Economist Ellen Perez Ducy writes a second part in her analysis for Diario Libre on DR-CAFTA now that the Trump Administration has levied a 10% tariff on the Dominican Republic, an outright change of the trading rules with the Caribbean and Central America.
In her analysis, “The Myth of Exports (Part II): The DR-CAFTA Paradox,” Perez Ducy makes the point that while free trade agreements may be hailed as a panacea for economic growth, it is up to each country to adapt export offerings to be able to capitalize on new market access. She stresses the importance of concentrating on the production of high value-added industrialized products without neglecting the strategic importance of agriculture exports.
She highlights it took the DR time to adapt its exports to DR-CAFTA, but eventually the country switched from being a major exporter of apparel to higher value-added exports prevailing for the free zone sector.
In her analysis for Diario Libre she explained: “The immediate aftermath of the DR’s congressional approval of DR-CAFTA in 2007 painted an even bleaker picture. Between 2007 and 2012, Dominican exports plummeted by US$932 million, a 20% decrease. Meanwhile, the overall DR-CAFTA bloc experienced a US$5.64 billion increase, almost entirely driven by Costa Rica’s boom in precision and medical equipment exports, which surged by 46% to represent a quarter of its total goods exports. Other Central American nations saw their export growth decelerate.
“It’s clear that the Dominican Republic initially failed to harness the opportunities presented by DR-CAFTA. A key factor was the unfortunate timing: the agreement’s implementation coincided with the dismantling of the Multifiber Agreement, which severely impacted the DR’s textile industry, then its primary export.
”However, the Dominican Republic’s story took a positive turn. Its free zones underwent a significant transformation. The proportion of textiles in total exports sharply declined from 40% in 2005 to 24.5% in 2013, and currently stands at 9.8%.
“Starting in 2013, Dominican exports experienced a remarkable surge. By 2024, they had increased by 64%, adding approximately US$2.7 billion. This growth was fueled by the robust production of cigars, electrical products, and medical equipment within the free zones. This strategic pivot has positioned the Dominican Republic as the country with the highest export growth in the region since 2013, surpassing Honduras and Guatemala in value since 2019, and trailing only Costa Rica.”
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Diario Libre
28 July 2025