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DOMIRICAH REPUBLIC

COURTRY ECOROMIC MEMORANDUM

BEYORD STABILIZATIOR: AH AGERDA FOR SUSTAINABLE GROWTH

June 28, 1991

Latin America and the Caribbean Regional Off ice Department III Country Division I

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lISCAL YEAR

January l - December 31

CURRENCY EQUIVALENTS

Currency Unit E Peso (RD$) As Of June 1991 RD$1 • US$0.079 US$1 .. RD$i2.6

This report was prepared by Dan Morrow (Task Manager) and Luis Ramirez (LA3Cl) with assistance from Raj Mallari, Dolores Velasco, Jamil Mubarak (Consultants}, and Madeline DeVan (LA3Cl). Chapter III is based primarily on initial work undertaken by Richard Ground (LA3C2) in late 1990 and early 1991. Laura Santalla provided secretarial assistance in typing and compiling the successive drafts.

CDE

CEA •

CORDE

FIDE

IDB

IMF

INES PRE

ONAP

ONAPLAN

ONAPRES

PEs

REFIDOMSA

QRs

ABREVIATIONS AND ACRONYMS

Corporaci6n Dominicana de Electricidad (Dominican Electricity Corporation)

Consejo Estatal del Azucar (State Sugar Council)

Corporaci6n Nacional de Empresas Estatales (National Corporation of State Enterprises)

Fondo de Inversiones para el Desarrollo Econ6mico (Investment Fund for Economic Development)

Inter-American Development Bank

International Monetary Fund

Instituto Nacional de Estabilizaci6n y Preci~~ (National Price Stabilization Institute)

Of icina Nacional de Administraci6n y Personal (National Administration and Personnel Office)

Of icina Nacional de Planif icaci6n (National Planning Office)

Of icina Nacional de Presupuesto (National Budget Office)

Public Enterprises

Ref ineria de Petr6leo Dominicana, Sociedad An6nima (Dominican Oil Refining Corporation)

Quantitative restrictions

DOMINICAN REPUBLIC: COUNTRY DATA SHEET

fil£!: 48,700 sq km Population: 7.1 million (1990) Rate of growth: 2.1% (1989-90)

Density: 138 per sq km

Population Characteristics Crude birth rate (per 1,000): 32 Crude death rate (per 1,000): 7

Nutrition Calories per day: 2357 Protein intake (g/day):49

Access to Electricity % of population: 38

GROSS NATrDNAL PRODUCT, 1990

GNP at Market Prices Gross Domestic Investment Gross National Saving Current Account Balance &ports of Goods, NFS Import of Goods, NFS

OtITPUT BY SECTOR (1990)

Agriculture Industry Services

Total

GOVERNMENT FINANCE

Current Receipts Current Expenditures Current Account Balance Central Bank Losses Residual Effect Capital Revenue Capital mpenditure Overall Balance y

Health lnf&nt mortality (per 1,000 live births): 62 Population per physician: 1763 Population per hospital bed: 450

Ech.:cation Adult literacy rate(%): 77 Primary school enrollment: 90

(% of 7-14 years)

Access to Piped Water % of population: 50

GNP per capita (USS, 1989)1/ 790

ANNUAL RATE OF GROWI1-I (% 1987 PRICES)

US$ Mn ~

6956 100.0 1060 15.2 734 10.6

-318 -4.6 1973 28.4 2256 32.4

Value Added US$ Mn ~

1273 1914 4118 7305

17.4 26.2

-™ 100.0

1973-80 1981-87 1988

4.3 2.6 0.3 6.7 4.6 8.2

-6.6 3.3 -47.9

9.4 1.3 8.7 10.1 1.2 -1.2

Consolidated Public Sector (RD$ Mn) Percent of GDP

1988 1989 1990 1988 1989 5138 7062 7425 18.1 16.7

-2620 -4198 -5854 -9.2 -9.9 2569 2864 1571 8.9 6.8 -768 -77 0 -2.7 -0.2 -589 .725 -408 -2.1 -1.7 111 101 95 0.4 0.2

-3386 -4788 -4495 -11.9 ·11.3 -2114 -2626 -3238 -7.S -6.2

.!m

7.7 22.l 22.l

3.4 9.6

!222 12.3 -9.7 2.6 0

-0.7 0.2

-7.8 -5.3

y Atlas methodology, base period 1987-89. Y Commitment basis.

1990

-8.2 -13.5 ·21.0

-4.8 -17.7

MONEY. CREDIT AND PRICES

Mon-:y and Quasi·mor.ey Bank Credit to Public Sector Bank Credit to Private Sector

12!! 4933 3051 3324

1988 7506 4406 4345

1989 9898 5155 6701

1990 12397 6038 8154

(Percent of Index Numbers)

Money and Quasi-Money as % of GDP Consumer Price Index (!98'i = 100)

Annual percentage change December-to-December change

Bank Credit to Public Sector Bank Credit to Private Sector

BALANCE OF PAYMENTS 11

Export of Goods, GNFS Imports of Goods, GNFS

Resource Gap (deficit=-)

Factor Services (Net) of which interest payments

Net T:ansfers Current Account Balance

Official Transfers Direct Foreign Investment Net MLT Borrowhlg

Disbursements Amortization

Other Capital (Net) y Capital Account Balance

Increase in Gross Reserves ( -) Gross Reserves (end-year)

RATE OF EXCHANGE

USSl.OO=RDS rdSI.OO=usS

1560 1952

-392

-299 252 260

-431

95 89

-305 90

395 437 316

ill 191

18.5 115.9

24.3 25.1 27.2

1988 1989 (Millions of USS)

1836 2068 1975 2429

-139 ·361

-321 -336 277 296 289 301

-171 -396

65 84 106 110

-213 -41 131 242 344 283 343 131 301 284

·130 112 261 171

Annual Averages

~ 6.15 0.16

1989 6.34 0.16

17.6 167.4

44.4 44.4 30.7

1990

2005 2233

1990 8.29 0.12

-228

-349 265

ill -262

56 133

·265 123 387 414

~

-76 164

y Beginning 1986, balance of payments is shown on a commitment basis.

22.5 191.7

45.4 17.0 54.2

21.5 305.6

59.4 17.1 30.6

Sugar Co fee Cocoa Tobacco Nickel Other Total

MERCHANDISE EXPORTS <AVERAGE 1985-90)

177 23.l 84 11.0 69 9.0 23 3.0

156 20.7 254 33.2 165 100.0

EXTERNAL DEBT, DECEMBER 31. 1990

Public Debt, incl.Guaranteed 3.05 Non-Guaranteed Private Debt 0.11 Total Outstanding & Disb. 3.16

DEBT SERVICE RATIO FOR 1990

Pub.Debt incl. Guaranteed 27.8 Non-Guaranteed Private Debt 1& Total Outstanding & Disb. 32.6

IBRDODA LENDING (1990) IBRD

(USS Mn)

Outstanding & Disb. Undisbursed Outstanding inc.

227.6 127.9

Undisbursed 355.5

'Y Include short-term Central Bank assets, IMF, arrears, rescheduling and other capital, n.i.-:.

TABLE OF CONTENTS

Resumen y Conclusiones (Spanish ) • Swmnary and ConclusicA • , , • • • •

. . . . . . . . . . . . . . i i

CiIAPTER I

CHAPTER II

CHAPTER III

CHAPTER IV

APPENDIX I:

ECONOMIC POLICIES AND PERFORMANCE THROUGH 1990 Overview of Economic Perf ot"Plance • Princip~l Reasons for Stagnation

and Disequilibria • • • • • •

. .

Summary and Conclusions • • • • • • •

CURRENT STABILIZATION PRO~RAM: THE NEW ECONOMIC POLICY • • • • • • . . . . Rey Elements of the New Economic Policy • • • •

Reducing the Fiscal Deficit • • • • • • • Tightening Monetary Policy • • • • • • • • Exchange Rate Policy • • • • • • • • Trade Regime • • • • • • • , • • • • • • •

Initial Results of the New Economic Policy •

AND AGENDA FOR STRUCTURAL REFORM AND SUSTAINABLE

1 1

6 11

13 13 13 15 17 17 18

GROWTH • • • • • • • • • • • • • • • • • 20 A. Consolidation of Fiscal Discipline • • • • • 20

Reforming the Tai Structure • • • • • • • • • 21 Improving the Financial Performance of Public Enterprise • , • • • • • • • • • • • • 24 Controlling the Public Sector Wage Bill • 25 Rationalizing Public Sector Investments • 25

B. Consolidation of Monetary Discipline 27 C. Creating an Incentive Framework for Efficient

Private Sector Growth • • • • • • • 29 Exchange Rate Regime • • • , • 29 Consolidating the Trade Reform • • • • • • 30 Financial Sector Reform • • • • 34 Eliminating Constraints to Competition 38 Promoting Foreign Direct Investment • 39

D. Reform and Privatization of Public

E. F.

G.

Enterprises • • • • • • • • • • • Improving Social Sector Programs Building the Institutional Capacity of

Government • • • • Conclusions • • • • • • • • • •

MEDIUM-TERM PROJECTIONS AND EXTERNAL FINANCING REQUIREMENTS • • • • • • Key Assumptions of the Projections Projection Results ••

Public Enterprises: Problews and Proposals

. . . .

. . .

for Reform . . . . . . . . . . . .

39 42

42 44

43 Sl 52

SS

STATISTICAL APPENDIX . . 64

Tables:

2.1 2.2 2.3 2.4 4.1

4.2

4.3

4.4 4.5 4.6 4.7 4.8

4.9

Graphs:

1 2 3 4 5 6 7 8

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Operations of the Public Sector Domestic Prices of Petroleum Products • • • • Private Sector Claims on the Financial System Selected Interest Rates for Commercial Bank Investment, Savings, and Productivity

of Capital • • • • • • • • • • • • • • • • • • • Medium and Long-term External Debt and

Arrears as of 1990 • • • • • • • • • • Key Debt Indicators for the Dominican

Republic and Comparator Countries Export Price Indices • • • • • • • • • • • • • Export Volume Indices • • • • • • • Medium-term Projection Results • • • • • Recent and Projected Macroeconomic Indicators Actual and Projected Balance of Payments,

1990 - 1999 • • • • • •••• Capital and External Financing

Requirements, 1991 - 1994 ••••••••

Real Growth of GDP . . . . . . . . . . Total Fixed Investment, 1970-90 Incremental Capital Output Ratio . . . Inflation Rate . . . . . . . . . . . • • Arrears to External Creditors . . . . . Consolidated Public Sector Deficit . . . . . Growth in Money and Quasi-money . Merchandise Trade Balance . . . . . . •

. . .

. . .

. . . . . .

14 15 17

45

47

48 49 50 50 51

52

53

2 3 3 4 5 7 9

10

RESUMEN Y CONCLUSIONES

1. Durante el periodo cnmprendido entre 1966 y 1978, la Repvblica Dominicana alcanz6 una de las mayores tasas de crecimiento real del PIB en America Latina y el Caribe bajo condiciones de estabilidad de prerios y ~quilibrio externo. Sin embargo, el periodo que ae inici6 a finales de los afios 70 se ha caracterizado por un estancamiento en la producci6n, por una taaa de inflaci6n cada vez mayor, por un creciente endeudamiento externo y por un grave deterioro de las condiciones socialea. La redJcci6n casi con~inua de las tasas de crecimiento del PIB en loa afios 80 fue consecuencia, en general, de niveles de inverai6n cada vez menorea y de una continua perdida de eficiencia en la inverai6n. Al llegar 1990 la economia estaba en crisis: la producci6n se habia reducido en 5%, la inflaci6n habia alcanzado tasas sin precedentes y los pagos en mora a los acreedores externos se acercaban a 20% del PIB.

2. El estancamiento y los desequilibrios internos y externos de la economia se debieron a seis razones principales. Primero, la Republica Dominicana sufri6 choques externos adversos y un fuerte deterioro en :os terminos de intercambio. No obstante 1 las respuestas de politica econ6mica a esos acontecimientos adversos agravaron los problemas de la economia en lugar de mejorarlos. Segundo, el Gobierno perdi6 disciplina fiscal en los afios 80: en promedio, el sector publico no financiero consolidado tuvo un deficit de 5,1% del PIB desde 1979, que se financi6 en gran parte con creaci6n de dinero. Tercero, el Gobierno no mantuvo disciplina monetaria: en la segunda parte del decenio, debido sobre todo a la expansi6n del credito al sector privado, la oferta monetaria aument6 mucho mas rapido que la demanda de dinero, lo que oca~ion6 una alta tasa de inflaci6n. Cuarto, la irregular politica cambiaria predominante en los anos 80 tendi6 a perjudicar a las exportaciones, lo que produjo un rapido aumento del deficit comercial y, por ende, un alto nivel de endeudamiento externo. Quinto, en los anos 80 hubo un clima cada vez mas desfavorable para la inversi6n y el crecimiento del sector privado. Eso se debi6 a una creciente inestabilidad macroecon6mica, a numerosos desajustes e incertidumbre causados por el regimen comercial, a una regulaci6n inapropiada del sector f inanciero y ~ extensos controles de precios, asi como a una actuaci6n def iciente de las empresas publicas que prestan servicios claves para el resto de la economia, tal como el de suministro de energia electrica. Sexto, la Republica Dominicana ha sufrido por una falta generalizada de capacidad t~cnica en las iustituciones del sector publico, por lo que se ha debilitado el manejo de la gesti6n macroeconomica en circunstancias de que este manejo se hacia cada vez mis dificil debido a las crecientes complejidades del sector externo, al mismo tiempo que se descuidaba la inversi6n en infraestructura publica y en desarrollo de capital humano. El numero de empleados publicos no calif icados e innecesarios ~igue siendo muy alto y los salarios reales se han reducido, de manera que ~a continuado desmejorando la calidad tecnica general de la administraci6n publica.

3. Para abordar la crisis econ6mica, el Gobierno inici6 una nueva politica econ6mica d~stinada a estabilizar la economia. Entre agosto de 1990 y el p.imer ~emestre de 1991, el Gobierno tom6 importantes medidas que han producido buenos resultados. Se redujo el deficit fiscal, principalmente mediante alzas en los precios de los bienes y servicioa publicos, sobre todo de los productos derivados del petr6leo y la energia electrica, y a traves de

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disminucione& ~n los gastos del sector publico. Se impueo una politica monet.lria relJtrictiva por medio de diversas medidae., incluyendo la exigar,cia de mayores reservas obli~atorias a los bancos comerciales y al Banco de Reeervas de propiedad del Estado. Se liberaron las tasas de interes pasivas y activas, con lo que se ofreci6 un incentive para aumentar el ahorro financiero y para uec~ mis eficientemente el capital. El tipo de cambio oficial ee ha devaluado .rogresivamente y, a causa de las poU.ticae fisc:alee y monetarias restrictivas menc!onada~ anteriormente, la diferencia entre la tasa de cambio fijo y la tasa interbanca~ia paralela desapareci6 completamente. Y, por ulti~o, regulando a traves de decretos gubernamentales, las autoridades han cr •• nenzado a l.iberalizar un regimen comercial altamente protegido y distorsionador.

4. La nueva politica econ6mica ha permitido detener la inflaci6n casi por complete en los cuatro primeros meses de 1991; la tasa de in!laci6n anualizada correspondiente al periodo de enero a abril fue inferior al 5%. Como resultado de ello, se ha estabilizado el tipo de cambio. Ahora, las tasas de interes estan determinadas por el mercado y las tasas pasivas y activas son poeitivas en terminos reales. Han aumentado las reservas internacionales en el Banco Central y el Gobierno ha podido liquidar sue pagos en mora con las instituciones financieras internacionales y reducir en forma selectiva los pagos atrasados con otros acreedores externoo. El programa de estabilizaci6n ha detenido el crecimiento negative de la producci6n, pero, como seria de e&perarse en esta etapa, no parece haber todavia indicios de poderse lograr una recuperaci6n en la tasa de crecimianto de la producci6n interna y del i~'lCJ!'eao.

5. Aunque la nuev~ politica econ6mica ha comenzado convincentemente a estabilizar la economia, es necesario hacer reformas substanciales de caracter estructural para poder conseguir tasas de crecimiento econ6mico que sean sostenibles en el largo plazo. La definici6n de una estrategia de crecimiento econ6mico sostenido debe comenzar reconociendo las debilidades de las instituciones del sector publico y la capacidad del sector privado dominicano para lograr aumentos significativos en la inversi6n y la producci6n. La primera prioridad de cualquier estrategia de crecimiento sostenido debe centrarse en corregir los errores de politica que han impedido el desarrollo del sector privado en el ultimo decenio y crear un medio propicio para el crecimiento de dicho sector. Sin embargo, pese a sus debilidades, no se puede prescindir del sector publico para mantener un medio macroecon6mico eatable y para realizar inversiones esencialea en infraestructura publica y desarrollo del capital humane. Eso exigira trascendentales reformas en el sector publico.

6. El programa de reforma estructural debe incluir actividades en seis Areas principales: (1) consolidaci6n de la aisciplina fiscal; (2) consolidaci6n de la disciplina monetaria; (3) creaci6n de un marco de incentives para el crecimiento e(iciente del sector privado, lo que exige que haya un regimen cambiario eatable, que se consolide la reforma comercial y la reforma del sector financiero, y que se eliminen las restricciones a la competencia y al fomento de la inversion extranjera directa; (4) reforma y privatizaci6n de las empresas publicas; (5) mejora de los programas del sector social; y (6) fortalecimiento de la capacidad institucional del Gobierno. Al considerar las reformas n&cesarias en cada uno de estos campos, hay que

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prestar atenci6n prioritaria a los c&nbios institucionales, regul&dores y juridicos iue ayt1daran a garantizar la continuidad de las reformas politicas en el largo plazo.

7. La consolidaci6n de la disciplina fiscal, que es la base de la estabilidad macroecon6mica, exigir6 que se logre un continue superavit fiscal primario. Para ello 1 el Gobierno de la Republica Dominicana neceeitara buscar reformas en varios frentes al mismo tiempo. En lo que respecta a ingresos, es indispensable recibir autorizaci6n del Congreso lo mas pronto posible para introducir las amplias reformas tributarias propuestas recientemente por un grupo de expertos internacionalee bajo el patrocinio del PNUD. Puesto que la disminucJ.6n reciente en el deficit fiscal depende demasiado del mayor impueoto a los productos derivados del petr6lao, y puesto que el actual sistema tributario no permite generar suf icientes ingresos sobre una base equitativa a medida que crece la economia, la reforma tributaria propuesta se necesita con urgencia, incluyendo cambios importantes en el sistema de administraci6n de impuestos, lo que permitir6 establecer una base de ingresos segura y eatable. Tambien en lo relative a ingresos, el Gobierno debe esforzarse por mejorar el rendimiento financiero de las empresas publicas. La mejor forma de elimlnar la carga financiera de estas sera SU privatizaci6n. A corto plazo, sin embargo, la mejora en su rendimiento financiero exigira que los precios de la producci6n de esas empresas se fijen a un nivel equivalente a su costo de oportunidad o costo econ6mico. Aunque la nueva politica econ6mica ha incluido importantes medidas en este sentido, se necesita adem6s que se establecezcan reglas y mecanismos institucionales en virtud de los cuales se pueda implantar en forma automatica y regular un sistema de fijaci6n de precios a un costo econ6mico. En lo que se ref iere a gastos, el Gobierno debe controlar la masa salarial del sector publico reduciendo el numero de empleados publicos no calificados y evitando aumentos del salario real hasta que se pueda efectuar una reforma integral de la administraci6n publica. Con el fin de que el Gobierno pueda adoptar decisiones racionales respecto del monto y la composici6n de las inversiones del sector publico en forma compatible con la disciplina fiscal, se necesitan mejoras trascendentales en el sistema de presupuesto y de programaci6n de las inversiones. El sistema actual depende demasiado de las decisiones directas del Presidente, lo cual no permite que se desarrolle la capacidad institucional necesaria para continuar sirviendo al pais en el futuro.

8. Con el fin de consolidar la disciplina monetaria, la formulaci6n de politica monetaria debe mejorar, incluyendo mayor autonomia, profesionalismo y responsabilidad en la Junta Monetaria y en el Banco Central. Se necesita que se formulen reglas de politica bien definidas y mas transparentes, a las cuales deberian estar sujetas la Junta Monetaria y el Banco Central. Para que sea efectiva la puesta en prActica de la politica monetaria se requerira tambien que se amplie la capacidad del Banco central para r~alizar operaciones de mercado abierto. Ademas, se debe volver a examinar cui~~0osamente las funciones y actividades de las instituciones f inancieras de propiedad del Estado, especialmente el Banco de Reservas y el Banco Agricola, ya que la imposibilidad que tiene el Banco Central para controlar la expansi6n del credito por parte de esas instituciones·ha sldo una de las principales razones de la perdida de disciplina monetaria en el pasado. La Junta Monetaria deberia concentrarse solo en asuntos monetarios y crediticios y deberia dejar

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los asunt~s de supervisi6n y los problemaa de solvencia bancaria a una Superintendencia de Bancos fortalecida.

9. La creaci6n de un marco de incentivos para el crecimiento'eficiente del sector privado exi9ira no solo estabilidad macroecon6mica, sino tambien reformas del regimen cambiario, del regimen comercial, del Sistema financiero y de las politic.~ que afectan a la competencta ya la inverei6n extranjera. En epocas pasada&. el ~men cambiario ha sido irreg~lar. Con el fLn de reducir la incertidumbre respecto del precio efect!~o del t~po de cambio para el sector privado, es muy im~ortante que el Gobierno establezca y mantenga un tipo de cambio unificado, determinado por el mercado. En el memento presente, el Gobierno debe tratar de aMpliar la credibilidad y sostenibilidad de la nueva politica. En ese sentido, la introducci6n de c~.mbios juridicos puede ser util. Sin embargo, lo mAs importante as <lUe el Gobierno debe dejar que las fuerzas del mercado guien el tipo de cambio unif icado.

10. En relaci6n con la reforma comercial, queda mucho por hacer para superar el estancamiento causado por el sistema extremadamente protector, conducente a desajustes y excesivamente discrecional que ha predominado por muchos anos. El objetivo debe ser reducir el grado de protecci6n otorgada a los productores nacionales y de reducir la varianza en estos niveles de proteccion, con el fin de crear un marco de inc~ntivos neutro con respecto a los productos exportables e importables. Al parecer, el efecto de los cambios introducidos con la nueva politica econ6mica se ha visto minado por una implementaci6n relativamente dis:recional. Al seguir una politica de liberalizaci6n del comercio en los anos venideros, el Gobierno debe tener presente varias lecciones derivadas de la experiencia de otros paises. En particular, es preciso planif icar la reforma comercial conjuntamente con otros elementos de la reforma fiscal, de manera que la perdida de ingresos provenientes de los menores aranceles, lo cual puede ocurrir despu6s de la fase inicial de eliminaci6n de restricciones cuantitativas y de exenciones, no mine la disciplina fiscal. Al estructurar el programa de reforma, es posible que sea mas facil adoptar y poner en practica un sistema arancelario sencillo y, aun en ese caso, el Gobierno debera considerar el establecimiento de un arancel 6nico que no distinga a una actividad econ6mica de otra. Para que sea fructifera, la liberalizaci6n del comercio debe estar apoyada por un tipo de cambio determinado por el mercado, ya que cualquier sobrevaioraci6n del mismo intensificaria las presiones impuestas a las industrias que compiten por importaciones. Para no volver atras, la reforma debe ponerse en practica lo mas pronto posible; y el nivel definitivo de los aranceles deberia alcanzarse en un lapso de dos o tree anos. Hay qu~ evitar cualquier desviaci6n con respecto al programa de reducciones arancelarias previamente anunciado. Por ultimo, la creaci6n de una eficiente administraci6n de aduanas es una parte necesaria de la libgral~.zaci6n del comercio y muy probablemente exigira una acci6n decisiva por parte del Gobierno.

11. La reforma del sector financiero sera esencial para crear un sector financiero eficiente y restituir el crecimiento basado en el ahorro interno y la inversi6!·. del sector privado. La reforma del sector financiero debe incluir varios elementos: (1) creaci6n de una Superintendencia de Bancos fuerte y aut6noma; (2) establecimiento de un marco institucional y de politica para ocuparse de las instituciones con dificultades financieras; (3) reestruc-

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turaci6n de loe banco~ de propiedaa dol ~etado; (4) fomento a un cambio gradual hacia un sistema me01os segmentado, con un menor numero de in~titucionee de servicio multiple; y (5) examen de las leyes y del reglamento prudencial en que se apoya el eiatemu. D~da la aparente debilidad de muchaa instituciones financierae y el rieago de crisis, el proceso de restituci6n de idoneidad financiera al Gector puede eer prolongado y doloroeo, pero debe seguirse con deterrninaci6n politica para no comprometer la estabilidad macroecon6mica. El planeamiento de lA reforma exigiri cuidadoso estudio, para el que eeri util la aaistencia preatada actualrnente por el Banco Mundial y el PNUD. Dado que un siatema financiero eficiente debe eer una de las bases de un c~~cimiento auto-sostenido encabezado por el sector privado, eaae reformaa deben reveetir maxima prioridad para el Gobierno.

12. La major forma de eliminar las restricciones p~ra la competencia consiste en abrir la economia a la competencia internacional por rnedio de la liberalizaci6n del comercio. Tambi~n es importante eli~:.nar el control de precios. El Gobiern? debe considerar nuevas leyee y reglamentos para restringir su propia autori1ad para controlar loe precioe y preecindir del Inetituto Nacic~ai de Fstabili?.aci6n de Precios (INESPRE). Dada la concentraci6n de activos en el sector f inanciero, existe un cierto rieego de que se desarrolle una falta d~ competitividad en el sistema bancario, pero ese rieego se puede reduci · ~rmitiendo la entrada de bancos extranjeros fuertes. La presencia de empr~s~- ~ublicas en la producci6n de bienes y servicios constituye necesariamente una limitaci6n a la participacion del sector privado en esas actividades1 el Gobierno deberia planificar la privatizaci6n de las empresas publicas que producen bienes y servicios que podri~n ser proporcionadoe mas eficientemente por el sector privado. Deberia fomentar tambien la competencia por medio de procedimientoe de licitaci6n publica en la adquisici6n de bienes y servicios para el sector publico.

13. La promoci6n de la inversion extranjera directa contribuira al vigoroso crecimiento del sector privado. Las companias extranjeras proporcionan no solo capital sino tambien tecnologias y canales de ~omercializa;.l6n, que eeran de suma importancia para ampliar la competitividad internacional y para mejorar la orientaci6n de las industrias nacionales hacia la exportaci6n. Aunque la inversi6n extranjera directa ha contribuido mucho al fomento de la induatria turistica, su pleno potencial no se ha explorado todavia, especialmente en el campo de la agricultura y de la agroindustria.

