Dominican Republic

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fDi Editor | 05/01/2004 12:00 am

A banking crisis in May 2003 precipitated a dramatic reversal of fortune for the Dominican Republic’s economy. Having enjoyed growth averaging 6.5% a year throughout the 1990s, the economy is expected to shrink 3.5% in 2003 following the collapse of three of the country’s banks, including the second largest.

A government bail-out – estimated to exceed $2bn, roughly three-quarters of the national budget – has triggered rampant inflation (up to 30%) and economic crisis. Political demonstrations in response have further destabilised the country.

Despite this, the government maintains the economy is fundamentally healthy, citing a 22% improvement in the tourism sector and ongoing foreign investment into the tourism and telecommunications sectors. There’s little doubt that the economy is in turmoil with knock-on effects wreaking havoc. The government is negotiating an IMF loan but the Fund demands heavy cuts in government spending.

If stability is restored, and albeit with a significantly weakened economy, the Dominican Republic could once again be an interesting investment destination, with opportunities in export processing, tourism and construction. In particular, industries benefiting from the currency’s plunge but not depending on local consumer spending will benefit.

The Dominican Republic is strategically located between North and South America and offers investors a range of incentives.

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