Although the government of the Dominican Republic has not yet officially signed the CAFTA-DR, the trade agreement between this Caribbean nation, Central America, and the United States should strengthen trade opportunities.
This AJOT reporter recently checked out first hand what impact CAFTA-DR will have on the Dominican Republic. As a result of a series of various meetings, most with government and trade leaders, AJOT discovered that, depending upon to whom you speak, CAFTA-DR will largely benefit trade with the United States with residual benefits for the DR. These are: 1) a consolidation of and expanded benefits outlined in the Caribbean Basin Initiative (CBI), 2) premier access to the US market, and 3) an opportunity for the DR government to focus on and make more transparent its governance and issues concerning globalization.
Jose Antonio Fiaquer, president of the Dominican Association of Exporters, comments, "In the 20 years since CBI we have not been able to profit from the US competitive position due to systemic problems within our government, our legal system, our infrastructure, etc. We have come to an awareness that we need to work together and increase our position on a competitive level."
To do that, he says, the government must get rid of taxation on imports and introduce a consumption tax, a move that will be highly unpopular with DR citizens.
Fiaquer sees these efforts as critical in that they create transparency in government. "But these changes should have been made years ago," he states. He fears the effort is too little, too late.
Reality check
John Schroder, a former New York City banker who now lives in the DR is an independent consultant to the banking and securities industry. He says that he anticipates few, if any, real changes to occur on the island as a result of CAFTA-DR.
"The trade deal will reduce tariffs on US products," he says. "This means the DR government will no longer get income from these tariffs. To the consumers it could mean items like a Whirlpool washing machine will cost 30% less here, but I don't believe that will happen."
He, like many, has not seen policies hold from one administration to another. Yet, with outside forces like the US government involved to enforce the trade agreement, the DR may have to discipline change.
One US government official, who wishes to remain anonymous, explains how -- like so many Latin American countries, the DR has a very small yet highly influential wealthy class. "Making this group different from those in other Latin American countries is how they flaunt their wealth," he says. As a result, there is a strong sense of "haves" and "have nots."
The situation is exacerbated by the number of Dominican criminals now being deported from the United States to their homeland; increasing numbers of desperate Haitians crossing the border to take jobs in construction, agriculture and services; and tourists who come to the DR and casually spend sums of money. The result is a dangerous element that was not so prevalent in the past.
Given the power the wealthy possess, the island faces an uphill battle to effectively make the necessary changes to put the DR on a straight footing. The American official adds, "A good number of changes still need to take place in the DR before CAFTA-DR can be implemented." The comment is a polite one at best.
Fiscal confidence
Having the biggest impact is the fact that the DR has recently weathered four years of highly mismanaged government and fraudulent accounting and embezzlement, which lead to the failures in mid-2003 of three Dominican banks and the jailing of executives from the largest bank. Simultaneously, the government covered 100% of depositors' losses by issuing Central Bank Certificates of Deposit, which raised national debt from the equivalent of about 18% of GDP to the equivalent of 54% of GDP thereby putting the currency into a tailspin.
With the nation reaching the boiling point, people elected a new
