Franco Uccelli, who follows the DR for the Bear Stearns brokerage firm, interprets the S&P downgrading in an update today. “For the Dominican Republic to avoid default in 2004, it needs to get the IMF program back on track (time frame: next three weeks) and keep it on track (time frame: next 12 months).” Uccelli explains the rating reflects concern regarding whether the DR will uphold an agreement with the IMF and policy implementation in the DR in the context of the highly-contested 2004 Presidential election. But Uccelli feels the risk of not getting the IMF program restored is relatively low, regardless of the fact that the revised IMF letter of intent is contingent upon completion of a series of prior actions.
Uccelli feels there will be a favorable outcome for the DR, mentioning the visit of John Taylor from the US Treasury Department and Roger Noriega from the US State Department as indications that the “US is on the Dominican Republic’s side.” He writes today, “While there is no indication that such support may translate into direct financial assistance, we believe that the highly-publicized visits of senior Bush administration officials to Santo Domingo were intended to show both the multilaterals and the Dominican government and congress that the restoration of an IMF program is the US’s preferred course of action.”