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Daily News - Monday, 25 April 2005

DR1 breaks for Secretary's Day
On occasion of the unofficial holiday of Secretary's Day, DR1 Daily News will not be published tomorrow. News will be compiled as usual for the Wednesday, 27 April edition. For breaking news, check back with the DR1 forums at http://www.dr1.com/forums

President Fernandez in Rome
President Leonel Fernandez is expected back in Santo Domingo today, 25 Monday, after a weekend visit to Italy to attend the inaugural of Pope Benedicto XVI. President Fernandez left on Friday evening and arrived in Rome on Saturday, via a stopover in Madrid. Upon arriving, he visited the tomb of former Pope John Paul II, the St. Peter's Basilica. In the evening, he attended a reception hosted by Ambassador Rafael Marion-Landais. On Sunday, he attended mass. After the mass he participated in a ceremony when the new Pope greeted the attending heads of state in the interior of the Basilica, including the Argentina President Nestor Kitchner, Chile President Ricardo Lagos, Colombia President Alvaro Uribe and El Salvador President Elias Antonio Saca.

First quarter growth: 4%
Central Bank Governor Hector Valdez Albizu has disclosed that the Dominican economy has grown by 4% during the first quarter of the year, way beyond the - 0.1% negative growth rate for the same period in 2004.
Valdez Albizu pointed out that despite the decline in borrowing from banks, private consumption is up 24.6% and net international reserves closed at US$441.1 million in March, exceeding the targets established in the letter of intent with the IMF for the entire year.
As reported in Diario Libre, Valdez Albizu recognizes that the peso is overvalued by two or three percentage points, stating that this is not due to monetary restrictions, but rather its performance on the free market. Valdez Albizu, as reported in the Listin Diario, said that the appreciation of the peso has meant savings of RD$10 billion in foreign debt payments. He said that the appreciation has also enabled the government to mitigate the increase in the price of petroleum.
Valdez Albizu also revealed that the country now has a surplus of US$348.5 million in its balance of payments.

ECLAC: 2.5% projected growth
The Economic Commission for Latin America and the Caribbean (ECLAC - CEPAL in Spanish) forecasts that Gross Domestic Product growth for 2004-2005 for the Dominican Republic will range from a low 2.2 to a high 2.7%. ECLAC projects a 2.5% growth for the country. Growth for the DR and El Salvador are the lowest forecast for Latin America. The Caribbean projected average is at 4%. Costa Rica posts a 3.5% projected growth rate, Guatemala 3%, Honduras 4.2%, Mexico 3.8%, Nicaragua 4%, and Panama 4.5%.
ECLAC says that the Latin America and Caribbean economy will grow by around 4.4% in 2005, which reaffirms a relatively positive regional scenario, despite the slowdown expected in the world economy. Highest growth rates are reported for Argentina, Chile, Uruguay and Venezuela.
ECLAC says that the strong performance of domestic demand will offset the external sector's reduced contribution to growth. In several countries, remittances from abroad will continue to drive growth in domestic demand. Employment should recover gradually as should real wages, although to a somewhat lesser extent.
ECLAC alerts that the high debt levels observed in some of the region's countries will make growth vulnerable to increase in interest rates in the US.
ECLAC also mentions that dollar depreciation against the euro and the yen, apparent in 2004, is expected to continue this year, with important consequences for the region, since it will give additional impetus to several countries' efforts to diversify their export destinations and, above all, will help to promote the region as an important alternative for tourism, mainly from Europe and Asia.
See http://www.eclac.org/cgi-bin/getProd.asp?...

Use surplus to cut taxes
Representatives of the manufacturing community are suggesting that the government should use the present surplus in revenues to eliminate taxes that distort the economy and penalize those who produce goods and services here. Yandra Portela Vila, president of the Association of Industries of the Dominican Republic said the government had collected RD$1.36 billion above what had been budgeted. This could mean a surplus of RD$4.36 billion by the year's end.
Portela said the surplus could compensate for the fiscal impact of eliminating of the 13% exchange surcharge, deemed illegal by the World Trade Organization, and the up to 3% tax on capital goods imports.
Portela spoke at a luncheon with economic reporters at the AIRD. Also participating were Circe Almanzar, Ligia Bonetti and Ernesto Vilalta, president of the Asociacion de Empresas Industriales de Herrera.
The business sector spokesperson says that instead of creating new taxes for the government to maintain its income, what needs to be done is to reduce tax evasion, so that small and medium sized businesses pay their taxes and more in the informal business sector pay taxes. She added that an improvement in the quality of government spending is also necessary.
As reported in the Listin Diario, the industrial sector's position is that when the DR-CAFTA free trade agreement comes into effect, the country's tax scheme should be the same as that of its competitors. She called for the elimination of the 13% exchange rate surcharge, and the up to 3% tax on raw material imports.
For the pharmaceutical sector, she said it is necessary to equate intellectual property conditions with the other DR-CAFTA signatories, as well as providing compensation for the luxury tax and establishing its depreciation.
They also request the acceleration of the depreciation of capital goods; mechanisms to compensate for advance payments of ITBIS (value-added tax), elimination of the consular invoice, and that investment in repairs and improvements can be deducted as expenses by agribusiness.
The business representatives consider that experience with the free trade agreement signed with Central America shows that the DR has not been able to compete. They explain that over the past five years, other countries have taken advantage of the agreement to export more to the DR, taking market share away from Dominican produce. "Why should it be any different with the FTA signed with the US?" asks Portela.

