Dominican Republic - Economic analysis of government's policies, investment climate and political risk.






DOMINICAN REPUBLIC: Economic Policy Analysis

This site presents an analysis of the Dominican Republic government's economic policies compared to a revised list of 34 economic policies as prepared by student Johanel Alcantara with the Mike P. McKeever Institute of Economic Policy Analysis (MIEPA)in December 2013. To read the analysis scroll through this site. To learn more about the background policies, click here  Introduction and Policy Recommendations

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Johanel Alcantara, a Dominican citizen who currently [December 2013] lives in San Francisco, has completed a study of the home country government's economic policies as compared to the MIEPA list of policies as outlined above. The study on Dominican Republic is shown below. The ratings herein are based on the following rating scale:


5.0 Perfect Facilitation of Wealth Creation
4.0 Midway between Perfect and Neutral
3.0 Neutral Effect on Wealth Creation
2.0 Midway between Neutral and Obstructionist
1.0 Perfectly Obstructionist to Wealth Creation
[Rating scale copyright Mike P. McKeever, 2013. Used herein with permission]

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Comparison of Dominican Republic's economic policies to MIEPA criteria as prepared by native student of Dominican Republic Johanel Alcantara, studying in the US in December 2013.



        1               4.9          14.7             15.0        98%

        2               2.5           7.5             15.0        50

        3               1.5           4.5             15.0        30

        4               2.0           6.0             15.0        40

        5               3.5          10.5             15.0        70

        6               4.5          13.5             15.0        90

        7               3.5          10.5             15.0        70

        8               1.5           4.5             15.0        30

        9               2.5           7.5             15.0        50

        10              4.0          12.0             15.0        80

        11              2.5           7.5             15.0        50

        12              3.0           6.0             10.0        60

        13              2.5           5.0             10.0        50

        14              5.0          10.0             10.0       100

        15              3.5           7.0             10.0        70

        16              2.0           4.0             10.0        40

        17              2.0           4.0             10.0        40

        18              1.5           3.0             10.0        30

        19              3.0           6.0             10.0        60

        20              1.5           3.0             10.0        30

        21              1.5           3.0             10.0        30

        22              2.5           5.0             10.0        50

        23              4.4           8.8             10.0        88

        24              1.2           2.4             10.0        24

        25              1.5           3.0             10.0        30

        26              3.0           6.0             10.0        60

        27              3.5           7.0             10.0        70

        28              2.5           5.0             10.0        50

        29              2.0           2.0              5.0        40 

        30              2.0           2.0              5.0        40

        31              3.0           3.0              5.0        60

        32              4.0           4.0              5.0        80

        33              5.0           5.0              5.0       100

        34              3.5           3.5              5.0        70

   TOTAL              96.5          206.4            365.0        56.6%
                      =====        ======            =====        =====

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1. Freedom from internal control 4.9

The government places no restrictions on it's citizens or foreigners in regards to moving around the country. As long as laws are not broken and regulations are followed, the government does not intervene.


2. Freedom of speech 2.5

The law provides for freedom of speech and of the press, and the government generally respects these rights in practice. Individuals or groups generally are able to criticize the government publicly and privately without reprisal. However, in a few cases, independent journalists and media outlets have reported that they were harassed or physically attacked after reporting cases of corruption and, to a lesser extent, of alleged human rights violations. Journalists at times practice self-censorship, particularly when coverage could adversely affect the economic or political interests of media owners.


3. Effective, fair police force 1.5

Overall citizens of the country don't feel safe most of the times. They either need to worry about the real criminals roaming the streets or the police that are after the criminals. When one has an encounter with the police one is accustomed to have to bribe them even if no crime or law was broken but as to avoid further complications with those with authority. Hundreds of people are shot and killed every year by members of the National Police. Officers are responsible, on average, for 15 per cent of all homicides in the Dominican Republic, according to statistics provided by the Office of the Prosecutor General. In many cases where the evidence suggests the killings were deliberate, officers are not held to account because of flawed, ineffective or corrupt investigations. As a result the families of victims are denied justice and a deep public distrust of the police is further entrenched.