14. La reforma y privatizaci6n de lae empresas pOblicas debe constituir un campo prioritario en el programa de reformas. En su mayoria, las empresas publicas existentes participan en actividades econ6micas que podrian ser mansjadas mejor por el sector privado. En parte, como el Gobierno las ha empleado para alcanzar objetivos sociales y politicos, dichas empresas han sido muy ineficientee y han sufrido cuantiosas perdidas financieras durante muchos anos. Su deficiente actuaci6n, eepecialmente la de la Compania Dominicana de Electricidad (COE), ha sido una carga importante para los eectores publico y privado. Por tanto, esas empresas deben privatizarse lo mas pronto poeible en una manera ordenada y reaponsable. Esa privatizacion se debe efectuar cuidadosamente en un proceso justo y transparente, que exiqira un 9ran esfuerzo profesional de caracter administrativo para lo cual el Gobierno se encuentra preparndo hoy en dia. Una entidad qubernamental debe

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recibir el mandato y los expertos necesarios para ocuparae del proceso de privatizaci6n. Deberia comenzarse con algunas de las compafiias mas pequefias, razonablemente viables, de propiedad de la Corporaci6n Doroinicana de Empresas Estatales (CORDE). Por lo menos, en un future cercano, serA necesario modificar radicalmente la relaci6n existente entre el Gobierno y las empresas­-ojal6 sean pocas--que aquel decida mantener en el sector publico. Estas reformas deber~n crear un marco apropiado de incentivos, de modo que dichas empresas funcionen de una forma mas eficiente. Con ese fin, es precise que el Gobierno y las empresas publicas lleguen a un acuerdo en lo que se refiere a contratos-plan.

15. Dada la elevada incidencia de pobreza y de las deficiencias en los servicios de educaci6n y salud producidos despues del esta~camiento de los anos 80, la meiora de los programas del sector social debe ser Pn importante elemento del programa gubernamenta!. La forma mas importante de reducir la pobreza seri con un aumento general del crecimiento econ6mico. Ademas, como una inversi6n a largo plazo en desarrollo de capital humano, el Gobierno necesitari aumentar sue gastos en educaci6n y salud y mejorar la ef iciencia de esas inversiones. A corto plazo, se debe ejecutar programas en forma mas efectiva para reducir la malnutrici6n y los problemas de salud afines. Para que esto se haga a un costo razonable, esos programas deben enfocarse principalmente hacia los grupos mas vulnerables de la poblaci6n.

16. Dado el legado de Gobierno centralizado y de administraci6n publica esta basada mayormente en padrinazgo politico en vez de meritos, el fortalecimiento de la capacidad institucional de! Gobierno llevara algun tiempo, pero sera indispensable para el exito d~radero de las reformas propuestas. El establecimiento de una administraci6n publica basada en meritos debe comenzar con un cuidadoso examen de la estructura y los fines del gobierno central. Mientras tanto, hay que empezar a tomar varias medidas lo mas pronto posible. Habra que excluir de la n6mina a un gran numero de empleados no calificados e ineptos. Los sueldos pagados a un selecto grupo de funcionarios administrativos y profesionales deben estar en armonia con los del sector privado. Ademas, el Gobiernc debe renovar seriamente los esfuerzos iniciados alguna vez por la Oficina Nacional de Administraci6n y Personal (ONAP) para establecer nuevas reglas o leyes que gobiernen la administraci6n publica.

17. Las reformas estructurales discutidas en el presente memorando son interdependientes y deben ponerse en practica en forma continua durante un periodo prolongado. Esto exigira la existencia de un grupo competente y eatable dedicado a la geeti6n econ6mica y de una capacidad institucionalizada para tener un buen sistema de formulaci6n de politicas.

18. suponiendo que las reformas estructurales discutidas antes se puedan llevar a la prictica con 6xito en los pr6ximos afios, las perspectivas de crecimiento econ6mico a mediano plazo en la Republica Dominicana son razonablemente favorables. Las reformas deben permitir una modificaci6n total de la situaci6n de deterioro de la inversi6n, el ahorro interno y la productividad general que ha sufrido el pais en el ultimo decenio. Se pronostica que, dada la ejecuci6n continua de un programa de reformas estructurales, el ahorro interno aumentaria a mas de 17% del PIB en 1995, lo que seria aproximadamente igual al nivel medio durante 1970-1979 y a cerca de

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19% en el afio 2000. Adamis, se estima que el ahorro externo seria i9ual a un 3% del PIB en 1995 y a un 4% en el ano 2000. Este nivel de ahorro externo es inferior al promedio de 5% logrado durante gran parte de los ultimos 20 afios. Sin embargo, en anos recientes, ese nivel se ha logrado solo mediante reprograrnaci6n de la deuda y acumulaci6n de pagos en mora. A causa de sus efectos negativos para la conf ianza en la futura estabilidad macroecon6mica, esta situaci6n no puede mantenerse y la Republica Dominicana debe tratar de normalizar sus relaciones con los acreedores externos con el fin de recobrar su solvencia externa. Aunque asi lo haga, es poco probable que el ahorro externo llegue a 5% del PIB en el decenio venidero. Basindose en estas hip6tesis sobre el ahorro interno y externo, se pronostica que la inversi6n aumentari a 21% del PIB en 1995 y a 23% en el ano 2000.

19. A corto plazo, el crecimiento del PIB dependeri en gran medida del aumento en la utilizaci6n de la capacidad instalada y en el aumento del empleo a medida que la economia se recupera de la reciente recesi6n interna. A mediano plazo, el crecimiento dependeri mis de la rapidez con que pueda mejorar la eficiencia del capital. Las reformas destinadas a crear un marco apropiado de incentivos para el crecimiento del sector privado y a mejorar la eficiencia de la inversi6n del sector publico podrian reducir la relaci6n incremental capital-producto (RICP) a 4,7 en 1995. Eso representaria una mejora considerable en comparaci6n con la relaci6n incremental media de alrededor de 12 observada en los afios 80, pero se mantendria por debajo del nivel medio de 3,6 registrado en los afios 70. Basindose en el monto proyectado de la inversi6n y en estos valores de los RICP, el crecimiento del PIB llegaria a un promedio aproximado de 4,6% en los anos 90 y el del consumo agregado excederia a la tasa de crecimiento demogr6f ico, de modo que aumentaria el consumo per c6pita.

20. La balanza de pagos proyectada en esta hipotesis, en la que se tienen en cuenta las proyecciones del Banco Mundial en lo relativo a precios de los productos y una estimaci6n del crecimiento del volumen de exportaci6n e importaci6n, tendria un deficit medio en cuenta corriente de un 3% del PIS durante el decenio. En la cuenta de capital, se supone que las instituciones financieras internacionales seguirin contrayendo nuevos compromisos de prestamo; que la Republica Dominicana lograri una reprogramaci6n de la deuda contraida con el Club de Paris (incluso de los actuales pagos atrasados y del capital y el interes pagaderos en 1991 y 1992) y, que se reprogramari toda la amortizaci6n pagadera a los bancos comerciales acreedores. Basandose en estas suposiciones, los desembolsos netos de la deuda a mediano y largo plazos se mantendrian negativos. Aun suponiendo que hubiera un sano aumento de la inversi6n directa, se produciri un deficit de f inanciamiento de un promedio de 0,7% del PIB durante el periodo de 1990 a 1995 y de 1,2% del PIS entre 1995 y 2000. Ese d6ficit sugiere que la Republica Dominicana necesitaria un alivio de la carga de la deuda pendiente con los bancos comerciales acreedores y con los acreedores bilaterales aun mayor que el supuesto en estas proyecciones.

SUMMA.ltY AND CONCLUSIONS

1. During 1966-78, the Dominican Republic achieved one of the highest rates of real GDP growth in Latin American and the Caribbean under conditions of domestic p~ice stability and external equilibrium. But the period since the late 1970s has been one of stagnation, increasing inflation, growing external indebtedness, and seriously deteriorating social conditions. The almost continuous decline in GDP growth rates during the 1980s reflected generally lower levels of investment and steadily declining efficiency of investment. By 1990 the economy was in crisis: output fell by 5%; inflation stood at historically unprecedented levels; and arrears to external creditors approached 20% of GDP.

2. There were six principal reasons for this stagnation and for the internal and external disequilibria of the economy. First, the Dominican Republic suffered adverse external shocks, especially deteriorating terms of trade. But the policy reAponses to these adverse developments aggravated rather than ameliorated the problems of the economy. Second, the Government lost fiscal discipline during the 1980s: the consolidated nonfinancial public sector has hod, on average, a deficit of 5.1% of GDP since 1979, and this was financed substantially by money creation. Third, the Government did not maintain monetary discipline: in the latter half of the decade, due largely to credit expansion to the private sector, money supply grew much more rapidly than money demand, bringing about high inflation. Fourth, erratic exchange rate policy during the 1980s tended to penalize exports, which led to a rapid increase in the trade deficit and hence to high levels of external debt. Fifth, during the 1980s there was an increasingly unfavorable environment for private sector investment and growth. This was due to the increasing macroeconomic instability; to numerous distortions and uncertainties caused by the trade regime, inappropriate regulation of the financial sector, and extensive price controls; and to poor performance by public enterprises providing key services such as electric power. And, sixth, the Dotninican Republic has suffered from a general lack of competence of public sector institutions, which have failed to provide good macroeconomic management in an increasingly complex external environment and failed to provide adequate investments in public infrastructure and human capital development. The number of unskilled and redundant public sector employees remains very high while real salaries have fallen so that the quality of the civil service has declined.

3. In response to the economic crisis, the Government has 1nitiated a New Economic Policy (NEP) intended to stabilize the economy. Beginning in August 1990 and continuing through the first half of 1991, the Government has successfully undertaken several important steps. It has reduced the fiscal deficit primarily by increasing the prices of publicly produced goods and services, especially for petroleum products and electric power, and by reducing public sector expenditures. Monetary policy has been tightened by several measures, including higher reserve requirements for commercial banks and the state-owned Reserve Bank. Interest rates on deposits and loans have been freed from regulatory control, thereby providing an incentive for financial savings and for efficient use of capital. The official exchange rate has been progressively devalued and, due to the accompanying fiscal and

ii

monetary policies, the spread between the free parallel, inter-bank rate and the fixed official rate has virtually disappeared. And, by regulation, the Government has begun to liberalize the protective and distortive trade regime.

4. The NEP has been successful in virtually stopping inflation during the first four months of 1991; the annualized inflation rate for January to April was only about 5%. As a result the exchange rate has stabilized. Real interest rates are now market determined and are positive for both deposits and loans. International reserves in the Central Bank have increased, and the Government has been able to clear its arrears to the international financial institutions and selectively reduce arrears to other external creditors. The stabilization program has apparently arrested the decline in output but, as should be expected at this stage, there does not yet seem to be any recovery in domestic production and incomes.

5. Although the NEP has made a very credible start at stabilizing the economy, structural reforms remain necessary to put the economy on a path of sustainable growth. Defining a strategy for sustainable growth must begin with recognition of the existing weaknesses of the public sector institutions and of the capacity of the Dominican private sector to realize substantial increases in investment and output. The first priority for a strategy of sustainable growth must be to correct the policy errors which have thwarted private sector development during the past decade and to provide an enabling environment for private sector growth. But, despite its weaknesses, the public sector must be relied upon both to maintain a stable macroeconomic environment and to provide essential investments in public infrastructure and human capital development. This will require major public sector reforms.

6. The agenda for structural reform and sustainable growth should include action in six major areas: (1) consolidation of fiscal discipline; (2) consolidation of monetary discipline; (3) creating an incentive framework for efficient private sector growth, which will require a stable exchange rate regime, consolidating the trade reform, reforming the financial sector, eliminating constrai~ts to competition, and promoting foreign direct investment; (4) reforming and privatizing public enterprises; (5) improving social sector programs; and (6) building the institutional capacity of the government. In considering necessary reforms in each of these areas, priority attention must be given to institutional, regulatory, and legal changes which will help to ensure that policy reforms can be sustained over time.

7. Consolidation of fiscal discipline, which is the foundation for macroeconomic stability, will require achieving a primary fiscal surplus on a consistent basis. To do this, the Dominican Government will need to pursue reforms on several fronts simultaneously. On the revenue side, it is imperative to obtain, as quickly as possible, Congressional approval for and to implement the comprehensive tax reforms recently proposed by a group of international experts under the sponsorship of UNDP. Since the recent reduction of the fiscal deficit depends excessively on the increased taxation of petroleum products, and the existing tax system is incapable of generating adequate revenues on an equitoble basis as the economy grows, the proposed tax ref orm--and accompanying changes in tax administration-- are needed to provide a secure and stable revenue base. Also, on the revenue side, the Government

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must strive to improve the financial performance of public enterprises {PEs). The best way to eliminate the financial burden of PEs will be to privatize them. In the short run, improving their financial performance will require pricing the output of these enterprises at economic cost. Although the NEP has included important measures to do so, it will be necessary to establish rules and institutional mechanisms under which pricing at economic costs can be automatically and regularly applied. On the expenditure side, the Government must control the public sector wage bill by reducing the number of unskilled public employees and avoiding real wage increases until civil service reform can be implemented. In order to ensure that the Government can make rational decisions about the level and composition of public sector investments consistent with fiscal discipline, very substantial improvements in the system for budgeting and investment programming are needed. The existing system is exceedingly dependent on the decisions of the President and does not provide an institutional capacity which will serv£ the country over time.

8. In order to consolidate monetary discipline, monetary policy making should be improved by increasing the autonomy, professionalism, and accountability of the Monetary Board and the Central Bank and by creating well-defined and morA transparent policy rules under which the Board and the Central Bank would operate. Effective implementation of monetary policy will also require increasing the capacity of the Central Bank for open market operations. Also, there must be a careful reexamination of the roles and activities of the state-owned financial institutions, especially the Reserve Bank and the Agricultural Bank, since inability of the Central Bank to control credit expansion by these institutions has been a major reason for loss of monetary discipline. The Monetary Board should focus on monetary and credit matters and leave matters of prudential supervision and problems of bank solvency to a strengthened Superintendency of Banks.

9. Creating an incentive framework for efficient private sector growth will require not only macroeconomic stability but also reforms in the exchange rate regime, the trade regime, the financial system, and policies affecting competition and foreign investment. In the past, the exchange rate regime has been erratic. In order to reduce uncertainty about the effective price of foreign exchange to the private sector, it is very important that the Government establish and maintain a unified, market-determined exchange rate. The Government must riow try to increase the credibility and sustainability of the new policy. Legal changes may be useful in this regard. But, most importantly, the Government must let the unified exchange rate be guided by market forces.

10. With respect to trade reform, much remains to be done to overcome the stagnation brought about by the highly protective, distortive, and exceedingly discretionary system which has prevailed over many years. The objective must be to reduce the levels of protection afforded to domestic producers, and to reduce the variance in levels of protection, so as to create an incentive framework which is neutral with respect to exportables and importables. The regulatory changes introduced under the NEP have apparently been undermined by discretionary implementation. In pursuing trade liberalization in the coming years, the Government should keep in mind several lessons of experience from

iv

other countries. In particular, the trade reform must be planned jointly with other elements of fiscal reform so that the loss of tariff revenues, which may occur after the initial phases of eliminating quantitative restrictions (QRs) and exemptions, does not undermine fiscal discipline. In structuring the reform program, a simple tariff system with just one flat tariff rate is likely to be easier to adopt and t~ implement. For trade liberalization to succeed, it should be supported by a market-determined exchange rate, since any overvaluation of the exchange rate would increase the pressures on import­competing industries. The Government should continue to seek wide support for its recent decision to have a market determined exchange rate, so that a reversal to the erratic exchange rate policies of the pest is prevented. Also, to avoid reversals, the reform should be implemented as quickly as possible; final tariff levels should be reached within two or three years; and deviations from the preannounced schedule of tariff reductions must be avoided. Finally, creation of an efficient customs administration is a necessary part of trade liberalization, and this will likely require decisive action by the Government.

11. Financial sector reform will be essential for the creation of an efficient financial sector and the restoration of growth based on domestic savings and private sector investment. Financial sector reform should involve several components: (1) creating a strong and autonomous Superintendency of Banks; (2) improve the institutional framework to deal with financially distressed institutions; (3) restructuring the state-owned banks; (4) encouraging a gradual move toward a less segmented system with fewer, multi­service institutions; and (5) revising the laws and prudential regulations underpinning the system. Given the apparent weakness of many financial institutions and the risk of crisis, the process of restoring financial health to the sector may be prolonged and painful, but it must be pursued Yith political determination to avoid compromising macroeconomic stability. Planning the reform will require careful study, for which the on-going assistance of the World Bank and UNDP should be helpful. Given that an efficient financial system must be one of the foundations for sustainable, private-sector led growth, such reforms must be a very high priority for the Government.

12. Eliminating constraints to competition can best be achieved by opening the economy to international competition through trade liberalization. Removing price controls is also important. The Government should consider new laws and regulations to restrict its own authority to control prices and should dismantle its price control agency, INESPRE. Given the concentration of assets in the financial sector, there is a risk of noncompetitive behavior among banks, and this can be reduced by allowing entry by strong foreign banks. The presence of public enterprises in the production of goods and services necessarily constrains private sector involvement in these activities; the Government should plan to privatize those public enterprises which produce goods and services which could equally well by produced by the private sector. The Government should also encourage competition by using competitive bidding procedures for its own procurement of goods and services.

13. Promoting foreign direct investment will contribute to vigorous private sector growth. Foreign companies not only provide capital but also

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technologies and marketing channels which will be very important in increasing the international competitiveness and export-orientation of domestic industries. Although foreign direct investment has already contribvted greatly to development of the tourist industry, its full potential has not been tapped, especially in agriculture and agroindustries.

14. Reforming and privatizing public enterprises should be a priority area for reform. For the most part, existing public enterprises (PEs) are involved in economic activities which should be handled by the private sector. In part because the Government has used the PEs to pursue social and political objectives, they have been very inefficient and heve incurred significant financial losses over many years. Their poor performance--especially the poor performance of the power company (CDE)--has been a burden on both the private and public sector. Therefore, the PEs should be privatized as soon as this can be done in an orderly, responsible manner. Such privatization must be done carefully in a fair, transparent process, and this will require a major administrative, professional effort for which the Government is not now equipped. An agency of the Government must be given the mandate and the expertise to handle the privatization process. Privatization should begin with some of the smaller, reasonably viable companies owned by CORDE. For those, hopefully few, PEs which the Government might decide to keep in the public sector, at least for the foreseeable future, it will be necessary to introduce significant reforms in the relationship between the PEs and the Government. These reforms should create an appropriate incentive framework so that the PEs must operate more efficiently. Toward this end, performance contracts should be agreed between the Government and the PEs.

15. Given the high incidence of poverty and the poor quality of education and health services following the stagnation of the 1980s, improving social sector programs must be an important component of the Government's program. The most important means to reduce poverty will be to increase general economic growth. In addition, as a long term investment in human capital development, the Government will need to increase its expenditures for education and health and improve the efficiency of those investments. In the short run, the Government should more effectively implement programs to reduce malnutrition and associated health problems. To be affordable, such programs must be targeted to the most vulnerable groups.

16. Given the legacy of centralized government and a civil service based on political patronage rather than merit, building the institutional capacity of the Government will take time but will be essential to the long-term success of the proposed re~)rms. Building a merit-based civil service should begin with a careful review of the structure and purposes of the Central Government. In the meantime, several steps should be initiated as soon as possible. Substantial numbers of unskilled and underquQlif ied employees should be removed from the payrolls. Salaries for a very select group of managerial and professional personnel should be brought in line with private sector salaries. And the Government must seriously renew the efforts once initiated by ONAP to create new rules or laws governing the civil service.

17. The stuctural reforms discussed in this Memorandum are interdependent and must be implemented on a sustained basis over a considerable period of

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time. This will require a competent economic management team and an institutionalized capacity for good policy making.

18. Assuming that the structural reforms discussed above can be successfully implemented during the next several years, the prospects for medium-term economic growth in the Dominican Republic are reasonably favorable. The reforms should make it possible to reverse the deterioration in investment, domestic savings, and overall productivity which the country has suffered over the past decade. It is projected that, given sustained implementation of the structural reform program, domestic savings would increase over 17% of GDP by 1995, which would be about equal to the average level during 1970-79, and to about 19% by 2000. In addition, it is estimated that foreign savings would equal about 3% of GDP by 1995 and 4% by 2000. These levels of foreign savings ar~ lower than the average of 5% achieved during much of the past twenty years. However, in recent years, this level of foreign savings has been realized only by rescheduling of debt and accumulation of arrears. Because of its negative effects on confidence in future mac~oeconomic stability, this situation cannot be sustained, and the Dominican Republic should seek to normalize its relationships with external creditors in order to eventually restore its external creditworthiness. Even if it does so, foreign savings are unlikely to reach 5% of GDP in the coming decade. Based on these assumptions about domestic and foreign savings, investment is projected to rise to 21% of GDP by 1995 and 23% by 2000.

19. In the near term, GDP growth will depend in large part on the increase in capacity utilization and employment as the economy recovers from the recent domestic recession. Over the medium term, growth will depend very much on how quickly the efficiency of capital can be improved. The reforms designed to create an appropriate incentive framework for private sector growth and to impTove the efficiency of public sector investment could potentially reduce the Incremental Capital Output Ratio (ICOR) to 4.7 by 1995. This would represent a ccnsiderable improvement over the average ICOR of about 12 observed in tne 1980s but not as much an improvement as to reach the average level of 3.6 experienced in 1970s. Based on the projected investment levels and these ICORs, GDP growth would average about 4.6% during the 1990s, and aggregate cons•.llllption growth would exceed the population growth rate so that per capita consumption would increase.

20. The pro1ected balance of payments associated with this s~enario, which takes into consideration the World Bank's projections for commodity prices and estimated of the growth in export and import volumes, would have an average current account deficit of about 3% of GDP during the decade. On the capital account, it is assumed that the international financial institutions will continue to make new loEm. commitments, that the Dominican Republic will obtain a rescheduling of Paris Club debt (including current arrears and principal and interest due in 1991 and 1992), and that all amortization due to commercial bank creditors will be rescheduled. Based on these assumptions, net disbursements of MLT debt would remain negative. Even assuming a healthy increase in direct investment, there would be a financing gap averaging about 0.7% of GDP during 1990-95 and 1.2% of GDP during 1995-2000. This gap suggests that the Dominican Republic would need greater debt relief from commercial bank and bilateral creditors than assumed in these projections.

CHAPTER I

ECONOMIC POLICIES AND PERFORMANCE THROUGH 1990

1. During 1966-78, following a period of political turmoil, the Dominican Republic experienced a substantial diversification of economic activity and achieved one of the highest rates of real GDP growth in Latin America and the Car~.bbean under conditions of domestic price stability and external equilibrium. As a result, many aspects of the quality of life of the Dominican people improved significantly. Beginning in the late 1970s, however, economic progress waned, and the 1980s were a period of very slow output growth, increasing inflation, growing external indebtedness, and seriously deteriorating social conditions. This poor economic performance was in part due to severe, protracted external shocks, especially the collapse of world sugar prices and the rise in petroleum prices. But the economic policy responses to those shocks aggravated rather than ameliorated the problems as the government strived for several years to shield domestic consumption through foreign borrowing, subsidies on key commodities, and an overvalued exchange rate. In the latter half of the decade the Government pursued stimulative fiscal and monetary policies. These policies culminated in the crisis situation of 1990, in which inflation stood at historically unprecedented levels, external arrears grew sharply, and output fell by over 5%.

2. This introductory chapter provides a brief, and therefore necessarily simplified, summary of economic policies and performance in the Dominican Republic during the past decade or so. The purpose is to highlight the fundamental causes of the economic crisis which culminated in 1990 and thereby to define an agenda for policy reforms necessary to stabilize the economy and to set the Dominican Republic back on a path of sustainable growth and improving social welfare.

Overview of Economic Performance

3. Rates of GDP growth in the Dominican Republic slowed dramatically in the 1979-90 period compared to 1970-78. This economic stagnation reflected not only adverse external shocks but also reduced levels and efficiency of investment, and this prolonged stagnation culminated in critical loss of internal and external balance during the past 2-3 years.

4. Annual rates of real GDP growth from 1970 through 1990 are shown in Graph 1. GDP growth averaged 7.5% during 1970-78 but only 2.3% during 1979-90. During the former period, GDP growth not only exceeded population grovth of 3.0% but also was sufficiently robust to allow both increasing investment and increasing consumption per capita. However, since 1979, GDP has on average grown more slowly than population, and per capita consumption has declined at an average annual rate of about 2.0%.

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Graph l

Dominican Republic Real Growth cf GOP

1sro 1972 1s14 1976 1s1a 19eo 19a2 1984 1986 19sa 1990

5. Underlying the stagnation of the 1980s was a decline in both the level and the efficiency of investment. As shown in Graph 2, gross fixed investment as a share of GDP has generally declined since 1979. Total investment was particularly low during 1982-198(. Graph 2 also shows public and private investment as a share of CDP since. It is striking that the decline in total investment during the first half of the 1980s resulted from cuts in public investment; as discussed further below, this reflected the Government's efforts to maintain consumption following adverse external shocks during this period. However, during the latter half of the decline, public investment recovered while private sector investment fell sharply such that by 1990 it was less than half the level of the early 1980s. As described below, this apparently reflected the severe loss of macroeconomic stability--manif est by high inflation and growing external arrears--and the consequent erosion of private sector confidence in the country's near-term economic prospects.

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Graph 2

COMINICAN REPUBLIC Total Fixed Investment, 1970-90

(Aa ..CDP)

oor;---;---r-r-~""7""-;----------;o---:--~~-r~-:---:---~!""""'----,

10

ti

0 , , , , , , , 1 1 1 1 1 1 , 1 , 1 1 1 1 , • • • • • • • • • • • • • • • • • • • • I 1 7 ., ., 7 $ 7 ., ., ~ 8 • ' I • I : • I ' •

0 , 2 s 4 I ., • I 2 4 7 Q Total 17 ,. 21 11 22 22 20 20 2Z ,. 24 25 1t zo 21 10 11 21 22 :zo 14 Pr Iwata 11 11 11 11 ,. 14 14 15 ,, • P11tillc 'T • 1 " • " • I ,, 12 11 .,

[~Total _._ Privata -.p.,tlllc I 6. The slow rate of GDP growth during the 1980s was the result not only of lower levels of gross investment but also lower efficiency of that investment. The five-year average Incremental Capital-Output Ratio (ICOR) for 1974-90 is shown in Graph 3. This is the ratio of gross investment (in real terms) over a five year period to the increase in output (i.e., real GDP) during that same period (with a one-year lead); it is a crude measure of investment efficiency. The almost continuous decline in ICOR since the mid­l970s is quite marked: the ICOR averaged 3.8 during 1974-80 compared to 8.8 during 1981-90.

16

14

12

10

8

e

4

2

0 1974 1976

Graph 3

Dominican Republic Incremental Capital Output Ratio

(Five Year Average)

1978 1980 1982 1984 1986 1988 1990

- 4 -

7. In addition to stagnation ~ :-· · . , .. ", t.ne economy of the Dominican Republic has suffered severe disequilibria, i.e., a critical loss of internal and external balance, especially during the latter half of the 1980s. This is manifest most dramatically in the rate of inflation and the growth of arrears to external creditors.

8. The rapid acceleration of domestic inflation is shown in Graph 4. Over the past three decades prior to 1987, the Dominican Republic had been a relatively low inflation country, especially compared to its Latin American neighbors. During the full decade of the 1960s, the Consumer Price Index (CPI) increased at an average rate of less than 2% per annum. Even during the turbulent 1970s, the average rate of inflation was only 10% per annum, comparable to that in the United States. During the first half of the 1980s the average rate of inflation increased to 16% per annum, exceeding that in the United States. Beginning in 1987, inflation accelerated s~arply, and for the three years 1988-1990 inclusive, the average rate of change in the CPI has been 50%.

