Yes, I know, this is long, but read it, before you'll know it you will be done...
in order for any country to become richer than it currently is, all it needs is to keep its economy growing at least around 2% per year average, if we were to copy the US or most Western Europe countries, because that's how they did it.
Anyhow, we do live in an age when certain countries have gone from rags to riches in less than one generation (ie. Singapore, Malaysia, Israel, etc etc etc). The DR was on such path during the 1996-2000 time period when our economy grew at an average 7% per year (that is phenomenal since it was well above the global average) and in 1998 before Hurricane Georges slammed into our shores, the DR was actually the fastest growing economy in the world, beating china by half a percentage point! Notice, at 7% economic growth per year the country would have doubled its national wealth every 10 years or so. Not a bad deal.
During that time period most people in the country, especially the denizens of Santo Domingo, witnessed the sudden mushrooming of businesses, money supply, investment, etc etc etc. The country had reached a level of economic prosperity and growth not seen for a very long while. Given this recent history of economic success the DR experienced, its more than clear that we as a country are capable of achieving greatness, if we truly want to.
What happened? Well, Hipolito came into power and saw all that extra cash (the DR government had a surplus when he came to power) and he spend, spend, borrow, borrow, borrow, two months into his administration people the world over were concerned about the erractic spending habits of these low lifes. Then, the US economy (and the rest of the world) slowed down and that affected the DR, it was exacerbated by Hipolito's inability to take fiscal responsibility.
Then, 9-11 comes and Osama gave the DR and the rest of the world a not so nice present by knocking our number one industry (ie. Tourism) to the edge of collapse with only Punta Cana remaining rather strong. Puerto Plata almost died and the Costa Caribe (Boca Chica, Juan Dolio, La Romana) died completely, just recently being revived!
Then, the American Airlines Airbus airplane chock full of Dominicans and tourist crashed in New York City two months after 9-11. That scared the heck of many potential tourist and Dominican visitors who had planned to visit the DR in that time period, despite this the NYC-Santo Domingo route remained as the only American Airlines route that was actually creating a profit for them!
During all this time, Hipolito's clan kept spending, spending, spending, borrowing, borrowing, borrowing. Debt per GDP kept climbing from around 16% of GDP when Leonel left to over 50% of GDP. Then, Hipolito's clan racked up a credit card debt of millions of dollars, credit cards under the Baninter bank. They failed to pay back their debt and voila, the next thing we know is that the country's strongest, largest, and most dynamic bank collapsed over night! Along with them, went two other major banks down the drain.
Hipolito finally realized that he needed to act accordingly, but he decided to use whatever amount of cash available to the government to cover the losses of a handful of depositor. What happened next was simple economics in action. Public Savings (Government reserves) were deepleted to severe levels caused the peso to lose its value over night. The collapse of the banks further cause people to lose faith in the peso, causing the peso to slide even further. The sliding peso caused all imported goods and services cost to skyrocket, and that cost was past to consumers initiating hyperinflation. Hyperinflation quickly ate away the purchasing power of the Dominican middle classes and lower classes, while the upper classes quickly moved their liquid assets into other forms of assets (ie. real estate, convert pesos to dollars, move money out of the country, etc), this further exacerbated the shortage of dollars in the economy and the money supply further causing the peso to slide and slide and slide and slide. After the DR managed to pull 2 million people out of poverty and into the middle class during the entire 1990 decade, in the past 2 years alone, Hipolito's policies manage to send 1 million of them back into poverty. What took years to create, was destroyed in no time.
To finish, Leonel comes back and finds a country that he left in perfect shape considering how the rest of Latin America was, he found the DR in the worst shape of any country in this hemisphere, only Haiti had it worst and not by much difference!
