Dominican Republic moves ahead: the tourism champion is increasingly boosting its other sector, including mining finance, telecommunications and infrastructure.

Author:Bamrud, Joachim
Position:COUNTRY REPORT
 
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Marco De la Rosa is bullish. The CEO of the Dominican subsidiary of U.S.-based energy company AES expects the Caribbean country will post a solid economic performance the next two years.

"I believe that the growth is sustainable, thanks to the investment that's coming into the country," he says.

Apart from heading up one of the largest foreign firms in the Dominican Republic, De la Rosa also is president of the Association of Foreign Investors in the country (known by its Spanish acronym, Asiex).

De la Rosa predicts that during the next five years, the Dominican Republic will see foreign direct investment of $10 billion, thanks to strong interest in the burgeoning mining sector and more traditional sectors, such as tourism, financial services and telecommunications.

The country's annual FDI levels as a percent of GDP compare favorably to countries such as Brazil and Mexico, he points out.

Last year, FDI reached $1.6 billion, which was the equivalent of 3.2 percent of GDP. By comparison, the FDI-GDP rates of Brazil and Mexico were 2.3 percent and 1.7 percent, respectively, according to Latin Business Chronicle.

With a GDP of $58 billion, the Domini can Republic has Latin America's ninth-largest economy. Its GDP barely trails Ecuador and ranks ahead of Guatemala, Uruguay and Panama.

Claudio Castro, director of Brazilian construction giant Odebrecht, says political and economic stability are among the key benefits of doing business in the Dominican Republic. Odebrecht is involved in several major construction projects in the country.

President Leonel Fernandez has been in office since August 2004 (after also serving as president from 1996 to 2000). He won't be able to mn for re-election in May of next year, but local and foreign investors expect continuity of macro-economic policies, whoever wins the election.

The Dominican economy grew by 7.8 percent last year. On average it grew by 7.5 percent in the six-year period 2005 to 2010. That compares with 2.9 percent the previous five years (from 2000 to 2004), according to a Latin Trade analysis of data from the International Monetary Fund. "We've had sustained growth," De la Rosa points out.

Much of the credit goes to Fernandez and his widely-respected economic team, including Economy and Planning Minister Temistocles Montas and Central Bank Governor Hector Valdez Albizu. Key officials promoting investment, such as Eddy Martinez (minister for export and investment) and Andres van der Horst (miNster and executive director of the National Competitiveness Council), also receive praise for their efforts.

When Fernandez assumed office in 2004, he inherited an economy in tatters. The GDP had fallen 0.3 percent in 2003 and barely grew by 1.3 percent in 2004. Meanwhile, inflation had reached a record 51.5 percent in 2004 following a 27.5 percent change in 2003. Fernandez managed to tame it to 4.2 percent in 2005. On average it has been 6.1 percent during the past six years.

Carlos Asilis, managing partner and chief investment officer at Glovista Investments and a former chief investment strategist with J.P. Morgan, sees Fernandez' greatest legacy as the preservation of the Dominican peso's purchasing power.

"The macro-economic stability helps businesses make real projections and at the same time provides peace of mind and confidence in the performance of companies in the country," says Oslvaldo Oiler Bolanos, project director at real estate company Promotora Granada. Standard & Poor's raised the country's credit rating in June, in part on the prospects of continued strong growth. "The Dominican Republic's economy remains resilient," S&P announced. "The upgrade reflects the country's progress in gradually improving its debt structure and debt management, its stronger growth and export prospects."

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FREE TRADE

Local and foreign executives also point to the free trade pacts the Dominican Republic has as a major benefit. The Dominican Republic is one of only six countries in the world that has free trade agreements with the European Union and the United States at the same time, which translates into benefits when doing business, according to van der Horst from the National Competitiveness Council.

"The free trade...

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