70%

60%

50%

40%

30%

20%

10%

Pel'l:ent

Graph 4

Dominican Republic Inflation Rate

0%-le::::;;::::z::;=::::;:==;::::z::::;:::::::r::;::=z=:;:::::=::::;;:::::=:;::=;:::z::;:::::::r::;;::::z::::;:::z:::;:::::i=::;::::z:::;::=i=;::::::r::;:::::=:;:::::=:;=i:::;:='

1970 1972 197 4 1976 1978 1980 1982 1984 1986 1988 1990 Note: Percentage change In annual average CPI Source: IFS

- 5 -

9. On the external side, the loss of balance can be seen most starkly the accumulation of arrears to external creditors, as shown in Graph 5. atock of medium- and long-term external debt grew rapidly throughout the from about US$1.5 billion at end-1980 to US$4.2 billion at end·1990, reflecting persistent trade and current ~ccount deficits and inadequate non­debt capital inflows. However, through 1986, thanks in part to rescheduling agreements with official and commercial creditors, the Dominican Re.public was generally able to avoid substantial arrears. But since 1987 arrears on public sector debt have grown rapidly. ThiR reflected not only the weak b11lance of payment~ position of the country but also, and perhaps more importantly, the weak f isca position of the Government and the unwillingness of the Government to sacrif i~e public sector investments for the sake of servicing external debt. By December 1990, total arrears of US$1.29 billion (excluding interest payments on late interest) were equivalent to about 18% of GDP.

in The 1980s

1400

1200 ,...

.. 1000

In Mllllcna or US$

Graph 5

Dominican Republic Arrears to External Creditors

1979 1980 1981 1982 198:3 19U 1985 19H 1HT 1999 1989 1990 Hot•• ~rh•clpal a 11\t••••t ••••••• ar• at eftel•yeu Sourc~ IMF

- 6 -

Principal Reasons for Stagnation and Diseguilibria

10. The principal reasons for the disappointinr economic performance during the 1980s were: (1) adverse terms of trade changes; (2) loss of fiscal discipline--initially to maintain consumption le•·'ls and then to stimulate the economy through public investment; (3) loss of monetary discipline; (4) inappropriate exchan~e rate policy; (5) an increasingly unfavorable policy environment for the private sector; and (6) lack of competence of public sector institutions. Each of these factors is discussed briefly below, and fuller analysis of each will be presented in Chapter III.

11. Adverse changes in the Dominican Republic's terms of trade, and other external shocks such as the devastation of Hurricane David in 1979 and the global debt crisis of the early 1980s, clearly had an important impact of the poor economic performance of the past decade. The country's terms of trade, i.e., the ratio of average of prices received for its exports over the average of prices paid on its imports, was consistently lower from 1978 onward than in the preceding years. The terms-of-trade index averaged 158 for 1960; 176 for 1973-80; and 120 for 1980-1990 (based on 1987~100). The dominant component of this adverse terms of trade shift was the increase in the ratio of the price of oil--a major ~mport--to the price of sugar--a majur export. It is notable that the oil/sugar price ratio did not increase sharply following the first oil shock of 1973-74 because of the boom in sugar prices at that time. The collapse of sugar prices in 1976 marked the beginning of the external shocks for the Republic.

12. Although these external factors were certainly costly to the Dominican economy, their impact was compounded by macroeconomic policy responses which, over the medium-term, failed to adjust the economy to the new external realiti~s and therefore failed to realize the country's potential for the restora~ion of sustainable growth. For the most part, economic policy from 1978 through about 1984 was designed to maintain consumption levels in the short term through foreign borrowing. This policy rather quickly became unsustainable as foreign creditors began to worry about the governments's creditworthiness and as commercial banks generally withdrew from voluntary lending to devloping countries. Policy then shifted to a strategy to stimulate growth through i ~lationary fiscal and monetary policies and accumulation of external arrears, but the ensuing inflation and loss of external creditworthiness rapidly undermined confidence in the economy and hence the performance of the private sector. The key elements of the~e macroeconomic policies are discussed in the following paragrapns.

13. A dominant feature of the macroeconomic policies of the 1980s was the loss of fiscal discipline, manifest in chronic fiscal deficits during the decade. The consolidated nonfinancial public sector deficit as a share of GDP from 1970-90 is shown in Graph 6. The following are the most important points with respect to fiscal policy during this period:

*

*

*

(Aa .. OOP)

- 7 -

Graph 6

Dominican Republic Consolidated Public Sector Deficit

1870 1872 1874 1878 1878 1880 1882 1884 1888 1888 1890

Fiscal deficits have been ~ersistently higher during 1979-90 than during 1970-78. The average deficit as a share of GDP was 5.1% since 1979 compared to about ~.8% during 1970-78.

One of the factors underlying the weakening fiscal discipline has been a secular decline in publi: revenues, i.e., a declining tax effort. Public revenues as a i:i!.:.ire of GDP averaged 18.2% in 1970-78 but only 13.3% in 1979-90.

During·the first half of decade, the fiscal deficits arose primarily due to increasing public consumption, which reflected large subsidies on key commodities and rapid increases in the number of public sector employees. Given the declining public revenues, such increases in consumption were possible only because of sharp cuts in public investments. The low levels of public investment in the first half of the decade were undoubtedly an important factor in the slow GDP growth: sacrificing public investment in infrastr~;ture and social services in order to maintain consumption undermined the foundations for growth.

- 8 -

* During the latter half of decade, the pattern shifted markedly, and the fiscal deficits were due primarily to an effort to revive growth through rapid expansion of public investments. This effort to restore public investment to higher levels through continued deficit financing and ext1 ~nal arrears did lead to a t~mporary increase in growth but, as discussed further below, contributed significantly to the loss of macroeconomic stability, which caused a sharp fall in private sector investment and hence in overall growth.

* The fiscal deficits were increasingly financed by money creation rather than borrowing from the domestic private s~ctor or from abroad, and this contributed to accelerating inflation during the decade. During 1978-80 more than half of the fiscal deficits were financed through foreign borrowing rather than credit from the Central Bank. But by 1981, even before the beginning of the debt crisis triggered by the Mexican default in August 1982, concerns about the Republic's creditworthiness caused net foreign borrowing to shrink. For the decade as a whole, domestic financing of the public sector deficit (by Central Bank credit to the public sector) averaged over 2% of GDP, and this contributed significantly to the acceleration of inflation during the period.

14. The loss of fiscal discipline was accompanied by a loss of monetary discipline, especially during 1986-88, which was manifest in a rapid expansion of net credit to the private sector. Net credit by the banking system to the private sector grew by 53% in 1986, 25% in 1987, and 31% in 1988. This expansion of credit reflected several problems in the financial system: negative real interest rates for lencling; very weak enforcement of reserve requirements in the banking system; and, until 1987, lack of any regulatory controls, or capital or reserve requirements, for the non-banking financial institutions (financieras). Given these circumstances, the expansion of domestic credit during these years may have been in part the result of lack of control by the monetary authorities. However, it may also have reflected an intentional policy to stimulate recovery following the recession in 1985.

15. The expansion of credit to the public sector to finance most of the fiscal deficit and also to the private sector as the result of inadequate monetary controls and/or stimulative monetary policy led to rapid growth in the money sn~ply, especially in 1986-88, as shown in Graph 7. The supply of money and quasi-moriey grew by 59.2% in 1986, 22.3% in 1987 and 45.2% in 1988. Throughout this period of rapid expansion of the money supply, interest rates on demand and time deposits, which were fixed by regulation, became increasingly negative in real terms, and it is therefore t~ be expected that demand for money and quasi-money assets was declining. It was the emergence of substantial excess supply of money which clearly gave rise to the surge in inflation beginning in 1988.

60

so

40

30

20

10

- 9 -

Graph 7

DOMINICAN REPUBLIC Growth in Money and Quasi-money

(Percentage change from preceding year)

1962 1963 1964 1965 1966 1967 1988 1989 1990

16. Following a long period of considerable stabili~y in which the exchange rate was fixed at parity to the US dollar, from the early 1980s exchange rate policy has been quite erratic. The Government has generally tried to maintain an official rate below the inter-bank, parallel rate in order to reduce the domestic currency cost of foreign exchange needed by the Government for external debt serv~ce and for imports of public enterprises. Therefore, for most of the decade there has been a dual or multiple exchange rate regime, but the rules of the game have changed frequently. Generally the official rate which was applied to exports and certain imports was significantly overvalued relative to the parallel rate. In other words, exports were almost consistently penalized. This chronic overvaluation of the exchange rate applied to exports almost certainly contributed significantly to the stagnation of exports, which in turn led to a rapid increase in the merchandise trade balance, as shown in Graph 8. During the five year period 1975-1979, the merchandise trade deficit averaged US$90m per annum; during 1980-1984, the average deficit grew to US$439m; and during 1985-89, the deficit averaged US$762m. Although many other factors were involved in the evolution of the trade balance, including adverse terms of .:.rade changes and

- 10 -

reductions in the U.S. sugar quota, the over-valuation of the exchange rate applied to exports was clearly an important policy failure in that it prevented the economy from adjusting to these adverse developments. The growing trade deficits were not fully off set by the robust growth of tourism receipts or earnings from the Export Processing Zones (which are both included in the service, rather than the trade accounts). Hence the increasing trade deficit was a major factor in the deterioration in the overall balance of payments, and the ultimate consequence was increasing external debt, which by the late 1980s could no longer be serviced.

200

0

-200

.. 400

-600

-800

-1000

In Mllllona of USS

Graph 8

Dominican Republic Merchandise Trade Balance

1970 1972 1974 1978 1978 1880 1982 1884 1986 1H8 1990

~

17. The stagnation during the 1980s also reflected the increasingly unfavorable environment for efficient private sector investment and growth. The growing macroeconomic instability clearly undermined private sector confidence in the country's economic prospects. This erosion in confidence was reflected in the sharp decline in private sector. investment during the latter half of the 1980s (see Graph 2 above}. which occurred despite the negative real interest rates during most of this period. In addition to this macroeconomic instability, private sector performance has consistently been

- 11 -

undermined by distortions and uncertainties resulting from the trade regime, the inappropriate regulation of the financial sector, extensive government price controls, the dominance of public enterprises in many activities, and the poor performance of those enterprises in providing basic goods• and services such as electric power. These policies by which the government has failed to create a favorable environment for private sector growth are discussed in detail in Chapter Ill.

18. A crucial underlying factor in the poor economic performance of the 1980s has been the general lack of competence of public sector institutions in the Dominican Republic. It is generally acknowledged that weak public sector institutions were part of unfortunate legacy of the Trujillo era. The tradition of centralized economic management established during that period has tended to prevail. Except for the offices of the Presidency and the Central Bank, there has been little serious attention to developing the capacity of line ministries and other institutions needed for management of the economy and public sector investments. Certainly the capacity of the Government to manage macroeconomic policies has not kept pace with the increasing complexities of the world economy since the breakdown of the Bretton Woods system of fixed exchange rates and the first oil shock. There has never been a cohesive, well-trained economic team to define and implement economic policy in a rapidly changing external envir.onment. Further erosion of competence of public sector institutions during the decade was also the result of the rapid increase in the number of public sector employees, which started in 1974 and accelerated sharply in 1978, and the simultaneous decline in average civil service salaries. Between 1978 and 1985 the total number of public sector employees increased from 129,000 to 218,000 while the average real wage fell by about one-third. As wages and salaries in the public sector fell below those in the private sector, the quality of the civil service has declined. This erosion in the competence of public sector institutions has undoubtedly contributed to: poor design and implementation of economic policies--both macro and micro; decline in the efficiency of public investment; increasingly ad hoc and uncertain "rules of the game" for the private sector; and increasing corruption, which also taxes the resources of the private sector.

Summary and Conclusions

19. This chapter ha~ attempted to summarize the principal factors which caused the severe economic stagnation and disequilibria during the past decade and which culminated in the loss of internal and external balance during the past several years. In short, in addition to adverse terms of trade changes, this stagnation and disequilibria resulted primarily from loss of fiscal and monetary discipline during the 1980s, which led to accelerating inflation, and inappropriate exchange rate policy, which led to balance of payments deficits and an inability to service external debts. These disequilibria have severely eroded private sector confidence, contributing to the generally unfavorable environment for private sector investment and growth. Poor economic policies, as well as increasing inefficiency of public sector investment, have been in part the result of the erosion of competence of public sector institutions.

- 12 -

20. This summary diagnosis of the experience of the past decade or so suggests the agenda for economic policy in the coming years. Priority must be given to stabilization of the economy through restoration of fiscal and monetary discipline accompanied by sound exchange rate policy. The importer.t steps which the Government has already taken to stabilize the economy will be the subject of the next ~hapter. Beyond immediate stabilization policies, structural reforms will be need to consolidate fiscal and monetary discipline and ensure that it can be sustained over time. Key elements of such reforms will be discussed in Chapter III.

21. A feasible strategy for sustainable growth must begin with recognition of the existing weaknesses of the public sector due to neglect of public sector institutions over many decades. These weaknesses impede the development and implementation of economic policies which directly effect the private sector and impede the design and execution of public sector investments. Given these weaknesses, growth can only be achieved if led by the private sector. The Dominican private sector is potentially capable of significant increases in output and investment, but over many years its activities have been seriously thwart~d not only by increasing macroeconomic instability but also by economic policies and bureaucratic interventions which have undermined efficiency and investment. The first priority for a strategy for the 1990s must be to correct these errors and provide an enabling environment for the private sector. Reforms to promote such an environment will be considered in Chapter III. But, despite its weaknesses, the public sector mu~t be relied upon to maintain a macroeconomic policy environment which will create the necessary stability and climate of confidence for the private sector, to provide certain essential investments in public goods, primarily infrastructure, and to make investments in human capital development which would be under-provided by the private sector, especially to lower income groups. These issues, together with issues related to the public enterprises, will also be considered in Chapter III.

- 13 -

CHAPTER II

THE CURRENT STABILIZATION PROGRAM: THE NEW ECONOMIC POLICY

1. The severity of the macroeconomic disequilibria in 1990--high inflation, depletion of international reserves, growing external arrears, and declining output--compelled the Government, following the election in May 1990, to define a New Economic Policy (NEP) intended to stabilize the economy. The NEP was initiated in August 1990 and various measures have been implemented since that time. Thie Chapter presents the elements of the NEP and describes its initial impacts on the economy.

Key Elements of the New Economic Policy

2. The New Econom:1.c Policy involves the following key elements: ( 1) reducing the fiscal deficit; (2) tightening monetary policy; (3) moving toward a unified, market-determined exchange rate; (4) eliminating controls over interest rates; and (5) initiating a reform of the trade regime. The details of each of the elements are presented below.

3. Reducing the fiscal deficit. The consolidated public sector deficitlf for 1990 was 5.3% of GDP compared to 6.2% in 1989 despite the fact that revenues fell by 4.5% of GDP. The revenue decline was caused by the domes~ic recession, the decline in revenues from f erronickel exports and the elimination of export taxes. The projected deficit for 1991 is now 2.5% of GDP. This significant reduction has been achieved primarily by increases in the prices of publicly produced goods and by cuts in expenditures, especially investments. A summary presentation of the consolidated public ~ector accounts is presented in Table 2.1.

Table 2.1: Operations of the Public Sector (in percent of GDP)

Pre I. Proj. 1989 1990 122!

Total revenue 16.9 12.4 12.1 Total expenditure 21.2 17.1 14.5

•Current 9.9 9.7 9.0 •Capital 11.3 7.4 5.5

Current account balance 6.8 2.6 2.9 Operating losses of Central

Bank ..0.2 0.0 0.0 Residual deficit -1.7 ..0.7 -0.1 Overall balance (commitment basis) -6.2 -5.3 -2.5 Interest arrears 2.6 3.3 0.0 Overall balance (cash basis) ·3.6 -2.1 -2.5 Financing 3.6 2.1 2.5

•Grants 0.6 0.4 0.4 •F.xtemal (net) 1.9 0.6 ..0.4 •Domestic (net) 0.7 1.1 0.0 •Interest rescheduling 2.S

1/ On a commitment basis, i.e., if interest on public debt had been paid, and before grants.

- 14 -

4. Domestic prices of petroleum products were increased in several steps during the second half of 1990, as shown in Table 2.2. Since importation of petroleum and petroleum products and their domestic sal,' at the wholesale level is the monopoly of the public enterprise REFIDOMSA, these price increases add to the total revenues of the consolidated public sector. Initially these increases were made during the period of high international oil prices brought about by the Gulf crisis and were needed to reduce the difference between international and domestic prices, i.e., to avoid a massive

Gasoline Diesel Kerosene LPG Fuel Oil

Table 2.2: Domestic Prices of Petroleum Products (in US$ per gallon) ~/

Oct. 1989

0.95 0.39 0.43 0.32 0.37

----1990----

1.43 0.85 1.15 0.30 0.48

1. 78 1.22 1.60 0.28 0.45

~I Based on the official exchange rate.

increase in the subsidy on domestic consumption of petroleum products. nowever, when the international price level of petroleum and its products fell in January 1991, the Government left domestic prices unchanged at levels well above international prices, thereby imposing a substantial tax on the consumption of petroleum products. This has clearly made an important contribution to the reduction in the overall fiscal deficit. However, thus far, the Government has fixed the domestic price level itself rather than the implicit tax, and therefore the level of revenue actually generated during 1991 will depend on the future movements of international price levels.

5. In August 1990, domestic prices of flour and sugar were also i~creased by 85% and 100% respectively to approximate their border prices. As these sales are the monopoly of the public enterprises Molinos Dominicanos and CEA, these price increases also augment gross revenues of the public sector. Power tariffs charged by CDE were increased by 85% in August 1990. As efforts to increase the reliability of service has begun to succeed, CDE has also intensified its efforts to collect from it3 customers.

6. The Government has also limited the increase in th~ public sector wage bill by holding wage increases below the past rate >f inflation. The minimum wage for the public sector was increased by 30% in September 1990 even though the CPI had increased 40% since the previous minimum wage adjustment in August 1989. The Government in its public statements has made clear that stopping inflation will require such sacrifices and that future wage increases will depend upon tax reforms which make it possible to finance such increases within the context of a declining fiscal deficit.

•

- 15 -

7. On the expenditure side, significant cuts have been made in capital expenditures, which fell from 11.3% of GDP in 1989 to 7.4% in 1990. In late 1990 capital expenditures were virtually eliminated. In 1991 capital expenditures are projected to be 5.5% of GDP. A reduction of this magnitude was necessary to reduce the overall deficit because of the sharp fall in revenue.

8. Tightening monetary policy. The rate of growth of broad money, measured by the total private sector claims on the financial system (including the Central Bank), has been slowed dramatically. As shown in Table 2.3, the rate of growth of broad money slowed to 28.8% during 1990 compared to 32.9% and 46.1% in 1989 and 1988 respectively. The ratio of broad money to GDP also declined during these three years.

Table 2.3: Private Sector Claims on the Financial System (Broad Money)

1988 llli 1990 (Percentage change from preceding end of year)

Total J;!rivate sector claims 46. l 32.9 28.8 Money 65.7 22.6 41.4 Quasi-money 33.l 35.6 29.3 Other 48.S 40.5 15.9

(In ];!ercent of GDP) Total Erivate sector claims 37.5 34.3 29.6

Money 11.6 9.7 9.2 Quasi-money 15.7 14.6 12.7 Other 6.0 5.9 4.3

Source: IMF, Recent Economic Developments, Table 7.

9. This decrease in the rate of growth in the money supply reflects a decrease of total private sector claims on the financial system due to negative real interest rates and a tightening of money supply by various measures which were initiated during 1988 and 1989 but significantly intensified under the NEP starting in August 1990. Prior to the NEP, these measures focussed primarily on stricter enforcement of reserve requirements on both bank and non-bank institutions and limiting recourse to the rediscount window and overdrafts from the Central Bank. In August 1990, stronger measures were taken:

* Marginal reserve requirements for incremental deposits in private commercial banks were set at 100% for 90 days but with the stipulation that 50% of these funds could be used to extend credit to the agricultural and industrial sectors (40%) and the service sectors (10%). Reserve requirements had been 40% for sight deposits, 30% for savings deposits, and 20% for certificados financieros. Assuming that banks could find borrowers in approved sectors for the full 50%

•

*

- 16 -

of incremental deposits, the new regulation amounted to a marginal reserve requirement of 50%--well above those which had prevailed.

For the state-owned Reserve Bank, which holds over 10% of the banking system's liabilities to the private sector, a 20% marginal reserve requirement on incremental deposits was established, and a program was initiated to reduce the deficiency of reserve requirements and reduce its overdrafts with the Central Bank. Previously the Reserve Bank had had very low reserve requirements which were not fully enforced.

* New rediscount operations were suspended, except in cases where such operations had been approved previously or the stability of certain financial institution$ was at peril.

* In order to reduce liquidity in the system, the Central Bank was authorized to issue one-year participation certificates for an amount up to RD$300m.

* The opening of new financial institutions was prohibited until August 1991.

10. In addition to these regulatory measures to limit credit expansion, the Monetary Soard in August 1990 initiated progressive increases in interest rate ceilings in order to reduce the distortions which such regulations had introduced in the financial system, to limit demand for credit, and to induce greater willingness by the public to hold financial assets. For many years, the legal rates on savings and time deposits had been in the range of 5% to 10% and on general loans by commercial banks, 12% (plus annual commissions and fees). Prior to August 1989, the effective lending rate including commissions and fees had been 24%; in August 1989, this ceiling was increased to 30%. As inflation accelerated from 1987 onwards, all of these rates became negative in real terms, thus increasing demand for credit but reducing the willingness of the public to hold financial assets. To begin to correct this critical distortion, the Monetary Board took these steps in August 1990:

* Interest rates on savings deposits were increased from 5% to 8.5% and on time deposits over 180 days, from 9.5% to 12.5%.

* The Central Bank discount rate was increased from 24% to 36%.

* The on-lending rate on credits provided through FIDE, the long-term discount facility of the Central Bank, was increased from 24% to 36%.

As inflation accelerated further during the latter half of 1990 in response to the various price adjustments and the devaluation of the official exchange rate, interest rate ceiling were adjusted further in October 1990. For example, the rate on savings deposits was increased to 10.5%, and the cost of funds from the discount window and from FIDE was increased to 43%. Finally, in January 1991, the Monetary Board decided to eliminate all regulatory floors and ceilings on interest rates for saving and lending. The course of interest rate regulations is summarized in Table 2.4.

- 17 -

Table 2.4: Selected Interest Rates for Commercial Bank (in percent per annum)

Deposits Savings Time (more than 100 days)

Lending General loans--nominal £/ General loans--ef fective 41

Memorandum Item Inflation (average)

~/ Legal maximums. Q/ Market-determined rate. £/ Legal maximum interest rate.

1989 ~/

5.0 9.5

12 18

45

Oct. 1990 ~/

10.5 14.5

12 31

60

March 1991 Q/

35

54

10 ~/

41 Estimated effective rate taking into account permitted commissions and standard practice of charging most interest in advance.

~/ Annualized average rate January-March 1991.

11. Exchange rate policy. As part of the NEP, in August 1990 the Central Bank announced its intention to adjust the official rate periodically in order to progressively reduce the differential between the official and parallel rates. At the same time, the Central Bank reintroduced the system of July 1988 whereby it administers all foreign exchange transactions. However, the Central Bank also indicated that its objective would be to unify the official and parallel rates by September 1991, at which time the surrender requirement for foreign exchange would be eliminated. In October 1990 and again in early 1991 the Central Bank devalued the official rate. By April 1991 the differential between the official and parallel rates was virtually eliminated.

12. Trade regime. In September 1990 the Government issued regulations (Decrees 339 and 340) which reduced the average nominal tariff rate from 95% to 26% and reduced the number of tariff levels from literally thousands to seven. Under the new system, a CIF ad valorem tax was introduced for all products included in the Temporary Customs Tariff: these generally range from 15-30%, but motor vehicles, fire arms, and jewelry was subject to duties of 60-80%. The Government also submitted to Congress legislation for a program of trade liberalization under which average nominal tariffs wo~ld be reduced to 20% over three years.

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Initial Results of the New Economic Policy

13. The New Economic Policy has thus far achieved considerable success at stabilizing the economy.

* Inflation has slowed very dramatically. In the latter half of 1990, inflation had accelerated due to the increases in prices of publicly produced goods and the devaluation of the official exchange rate. But, starting in January, monthly inflation virtually stopped; inflatinn monthly rates for January through April have been 0.07%, 0.8%, 1.5%, and -1.0%. This reflects considerable success in reestablishing fiscal and monetary discipline.

* The parallel exchange rate has stabilized in the range of RD$12.5 per US$, about equal to the official rate, and has remained at this level since April. The nominal appreciation of the parallel exchange rate reflects both the near-term improvement in the country's balance of payments due to the decline in international oil prices since January and, perhaps more importantly, the credibility of the Government's stabilization program and its impact on expectations about future inf lat ion.

* Interest rates on both deposits and loans are now market determined and have been positive in real terms, providing stimulus for savings and for efficient investment decisions. Although real interest rates on lending is now quite high compared to the inflation rate in recent months, some decline in these rates can be expected as confidence grows that future inflation is under control.

* Internati~nal reserves held by the Central Bank have increased, providing sufficient resources for the Central Bank to clear its arrears with the IMF, the World Bank and the IDB and to make partial payments of arrears to certain bilateral creditors.

In general, the NEP has succeeded in dramatically changing expectation about the future path of fiscal and monetary policy, inflation, and the exchange rate.

14. In order to strengthen confidence in the Government's commitment to sustain its stabilization program and to create favorable circumstances for obtaining necessary debt relief and new financing from external creditors, the Government has indicated its intention to enter into a Standby Arrangement with the IMF. This Arrangement would define a fiscal and monetary program through the end of 1992.

15. The stabilization program has clearly been successful in the short run in arresting domestic inflation, stabilizing the nominal exchange rate at a reasonable level, improving the international reserve position of the Government, a~d thereby rebuilding confidence in the near-term prospects of the economy. However, the initial impact of the NEP on the real economy is difficult to assess because of lack of data. It should be expected that,

- 19 -

given tight fiscal and moneta.·y policy and the associated high real interest rates, there will be no recovery of investment in the short-run despite the improved near-term outlook for the economy. However, the decline in private sector investment observed in recent years is likely to stop, and real output may at least stabilize in 1991.

16. Even though the NEP has made a very credible start at some of the reforms which will be necessary to restore growth on a sustainable basis, it falls short or still fails to address many of the reforms which will be needed. ~hese remaining shortcomings and the agenda for further reforms will be the subject of Chapter III.

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CHAPTER III

AN AGENDA FOR STRUCTURAL REFORM AND SUSTAINABLE GROWTH

1. Although the New Economic Policy ha£ succeeded in stabilizing the economy, it does not yet fully address the broader issues of structural reform and adjustment which must be tackled in order to provide a basis for sustainable growth, i.e., growth without accelerating inflation and without steadily accumulating external debt. As stressed in Chapter I, such reforms must (1) create a macroeconomic policy environment and an incentive framework needed to stimulate efficient private sector investment and output; and (2) improve the capacity of the public sector to sustain such policies, even in the face of future external shocks, and to implement essential investments in public infrastructure and human capital development.

2. This chapter discusses the priority areas for structural reform. These are: (1) consolidation of fiscal discipline; (2) consolidation of monetary discipline; (3) creating an incentive framework for efficier.t private sector growth, which will require a stable exchange rate policy, consolidating the trade reform, pursuing financial sector reform, eliminating constraints to competition and promoting foreign direct investment; (4) reforming and privatizing public enterprises; (5) improving social sector programs; and (6) building the institutional capacity of the government.

