Dominican Republic Overview
The Dominican Republic (the “DR”) has the privilege of an excellent geographical location, fair climate, beautiful beaches, rich and fertile land and the kindness of its people, which together form a well-known trade mark. This, coupled with the country's solid macro-economy and political stability, and national treatment of foreign investors, makes it an ideal place for existing and new investments.
Economic growth and political stability
The DR is an open economy, the largest in Central America and the Caribbean, with the highest growth rate of the region over the past 30 years. It has experienced an average economic growth rate of 6% per annum during the 1990s and 5% pa during the 2000s, with growth continuing at an average rate of 4% pa during 2012 and 2013. The year 2015 closed with an impressive rate of 7.0%, registering the highest growth rate in Latin America for a second consecutive year, bolstered by the construction, financial services, commerce and education sectors.
The country’s political stability over the past few decades has also been an important factor in the DR's economic and institutional development, and has set the stage for numerous reforms intending to modernise its legal framework. According to the World Bank Group's Doing Business 2016, the DR continues to be ranked as one of the 15 principal economies in the ease of doing business ranking in Latin America.
Presidential, congressional and municipal elections took place recently: the current President was re-elected for another four-year term, hence it is expected that current governmental projects shall continue.
Joining global markets
The DR grew from a closed and primarily agriculture- and sugar-oriented economy during the 1960s to a free market economy by the 1990s, actively promoting foreign investment. It has entered into free trade agreements (EPA, DR-CAFTA and others) with major world economies such as the EU and USA, as well as with several Central American and Caribbean countries. Under the DR-CAFTA, almost all goods have obtained duty free access, with the exception of a few sensitive agricultural and agro-industrial products that are still pending liberalisation.
In addition, countries like Canada, Mexico, Chile, Colombia, Panama and Taiwan are holding negotiations with Dominican authorities with the aim of entering into trade agreements. Likewise, the DR and Cuba have initiated dialogue regarding possible agreements.
Key economic sectors
Services (hotels, restaurants and retail) and manufacturing (free zones and local manufacturing) constitute the two key sectors. Notwithstanding, sectors such as mining have had a great impact on the real GDP of our economy, especially from 2009-13, but later diminished due to the decrease of prices in the international markets, mainly of gold and silver. With respect to tourism, according to the DR Central Bank, from January to May 2016, there was an increase of 6.2% in non-resident visitors.
Local industry has undergone rapid modernisation thanks to major investments in the last decade, some of which have originated from foreign investors as in the case of rum, beer, soft drinks and the food sector in general. Regarding agriculture, the country is one of the regional leaders in the export of cacao, coffee, organic bananas, avocados and coconuts, in addition to its strong sugar industry.
Financial and capital markets
The Ruling for Securities Market Law was recently amended with the purpose of adapting the legal framework of public securities offerings under trusts, and thereby increasing the different public securities offering instruments and promoting and modernising the securities market. Public securities offerings under trusts were created by Law 189-11 for the Development of the Mortgage Market and Trusts in the DR.
The country has embarked on numerous large infrastructure investments in streets, highways, the Santo Domingo subway and a modern port operated by the private sector. The ring road of Santo Domingo is the largest public infrastructure work of the current government, of which phase I and II are already functioning, and phase III is expected to be finished by next year. This will expedite cargo transport from the most important ports of Santo Domingo to the rest of the regions of the country, without entering through the city of Santo Domingo.
Opportunities and hurdles to overcome
The DR's country trade mark provides an ideal platform from which to continue developing tourism and eco-tourism in others parts of the country. The country has an abundant work force and the necessary infrastructure for the development of multiple investment projects in various sectors, such as mining, agro-industry, free zones and services in general.
One of DR's main problems has been its weakness in the electrical sector, with an inefficient distribution electric sector, that continues to run a deficit. As part of the DR's National Development Strategy Law for 2010-2030, an electrical pact has been discussed with all sectors ordered to establish common goals to solve the sector's problems. We understand that once the pact is agreed upon, investment opportunities will blossom. The Dominican government has invested in two 660 MW carbon plants, and the President has publicly invited the private sector to invest in such plants, although the terms and conditions for this investment have not yet been specified. Likewise, officials of the electricity sector have publicly expressed that the government consider the construction of liquefied natural gas plants around 660 MW to ensure demand.
DR is located across two thirds of Hispaniola Island, where the remaining territory belongs to Haiti, and hence, Haiti represents a very important export market for DR. The Quisqueya Business Summit discussions (“Consejo Binacional Quisqueya”), led by the most important Haitian and Dominican businesspeople, were created in order to develop trade and business in both countries. The principal spokesmen of this forum presented their proposals at the Dominican-Haitian border before the International Finance Corporation (IFC). In the same, the need to create employment opportunities in the DR-Haitian border in the next 25 years was highlighted as the best way to generate opportunities and improve the quality of life of its inhabitants.
The passing of Law 141-15 on Restructuring and Liquidation of Companies and Business Persons shall promote more investments in the DR. This will also be the case with the possible expected approval of Public Private Participation Law, the first draft of which is currently being discussed.