DOING BUSINESS INTHE DOMINICAN REPUBLIC2POLITICALANDECONOMICOUTLOOK8The Dom<strong>in</strong>ican <strong>Republic</strong> is currently go<strong>in</strong>g through an important process ofdemocratic consolidation, and <strong>the</strong> results of <strong>the</strong> last three presidential electionsheld <strong>in</strong> 1996, 2000 and 2004 reflect <strong>the</strong> grow<strong>in</strong>g democratic maturity of <strong>the</strong>nation.These election processes have been carried with transparency, without question<strong>in</strong>gsand with great poll participation.The traditional political leadership that had ruled <strong>the</strong> country s<strong>in</strong>ce <strong>the</strong> beg<strong>in</strong>n<strong>in</strong>gof <strong>the</strong> democratization process <strong>in</strong> <strong>the</strong> sixties has been gradually be<strong>in</strong>greplaced by a younger generation of leaders who are try<strong>in</strong>g to achieve an economicallyfeasible project compris<strong>in</strong>g global competition, public sector responsibilityand decentralization.While this process takes place, <strong>the</strong> country is experienc<strong>in</strong>g very importantmoments for its future from <strong>the</strong> economic standpo<strong>in</strong>t.S<strong>in</strong>ce 1996 <strong>the</strong> country had achieved <strong>the</strong> highest economic growth rates <strong>in</strong> Lat<strong>in</strong>America, as a result of <strong>the</strong> constant macroeconomic stability and <strong>the</strong> gradual<strong>in</strong>crease of private sector participation.In this regard, <strong>the</strong> growth experienced by <strong>the</strong> Dom<strong>in</strong>ican economy between<strong>the</strong> years 1996 and 2000 captured <strong>the</strong> attention of <strong>the</strong> <strong>in</strong>ternational community,be<strong>in</strong>g praised by <strong>in</strong>stitutions such as <strong>the</strong> International Monetary Fund and<strong>the</strong> Economic Commission for Lat<strong>in</strong> America and <strong>the</strong> Caribbean. In fact, dur<strong>in</strong>gfive consecutive years <strong>the</strong> country had been break<strong>in</strong>g its annual growthrecord.Dur<strong>in</strong>g recent years, <strong>the</strong> economy grew 2.7%, a low rate when compared withprecious years, but still five times higher than <strong>the</strong> average growth rate <strong>in</strong> Lat<strong>in</strong>America, <strong>in</strong> spite of adverse factors, such as <strong>the</strong> September 11 events, <strong>the</strong> raise <strong>in</strong>oil prices and <strong>the</strong> world economic recession, which affected important sectorslike tourism and free zones.The Dom<strong>in</strong>ican economy shows two clearly different economic profiles: on <strong>the</strong>one hand, <strong>the</strong> external economy, whose ma<strong>in</strong> growth factors have been tourismand <strong>in</strong>dustrial free zones, and on <strong>the</strong> o<strong>the</strong>r hand, <strong>the</strong> <strong>do</strong>mestic economy, whosema<strong>in</strong> growth factors have been communications, electricity, construction, commerceand transport.Free zones and tourism have developed <strong>in</strong>dependently from <strong>the</strong> general commercialenvironment of <strong>the</strong> country, for <strong>the</strong> follow<strong>in</strong>g reasons:Special legislation has protected <strong>the</strong> rights of foreign <strong>in</strong>vestors,Particular tax structure has granted a fair treatment for new local and foreignparticipants, andA competitive environment has favored <strong>in</strong>novation.It should be noted that <strong>the</strong> victory of Dr. Fernandez at <strong>the</strong> presidential poll on2004 caused, maybe more a psychological motivation than an economic one, certa<strong>in</strong>important developments worthy of mention<strong>in</strong>g:1. A significant reduction of <strong>the</strong> exchange rate, which has largely stabilized atapproximately RD$30.00 per US$ <strong>do</strong>llar.
<strong>Pellerano</strong> & <strong>Herrera</strong>Attorneys at law2. Reduction of <strong>in</strong>terest rates.3. Reduction of <strong>in</strong>flation rate to close at 29% at <strong>the</strong> end of <strong>the</strong> year.4. Increase return of capitals that had been placed abroad.3POLITICALSYSTEMThe Constitution of <strong>the</strong> Dom<strong>in</strong>ican <strong>Republic</strong> def<strong>in</strong>es <strong>the</strong> government system asbe<strong>in</strong>g democratic, republican and presidential. It also provides that <strong>the</strong> exerciseof power is divided among three <strong>in</strong>dependent branches:executive,legislative andjudicial.EXECUTIVE BRANCHThe President of <strong>the</strong> <strong>Republic</strong> exercises <strong>the</strong> Executive Power.The President is elected through direct vote, toge<strong>the</strong>r with <strong>the</strong> Vice-president, fora four-year-period.They may be re-elected for an additional period, accord<strong>in</strong>g to<strong>the</strong> last amendment made to <strong>the</strong> Constitution <strong>in</strong> 2002.To be elected President, <strong>the</strong> candidate must ga<strong>in</strong> a majority vote of at least 50%plus one.If none of <strong>the</strong> candidates obta<strong>in</strong>s such majority, a second poll will take place atwhich <strong>the</strong> population will decide between <strong>the</strong> two candidates that had <strong>the</strong> bestresults dur<strong>in</strong>g <strong>the</strong> first poll.The President of <strong>the</strong> <strong>Republic</strong> is <strong>the</strong> Head of State, Government and PublicAdm<strong>in</strong>istration, as well as <strong>the</strong> Commander <strong>in</strong> Chief of <strong>the</strong> Armed Forces.A cab<strong>in</strong>et of m<strong>in</strong>isters (“Secretarios de Esta<strong>do</strong>”) that he designates assists <strong>the</strong>President <strong>in</strong> his function.S<strong>in</strong>ce August 2004, <strong>the</strong> President of <strong>the</strong> <strong>Republic</strong> is Leonel Fernandez and <strong>the</strong>Vice-president is Rafael Alburquerque, of Parti<strong>do</strong> de la Liberacion Dom<strong>in</strong>icana(PLD), which won <strong>in</strong> <strong>the</strong> first election round with a majority vote of 57.11%.LEGISLATIVE BRANCHThe Legislative Power is <strong>in</strong>vested <strong>in</strong> <strong>the</strong> National Congress, composed by twochambers: <strong>the</strong> Senate and <strong>the</strong> Chamber of Deputies.The members of both chambers are elected through direct majority vote for fouryear periods. Re-election is always possible, without any limitation.The Senate is composed of 32 members, one for each prov<strong>in</strong>ce and one for <strong>the</strong>National District. The office of Senator and Deputy are <strong>in</strong>compatible with anyo<strong>the</strong>r position or employment at <strong>the</strong> Public Adm<strong>in</strong>istration.The Chamber of Deputies is composed of 150 members elected directly by <strong>the</strong><strong>in</strong>habitants of <strong>the</strong> respective prov<strong>in</strong>ce or National District, at a proportion of onedeputy for every 50,000 <strong>in</strong>habitants plus fraction exceed<strong>in</strong>g 25,000, but neverless than two.9