3. In considering existing problems and possible reforms in each of these areas, emphasis is given to the need for institutional, regulatory, and/or legal changes. This emphasis reflects the judgment that economic recovery and sustai~ed growth cannot be achieved unless and until (1) a coherent macroeconomic policy framework is forged and maintained through time and (2) the capacity of the Government to design and implement a public investment program is rebuilt. The mismanagement of economic policy over the past twelve years which plunged the economy into its recent crisis was symptomatic of major institutional imperfections as well as out-of-date approaches to policymaking. Corrections of economic policies, such as those recently achieved under the New Economic Policy, will not likely be sustained unless the institutional framework within which these policies are formulated and implemented is overh1 'ad drastically. Therefore, the agenda for structural reform discusb~d in this Chapter must cover not only the policy reforms themselves but also reform of the institutions which make policy.

A. Consolidation of Fiscal Discipline

4. The foundation of macroeconomic stability, which is a prerequisite for vigorous private sector growth, is a sustainable fiscal balance. For a government with a substantial overhang of public sector debt, a sustainable balance is likely to require achieving a primary fiscal surplus, i.e., a surplus excluding interest payments on public debt. The primary fiscal balance is an important measure of fiscal effort because it eliminates the legacy of past fiscal policy, i.e., interest payments on public debt.

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5. For the Dominican Republic to achieve a primary fiscal surplus on a sustainable basis will require action on several fronts. This Chapter focuses on four areas of particular importance: (1) reforming the tax structure; (2) improving the fiscal performance of public enterprises by raising and maintaining output prices at economic levels; (3) controlling the public sector wage bill; and (4) rationalizing capital expenditures by improving budgetting and investment programming. This analysis does not attempt to quantify how much can be achieved in each of these areas. In particular, this Memorandum does not attempt to estimate appropriate levels of revenues and expenditures for the public sector and to make judgments about the appropriate priority of increasing revenues versus reducing expenditures as the means to improve the fiscal balance. However, at the beginning, it should bu noted that, to the extent that public sector employment is excessive and public sector investment is inefficient, it seems likely that there is considerable scope for reducing expenditures, and such efforts may deserve priority over increasing revenues beyond current levels.

Reforming the tax structure

6. Public revenues in the Dominican Republic have been raised largely through indirect ta~es (which accounted for about 70% of total revenues in 1989), of which import taxes have been most important (39% of total revenue in 1989). The tax system is characterized by a very large number of different taxes, high marginal income tax and import tax rates, and low collection rates. A summary of the major types of taxes and the problems with each is presented in Box 3.1. There are several reasons for this contrast between high tax rates and low revenues. First, there are numerous exemption and gimmicks built into the tax system; most were introduced in an ad hoc manner and some, to encourage the development of specific sectors, such as tourism and free trade zones. Second, the 15 agencies responsible for tax administration and collection are generally incapable of enforcing payment of taxes, especially income taxes, because of the extraordinary complexity of the system and the lack of trained personnel and modern equipnent. The third, and perhaps most important, factor is the massive tax evasion due to the high rates and arbitrary administrative procedures. Evasion is, of course, also profitable to tax collectors, who, like other public sector employees, are paid wages far below those required for subsistence. Finally, willingness to ~omply with tax obligations has been undermined by the progressive deterioration of public services. As a results of these various factors, the tax system has become highly inelastic, especially in recent years, as the most dynamic sectors.of the economy--tourism and free trade zones-- pay little or no taxes and tax evasion has increased systematically.

7. Previous attempts to reduce fiscal deficits by increasing tax revenues have tended to resort to expedient measures which had strong disincentive effects and did not provide a healthy and stable basis for revenue generation. For example, to correct the large deficits in 1985, a 36% foreign exchange surcharge on exports was applied. This, as well as other taxes on exports or trade generally, helped to reduce the fiscal deficit but aggravated the problem of stimulating exports and creating a proper incentive framework for the tradable sectors. During 1988-90, increases in total revenues have depended disproportionately on tax payments by the Falconbridge Mining Company, which will fluctuate with international nickel prices. (See Stati~tical Appendix, Table 5.4).

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Box 3.1 Summary of Hajor Taxu ae of 1990

* Sales tax. The revenues from the sales tax (lTBl) have accounted for about 12% of tax revenues in recent years. The lTBl tax rate is 6%. During the late ~980s, the range of goods and services on which the sales tax is levied has been progressively increased: in 1985, it was broadened to cover a range of services such as hotels, telex, and cable TV; in 1986 to cover telephone services; in 1987, leasing and car rental services; and in 1989, cigarettes, cigars, alcoholic beverages and soft drinks. Nonetheless, there is still scope for broadening the base further, for example, to apply to petroleum products.

*Excise taxes. Excises tax account for about 14% of tax revenues. Current excise taxes are based on 58 separate laws, which define over 100 individual tax rates and bases. This set of taxes is therefore exceedingly difficult to adminiater and should be drastically simplified.

*Personal income taxes. The personal income tax system, which yields only about 12% of total taxes, is complex, inequitable, and highly distortionary. Marginal tax rates reach over 75%, and tax brackets are not indexed for inflation so that more and more persons are subject to the high marginal rates and even the lowest income earners are liable for income tax. The system is riddled with both deliberate and unintended loopholes. For example, interest and expense deductions are very liberal; income earned through consultancy and advisory positions are tax exempt; "fringe benefits" are not regarded as taxable income~ there are numerous "development incentives"; and capital gains are not taxed. The combination of high marginal rates and numerous exemptions have distorted private sector decision-making and led to massive tax evasion. A thorough reform of the personal income tax system, which would lower average rates, reduce exemptions, and simplify the system, is needed.

*Corporate income tax. This tax yield roughly 12% revenue, has been virtually incapacitated because of a chaotic web of overlapping incentives and exonerations. The administration of the tax is highly arbitrary, making it very difficult for business to anticipate their tax obligations. lt also need a thorough reform.

*Trade taxes. Prior to the September 1990 reforms (see below), the average import tariff was very high (91% in 1989) but the actual import tariff revenue was rather low. This poor revenue performance was due to widespread exemptions, the use of a very low exchange rate in customs dut:y calculations, evasion and undervaluation, and erroneous classification of goods in customs. The proliferation of trade regulations over the years have created a system which is virtually impossible to administer efficiently. As in the case of income taxes, a thorough simplification is needed. With respect to export taxes, until recently explicit taxes on traditional exports contributed a significant fract:ion of Government revenues. However, the sugar tax was abolished in 1989; the coffee and cacao tax, in early 1990. Gold remains subject to a heavy tax (the difference between t:he official exchange rate and RD$4/US$).

*Property taxes. ln practice, property taxation does not exist in the Dominican Republic. There is no land or wealth tax, only negligible property transfer. and inheritance taxes.

8. The recent increases in revenues under the New Economic Policy have come about in large part due to the pricing of petroleum products. As discussed in Chapter II, domestic prices for gasoline~ diesel and other petroleum products were increased substantially in late 1990 as international prices rose due to the Gulf crisis. These domestic price levels have been maintained during 1991 despite the decline in international prices. This implicit tax has accounted for a substantial part of the improved fiscal position of the Government. While this has been a very welcome development, it certainly does not provide a secure revenue base because the amount of the tax will vary according to international prices. This very serious weakness in the current fiscal policy must be corrected as soon as possible.

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9. Recognizing the importance of improving the tax system, the Government has prepared a proposal for a thorough tax reform. The proposed reform reflects many of the recommendations developed by a team of international experts under the coordination of the Harvard Institute for International Development and funded by UNDP. The proposed reforms would cover all types of taxes and would greatly simplify the tax system. Income tax and import tax rates would be reduced, as would exemptions and deductions, and distributional equity would be improved. At the same time the reforms as proposed would increase the total revenue generated by the tax system and ensure tax buoyance, primarily due to the improved income tax system. Most importantly, the reforms would provide a more stable ,and secure level of revenue and would greatly reduce the uncertainties and distortions which the existing tax system imposes on the private sector. The proposed tax reforms are summarized in Box 3.2.

Box 3. 2 Sumnary of Propoeed Tax Refoni•

*Sales tax. The tax rate would be increased from 6% to 10% and the base would be broadened to include petroleum products and leased items. Sales tax paid on the purchase of capital goods would be deductible against sales tax owned on sales.

*Excise taxes. A single excise tax !aw would replace the existing 58 laws and would set 4 tax rates ( 10, 20, 30, or 60%) on about lO cOUlllodities and sarvices (including vehicles, liquor and tobacco, transportation abroad, long-distanca telephone, and hotel rental). Public sector organizations would pay excise taxes.

*Personal income tax. The personal income tax would be greatly simplified with lower rates and almost no deductions. There would be only tvo tax rates of 20% and 30%. Each individual would have a basic credit of RD$8,000 (indexed to inflation) so that no taxpayer who earns less than RD$40,000 would pay any income tax. All deductions would be eliminated except for contributions to an approved pension plan. Capital gains wold be taxed upon realization as ordinary income. Withholding would be introduced.

*Corporate income tax. All business income would be taxed at a 30% rate and all existing exonerations would be phased out over a 3 year period. Limits would be set on the maximum amount of interest expense to be deducted and on rates of depreciation. Estimated income tax must be paid quarterly, and interest on late payments would be charged.

*Trade taxes. Quantitative restrictions would be replaced by tariffs. The structure of tariffs would be simplified and reduced with a maximum rate of 35% and a minimum 10% to be achieved over a period of 3 years. Existing exonerations from tariffs would be reduced or eliminated to the extent possible and no new exonerations would be allowed. All public sector organizations would pay the full rate of :import duties. The tax base for applying all tariffs would be the cif value of the co1T111odity converted into RD$ using a single market exchange rate.

*Property taxes. A system of property taxes would be introduced. All property including state property would be registered, valuation would be based on "fair market value" and revalued every three years, and a single rate of tax would be applied •

..................................................................................... ;

10. The importance of moving forward quickly to obtain Congressional approval and to implement the proposed tax reforms cannot be overemphasized. Given that the fiscal component of the current stabilization program rests excessively on the implicit taxation of petroleum products, fiscal discipline­-and hence the entire stabilization program--is at risk until tax reform can be achieved.

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11. Of course, passing the tax reform will be of little use unless the capacity for tax administration can be greatly strengthened. The UNDP study recommended substantial reforms in tax administration which would increase the effectiveness of revenue collection agencies, reduce the compliance costs imposed on individuals and businesses, and remove the uncertainty and arbitary aspects of tax administration. The reforms would require innovations in tax administration by which (a) the reveaue collection agencies effectively use computers to improve record keeping and collection functions and (b) most of the payment taking and recording functions of the tax system are moved to the banking system. Effective implementation of such administrative reforms would involve some budgetary cost, but such costs would be extremely small compared to the increase in revenues generated. Hence, these efforts to improve tax administration deserve very high priority on the Government's agenda.

Improving the financial performance of public enterprises

12. Historically the financial losses of public enterprises (PEs) have been an important factor in the overall fiscal performance of the consolidated nonfinancial public sector. In 1985, the current account deficit of the public enterprises plus the current transfers from the Central Government amounted to 4.9% of GDP. (See Statistical Appendix, Table 5.2). Although some progress was made during the late 1980s in reducing these financial losses, in 1989 the current account deficit plus current transfers from the Central Government still amounted to 0.9% of GDP. Most of these financial losses can be attributed to the power company (CDE) and the numerous "Small Enterprises," including the water and sewerage operations in Santo Domingo, and the Port Authority. The losses of CORDE, CEA, and INESPR.E have, in most years, been only a small part of the total losses. In addition to these current account losses, the public enterprises are heavily dependent on the Central Government for capital transfers, which, for example, amounted to 1.2% of GDP in 1989. Although at least some of these capital expenditures may have been efficient investments, they nonetheless contributed to the overall financing requirement of the consolidated public sector. In summary, the financial demands of the public enterprises on the consolidated public sector are sufficiently large that the Government cannot expect to solve its fiscal problems without virtually eliminating the financial losses of the public enterprises and making them much less dependent on the Central Government for their capital expenditures.

13. In most cases, the best way to eliminate the financial burden of PEs on the public sector will be to privati·~e these enterprises. Issues of privatizing and reforming PEs are discussed further below, as well as in Appendix 1. However, for those PEs which are not privatized in the short run and for which thorough refot:"'Ds take time to implement, the most important means to reduce financial losses is to set the prices of their outputs at economic levels, i.e., to eliminate subsidies to the consumers of their output. The basic principles which should be followed with respect to the pricing of publicly produced goods and services are theoretically quite clear. Tradable goods, such as petroleum products, wheat flour, etc., should be priced (prior to any taxes) at their equivalent import price (or the export price for exported goods). It is the import price, which will vary over time, represents the opportunity cost to the country of the consumption of that

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good. Nontradable goods, such as electric power and water, should be priced at their long-run marginal cost (LRMC), i.e., at the unit cost of supply for the incremental output over a reasonable period of time. This LRMC also is the opportunity cost to the country of the nontradable good. The level of the LRMC will reflect, of course, the efficiency of the PE produc1ng that good, and any inefficiencies reflected in the LRMC would constitute an unnecessary tax on consumers. The recently adopted measures authorizing PEs to adopt flexible pricing policies will permit PEs to adjust prices to their economic levels. The next step is for the Government to ensure that PEs will actually use this authority on the basis of automatic price adjustment at regular periodic intervals.

14. Under the New Economic Policy, the Government has made important adjustments in the pricing of publicly produced goods, especially petroleum products and power, which have contributed greatly to reducing the overall fiscal deficit. In order to secure these gains, it will be necessary to establish rules and institutional mechanisms under which the pricing principles noted above can be automatically and regularly applied. The creation of regulations governing pricing of and of semi-autonomous institutions to objectively apply those regulations would help to depoliticize the pricing of key publicly produced goods and services.

Controlling the public sector wage bill

15. The cost of salaries and wages for public sector employees is the largest component of current expenditures. For the Central Governmant, salaries and wages have been about one-third of current expenditures in recent years. Clearly fiscal discipline cannot be sustained unless this component of the fiscal accounts can be kept under control.

16. As discussed in Chapter I, the number of public sector employees grew sharply in the late 1970s and early 1980s while salaries and wages fell in real terms. Government bureaucracies and public enterprises have become bloated with redundant and unskilled employees. For skilled workers and professionals, wages and salaries in the public sector have been far below those in the private sector. This was a major reason for the erosion in the competence of the public sector. In the medium- to long-run, improving the competence of the public sector institutions will require higher real wages and salaries, but this should be done only in the framework of a thorough civil service reform which would involve retaining only suitably qualified staff and substantially reducing the overall number of public sector employees. Issues of civil service reform are discussed further below in the section on Building the Institutional Capacity of the Government. In the short-run, emphasis should be given to reducing the numbers of unskilled government employees. Furthermore, wage adjustments should not be explicitly or implicitly indexed to historical inflation rates since this would set the pattern for private sector wages and prevent disinflation. As progress is made in selecting qualified employees and reducing overall numbers, real wages and salaries must be increased --but at a pa:e consistent with overall fiscal targets.

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Rationalizing public sector investments

17. The restoration of growth and steady improvement in living standards in the Dominican Republic will require a substantial level of public sector investment as well as adequate allocations for the operation and maintanence of public infrastructure and services. Given the objective of achieving a primary fiscal surplus, this must be done within a well-defined budget constraint. This will require major improvements in the institutional capacity for budgeting and investment programming.

18. In recent years the system for budgeting and investment programming has become increasingly dualistic. On the one hand, there is an institutionalized, but very weak, process involving ONAPRES, the budget office, and ONAPLAN, the planning off ice, within the Technical Secretariat of the Presidency. These offices, with very little coordination with the line ministries and between themselves, prepare a budget and a three-year investment program respectively. The President himself is very much involved in the actual execution of these programs. On the other hand, there is a separate process handled more directly by the President under which substantial revenues--perhaps half of the total--are directed through the Presidential Fund and then allocated to investment projects selected by the President.

19. The primary legal mechanism by which this dualistic system comes about is Budget Law 531. Under this law, whenever actual monthly revenues exceed the estimated revenues in the approved budget, 75% of the "surplus" is allocated to the Presidential Fund (Fund 1401) and 25% to the Budgetary Reserve Fund.!/ In recent years, the revenues in the approved budget have been grossly underestimated; for example, estimated revenue in 1988 was about half actual revenue, and the 1990 budget estimated domestic revenue at RD$4.8 billion, which was RD$2.0 billion below the actual income in 1989 despite an average inflation rate of 44%. In this way, the Presidential Fund, conceived initially as a residual fund for extraordinary revenue, has been transformed into the dominant element in expenditures.

20. Given this situation, the formal budget is not used as a framework for policy formulation. The budgetary process does not impose any discipline on the government in terms of defining and making choices about revenues and expenditures, nor does it provide a basis for monitoring and evaluating the activities of government agencies.

21. The formal process of investment programming is equally weak. ONAPLAN is supposed to prepare a rolling, three-year public sector investment

11 The Budgetary Reserve Fund may be used to cover revenues that fall short of estimates or for expenditures due to extraordinary events. It may accumulate up to 5% of estimated annual revenues, at which point it ceases to accumulate, with any excess also transferred to the Presidential Fund. At the end of the fiscal year, the balnnce of the Budgetary Reserve Fund is transferred to the Presidential Fund. The same is done with all undisbursed budget allocations.

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program. Traditionally, the program has been more in the nature of a loose inventory of projects rather than a determination of the suitable level and composition of public sector investments within the context of an overall macroeconomic program. Furthermore, projects included in the inventory are not systemmatically evaluated or prioritized; their foreign exchange costs and operation and maintenance requirements are not assessed. Funding for preinvestment studies is extremely scarce, despite the existence of a National Preinvestment Fund (FONDOPREI), and, as a result, there are very few rigorous project studies. The investment program prepared by OHAPLAN rarely has been congruent with the budgeted public sector capital expenditure defined by ONAPRES. Hence, no overview of projects actually executed exists.

22. In short, an institutional process which can mobilize the expertise of a professional civil service and can be guided by an economic team responsible for macroeconomic management does not exist in the Dominican Republic. Without such an institutional process, the extent to which public investments are well selected and consistent with overall fiscal discipline depends on the quality of the President's decision making.

B. Consolidation of Monetary Discipline

23. In the past, monetary policy has been erratic and unpredictable. Although the NEP has involved considerable tightening of money creation, consolidating monetary discipline over many years will require improving the institutional and legal framework for monetary policy making. The responsibility for monetary policy rests with the Monetary Board, but the Board and the Central Bank itself have been, de facto, subordinated to the Executive Branch. Monetary policy making could be significantly improved by reforms to increase the autonomy, professionalism, and accountability of the Monetary Board and the Central Bank and by efforts to create well-defined and more transparent policy rules under which the Board and the Central Bank would operate.

24. The Monetary Board now includes ten members appointed for an indefinite term by the President. Membership on the Board is honorary and is therefore limited to individuals who are employed elsewhere or independently wealthy. The Charter Law of the Central Bank (Law 6142, Article 10) requires that 7 of the lO members are from the private sector; and the remaining members are Governor of the Central Bank, the Secretary of Industry and Cotllmerce, and the Secretary of Finance. The autonomy and professionalism of the Board could be considerably enhanced by legal reforms which would require that members work full time and exclusively on the Monetary Board. Members should· be appointed for a specific term of office, and, to insulate somewhat the Monetary Board from the traditionally overwhelming influence of the executive branch, these terms should not coincide vith that of the Presidency but could be lengthened and staggered. Creation of an autonomous and professional Board may be facilitated by reducing the number of members from ten to six, including the Central Bank Governor. And, of course, salaries for members of the Board should be set and maintained in line with salaries paid to high-level executives in the private financial sector.

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25. Monetary discipline would also be facilitated by revising as appropriate, existing policy rules and then adhering to that revised set of rules. For example, Articles 39 and 72 of the Central Bank Charter Law contain rules regarding the monetary authorities' stock of net external assets. Article 39 states that the stock of Central Bank credit must be backed up by net external assets equivalent to at least 50% of that stock, while Article 72 recommends that the stock of net external assets of the banking system should be equal to at lc~ast three months of imports. These rules have been violated systematically for at least two decades. Redefinition of rules to which the Board would strictly adhere would help to restore confidence in future monetary discipline. Furthermore, to enable the public to monitor adherence to policy r~les, the Monetary Board and Central Bank should be required to disseminate in a timely fashion all statistics and other data that facilitate evaluation of monetary policy. Thie innovation would help to reestablish monetary stability as it would help to reduce the chronic uncertainty surrounding Central Bank behavior.

26. Effective implementation of monetary policy will also require increasing the capacity of the Central Bank for open market operations. Historically the Central Bank has not had any significant capacity for open market operations and has therefore relied almost entirely on the manipulation of reserve requirements to influence the money supply. Improving the capacity for open market operations will require design of appropriate financial instruments and training of staff, and for this technical assistance from the IMF would likely be very helpful. Also, there may be a need to revise existing legal provisions. For example, Article 64 of Charter Law of the Central Bank authorizes the Central Bank to issue stabilization bonds in pesos or dollars to regulate the money supply but implicitly limits the volume of such bonds to 5% of Ml without Congressional epproval. This might unduly limit the autonomy of the monetary authorities in conducting open market operations. Also, Article 65 of this law obliges the Central Bank to repurchase stabilization bonds at par. This provision would make it impossible to establish a secondary market in these bonds and adversely affects the development of a securities market.

27. Consolidation of monetary discipline also requires a reexamination of the roles and activities of the state-owned financial institutions, especially the Reserve Bank and the Agricultural Bank. The Central Bank has frequently, following the decision of the Executive Branch, extended credits to these institutions to finance the deficit operations of the rest of the public sector. This has been done even though the Reserve Bank and the Agricultural Bank have been chronically in arrears to the Central Bank and that the Charter Law of the Central Bank (Article 48) stipulates that the Central Bank will not consider any request for credit from banking institutions in arrears to the Central Bank. In short, via this mechanism, the Central Bank has often lost control over the pace of credit expansion.

28. In order to increase the effectiveness of the Monetary Board, it should focus on monetary and credit matters but leave matters of prudenti~l supervision of financial institutions and problems of bank solvency to the Superintendency of Banks. The need to strengthen the Superintendency of Banks and its capacity to enforce reserve requirements is discussed below in the context of financial sector reform.

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C. Creating an Incentive Framework for Efficient Private Sector Growth

29. Establishing fiscal and monetary discipline on a sustained basis is the key to macroeconomic stability, and macroeconomic stability is in turn the principal requirement for a vigorous private sector. However, ensuring efficient private sector growth will also require a correct set of incentives, i.e., appropriate price signals and a competitive environment. This involves: (1) creating a stable exchange rate regime; (2) consolidating the reform of the trade regime; (3) reforming the financial sector; (4) eliminating constraints to competition; and (5) promoting foreign direct investment.

Exchange rate regime

30. The exchange rate is perhaps the most important price in any economy and is especially critical in a small, open economy such as the Dominican Republic. The regime governing the determination of the exchange rate and the access of economic agents to foreign exchange is crucial to efficient and sustainable growth.

31. Over the last decade or so the exchange rate regime has changed frequently. Indeed, the Dominican Republic has tried virtually every approach to exchange rate policy (except a crawling peg)--and most of these approaches have been put into effect at least twice. This instability in the exchange rate regime has created great uncertainty in the private sector about the rules of the game and the price at which private agents will have access to foreign exchange. Government decisions about the exchange rate regime have often been designed primarily to reduce the fiscal cost to the Government of acquiring sufficient foreign exchange to pay its external debt service and the import bills of public enterprises and without adequate regard to the impact of these decisions on the private sector.

32. Under the New Economic Policy, the Government has indicated its intention to move toward a unified, market-determined exchange rate. This would be a major step forward in ensuring that the price of foreign exchange adjusts quickly to changes in the economic realities which affect the country's external balance. It would be a policy which would send the proper price signal to the private sector and hence would be a crucial element in the incentive framework for private sector growth. Previous efforts to allow a unified, market-determined exchange rate have not lasted very long. The Government must now try to increase the credibility and sustainability of its new policy. A formal agreement with the IMF--which involves a commitment to an external party--would help to do so. Formally completing the regulatory shift to the unified system would al~o be crucial to the credibility of the policy. In addition, the Government should carefully and publicly articulate to the private sector the rationale for and its commitment to the new policy.

33. In order to increase confidence that the new system will be sustained over time, the Government may wish to consider legal changes to sanction the new system. The Charter Law of the Central Bank (Law 6142, Article 4) now states that "It is the responsibility of the Central Bank ••• to maintain the external value (i.e., a fixed exchange rate) and the convertability of the national currency (i.e., Dominican peso)." The law could be revised to state

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that the Central Bank must maintain the convertability of the peso but to delete the requireme~t that it maintain a fixed rate. An explicit prohibition on multiple exchange rates might also be included. Furthermore, Article 25 of that law now stipulates that the Monetary Board will dictate regulations to which the purchase and sale of gold and foreign exchange must conform. This provision, which may imply a general authority to interfer in the foreign exchange market, might be replaced by a new provision stipulating that the Board may only limit the convertability of the peso under certain extreme conditions and, even then, only for limited periods.

34. Most importantly, the authorities must allow the new poli_y to work, i.e., to allow market forces to guide the nominal exchange rate. In periods during which external prices, production of major exports, and capital account flows are relatively stable, this will likely mean a rather steady nominal depreciation in those periods during which the inflation rate in the Dominican Republic exceeds that in the United States, which is the country's dominant trading partner. Such nominal depreciation is necessary to maintain the real exchange rate at a competitive level, and, to the extent that an expectation of such nominal depreciation is created, the foreign exchange market will be more orderly. Also the authorities must be prepared ~o sustain that policy through the inevitable shocks which will lead to stronger movements in the market-determined rate. In the near term when reserve levels are low, this would involve not wasting meager international reserves in an effort to prevent or even slow depreciation of the currency in response to adverse shocks. It may also require a decision to accumulate reserves beyond minimal levels in the event of favorable developments. If such accumulation of reserves is possible, they could be used in the future to "lean against the wind" in the event that external shocks which are clearly perceived to be temporary lead to sharp depreciation.

Consolidating the trade reform

35. The trade regulations introduced in September 1990 as part of the New Economic Policy were a step in the right direction, moving away from the highly protective and distortive trade regime which has prevailed for more than a decade. However, the Dominican Republic has a long way to go to fully establish a trade regime which provides the proper incentive framework for private sector development.

36. In order to understand the difficulties and opportunities which lie ahead on the road of trade liberalization, it is useful to review the nature of the trade regime which has prevailed over many years. There has been a dualistic regime under which domestic industry has evolved into two separate sectors--ths customs zone which afforded a high degree of protection and has experienced stagnation, and the free trade zones which have expanded vigorously.

37. The trade regime governing the customs zone became a labyrinth of discriminatory tariffs, trade laws, regulations, and decrees which created a high level of effective protection for most products, but with wide variance among products and considerable scope for discretionality and corruption. It

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has also been strongly biased against exports. This regime has evolved since the late 1960s: prior to that time, tariffs were relatively low and were imposed primarily for revenue purposes; beginning in the late 1960s, higher tariffs were justified to protect "infant industries." However, by the early 1980s, the average effective level of protection exceeded 100%, one of the highest levels in Latin American, and the industries had become senile. In 1986 the nominal protection for all 2670 tariff positions was 67% (unweighted average) with a standard deviation of 51%. For consumer ~oods (1047 items) the corresponding figures were 81% and 71%; £or intermediate goods (1017 items), 68% and 28%; and for capital goods (576 items), 41% and 27%. This cascading structure of tariff a resulted in estimated effective rates of protection in excess of 100% for thirty subsectors (defined at the SIC four digit level), 50-100% for twelve subsectors, 0-50% for four subsectors, and negative protection for two subsectors. A large number of import items were simply prohibited. The regime itself was extremely complex, discretionary, and subject to change by decree. For example, the exchange rate applied for customs valuation purposes varied in 1986 from RD$3 per US$ to over RD$12 compared to an official rate of RD$7.6. Mcreover, the amount of paperwork required to import was enormous.

