A group of Japanese businessmen visited President Leonel Fernandez yesterday, together with Dominican businessman Antonio Najri, owner of the Toyota dealership in the DR (Delta Comercial) and Agriculture Minister Amilcar Romero. Diario Libre reports that the group included Takashi Hasegawa, representative of Toyota Tsusho America, and Hideaki Otaka, from Toyota Motors of North America, as well as Akira Kimura and Zachary Henry, managers of both companies, respectively. Najri reported that this year Toyota would break their vehicle sales record in the DR.
First Lady Margarita Cedeno de Fernandez has led the opening of a project called "murals for a country without violence, towards a culture of peace", which is aimed at promoting non-violence among students. According to a report in Listin Diario, 110 community murals will be painted by intermediate students who will focus on the elimination of domestic and gender violence in particular. The program began at Paraguay School in Ciudad Nueva in Santo Domingo.
Diario Libre adds that 561 new agents will be added to the School Police force, increasing the total number of agents to 813. These agents have been trained in preventive measures and the control of gangs that affect educational centers.
The government has cut back 6,021 jobs during the first nine months of this year, as reported by the Central Bank. El Caribe newspaper observes that this responds to the control measures to limit public spending in accordance with the stand-by arrangement with the International Monetary Fund (IMF). Institutions that have reported personnel reductions include the Presidency (-33.4%), Public Health (-7.6%), Agriculture (-11.5%), Tourism (-70.3%), Dominican Agrarian Institute (-29.3%), National Lottery (-17.6%), and the National Institute of Hydraulic Resources (-10.7%).
During the previous administration, then Central Bank governor had said there are over 120,000 surplus jobs in government.
The National Business Council (CONEP) has given up its quest for consensus after it became evident that a functional mechanism for the exclusion of an increase of the tax applied to diesel used by industries that generate their own energy would not be found, according to Clave Digital. None of the parties could present a formula that would allow the exclusion of this tax. CONEP's withdrawal leaves the final decision on the bill, which will be voted on again today, to government representative, led by Presidential Technical Secretary Temistocles Montas, and the Chamber of Deputies Finance Commission led by Marino Collante.
Listin Diario reports that the government, CONEP and the Chamber of Deputies held talks yesterday with the mediation of the National Dialogue Office, and agreed to present a new tax reform bill with collections amounting to RD$3 billion less than originally requested by the government. The bill's estimated collections will drop from RD$32 billion to RD$29 billion. Collante said that the bill is on today's agenda for approval by a second vote in the Chamber of Deputies, after which it would be sent to the Senate. Collante said the tax on diesel would be maintained, as it is impossible to identify sources for the RD$4 billion excluded in favor of the agribusiness sector. CONEP had objected to the tax on diesel and the application of VAT (ITBIS) to finished products, a decision which it left for the government and Congres to make. The change to the bill includes a paragraph that issues a tax credit to 52 generating companies that are not connected to the national energy system so that they do not have to pay the increased tax on diesel. These companies use up more than 15 MW. The credit excludes hotels, which consume less than 5 MW, according to an unnamed source. Montas stated that the diesel tax would generate approximately RD$3 billion. The Association of Industries was not represented at the meeting. The changes also include a 29% income tax (instead of 30%), and a paragraph excluding the 1.5% anticipated tax on gross sales. Income tax would be reduced to 28% in 2007; to 26% in 2008 and would return to 25% in 2009. The Association of Industries of Herrera (AEIH) warned that the revised reform would make productive sectors less competitive and would require additional taxation changes within a few months. Engineer Ernesto Vilalta classified the bill as a "fiscal mess", stating that the tax on diesel would increase transportation costs, which would have an impact on prices and make local products less competitive than international products.
Diario Libre indicates that the business sector withdrew from the negotiations, upset that the tax for diesel used in electricity generation would be maintained for companies that use less that 15 MW. Despite this objection, the Chamber of Deputies will vote again on the tax reform today. The final version contemplates the 29% income tax rate and a 70% current differential applied to diesel for general use, and an anticipated 1.5% tax on gross sales for companies with more than a RD$5 million monthly turnover. Also included is a 17% tax on the registration and license plate of recently imported vehicles and the exemption of VAT (ITBIS) for several products, and agricultural machinery and raw materials.
El Caribe reports that stress and fatigue characterized the negotiations between the government, the Deputies and the business sector, which went on for three hours yesterday at Pontificia Universidad Catolica Madre y Maestra (PUCMM). Neither the industrial sector nor small businesses were represented at this meeting. No consensus was reached on the increase of the tax on diesel.
Meanwhile, PRD President Ramon Alburquerque said that the government would have to desist from taxing diesel if it wants the tax reform to pass. He emphasized that the PRD opposes any tax that would affect the middle class and consumers.
The rush to pass the tax reform is in order to compensate the government for loss of revenue when the exchange commission is removed in order to comply with requirements for the implementation of DR-CAFTA. Now, though, it appears the implementation of the treaty with the United States may take many more months.
