Many tasks ahead

There are many other parts to the strategy though and, in some ways, building up tourism will be one of the easiest tasks that the president faces, given the country’s many natural advantages in that area and the many challenges it faces in others. Among other objectives, Mr Fernandez intends to tackle corruption, improve education and, most of all, sort out the battered economy. The president, who previously served from 1996 to 2000, was voted back into office to replace Hipolito Mejia.

Already corruption is decreasing, says Luis Heredia Bonetti, partner at law firm Russin, Vecchi & Heredia Bonetti, who has represented most major foreign investors in the Dominican Republic. “There has been a lot of improvement, with less discretionary power given to officials and an improved administration of justice,” he says. “In the past government, we were hit by a wave of corrupting new practices.” What is needed is a tough, no-nonsense stance on the issue, which the president seems to have taken. “Examples have to be established so the foreign investor knows we are not tolerating corruption; this administration is showing definite interest in that,” Mr Bonetti says.

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In terms of education, the government is aiming to train its workforce better in high technology. “You can still find good labour here but we have to improve our educational system,” says Mr Bonetti. “It is one of the visions of the president.” In his previous term, Mr Fernandez established a technology institute to provide IT training.

Making strides

The government is making strides in other areas, too. In a speech commemorating his first 100 days in office, Mr Fernandez said: “The government came into power on August 16, 2004. Since then, all we have done is immerse ourselves in a patient and laborious task in order to try to successfully resolve the catastrophic situation that has been inherited from the last administration. We are trying to recover the vitality and dynamism, which has always distinguished the Dominican Republic. We intend to recover the path of peace, progress and well-being for the nation.”

He continued: “Only three months ago the country was on the verge of declaring itself bankrupt, faced with international commitments. The government’s debts exceeded $500 million. The deal with the IMF was broken as a result of the inability to comply by the previous government. The confidence and the credibility of the Dominican Republic had evaporated before the eyes of the international community.”

Mr Fernandez said that the first action he had taken was “to recover the confidence of the economic parties, national and international, and this is what fundamentally explains the spectacular fall of the dollar in the exchange rates. Apart from this, we have been able to halve interest rates. It is more than ever expected.”

Economic rise

Since last August, the exchange rate has fallen from 58 pesos/$ to about 30 pesos/$ and inflation – once as high as 42% – has been slashed. The improvement in the exchange rate nearly halved the country’s debt and its agreement with the Paris Club was restructured. A hike in taxes on petrol, alcohol, cigarettes and imports will help to pay off the country’s external debt, says finance minister Vicente Bengoa.

 

 

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Finance minister Vicente Bengoa: Tax rises will help to pay off external debt

 

But Mr Fernandez’s most significant achievement in his first few months in office is restoring calm in the aftermath of the banking and economic crises that rocked the country last year and shattered investor confidence. That confidence is slowly returning, and the president has impressed both his domestic constituency and international audience with his clear focus and vision. “Prices have come down now and the middle class people who had left are now coming back,” says Mr Bengoa.

The good news continues to trickle in. On February 1, the announcement was made that the IMF had approved a much-needed two-year $670m loan package for the country. A satisfactory agreement with the IMF was seen as critical to the government’s efforts to rebuild the economy and improve the Dominican Republic’s international standing.

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  • fDi will be chronicling these and other developments in the Dominican Republic, charting the country’s progress on its path back to economic stability and assessing the opportunities it holds for foreign investors, in a special report in the next issue