38. The revenue generated by this complex and discretionary system were, however, far less than the tariff and tax levels would suggest. For example, using 1989 trade and tax data, the total average nominal import tax was 91%, comprising an average basic tariff and other import taxes of 67%, the foreign exchange commission of 20%, and the sales tax of imported merchandise of 4%. However, the actual total average import tax collected was less than 28%. This was due to the extensive use of exemptions and to the massive tax evasion which the high nominal tariff rates induced.

39. The Dominican Republic has found--as have other Latin American countries--that the scope for import substitution via high protection of domestic manufacturing has been exhausted. Behind this protective trade regime, domestic manufacturing has stagnated: value added in manufacturing in 1990 is only slightly above the level in 1980. (See the Statistical Appendix, Table 2.2). Of course, this stagnation was also due to the m&ny other unfavorable factors discussed in this report. But the trade regime was clearly one of the most important of these unfavorable factors in that it created an incentive framework in which domestic industries were not compelled to be internationally competitive and could hope to grow only at the rate of domestic demand. Furthermore, the private sector was compelled to devote considerable effort and resources to coping with the bureaucratic obstacles to trade.

40. By contrast, the industries operating in the free trade zones--free of the many encumbrances of the tariffs, taxes, regulations, and corruption which strangled economic activities in the customs zone--have grown rapidly. In 1980 the number of employees in the zones was 16,400 and the gross value of exports was US$117 m. By 1990, the estimated number of employees had grown to 120,000 (reflecting an average annual increase of 22%) and the gross value of exports, to US$790 m. This performance of the free trade zones dramatically illustrates the potential for growth of export-oriented industry taking advantage of the Dominican Republic's abundant labor and its important

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locational advantage. The existence of the free trade zones, of course, allowo the Dominican Republic to realize a part of this potential, especially in light manufacturing. But thn free trade zones are not a substitute for trade liberalization for the rest of the economy. Such trade liberb-iZation will not only expand the base for export-oriented light manufacturing but also stimulate export-oriented agriculture and compel! efficiency in import competing sectors.

41. The need for trade liberalization to stimulate growth with a sustainable external balance has now been widely recognized within Latin America} and most countries in the region are well advanced in reducing levels of protection. The consensus in favor of such reform appears to be growing also within the Dominican Republic, but the country still lags far behind in achieving trade reform. The medium-term objective must be to reduce the levels of protection afforded to domestic producers, and to reduce the variance in levels of protection, so as to create an incentive framework which is neutral with respect to exportables and importables. The key questions are how quickly such trade liberalization can take place and how to ensure that it is implemented effectively and fully.

42. The changes introduced by regulation in September 1990, as described in Chapter II, are clearly a step toward trade liberalization. To the extent that the regulations are i~plemented, levels of protection have been significantly lowered and harmonized, exemptions from import duties have been reduced, and quantitative restrictions (QRs) on imports have been eliminated. A program for further reductions and harmonization over the next two years has also been announced. Legislation was also submitted to Congress to embody this trade liberalization program in law. Assuming reduction in exemptions and the replacement of QRs by tariffs, it has been estimated that the total revenues obtained from customs in the near term will not change from previous levels. It is to be hoped that this means that the total payments made by importers will decline while the share of those payments which actually finds its way to the Government accounts increases.

43. However, two problems apparently have emerged since the September 1990 regulations. First, implementation of the new tariff levels and guidelines for exemptions has reportedly suffered from considerable discretionality. This tends to reduce the automacity and transparency of customs administration and provides scope for corruption. Some import prohibitions apparently remain in place. Second, the legislation introduced to the Congress was reportedly subject to considerable change with a view toward retaining higher levels of protection for certain industries. Perhaps fortunately, this alterred legislation was not passed before the Congress adjourned, and new legislation has not been resubmitted by the Executive Branch.

44. Achieving and sustaining trade liberalization in the Dominican Republic clearly requires continuing efforts by the Government. In pursuing this objective, the following considerations, which reflect the lessons of trade liberalization in other countries, should be kept in mind.

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45. First, because maintaining sufficient fis~al discipline is a sine qua nQ!1 for successful adjustment, it is important that reform of the trade regime doee not red~1ce customs revenues so rapidly as to jeopardize overall fiscal discipline. In other words, the trade liberalization prog~am cannot be planned independently of the fiscal program, and any loss of customs revenues due to the progrePsive reduction in tariffs must be compensated by increases in other revenues and/or sustainable reductions in expenditures. In the case of the Dominican Republic, import taxes and foreign exchange surcharges still constitute a major source of revenue, accounting for RD$2.4 billion out of total revenues of RD$7.2 billion in 1990. As already noted, two of the most important aspects of trade reform--replacing QRs by tariffs and eliminating exemptions to tariffs--are clearly revenue enhancing, and replacing QRs by tariffs is therefore especailly important. Therefore the first phases of trade reform can assist, rather than undermine, the consolidation of fiscal discipline. But the subsequent phase of reform involves progressive reduction of tariff levels, and this will !ikely reduce customs revenues£/. The pace of this reduction in tariffs must be matched by offsetting adjustments in other elements of the fiscal accounts. Given the potential for improving income and sales tax revenues by tax reform and improved administration, this should be easy to do.

46. Second, a simple system which does not discriminate among economic activities may be easiest to adopt and implement. A simple system would be less vulnerable to debate about which levels should apply to what goods, as illustrated by recent experience in the Congress. The Government should seriously consider revising its recent proposals and instead propose a flat tariff rate. A flat tariff rate system would also have the advantage of great clarity and automaticity.

47. Third, trade liberalization is most likely to succeed, if the currency is not overvalued at the beginning of the liberalization program. To avoid this, the exchange rate should be allowed to move to a market-determined level. If this involves real depreciation, it raises the domestic currency price of both exports and imports. Such depreciation would offset in part the impact of the reduction of tariffs on import-competing industries, slowing the pace at which these industries contract; and it stimulates output of exports, thereby absorbing labor from those import-competing industries which must contract. In the case of Dominican Republic, the decision by the Government to move to a unified· and market-determined exchange rate regime is therefore an important complement to trade liberalization.

48. Fourth, during the course of the trade liberalization, opposition will likely build up from those industries which had been viable only at higher levels of protection, and therefore the liberalization process can be vulnerable to stalling or even reversal. To prevent such reversals, the Government should proceed quickly to achieve its final targeted level for

2) It is not certain that lower tariff rates will reduce total revenues because, as rates decline, goods which had previously been smuggled into the country may be imported through legal channels so that the volume of goods on which tariffs are paid will go up.

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tariffs. No more than two or three years should be necessary to achieve targetted levels. It should also take steps to make reversal more difficult. External commitments, e.g. under the GATT, may be useful in this regard. Making the liberalization seemingly non-reversible contributes to its economic success in that it may induce the private sector to begin making production and investment decisions in anticipation of the future tariff structure. This would hasten the realization of a more competitive productive structure. Conversely, any deviations from the preannounced program of tariff reductions would both encourage the opponents of the reform and undermine the willingness of private firms to take such decisions.

49. Finally, creation of a non-discretionary, transparent, and non-corrupt customs administration is a necessary part of trade liberalization, but it has not been an easy task in many countries. The Government must be prepared to take decisive act;ons to put in place an efficient customs administration. In some countries, this has involved the wholesale restructuring of customs administration. In other countries, such as Indonesia, it was considered necessary to eliminate the existing customs administration altogether and to contract out these services to a private firm.

Financial Sector Reform

50. The Dominican financial sector has been characterized by three basic features: (1) a complex regulatory environment and special economic incentives aimed at segmenting the financial sector into various types of entities providing differentiated financial services; (2) a high level of financial repression, including administered interest rates and high reserve and directed credit requitements; and (3) a largely incompetent and ineffective supervisory authority.

51. The combination of all these fea~1•~es has led to a sector characterized by a disproportionately larg~ number of institutions (666 as of July 31, 1989), of which about 75% are informal non-bank financial entities. Despite the number of institutions, ~ommercial banks continue to control a substantial share of the sector (50% of total assets). There is a high level of concentration in the commercial banking sector with three commercial banks (including a state-owned bank) controlling over 60% of sector assets. The level of concentration may be underestimated, however, due to the prevalence of financial conglomerates providing a full range of financial services through the various forms of specialized financial institutions, while maintaining a common ownership structure and profit center.

52. The rapid growth of the informal sector in the mid-eighties was a response to the high degree of financial repression and the market's perception of the inability of the authorities to effectively enforce existing banking regulations. In addition to the spontaneous emergence of hundreds of small financieras with minimum capital and banking experience, most financial conglomerates developed their own informal entities as the vehicle to circumvent interest rate controls and taxes on financial intermediation.

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53. The quick development of the informal market and the growing macroeconomic instability created serious pressures on the regulated financial sector. This was mainly reflected in a growing disintermediation pattern that led to an estimated 37% reduction in the total assets to GDP ratio for the sector in the period 1988-1990 and a marked preference for investing in foreign exchange denominated assets. By mid-1989 the economic authorities initiated a process of gradual liberalization aimed at reducing the level of fina~cial repression of the regulated financial sector. Interest rate ceilings were increased and lending specialization requirements were partially relaxed in view of the serious levels of financial distress faced by the different segments of ~he regulated financial sector. This pr~cess was further deepened in 1990 under the NEP, leadi~g to the total liberalization of interest rates in January 1991.

54. As a result, the competitive pressure from the informal sector has been largely eliminated. In fact, most financieras are having serious problems surviving in an environment where depositors are indicating a clear preference for more secure institutions. An estimated 25% of the financieras have already exited the market, and it is expected that they will continue to go out of business in growing numbers in the coming months. On the other hand, the interest rate liberalization has put the specialized banking sector in a vulnerable position since no long-term funding is being made available to them through the Central Bank's rediscount windows and high real interest rates have totally dried up the demand for longer term financing. As a result, mortgage and development banks and savings and loan associations (S&Ls) have become increasingly involved in short-term, general purpose financing in competition with commecial banks.

55. A much stronger and more efficient financial sector will be essential for restoration of growth based on domestic savings and private sector investment. The financial system must not only mobilize domestic savings by offering secure and remunerative op~ortunities for savers but also lend those funds efficiently for the most productive uses. Although eventually a securities market may develop to channel funds more directly from savers to in7estors, at the present stage in the development of the Dominican economy, it is the banking system, broadly defined, which must be the vehicle for interm~diating savings and investment. In order to fulfull this crucial function, substantial reforms will be needed.

56. Under the New Economic Policy, the Government took a very important first step by liberalizing interest rates in January 1991. The artificial ceilings on interest rates for both deposits and loans have both sapped the liability base of the system in recent years, as inflation rose and real deposit rates fell, and driven lending institutions to complicated schemes for charging for loan funds, which has led to a very untransparent system. Letting interest rates--one of the most important prices in any economy--to adjust to market levels is an essential step toward building an efficient system of financial intermediation.

57. However, in order to create a stable and efficient financial system, further reforms will be needed in five areas: (1) creating a strong and autonomous Superintendency of Banks; (2) creating a policy and institutional

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framework to deal with financially distressed institutions; (3) restructuring the state-owned banks; 4) encouraging a gradual move toward a less segmented system with fewer, multi-service institutions; (5) and revising the laws and prudential regulations underpinning the system.

58. At present the Superintendency of Banks is not fully capable of monitoring the status of financial institutions and enforcing prudential regulations as required to maintain a financially sound system. Improving the capacity for supervision is essential for financial sector reform. In part, this inadequacy is the result of the very meager resources available to the Superintendency: it simply does not have the trained staff and the computer facilities to do the job. This inadequacy is also the result of the proliferation in the number of institutions in the system since the growth in the number of financieras during the 1980s. Although new regulations in the latter half of the decade were intended to establish prudential guidelines for these institutions and to bring them under adequate supervision, the resources available to the Superintendency have not been sufficient to do so. The Superintendency also suffers from ~-ts subordinate position within the Government: it is an administrative dependency of the Secretariat of Finance and subject to the authority of the Monetary Board. As a result, the Superintendency cannot take direct, independent action but must submit the results of its inspection of a bank to decision by the Monetary Board.

59. Despite the lack of reliable information, there are various indicators pointing to generalized liquidity and solvency problems in the Dominican financial sector. The recent failures of five commercial banks (whose operations remain suspended), some mortgage, development and S&Ls institutions, and over 100 unregulated financieras provide a clear indication of a sector that faces a high degree of financial distress. The handling by the authorities of the various financial institutions which have been ordered closed has been very poor. Several months after having suspended their operations, the authorities have made no final decision on their liquidation or on a strategy to deal with the financial problems faced by these institutions. Although the Monetary Board has recently authorized the Superintendency of Banks to intervene in priva~e commercial banks facing severe liquidity problems and has approved procedures to deal with financial institutions in distress, prudential regulaticns still need some strengthening. At present most prudential regulations continue to be issued by the Monetary Board. The Board has developed into an all embracing power with authority to amend laws and issue detailed regulations even in matters that would normally be handled through detailed instructions of the Superintendency of Banks. This has led to an abundant and ever-changing regulatory environment that has affected transparency and reliability of sector rules. To improve this situation the key prudential regulations should be established in the law, where a new policy and institutional framework is defined which would establish in a transparent manner the circumstances triggering intervention and measures applicable to a bank £acing financial distress and the procedures to deal with distress condition>. This new framework would prescribe the sphere of intervention of the banking authorities, promote private solutions to the crisis, and provide for an expeditious asset liquidation procedure in case the bank would not be able to overcome the crisis. In addition, further work will be needed to determine

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the viability of existing institutions and the steps that must be taken to restore financial health to the sector. Given the apparent weakness of many financial institutions and the risk of crisis, the process of restoring financial sector health may be prolonged and painful, but it must be pursued with political determination to avoid compromising macroeconomic stability.

60. The state-owned banks, especially the Reserve Bank, have not in the past been subject to the same prudential regulations as private banks, and this has been one reason for poor monetary discipline. These banks should be required to comply with these regulations, and, in most cases, compliance with these regulations and elimination of privileged access to Central Bank lines of credit will require a substantial restructuring effort.

61. It i~ evident that the Dominican financial system is overcrowded with establishments, especially the so-called "financial companies not regulated by special laws," which apparently number up to 400. The large number of institutions adds to the instability and lack of control of the financial system. Much of this proliferation in institutions is the result of costly adaptation by the market to the excessive regulations. Consolidating the system into a financial market with fewer but more uniform and solid institutions would likely improve it.s soundness and efficiency. This is a process which will take some time.

62. At present the financial systems is based on several laws, especially the General Bank Law (Law No. 708 enacted in 1965), which are outdated and inadA~uate in several respects and therefore require careful review. The exis .g legal framework has brought about the segmentation and specialization in the market. Also, for example, the General Bank Law establishes minimum c~pital requirements and fines for reserve requirement deficiencies which, having been made obsolete by inflation, have been superseded by regulations. Some of the problems mentioned above with respect to the Superintendency of Banks result from provisions in the General Bank Law: it is that law which makes the Superintendency a subordinate, rather than autonomous, institution. Hence, thorough reform of the financial sector will require reexaminat~on and likely revision of this, as well as the laws governing development and mortgage banks.

63. All of these areas will require very careful study in order to decide upon a detailed program of reform. The on-going study conducted with the assistance of the World Bank and UNDP should be very helpful. The reforms themselves will take time to fully implement. Given that an efficient financial system is one of the foundations for sustainable growth, such reforms must be very high on the agenda for Government policy makers.

Eliminating Constraints to Competition

64. Creating an appropriate incentive framework for private sector development involves not only reducing trade barriers in order to expose domestic firms to international competition but also eliminating other potential barriers to healthy competition among domestic firms, including those involved in nontradable goods and services.

•

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65. With respect to tradable goods, opening the economy to international competition through the elimination of quantitative restrictions, reduction of tariffs, and simplification ~f import procedures is certainly the most important step in ensuring adequate competition. In addition, removal of price controls is an essential element of an appropriate incentive framework. Historically, the Government of the Dominican Republic has made very extensive use of price controls. In recent years, these have been administered by the National Price Stabilization Institute (INESPRE) and were applied not only to goods and services produced by state enterprises but also to many goods produced only by private sector firms. Although efforts to limit the price of basic goods by administrative fiat may reduce their direct costs to consumers in the short run, this inevitably has two perverse effects. First, the artifically low price does not provide sufficient incentive for firms to expand supply. In the longer run, this is especially perverse in those industries which cannot grow enough to take advantage of economies of scsle or new technologies. Second, given that demand exceeds supply at the artificial price, rationing of available supply among consumers will take place by other mechanisms such as corruption, by which someone other than the producer ends up extracting a market price from the consumer, or queuing, by which people pay in terms of waiting time rather than money for the right to acquire the good.

66. Given these perverse effects, the only acceptable rationale for price controls would be to prevent monopolistic or oligopolistic behavior by a limited number of producers or market makers for key commodities. Again, for tradable commodities, such behavior can be limited, if not eliminated, by substantially reducing barriers to imports. The concentration of financial assets among a few large banks indicates the risk of noncompetitive behavior in the financial sector; an important means to reduce this risk is to allow entry to strong foreign banks. A few foreign banks are already operating in the Dominican Republic, but given the right environment the scope for foreign bank operations could be significantly expanded, and this would ensure healthy competition in financial services. In other services, allowing entry by foreign firms may also be important. For nontradable goods and services, such as domestic trucking, noncompetitive pricing behavior by the private sector can be an important problem, especially in a small economy such as the Dominican Republic. If anti-trust laws could operate effectively, this would be the best solution to such problems, but in some cases regulation of pricing by a professional governmental agency may be necessary.

67. Under the New Economic Policy, the Government has made progress in raising certain prices toward economic levels and in reducing the coverage of price controls. However, given the prevalence of price controls in the past, private sector firms may be reluctant to invest in the production of goods which may again become subject to price controls in the future. From this point of view, the very existence of laws, regulations, and institutions which give the Government the authority and administrative mechanism to impose price controls constitutes an impediment to private sector investment in the production and marketing of these goods. For this reason, in order to create the proper incentive framework, the Government should consider new laws or regulations which restrict its own authority to control prices and should dismantle agencies such as INESPRE which are dedicated to this purpose.

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68. A similar impediment to the growth of the private sector is the pervasiveness of public sector enterprises in the production of many basic goods. As discussed in the next section, public enterprises, especially those owned by CORDE, are now involved in the production of a very wide range of goods which, in most countries, would be produced only by private sector firms. Even though these enterprises do not have a legal monopoly and do not produce a high quality product at a competitive price, their very existence probably constitutes a major barrier to entry for private sector firms. A private firm would understandably assume that, if it successfully began to produce higher-quality and/or lower price goods in direct competition with a public enterprise, that enterprise would be able to use the resources of the Government, by direct subsidy or otherwise, to maintain its market share. In other words, private sector firms would likely assume that there would not be fair competition--or a "level playing field"--if it competes with a public enterprise. Hence, there will be no serious private sector effort to produce goods which are now produced, however inefficiently, by the public sector. This is an important reason for privatizing those public enterprises which produced goods and services which could equally well be produced by the private sector. This is the subject of the next section.

69. In its efforts to eliminate constraints to competition in the economy, the Government--as a major purchaser of goods and services--can make an important contribution by using appropriate competitive bidding procedures in its own operations. The creation and enforcement of regulations requiring competitive bidding for all Government purchases and contracts would not only increase the efficiency of government operations but also help create the proper environment for private sector growth.

Promoting foreign direct investment

70. Vigorous private sector growth in the Dominican Republic would be greatly facilitated by direct investment from foreign companies. Foreign companies not only provide capital but also technologies and marketing channels which will be very important in increasing the international competitiveness and export-orientation of domestic industries. The potential value of foreign direct investment is demonstrated by the rapid growth of the Dominican tourist industry, which has been financed in large part by foreign firms. The investments in the tourist sector have been the major factor in the increase in net direct investment from less than US$50 m. annually in the mid-1980s to well over US$100 m. in recent years. Despite this recent increase, net direct investments remain below 2% of GDP compared to levels of about 4% of GDP in the late 1960s. Hence the potential for foreign direct investment in the Dominican Republic has barely been tapped, especially in agricultural and agroindustries, for which the country,s natural resources and proximity to the U.S. market are especially well suited. In order to realize this potential, it is important to review the legal and regulatory environment affecting foreign direct investment to ensure that this environment is no less favorable than offered by other countries in the region. In addition, all of the reforms discussed in this report which are essential to provide an appropriate incentive framework for the domestic private sector are also important for the promotion of foreign direct investment.

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D. Reform and Privatization of Public Enterprises

71. Public enterprises (PEs) have played a dominant role in the Dominican economy for decades. For the most part the existing PEs were the appropriated assets of the Trujillo regime; they were not created to correct market failures or to implement a particular development strategy. Nonetheless, the PEs have been pervasive in the economy. In agriculture, the sugar estates of the State Sugar Council and the collective rice f arros of the Dominican Agricultural Institute own over 38% of all arable land. PEs operate in heavy industries (e.g. petroleum r1'tining), power generation, transport (e.g. aviation), construction (e.g. housing), financial services (with six public banks holding over one-third of the net assets of the financial system), mining, communications, and consumer goods. Appendix I provides a detailed discussion of four major PEs, including some of the largest companies within the holding company called CORDE, and their problems.

72. Four major points must be made about the PEs in the Dominican economy. First, for the most part, they are involved in economic activities which in most countries would be handled by the private sector. For virtually all of these activities, there are no compelling reasons--in terms of natural monopolies, externalities, or other market failures--for a public enterprise. Second, the Government has used the PEs to pursue social and political objectives and has not allowed or required them to function as if they were private enterprises. In particular, the PEs have often been used to provide goods and services--such as wheat flour, sugar, and electric power--at subsidized prices. And employment opportunities in the PEs have been used consistently for the purpose of political patronage. Third, primarily as a consequence of this second point, most of the PEs in the Dominican Republic have been very inefficient: they have suffered from poor management, which often results from politically motivated appointments to managerial positions; they have provided unreliable service; and they have generally incurred large operating deficits. As a result of their poor financial performance, they have required substantial financial support from the Central Government, and collectively the PEs have been a major reason for the fiscal deficits of the consolidated public sector during the 1980s. They have incurred significant debts--both internal and external--which they are now generally unable to service. Fourth, their poor performance and, in some cases, their very existence has been a·burden or. both the private sector and the rest of the public sector. The provision of unreliable service by key PEs has hampered private sector performance, and, as noted above, their involvement in any economic activity has almost certainly deterred private sector involvement in that activity. Also, managing the PEs has been an additional burden--both financial and administrative--on the already weak capacity of the Government.

73. The most prominent example of the problems of the PEs is the case of Corporacion Dominicana de Electricidad (CDE). Over the last decade, CDE has required very large current and capital transfers from the Central Government. Nevertheless, CDE has been exceedingly inefficient, its service has been extremely unreliable, and in recent years its power output has actually declined. This poor performance has caused significant loss of output by the private sector and compelled many private companies to invest in small and

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inefficient power generators of their own. During 1990 and 1991 some improvements have been made in the operations of CDE, and, as reliability of service improves, it has been more successful at collecting bills from customers. However, the funds already invested (some US$50 m.) in the integral rehabilitation program will be wasted unless the Government gives timely financial and institutional support to the program. Without this support, CDE will remain among of the worst public power companies in Latin America and the Caribbean.

74. In short, the poor performance of the PEs has been one of the major reasons for the economic stagnation and disequilibria of the 1980s, and solving the problems of the PEs must be a key component of the structural reforms necessary for sustainable gr:>Wth. Because there does not appear to be a sufficient policy rationale for keeping most of these PEs in the public sector, the priority should be to privatize these PEs as soon as this can be done in an orderly, responsible manner. For those PEs for which privatization is not considered appropriate or needs to be delayed for some time, reforms should focus on redefining the relationship between the enterprise and the Government so that the PE is subject to a market-like discipline.

75. With respect to privatization, several general points are important. First, sale of public assets must be done carefully and in a fair, transparent manner to ensure that the Government receives a fair price and to avoid suspicions and accusations that private purchasers are benefiting unfairly at public expense. This will involve the professional preparation of valuations of the companies to be privatized and a public bidding process. Second, to implement such an orderly and transparent process of privatization for a large number of PEs will require a major administrative effort requiring considerable expertise. This capacity and expertise does not now exist within the Government, and therefore priority must be given to creating an agency within the Government which will have the mandate and capacity to implement the privatization process. Such an agency will likely need to procure the services of experts to assist in the preparation of clear and transparent valuation criteria, in the actual valuation of PEs, aTid in the sales process. Third, once it ha~ been decided that a particular PE does not belong in the public sector, as a general rule, only the minimum necessary steps should be taken to make it more attactive for sale to a private owner. In particular, there may be legal steps necessary to ensure that the Government can sell the enterprise. Issues of arrears on debts within the public sector must be settled. But new investments should not be made in order to make the PE more profitable: the company should be sold at its existing value. PEs for which there is no offer should be dissolved. Fourth, in order to initiate the process and establish its credibility, it would seem best to begin with the privatization of several small, reasonably viable enterprises. As discussed in Appendix I, some of the smaller CORDE enterprises may be suitable for early privatization. Further comments on the particular issues related to privatization of some of the major PEs are given in Appendix I.

76. For those, hopefully few, PEs which the Government might decide to keep in the public sector, at least for the foreseeable future, it will be necessary to introduce significant reforms in the relationship between the PEs and the Government. The basic purpose of such reforms should be to· create an

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appropriate incentive framework so that the PE must operate more efficiently. A key reform must be to avoid political appointment of manaeers who do not have adequate expertise or skills. Supervisory agencies should ideally establish objectives and performance-based incentives for managers and board of directors of the PEs. Specific targets should be established for reducing the financial dependency of the enterprise on the Central Government. As part of those performance contracts, PEs should be allowed to eliminate excess labor and to contract-out services previously provided within the company in order to improve productivity. As already noted above, financial viability will require that output prices are allowed to move to economic opportunity costs. More detailed discussion about previous and possible reform efforts for CORDE, CEA, Rosario Dominicano, and REFIDOMSA is presented in Appendix I.

E. Improving Social Sector Programs

17. As the economy stagnated during the 1980s, poverty worsened significantly, and by the late 1980s it was estimated that one quarter of Dominican families were living below the poverty line and that two-fifths of children were malnourished. While enrollment rates in schools were reasonably good compared to other Latin American countries, the average quality of basic educatinn had declined to a level insufficient to prepare youth for productive employment or further education and training. The rate of literacy is estimated to be below 70%, which is one of the lowest levels in the region. Serious deficiencies in health, water supply, sanitation, and housing affect 30-40 percent of the population.