Two Central American newspapers reported yesterday that the DR-CAFTA agreement would not come into effect next January as previously announced and that the possible new date would be in April, according to Listin Diario. El Nuevo Diario from Nicaragua quoted economist Alejandro Martinez Cuenca saying that the five signatory countries with the US have not harmonized their legislation with US laws. Only El Salvador has made minimal progress in this aspect whereas the other five nations still have a lot to get done, including the DR, which affects US President George W. Bush's commitment to his country's Congress. Laws to be harmonized include intellectual property, labor laws, biodiversity and copyright, among others. La Prensa newspaper, also from Nicaragua, reports that a government official, Dean Garcia, said that a meeting of representatives of the signatory countries is being planned for next 10 December, when a more certain date of application of the treaty would be confirmed. Garcia indicated that none of the countries has deposited the ratification instruments to the Organization of American States (OAS), which is one of the requisites for the agreement to come into effect. For the news story released in Nicaragua on the postponing of DR-CAFTA, see http://www.elnuevodiario.com.ni/2005/11/27/nacionales/6694
Franco Uccelli, analyst for Bear Stearns, has sent out a positive note on improvements in the Dominican economy, based on inputs from the Central Bank's third-quarter macroeconomic report. He concludes that the report shows that the country's recovery "continues to consolidate around higher than expected growth and better than anticipated fiscal results."
He states that the latest macro numbers reveal that both the country's IMF quantitative performance criteria and indicative targets for the third quarter were met with relative ease. "The evidence also suggests that the Dominican Republic's economic fundamentals remain very much on track to meet (and in many cases exceed) year-end targets," he writes.
In his outlook on the Dominican economy, Uccelli states: "We remain bullish on the country's medium term macroeconomic prospects. We also recognize, however, that a number of key challenges (passage of the government's pending fiscal reform, sanctioning of next year's budget, the effective implementation of CAFTA, compliance with the IMF program, the formulation of a plan to ensure the financial sustainability of the electricity sector) must be overcome for the latest gains to become more permanent fixtures of the Dominican Republic's economic reality."
In his report, Uccelli states:
* GDP growth - The Dominican economy expanded by a whopping 10.6% in the third quarter, boosting the year-to-date growth through September to 7.3%, compared with growth of only 1.3% recorded during the same period of 2004. The country's robust levels of economic activity were largely supported by a 26% expansion in the communications and a 19% expansion in the commerce sectors, which together account for more than 28% of the Dominican Republic's GDP. On the back of stronger than expected performance, the Central Bank has revised its growth forecast for the year as a whole to 6.6%, a bit lower than the 7% level that a number high ranking officials have telegraphed for some time now.
* Inflation - After dipping to negative territory between June and August, DR's 12-month rate of inflation closed the third quarter at 4.2% before dropping to 4% in October. With the cumulative year-to-date rate running at 6.1% in September (and 7.3% in October), the Central Bank is now forecasting inflation to close the year at 9.4%, which would be down from last year's 28.7% and in line with the stated goal to keep inflation in the single-digits. The main pressures on inflation are coming from the transportation, education and housing sectors.
* Monetary accounts - DR's Central Bank credits the recovery in market and consumer confidence, which in turn were prompted by the implementation of effective monetary and fiscal policies, with the restoration of monetary stability in the country. Such stability has been characterized by a reduction in inflationary pressures, a decrease in benchmark rates (from around 26% earlier in the year to 14% at the moment), and a build up in net international reserves (which, excluding foreign currency deposits from commercial banks soared by 266% though the end of October). All of these outcomes were facilitated by careful management of the size of the country's monetary base, which was consistently kept well below targeted ceiling levels. Despite a sizeable increase (+34%) in the stock of Central Bank certificates since the end of last year, we believe that the decline in interest rates should ensure that quasi-fiscal losses remain within the IMF program guidelines, which call for a quasi-fiscal deficit of no more than 3.2% of GDP for 2005.
* Fiscal accounts - The central government delivered an impressive performance in the nine months through September, recording a healthy 1.8% of GDP budget surplus, compared with the 5.2% of GDP deficit it registered during the same period of 2004. This was facilitated by a 25% increase in total government revenues compared with a more modest 7% increase in total expenditures. The government's remarkable performance was replicated at the non-financial public sector level, where a US$200 million IMF deficit target for the first three quarters of the year was significantly outperformed by the US$300 million surplus that was recorded instead. While the pace of public expenditure will likely pick up during the last quarter of the year, we do not believe that believe that it will intensify enough to take the NFPS year-end balance beyond the current 0.8% of GDP deficit target. Indeed, we believe that given recent trends a balanced or close-to-balanced result can not be ruled out.
