The government's economic team has handed in its project for what they call "fiscal corrections" and what others are calling a new tax plan. As a result, Fernandez will address the nation next Tuesday to explain exactly what is involved in the new plan, especially the details of the Selective Consumer Tax and the extension of the VAT tax base. Finance Minister Vicente Bengoa, who met with the President for more than three hours yesterday, said that the team explained the details of the "correction" to the President. Bengoa refused to give reporters any hints about the details of the package.
In full-page advertisements in most of the daily newspapers, 26 major business associations are expressing their rejection of the government's proposed tax reform, no matter what shape it takes. Headed by the National Council for Business (CONEP), and embracing every possible sector from soft drinks to meat packers, the associations point out that there have been five tax increases since 2000 and three within the last two and a half years. These tax increases have produced an additional RD$90 billion in revenues and have allowed the government to nearly double its annual budget. To add insult to injury, the associations clarify that up to September 2006 government spending had increased by 25% over 2005, but government income had increased by just 19.9%. Non-personnel services grew by 83.7%, operating expenses in office supplies grew by 39.8%, government expenditures in publicity grew by more than 130% and per diem payments increased by more than 80%. Purchases of fuels increased by 100%. The associations emphasized that "one of the budget items that is out of control... is the electricity subsidy." They said that all this does is hide the distributors' management and debt collection inefficiencies without investing in a definite solution to the problem. The nation's business leaders ended by saying that "it appears to be paradoxical to propose a new tax increase, since it threatens the competitiveness of local businesses on the threshold of entering DR-CAFTA." "Most of the countries around the world are reducing taxes to become more competitive. In our country we need to do exactly this if we are to compete fair conditions, and attract domestic and foreign investments to create jobs and sustainable development," concludes the business sector statement.
Hoy newspaper page two, Que Se Dice commentary mentions today how no government officer, especially those who have defended the fiscal reform has referred to demands for the government to adjust its spending in order to convince the country to swallow the heralded next belt-tightening. "The explanation to the silence is as simple as it is obvious," writes the commentator. "Belt tightening for government officers today means resigning per diem, representation, and travel abroad allotments, not to mention the de rigeur SUV or the chauffeur that takes the boys to school and the missus to the beauty parlor and the supermarket," is the explanation given. "We then cannot blame them if they do not want to give up these privileges, without which, we have to recognize, governing this tropical paradise loses all its charm," is the conclusion.
Economist Carlos Despradel says that the government is hard-pressed for revenues now because it is paying the price for overspending on campaigning in the run-up to the Congressional elections that took place in May. The ruling party managed to win a majority in Congress. He warns that it is in the government's best interests to reduce spending rather than forge ahead with a tax increase. As reported in Hoy newspaper on Monday, 6 November, Despradel says that if the government wants to increase taxes, it should at least show signs of austerity, but that that is not happening. He said that the economy today is very different compared with what Fernandez tackled during his first Presidency, in 1996. He rejected the statements claiming that it is the International Monetary Fund that is making the impositions for more taxes. He explained that all the IMF demands is fiscal balance, but it is up to the authorities to choose how to achieve this. "It is the authorities' choice to decide if they are going to achieve this balance, either by increasing income or cutting expenses. Whichever option is chosen, the IMF has to accept," said Despradel, who is a former governor of the Central Bank. Despradel was speaking during an interview with PRD secretary general, Orlando Jorge Mera for the "Lideres" TV program on Color Vision. Despradel said that in 2006 the government was not able to comply with the IMF Stand-by agreement program because of overspending in the first two quarters of the year. Despradel highlighted the fact that government revenues in 2004 were up 40%, while inflation was 29%, for a surplus of 11%. Then in 2005, revenues were up 22% and inflation was 7%, so the government had a 15% surplus. In 2006 revenues were up 16% and inflation is estimated at 8%, for 8% real additional revenue. "That means that the government has increased its revenues beyond inflation for three consecutive years. Each year it has had more money to spend. Any company or family would want that," commented Despradel. He said that Dominicans are questioning the use the government is giving to the additional funds generated by the so-called fiscal reforms. He commented that Income Tax is up 24%, when compared with 7% inflation, which is positive. Property tax is up by 76% this year, and ITBIS has produced 27% more. But current government spending is up by 37%, "an extraordinary increase in a country where inflation has been low." He observed that regardless, the government complains it has not had enough revenues. To make his point about overspending in the run-up to the May election, he analyzed the situation where in January 2006 the government spent RD$104 million on materials and supplies, but in February this increased to RD$2.1 billion, in March to RD$1.2 billion and in April to RD$2.1 billion. Likewise, he mentioned that in January, the spending on wages for those not on the payroll (non-personnel services) was RD$148 million, but in April this had increased to RD$1.2 billion.