78. The most important means to arrest this decline and reduce the incidence of poverty will be to restore general economic growth to levels which will permit at least modest increases in per capita consumption. In addition, as a long term investment in human capital development, the Government will need to increase its expenditures for education and health and improve the efficiency of those expenditures. Efficiency could be improved, for example, by emphasizing preventive and basic curative health services. In the short-term, the Government should more effectively implement carefully targetted programs to reduce malnutrition and associated health problems. In order to achieve these objectives within the constraint of greater fiscal discipline, two basic principles will be important. First, the beneficiaries of social sector investments should be expected to pay at least part of the cost of services commensurate with their income levels. Second, programs involving direct provisions of goods and services, or cash transfers, must be limited to the most vulnerable target groups. Generalized subsidies or provision of goods and services are simply not affordable. In order to achieve efficient targeting, greater effort will be needed to collect data on poverty, nutrition, etc. A separate World Bank study on means to improve social sector programs is expected to be completed soon.

F. Building the Institutional Capacity of the Government

79. Although the private sector must be relied upon as the principal source of economic growth, the public sector must be able both to maintain a stable macroeconomic policy environment and to provide in a reasonable efficient manner the necessary investments in public infrastructure and human

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capital development. At present the government institutions in the Dominican Republic are very poorly equipped for these tasks. Some of the needed reforms with respect to budgeting and investment programming have already been discussed above in the context of the management of expenditures consistent with improved fiscal discipline. This section will discuss briefly broader issues of civil service reform which, over the medium to long-term, would contribute very substantially to improving the capacity of the government.

80. Since the Spanish colonization, the governmental bureaucracy in the Dominican Republic was staffed from top to bottom by executive appointment. Appointments were made primarily on the basis of political loyalties, and virtually all public employees served at the pleasure of the president. After the demise of the Trujillo regime and the establishment of democratic government, successive administrations have continued the tradition of a strong executive and personalized leadership, with the result that public institutions have never matured as effective agents of economic and social development. A merit-based civil service has never been created in the Dominican Republic.

81. Moreover, over the last decade or so, the capacity of governmental institutions has been further eroded by the rapid decline in real wages and salaries, high turnover, rampant corruption, a massive exodus of qualified employees, and an overabundance of unskilled labor. The average real public sector wage has plunged about 60% since the early 1970~, and about 40% since 1980. The real salary of secretaries of state has declined by 80%. Not surprisingly, the Govenunent uas been unable to retain mid- and high-level managers and professionals. An acute shortage of qualified personnel has become one of the main obstacles to operational and financial efficiency throughout the public sec~or.

82. This shortage coexists with an abundance of unskilled and underemployed labor in many state entitites. Overall public sector employment could be reduced substantially without affecting adversely public sector operations.

83. In 1965, the Provisional Government created the Technical Secretariat of the Presidency (Law SS), which consists of the National Planning Office (ONAPLAN), the National Budget Office (ONAPRES), the National Administration and Personal Office (ONAP), and the National Statistics Office (ONE). ONAP was created specifically for the purpose of developing and implementing a modern, merit-based personnel system. It prepared a series of administrative reform bills, including a Civil Service and Employment Law, a Law of Public Administration Procedures, a revised Law of Administrative Justice, and a Law of the Regional Administration of the State. Only one of these draft laws ever reached Congress, and none was approved. Instead, successive chief executives have pref erred to maintain the traditional system of political patronage and have periodically used the government bureaucracy to absorb significant numbers of the unemployed.

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84. The economic decline of the last decade or so should provide convincing evidence that the Dominican Republic can no longer afford to operate public institutions based on political patronage. The long-term success of the proposed reforms required to restore sustainable growth will depend in large measure on the creation of a merit-based professional civil service. It will take some time to develop a merit-based civil service, and that process should begin with a careful review of the structure and purposes of the Central Government. In the meantime, several steps should be initiated as soon as possible. First, substantial numbers of underqualified and unskilled public employees should be removed from the public payroll. The existing system apparently provides sufficient flexibility to do so. Government jobs are classified into two categories--permanent (fi1o) and temporary (nominal). Traditionally, a new administration reduces public employment during the first year after election by eliminating temporary jobs; these are then refilled with political supporters. For a meaningful reform, these temporary jobs could simply be eliminated with adequate severance payments. Second, salaries for a very selective group of managerial and professional personnel should be brought in line with those in the private sector in order to attract the talent required to administer public sector institutions more effectively. The private sector now enjoys sufficient number of capable professionals and managers, and incentives to attract some of these persons into the public service and thereby improve public sector performance would enhance, rather than hinder, private sector development. Third, the Government must seriously renew the efforts once initiated by ONAP to create new rules or laws governing the civil service. The draft laws once prepared by ONAP may still deserve reconsideration, and ONAP or a successor institution should be given the mandate--and the competence--to do so. As an initial step or perhaps as an expedient alternative to new legislation, significant steps toward a merit-based civil service may be possible by decree since Article 55 of the Constitution allows the President to appoint all public employees and presumably would all him to define the rules governing such appointment.

G. Conclusions

85. In conclusion, three, related points deserve emphasis. First, in order to maintain macroeconomic stability, to design and implement structural reforms, and to achieve sustainable growth, the Government must give attention not only to the policies themselves but also to the institutional processes by which policies are made and implemented. When external circumstances change, or when key people in the Government step down, sustaining good macroeconomic policy will require an institutionalized capacity to make good policy decisions.

86. Second, the structural reforms discussed above are interdependent and they will take time. Successful change in one area cannot be sustained without reasonable success in the other areas. For example, increasing revenues will not contribute to growth if the Government cannot improve its capacity for efficient investment; a unified, market-determined exchange rate policy is not likely to be maintained unless the Government can find sufficient revenues to off set the fiscal costs of currency depreciation; the private sector will not

- 45 -

be able to respond to the new incentive framework after trade liberalization unless the financial reform brings about reasonably efficient financial intermediation; and fiscal discipline will not stop inflation if the Monetary Board cannot control money creation through the financial system. And many of the reforms will take ~ime to do well.

87. And, third, making good policies over time and keeping all of the interdependent reforms on track will require a reasonably coherent, stable team of economic policy makers. Such an economic team has seldom been in place in the Dc>tninican Republic, but success in escaping the economic legacy of the 1980s and realizing the nation's economic potential in the 1990s will require the sort of competent economic management which only a capable team can achieve.

- 46 -

CHAPTER IV

MEDIUM TERM ECONOMIC GROWTH PROSPECTS AND EXTERNAL FINANCING REQUIREMENTS

1. The medium-term prospects for the Dominican Republic will depend on how succesfully the Government implements the structural reforms discussed in Chapter Ill. In this chapter it is assumed that the Government achieves considerable success in the key areas of fiscal and monetary discipline, trade and exchange rate management, public sector efficiency, and financial sector reform. On this basis, domestic savings, investment, and capital productivity are projected to improve substantially. Poor performance in any of these key structural reforms will be a serious impediment to reaching the growth rates shown in the macroeconomic projections.

Key Assumptions of the Projections

2. Investment, savings and productivity of capital. The results of the macro-economic projections depend critically upon achieving a significant improvement in the efficiency of capital and upon recovering past levels of saving and investment. The efficiency of capital will need to more than double the levels achieved in the 1980s, or, if measured roughly by the Incremental Capital-Output Ratio (ICOR), the amount of additional capital required to increase output by one unit would need to decrease to less that half the amount observed in the 1980s. However, the assumed ICOR levels would remain above the average level of the 1970s. Domestic savings will need to increase substantially, from the historically low level of about 10 per cent of GDP observed in 1990 to at least 14 per cent in 1992, 18 per cent in 1995 and 19 per cent in year 2000. Without these increases in the rate of domestic savings, it will be impossible to reach the levels of investment postulated irL the projections, which increase from the very low 14 per cent of GDP observed in 1990 to at least 17 per cent in 1992, 21 per cent in 1995 and 23 per cent in year 2000. Table 4.1 compares the historical levels of investment and savings --as per cent of GDP-- and of the productivity of capital --as measured by the Incremental Capital-Output ratio (ICOR)-- with their corresponding levels postulated in macro-economic projections.

Table 4.1: Investment, Savings, and Productivity of Capital

Average Projection results 1970-79 1980-89 1990 1992 1995 2000

Investment 24.2 22.3 14.5 17.l 20.s 22.8 (as l of GDP) Domestic Savings 18.0 14.9 10.S 13.7 17.6 18.9 (as % of CDP) ICOR 3.6 12.8 5.3 4.7 5.0

- 47 -

3. To improve the productivity of capital is critical. Improvements in productivity in the private sector could only be achieved by creating an enabling environment as discussed in Chapter III. In such an environment domestic entrepreneurs would be able to concentrate their efforts on productive activities rather than rent-seeking behavior. Rent seeking behavior is the product of lack of automatic, transparent, and non­discretionary rules observed in almost all areas of activities in Dominican Republic. Low capital productivity is also a direct product of non­competirive behavior. Lack of competition in the production of tradables is mainly due to inadequate trade policies that create high levels of protection to some local industries. Lack of competition in the production of non­tradables is mainly due to the existence of barriers for private firms to freely enter into the market. In Dominican Republic the Government has entered many productive activities that are usually performed by the private sector in other countries. This inhibits the private sector from entering the market for fear of unfair competition, even when government enterprises are well known for their inefficiency. Little hope will exist for raising capital productivity if the Government continues to be inefficiently in charge of typically private sector activities.

4. The overall productivity of capital has also been affected by the quality of the public investment program. Although the Government has on many ocassions made efforts at improving the productivity of government capital, including a major review of the investment program of 1989-91 done in late 1989, the productivity of investment by the Government continues to be very low. The poor management of public finances and of the public budget has directly affected productivity of public investment. The lack of local and foreign resources derived from poor management of fiscal, monetary and debt policies has forced many delays and interruptions in project implementation, cost increases and real losses in productivity. A new revision of the Government's investment program in line with a realistic assessment of funding possibilities is urgently needed.

5. Domestic savings need to be raised substantially. Private savings, however, can not be presently mo~ilized efficiently into productive activities due to serious weaknesses in the financial system as discussed in Chapter III. Di~trust in the capability of the domestic financial sector to offer safe and rewarding opportunities directly affect the level of domestic savings. The reform of the financial system is essential to stimulate domestic savings. Public savings, on the other hand, will depend heavily on the capacity of the Government to implement the recently proposed tax reform, to enhance tax administration, and to eliminate the losses of public enterprises. Since all these reforms will take time to be implemented, the macroeconomic projections have initially taken into account a relatively modest improvement in the rate of savings from 10.5 per cent of GDP in 1990 to 13.7 per cent of GDP in 1992. The domestic savings rate increases substantially in the later years, to at least 18 per cent of GDP in 1995 and beyond.

6. ~xternal Debt. The structure of the Dominican Republic's external debt as of the end of 1990 is shown in Table 4.2. Several aspects of the current debt structure deserve emphasis. First, the public sector external debt accounts for about 95% of the total debt. Second, about three-fourths of

public sector's external debt is owed to official creditors: about half of the total external debt is to bilateral creditors, of which the United States is the largest cr3ditor; and about one-fourth is to the international financial institutions, of which IDB is the largest creditor. Commercial banks hold only about one-fourth of total public sector debt. Third, arrears--both principal and interest arrears--have become very large. The fact that principal arrears have become so large reflects the fact that, ~ollowing its Paris Club rescheduling in 1985 and its unsigned Multi-Year Rescheduling Agreement (MYRA) with commercial banks in 1986, the Dominican Government has not attempted to normalize its relationships with these creditors and thereby to obtain additional rescheduling of principal.

Table 4.2: MedilA!l and Long·term External Debt and Arrears as of 1990

(Millions of USS)

-·-·······-----·-···-----------·····---·-····-···········--·-···-·------------------------------·····

A. Public & Publicly Guar. LT 1. Official Creditors 3/

a. Multilateral b. Bilateral

2. Private Creditors a. Conmercial Banks b. Other Private

B. Private Non-Guaranteed

Total Long·Term DOD

DOD 1/

3051.3 2221.6 815.8

1405.8 829.7 660.8 168.9 109.7

3161.0

Arrears 2/

1431.3 1130. 9

43.8 1087.1 300.4 231.5 68.9

1431 .3 ===================================================================================================== 1/ Includes arrears on principal but not on interest. 2/ Arrears of principal and interest, and including contractual

penalties for late payments. 3/ Excludes reserve liabilities to IMF.

7. The Dominican Republic is classified in the World Bank's Debt Tables as a "moderately indebted middle-income" country. Table 4.3 presents key debt indicators for the Dominican Republic and for comparator countries and groups of countries. Ae of 1989, its ratio of total external debt the GNP is higher than the average for moderately indebted middle-income countries. However, the ratio of its external debt to exp~rts of goods and services is about equal to the average for this category of countries. In terms of debt service payments, in 1989 the Dominican Republic actually paid much less as a share of exports than most debtor countries. Even if the Dominicn Republic had paid all interest due in 1989 (but rescheduled principal), its debts service to exports ratio would not have been particularly large. However, virtually all of the external debt is public sector debt, and the fiscal burden of debt service is substantial.

8. Although from a balance of payments perspective, the Republic's debt problems are not so severe as those of many other debtors, they nonetheless pose a serious obstacle to the restoration of a sustainable external balance and to sustainable economic growth. The problem is most difficult in the short-run because the Government has allowed arrears to build up to such high levels. The existence of this external debt overhang, including substantial arrears, is a serious threat to renewed growth for two reasons. First, even in the near term, the overhang of public debt obligations aggravates the uncertainty about macroeconomic stability and thereby impedes private sector investment and growth. Until it is clear how the Government will deal with

- 49 -

Table 4.3: Key Debt Indicators for the Dominican Republic and Comparator Countries

(based on 1989 data)

EDT/GNP EDT/XGS TDS/XGS TDS+ INT. ARREARS/XGS

Dominican Republic 63.3 164.9 12.9 ~at. America & the Caribbean 46.7 284.4 30.5 Moderately Indebted

Middle-Income Countries 48.6 169.4 31.l Moderately Indebted Low-

Income Countries 57.1 243.4 31.2 Severely Indebted MiddlP.-

Income Countries 54.9 294.3 28.6 Severely Indebted Low-

Income Countries 99.S 492.7 22.8 Nicaragua 623.6 2923.9!!,/ 9.3!!,/ Jamaica 91.2 236.2 19.2 Guatemala 32.6 171.1 19

Notes: TDS = Total debt service (interest plus amortization actually paid). EDT • External debt XGS = Exports of goods and services GNP • Gross national product !!I For 1988.

25.31 41. 76

32.04

31.42

42.96

50.60 322.55!!,/ 36.63 27.37

its external obligations, the prospects for maintaining fiscal and monetary discipline will be clouded. Second, especially in the medium- to long-run, the Dominican Republic will almost cartainly need to be a net capital importer in order to attain a reasonably satisfactory growth rate. To the extent possible, such capital should be obtained through direct investment, grants, and other non-debt instruments. But, in addition, the Dominican Republic is likely to need net flows from official and perhaps other creditors. Specifically, the Dominican Republic in the coming years should avail itself of the financial and technical assistance provided by the multilateral and bilateral creditors, ·especially if such financing is available on concessional terms. In the longer term, it may wish to take advantage of international capital markets to augment domestic savings. To do so, it must reestablish its creditworthiness.

9. In these medium-term projections, several assumptions have been made regarding external debt. First, it is assumed that the Dominican Republic will fully service its obligations to the multilateral financial institutions consistent with their status as preferred creditors. This will make possible not only new commitments from these institutions but also technical assistance which could play a useful role in macroecon~mic management, project desig~ and implementation, and in~t1~~tional development. On the assumption that the Government moves forw~ "Q to implement the slructural reforms discussed ~n earlier chapters, the projections assume new commitments over the next five years somewhat higher than in previous years. Second, it is assumed that during 1991 and 1992 the Dominican Republic obtains a rescheduling of Paris

- 50 -

Club debt of exi•ting arrears and of principal and interest due in 1991 and 1992 on the terma already approved for heavily-indebted lower middle-income countriee. The projection• also assume that from 1993 onward th• Dominican Republic would ••rvic• existing Paris Club debt as it falls due rather than to seek additional rescheduling. Third, it is assumed that the Dominican Republic can negotiate with other bilateral creditors to obtain the came terms for rescheduling provided by the Paris Club creditors. And, finally, with respect to comnercial banks, it is assumed in these projections that the Dominican Republic can reschedule all amortization payments beyond the planning horizon but will pay all contractual interest.

10. Exports. Export price assumptions are as provided by the World Bank's commodity division. Bank's forecasts incorporate commodity specific prospects for demand, supply and trade, and have underlying macro-economic assumptions for the global economy. The sugar price used is a weighted average of the projected world free market price and the US quota price, with the weights provided by the share of sugar assumed to be sold under the quota arrangement. The US quota price is projected at about US$20 per 100 lbs in 1992, while the free market price for that same year is projected at about US$13.4 per 100 lbs. Nickel prices are likely to decline as the market returns to balance following the surge in consumption in recent years and the sharp increases in prices in the late 1980s. However, the decline is not expected to be as dramatic as the explosion in prices in 1988. In fact, between 1995 and 2000, nickel prices are expected to increase in real US dollars terms. For the years 2000 and 2005, nickel prices are expected to be at $2.39/lb and $2.2/lb, respectively, in constant 1985 dollars, roughly equivalent to the marginal production costs expected to prevail over the long run. Table 4.4 shows the export price indices used in the projections.

Table 4.4: Export Price Indices

1990 1991 1992 1993 1996 U9S 1996 1997 1998 1991 2000

Sugu· 100.0 101.8 156. l 148.1 uo.o 119.6 126.9 ll4.S 142.6 151.2 160.3 CoffH 100.0 108.4 112.J 117.2 124.l 137.9 1(,9.9 16Z.8 176.9 192.2 208.8 Cocoa 100.0 102.4 108 . 112.6 118. l 126.0 134.6 llol .9 1S3.8 164.l 175.6 Tobacco 100.0 102.7 106._ ?S.J 106.6 110.1 114.0 111.0 122. l 126.4 uo.1 Bauxite 100.0 106.7 106.7 .10.0 116. 7 u.s.o 127.3 129 • .S Ul.9 ll4.2 136.7 Nickel 100.0 100.9 96.7 18.6 86.4 19.7 9.S. t 100.1 106.1 au.z 120.0 Cold 100.0 10~.1 110.3 us.• 123.1 121.2 Ul.O U7.9 143.0 141.J UJ.I Silver lOO.O lOl!.O 106.0 108.0 112.0 111.0 124.5 lll.l Ul.4 146.0 U4.0 Other Coed• 100.0 109.0 110.l 109.1 lU.6 us.a 120.S 126.2 uo.J Uto.7 U9.2

11. The export volume projections used in this study are sU111D&rized in Table 4.S. Sugar volumes are assumed to increase regularly within the levels of USA quotas after facing a temporary set back in 1991 and 1992 due to labor unrest. Geld and bauxite fall to zero after 1992 due to exhaustion of the mines.

- 51 -Table 4.5: Export Volume lndicea

1990 1991 1992 199J 1994 i11u 1996 1997 1998 19'1 2000

Susu· 100.0 us.o 115 .o 124.0 126.S 129.0 J.l1.6 134.2 U6.9 U9.7 1"2 .J Coffee 100.0 106.6 119. l 1211.s U•.8 137 ,9 164.2 uo.1 1S7.S 16'o.6 112.0 Coi:o• 100.0 106.6 lll .S 116.2 199.0 121.8 124.9 128.0 Ul. 2 ll"·' 137.9 Tobei:i:o 100.0 112.11 137 .1 138.7 141.9 144.4 147.6 uo.9 U4.2 157. 7 161.2 leu1'ite 100.0 uo.1 U0.7 o.o o.o o.o o.o o.o o.o o.o o.o IU.i:kel 100.0 106.3 106.J 106.l 106.3 106.l 106.3 106.3 106. 3 . 106. J 106.3 Cold 100.0 92.9 96.4 o.o o.o o.o o.o o.o o.o o.o o.o Silver 100.0 108.8 112.9 117 .o 121. l 12S.2 129.2 133 .• 137 .s 14 l.6 us.a Other Coode 100.0 14.l 48 • .S 97.• 134 .1 167.9 lH.S 136 .1 ll6.8 137.S 138.2

Pro1ection Results

12. Table 4.6 shows the projected evolution of GDP, consumption, savings and investment. As the investment rate is assumed to increase to about 23 per cent of GDP, and the incremental capital-output ratio is expected to improve to about 5, the rate of growth of GDP stabilizes at about 4.6 per cent a year after full capacity utilizatiun is reached by 1995-96. During the early years of the projections, however, the rate of growth is more rapid, from the zero growth rate expected in 1991 to about 5 per cent in 1994, when full capacity utilization is assumed to be reached. B~cause the domestic saving rate increases, but no growth is expected in 1991, consumption actually falls in real terms in 1991 but quickly recovers to about 3 per cent, a rate higher than the rate of growth of population (2.4%) during 1992-94 period. By 1995, however, per capita consumption is expected to decline tempora~ily, as growth is limited by the rate of growth in the stock of capital and the improvement in capital productivity.

Table 4.6: Medium-term Projection Reaults

1990 1991 199? 1993 199" 1995 1996 1997 1991 1991 2000

CDP crovth o.o 3.0 4.0 5.0 1.2 4.6 6,6 4.6 4.6 4.6 Con•umption 1r0V1:h -1.2 3.2 3.0 2.8 1.7 4.0 J.l 4.6 4.6 4.6 S/CDY 11.3 12.J u.1 14.7 u.1 17.6 17.9 U.9 18.9 U.9 18.9 1/CDY 14.J 16.0 17 .1 ia.1 19.5 20;e 21.8 zz.8 22.1 22.8. 22.8

13. Additional macroeconomic indicators from the projections are presented in Table 4.7. Exports of goods and non-factor services increases at an annual average rate of 4.9% in 1992-94, while imports of goods and non-factor

- 52 -

services --implied by import-income elasticitii!s of about 1.1 on average, except for petroleum products--grow at 4. 3% o,., c- ·er age in the same period. Gross domestic savings are required to grow at an average rate of ll per cent a year during 1992-94, while gross domestic income would be growing at an average 4.1% a year during the same period. If this rate of gr9Wth in savings is not achieved, investment targets could not be achieved and GDP growth would slow down.

Table 4.7: Recent and Projected Macroeconomic Indicators

--Growth Rates (%per yr.)--Estim. Projected 1991 1992-94 1995-99

Shares of GDY (%) Estim. Projected 1990 1994 1999

Gross Domestic Product 0 4.5 4.6 100 99 99 Cross Domestic Income -0.5 4. l 4.S 100 100 100 Consumption -1.3 3 5.0 89 84 81

Public 4 4 4 6 7 7 Private -l. 7 2.9 4.1 82 78 75

Gross Domestic Investment 10 11.2 10.0 15 19 23 Exports, GNFS 0.7 4.9 3.0 28 28 27 Imports, GNFS l. 7 4.3 4.7 31 32 31 Gross Domestic Savings 8.5 11.4 6.3 11 16 19

Memorandum Items: National Income, p.c. -3.6 2.0 3 • .5 Private Consumption, p.c. -3.8 0.8 2.4

Source: Statistical Appendix and Bank staff estimates.

14. Table 4.8 shows the projected balance of payments in detail. The BOP's resource balance --which shows as counterpart the amount of foreign savings required --remains within a limit of about 3 per cent of GDP in the early years of the projections and about 4 pEr cent in the late years. Table 4.9 shows the uses and sources of external financing associated with this BOP projection. The level of foreign savings projected here is absolutely necessary as a complement to domestic savings in order to reach the required levels of investment and to allow for a minimum accumulation of net reserves of about US$50 million a year. The required levels of foreign savings are well below the levels reached historically during the last twenty years. To achieve these levels, however, there will be a need to mobilize external resources in addition to those already assumed in order to finance a relatively moderate financing gap.

15. Based on the many assumptions used in these projections, including those related to external debt, it appears that there will be a financing gap averaging about US$95m. annually during 1993-95, and about US$170m. from 1996 onwards. !n order to achieve the growth path in these projections, which, as already noted, is the minimum growth needec to allow some increase in per capita consumption, additional financing and/or debt relief will need to be

- 53 -

obtained. This would suggest that it would not be possible for the Dominican Republic to make its full contractual interest payments on commercial bank debts as assumed in these projections (unless new money financing were available from the commercial banks themselves). Some additional debt relief from commercial bank creditors, beyond the rescheduling of amortization, and/or from bilateral creditors appears necess~ry.

