Dominican Republic - Market ChallengesD.R. - Market Challenges
Market Challenges
While the DR’s economic growth is expected to stay strong, challenges exist. Food costs make it increasingly difficult for the poor to afford the basic food basket. The impacts of enviromental degradation, such as mangrove, beach and coral reef erosion, threaten long term critical resources for tourism, a major economic driver. National debt is worisome, having reached $43.2 billion in 2018, nearly 50% of GDP.
The DR’s per capita GDP of $8,341 masks a very uneven distribution of wealth heavily in favor of the upper classes. Around 36 percent of the population lives below the poverty line. Education outcomes have been well below other countries in Latin America. Under previous governments, public spending had been disproportionately funneled into public works and the electricity sector at the expense of other social programs, such as education and healthcare. The DR’s poor performance in these global rankings, in terms of both the quality of its public education and time spent in school, prompted the education reforms of the Medina administration, which committed to investing the equivalent of four percent of GDP annually in the education sector.
The DR is a net importer of oil, and low oil prices have significantly benefitted the country. Nonetheless, electricity subsidies continue to burden fiscal accounts, making this sector a drag on the economy. Compounding the problem is the inability of the three state-owned electric power distribution companies to collect payment on roughly 35 percent of the electricity they supply – either through technical losses or non-payment of bills and/or theft by individuals and companies. The accumulation of debts owed to the power generators results in lack of working capital, disruptions in fuel supplies and frequent blackouts across the country. The Medina Administration has borrowed to make partial payments to the generators while it urgently seeks more long-term solutions to problems of the sector.
Though it has improved somewhat in its rankings compared to previous years, the lack of transparency and corruption continue to earn the DR low scores in international comparison tables. The country ranked in 102d place out of 190 countries in the World Bank’s “Ease of Doing Business” 2019 Index, and in Transparency International’s 2018 Global Corruption Perception Index, the DR ranked in 129th place out of 180 countries. Procurement by government agencies and parastatal organizations is often conducted by private direct negotiation with preferred suppliers and lack transparency, which discourages competition and facilitates corrupt practices. However, the situation has improved since the implementation in 2007 of CAFTA-DR, which includes requirements for government procurement of goods and services by public tender. There is a lack of institutional continuity across changes in government administrations. The wholesale turnover in government personnel that typically occurs with changes in administrations can result in loss of records, which in turn can result in payment disputes and rejection of bills for goods and services purchased by preceding administrations.
Prepared by our U.S. Embassies abroad. With its network of 108 offices across the United States and in more than 75 countries, the U.S. Commercial Service of the U.S. Department of Commerce utilizes its global presence and international marketing expertise to help U.S. companies sell their products and services worldwide. Locate the U.S. Commercial Service trade specialist in the U.S. nearest you by visiting http://export.gov/usoffices.
While the DR’s economic growth is expected to stay strong, challenges exist. Food costs make it increasingly difficult for the poor to afford the basic food basket. The impacts of enviromental degradation, such as mangrove, beach and coral reef erosion, threaten long term critical resources for tourism, a major economic driver. National debt is worisome, having reached $43.2 billion in 2018, nearly 50% of GDP.
The DR’s per capita GDP of $8,341 masks a very uneven distribution of wealth heavily in favor of the upper classes. Around 36 percent of the population lives below the poverty line. Education outcomes have been well below other countries in Latin America. Under previous governments, public spending had been disproportionately funneled into public works and the electricity sector at the expense of other social programs, such as education and healthcare. The DR’s poor performance in these global rankings, in terms of both the quality of its public education and time spent in school, prompted the education reforms of the Medina administration, which committed to investing the equivalent of four percent of GDP annually in the education sector.
The DR is a net importer of oil, and low oil prices have significantly benefitted the country. Nonetheless, electricity subsidies continue to burden fiscal accounts, making this sector a drag on the economy. Compounding the problem is the inability of the three state-owned electric power distribution companies to collect payment on roughly 35 percent of the electricity they supply – either through technical losses or non-payment of bills and/or theft by individuals and companies. The accumulation of debts owed to the power generators results in lack of working capital, disruptions in fuel supplies and frequent blackouts across the country. The Medina Administration has borrowed to make partial payments to the generators while it urgently seeks more long-term solutions to problems of the sector.
Though it has improved somewhat in its rankings compared to previous years, the lack of transparency and corruption continue to earn the DR low scores in international comparison tables. The country ranked in 102d place out of 190 countries in the World Bank’s “Ease of Doing Business” 2019 Index, and in Transparency International’s 2018 Global Corruption Perception Index, the DR ranked in 129th place out of 180 countries. Procurement by government agencies and parastatal organizations is often conducted by private direct negotiation with preferred suppliers and lack transparency, which discourages competition and facilitates corrupt practices. However, the situation has improved since the implementation in 2007 of CAFTA-DR, which includes requirements for government procurement of goods and services by public tender. There is a lack of institutional continuity across changes in government administrations. The wholesale turnover in government personnel that typically occurs with changes in administrations can result in loss of records, which in turn can result in payment disputes and rejection of bills for goods and services purchased by preceding administrations.
Prepared by our U.S. Embassies abroad. With its network of 108 offices across the United States and in more than 75 countries, the U.S. Commercial Service of the U.S. Department of Commerce utilizes its global presence and international marketing expertise to help U.S. companies sell their products and services worldwide. Locate the U.S. Commercial Service trade specialist in the U.S. nearest you by visiting http://export.gov/usoffices.