The Dominican Republic’s formula for achieving political stability

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The Dominican Republic’s economy will grow by 5.3% this year, according to the latest forecasts from the Economic Commission for Latin America and the Caribbean.

This growth is partly linked to the stable management of the administration of Luis Abinader, which has attracted foreign investment.

BNamericas talks to local political analyst Melvyn Pérez about the foundations of this stability and how it helps the construction industry.

Numerical: How do you rate the Dominican Republic government?

Perez: It can be said that there is no major problem or impending crisis situation. The government, although a relatively young administration, has done quite well. He has been in power for two years. President Luis Abinader had no political experience, never held office, and is not known to have participated in any particular activity.

He is very wealthy and comes from a family that is very involved in politics and very powerful. A lot of his cabinet includes influential business people, so even though he’s a social democratic party, he gets along pretty well with the conservative establishment… and it’s a very conservative country .

To rehash: The government is progressing quite well without major problems, at least for the moment, and has succeeded in maintaining economic stability, but above all it has succeeded in lowering the exchange rate. The peso has strengthened. A few months ago the peso was 59 to the dollar, now it is 53; it is getting stronger in a way never seen before and this has helped maintain economic balance.

Numerical: So the country is stable?

Perez: It is important to point out that, unlike many Latin American countries, elections here have been held without problems since 1966. There are occasional protests, but elections are not interrupted. The only ones that were interrupted were in 2020 with the pandemic, but we have more or less a working democracy.

The country is politically stable vis-à-vis unrest, unlike those seen in other countries. We don’t have much of a tradition of organizing this kind of protest. Sometimes they occur in marginalized areas, but they usually do not disrupt public order.

Numerical: And is the ruling party widely accepted by the public?

Perez: The stream government party, the PRM, was founded in 2014. It is a new party composed mainly of young people who had not been in power, but who are children or grandchildren of great political leaders, so it is a left well prepared. Even so, very early [gaining power] was not the main game.

The PRM won mainly because of the split between the Dominican Liberation Party (PLD), which was a very strong party that ruled for the past 16 years, and the Dominican Revolutionary Party (PRD). A crisis in the PRD, which occurred in 2013, resulted in a division from which emerged the PRM, which currently governs. This PRM has held firm and currently the main opposition it receives is from within.

His opponent, the Dominican Liberation Party (PLD), which was previously led by Leonel Fernández, found itself divided. Fernández founded his own project in 2019 but failed to get it off the ground and only has the sympathy of around 10% of the electorate.

The LDP was unable to produce a leader. An internal competition is planned for the end of the year, but a leader has not yet been defined. The only strong and functioning party is the PRM.

Numerical: Does this stability positively affect the construction sector?

Perez: Construction is one of the major contributors to GDP, not only directly but also due to its link with tourism.

About a year ago, the government announced the construction of eight large dams. It is a gigantic project. Although there are many dams, the government’s plan is that we need more to store more water, and these started as two projects. There are others under construction and nearing completion.

The fact is that with the construction of eight dams, six tourists [vessel] docks and large housing projects, the construction sector has benefited the most because it really provides a lot of jobs. In our case, we have tourism, and without infrastructure, there is no tourism.

There are usually not many protests regarding construction or infrastructure, although if you look at the dams you will find some. Recently, there were other demonstrations which were nothing extraordinary, but they were against a mining company.

Environmental groups often protest but do not have enough power to stop the projects. However, construction projects in the Dominican Republic require a lot of bureaucracy and lots of paperwork, as local construction companies tend to be relatively strong and tenders are heavy. In this part it is a bit complicated because getting involved here [foreign companies] need to partner with local businesses.

Apart from this, regulations have emerged, especially after the Odebrecht [corruption scandal]. We were the third country that dealt with the most bribes. So that part, getting new contracts and the relevant regulations are now a bit more complex, but I don’t think they’re much different from other countries either.

Numerical: Is there an opening to develop different infrastructure projects?

Perez: In the Dominican Republic, we are very open and almost all governments have had a very consistent approach to private investment. We haven’t had a government that has opposed investment since 1963. Presidents come and go, but they all seek foreign investment.

Some reforms are currently underway to make it even easier, and there are a series of projects aimed at even more investment. One of them concerns cruise terminals. Two terminals are in operation, and although we are a tourism player, we were not open to this market. However, a terminal has been opened in Puerto Plata, and the terminal in Santo Domingo receives some [tourists].

There are plans to open six cruise terminals over the next four years. There are also several large tourism projects such as the Cabo Rojo project in Pedernales which is a huge amount of totally virgin land where there are plans to build enough hotel rooms to compete with our main tourist destination Punta Cana, and it will bring million bucks investments.

There are also many projects in the field of energy for natural gas power plants and renewable energies. The president is among the wealthiest businessmen in the country and a large part of his cabinet are also businessmen rather oriented towards investment and business promotion.

Numerical: Do foreign companies have enough opportunities to enter the Dominican market?

Perez: The main telephone company is Mexican, the main soft drink company is also Mexican; there are a lot of Mexican businesses here. Apart from that, we have a large presence of foreign companies, notably Canadian, Spanish, in the mining field. The two main mining companies in the country are Canadian. The market is really open, although there is the problem that characterizes Latin America: corruption.

However, the obstacles mainly relate to entering the country, and they are mainly bureaucratic. After the initial paperwork, there are no difficulties that affect the free market. Of course, it depends on the sectors because there are some that are dominated by large groups of companies. In other words, there is very strong competition with established players.

Numerical: What advice would you give to companies interested in doing business in this market?

Perez: Familiarize yourself with the local culture, although it is advice that applies in almost all countries, but it is fundamental. In some countries it may be more complex than in others, and in our case we are geographically isolated. We have somewhat more particular characteristics, so anyone who wants to invest here must know more or less the Dominican idiosyncrasies.

It is also very important to know the history of the competition. Many people come here to invest and we have a lot of openness in many sectors, even if there are many others where it is difficult. For example, in the supermarket sector we have no foreign chains, while in the mining sector there are many, in tourism as well, and in the transport sector there are no foreign chains. foreign companies.

Thus, each sector has its own characteristics and particularities that differentiate it from other economic activities. In the case of construction, there are very large companies with a lot of experience, so consortia are usually formed. Through them, foreign companies bring their experience or capital to consolidate the projects, because during the construction of dams, airports, terminals, etc., qualified personnel [with experience] is required.

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