4. Private property 2.0

Property rights exists but are irregularly enforced. One often encounters problems in receiving a clear and clean title to land. There are too many processes involved in making sure that the land and/or property you are buying is actually the sellers. Consulting with an attorney is always encouraged but that same attorney may not be looking out for your best interest. Cases have occurred in which a buyer acquires title over a property some distance away from the one he or she believes to be purchasing due to careless work by a previous surveyor or to fraud by the seller. In the caribbean the country received one of the lowest scores in regards to property rights.


5. Commercial banks 3.5

There are several commercial banks in the country. Following the collapse of Banco Intercontinental (Baninter) in 2003 and the subsequent uncovering of fraud carried out by its key executives, the banking legislation has been strengthened and there is little likelihood of any further banking problems. Banks are eager to lend, however, interest rates can be fairly high.


6. Communication systems 4.5

The country is considered one of the countries with the most advanced telecommunications infrastructures in Latin America, with over 8.9 million cell phones connected (on just about 10 million populants, with 3.5 million of them on extreme poverty conditions). Broadband Internet access is growing, with over 622,931 Internet accounts globally and 3,851,278 Internet users as of December, 2010 according to INDOTEL(DR Telecommunications Institute). There are 46 free-to-air channels and other providers provide cable television which include domestic and international channels. The country also has extensive radio infrastructure.


7. Transportation 3.5

Transportation in the country is composed of a system of roads, airports, ports, harbors and an urban railway. There are five main highways which are in good condition. They connect the biggest cities and tourist centers. The country suffers from lack of good paved roads to connect the smaller towns and less populated areas. Mass transit was recently introduced into the capital. There are railways but they are not fully developed. Being an island the country has many ports for both tourism and cargo. The country has 7 major and 31 minor airports.


8. Education 1.5

Education is severely lacking. Public investment in education is 2.3% of their gross domestic product, which ranks 122nd out of 132 countries. Around 85% of poor parents have never completed primary education. The country was ranked 101 out of 177 countries in terms of literacy. For every 100 child entering formal education, only 75 complete grade 4; 63 complete grade 6 and only 52 complete the 8-year primary level. This situation is even worse in rural areas where most schools stop at grade 5. In a 2008 study of academic achievement for 3rd and 6th grade students in 16 Latin American countries, the country came in last in the areas of math, reading and science.


9. Social Mobility 2.5

There is little social mobility. Racial and economic issues determine social stratification in the Dominican Republic. Social class determines access to power and position, although in the large cities, the lines of demarcation often blur slightly. Status is defined more by family background than by absolute wealth.


10. Freedom from outside control 4.0

The extradition of Dominican citizens is prohibited. This prohibition applies also to foreigners, which have obtained Dominican nationality before committing the crime that motivates the extradition request. The Dominican Republic has signed extradition treaties with the United States and Spain. Furthermore, the country is a member of the Inter-American Extradition Convention of 1981.


11. Protection of Domestic Enterprises 2.5

(exports)+(imports)=(trade)/(GDP)=(percent) 18.2+9.467=27.667/98.74 = 0.2802 28%

The country runs a trade deficit. It is ranked as number four in the world with respect to number of free zone facilities so protection of domestic enterprises are not very high. The tourism industry is one of the few industries where domestic protection from the government occurs. This is mostly because it is a physical industry. With the exception of information services and agro-processing, free-zone enterprises entailed limited technology transfer for longer-term development. Free-zone development also forged few economic links with the local economy because of the limited value added by assembly operations. The liberal tax and tariff exemptions extended to free-zone manufacturers reduced the potential revenue base of the government and forced domestic businesses and individuals to assume a greater portion of the tax burden.


12. Foreign currency transactions 3.0

The Dominican peso is used by the majority of residents, however, there are many private transactions which are done with U.S. dollars and the euro. This is mostly caused by tourism related activities. In touristic areas, one can expect a service provider to request services to be rendered in U.S dollars.


13. Border control 2.5

The country which shares the island with it's bordering neighbor Haiti, has a difficult time controlling it's shared border which only spans 275km. The Army in May sent 1,500 soldiers to help reinforce border patrol in order to prevent the trafficking of undocumented persons, smuggling of goods, drugs and other crimes. Besides the border crossing, the country also has a hard time controlling it's water ways. Many Dominicans cross the Mona Passage to land in Puerto Rico as a gateway to the U.S.


