News on the United States and the DR-CAFTA

The DR is behind the other DR-CAFTA countries when it comes to applying policies that strengthen economic freedom and local competitiveness, as presented during an American Chamber of Commerce (AmCham) workshop yesterday. According to Ignacio de Leon, the DR has the worst Index of Economic Freedom among the DR-CAFTA countries, and the lowest competitiveness index published by The Heritage Foundation. The DR is ranked 87th, behind El Salvador, Costa Rica, Guatemala, Honduras and Nicaragua. Economic freedom is defined as where individuals are free to work, produce, consume, and invest in any way they please, and that freedom is both protected by the state and unconstrained by the state. The index measures business freedom, trade freedom, fiscal freedom, government size, monetary freedom, investment freedom, financial freedom, property rights, freedom from corruption and labor freedom. See http://www.heritage.org/research/features/index/countries.cfm

11 April 2008 - DR1 Daily News

Fernando Capellan, president of the Dominican Free Trade Zone Association (ADOZONA) says that US protectionist policies have prevented free trade zones (FTZs) in DR-CAFTA countries from making the most of the agreement. Capellan, quoted in Listin Diario, said that certain mechanisms like the 2x1 and the manufacturing accumulation program have not been put in place, even though they could make the sector more competitive. The accumulation program would allow DR-CAFTA countries to import 100 million squared meters of clothing into the US tariff-free while the 2x1 would allow DR-CAFTA countries to import two yards of US-made fabric for one yard of non-US fabric. Capellan says that the DR has not experienced any major advances through the DR-CAFTA because of Washington's protectionist policies.

01 April 2008 - DR1 Daily News 

The Dominican Republic and Guatemala are the only two countries in DR-CAFTA that have not been able to access money from the Millennium Account because of internal issues. This is based on some 20 indicators, according to Jose E. Signoret, the director of the Office for Strengthening Commercial Capacity, part of the Office of the United States Trade Representative (USTR). Chief among these indicators are issues concerning corruption, governance, and improving the general population's quality of life. According to Signoret, "a country does not have to score high on all 20 indicators, but there are some that are critical for the Dominican Republic". Because the DR has a higher per capita income than Honduras and Nicaragua, there are stricter rules to follow, according to an article in Listin Diario. In light of the latest report that covered October and November 2007, the official was asked how the 2007 numbers compared to the 2005 numbers. Signoret said that "the indicators have not moved much and the problem is that they have stayed more or less the same". Duty Greene, USAID/Dominican Republic's Economic Policy Advisor, told reporters that the three main criteria are governance, the economy and the social sectors (education and health). The economist said that the reduction in the time needed to start a business was encouraging, but the major problem was in the indicators on corruption.

31 March 2008 - DR1 Daily News 

Industry and Commerce Minister Melanio Paredes says that the country has benefited from the DR-CAFTA agreement, because capital goods, including machinery and raw materials can now be purchased at lower prices. During a speech at the American Chamber of Commerce (AmCham) luncheon Paredes cited a report by the Ministry of Hacienda that indicated that of the US$982 million in untaxed imports to the DR, 23% was made up of capital goods, 54.7% represented raw materials and 22.3% represented consumer goods. Paredes also said that during the last 15 years, foreign direct investment in the DR has shown considerable growth, going from US$916.8 million in 2002 to US$1.7 billion in 2007. Foreign direct investment grew by US$238.7 million between 2006 and 2007. Paredes says that investment has been fortified by the confidence brought on by DR-CAFTA.
Although there have been many benefits from DR-CAFTA, Paredes did acknowledge that Dominican exports have decreased from 52.4% in 2005 to 43.3% in 2007. The Minister attributed this to the increased strength of the Chinese economy and the removal of textile quotas by the US.
Paredes said that total DR-CAFTA imports and exports, for all countries, went from US$32 billion in 2003 to US$41.2 billion in 2007, which represents a 28.9% increase. The minister also spoke of the way in which the agreement has strengthened competition, adding that DR-CAFTA is very important for the Dominican economy's future development.
He also commented that DR-CAFTA strengthens Dominican institutions, contributes to the efficient development of the economy and strengthens the judicial system. Other benefits include the integration of the country into the world economy.