Table 4.8: DOMINICAN REPUBLtC1 Actual and Projected oalance Of Payments, 1990 • 1999 (US$ Millions)

(Actual) 1990

CE&timate) 1991

•..••.•.•••....•••.•••••• (Projection•>························· ----(Feriod Averages>-··

Export• of GNFS Merchandise CFOB> Non-factor aervices

Imports of GNFS Merchandise Non-factor services

F.esoi.orce balance

Net factor income Factor receipt& Factor payment&

lntereat on Public Debt Other factor Payments

Net Current Private Transfers

Curr.A/C Bal before Off. Grants

LT Capital Inflows n.e.i. Direct investment Official Capital Grants Net LT Borrowing (OKSJ

PPG Disbursements PPG l\epayments

Other LT Inflows (Net) o/w1 Arrears l /

Debt l\elief

Short-Tnm ' other CNet) 2 /

Financing GAP

Changes in Net l\eaerves

l/ E•:!udea reserve liabilities 21 Includes errora and ommissions

2005.3

734. 7

12 70. 6

2233.3

1792. 9

440.4

·228. 0

-349.l

11.8 360.9

265.2

9L 7

314.8

-262.3

480.2

132.8 55.8

-264.6 122.8

3~7 .4

556.2

519.6

63 .1

-142.2

o.o

-75.7

1992 1993 1994 1995 1996 1997 1998 19H

2160.6 2211.9 2244.9 2377.0 2622.0 2768.0 3017.1 3255.4 3518.l

775.1 807.8 843,9 881.9 993.1 988.7 1061.0 1134.6 1214.9

1385.5 1404.l 1401.0 1495.l 1628.9 1779,3 1956,2 212C.8 2303.2

2442.8 2470.6 2515.) 2695.0 2912.9 3162.0 3456.3 3734.4 4040.7

1951.7

491.1

-282.2

-302. 8

11. 5

314.3

259.8 54.5

lf~7.5 1982.3 2125.7 2297.4

513.1 533.4 569.3 615.5

-258.7 -270.9 -318.0 -290.9

.332. 9

17 .4

350.3 287.3 63.0

-317 .4

23. 3

340. 7

262.3 78.5

-345.2

26.8 372. 0 244. 6

127. 3

-330.1

30.3 360.4

233.0

127. 3

2493. 5

668.5 .394,c

2724 .1

732.2 • 439,0

-316.3 ·307.2 33.8

350.1

222.8

127.3

37.3 344.5

217. I

12 7. 3

2943.6

HO. 7 -4 76 ••

33S .o 210.7 12 7. 3

31SL2

8~~. ~

-522.5

-28E .6

44. 3

331. ! 2C3.7

127. 3

336.8 353.7 367.e 382.5 397.8 413.8 430.3 447.5 465.•

-248.2 -238.0 -220.5 ·280.6 -223.l -296.5 -315.9 -3<S.6 -3•3.9

288.3 322.7 158.7

145.C 150.0 157.5

55.8 75.0 91.5

·14C.7 -131.4 -90.3 167.0 186.2 20i.6

307.6 3l7.5 291.9

228.1 229.0 0.0

-1288.6 o.o o.o 1516.9 229.0 o.o

43.9 o.o o.o

207. I

165.4

91.5

-49. 9

225.8 2 75 .6

o.o o.o o.o

o.o

222. 2

173.6 91.5

-42.9

21&.3

261.2

o.o o.o 0.0

o.o

246.0

182.3

91.5

·2 7. 8 210.3

238.1

o.o 0.0

o.o

o.o

221 .9

191.4

91.5

-61.0 187.0

248.0

o.o o.o o.o

o.o

210.8

20l. 0

91. 5

-81. 7 171. 3

253.0

o.o 0.0 o.o

o.o

2C•f. 5

21l.0

91. 5 -9E.O 16C .o 256.0

0.0

0.0

0.0

o.o

o.o 0.3 111.8 123.5 51.0 100.5 144.0 167.8 187.4

-84.0 -85.0 -50.0 -50.0 ·50.0 .50.0 -50.0 -50.0 -50.0

1991-95 1995.99

2323.3

860.4 l4E;.9

2607.4

~OE-2. 9

.5o4". !­-26". j

-32~.;

2 ~ . Ci

34 :'. ~

25 7. 4

9C. i

3E 7.:

237.6

158. 3

81.1

-91.0

199.7 29C .6

9 J. 4

-257.S 349.2

8.8

5 7. 3

-63. 8

3CJE . t

107L5

1957.7

3:.L .2

2 72!-. E-

73Z. ~

·'" ~ ~. l

34'-. E

2. - . 5 l 2 7. 3

-3~ ... 6

19 ! . 9

91. 5

·6L 9 189.4

251. 3

o.o o.o o.o

o.o

130. l

-50.0

- 54 -Table 4.9: DaKtNtCAN UPlliLtC I Capital ' E&umal

Piaancins laquire .. nta. 1991 - 1994 <to 05$ Killion•>

1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 1992-1994 1995-1999

--··-·-···--······--------------------------------------------------------------------------------------------------------- ------------------------11 lequir•d Piaancinc -725.4 -639.8 0 640.S -562 .4 -606 .2 -534.3 ·584.6 -613.9 -631.6 -649.9 -612.2 -602.9 ......•••..•.......

a. Curr.A/C Jal bafora Off, Grant• ·2li2.3 -24$.2 -238.0 ·220 .s -280.6 0 2H.l ·296.S -31S .9 -328.6 .343,9 -246.8 -301. 6 b. lnct•••• in Nat l•••rv•• -7S./ -84.0 .es.o -so.o -so.o -50.0 -so.o -so.o -so.o -so.o ·67 .3 -so.o c. PPG AllOrti&ation -387.4 -307 .6 -317. s -291.9 -275.6 -261.2 -238.1 -248.0 -2S3.0 -256.0 ·298.2 -251 .3

21 Source• of Financing 72S.4 639.8 640.2 450.6 482.7 483.4 484.l 469.9 463,8 462.S 553.3 472. 7 .................... .. o/v1 Direct inveet .. nt 132.8 145.0 lSO.O 1S7 .s 165.4 173.6 182.3 191.4 201.0 211.0 154 .s 191.9

b. Official Capital Grant• 5S.8 S5.8 75. 0 91.S 91,5 91.S 91.S 91.S 91.5 91.S 78,S 91.S c. PPG Diaburaa .. nta 122.8 167.0 186.2 201.6 2H.8 218.3 210.3 187.0 171.3 160.0 195.1 189.4

i. Multilateral 86.6 135. 7 169.6 192.0 219. 2 214.2 209.0 187.0 171.3 160.0 179. I 188.3 11. lilueul 28.8 23.6 12 .8 8.1 S.8 3.9 1.2 o.o o.o o.o 12.6 1.0

i11. Private 7.4 1.1 J.8 LS 0.8 0.2 0.1 o.o o.o o.o 3.S 0.1 d. Other LT tnf lava !Natl SS6.2 228.1 229.0 o.o o.o o.o o.o o.o o.o o.o 114.3 o.o

o/va Arrear• II 519.6 -1288.8 o.o o.o o.o o.o o.o o.o o.o o.o ·322. 2 o.o Debt kelief 63.1 1516.9 229 .o o.o o.o o.o o.o o.o o.o o.o 436.S o.o .. Sho•t-Tera ' other (net) 2/ -142.2 43.9 o.o o.o o.o o.o o.o o.o o.o o.o 11. 0 o.o

31 Financing GAP o.o o.o 0.3 111.8 123. s Sl.O 100.S 144.0 167 .8 187 .4 H.9 130.1 .......•......

II Exclude• le1erv• L1ab111t1ea 2/ Include• error• and 0111111111ona

- SS -

APPENDIX I

PUBLIC ENTERPRISES: PROBLEMS ARD PROPOSALS FOR REFORM

l. Chapter III briefly discussed four major public enterprises. The purpose of this appendix is to provide additional information on these four corporations and to highlight their structure, operations, performance and problems.

Corporacion Dominicana de Empresas del Estado

2. The Corporacion Dominicana de Empresas (Dominican State Enterprise Corporation -- CORDE) was created in 1966 to manage assets recovered from Trujillo. Over the years, it developed into a holding company for 32 state­owned corporations and 13 companies in which the Government holds a minority interest. CORDE's Board of Directors is chaired by the Minister of Industry and Commerce. Its Directors are the CORDE's General Manager, the Director of the Industrial Development Corporation, the Minister of Finance and a representative from the private sector chosen by the President of the country. All of CORDE'S major decisions must be approved by the National Development Council, which has ceased to function.

3. CORDE's staff of 3S3 employees is deeply involved in the day-to-day management of the companies. It approves all investment programs, personnel recruitment decisions and weekly expenditure plans. CORDE's operational coordinators assist the enterprises' managers, often to the extent of taking over all responsibility from them.

4. The enterprises pay CORDE dividends, often in the form of stock, for its services. Dividend income was RD$14 million in 1989 (versus RD$7 million in 1988), of which RD$10 million were shares. Because there is no market for the stock, however, the true value of the income is difficult to estimate. It should also be noted that there are inconsistencies between amounts reported in CORDE's financial statements and those of the individual enterprises that cast further doubt on the accuracy of the income data. Until 1987, CORDE was exempt from taxes on its profits, duties on imported goods, interest payments on its bonds and other fees.

5. In 1986, The Government placed CORDE under new Manageruent. The number of less skilled workers was reduced, particularly in the maintenance division and other changes were introduced. After 15 year.s of losses, CORDE net income was positive in 1989 and stockholders equity reached RD$163 million, up from RD$8 million in 1986. As mentioned above, however, inadequacies in accounting cast doubt on the accuracy of financial information.

- 56 -

6. CORDE-controlled enterprises produce a wide range of goods and services (Table A-1), but the five largest!' account for 70% of all sales (RD$1,219 million in total in 1989). The enterprises are required by law to pay 15% of their profits to their employees (2% to the Board of Directors, 3% to management; 8% to workers and 2% to clerical employees). At the end of 1989, the enterprises had 8,216 employees and a wage bill of RD$97 million. Turnover among managers in the enterprises is high: in 1989, management of 16 of 23 active companies changed hands.

7. CORDE's enterprises have been managed to meet short-term political goals. Most of the subsidiaries suffer from poor management, high wage bills, large debt burdens and little or no maintenance of assets. These problems have led nine enterprises to shut down or curtail operations. The individual subsidiaries are discussed in the following paragraphs.

8. Although it is not the largest of CORDE'S enterprises, Compania An6nima Tabacalera is its most valuable asset. This enterprise has been consistently profitable (its net income has averaged about 10% of sales in recent years. Sales increased from RD$73 million in 1985 to about RD$166 million in 1989 mainly because cigarette prices increased by 174% (about 32% in real terms) between 1987 and 1989. Costs as a percentage of sales remained stable over the same period, and stockholders' equity during 1988-89 remained constant at about RD$53 million. The company has been servicing its debt on time. The State Reserve Bank holds about 2% of the company's shares as collat~_al for some of CORDE's debts.

9. CORDE's largest enterprise is Molinos Dominicanos. This enterprise's financial performance is largely determined by the Government's pricing policy for flour. Because the cost of production has increased while the price of flour has been kept low, the enterprise reported losses of RD$34 million, on sales of about RD$275 million, in 1989. Losses are expected to be much greater during the next few years if much needed new investment is undertaken and the outstanding debts are paid. Although CORDE owes Molinos Dominicanos of about RD$10 million, Molinos Dominicanos was US$840,000 in arrears on its debts to foreign banks and US$14 million in arrears on its debts to bilateral lenders at the end of 1989.

10. Compania Dominicans de Aviaci6n (CDA) is another of CORDE's largest enterprises (sales of over RD$200 million and 400,000 passengers in 1989). The airline's performance also depends on the Government's pricing policy, but in this case the administered price of fuel (50% of the international price) reduces operating costs. The price controls have enabled the airline to earn net income of RD$15.5 million per year during 1988-89. Had it been required to pay the full fuel cost, CDA would have experienced losses in 1988-89, even though it received RD$3 million of Government contributions in 1989. CDA's total liabilities (about RD$140 million) have remained relatively constant

:' Compafiia Dominicara de Aviaci6n, Molino~ Dominicanos, Compafiia Tabacalera, Seguros San Rafael and Compania Dominicana de C~mento.

- .,,, -Table A-1 OPERATIONS OF CORDE ENTERPRISES, 1989!1

Enterprise

Ma1ority ownership 1. Cia. An6nima Tabacalera 2. Dominicans Ind. de Calzados 3. Distribuidora de Sal en Grano 4. Fabrica de Aceites Vegetales 5. Fabrica Dominicana de Cemento 6. Fabrica de Baterias Dominicanas 7. Fabrica de Clavos

y Alambres de Puas "Enriquillo" 8. Fabrica de Sacos y Cordeleria 9. Ind. Nacional del Papel 10.Ind. Nacional del Vidrio 11. Marmoleria Nacional 12. Minas de Sal y Yeso 13. Molinos Dominicanos

14. Molinos del Norte

15. Pinturas Dominicanas 16. Planta de Recauchado 17. Refineria de Sal

18. Seguros San Rafael 19. Sociedad Inmobiliaria 20. Tejidos Antillanos 21. Teneria FA-2

22. Cia. Dominicana de Aviaci6n

23. Atlas Commercial

24. Tecnometal

25. Caribbean Motors 26. Deiminicana Motors 27. Quisqueya Motors 28. Chocolatera Industrial 29. Ind. Dominico-Suiza 30. Ferreteria Read 31. Industrial Lechera 32. Ind. Licorera "La Altagracia"

Source: CORDE.

Description Employment

cigarettes, cigars, shoes

printing

distribution of salt edible oils

cement car batteries

nails and barbed wire sacks and ropes

paper glass bottles

152

40 409

840 extraction of marble extraction of salt and gypsum production of flour

870 production of flour

74 paints and containers retreading of tires salt refinery

187 insurance

cloth real estate management

tannery 125

airline

car and spare part sales car repairs 7

551

807

mechanical shop for CORDE enterprises not commercially active not commercially active not commercially active closed closed closed closed closed

1,286 97

352 523

80

662

227 326

271 20

272 15

20

~I CORDE also has minority shares in: (i) Cementos Nacionales (9%, cement production); (ii) Equipos Construcciones (38%, road constructi<ln); (iii) Falconbridge Dominicans (10%, nickel extraction); (iv) Fomento Ind .. Mere. y Agricola (5%, commercial financing); (v) Dominit (38%, asbestos goods production); (vi) Ind. Nigua (23%, papl'r products); (vii) Lab. (Quimico Dominicano (16%, medicines production); (viii) Nacional de Construcciones (4%, construction comp:u1y); (ix) Ropas y Tejidos Dominican011 (24%, clothing production); (x) Sociedad Ind. Dominicana (22%, edible oils and animal food production); (xi) Miners Dominicans "El Yujo" (1%, mining company); (xii) Banco de Desarrollo Agropecuario (1%, financing of agrirnllurc); and (xiii) Tuberia Dominicans (6%, tire tube production). The share of CORDE in the paid capital of these enterprises amounted to RD$23 million in 1989.

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during recent years. RD$34 million of this amount is overdue payments owed to the Banco de Reservas and RD$14 million owed ~o CORDE. Nevertheless, CDA's earning potential is good, because of its protitable routes to San Juan, Puerto Rico, and Milan, Italy.

11. The financial performance of Fabrica Dominicana de Cemento (FDC) has improved during the last three years as a result of the Government's large construction program. After suffering losses for many years, the company reported net income of RD$ll million in 1989, despite equipment and supply problems. Demand for cement now exceeds production capacity, and the controlled price of cement has been increased. Despite significant success in reducing the number of employees,l' FDC's production costs are higher than those of the country's two private cement plants. There is reason to believe that the company would benefit from further staff reductions. FDC's liabilities exceeded assets by about RD$20 million at the end of 1989(?). The company owed RD$33 million to the Banco de Reservas and about RD$18 million to CORDE at the end of 1989. These figures are net of the RD$100 million of debt the Ministry of Finance forgave in 1988.

12. The lndustria Nacional del Vidrio (INV) is the country's sole producer of glass bottles. It has generally been profitable since 1985 (net

·income of RD$12 million in 1989). INV is unable to meet current demand. Production was expected to increase during 1990 after installation of a new US$12 million electricity generating plant. The plant was financed by INV's customers who will be repaid in bottles. An additional oven is needed, but neither the INV nor CORDE is able to finance the investment.

13. Although its production has remained constant, lndustria Nacional del Papel's (INP's) revenue and profits have been steadily increasing since 1985. Produc~ion is expected to fall in 1990. INP is in arrears in its debt service; it owes RD$40 million to the Banco de Reservas and RD$9 million to CORDE.

14. The vegetable oil factory, Fabrica de Aceites Vegetales (FAV), reported a profit of RD$3.S million in 1989. The enterprise's performance is dependent on an import quota and the price set by the Government for soy bean oil. FAV's debts are solely for working capital.

15. CORDE's other enterprises are small, cut the common theme is one of mixed performance, with Government price controls determining profitability. Most of these enterprises are also saddled with laree debt burdens.

16. Reform and Privatization of CORDE. In gauging whether reform or privatization is the best approach, CORDE's historical experience provides a guidepost. Management contracts have been used in the past by CORDE for Fabrica Nacional de Cemento, and Molinos Dominicanos. However, outsourcing private sector managerial expertise without changing the ownership or control of the assets failed to lock in efficiency gains for a sustained period of

3/ FDC had 523 omployees at the end of 1989, down from lt300 in 1982.

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time. The reform and privatization of CORDE and its enterprises requires three preliminary actions by the Government: i) leeislative clearance of the ownership status of the enterprises and divestment of CORDE's assets (the Government's presence on the Board of Directors of CORDE should suffice to protect its rights); ii) elimination of all tax and duty privileges of CORDE as well as the Government's guarantee of Corde's debt s~ that public enterprises compete on an equal footing with private sector; and iii) accounting standardization for al public enterprises.

17. Specifically, CORDE's enterprises are the best candidates for privatization because they are relatively small, are not strategic to the national security and are owned through control of their shares. The main issues is doubts about the true ownership of the shares (some enterprises belong to Trujillo family, while some other shares are collateral for unserviced debt) and the uncertainty involved in selling the shares and negotiating the indebtedness of the enterprises (total debt is about RD$900 million). Another issue is the legal right of employees to 15% of profits for which they would have to be compensated.

18. CORDE at present cross-subsidizes the ineffir.ient firms with profits from the better enterprises. Thus, divestment of CORDE's enterprises has to be comprehensive and not partial. Another problem is that many enterprises have negative net worth, which makes it necessary for the Government to assume some liability in order to sell them. The use of an independent agency would permit CORDE's employees to bid for the companies without any conflict of interest.

19. The enterprises that can be divested by this route are the more profitable ones: (i) Cia. An6nima Ta. acalera (2% of the shares held as collateral); (ii) lndustria Nacional de! Vidrio (46% of the shares held as collateral); (iii) Industria Nacional del Papel (99% of the shares held as collateral); (iv) Fabrica de Baterias (all of its shares held as collateral); (v) Teneria FA-2 (all of its shares held as collateral); (vi) Seguros San Rafael (47% of the shares held as collateral). There are s~ecial considerations in the divestment of some of the above mentioned enterprises. In the case of Sociedad lnmobiliaria, it could be worthwhile to separate the management operations from the real estate assets of the company. The real estate assets can be sold separately and preferably renters of the units should be offered a first option to buy assisted by appropriate financing. The real estate management part of the company should be sold to the 15 employees. Although Fabrica de Baterias Dominicanas is a small company which is profitable solely as ~ result of protection. Transfer of ownership to workers is not feasible as workers ·would not have the capital to make the company competitive with lower levels of proter\tion. Teneria FA-2 is a prime target for early divestment (as a pilot case) because of its small size, lack of debt problems and is in need of investment in new machines and spare parts.

20. The expertise that the independent privatization agency would acquire by the divestment of the above mentioned enterprises should be used to divest the other enterprises of CORDE. In particular, this applies to Tejidos Antillanos, Fabrica de Cementos, Fabrica de Aceites Vegetales, Fabrica de

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Clavos y Alambres de Puas "Enriquillo". The companies that could be potentially sold to their workers because of their size are Atlas Comercial, Tecnometal and Planta de Recauchado. However, the debt arrears problems of the Planta de Recauchado would have to be settled and part of its liabilities canceled to avoid saddling the workers with a company of negative net worth.

21. All of CORDE's enterprises that are currently not commercially active should be sold at the best offer. CORDE should make public any available studies or project assessments of these enterprises to try to increase their value. Enterprises that receive no offer should be scrapped and dissolved. Further, in the mediwn term CORDE should asswne the role of a caretaker of any divestment agreements, especially in the companies in which it currently is a minority shareholder. CORDE will require a long time to structure and carry out the privatization transactions. However, Mexico managed to privatize more than 130 enterprises between 1983 and 1988. CORDE should play this role until the divestment agreements are completed and until a stock market is created in the Dominican Republic when it could aid the development of this stock market by selling its shares.

Conse1o Estatal de Azucar

22. There are three sugar producers in the Dominican Republic: the Consejo Estatal de Azucar (State Sugar Council - CEA) and two private companies (Central Romana and Casa Vicini). CEA was created in 1966 to administer the lands and sugar mills that were expropriated by the Government after Trujillo's fall from power. With over 32,000 workers, 60% of whom are seasonal, CEA is the nation's largest employer. It is exempt from customs duties and has access to foreign exchange at the official rate.

23. CEA owns 12 sugar mills, of which 10 are in operation, producing an annual average of 732,000 short tons of raw sugar per year. Central Romana owns one sugar mill and produces an average of 200,000 short tons, while Casa Vicini owns three smaller mills (one of which is currently open) and produces 50,000 short tons. In recent years, low world sugar prices, reductions in the preferential U.S. sugar quota and increases in production costs have led to reduced production. These developments have also stimulated diversification, including alternative uses of both sugar cane and land. Because of the subsidies it receives, CEA, the highest cost producer, has kept its production above efficient levels. This has forced the more efficient private producers to reduce their output, and Casa Vicini has closed two of its three mills.

24. CEA has sustained losses every year since 1977. In 1980-87, CEA's cwnulative operating losses exceeded RD$1 billion. The reasons for this poor performance are: (a) Government-controlled domestic prices that are set lower than both the cost of production and border prices; (b) excess employees; (c) poor agricultural/technical policies; and (d) Government withholding of 25% of income from exports. Because of the low prices, the quantity of sugar diverted to the local market is increasing, much of it being smuggled out of the country. Cwnulative losses from the diversion of cheap sugar during the 1980s are estimated at RD$105 million.

•

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25. CEA has financed its operating loeaes with domestic credit (about 50% of the shortfall) 9 external borrowings (about 30%) and Government transfers (20%). At the end of 1989, CEA was in arrears on its interest payments to external lenders. The 1990 increase in international sugar prices should lead to an adjustment of local prices and strengthen CEA's financial performance.

26. Reform of the State Sugar Board (CEA). CEA'e has reduced its wage bill by laying off 12,000 employees during 1986-89 and has rationalized its expenditures and taken measures to improve revenues. CEA has leased land and/or entered into joint ventures with these private companies --INDUSPALMA for non-sugar crop production; DOLE and FRUDOCA for pineapples production; local private investors for production of citrus concentrates; Foundation for the Development of the South and the Special Agricultural Development Fund for tomato and pepper production. ln each case, CEA's share was deter'lllined by the commercial value of the land contributed when the agreement was signed. Diversification guidelines have also been established such that employment of Dominican labor is given priority, and small and medium local producers are encouraged.

27. To improve the efficiency of its operations CEA has closed Catara} and Esperanza mills and has plans to close its Amistad mill and two other mills near San Pedro de Macoris. CEA's management also has instituted programs to increase the sucrose content of cane and is renovating its mills and transport system. CEA's target is to keep producing the same quantity of sugar with 7 factories. The current director of CEA proposed to the President of the country a restructuring plan for the enterprise in August 1989. This entails: (1) creation of a corporation of local and foreign investors, companies using sugar and molasses as an input, cane growers (colonos), sugar workers through a workers organization, and CEA, which would only contribute assets; (ii) the corporation would concentrate its operations in the prime sugar growing area and would have a target production of about 600,000 tons of sugar per season; (iii) the prime sugar growing area would have its installations and infrastt'Ucture refurbished and the other sugar producing units would be closed; (iv) exceptions are the Ingenio Barahona, which could be established as an independent production unit through improvements in its equipment, while the Ingenios Montellano and Amistad could be united to produce the molasses required for the production of liquor; (v) the large extensions of land that would be £reed from cane growing is to be utilized for other crops; and vi) the corporation would not require any tra~sfers from the public sector. This proposal should be considered.

28. Another reform issue, which is beyond CEA's control is the determination of the domestic price of sugar. The price of sugar should not be administered, and barriers to private sector trade in sugar should be removed so as to encourage its export by traders at the border equivalent price. The current scarcities are a result of the price controls which benefit the smugglers to Haiti far more than the Dominican consumers they are supposed to protect. However, Instituto Azucarero Dominicano lobbies for continuation of controlled prices rather than suggesting a deregulation. To be able to determine the real financial condition of CEA, all taxes and transfers to the sugar industry should be made very transparent. The reform efforts of the CEA management are laudatory and chances of succeeding would be

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enhanced if it could be independent of the political process enabling it to freely control its assets.

Rosario Dominicano

29. Rosario Dominicano was created in 1972 to locate, develop and exploit gold and silver. It was granted a 75 year concession for this purpose. In 1979, the Central Bank acquired ownership of 99% of the company. The Central Bank is required to transfer 64% of the dividends it earns on its investment to the Treasury.

30. In October 1985, the government granted the company a concession to explore a 26,764 ha area (the Maimon concession) for metallic minerals. New sulfurous reserves discovered in the area would allow production of gold (400,000 ounces a year), silver (1 million ounces a year) and sulfuric acid (2,500 tons a day) to continue for 30 years. Several international corporations are interested in participating in the project, for which US$400 million in investment that would be required to start exploitation. So far, the President of the country has not authorized the project because of very legitimate environmental concerns about the immense output of sulfuric acid. (Reports of any sulfuric acid spills could severely damage the tourist industry.) Thus, the company also has proposed an alternative processing system based on bio-oxidation that would eliminate the production of sulfuric acid, but the efficiency of this technology has yet to be proven and its costs are uncertain.

31. The corporation is heavily taxed. In 1987-89, it paid an annual average of RD$35.6 million in income tax (40% of net income), RD$76.4 in special taxes and RD$116 million in export taxes. As a result, net profits fell from RD$71 million in 1987 to RD$6 million in 1989. At the end of 1989, the company was servicing RD$170 million in long-term debts. These three factors have caused serious liquidity problems.

32. Reform of Rosario Dominicano. The company's management has been adequate. However, the size of the investments required for the continuation of its activities, the scarcity of foreign exchange in the country, and the lack of access to external credit by the public sector makes joint venture with a private company a necessary option. The type of joint venture will be determined by the Government's tax policy toward the company. The current heavy tax load on the company would make it necessary for any outside partner contributing the capital for the investments to acquire a very large share of the joint venture company to be able to recover its costs through its share of the profits. Therefore, the decisions about the amount of the investments, the size of the shares of the different partners in the company, and the tax load on the company are all interdependent. The higher the external investment, and the higher the tax load, the smaller will be the share of the public sector in the company. However, a decision is pending with the President which cannot be delayed as the company is about to cease production.

•

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Ref ineria Dominicans de Petr6leo

33. The Government and the Shell Company, Ltd. each own 50% o! the stock of Ref ineria Dominicana de Petroleo (Dominican Petroleum Refinery -­REFIDOMSA). REFirOMSA refines crude oil and imports refined products fo!: the domestic market. The refi~ery has the only facility in the country which is equipped to receive oil products.

34. Under the terms of the San Jose Agreement, REFIDOMSA was granted the right to purchase crude oil under favorable ~erms, including the right to use 20% of the amount billed as a concessional credit for energy development projects. Since August 1989, the Gover~.ment has had to pay for crude oil in advance because it had incurred arrears of about US$100 million on payments due to Venezuela and Mexico. The advance payments total about RD$120 million for the two monthly shipments. The refinery does not have reserves to compensate for any delays in shipments beca~se of its small capacity (30,000 bbls per day).

35. At the end of 1989, Governm~nt arrears of about RD$300 million on its payments to REFIDOMSA precipitated a liquidity crisis for the company. To meet its most pressing needs, REFIDOMSA borrowed about RD$200 million from the State Reserve Bank. REFIDOMSA tried to recover the funds by not paying its income taxes, but the Government forced it to pay the taxes, plus a penalty of RD$1 million. A second attempt to collect the arrears, by not making payments on the State Reserve Bank loan, has resulted in litigation. The matter has yet to be resolved.

36. Reform of REFIDOMSA. A commission hQs been created to revise the contract between the Government and Shell to define ownership and management of th~ company. The day-to-day operation of the company is similar to that of a private company. However, the contract that makes the Government owner of 50% of the company should be changed to ease settlement of the Government's arrears with the company by REFIDOMSA buying back shares of the company from the Government for an amount equivalent to the arrears. This transaction would put the company in priv~~e control and necessitate some further reforms.

37. To enhance competition, the unloading facilities of the company should be accessible to any fuel importer, and the Government should allow market prices or import parity prices for fuels. In particular, both CDE and CDA should pay market prices for their fuel and any support would have to be made through the Government's budget. Subsidies for fuels for low income users would have to be more targeted. The Government should no longer subsidize or add taxes on the company. The company could increase its profits by improving its operat ;.ons and through higher prices if the maximum price of RD$40.46 for the importation of crude oil is removed.

STATISTIC..L APPENDIX

T1ble no.