14. Currency 4.5

The official currency of the country is the Dominican peso, however, the United States dollar is used as a reserve currency by the Central Bank of the Dominican Republic. Currently the exchange rate for one U.S dollar is 42.52 Dominican pesos.


15. Cultural, language homogeneity 3.5

The population is 73% mixed-race, 16% white and 11% black. The country mostly being catholic shares many command values and customs. The official language is Spanish. The country shares the island with Haiti in which they had have a long history of conflict. Most recently issues of illegal immigration have place a bad view on Haitians. Many Dominicans feel that the illegal Haitians are taking their jobs but these are jobs that the Dominicans would not do themselves.


16. Political effectiveness 2.0

The Dominican Republic is a democratic republic and shares similar political structure to the United States. Within the country there are 31 provinces which include 124 municipal districts. Overall the citizens of the country are well represented in terms of numbers, however, in terms of action taking place, things could be much better. The country lacks the infrastructure for adequate for properly handling natural disaster but it's taking steps (however, slowly) to improve these systems. There are plans to have a 911 phone system in place by the end of the year but layers of corruption will certainly inflate the price of the system (currently set for $50M).


17. Institutional stability 2.0

The institutions of the country tend to remain fairly stable and not change frequently. However, since there's so much corruption at every level of government, a business owner can expect extra costs for counting on doing business. Since the corruption is so inherent, business owners can predict certain outcomes.

18. Honest government 1.5

According to the corruption perception index of the year 2012, the Dominican Republic was ranked 118 out of a list of 176 countries and territories. The corruption is so intwine that it is an everyday thing for most of the population. Knowing the right people or having the correct amount of money will get you out of anything.


19. Common laws 1.0

Like any other country, there are laws on paper but in practice they are barely enforced. The rule of the land is money. One could be certain to buy your self out of anything if the price is right no matter how severe the crime. Law enforcement agents participate in corruption by taking bribes or by making false arrests hoping that the victim has any money to pay to be left off. There's a general conscience that any one with money could get away with anything and they do.

src: Personal

20. Central Bank 3.0

The Central Bank for the Dominican Republic serves as a decentralized and independent organization. It is governed by the Monetary and Financial law of the country. It is ruled by the Monetary board. A 2003 bank crisis in which the country's 2nd largest bank failed demonstrated lack of proper management and accountability on behalf of the central bank.


21. Domestic budget management 1.5

Year    Tax Revenue (Billions)  Expenditures (Billions)
2012           	 8.22                  	12.07
2011           	 8.07                  	9.5
2010           	 7.11      	        8.63
2009             6.36			7.59

For the past four years the government has failed to balance the national budget. The deficit has gotten bigger every year. The government constantly has issues with collecting taxes as people usually try their best to avoid them.


22. Government debt 2.5

Public debt was 42% ($24.78 billion) of the GDP for the year 2012 which is a fairly high percentage of the overall GDP. The external debt was an additional $16.33 billion. The country shows trends of relative excessive indebtedness which tends to keep growing every year. The country currently has a credit rating of B+ and considered stable. Further efforts need to take place in order to lower the debt ratio.


23. Economic statistics 4.4

MEPYD (Ministry of Economic Planning and Development) provides wealth of information regarding the state of the economy on a month to month basis. It releases and publishes reports online on their website which was recently updated to be easier to access and to digest. It also collects census data with the most recent one being done in the year 2010.


24. Protection of public health and safety 1.2

The infant mortality rate is 20.44 deaths/1,000 live births and the number of new tuberculosis cases is 62/100,000. In comparison with other developed nations, theses numbers show a huge lack of investment on public health and safety standards. However, compared to previous years, the numbers have dramatically improved and even cut in half. There are also many initiatives which will help get these numbers lower but it will take a massive effort.


25. High wage policies 1.5

The country has labour laws which set a minimum wage for private sector employees. The wages vary depending on the size of the company (ie how many employees) and what sector of the economy they fall under. There are also other requirements which may turn away potential employers. These requirements range from fringe benefits to participating in company profits. With all these requirements, not all employers follow the law nor are they sometimes enforced. There's also the issue of employees not being aware of their rights or work off the books. An average single working person who is not a professional would have a very hard time or perhaps impossible chance of being able to afford an apartment, a refrigerator and a vacation. A majority of citizens have a hard time providing more than the bare basic living necessities. As with the other laws, they are nice on paper but not always enforced.


