do business in the Dominican Republic - Pellerano & Herrera

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DOING BUSINESS INTHE DOMINICAN REPUBLICneed of prior approval from the Central Bank was eliminated, this registration isa mere formality for statistical purposes.Under the Tax Code, interests on international loans were subject to a 15% withholdingtax, payable by the local debtor. Law 146-00 on Tax Reform reduced thisrate to 5%, which was again raised to 15% by Law 92-04 on Bank Risk Prevention.MULTILATERAL ORGANIZATIONSAt an international level, the Dominican Republic benefits from different programsfor project financing, and for investment insurance against exchange andpolitical risks, both of which contribute to make the country an attractive andsafe place for the placement of investments.Since the Dominican Republic belongs to a number of international organizations,the investor who decides to carry out a project in the country could benefitfrom the facilities for project financing and investment guarantee that areavailable under different international schemes.International organizations such as the World Bank and the Inter-AmericanDevelopment Bank (IADB) grant credit facilities under good conditions for therealization of projects in sectors considered to be important for the developmentof the national economy. Private projects in areas like agriculture, tourism andindustry benefit from these programs. In this regard, in the year 2001 theInternational Financing Corporation (IFC), of the World Bank Group, opened abranch in the country in order to be able to provide direct financing to localcompanies in areas of strategic importance for development. Furthermore, alsoin that year the Dominican Republic became a member of the MultilateralInvestment Fund (MIF), a fund managed by the IADB to provide financialresources for private sector development, particularly small enterprises.Furthermore,the Dominican Republic is a member of the Multilateral InvestmentGuarantee Agreement (MIGA), an agency of the World Bank established in theyear 1988 to promote the flow of capitals to its developing member countries.The MIGA grants guarantees to cover the risks of impossibility of exchange intoforeign currency, expropriation, non-compliance of contract by the governmentand civil disturbance or war.The Overseas Private Investment Corporation (OPIC), a government agency ofthe United States, is also active in the country with financing facilities andinvestment insurance programs against certain risks.18EUROPEAN DEVELOPMENT FUNDSThe European Investment Bank (EIB) is an institution of the European Unionthat, under the framework of the Lome/Cotonou Convention, offers long-termand low-interest loans for the financing of projects in ACP countries. The EIBgrants loans to the Dominican Republic mainly in the following sectors: industry,tourism, mining and energy, as well as transport and telecommunications whenthe project is related to one of the mentioned sectors.
Pellerano & HerreraAttorneys at lawEIB loans are generally used for the application of the National and RegionalIndicative Programs set forth by the Lome Convention, which are prepared jointlyby each ACP country and the EU every five years, and contain, among otherinformation, an indication of the economic areas that should benefit from thefinancial support and the projects to be executed for such purposes.These fundsare channeled through the European Development Fund Office of theGovernment.Under the first financial protocol of the recently approved CotonouAgreement, which substitutes and enlarges the benefits of the Lome Convention,a substantial amount of financial resources will be made available to ACP countries:more than 25 billion euros over the next seven years.For the period 2003-2008, the Dominican Republic will receive approximately200 million euros, of which 176 million will be for donations and the rest will befor regional projects and loans channeled through local banks.In this regard, the country was chosen by the Center for the Development ofEnterprise (CDE), an ACP-EU institution financed by the European DevelopmentFund to support ACP companies and partnerships between ACP-EU contractorsin the fields of industry, agriculture, construction, tourism, telecommunications,transport and others, to be the seat of its first regional office in the Caribbean.This decision was taken on the basis of the fact that approximately 40% of theCDE´s portfolio for the region has been invested in the Dominican Republic.Furthermore, in March 2002, the Dominican Republic was selected as model forall 77 ACP countries for the use of Cotonou funds, and the EU opened an officein the country to channel funds to other nations of the region.This local officewill also facilitate the negotiations towards the execution of a trade partnershipagreement of ACP countries with the EU that would enter into effect in 2008.2THEDOMINICANREPUBLICSTOCKMARKET19DEVELOPMENT OF THE STOCK MARKETThe local stock market started to develop, very slowly at first, under Law 3553 of1953,which allowed the creation of the National Stock Exchange and the NationalCommission of Securities, and more rapidly at the end of the eighties, underPresidential Decree No. 554-89, that created the Stock Market of the DominicanRepublic (BVRD) as a non-for-profit self-regulated institution, which started tooperate in 1991.Despite the limitations resulting from the lack of adequate legislation, transactionsat the BVRD grew if not considerably, at least steadily during the nineties.With the passing of Law 19-00, which fills in the legislative gaps that were limitingthe expansion of financial markets in the country, the Dominican stock market hasbeen acquiring significant value, for both local and foreign companies. Volumesnegotiated at the BVRD reached record levels in the year 2001, going fromRD$4,041.7 million in 2000 to RD$22,680.6 million in 2001, an increase of 461.2%.
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