Orlando Sentinel, USA
Trade challenges for Dominican Republic
Terry L. Mccoy | Special to the Sentinel
3 June 2007
SANTO DOMINGO — On paper, the Dominican Republic is one of most dynamic countries in Latin America and the Caribbean. Last year the economy of this country of 9 million people, which shares the island of Hispaniola with Haiti, expanded at 10 percent. Politically the Dominican Republic is seen as one of the region’s most stable democracies.
To add to the allure, a free-trade agreement with the United States (DR-CAFTA) took effect in March. This is good news for Florida since the Dominican Republic is one of our leading trading partners.
Given its paper strengths, I was initially surprised on a visit to encounter widespread doubts among Dominicans about their ability to take advantage of the new trade agreement. DR-CAFTA not only guarantees the Dominican Republic and four Central American counties (Costa Rica has yet to ratify the agreement) duty-free access to the largest, most developed market in the world, but it opens up their markets to U.S. exports and investment.
Many see free trade with the United States not as an opportunity but as a threat. After a few days in the country, I began to appreciate some troubling problems that must be addressed if the Dominican Republic is to live up to its paper reputation and prosper from its new relationship with the United States.
Since I was last in Santo Domingo, the capital city has experienced explosive growth, and with it urban sprawl and gridlock. It is widely asserted that laundered drug money is financing much of the construction of the high-rise luxury condominiums that are displacing lovely single-family homes. To the visitor, there seems no other explanation for the proliferation of luxury vehicles clogging the streets of Santo Domingo.
At one point stuck in one of the incessant tapones (traffic jams), I gazed out the car window to see a Jaguar dealership, which seemed completely misplaced in a country where average per-capita income is one-fourth that of the United States and more than 40 percent of the population lives in poverty. Drug trafficking has also brought rising crime, although thankfully still not on the scale of Rio de Janeiro or Bogota.
Construction of a new subway adds to the chaos of Santo Domingo. The government of President Leonel Fernandez promotes the Metro as a solution to the capital’s congestion, but skeptical residents see it as a white elephant plagued by cost overruns and corruption. Fernandez, who grew up in the large Dominican community in New York City (whose remittances are crucial to the Dominican economy), first came to power in 1996 as a dynamic fresh face promising to reform politics. Although he seems well on his way to a third term in next May’s election, his government is increasingly identified with the patronage, corruption-tainted politics of the past.
Power blackouts have plagued the Dominican Republic since the 1980s. Electricity rates are among the highest in the world, but most consumers do not pay their bills. When the power grid goes down — as it does almost daily — hotels, businesses and the wealthy crank up their generators. The poor swelter. Every administration promises to fix the power problem but it persists, hurting economic productivity and adding to social stress.
As poor as the Dominican Republic is, it is well off compared to neighboring Haiti, and Haitians pour across the porous border in search of jobs and a better living. By some estimates there are half a million Haitians living in the Dominican Republic, the vast majority there illegally and living in precarious conditions that have led to worldwide condemnation of the Dominican Republic for treatment of Haitian migrants. Much like the United States with Mexico, the Dominican Republic is struggling, so far unsuccessfully, to secure its border and deal with a large illegal migrant population.
The Dominican Republic on the ground may not be as impressive as it is on paper. It does face serious problems. But it has real strengths, as a visit to the lovely city of Santiago in the rich agricultural interior of the country reminded me. I did not get to visit the booming tourist resorts.
Furthermore, DR-CAFTA can be an asset, since under it the government is committed to strengthening the rule of law, transparency and accountability. Dominicans should press their leaders to fulfill these commitments. For its part, the Dominican government should press for full U.S. cooperation in addressing two challenges we share: stemming the flow of drugs and improving conditions in Haiti.
Terry L. McCoy is director of the Latin American Business Environment Program at the University of Florida. He was in the Dominican Republic giving presentations on DR-CAFTA.