The Caribbean offers a wide range of opportunities. The Dominican Republic, one of the region’s most flourishing performers, has experienced accelerated modernization and now boasts world-class resorts, industrial parks, and export-processing zones.

And with the recent election of President Leonel Fernandez, new policies embracing trade and investment are having a positive impact—creating new opportunities ... and risks.

What’s Changed?

President Fernandez appears to be focusing more on international issues than his predecessor, Joaquin Balaguer, who held the office of Presidency for three decades. In doing so, President Fernandez is pursuing policies designed to make the country a more trade and investment-friendly environment.

In September 1996, Fernandez implemented legislation to encourage investment, primarily by allowing unlimited foreign investment in nearly all sectors of the economy. And in June, he signed a privatization law that created the Commission for the Reform of Public Enterprises to serve as the institution to manage and control new privatization efforts.

Investment Opportunities Grow

On a historical-cost basis, U.S. direct investment in the Dominican Republic rose 93% from 1991 through 1995, reaching almost $1.3 billion. Now with the enactment of the two new laws, this rate will likely increase at a faster pace.

According to the Bank of the Dominican Republic, the following sectors, ranked by cumulative investment, offer opportunities for U.S. and Florida investors:

  • Transportation, Communication and Warehousing
  • Finance, Insurance, Real Estate, Trade Services and Tourism
  • Food Products
  • Chemicals
  • Commerce
  • Metal Industry, including equipment and machinery
  • Mining
  • Beverages and Tobacco
  • Textiles and Apparel

U.S. and Florida Exports to the Dominican Republic Rising

U.S. exports to the Dominican Republic rose from $1.7 billion in 1990 to $3.2 billion last year, registering an increase of just under 92%. Exports from Florida also showed improvement, increasing 7.4% during the first quarter of 1996, compared with the same period in 1995 (most recent available statistics).

Growth Is Strong

The Dominican Republic’s gross domestic product registered a strong 7.3% growth in 1996, up from the previous year. And inflation dropped from 7.2% in 1995 to 4% last year. Growth was strongest in the tourism, mining, telecommunications, and free trade zone sectors. So, as the economy expands, your opportunities will increase.

On the downside, continued electrical power shortages have impeded industrial development. Agricultural growth suffered through a drought in 1995, and sugar refining has been hit hard by a poor sugar crop.

Trade Barriers Remain

Trade barriers in the Dominican Republic range from 3% to 35% depending on product categories. There is also an 8% sales tax and a 1.5% tax on the purchase of foreign exchange. In addition, certain luxury goods are assessed a high consumption tax ranging between 5% and 80%.

Non-tariff barriers remain, in particular, for agricultural products such as sugar and poultry. And weak protection for intellectual property, which includes trademarks, patents and copyrights, continues to affect investment and business practices.

The Dominican Republic government’s refusal to accept the validity of commercial invoices for purposes of customs valuation also poses a barrier to trade. Further, a complex system of licensing, consular approvals of invoices, corruption, and poor organization at the port pose additional obstacles.

The Caribbean Basin Initiative Is Working

The Caribbean Basin Initiative (CBI), implemented under the Reagan administration, is a broad program designed to promote economic development in Central America and Caribbean countries. It has been successful in achieving its major goal of expanding foreign and domestic investment in non-traditional sectors (i.e., manufacturing) in order to diversify these countries’ economies and expand their export base.

The CBI Initiative grants member countries reduced tariffs and duty-free access to the United States for a variety of products which make your imports less expensive.

The Caribbean Basin Countries Want NAFTA Parity

Since the North American Free Trade Agreement was implemented in January 1994, CBI countries have voiced concern that U.S. trade and investment has been diverted to Mexico as a result of preferential access granted there. Officials of the textile industry have repeatedly expressed serious concern that unless they receive NAFTA parity, they will lose significant business.

In response, President Clinton has pledged his commitment to expand the U.S.-Caribbean trade relationship in an attempt to increase your incentive to do business there.

This article appeared in July 1996. (BB)
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John Manzella
About The Author John Manzella [Full Bio]
John Manzella, founder of the ManzellaReport.com, is a world-recognized speaker, author and nationally syndicated columnist on global business, trade policy, labor, and economic trends. His latest book is Global America: Understanding Global and Economic Trends and How To Ensure Competitiveness.




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