IMF on DR bond exchange
The International Monetary Fund reports on recent actions taken by the Dominican economic authorities to restructure debt and re-establish macro-economic and financial stability. In a letter about the Dominican Republic to members of the financial community dated 20 April, Rodrigo de Rato, managing director of the IMF stated that key elements of the program include a substantial fiscal adjustment and structural reform measures. The IMF maintains a 28-month stand-by arrangement as of 1 February 2005. De Rato said that the program also has the approval of the World Bank, the IDB and Paris Club member bilateral creditors.
The program is described as: "a bond exchange offer that aims to help solve the country's short-term liquidity problem in a manner consistent with medium-term debt sustainability. Discussions are also well advanced on rescheduling external private bank loans and suppliers credits to the Dominican Republic. A successful bond exchange and rescheduling of debts to external banks and suppliers will depend on high participation rates to secure financing assurances for the Fund-supported program. Successful completion of these private debt restructurings is also necessary to fulfill the country's commitment to seek comparable treatment from private creditors in line with the requirements of the Paris Club's 2004 rescheduling, as well as a precondition for additional Paris Club debt relief in 2005-06."
See http://www.imf.org/external/np/sec/pr/2005/pr0589.htm

More on Supreme Court scandal
Contractor Guillermo Bonelly Knipping has criticized the government for paying RD$176 million to designer Margarita Gomez to furnish and decorate the Supreme Court of Justice and Attorney General building, despite his having won a RD$60 million contract by public tender, of which he owned up to having been paid RD$40 million when interviewed on the Gobierno de la Manana, morning talk show.
Bonelly said that his company, Importadores y Representatives Bohenco Santo Domingo won the contest in 1999 to furnish and equip the Supreme Court at a cost of US$3.2 million, equivalent to RD$60 million today. The project was shelved when former President Hipolito Mejia abandoned the completion of the Supreme Court building.
Bonelly said he delivered several letters to the Minister of Public Works alerting them about the increase of costs if the completion was delayed.
With the change of government, Public Works Minister Freddy Perez gave him the go-ahead to continue with the works, and he committed to deliver by 7 January. Bonelly said that all subcontractors participated in the meeting, not Margarita Gomez, who was latter to be entrusted with the furnishing contract.
Bonelly said that Gomez later appeared and "did whatever she pleased, going to the extreme of ordering us to remove our installations so she could bring her furniture."
He complained that Gomez did not work with the architects that built the installation and instead made modifications that have changed the interiors in such a way that he feels is not adequate for the work of the Supreme Court of Justice nor the Attorney General's offices, as reported in Hoy newspaper.
He stated that he had received payments for RD$15 million in 1999, RD$25 million in 2000, for a total of RD$40 million. He said that he began supplying contracted furnishings to the Supreme Court in October 2004, but was obliged to remove them by Margarita Gomez.
El Nacional newspaper reported that Bohenco received an additional payment for RD$14.5 million on 22 November, for a total of RD$65.8 million in decorating services.
He also alleged that Gomez imported imitation antiques from China. "I do not know the prices, but the totals should be unjustifiable," he said.

