Weekly Report - 3 February 2004

DOMINICAN REPUBLIC | `Unsustainable' debt with power companies. Frank Marino Hernández, director of the think-tank IDEA, has pointed to the government's debt with the electricity firms -- about RD$25bn (US$550m at the current exchange rate) -- as one of the underlying causes of the country's chronic power crisis. Since 1999, he says, the government has been falling behind in the disbursement of the subsidies meant to compensate for keeping the electricity rates low. The rates were to have been made more `transparent' over the past four years, but this did not happen. Of the outstanding debt, US$400m or so is owed to the generating companies, and about US$100m to Unión Fenosa — and the debt is increasing at an unsustainable US$40-48m a month, according to Marino.

GUYANA | Debt relief cleared. The IMF, the World Bank's International Development Association (IDA) and the Paris Club have agreed that Guyana has met the eligibility requirements for debt reduction under the enhanced Heavily Indebted Poor Countries (HIPC) initiative. This means that US$413.6m will be written off. The Paris Club has just approved the bilateral component of US$90m.

GUATEMALA | Fiscal adjustment looming. Finance minister Antonieta de Bonilla has been softening up the public for a tough fiscal adjustment. First she announced that, without corrective action, the fiscal deficit could climb to 4.7% of GDP, and that fiscal reform would be required in the short term. This, she said, was the main reason behind President Oscar Berger's policy of seeking a `fiscal pact'. Later, however, she announced that she would be recommending a 20% cut in budgeted spending for this year, to keep outlays down to Q24bn. This, with revenues at Q19.5bn, should hold the deficit down to 2% of GDP. 

COSTA RICA | FTA deal with US. The US has finally approved the `market-opening language' put forward by Costa Rica, clearing the way for a Cafta deal with all Central American governments. Costa Rica has agreed to open its insurance market to external competition by 2011, and to deregulate `value-added' telecoms services.