do business in the Dominican Republic - Pellerano & Herrera

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DOING BUSINESS INTHE DOMINICAN REPUBLIC16Three permanent members (the Governor of the Central Bank, who presidesover it, the Minister of Finance and the Superintendent of Banks)Six members designated by the President of the Republic for a renewabletwo-year-period, not being able to be removed of their posts withoutjust cause, and removal may only be decided by majority vote of _ of themembers of the Board.b) Central BankThe Central Bank is a public entity of Public Law with its own legal personality.As the only issuing entity, it is granted autonomy under the Constitution. It hasthe function to execute monetary, exchange and financial policies, pursuant tothe Monetary Program approved by the Monetary Board and by using theinstruments provided in the law.c) Superintendence of BanksThe Superintendence of Banks has the mission to carry out, with full functionalautonomy, the supervision of financial entities, in order to see to the complianceof their legal obligations, requiring them to make the relevant risk provisions, tocomply with the legal provisions and to impose sanctions. It has also the attributionto propose the authorizations and revocations of financial entities that theMonetary Board has to evaluate.d) Guarantees of AutonomyLaw 183-02 sets forth the necessary safeguards to ensure that the Monetary andFinancial Administration carries out its functions in an independent andautonomous manner.Firstly, the Administration is granted the resources required to execute its functionswith budgetary and financial independence (Article 5).Furthermore, the law seeks to strengthen the professionalism of theAdministration's human resources through a personnel regime that focuses onmerit and professional capability, includes rules intended to ensure impartialityin the exercise of their functions, reaffirms the confidentiality duty and creates asevere regime of personal financial liability in the event of misappropriation offunds (Articles 6-8).In addition, the law provides special attention to the professionalism and independenceof the Administration's higher organs in order to prevent politicalappointments and conflicts of interest. For such purpose, it sets out in detail theselection criteria for a fixed time-period of the members of the Monetary Board,its compensation regime and grounds of removal, creating furthermore statutesfor the Central Bank's Governor and the Superintendent of Banks.In this same context, the mechanisms of monetary transparency, through whichthe Administration is obliged to inform the public of its activities, seek to ensurethat the Administration performs properly with its duties (Articles 22 and 23).Public protection against the Administration's decisions is reached by virtue ofnew administrative and litigious-administrative appeals that may be filed by
Pellerano & HerreraAttorneys at lawaffected parties. In this regard, the creation of a Litigious-Administrative Court forMonetary and Financial Issues to decide on appeals filed against administrativedecisions issued by the Monetary Board is one of the most significant contributionsof the reform (Article 77).The law grants a one-month-period for the filingof the respective appeal with the Court (Article 4.b).Moreover, a mandatory public consultation procedure is established in order toenable interested parties to file their comments regarding regulation proposals ofthe Administration (Article 4.g).CURRENCY AND EXCHANGEAccording to the Constitution, the national currency is the Dominican Peso. Law183-02 abrogated Monetary Law No. 1528 of 1947, which had become obsolete,since it provided that a Dominican peso has the same value as a US dollar.This legal framework provides that the foreign exchange regime shall be based onthe free exchange of national currency against foreign ones,being economic agentsable to execute transactions in foreign currency under any terms that they maywish to agree upon.The Central Bank may not, under any circumstances, requirethat certain international exchange operations shall be solely made with the CentralBank or under conditions preventing that the market freely determines prices.17SOURCES OF FINANCINGLocal and Foreign LoansFinancial institutions grant generally short or medium term loans,with periods ofone to five years, but the financing of constructions and projects with governmentfunding can be long term, with periods of ten to twenty years.Law 312 of 1919 used to set a mandatory interest rate of 12% per year. However,the Monetary Board allowed banks to charge “commissions”whose rates dependedon the prevailing market conditions. This statute was abrogated by theMonetary and Financial Law No.183-02,which provides that interest rates for anytype of transaction shall be freely determined by the market (Article 24).As to the interest rates of the last years, we may mention the following:The average loan interest rate charged by banks in 2002 was 26.1%,while thedeposits interest rate was 31.39%.In 2003, the loan rate was 16.79% and the deposits rate 20.53%.In 2004, multiple banks had a loan interest rate of 30.88% and a deposit rateof 21.27%.These rates were similar at the other financial entities.As to loans in foreign currency, there is no legal or exchange restriction to theirexecution. Law 183-02 provides that transactions made in Dominican Republicmay be agreed in local or foreign currency, establishing that debts shall be paidin the currency agreed-upon by the parties.The foreign creditor needs only to register the loan at the Central Bank, and thedebtor will then be able to pay in foreign currency obtained through the privateexchange market any amounts due under the agreement. Since 1994, when the
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Design: Lourdes Saleme y AsociadosP
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