tax-exempt vehicles.
The new wage scale will also benefit 80,666 retired government employees, for whom a minimum monthly payment of RD$3,000 was established. According to the legislation, the 30% pay rise will be given in two parts: an initial 20% effective January 2005 and another 10% effective as of June 2005. The bill will also index the wages of public sector employees to the Consumer Price Index published by the Central Bank.
The PRD-majority Senate has voted to replace another of its members. The new senator-elect is Roberto Rodriguez, who although elected to the Senate in 2002 to represent the province of El Seibo chose not to accept the seat because the government post he occupied as director of the nationwide aqueducts department was presumably more convenient. In 2002, Rodriguez was replaced by Marcial Valera, who has now resigned to return the post to Rodriguez.
As reported in Hoy newspaper, Rodriguez is a prominent member of the Proyecto Presidencial Hipolito (PPH), the group that backed the political aspirations of former President Hipolito Mejia.
The El Seibo senator will become the second prominent official of the Mejia government to enter Congress, following in the footsteps of the former director of the Supervisory Office of Public Works director, Hernani Salazar, who is now the senator for the province of Duarte.
Diario Libre reports today that the local affiliate of the AES Corporation has sold its shares in the AES Ede-Este power distribution company to TCW Energy Advisors, LLC. The newspaper describes the firm as one of the largest holding companies in the world and speculates that this could have implications for the DR's sovereignty. TCW stands for Trust Company of the West, and is described online as a group of companies that has been providing investment management services for nearly a quarter century and is ranked among the largest employee-owned investment counseling firms in the United States. TCW manages both domestic and global investments for a broad spectrum of clients with diverse objectives. Diario Libre says that the company is the largest holder of sovereign bonds of the Dominican Republic.
Today's newspaper's editorial says that the sale announced on Monday is not a run-of-the-mill one. The newspaper observes that the sale of Ede-Este shares comes on the heels of the Chamber of Accounts' announcement of irregularities in internal operations, and that the transfer appears to be a maneuver to escape investigation. National District Attorney Jose Manuel Hernandez Peguero last week received results of a study on the audit conducted that indicated perjury was committed against the Dominican state to the tune of RD$2 billion. According to the Chamber of Accounts, Ede-Este defrauded the Dominican government by using irregular maneuvers that obscured the real results of its operations while negotiating with allied companies.
Yesterday, Felix Alcantara, the president of the Fondo Patrimonial de las Empresas Reformadas (Fonper), which body overseas capitalized companies, ordered an investigation to determine the conditions under which AES sold its shares in the electric distribution company.
Diario Libre reports that with the sale of Ede-Este, AES is effectively freeing itself from a money-losing operation while maintaining its profitable power generation outfits.
For more on TCW, see http://www.tcw.com/
While supermarkets were adjusting their prices upwards on a daily basis when the peso was losing value against the US dollar, the reverse has happened now that the peso has appreciated and, for the most part, the elevated prices are being maintained. But as supermarkets vie to attract consumers by being the store with the lowest prices, and with the peso's continued upward trend, consumers are hoping for relief. Many prices were pegged to the rate of RD$55 to US$1 seen last summer. With the US currency now valued at approximately RD$30, the general public is hoping to encounter products on the shelves at considerable discounts. Listin Diario reports that many establishments, such as Plaza Lama, Supermercados Nacional, Bravo, La Cedena and hardware stores such as Popular, Hache, Americana and Almacenes Unidos, are publishing their before-and-after prices, in their attempt to woo consumers.
The director of the National Budget Office (Onapres) said that the government expects an average exchange rate of between RD$27-RD$31 to the US dollar for next year. Ruben Pena stated that they had used a rate of RD$37.50 for next year's national budget in order to gauge income and spending and to have a buffer should anything unforeseen occur. On Monday, Technical Secretary of the Presidency Temistocles Montas had said that the 2005 Budget had been calculated using a RD$37-to-US$1 rate of exchange.
As reported in the Listin Diario, this statement was criticized because it could be interpreted as an indication of the rate at which the government would like the exchange rate to settle. On the same day of Montas' statement, the peso dropped to RD$31 to US$1, down from RD$27 to US$1 the previous day.
Pena said that the reference rate used by the government does not represent any official expectations of what the rate could be. He said that last year when the budget was designed, the government used a rate of RD$35 to US$1 but the rate went on to climb to RD$55 to US$1. Pena said the difference in rates was one of the factors that led to the suspension of the IMF agreement.
News reports say that only ten of the presumed 40 illegal boat travelers were rescued yesterday after their boat went adrift while attempting to reach Miami, Florida. The boat left the DR from Luperon, in the western part of the province of Puerto Plata on the North Coast. Most of the ill-fated travelers were from Puerto Plata and the province of Santiago Rodriguez.
One of the survivors said that the problems began when the boat's motor failed half an hour after leaving the Dominican shore. The travelers blamed the vessel's captain, who reportedly died in the tragedy, for not returning to land at the first sign of trouble. Ten were rescued alive, but an estimated 30 are thought to have died.
The Baseball Writers' Association of America has named 28-year-old Vladimir Guerrero, the Anaheim Angels' right-fielder, as the winner of the American League's Most Valuable Player award. Vladimir Guerrero was back in his native Dominican Republic when he learnt the news. He visited the Presidential Palace and received congratulations from President Leonel Fernandez.
"The Dominican people are proud of his accomplishments," said Sports Minister Jay Payano on behalf of Fernandez. "We invite everyone to visit the Dominican Republic to see where Guerrero and other great Dominican players like Pedro Martinez began."
Guerrero defeated David Ortiz and Manny Ramirez of the Boston Red Sox, and US nationals Gary Sheffield of the Yankees. The results of the vote show that Sheffield placed second, followed by Ramirez.
The MLB website credits Guerrero's MVP accolade to his having hit .337 with 39 homeruns and 126 RBIs, and having scored 124 runs and played in 156 games to lead his club in almost every significant offensive category. Guerrero also racked up 39 doubles, 206 hits, an on-base percentage of .391 and a .598 slugging percentage.
Other reasons for the honors are his consistency throughout the year and his stellar performance at the end of the regular season when the Angels caught the Oakland A's to win their first division crown since 1986 and reach the playoffs for the second time in three years. Over the regular season's last 10 games, Guerrero hit .474 with seven homers and 12 RBIs, striking out just once in his final 38 at-bats.
David Ortiz of the Boston Red Sox finished fourth in the voting, followed by Orioles shortstop Miguel Tejada, yet two more players of Dominican origin.
Guerrero is the fifth Dominican to be named an MVP and the fourth in the AL, joining 2003's winner Rodriguez for the Texas Rangers, 2002 winner Miguel Tejada for Oakland and George Bell who was honored in 1987 while playing with the Toronto Blue Jays. Chicago Cubs right-fielder Sammy Sosa was the NL's MVP in 1998.
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