RD$307.6, not RD$106 million
El Nacional newspaper in its Friday issue says that the government paid contractor Margarita Gomez RD$241.8 million for the furnishing and interior decoration of the Supreme Court of Justice. For her part, decorator Gomez has issued a press release stating that she had been paid RD$106 million. According to the newspaper, Gomez left out the most recent check for RD$66.7 million she received on 1 March 2005.
This is in addition to the RD$65.8 million the government had already paid the previous contractor for the decoration, Bohenco, as reported in Friday's El Nacional newspaper.
The scandalously high cost of the decoration of the Supreme Court led President Leonel Fernandez himself, who reportedly authorized Margarita Gomez to do the decorating, to head a commission to look into the actual costs.
Public Works Minister Freddy Perez has remained silent regarding the Supreme Court case. Meanwhile, news reports indicate that deputy minister Carlos Polibio (Kalil) Michel Presbot, in charge of the Supreme Court completion project, has been banned from entering his offices at the Ministry of Public Works and that several of his staff have been suspended.
As reported in Hoy newspaper, Attorney General Francisco Dominguez Brito said that politics aside, anyone who made mistakes in the construction and equipping of the building would be held responsible.
The governmental Accounting Office (Camara de Cuentas) head is also reviewing what the government has spent on the building. But state lawyer Julio Cury told Diario Libre that what the Accounting Office is doing is purely blackmail. He said that so far, all the office has requested is the Supreme Court's flow chart and a list of the 40 contractors.
El Nacional reported that this week freight trucks with furniture and equipment for the Supreme Court were unloading despite the inventory and other investigations ongoing.
The newspaper indicates that this week the auditors noted that furniture was missing in some offices, which could have led to the restocking of furniture.
El Nacional reports that on 8 March, in a written document to President Leonel Fernandez decoration contractor Margarita Gomez reported on the "formal delivery of the decoration of the Supreme Court of Justice building." In her proposal of 28 October 2004, she had committed to deliver the furniture and complete the decoration in 30 days. President Fernandez inaugurated the building on 7 January 2005.
Nevertheless, a spokesman for the Ministry of Public Works justified the new delivery of furniture on grounds that the contractors had not yet finished their work, as per the El Nacional report.
As reported in El Caribe, technical director Rolando Rodriguez says that the contract with Bohenco was rescinded because with only weeks to go for the inauguration, the company had only furnished 10% of the facility. Rodriguez explained the arrival of three container freight trucks to the Supreme Court yesterday with new furnishings by saying that the furnishings had been ordered from abroad and had just arrived.

Plan Renove case
Judge Alfredo Rios Fabian has sent to trial the government cases against three former presidents of the transport renovation plan, Plan Renove and 11 others. The former Plan Renove presidents are Ramon Emilio Jimenez hijo (Milo), Fabio Ruiz and Siquio Ng de la Rosa. The case against another former Plan Renove president, Pedro Franco Badia was sent for a hearing with another judge after the latter disqualified Judge Rios from hearing the case. The judge released former banker Angel Rondon Rijo from responsibility. He had been accused of distributing US$995,000 to a number of legislators in return for their votes in favor of the transport scheme.
Others being sent to trial are businessman Juan Julio (Johnny) Morales; and Paulino Antonio Reynoso (Padre Tono), former president of the transport office (OTTT); Casimiro Antonio Marte, director of the Conatra transport Union; Terrabus businessman Milciades Amaro Guzman; Diogenes de la Cruz, former president of the country's largest truckers' union and director of OMSA during the Mejia administration; deputy director of OTTT Gervasio de la Rosa; transport union director Francisco Antonio Perez; Fenatrado president, Blas Peralta; Alfredo Pulinario (Cambita) and Freddy William Mendez and US resident Shlomo Ben Tov (alias Sam Goodson). The basis for the case is an audit prepared by the former controller general during the Mejia administration, Federico Lalane. The state is prosecuting for alleged fraud against the state for RD$1.8 billion.
The case goes to trial in 15 to 45 days. Evidence of the fraud collected by state prosecutors will be reviewed by the court.

Morales called intellectual author of Renove
Judge Alfredo Rios Fabian documents in his indictment for the Plan Renove case that businessman Johnny Morales was the intellectual author of the Plan Renove transport scheme, whereby 14 persons are accused of fraud to the state, as reported in the Listin Diario. Judge Rios said that the trial needs to establish that Morales was the intellectual author of the illicit association that was formed and organized to scam the Dominican state with the sale of Hyundai vehicles and to obtain numerous economic benefits for himself and several government officers and businessmen.
Judge Rios said they have found sufficient elements to lead them to assume that Morales participated in an active way in the purchase of the vehicle units. As reported in the Listin Diario, in one of the motivations of the indictment, the judge explains that "Morales, through his partner abroad, Sam Goodson, offered to the state vehicles of less quality and higher cost and for that purpose traveled frequently to Miami where he conceived the strategy of contracting the company of Goodson by way of bribes, gifts and promises of economic advantages for the government officers."
In the motivation, the judge says that Morales used as a front for this purpose his son-in-law Hector Manuel Everts Garcia, who represented Sam Goodson in the country. The judge wrote that the scheme was to present to the authorities the advantage of having a newly created company that sold vehicles, that they called Hyundai American Corporation, that in turn represented Hyundai Comercial Vehicles American of Sam Goodson. The judge stated that 1,102 vehicles were purchased for an inflated US$56.5 million by using the company. The downside is that the irregularity of the purchase left the vehicles without the guarantee offered by Hyundai, because the company did not have a RNC or tax registration number. The judge says it has proof that Morales received for his services two Hyundai vehicles valued at RD$3 million. The judge says that Morales used his chauffeur of 30 years, Jose Gregorio Javier Estrella, as front in the operation who received RD$31.3 million at the time of the transaction. The money was deposited in a Central Bank CD.
Diario Libre today provides a comprehensive list of accusations against several others in the Plan Renove case. See http://www.diariolibre.com/app/article.aspx?id=32218
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