Leonel has put some more fiscal responsibility into the management of government finances, this and his track record of maintaining economic growth calmed the nerves of many people. It did not took long after Leonel took power for the peso to gain its value, for macroeconomic stability to be achieved, for hyperinflation to end, and for the roller coaster ride to finally end. Today, we stand with an economy that grew by 2% last year (almost all of that growth took place from August 2004 to December 2004, in other words, since Leonel took power. If Leonel would had been ruling since January 2004, the country might had grown by 4% instead of 2%, but 2% is a miracle considering what we went through and its right on target for healthy economic growth over the long term).
The economy is correcting itself, everything is falling in place. Foreign Investment has increased dramatically, inflation is under control and at tolerable levels, the economy is growing and its expected to finish this year well above 2% economic growth, the peso has stabilized, money supply is growing, government reserves (ie. Public Savings) have grown dramatically, almost fully recovered - truly phenomenal, and many of the upper classes are bringing back part of the assets they moved out of the country in order to protect themselves from the crisis. The economy today is in a position almost surreal since most countries that go through the roller coaster ride we have gone through in the last couple of years usually take over 10 years to fully recover. Here we are, not even one year into Leonel's term and the economy has turned around 180 degrees from where it was this time last year. Truly phenomenal.
What do we need to do to maintain our economic growth during the next 10 years is the following:
1. Maintain control over inflation. By doing this, real income growth will not be eaten away and the average Dominican will have more money to buy goods and services, causing consumption to increase, cuasing the economy to propell itself into growth beyond what its doing right now.
2. Maintain macroeconomic stability. Macroeconomic is a fancy economic word for the entire economy. If the entire economy is stable, obviously things will continue to improve.
3. Maintain fiscal responsibility. To do this, the government just needs to keep increasing its reserves at the phenomenal rate it has been doing since Leonel came back, keep the debt load from increasing too much too fast, and lower corruption levels.
4. Increase productivity of the country and this is done through implementing new technology that enables people to do more using less time and effort, thus they can be much more productive. The much more productive a person is, the much more valuable that person becomes and the much more money will be paid (all other things constant) for that person's labor.
Productivity can also be increased through education, but as noted above, new technologies, more efficient ways of doing things, better usuage of time, etc can also increase productivity without having to focus too much on education. If the money for education is there, then it should be used for such, if not, it's better to focus on introducing more efficient ways of doing things so the Dominican workforce can become much more productive.
5. Solving the energy problem would be a God send. This will greatly lower the cost of doing business and will increase the efficiency of the economy as a whole.
6. Investment in the main infrastructural projects. This includes building and/or maintaining the country's seaports, airports, main highways, etc in top notch conditions in order to maintain a stable and fastest flow of goods and services throughout the nation, causing the economy to become even more efficient, but its even more important for the investment to be focused within the economic core of the country (Santo Domingo, the Santiago area, and the major tourist zones) since those areas account for 90% of the entire economy of the country.
7. Other factors which we have achieved and must maintain for economic success over the next 10 years include: Political stability, preferential trade agreements with major international markets, diversification of trading partners, encourage more foreign investment, and help (notice, help, not solve) in Haiti's problems since the threat of massive migration of impoverished people into any country, let alone the DR, can always dwarf whatever economic gains the country will receive during that time period.
Having said all of this, its important to keep in mind that the Dominican Republic is still the Caribbean's and Central America's largest economy, we are the third largest trading partner of the US in the Western Hemisphere (only Mexico and Canada trade more with the US), we have tremendous preferential trade agreements with the US and Europe and Latin America, we still have the largest middle class and upper class in numbers than any other country in the Caribbean/Central American region, our middle class has grown dramatically during the 1990s and despite its decline in the past 4 years, there are signs of middle class growth once again.
Our country has only been through a rough time, but this is not the end. We have the potential to make it big, we have shown the world and our selves that we are capable of doing so, all we need to do now is get to work and make sure that we learn from this most heartbreaking mistake we ever took of electing Hipolito (an agronomer who should had stayed in the fields planting Tobacco rather than planting a disaster) and keep our over all belief in the progress of the country.
Being positive also helps and trying to fix what has gone bad is an extra plus!