26. Environmental protection 3.0

Tourism being one of the country's main industries, depends on the environment being clean. People visit the country because of it's tropical paradise setting and keeping it this way is a high priority. In the year 2000 law 64-00 was passed to have the State assume the responsibility of protecting and restoring the environment. Before this law was passed, many other special laws and measures were set but many were based on nonscientific information. The consolidation of the previous laws and scientific based policies are very promising on paper but enforcing the actual laws and policies are another story. There are laws that require a permit (fee) to cut down a tree, however, that doesn't do much to protect the environment.


27. Strong army 3.5

The military of the Dominican Republic currently consists of approximately 44,000 active duty personnel. It is the second largest military in the Caribbean. About 60 percent of the military personnel are utilized for non-military operations. These operations range from providing security to government-owned non-military facilities, toll security and other security related tasks. There are other groups within the military which participate in counter proactive measures, ranging from terrorism, illegal drug trade and contraband. They also protect the Dominican border with Haiti in minimizing illegal immigration from Haiti. When it comes to proctecting it's investment one can count on the military to protect it. However, such protection comes at a financial price.


28. Foreign trade impact 2.5


18.2+9.467=27.667/98.74 = 0.2802 28%

The Dominican Republic has a trade deficit of $8.733 billion. For 2012 imports were $18.2 billion while exports were $9.467 billion. Exports include mining of precious metals, agriculture, textiles and medical equipment. Imports include foodstuffs,petroleum, fabrics, chemicals and pharmaceuticals. CAFTA-DR (Central America Free Trade Dominican Republic) agreement helped boost exports by reducing tarrifs that countries had to pay to sell their goods in America. One main weakness of it's exports, is that a big percentage (~75%) of it is with the USA. It's main trading partners could be counted by hand. In terms of domestic comsuption, it primarily depends on it's agriculture sector.


29. Management of foreign currency budget: 2.0

The Dominican Republic runs a trade deficit. For the year 2012 it exported 9.467 billion while it imported 18.2 billion. Running a trade deficit of 8.733 billion. The country is mostly a service economy now because of tourism but agriculture and textiles still play a major role in the economy, however, these are often very competitive markets. Currently the exchange rate for 1 US dollar is 42.55 Dominican Pesos.


30. Layers of collective action: 2.0

There are very low levels of collective action in the Dominican Republic. If one focuses on only the following three sectors; education, health and electricity, one can observe that there's a low standard of quality and importance. The middle class often opts out to use more private means to get things done. This creates a low level of institutional trust and fragmented interests among the population. There's also a stigma of working indivuallyinstead of working together in order to get ahead.


31. Pro-business climate: 3.0

The government it self has a very high interest in attracting and supporting a pro-business climate. However, the population it self may not be very pro-business friendly in the sense that corruption is rampant so it's very hard to trust and do business with other people.


32. Government enterprises: 4.0

The government in the last couple of years has cut down on wasteful spending. The percentage of the GDP which came from government spending was as high as 38%. Now however, this rate is much lower, hovering at around 28%. The government however, still subsides the electricity for the poorer section of the population.


33. International security agreements: 5.0

Like many other nations, the Dominican Republic is member of many international groups like the United Nations, World Trade Organization and many other region specific entities like ACS (Associated of Caribbean States) and CELAC (Community of Latin American and Caribbean States). The country also has it's own military, which it's main principal mission is to defend the nations but mostly serves as an internal security force.


34. Protection of domestic enterprises from government mandated costs: 3.5

Like many other developed countries, the Dominican Republic provides many of the similar laws for employees and employers. There are also environmental protection laws. However, a big issue is that because of inherent corruption and inefficiencies in the government, laws are not always strictly enforced and politicians are often bribed.



All the information and conclusions in each country analysis are solely the responsibility of the individual student and have not been verified, corrected, checked for copyright infringement or evaluated in any way by MIEPA or Mike P. McKeever. You are solely responsible for the results of any use you make of the information and conclusions in these studies. Use them at your own risk as interesting supplemental information only instead of seasoned judgements about the policy factors contained herein. Each student has granted permission for his or her work to be displayed here under his or her own name or wishes to remain anonymous and have either created a pen name or used no name at all; if you wish to contact them for any reason, forward your request to MIEPA and the student will be notified of your interest.

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