do business in the Dominican Republic - Pellerano & Herrera

DOING BUSINESS INTHE DOMINICAN REPUBLIC2POLITICALANDECONOMICOUTLOOK8The Dominican Republic is currently going through an important process ofdemocratic consolidation, and the results of the last three presidential electionsheld in 1996, 2000 and 2004 reflect the growing democratic maturity of thenation.These election processes have been carried with transparency, without questioningsand with great poll participation.The traditional political leadership that had ruled the country since the beginningof the democratization process in the sixties has been gradually beingreplaced by a younger generation of leaders who are trying to achieve an economicallyfeasible project comprising global competition, public sector responsibilityand decentralization.While this process takes place, the country is experiencing very importantmoments for its future from the economic standpoint.Since 1996 the country had achieved the highest economic growth rates in LatinAmerica, as a result of the constant macroeconomic stability and the gradualincrease of private sector participation.In this regard, the growth experienced by the Dominican economy betweenthe years 1996 and 2000 captured the attention of the international community,being praised by institutions such as the International Monetary Fund andthe Economic Commission for Latin America and the Caribbean. In fact, duringfive consecutive years the country had been breaking its annual growthrecord.During recent years, the economy grew 2.7%, a low rate when compared withprecious years, but still five times higher than the average growth rate in LatinAmerica, in spite of adverse factors, such as the September 11 events, the raise inoil prices and the world economic recession, which affected important sectorslike tourism and free zones.The Dominican economy shows two clearly different economic profiles: on theone hand, the external economy, whose main growth factors have been tourismand industrial free zones, and on the other hand, the domestic economy, whosemain growth factors have been communications, electricity, construction, commerceand transport.Free zones and tourism have developed independently from the general commercialenvironment of the country, for the following reasons:Special legislation has protected the rights of foreign investors,Particular tax structure has granted a fair treatment for new local and foreignparticipants, andA competitive environment has favored innovation.It should be noted that the victory of Dr. Fernandez at the presidential poll on2004 caused, maybe more a psychological motivation than an economic one, certainimportant developments worthy of mentioning:1. A significant reduction of the exchange rate, which has largely stabilized atapproximately RD$30.00 per US$ dollar.