27 March 2008 - DR1 Daily News 

El Caribe, citing a report by the Central Bank, is reporting that foreign direct investment (FDI) to the DR increased significantly in 2007. The period in question represents the date after DR-CAFTA came into effect and according to the report, FDI reached US$1.7 billion in 2007. This figure represents a 16.3% increase from 2006 and an absolute value increase of US$238.7 million in comparison to 2006 when FDI was US$1.5 billion. FDI was directed specifically into the real estate sector (US$723.3 million) for a relative growth of 120% and absolute growth of US$394.8 million. Tourism experienced a growth of US$163.5 million, or 58.1% for a total FDI of US$445 million. Telecommunications also experienced an FDI boost of 22.2% or 75.8 million. Total FDI in telecommunications equaled US$417 million. Eddy Martinez, director of the DR Center for Exports and Investment (CEI-RD) says that this record level of FDI is due to the country's entrance of DR-CAFTA. Martinez says that this figure is expected to increase in 2008 due to the DR's new agreement with the European Union. He added that this places the DR in a unique position, as the country now has access to both the US and European markets. Speaking on the needs of the system, Martinez said that all the country needs now is the application of active policies aimed at attracting investment. This is the new challenge the country faces. According to Martinez, the strength of the euro and US dollar compared to the peso is attractive to investors. He added that these investments would help maintain the DR's economic stability.

25 March 2008 - DR1 Daily News

It was highly touted and keenly anticipated, but one year after the introduction of the free trade agreement, the DR can show few benefits from DR-CAFTA. According to Hoy, the DR has a negative trade deficit with the US and other CAFTA countries (Costa Rica, El Salvador, Guatemala, Honduras and Nicaragua). The only exception is Nicaragua with whom the DR registered a surplus in the balance of trade. According to Industry & Commerce Minister Melanio Paredes, the DR's exports to the US only increased by 6%, excluding production in the free trade zones (FTZs). During that same period US exports towards the DR increased by 18%. Paredes added that the necessary studies are being completed to determine what the actual balance of trade between the US and the DR should be. Andres Vanderhorst, director of the National Competitiveness Council explained that the signing of DR-CAFTA was inevitable. Nevertheless, he insisted that Dominican exports to the US market have to increase. Paredes says that for the DR to take advantage of the treaty, Dominican companies need to change the way in which they manage their business. He says that they must realize that the government will facilitate business opportunities and that business organizations are trying to strengthen the business climate in the DR. As for products that have not seen a reduction of price since the introduction of DR-CAFTA, Pablo Amaury Espinal, director of Foreign Trade at the Minister of Industry of Commerce, said that they are conducting research to determine why this has been the case so far.

13 March 2008 - DR1 Daily News

Business representatives say that external factors are to blame for the continued high prices of products that are now tariff-free as part of the DR-CAFTA free trade agreement. On Saturday the agreement, which was touted as a strengthening tool for the Dominican economy, will have been in place for one year but not much has been voiced in regards to the successes or failures of the agreement. Representatives from the Industrial Federation Association (FAI), the National Young Entrepreneurs Association (ANJE) and the National Wholesalers Association (ASODAI) agree that tariffs and reevaluation of imported goods, among other things, have been the reasons why prices haven't gone down. El Caribe cites a report by the Customs Department (DGA) indicating that DR-CAFTA has cost the DR RD$2.54 billion in its one-year existence. Ignacio Mendez of the FAI says that the reevaluation of products has led to a price increase in some cases. Pablo Piantini of ASODAI says that some products are directly affected by the increase in the ITBIS (VAT) tax and this has led to price increases.

26 February 2008 - DR1 Daily News 

14 September 2007 - www.jamaica-gleaner.com

 A $2 million grant approved by the United States will go towards supporting a comprehensive programme of labour rights projects in six partner countries that are party to the Central America Free Trade Agreement (CAFTA-Dominican Republic) signed with the United States.

