Caribbean & Central America - June 2013 (ISSN 1741-4458)

As President Danilo Medina prepares to mark his first nine months in office on 20 June, he and his Partido de la Liberación Dominicana (PLD) government remain popular – not only among the general public but crucially, the country’s fickle business sector. All this, despite adopting some tough measures to address the large fiscal deficit and other serious economic problems inherited from the previous PLD administration.

Soon after Medina took office in August last, his administration not only adopted some tough austerity measures which severely limited government spending (primarily lowering the level of administrative spending) but also pushed through congress a highly resisted tax reform plan [RC-12-12]. While the measures produced social discontent and earned the Medina administration criticism from the business sector, they have started to produce some noticeable results, reducing the deficit and allowing Medina room to manoeuvre and re-direct some of these savings towards areas of the economy that are in need of a boost.

On 6 May Finance Minister Simón Lizardo Mézquita, revealed that thanks to the austerity measures and the larger tax intake resulting from the tax reform, the government had not only reduced the deficit to 0.1% of GDP in the first quarter of the year (much lower than the official projected figure of 0.7%); but had saved some RD$15bn (US$360m) which would be used to reverse some of the negative effects that the tax reform has had on the domestic economy. The most controversial aspect of the tax reform was the increase on the tax rate paid on industrialised products (Itbis), which is applied to a range of manufactured products ranging from machinery to processed foods and beverages. The increase to the Itbis was resisted by both consumers and businesses alike, who warned it would only hamper domestic consumption. The central bank (BCRD)’s first quarter results show that real GDP growth in the first quarter of the year was just under 1%, on the back of weaker-than-expected consumption levels. This led the BCRD to cut the local reserve requirement for financial institutions operating in the country by 3.5 percentage points, releasing some RD$20bn (US$487m) into the local economy in the hope of boosting it.  

To reinforce efforts to promote more activity, Lizardo said the government would assign RD$9bn (US$216m) of the “spare cash” to the local construction sector. In subsequent weeks the Medina government has announced a series of other measures all aimed at further stimulating the economy and easing some of the pain on consumers. These include the 31 May decision to temporarily suspend Itbis charges on the purchase of low-cost homes for the next six months and an 11 June presidential decree (164-13) which stipulates that from August all public institutions must first seek to source goods and services from national small and medium-sized enterprises (SME’s) before turning to larger businesses.

The adoption of such measures and the renegotiation of the Pueblo Viejo mining concession [RC-13-05] have helped Medina maintain high levels of approval. The latest Gallup opinion poll, released on 24 April, found that 70% of respondents believed that Medina’s performance so far has been “better than expected”, with 60% saying they believed that the economy was improving and that they expected further improvements in the future. Meanwhile the ‘Barómetro de Empresas’ business poll carried out by the local subsidiary of Deloitte and released on 6 June, found that 64% of the 102 local business leaders surveyed approve of Medina’s performance so far, with only 5% expressing disapproval. In particular 47.6% of respondents were positive on the level and quality of government spending, while 19.4% found it to be “bad”. In the previous (September) Barómetro poll, 59% approved of Medina’s performance, while 77% said that government spending levels were “bad”.     

• Ombudsman

On 29 May Zoila Martínez Guante was sworn in as the Dominican Republic (DR)’s first ever ombudsman following her approval by the legislature. For years national and international human rights organisations like the national human rights commission (CNDH) and Amnesty International (AI) have called for the post – which has remained vacant since its creation in 2001 – to be filled. The political parties’ inability to agree on a candidate was the main obstacle. Martínez, a former national district prosecutor who is closely identified with the Partido Reformista Social Cristiano (PRSC), was selected only after a political agreement between the ruling Partido de la Liberación Dominicana (PLD) and its PRSC ally was reached, a process lambasted as “embarrassing” by the CNDH.