Over the past four years the trade deficit between the Dominican Republic and five Central American republics has grown by 1,746%. In 2000, when the DR signed a free trade agreement with El Salvador, Guatemala, Costa Rica, Honduras and Nicaragua, the deficit was US$6 million. Today the figure stands at close to US$99 million. A recent study by Celso Marranzini for the National Competitiveness Council that uses data from the Customs office and CEDOPEX evidences this enormous growth in the trade deficit.
According to the report on the study in El Caribe newspaper, the deficit is the result of the inefficiencies within the local system.
Eddy Martinez, director of the CEI-DR, the office that integrated the tasks of promoting exports and encouraging investment in the DR, announced last week the implementation of a simplified export system (ventanilla unica) would begin in March, hoping to facilitate exports. The system was first announced back in 1998, just three months before the nation announced a free trade agreement with Central America, but never went into effect.
Since then, Dominican exports to Central American have fallen and Central American exports to the DR have taken off. Costa Rica has been the largest beneficiary of the deal, now contributing 50% of the imports from Central America.
According to Flaquer Lopez, the reason for the Central American edge is that they implemented a policy of export incentives over ten years ago. In the DR, similar plans have been around since 1998 when the National Competitiveness Plan was drafted, but never implemented.
Likewise, Dominican companies, accused of lack of export “aggressiveness,” are affected by an exchange commission of 13% on machinery and inputs, interest rates three or four times higher than those prevalent in Central America, the highest power tariffs in Latin America, and the absence of compensation mechanisms to avoid that the country export taxes. The appreciation of the peso is not stimulating exports, either.