Caribbean & Central America - November 2011 (ISSN 1741-4458)

The country’s GDP grew by 4.2% in the first nine months of the year compared with the same period of 2010. The figures come from the governor of the central bank, Héctor Valdez Albizu. He claimed that the performance was “satisfactory” given the unsettled international outlook. 

In the first nine months of 2011, the inflation rate was 7.5%. Albizu attributed this to an 81% surge in the prices of the goods linked to oil. Transport, fuel, electricity and food and drink prices have all increased substantially.

At the end of 2010, the government had forecast that the economy would grow by 5% in 2011 and inflation would be between 8% and 8.5%.

Albizu said that almost three quarters (72%) of the country’s economic sectors increased output in the first nine months of this year. Mining was the clear star, increasing output by 74%. Free zone activity was up by 14% (reflecting a stronger US economy). Agriculture grew nicely (up 6.9%); manufacturing increased by 5.7% while the health and education sectors were both up by over 5%. The laggards were financial services (3.9%); commerce (3.7%) and, somewhat surprisingly, tourism (3.7%).

Albizu said that although that the country had entertained 111,469 more foreign visitors in the first nine months of 2011 than it did in the same period of 2010, bringing the total up to 3.3m, there had been no significant increase in the average spend.

Exports were up by 24%, compared with the same period of 2010, thanks to a strong performance from mining and free zones. Imports were up by 16.7%, well down on the 27% rate of increase recorded at this point in 2010. This is extraordinary given the increase in oil prices which means that a third of the country’s import bill (or US$3.44bn in the first nine months of 2011) goes on oil. In the first nine months of 2011, the country’s oil bill was up 34% on the same period of 2010.

Remittance revenues grew by 7.2% in the first nine months, but foreign direct investment (FDI) was strong, at US$1.835bn over the same period, putting the country on course for a total of at least US$2bn in 2011. This will be the third consecutive year in which FDI will have been above US$2bn.

WTO: On 20 October the World Trade Organization (WTO) gave a preliminary ruling against the Dominican Republic in its dispute with Central America over its decision to impose 38% duties on Central American exports of plastic bags mostly used to pack food and agricultural products.  The ruling came from a special group set up by the WTO to resolve the dispute which involved Costa Rica, Guatemala, Honduras and El Salvador. The Dominican Republic imposed the tariff as an anti-dumping measure.  The Central Americans argued that their exports of the packaging materials had not reached a level at which Dominican producers were threatened with bankruptcy.  Third parties such as China, Colombia, the European Union (EU), Nicaragua, Panama, Turkey and the US all filed an interest in the case on the side of the Central Americans. Some of these countries (notably Colombia, Mexico and Panama) also saw an increase in DR tariffs on their exports of packaging but the increase was lower than that imposed on the Central Americans.

The decision will now go for ratification by the disputes settlement organisation of the WTO. It is expected to rule at the end of this year. By April 2012 all the packaging items originating from Central America will be free of tariffs anyway under the Cafta-DR free trade agreement.

• Solvency

Albizu said that the financial system was well capitalised with an average solvency ratio of 17%, well above the 10% stipulated by law.