News on the Economy

Between January and June 2008 the government spent RD$130.9 billion, of which RD$43.5 billion or 32.4% was spent on subsidizing fuel, free trade zones, bakers, milk producers, transport, farmers and other sectors. The government spent an additional RD$41.5 billion, interests payments accounted for RD$134.1 billion, loans RD$4.88 billion and RD$28.9 billion went towards capital spending. The central government's revenues were up with the Tax Department (DGII), Customs and the Treasury collecting a total of RD$132.3 billion. This is 9.9% more than was budgeted and is 4.7% higher than the same period in 2007. The report by the Ministry of Hacienda says that inflation between January and May was 5.07%. The report also indicates that there was less money circulating in the DR in June, with RD$133.4 billion in circulation. This is RD$655.2 billion less than in May 2008. Listin Diario writes that this restrictive policy could be a way of combating inflation caused by the devaluation of the dollar and fuel price increases. Gross international reserves registered at US$2.6 billion in June; that is US$2.21 billion less than May. Net international reserves decreased from US$2.2 billion to US$1.95 billion.
On the same subject, economist Bernardo Vega, writing in Clave newspaper, says that in order to keep inflation under control after the big spending of the election period, the government has resorted to selling reserves, increasing interest rates and putting new banking reserve restrictions in place to reduce money in circulation.

03 July 2008 - DR1 Daily News 

International Monetary Fund economists report an increase in international banking in DR-CAFTA countries, with the exception of the DR. The economists said that two foreign banks were forced to leave the DR banking sector because they encountered "ferocious competition" and couldn't adapt to the country's finance culture. Republic Bank and CitiBank both ceased operations in the DR. Economists Carlos Medeiros, Torsten Wezel and Jorge Cayazzo revealed their findings during the Seventh Annual Regional Conference of Central America, Panama and the DR, held in San Salvador, El Salvador. International banks market share is above 90% in El Salvador, 55% in Panama, and 25% in Costa Rica, while international banks only make up 10% of the banking sector in the DR and Guatemala. The economists believe that the banking system in the region operates in basically the same way, but that similar banking regulations should be implemented across the region. Alfred Schipke, senior economist at the IMF's Western Hemisphere Department says that there needs to be convergence in banking rules in the region as a way of preventing high risks at the capital level. Schipke revealed that the Council's Superintendents signed a cooperation agreement that will allow increased supervision of banks in the region.

01 June 2008 - DR1 Daily News 

Lisandro Macarulla, president of the National Council for Business (CONEP) says that the Central Bank's current monetary policy affects the nation's productive sectors. "A monetary policy that increases interest rates, increases the cost of money and limits access to financing, affects productive sectors that need to evolve in order to be more competitive." He added that expensive financing will limit sectors from making the necessary investments required to strengthen their exports and reduce the deficit in the trade balance. Macarulla agreed with banker Alejandro Grullon's criticism of the Central Bank's policy of high-interest CDs that he said "sucked up" much of the nation's cash. Macarulla said that the government recently increased interest rates as a way of controlling inflation, but this move has had negative ramifications.

01 July 2008 - DR1 Daily News

The National Council for Private Business (CONEP) has released its "diagnosis" of the Dominican economy. According to the report, "The Dominican Economy: Pending macroeconomic and sectorial challenges", economic growth has been unbalanced. "Evidently, we are experiencing very asymmetrical growth, in that sectors that drive the economy and should be growing aren't doing so."
The report found that commerce (businesses for the most part based on imports), finance and communications were the growth sectors, with 52% growth of the GDP from 2000-2007. On the other hand, productive sectors, such as industry, mining, farming, free zones, construction and tourism together only grew 23.6%. The report points out that workers in the informal sector now make up 56% of the labor force. CONEP stresses that the high cost and relatively low reliability of power service continue to be the greatest obstacles to doing business in the DR.
The study cited increased imports and lack of competitiveness in the productive sectors as problematic. The report also describes the growth as regionally asymmetrical because most of it is concentrated in Santo Domingo. Unbalanced growth is also reflected in increased unemployment.
According to CONEP there is a lack of concern by the state in matters of social development and infrastructure. This apathy is reflected in increased foreign debt, the quasi-fiscal debt and the deficits incurred by government subsidy programs. The study calls for increased spending on education, health, justice, public order and infrastructure because the DR is among the three countries in Latin America that invest least in social costs. The study also investigates the burden of debt payment on the economy. According to the diagnosis, 29% of all revenue collected by government goes towards debt payment and the subsidy to the energy sector, which has totaled RD$12.3 billion from January to April, further hindering economic growth.

