| Daily News - Monday, 20 December 2004 |
The Central Bank of the Dominican Republic has lots of dollars. According to today's El Caribe, the net reserves at the Central Bank have reached US$544.5 million, signifying the second highest level of currency reserves since July 2002. Just last month's level was slightly higher, however. The lesser dollar-peso exchange rate and the stability of the economic indicators have created an auspicious scenario for the Central Bank, as it takes advantage of the situation to increase its international currency reserves, which had fallen to less than 25% of the current levels by last December 2003. The Central Bank is purchasing dollars on the exchange market. In order to do so, it emits pesos that it later recoups through the sale of CB certificates. Current estimates place the amount owed on certificates of deposit in the Central Bank at 14% of the projected GDP for the Dominican economy for 2004. In order to stifle inflation, the bank has reduced the amount of currency in circulation by 5.8% in over the past four months. The good news is that interest rates are down some 10% since six months ago, the exchange rate is down nearly 30% and the bank's net international reserves are up.
While debt service payments will consume US$1 billion in 2005, Finance Minister Vicente Bengoa announced that the Dominican Republic is up to date on its payments to its creditors. In four months the Ministry of Finance has paid out US$362 million, and it seems that the US$200-million bridge foreign loan that was being discussed will no longer be necessary. Speaking to El Caribe, Bengoa said that the exchange rate's stability and increased collections at the tax offices were the determining factors for this good news. The finance minister also said that before the year is out the government will pay the US$65 million owed to the Paris Club. He said that a deal for US$45 million with the DR's Reserve Bank will be used to "complete" the necessary funding. Bengoa was delighted to point out that the US$65-million payment was due in December of 2003 and that when the current administration took over the government they discovered deferred payments and arrears totaling US$200 million.
Economist Bernardo Vega is an exceptional essayist on economic themes, especially since he writes so well and so clearly. In today's El Caribe, he sets out what the government must do in order for the IMF to consider the proposal for the renewal of the stand-by agreement that will help the Dominican Republic restore economic stability after the disastrous banking failures of two years ago. Vega says despite the many rounds of negotiation, the Dominican government still has 18 things to do before the year's end to entice the IMF council to consider and, hopefully, approve the renewal. The major obstacle has not come from the PRD, as would be expected, but rather from the business sector, which is hindering the approval of the 2005 national budget. The industrialists have introduced legislation that will reduce official income without any corresponding reduction in expenditures or alternative sources for the lost income. The budget includes, among other things, new bond issuances, but the government wants to postpone any new "mini" tax reforms until January, because budget approval is the top priority. Another precondition is that the government must have liquidated all the late payments owed to the IDB, the World Bank and the Paris Club creditors. Moreover, negotiations must be started with the holders of sovereign bonds in order to extend the due dates under friendly terms. There are several other controls that the President will have to implement in the National Treasury, and these include decrees that will permit the centralization of all data concerning foreign debts and the elimination of all tax exemptions. The Central Bank is also being called upon to fulfill a series of measures that include the disposal of all of the assets that were offered as guarantees by the debtors of the failed banks, and the restructuring of those banking institutions. Even the energy sector is being obliged to undergo a rigorous reform that will be overseen by several of the international financial organizations. And with all of this work to be done, if Congress does not ratify the budget proposal for 2005 by the end of the year (that is, in eleven days) the IMF will not approve the stand-by agreement in January.
The last word on the weekend was that neither the senators nor the government would budge on the issue of the 25% tax on soft drinks using High Fructose Corn Syrup (commonly called "corn syrup" or simply, HFCS). The tax is standing in the way of the much-debated DR-CAFTA agreement that will allow the Dominican Republic to liberalize trade with the United States. According to El Caribe, the negotiation session scheduled for Saturday was not held and has been rescheduled for today. While the senators have said that they are willing to be flexible on the issue, the government team is insisting that they will accept no other solution but the repeal of the tax. Last week, President Leonel Fernandez told the senators in a message sent to Congress, that he would not "tolerate" any changes to the 25% tax legislation, except its complete dismantling. He reminded the senators that the country's future depends on commercial integration with the United States, and that nothing would be done to derail the free trade accord.
Reportedly, the senators are due to vote on the National Budget in their Tuesday session.
The National Drug Control Commission (DNCD) has seized 1.387 kilos of cocaine discovered in a truck on the outskirts of Santo Domingo that included a National Police colonel as one of its passengers. According to the story in El Caribe, the arrests are part of a year-long operation being conducted in collaboration with the US Drug Enforcement Administration (DEA). The Listin Diario, which also carries the story as its main headline, puts the value of the drugs at RD$900 million and reports that the DNCD has identified the passengers of the truck as NP Lieutenant Colonel Lidio Arturo Nin Terrero, former Army captain Quirino Ernesto Paulino Castillo, driver Tirso Cuevas Nin and Belikis Ubri Medrano. El Caribe says that Nin Terrero has been expelled from the NP and will be tried in the civilian court system. "This is the second biggest drug seizure made by the DNCD in the past 10 years," stated a press release from the DR's drug enforcement agency. They indicated that the 1,200 packets of cocaine were being transported from the DR's southern border to a free zone company in Santiago, where it was to be processed for export to the US.
