Bernardo Vega, an economist who served as the Dominican ambassador to Washington, writes that there are several very important changes in the Dominican economy. The thing is, we often do not recognize these changes when they happen. The first change is the fact that last year Dominican exports of sugar, coffee, tobacco and cigars only produced US$122 million, but the wages and other local expenses, together with taxes and dividends paid to the Dominican treasury by Falconbridge Dominicana alone, reached US$136 million. This means that just one industry contributed more to the national treasury than the three most traditional exports. This, according to Vega, points out the importance of mining and the need to promote more of it.
Another structural change that he has observed is the fact that of every three dollars that our country pays for imports (except the free zones), one of the three dollars goes to pay for petroleum and its derivatives. Thus, the terrible consequences of our oil dependency and the need to lessen the dependency thorough the use of alternative energy sources including natural gas and hydroelectric energy.
A third change is seen in the fact that one out of every three tourists that visit the Dominican Republic is an American, and we have traditionally thought that most of our tourists were European. Even when these “non-resident Americans” are Dominicans that have naturalized American citizenship, the truth is that with all of the direct flights from more than 20 U.S. cities, we are receiving tourists that spend more than the Germans, Italians and French, whose presence, it is true, diminished in 2004 in spite of the fact that the euro reached higher levels against the peso, making the DR an even less expensive destination for Europeans.
Another past true that is no longer is that most of the Dominican foreign debt stems from grants from international financial agencies like the IDB and the World Bank and the IMF. Unfortunately, the truth is that just 31% of the foreign debt is with these agencies. Dominican obligations with private banks, and through our sovereign bonds, accounts for 35% of the total debt. Moreover, the DR owes the United States government 12% of the total, Spain 6% and to other governments 16%.
It so happens that most of the debt was taken at commercial interest rates and time, in many cases without any transparency in the operation and for projects that were not priorities and were overvalued in the first place. Luckily, the IMF has placed debt limits that begin with the initial contracts, not with the disbursements.
One good point that Vega brings up is the fact that over the past five months the general public has more money in Central Bank certificates than the commercial banks themselves. This is a sign of confidence.
Lastly, there is one more structural change to look at. Previously, most of the workers in the free zones were involved in textile manufacturing and assembly, but the increase in electronics, service centers, shoes, jewelry and pharmaceuticals, together with the recent reduction of textile employees combines to show that nearly 40% of the free zone employees are now in non-textile industries. Vegas thinks that this is healthy and a step in the right direction.