* External accounts - The US$900 million current account surplus recorded during the first nine months of 2004 gave way to a US$137 million deficit (equivalent to 0.7% of GDP) during the same period of this year. The more than US$1 billion swing reflected a sizeable increase in DR's non-FTZ imports (FTZ imports actually decreased by US$80 million during the period), which soared by more than 37% from US$3.8 billion between January-September 2004 to US$5.3 billion during the same period of 2005. Total exports, on the other hand, rose by some US$200 million (+4.7%) during the first three quarters and their expansion was outpaced by higher growth registered by both tourism revenues (+14.2%) and remittances (5.1%). Although the government expects the external current account surplus to decline from 7.6% of GDP in 2004 to 1.6% this year, with the balance already in negative territory we believe that a small deficit (around 1% of GDP) will be the most likely outcome for this year. The behavior of DR's external accounts during the first nine months of the year is consistent with its sharp recovery in economic activity and with the appreciation experienced by its currency during the first half of the year.
For the full Central Bank source document on the third-quarter macroeconomic results in Spanish, see http://www.bancentral.gov.do/
Yesterday, Department of Prevention of Corruption (DEPRECO) director and special prosecutor for banking fraud, Octavio Lister, said his department could begin their investigations into the Banco del Progreso case. According to Listin Diario, he stated that he does not know why the former bank President, Pedro Castillo, left the country, although according to statements made by Central Bank attorney Ramon Pina Acevedo, Castillo had gone abroad to solve pending matters with US authorities. Lister said that although they had not yet launched any investigation, he knew that Castillo had been fired by the Board of Directors but that there is still information to be received about what happened there. The Justice Department has not requested exit restrictions against Castillo. Earlier this month Castillo was removed from his post as President of Banco del Progreso, and several days after his departure, the new President, Roberto Bonetti said that the executive had engaged in decision-making without the Board's consent. Castillo returned to the country on Sunday. As reported in Hoy newspaper, he denied his departure had to do with the audit into his term as president of Banco del Progreso.
Central Bank attorney Ramon Pina Acevedo has said that the sentence against financial advisor Luis Alvarez Renta in a court in Miami is a step forward for the justice system against those responsible for the bank frauds that occurred in the Dominican Republic, and he assured that Dominican courts would have to conclude with the conviction of Ramon Baez Figueroa and all others involved. Clave Digital reports that Pina Acevedo leads the team of lawyers representing the Central Bank and the Superintendence of Banks in the cases against former executives of Baninter, Bancredito, and Mercantil Banks, which collapsed in 2003. He was interviewed by Hector Herrera Cabral on the D'Agenda program transmitted on Channel 11.
The Social-Democrat Revolutionary Party (PRSD) has asked the president of the Chamber of Deputies to pass legislation that criminalizes tax evasion together with the tax reform bill. Diario Libre reports that PRSD spokesman Ovi Saldivar explained that evasion is one of the reasons why the government cannot collect the funds it needs to invest in social spending in favor of the majority of citizens, and pointed out that VAT (ITBIS) evasion is approximately 40 to 45% of the amount paid by consumers, which is not reported by retailers.
The biggest shipment of ecstasy pills ever caught by the National Drug Control Department (DNCD) was seized at Puerto Plata's Gregorio Luperon Airport on Sunday. Diario Libre reports that agents found 259,337 pills in 50 packages inside three bags that had been abandoned in the customs area of the terminal. One of the bags also contained a 9-miimeter Glock automatic pistol with two chargers. The drugs arrived on Arke Fly flight 341 from Amsterdam, the Netherlands, although they were tagged with another airline's numbering. No one has been detained in connection with the case. The passenger that was supposed to have arrived with the drugs did not board the flight, and no Dominican contact showed up to collect it. Ecstasy is produced mainly in Europe and is almost always marketed in pill form. It is a laboratory-manufactured drug that is mainly used by teenagers.
Renowned physicians specializing in sports medicine will come to the DR to take part in an international seminar and offer high-level conferences to colleagues from ten countries of the Americas. The event will begin this Thursday at 10:00 am at the Dominican Fiesta Hotel. The seminar is being held under the auspices of Olympic Solidarity and the Dominican Olympic Committee (COD), and is organized by the Dominican Federation of Sports Medicine, presided by Milton Pinedo, according to a report in Listin Diario. This was announced at a press conference by COD President Luis Mejia and Secretary Antonio Acosta.
The National Choir is closing its 50th anniversary celebrations with a series of Christmas concerts at different locations around Santo Domingo. Hoy reports that the program, which lasts from December 1st to the 18th, will include Christmas carols and will be conducted by Professor Jose Enrique Espin. The choir will perform on Thursday, 1st December, at the First Lady's office; Tuesday 6th at Colegio Santo Domingo; Thursday 8th at Cuesta Bookshop; Tuesday 13th at Escuela Celina Pellier in Los Mameyes; Wednesday 14th at Convento Dominico; Saturday 17th in Plaza Espana; and will close on Sunday 18th at San Vicente de Paul Parish in Los Mina.
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