Speaking on the "Lideres" television program on Color Vision, former Central Bank governor Carlos Despradel said that the government has invested more than RD$3 billion in the construction of the first Metro line, "but what is of greatest concern is what remains to be spent. Nobody, not even the builders, knows what the metro will end up costing," he said, as reported in Hoy newspaper. He mentioned that even with the controls that the US government had over the construction of the Puerto Rico Metro (which is 17 kms long), it has been a failure and ended up costing US$2.25 billion, or RD$75 billion. Despradel said that making a conservative estimate, the Santo Domingo Metro would cost RD$35 billion, of which only RD$3 billion have been spent so far. "And where are the remaining RD$32 billion going to come from," he wonders. Despradel comments that the construction of the metro was not a priority for a country that was just coming out of a profound banking crisis, with a Central Bank debt now at RD$160 billion. He said problems would multiply when the Central Bank begins to pay the debt. Despradel believes that in 2007 the government will have to decide whether to freeze the Metro's construction, which could be perceived as a political failure, but he warned that on the other hand the construction would require an investment of hundreds of millions, which is a great dilemma for the authorities.
Electrical engineer Luis Arthur warns that the cost of continuing with the Metro is way beyond the cost of admitting its untimely construction and stopping now. The builders have started construction works at different points across the 14 kilometer route, giving the impression that to stop it now would be impossible as the city would be left full of holes. Writing in El Caribe, Arthur makes the point: "A train, that if it is ever inaugurated, will start like another bottomless pit of subsidies and improvisations, having served only to enrich a few who will not learn their lessons, of building without tenders, without a budget, without transparency, with the state footing the bill, at our expense. "If you compare the train with the ancient and growing electricity problem, we will find that electricity at least serves everybody and is indispensable for production, development and quality of life. The little 14-km train will benefit only a few in its transversal crossing of the city, on the secondary route from Villa Mella to La Feria. All will pay so very few can benefit. That is the wrong way to govern! A President that squeezes the country and its people as he tries to fulfill a pharaonic dream, will find it difficult to serve the rest of his term in peace and tranquility, and finish with prestige, let alone get himself re-elected, concludes Arthur. Arthur is very critical of the government for continually increasing taxes without rationalizing its performance, without revising excesses on its payroll and spending. "Unwisely, the government stubbornly plunged into building a train, ignoring all opposition, and now wants to squeeze the population and demand more sacrifices," he writes, in reference to the announced new tax adjustment. He mentions that the President has not been able to meet practically any of the objectives he outlined in his inaugural speech to the nation.
The Chamber of Deputies has approved a 60-day extension of the current session in order to ponder the pending legislation, including DR-CAFTA, receive the 2007 Budget Proposal and the controversial "fiscal corrections" program. The deputies sent the legislation that will allow DR-CAFTA to come into effect for study by a special commission, which has to present its report by next Thursday. The deputies also sent the proposed sale of several million square meters of former sugar lands to the Compania Gestiones Rodajes S.A. or Salomon Risek Llabaly. The Mejia administration had approved the sale of the lands in Monte Plata for RD$32,474,992.
Over the last two years, the Dominican Armed Forces have discharged 7,181 members for serious offenses including drug trafficking, contraband, robbery, assaults, kidnapping, illegal immigration, counterfeiting and other crimes. The number averages out to nearly 300 discharges each month, or ten per day. The group includes 200 high-ranking officers. The statistics do not specify whether it included members of specialized units such as the Airport Security (CESA) or the Port Security (CESEP) forces where many have been caught in illegal activities. According to Diario Libre, the vast majority of officers and men were discharged and sent before ordinary justice during Admiral Sigfrido Pared Perez' term as Armed Forces Minister.
Dozens of hospitals in the northern Dominican Republic are being hit by a 24- hour strike by doctors, who are demanding increased wages and a better supply of medicines. They are also protesting against the practices of charging patients at public hospitals and of hiring doctors without going through the required processes. According to Oscar Lopez Camacho, the regional vice-president of the Dominican Medical Association, the strike marks the first anniversary of the signing of an agreement with the Public Health Ministry, which promised to solve these and other problems.
The Dominican Telecommunications Institute (INDOTEL) describes the latest report on stolen cell phones as "alarming." According to INDOTEL, an average of 600 cell phones were stolen each day during October. The head of the institute asked for cooperation from the media, and asked citizens to report all stolen cell phones. Companies that service cell phones have accepted the obligation to deny servicing any cellular phone of "dubious" origin. There are currently 3,623,289 cell phones registered in the Dominican Republic, and, of these, 3,118,196 use the pre-paid card system.
