A proposed increase in the minimum wage in the United States would benefit the industrial free zones of the Dominican Republic, where some 30,000 jobs have been lost as a result of the entrance of Mexico to the North American Free Trade Agreement. The proposed increase has the support of both the Democrats and Republicans. Industrial experts believe that the increase in the minimum wage would bring about a reactivation of orders and production contracts, which have been on the decline since the second half of last year, as a result of the increased competition from Mexico. Mexican exports enter the U.S. tariff free and are not subject to quotas, a benefit from being a member of NAFTA.
More than 60% of Dominican industrial free zone industries manufacture textile items. In the categories of men’s and women’s trousers alone, last year the Dominican Republic exported over US$170 million, or 30% of total clothing exports. Trousers, especially pre-washed jeans, pay the highest tariff, up to 17%.
Local experts are hoping that the specialized subcommittees of the United States Congress will approve a budgetary proposal of President Clinton whereby funds are provided to grant parity with Mexico for the Caribbean manufacturers. Such parity would cover textiles, footwear, tuna and some types of watches.
The president of the Dominican Association of Free Zones, Carlos Manuel Alvarez, said that investment in the sector has stagnated given the lack of parity and the electricity shortage. He said he is optimistic that the parity provision will be approved in January 1997 and investment will resume its normal pace. He explained that the long hours of power cuts have placed an excessive burden on the factories’ own generators, and many companies are now having problems. He advocated that the government provide the CDE with the necessary funds to pay the private electricity suppliers so that the service improves.