To be implemented by the Organization of American States (OAS)-affiliated non-profit Trust for the Americas, jointly with the OAS Department of Social Development and Employment, the 24-month initiative involves Costa Rica, Dominican Republic, El Salvador, Guatemala, Honduras and Nicaragua.
The grant agreement is part of a larger United States government commitment of some $40 million per year for 2006-2009 “to build the capacity of labor ministries, in dialogue with social partners, to better carry out their responsibilities in safeguarding the rights of workers,” Michael Puccetti, the US Deputy National Summit Coordinator, explained as he announced the contribution at a brief ceremony during the Fifteenth Inter-American Conference of Ministers of Labor that ends in Trinidad and Tobago today.

“The United States is committed to free trade and [is] committed to ensuring that the benefits of free trade are enjoyed by workers and their families,” added Puccetti, who also commended CAFTA countries for seizing labor challenges and created opportunities for achievements and success. The US government commitment involves the State Department, Department of Labor, Office of the US Trade Representative and US Agency for International Development (USAID).

OAS Secretary General José Miguel Insulza, meanwhile, hailed the grant agreement and thanked the US government for this major boost to efforts to labor-related initiatives. He further underscored the need for greater levels of compliance with labor laws as well as for more training for workers. Insulza said businesses stand to benefit by being more rigorous in their labor practices, as compliance with labor laws is a key component of such agreements.

Others on hand for the grant announcement included Charlotte Ponticelli, Deputy Undersecretary for International Affairs at the US Department of Labor, as well as representatives of the CAFTA-DR countries and other ministers and conference delegates.

Among other objectives, the $2 million initiative targeting the six CAFTA-DR countries will help raise awareness and understanding among workers regarding their rights under current labor laws and how to claim them; build capacity of both worker and employer organizations engaged in compliance issues; and build the advocacy and technical capacity of civil society organizations, including labor and human rights NGOs, labor rights attorney and public policy advocacy organizations.

Source: www.jamaica-gleaner.com

Treasury Minister Vicente Bengoa has denied the Dominican Association of Industries (AIRD) claim that there has been an increase in public costs and spending and that this violates the Austerity Law. Bengoa, quoted in Listin Diario, said that instead of increasing public costs the government has reduced costs and is below the benchmarks set by the IMF. Bengoa defended the government by saying that government revenues have increased and that there has been increased investment as a result, but that it is lower than had been projected. The Minister says that the Dominican economy is doing well and has the highest rate of growth in the region. Yesterday, leading AIRD members criticized government overspending in violation of the 2007 Austerity Law in an interview with Hoy newspaper. AIRD president Manuel Diez, vice president Ligia Bonetti, and executive director Circe Almanzar said that increased taxation and spending could bring about an economic crisis.

7 September 2007 - DR1 Daily News 

According to US International Trade Commission statistics on trade between the US and the DR for the first half of the year, the United States is the big winner in the start of the implementation of the free trade agreement, DR-CAFTA. US exports to the DR are up 12.67%, from US$2,487.5 million from Jan-June 2006 to US$2,802.6 million for the same period in 2007. Dominican exports to the US, nevertheless, have declined from RD$2,162.5 million for the first half of 2006 to RD$2,060.2 million for Jan-June 2007, for a 4.73% decline. The DR had a negative balance of US$742.3 million with the US for the first half of the year, up from US$325 million for the first half of 2006.
In 2004, the DR had a favorable merchandise trade balance of US$185.5 million with the US. This slid to a negative balance of US$104.9 million in 2005 and US$818.8 million for all of 2006.
The growth of the trade deficit stemmed principally from the decline in apparel exports due to competition from China. A strong peso and increasing local production costs also affected the capacity of the country to compete with US imports from Asia, following the elimination of quotas in 2005.
The DR is the seventh largest importer of US goods in the western hemisphere, after Canada, Mexico, Brazil, Venezuela, Colombia and Chile. It is the 11th largest exporter in the western hemisphere, after Canada, Mexico, Venezuela, Brazil, Chile, Colombia, Ecuador, Peru, Argentina and Costa Rica.
For more information, see www.itc.gov

7 September 2007 - DR1 Daily News