President Leonel Fernandez inaugurated the new bridge over the Chavon River in a ceremony that was unexpectedly attended by several personalities of note. Besides the President and his wife, guests included baseball player Sammy Sosa; don Alejandro Grullon, the president of the Foundation for the Basilica of La Altagracia and chairman of the Banco Popular Dominicano; Ramon Menendez, the executuve VP of Casa de Campo; Daniel Flaquer, the head of Tropical Tours, and La Altagracia's Bishop Nicanor Pena, who expressed the feelings of thousands when he thanked the President and told him that he had had to cross the river on foot, often at night. The new bridge, built by Grupo Modesto, cost RD$70 million and will stand in for the one destroyed by the floodwaters associated with Hurricane Jeanne that hit the area last September. The government earlier had put in place a RD$40 million causeway, built by Constructora Pagan, which will now become a pedestrian crossway.
With most of the country's favorite beverages sold in bottles, it is no wonder that recycling should provide a golden opportunity for some. While the recycling of bottles is not a sector that is formally overseen, it is estimated to move RD$711,360 annually in the DR, according to the Listin Diario. Of the total, 64.3% can be attributed to empty beer bottles and 35.7% to rum and wines. The "botelleros," who sometimes have as many as 10 people working for them, are not being acknowledged by the state as potential contributors to the revenue system, even though approximately 3,000 outposts for bottle recycling exist across the country. Once collected, the bottles are returned to the nation's major alcoholic beverage producers: Cerverceria Nacional Domincana (CND) and Brugal. Other producers account for an estimated 10% of the market. Daniel Martinez, the president of Botellas Nacionales, explained that whiskey bottles are the only ones that are reused among nationally produced liquors. His organization buys bottles all across the country from collectors found in the towns and barrios who cull the local nightspots, colmados and other suppliers. A case of 24 beers nets RD$30 for the bottle resellers, who have paid between RD$20-$22 for their commodity, meaning they earn as much as RD$10 per case. Large capacity posts may earn as much RD$100,000 on a weekly basis. It is estimated that 75,000 people in the DR make a direct living from the sale of empty bottles.
Over the weekend, the main headlines were dedicated to the effects the continuous rains have had on vast areas of the Cibao Valley. El Caribe reported that 15,000 people had been affected by the rising flood waters, with one death confirmed. In Gaspar Hernandez, situated on the North Coast, 3,000 families were cut off by the waters of the Beragua River, the body of water that claimed the life of Mariano Baez. Civil Defense brigades, firefighters and Public Works teams attempted to clear the roads of the refuse left behind by the flooding of the area's two rivers, the Beragua and the Yasica. The communities of Batey Ginebra, Las Marias, Semillero I, La Lomota, La Cuchara, Rincon, and La Boca were reconnected with the main highways. Helicopters were used to fly in food to the isolated communities, and, according to the provincial governor, hundreds of families were evacuated from the areas of highest risk. Farmland in the region, noted for its plantains, yucca and batatas, was severely damaged. In Santiago de los Caballeros, the situation is markedly different with hundreds of flood refugees returning to their homes after spending several days in emergency shelters or with relatives. Officials commented that the families are returning to the same dangerous housing that was either flooded or nearly flooded this past week. The Touristic Highway that connects Puerto Plata and Santiago was reopened, although authorities warn that landslides could still occur. Further east, in the province of Maria Trinidad Sanchez, some 40 rural communities that had been without access to any main roads began to recover slowly. Life in Puerto Plata was reported to be returning to normal after the torrential rains flooded and isolated some of the most disadvantaged neighborhoods and communities. City officials were working on cleaning the drainage pipes and clearing the refuse deposited by the flood waters.
The weather department has forecast good weather for the holidays.
More attractive airfares are beckoning travelers, according to travel agencies, who are reporting a decrease of between 30%-40% in the cost of plane tickets. This phenomenon is due mainly to the lower cost of the US dollar on the local exchange market. Tickets to Puerto Rico, Miami, New York and Spain are the lowest they have been in several months. A fare to New York on American or Delta (SDQ-JFK) now costs RD$12,975 or RD$12,472, depending on which line a person chooses. This is RD$5,000 less than just a few months ago. El Caribe reports that flights to Spain are down to RD$13,000 on Europa Air Plus, a substantial reduction from the RD$34,000 fare that these tickets cost in September. Normally, these airfares would be about RD$27,000 if not on sale.
The contents of this webpage are copyright © 1996-2008. DR1. All Rights Reserved.