The nation's oldest university is set for a meeting of the professors' and employees' unions. The unions meet today to discuss their strategy to get the administration to annul a contract with a local health insurance provider. University Dean Roberto Reyna said that the institution would not yield to the pressures being exerted by the unions. Reyna accused the union leaders of being "insensitive" and of putting the students at risk of losing a semester of work.
In a move that caught most political observers by surprise, Danilo Medina, one of President Leonel Fernandez's closest advisors, resigned his post as Presidential Minister (secretario de la presidencia) yesterday. Speaking at a press conference at the Hotel Embajador, Medina told reporters that he was resigning his post - that combines attributes of the chief of staff post in the US White House with some of those of a prime minister in Europe- "in order to serve the country from within the PLD." Medina said that he had fulfilled his promise to serve for two years. Immediately, the rumor mill began generating ideas about the significance of the timing of Medina's resignation. According to Diario Libre, it is a given that Medina will seek the party's nomination for the 2008 Presidential elections, and now needs to distance himself from the Presidential Palace. President Fernandez announced through his spokesperson that the post of Presidential Minister would remain unfilled for the time being. Diario Libre asked political scientist Cesar Perez and sociologist Ramon Tejada Holguin about the resignation of such a key person in the government's team. According to them, this could bring about serious tensions within the party, especially if a fight between Fernandez and Medina is in the offing. It is yet to be seen whether President Fernandez will seek re-election in 2008. If he decides not to run, others that could seek the PLD nomination are Santiago senator Francisco Dominguez Brito, former Santo Domingo senator Jose Tomas Perez, and former Vice President Jaime David Fernandez. Observers say that primarily for his lack of charisma, Danilo Medina failed to win the presidency when he ran for President in 2000. At the time, President Fernandez was banned from re-election, which is not the case today, as he benefited from a constitutional change pushed through Congress by his predecessor, who sought to be re-elected but failed in 2004.
Although the number varies across the media, a quake measuring 5.0 - 5.2 on the Richter Scale shook up most of the Cibao Valley and parts of the north coast yesterday morning. So far, there have been no reports of injuries or structural damage due to the shock, which was classified as "superficial" or close to the surface. The Seismological Institute at the UASD said that the quake was centered to the NNE of the city of La Vega. Towns as far away as Mao and Esperanza in Valverde province and Nagua and Cabrera in Maria Trinidad Sanchez province reported the event. It all happened at 10:11am yesterday morning. According to the institute's Juan Arias, there were no pre-shocks or aftershocks.
The Cap Cana tourist project has successfully placed a US$250 million bond issue on the international bond market. The bonds are seven-year, 9.62% paper. This is the first time that a Dominican entity has been able to place bonds at an interest rate below 10%. The money will be used to pay off the US$62.3 million in local commercial loans, with the rest going into the development of the 12,000-hectare beach, golf and marina resort development that includes eight kilometers of pristine shoreline and three Jack Nicklaus Signature golf courses, the first of which was inaugurated on Wednesday, 8 November. The company has sold over US$500 million in real estate (600 units). According to Abrisa Group head Abraham Hazoury, the bonds have received a "B" rating from Fitch Ratings and a B-3 rating from Moody's. According to Ricardo Hazoury, who heads the Cap Cana operations for the Abrisa Group, Bear Stearns handled the financing operation, which entailed "an innovative financial structuring with a level of complexity and sophistication never seen before on the international markets." The bonds were such hot items that there was excess demand for them, which allowed the interest to be set below 10%. A company statement indicates that development began in 2002 and to date the company has invested approximately US$220 million in infrastructure and other improvements, including 17 miles (27 kms) of paved roads, water reservoirs and treatment facilities, power generation capacity (five megawatts), a private beach club, the first Jack Nicklaus Signature Golf course, and substantial completion of the marina and numerous residential units. The first condos were delivered in October 2006.
Make plans for attending the opening of the V Santo Domingo International Theater Festival that kicks off with a not-to-be missed performance of the Franco-Chilean production, "Roman Photo" (La Gran Reyneta directed by Jean Courcoult, director of the famed Royal de Luxe theater company) at 7 pm at the Plaza de Espana in front of the Columbus Alcazar in the Colonial City. The festival is about 10 days of theater, with 72 free performances, 34 of these with works from 17 countries and 38 Dominican presentations. Works on agenda, include the presentation of "La Estupidez," a dramatic comedy by Argentinean Patron Vasquez, at the Manuel Rueda hall of the Bellas Artes Palace on Friday and Saturday, 10 and 11 November at 7 and 9 pm. Other visiting companies that will be performing are Teatro Circular (Montevideo, Uruguay) presents "Onetti en el Espejo", Teatro Avance (Miami), Grupo Teatral Yuyachkani (Peru), Teatro Matacandelas (Colombia), Argos Teatro (Cuba), Compania Nacional de Danza de Ecuador, Equilibrio Precario (Chile), among others.
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