01 July 2008 - DR1 Daily News

International Monetary Fund economists report an increase in international banking in DR-CAFTA countries, with the exception of the DR. The economists said that two foreign banks were forced to leave the DR banking sector because they encountered "ferocious competition" and couldn't adapt to the country's finance culture. Republic Bank and CitiBank both ceased operations in the DR. Economists Carlos Medeiros, Torsten Wezel and Jorge Cayazzo revealed their findings during the Seventh Annual Regional Conference of Central America, Panama and the DR, held in San Salvador, El Salvador. International banks market share is above 90% in El Salvador, 55% in Panama, and 25% in Costa Rica, while international banks only make up 10% of the banking sector in the DR and Guatemala. The economists believe that the banking system in the region operates in basically the same way, but that similar banking regulations should be implemented across the region. Alfred Schipke, senior economist at the IMF's Western Hemisphere Department says that there needs to be convergence in banking rules in the region as a way of preventing high risks at the capital level. Schipke revealed that the Council's Superintendents signed a cooperation agreement that will allow increased supervision of banks in the region.

01 July 2008 - DR1 Daily News

Seldom in the news and never in headlines, banker Alejandro Grullon featured in both last Saturday as he blasted the Central Bank's policy of high interest CDs that "sucked up" much of the nation's cash. According to Grullon, who is president of the Popular Financial Group, "the lack of liquidity that is affecting the financial sector and the nation's economy is due to the fact that the Central Bank has rounded up all the pesos in order to maintain the exchange rate at the level it has been at over the last few years." According to Listin Diario, Grullon said that "this is not normal" and because of this policy, there is a lack of money available to loan for agriculture and cattle farming. The prominent banker called on the government to reduce spending and to halt non-reproductive investments, and, at the same time, to stimulate investment in agricultural production for the international market as well as for local consumption.

30 June 2008 - DR1 Daily News

The Center for Exports and Investments - Dominican Republic (CEI-RD) is reporting that representatives from twelve US companies are interested in importing Dominican grown mangos. The US firms are based in New York, New Jersey and Miami. In recent years the Dominican mango has become a hot agricultural commodity. The DR has 1,014 mango producers and 14 exporters. The DR is also known for producing different varieties of mangos including Keitt, Kent and Tommy Atkins mangos. There are also local varieties such as Banilejo, Gota de Oro, Yamagui, Juan Jaquez, Madame Francis and Puntita. The DR averages US$3 million in mango exports per year. During the first four months of the year the DR exported US$518,874 worth of mangos.

20 June 2008 - DR1 Daily News

The National Free Trade Council for Exports has approved the creation of 22 new companies that will be opened in the free trade zones (FTZ). The incorporation of the new businesses will require an investment of RD$832.2 million and could generate as much as US$22 million in revenues and salaries. The new businesses are expected to create 4,000 new jobs.

20 June 2008 - DR1 Daily News

Government revenues continue to increase over what was estimated for the year. The government is reporting revenues of RD$108.8 billion for the first five months of the year, up from RD$99.38 billion in 2007. The revenues are 43.6% of the estimate for the entire year, and the pace of collections is greater than projected. Nevertheless, Listin Diario points out that revenues in May fell slightly below projections. Revenue collection grew by 9.5% in comparison to the first five months of 2007. In 2007 the government collected RD$99.4 billion between January and May 2007. The National Budget is for RD$300.89 billion, which is 16.4% more than in 2007. The 2008 budget projected that local tax revenues would reach RD$249.6 billion, and allocated RD$70 billion to pay for the foreign debt.
Income tax collection during this period increased by 58.4% compared to the first five months of 2007. Property tax increased by 63.6%. ITBIS (VAT) collection grew by 16.1% and taxes on foreign trade grew by 6.3%, going from RD$9.6 billion between January and May 2007 to RD$10.2 billion for that same period in 2008. Tax Department (DGII) collections grew by 13.9%, going from RD$64.6 billion in the first five months of 2007 to RD$73.7 billion for the same period in 2008.
See www.finanzas.gov.do

19 June 2008 - DR1 Daily News

National Private Business Council president Lisandro Macarulla disagrees with Jose Luis Machinea who said that the DR has some of the lowest taxes in the region. Machinea, the executive minister for the Economic Commission for Latin America and the Caribbean (ECLAC) says that the DR has some of the lowest taxes and that a new fiscal reform is necessary. Macarulla says he is confused by Machinea's comments considering that the DR has had four fiscal reforms in the last four years. Macarulla also said that according to an ECLAC report released in 2007, the DR had higher taxes than twelve Latin American countries studies, surpassed only by Chile, Honduras and Nicaragua.

19 June 2008 - DR1 Daily News