Between 1993 and 2003, the Dominican Republic received only US$281.1 million in direct, net, foreign investments, according to the flow charts of the Central Bank on direct foreign investment. The numbers indicate the large amount of money sent out of the country as profits. During those years the DR received a total of US$6.62 billion in direct foreign investments and US$6.34 billion were expatriated. The resulting sum shows that just 4.2% that stayed in the country.
If data from 2004 is included, the picture gets even worse, at least until September 2004. There was a drop in DFI by 11.4%, with only US$463 million invested and US$1.02 billion remitted outside the country. These numbers present serious questions as to the future of foreign investment in the Dominican Republic.
As reported by El Caribe, the number one producer of direct foreign investment (DFI) has been tourism, with 25% of the total DFI concentrated in that sector. As a result, large or medium-sized international hotel chains own 80% of hotel inventory in the DR.
Telephone service is called a “gold mine” by the report, with an annual growth rate, since 1997 of 18% and 20% of the DFI. Players are Verizon (formerly Codetel), Tricom, Centennial, that entered the market in 2000, taking over from All America Telephone and Telegraph, and Orange, capitalized from France.
A third major sector is power generation. According to El Caribe, there was lots of generation but little light. The energy sector has 19% of the DFI and holds 60% of the nation’s generation capacity since 1999. The US$1.2 billion invested in the sector has not been able to solve the electricity problems for most Dominicans.
In spite of raising their exports from US$800 million in 1990 to US$4.3 billion in 2002, the industrial free zones only reported 4% of the direct foreign investments. Currently there are 53 free zones and they have 500 companies. Of these, 50% are US companies, and 34% are local companies. The Central Bank bulletin that tracks the cash flows of DFI and the remittances that are returned to the investors points out that a direct subtraction of one from the other may not be equitable since the remittances are subject to controls by the head office and the investment policy of the resident company. The bank, in an earlier bulletin pointed out that pressure from these companies to find dollars to send back to their head offices was exercising some important pressure on the exchange rates.