I. Population . ···-· ..... 1.1 Past and Projected Population, 1980·2DOO 1.2 Past and Projected Popu•.·ion by Region, 1980·2000 1.3 Household Characteristic~ by Income Decile Group, 1989 1.4 Public Social Expenditure, 1980·88

JI. National AccOlllts

2.1 Gross Domestic Product by Sector in Current Prices, 1980·90 (Official> 2.2 Gross Domestic Product by Sector in 1970 Prices, 1980·90 (Official) 2.3 Gross Domestic Product by Expenditure in Current Prices, 1980·90 (Official) 2.4 Gross Domestic Product by Expenditure in 1970 Prices, 1980·90 (Official)

Ill. 8al1nce of P1yments 1nd Trade

3.1 Balance of Payments, 1980·90 (Official) 3.2 Exports of Principal Comnodities, 1980·90 3.3 Exports by Destination, 1980·90 3.4 J~rts, 1980·~0

3.5 Sugar Exports and Petroleun I~rts, 1974·90 3.6 Net International Reserves, 1980·90

JV. External Debt

4.1 MediU11 and Long·Tenn External Debt by Creditor, 1980·90

V. Fiscal Acc°'61ts

5.1 Operations of the Consolidated Public Sector, 1984·90 5.2 S1.111111ry Operations of the Consolidated Public Sector, 1984·90 5.3 Central Governnent Oper1tions, 1984·90 5.4 Central Goverrvnent Revenues, 1984·91 5.5 Central Goverrvnent Expenditures, 1984·90 5.6 Central Goverrvnent Transfers, 1984·90

VI. Monetary SY'tem

6.1 S1.11111ary Ac~ounts of the Banking System, 1980·90 6.2 SU11111ry Accounts of the Non·bank Financial Jl'IStitutions, 1980·90 6.3 Camnerci•l Bank Credits and Deposits, 1984•1989

STATISTICAL APPENDl~

Table "°· Vil. Agriculture

7.1 Agricultural Production of Selected Products,1986·90 7.2 S'41PlY and Dem.nd for Selected Crops, 1987·91

Vil I. lndl.dtry, Power end Touri am

8.1 T04.lrisrn Receipts and Expenditures, 1976·1989

IX. Free Zone Statistics

9.1 Gross Domestic Product of the Free Zones, 197u·88 9.2 Free Zone Exports, 1981·88 9.3 Local Expenditures of Free Zone Enterprises, 1984·88 9.4 Free Zone Revenues by Zone, 1978·87 9.5 FrH Zones: NLl!Oer of Firms, Eq,loyees and Average Salaries, 1978·1988

X. Prices and Wages

10.1 Cons1.111er Price Indices, 1980·90 10.2 Minfftl;lll Salaries, 1980•90

iible 1.1: DO"INICAN REPUBLIC - PAST ANtl P~OJECTED ?OPULATICH, 1960-:ooo

----------·------------·-------------------------------------------------

To bl

19~0 s:z4.o 19"0 4=99.0 H~O Sbrio.9 111:5 U!6.3 1996 65:4.9 11a1 o7lS.6 1908 69c7.4 1';29 1v1?.1 19'l0 716i:,g . ;~' 4 .• nzo .1 1112 . 747•J.S H9l H:0.4 19~4 776a. i H95 79!5.3 2000 a:i:o.9

Avg. Annu1l 6r~w.th 1!

2.91 2.as 2.aa 2.41 2.~2

2.30 2.2= 2.21 2.15 Z.10 ~."6 2.01 1.95 1.56 1.72

l!rbi!I Rural

Z9~3.2 :94:.6 :497. 7 2·H3.~ lo~5.7 2n9,3 :;n. 1 29';7.9 .... ,. . _,.., ... ~ 2045.9 ~Ce:4.9 :9~4.3

4=05.l 29e4.S 4~4~.2 2976.9 4400.1 2~90.4

4:15.6 3004.9 4749.4 3019.5 4231.1 3tl~4.2

5511.4 l109.5

Tible 1.2: DOHINICAN REPUBLIC - PAST AND PROJECTED POPULIHIOH B'i R£GIOll, l9S0-70iJO

Sou the.st Ctbao Southwest TOTAL

lot•J V•ldesi• Yu•• Tot•I Central East West Total El Valle £nr1qu1llo

1981) 2660.2 2l46.l 521.'I n12.2 llb8. I 644.2 n9.9 1tb.4 44~.1 271.l 5696.9 1905 311t.9 2592.l 582.6 2468.7 14~8. 9 b81.0 322.il 772.0 481. 9 no.a Mild 1986 l28l.6 2686.8 594.8 25""·• 1478.2 695.5 326.8 732.9 4Ba.9 7'H.O 65b5.0 1981 3390.l 7783.l 607.0 2Sl2.5 1497.9 704.0 330.b 792.8 49~.e 2flf). 9 6715.b 1988 3500.6 2881.l bl9.2 2564.6 15i1. 9 7l2.5 n4.2 802.2 502./1 299.6 69&1.4 l~~y l611.6 2980.l Ut.3 2596.3 J5j7,8 72fl.8 337.7 911.2 ~(19. I 302.1 7019 .1 1990 3122.9 3079.7 643.l 2627 .2 1557.2 729.0 m.o 819.7 515.! 304.4 7169.8 1991 3334.8 3119. 7 655.1 ~657.6 1~76.3 737. l 344.2 0n.i, ~n.2 ll>li.4 7310.J 1992 39'7 .8 3280.9 666.9 2687. 7 1595.l 745.2 347.2 8j5.l 5U.O 3ll8.l 7410.5 1993 4061.2 3382.6 678.6 2717. l 1614.0 75l.2 l50.0 842.l 552.4 309.6 7620.4 1119' 4174.5 3484.4 690.l 2745.8 lbl2.3 no.1 352.7 848.6 5H.6 lll.U 7169.9 199S 4287.2 3595.9 701.l 2773.~ 1650.2 767.8 3~·~.~ 9~4.9 542.5 ~12.4 7915.3 2000 4845.4 4090.1 n4.7 2895.7 1132. 9 nb.1 366.2 880.1 ~62.1 317.~ 8621.2

---------·---------------------------------------------·-------------------------------------------------------------------------Source: Techniul Secret•rr of the President, Hational Plannrnq Off1ct>.

Ptr C1p1h heily l1to11 lr1etrl f1D11thlrl

heiliH Pf' fru It

h1ily Sill

P1r1011 "' rDDI

Hin ID ICCfH to: IV HI ul10 nuiwrr nlr ittf•lar lt I tplloiit I llOYI

"' lul .. t If fHthH ltlih

T.1ble I. J: ounlNIC~N RlPUbl IC . HUUSIHUlD rnr.u.u1111sms &Y IN(Oll[ PllllS, 1989

Deca It Group ------------- ---------------- ----- ------------ -------.. -. -· --- ------------------ -- ----------------------------------------····------·-··t··-··· 1 2 l 4 ) 6 1 a ' 10 avm,•

lotil

0·11.U 11.4-100 100.01-IJl.J lll.lH7U 176.68-114.2 nt.Jo-m.o m.01-m.5 347.)1-441.6 m.H-m.oo m.01-9000

109812 rnm mm mm 1~4m mm nooo 1~6995 nem 162m mom

6.1J 6.ll us 4.91 5.t UI 4.l 4.29 4.U 4.09 4.97

!.)J l.'6 l.)t UI 1.19 U6 0.94 0.96 0.96 0.7J I.I)

S1.64 11.17 l5.2t 39.BJ 25.7) 19.Z? i~.n ll.18 10.09 6.4 ?1.o• 15.16 JO.en 16.lt ·~ .94 n.n 7U6 14.I 1).88 n.o9 u.n 24.01 ~8.58 57.95 411.01 )U1 39.89 J6.n ~U9 211.(1) 21.16 UJ lt.85 BJ.)9 9t.61 81.19 ll'l.14 11.44 81.87 6U) 74.69 )1.11 29.56 11.09 ll. 76 l.01 S-65 9.41 l.9 U1 ~.Ill Mt l.81 1.1 4.91 9M4 911.11 97.74 91.bl 9J.75 90.48 BUB 79.86 14.09 ... 911 Bl.48

•••• ID IHtH lo tltdmilr 16.01 1.91 '·' 16.U 4.1 9.61 8.7 5.11 l.U 7.lJ 1.84 lift II •011H liUll

ru111c 11th 10.0 4.11 2. 76 4.91 0.81 .. u.17 1.64 .. .. 2.28

'"' '"'" 11111 '·" 10.a U5 8.09 l.)8 .. 0.11 4.94 .. .. l.1)

-------·-···--------------·-·-····· ................................................................................................... ----- .... ------- ...... --.. --...... ---- -- ----- -.. --.. --- -.. ----- --....................... -_______ .. ___________ .., ______________ Sourm llHP/18111 1'89 HouHMll Sumr.

ljOrtuiia.0,1404,

Table 1.4: COPIINICAN REPBULIC - PU&L!C seem EXPENDlTiJRE. 19So-ae

---------------------------------------------------------------------------------------------------------------------------------

1990 19Sl !93~

1?94

1 .. - ..

1 ::;) 1···

. ,~.c: • w.J

i;;7 1133

H90 !981 19a2 HS~ 1934 19as 1986 1987

11aa - - - - - - -

72.8 a:.9 32.9 91.3

104.2 1:1.l !;~.?

... "'1 •: .... , ...... "\I •,­" • • 11 .-..... -: . "'"" "' ~. . .. J • • .:

...,,-, C'C

-·-· .... .J

1;.?~

17.7S :i;; .33

6.83 7.55 S.!S 7.~1

8.!2 o.93 6.73 6.:7 8.09

1.10 1.14 1.04 i.oo 1.01 o.~4

0.97 1.0~

- - - -1.40

136.3 !:'). 9 loo.9 1:'7.S 1~9.7

3:1.b ~S3.o

.J: • ..:: • .. "::l .,,,,.,._, ..

37.i: ~;.7~

::.24 !4.:5 H.42

l~.5~

1:. 76 1:.H 9.77 10.0~

2.C6 2.21 2.!0 2.06 1.93 1.73 1.79 1.60

1.JI

12.S 13.0 5.5

1a.a 6.9

1s.a ZLO

111c: !2 ........ 4:9.2

.. .,) .....

" . ' ... I A~ ..... ~ l. 34 :.:4 ') .... ,,.,1.;

22.~7

2:.:7

LZ'l l.19 0.54 1. 57 0.54 o. 09 0.12 7.96 e.59

0.19 0.19 0.07 0.22 o.o:r O.!~ 0.13 1.33

1.43

ll~iER i SEli~SE

(P11llio~s ct RD1i

26.9 17,:J 8.9

16.3 14.8 lS.7 Z7.J

l')~. 5 2S:J.O

. .. I. Va. . .. ~ •• ..>

2.:: 4,~; . ,_ .. ""'"' 9.:3 ... ~ ...

ii.Wt••

2.s: 1.~5 0.27 i.s: 1.15 o.n 1.20 3.Z7 5.12

'~ ., o .... 69.5 72.!

9!l.7 1:6.! 127.b !:·:.: i;:.1

' .... ... , .... ... .l: ... .

!:.:;

•• -'!.,. •... .; e.~s

J. •• .... v.,

1 .s:: 6.13

40.2 59.2 44.C s= .') 94.5

f I• f ...... 1 .... ... t:: , ...........

.. . -....

, ........ ·=·-~ '. -... :'.: ... .. , ... .. -., ....

4.:~

s.:~

4.37 . ,. .... ~ 7 •. .. ~o 5.~:

6.93 4.18 3.31

(As Percent of Current Gross Do1estic PrJ~~c

0.41 0.94 0.70 0.23 o.9c 0.90 0.11 0.90 0.56 0.21 0.96 0.67 0.14 0.9~ 0.91 0.1~ o.e3 0.90 0.17 o.a1 1.00 0.55 0.67 0.71

o.sa 0.54 0.60

TGT~L

401.5 ~CO.b 4.::,g ~l=. a ::;.~ ·.: ~ I"""''•

, ..

' .. , ... i

-- c., .JWt -''

3:.:: ....... .,. ,., ..

4" ~= .. ·--· ........ .j.,;, 1 ..

~3.35

S.l9 5.53 4.7a 5.19 4.~~

4.57 4.97 5.·~=

~.!l1

--------------------------------------------------------------------------.------------·---------------------------------------

1au1e 1..1: UUHINILAN Ntl'UULIL • I.RU~~ OUMl:SllC PROOUCT BY SECTOR, 1980-90 (Official)

(In millions of Dominican pesos)

···············-··········-----··-------------------------------------·----------------------------·------------······-····-···

1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 Prel. 1990

·------······-····-···---------------------------------------------------------------------------------------------------------Agrlcul ture Crops livestock Forestry & fishing

Mining Memfacturlng Construct Ion Electricity, water Conmerce Transport & f.amunlcations Finance, Insurance OWnershlp of dwelt lngs Public Adillnlstratfon Other services

CDP, market prices

Agriculture Crops livestock Forestry & fishing

Mining Ma,.,fec;turfng Construct Ion Electricity, water Connerce Transport & CCllllUllcatfans F lnance. Insurance OWnenhfp of dwell fngs PIA>llc ftct.lnlstratlon Other services

COP, market prices

1336 947 347

1,2

352 1015

1,79

30 101,8 362 238 556 552 662

6631

20.2 11,.3 5.2 0.6 5.l

15.l 7.2 o.s

15.8 5.5 3.6 8.4 8.3

10.0

100.0

131,9 952 35l

1,5

271 1133 537 67

1198 l,08 287 681 608 7Z6

7267

18.6 1l.1 4.9 0.6 3.7

15.6 7 .'4

0.9 16.5 5.6 3.9 9.4 8.4

10.0

100.0

1412 952 410

1,9

206 11,55

515 a2

1350 420 336 693 664

811

7965

17.7 12.0 5.2 0.6 2.6

18.3 6.7 1.0

17.0 5.3 4.2 8.7 8.3

10.2

100.0

1485 973

1,62

50 229

1528 669

78 1451 1,63 368

723 704 927

8623

1916 1ZZ7 627

61 244

1708 882

114

1782

523 422 800 812

1154

10315

2804 1933 nz 99

733 1902 899

70 2087

733

781 111,9 1267 1381

13804

(as percent of COP)

17.2 11.3 5.1, 0.6 2.7

17.7 7.8 0.9

16.8 5.4 4.3 8.1, 8.2

10.8

100.0

18.5 11.9 6. t

0.6 2.4

16.5 8.5 0.9

17.2

5.1 I,. 1

7.7 7.9

11.2

rno.o

20.l 14.0 5.6 0.7 5.3

13.8 6.5 0.5

15.1 5.3 5.7 8.3 9.2

10.0

100.0

]088 2124

851 113 722

2254 1150

82 2384 837 986

1287 1396 1594

15780

19.6 1l.5 5.4 0.7 4.6

14.3 7.l 0.5

15., 5.3 6.2 8.2 8.8

10 .1

100.0

3655 5173 2526 3544 996 11,33 13l 196

104] 1397 2866 3979 1n1 2786

104 145 2811 3946 1050 1520 1248 2077 1511 2220 1520 2161 1957 2749

19536 28353

18.7 18.2 12.9 12.5 5.1 5.1 0.7 0.7 5.3 1,.9

14.7 14.0 9.1 9.8 0.5 0.5

14.4 13.9 5.4 5.4 6.4 7.3 7.7 7.8 7.8 8.3

10.0 9.7

100.0 100.0

7558 10551 5119 6865 2158 3264

281 422 1997 2678 5866 8050 4~4 5141

189 256 601,9 8414 2307 3369 3577 5830 3246 4893 3496 5404 4064 5970

42193 60555

11.8 12.1 5.1 0.7 4.7

13.8 9.5 0.4

14.3 5.4 8.4 7.7 8.2 9.6

100.0

17.4 11.3 5.4 0.7 4.4

13.3 8.5 0.4

13.li 5.6 9.6 8.1 8.9 9.9

100.0

·······-···············--·····-·---··················-·····-·------·---------------·-------------·-----------------------------Source: Central Bank of the Dominican Republic.

1uo1e ,.c: UUl11NILAN HlPUULIL ·~ROSS UOHlSTIC PR<X>UCT BY SECTOR, 1980·90 (Official)

(In millions of 1970 Dominican pesos) ····-···--············-························--~---···············-··--···--·········--·-·············-········-···-···-·····

1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 Pre\. 1990

··································-······-·-······-··-···-·-····················································--···········--Agrfcul ture

Crops livestock Forestry & fishing

Mfnlng M11oof11cturlng Construction Electricity, veter coamerce Transport & Cmmunlcetlons finance, Insurance OWnershlp of dwelltngs Pti>llc Adnlnlstretlon Other services

COP, 1111rket price

Agrlcul ture Crops livestock Forestry & fishing

Mining Mera1fecturlng Construct Ion Electricity, water Comnerce Transport & CCllllllllicatlons Finance, Insurance C>wnft•shlp of dwell lngs Pli>llc Adnlnlstratlon Other services

GDP, 1111rket price

464.2 297.5 168.2 18.5

124.6 530.2 197.5 49.0

473.6 230.5 70.4

198.1 280.1 265.4

2903.8

411.8 211.1 179.1 19.6

135.6 544.5 196.5 53.4

494.9 242.6 73.3

198.8 300.1 271.4

2922.8

(15.0) (28.4)

6.5 5.7 8.8 2.7

(0.6) 9.0 4 .'S 5.3 4.0 0.4 7.1 2.3

0.7

'S34.3 323.8 190.0 20.5 93.8

562.3 183.1 48.4

s20.2 256.7 76.5

201.2 311.9 280.9

3069.3

'S50.8 330.6 199.1 21.1

124.8 568. 1 226.7 50.3

522.8 259.5

79.5 206.0 320.5 300.3

3209.4

')51.0 329.0 200.0 21.9

135.1 554.4 226.8 56.6

514.4 257.0 81.8

210.2 330.6 300.4

3218.2

(Average annual growth <X>>

29.7 51 9 6.1 4.4

(30.9) J.J

(6.8) (9.4) 5. 1 S.8 4.5 1.2 3.9 l.5

5.0

l.1 2.1 4.8 3.1

31.1 1.0

21.8 3.9 0.5 1.1

3.9 2.4 2.8 6.9

4.6

o.o (0.5) 0.5 3.8 8.2

(2.4) 0.1

12.5 (1.6) (1.0)

2.8 2.0 3.1 0.0

0.3

531.3 314.8 193.9 22.6

134.7 515.0 192.0 59.4

489.1 241.7 120.2 212.2 333.6 305.9

1135.1

<3.6) (4.3) (3.1)

l.2 (0.3) (7.1)

(15.4) 4.9

(4.9) (6.0) 47.0 1.0 0.9 1.8

(2.6)

528.5 312.1 193. 1 23.3

119.7 'S'S0.8 221.8 62.7

504.3 249.2 136.7 214.5 331.9 313.9

3234.0

(0.5) (0.9) (0.4) 3.1

(11.1)

7.0 15.5 5.6 3. t

3.1 13.7 1.1

(0.5) 2.6

3.2

541.8 323.2 196.7 23.9

150.7 6'0.0 297.4 69.4

'S17.9 272.2 150.7 219.4 314.6 321.3

3467.4

2.9 3.6 1.9 2.6

25.9 10.7 34.1 10.7 2.7 9.2

10.2 2.l

(5.2) 2.4

7.2

536.5 315.1 196.9 24.5

140.2 588.2 125.1 67.1

'S05.0 273.8 174.2 223.9 339.5 332.4

3505.9

<J.3) (2.5) 0.1 2.5

(7.0) (3.6) 9.3

(3.l)

(2 .5)

0.6 1S.6 2.1 7.9 l.5

1.1

548.7 317.9 205.8 25.0

139.3 603.7 347.5 61.4

538.3 289.1 205.6 227.9 349.0 344.7

3655.2

2.3 0.9 4.5 2.0

(0.6) 2.6 6.9

(8.5) 6.6 5.6

18.0

1.8 2.8 3.7

4.3

514.9 283.2 206.8 24.9

124.1 550.l 293.5 54.6

497.4 280.4 222.6 228.2 358.4 344.0

3468.4

(6.2) (10.9)

O.'S (0.4)

(10.9) (8.8)

(15.5) (11.1)

(7.6) (3.0) 8.l 0.1 2.7

(0.2)

(5.1)

····---··-····---·-··········-····-·····---------·-·-·····-·-----···---------·---------------------------------------------···· source: Central Bank of the Dominican Republic.

Teble 2.3: DC»llNICAN R£1'\JBllC. CROSS DOMESTIC rROOUCT BT £Kr£NDITURE, 1980·90 (Official)

(In millions of Dominican pesos) ··················-····--···-···························-··----·-·-----···--··----·--···-····-··----······--···················

1980 1981 1982 19113 1984 19115 1986 1987 1988 1989 Prel. ,990

·········-··------·--·----------··-····--·-·····-··········-·········---------------------------------------------- ·······----ConslJl'f>t I on

Private c-rel gowrment

Gross O~stlc 1-vl!stment Flud Investment Ch11119es In stocks

Resource Bel ence hporte, CNFS tqiorts, CNFS

COP, •rlcet prices

Net Fec:tor Income Gross Netlonal Pro6.Jct

Gross ~omestlc Savings Gross National Savings e/

CMSUl'f>tl on 1-rfvete General gover"""1t

Gross Domestic: Investment F I 11ed I nves tllll!nt Changes In stocks

lesource Balance E11ports, GllFS lq>orts, GNFS

GOP, •rltet prices

Net •actor Income Gross r.atlonel Product

Gros~ Domestic Savings Gron National Savings a/

561l 5109 504

1665 1584

82

·647 1271 1919

6631

·277 615~

1018 941

84.6 77.0 7.6

25.1 23.9 1.2

·9.8 19.2 28.9

100.0

-4.2 95.8

15.4 14.2

5856 5161 693

1716 1655

61

·306 1513 1818

7267

·277 6990

141' 13!7

80.6 71.1 9.5

23.6 22.8 0.8

·4.2 20.8 25.0

100.0

·3.8 96.2

19.4 18.1

6710 5931

779

1646 1541

99

·391 1142 1533

7965

·255 7710

1254 1189

7172 6186

7116

1787 1705

62

·336 1242 1578

8623

·297 8126

1451 1149

8612 7741 871

2203 2169

33

·479 2914 3393

10315

·1511 9977

1724 1571

(es percent of CDP)

84.3 74.5 9.8

20.7 19.3 1.2

-4.9 14.3 19.2

100.0

·3.2 96.8

15.7 1'.9

83.2 74.1 9.1

20.7 19.8 0.7

·l.9

14.4 18.J

100.0

·J.4 96.6

1". n 1'..6

83.3 74.9 8.4

21.J 21.0 0.3

·4.6 28.2 12.8

100.0

·3.5 96.5

1().7

1'>.l

11745 10633

1112

2m 2747

52

·741 4117 4858

13804

·704 13099

2059 2107

85.1 77.0 8.1

20.3 19.9 0.4

·5.4 29.8 35.2

100.0

·5.1 94.9

11,. 9 , ... _,

11132 12035

1297

3109 3024

65

·661 4090

4751

15780

16126 22746 14921 20963

1205 1783

4919 6455 4802 6168

118 88

·1509 ·848 5996 111911 7505 12046

19516 211353

l60Y6 54188 33491 50272 2605 3916

8569 8788 8469 8700

100 88

·2272 ·2420 11028 16114'1

15300 19269

42393 60555

·711 ·1150 ·1965 ·2128 ·2894 15069 111186 26188 40265 57661

2448 2440

84.5 76.3 8.2

19.7 19.2 0.5

·4.2 25.9 JO. 1

100.0

·4.5 95.5

1~.c;

15.5

3410 3260

5607 5408

82.5 80.2 76.4 TJ.9

6.2 6.3 25.2 22.8 24.6 22.5 0.6 0.3

·7.7 ·3.0 30.7 39.5 38.4 42.5

100.0 100.0

·5.9 94.1

17.«; 16.T

·6.9 93.1

19.8 19.1

6297 6074

6367 6083

85.1 89.5 79.0 81.0 6.1 6.5

20.2 14.5 20.0 14.4

0.2 0.1 ·5.4 ·4.0 30.7 27.8 36.1 31.8 .

100.0 100.0

·5.0 95.0

14.9

14.J

·4.8 95.2

10.5 10.0

el Includes net factor Income end net current tran~fer~. 6/0J/91

Source: Central Bank of the Domlntcan Republic.

lolJle l.lt: IJtJHINll/IN Nll'UUllt: · LllOS~ UlW1lSllt: PRllllUll DY Slt:JOR, 1980·'10 (Official)

(In ~Ill Ions of 1970 Dominican pesos) ···························-·············-········································································-············

1980 198, 1982 190J 1984 190~ 1906 1987 1988 ht.

19119 Prel. 1990

·········································-···········--····························--------·-············--···········-········ Consm.,tlon

Private Gtner1l goverrment

Gross D0111estlc rnvestment Ff•ed lnvestl!Mt Chlll'l9fll In 1tock1

Resource D1lence E•portl, GllFS

hrport1, GNFS

GOP, 1111rket price•

Net Fector lnccme Gross N1tlon1l Product

Cepacltr to lwport Ter1111 of trldl ldJustmmt

Gross Donie1tlc lnc01111! Gross Netlon1l lnconie

COM~tlon

Prlv1te ' Gener1I govermmt Gross 0111111t1tlc Investment

F heel fnvestlll!flt Chenges In 1tock1

Ellporta, GNfS lllfJOl'll, GNFS

GDP, •rftlt prices

Gross N1t!~I Product

Gron Oca1t le 1nc­Gro11 l1tfonel lncoine

2,462.4 2,430.4 2,~7.J 2,711.4 7,6J0.2 2,6]].8 2,751.4 2,7T7.6 2,670.2 l,149.0 2,666.11 2,201.7 2,098.3 2,109.9 2,106.0 2,784.l 2,272,8 2,166.6 2,459.l 2,329.6 2,795.2 2,302.7

260.7 112.1 117.4 147.4 J4S.9 J61.0 186.8 118.3 148.6 151.11 164.1

740.0 695.7 52.J

·]06.6 560.0 866.6

668.5 617.8 l0.7

• 176.1 598.J 774.4

540.U 496.7 51.J

·126 518.l 644.l

594.7 559.5 J5.2

·118.7 544.4 661.1

622.8 608.l

14.S

·14.8

572.0 606.8

591.5 571.4 22.1

·92.2 564.J 656.5

617.2 871.4 945.1 591.2 8Jl.5 920.1 26.0 19.9 24.11

·116.6 ·181.6 ·117.4 571.9 646.~ 702.6 706.5 810.0 820.0

nz.5 752.8

19.7

·166.l 710.) 976.6

8411.6 811.4 17.2

·47.0 789.9 1116.9

2,901.8 Z,922.8 l,069.l J,209.4 l,218.2 J,115.1 J,234.0 l,467.4 l,505.9 l,655.2 l,463.4

·122.2 ·111.2 ·~7.4 ·110.4 ·78.t ·156.0 ·145.11 ·199.4 ·241.11 ·184.4 ·167.6 2,701.6 2,809.7 2,971.11 l,099.0 l,140.1 2,979.1 l,0118.2 l,263.0 l,262.t J,470.8 J,300.11

574.2 ·14.2

2889.6 2767.4

644.2 ·45.9

2877.0 2761.11

·1.J ·4.7 27.4

·10.6 ·8.J

·41.J 6.8

·10.6

0.1

1.0

·0.4 ·0.1

479.9 522.0 655.4 5~2.J

18.4 22.4 ·81.4 12.0

1107.7 1211.9 1114.7 1147.1 1010.J 1121.5 3056.6 2991.2

(average 1nrA11l uro~t~)

11.9 10.1 1.6

·16.0 ·22.1 67.1

·1J.4

·16.8

5.0

5.8

o.o 8.9

J.l J.J l.O 8.5

12.6 ·11.4

5.0 2.9

4.6

4.]

4.0 l.7

·J.8 ·4.J ·0.4 4.7 8.7

·58.8 5.1

·0.5

O.J

1.l

·l.O ·2. 1

0.1 ·0.5 4.4

·4.7 ·6.1 52.4 ·1.J 8.2

·2.6

·5.1

0.4

-2.1

609.9 ·18.0

1196.0 1050.2

4.5 4.1 7.1 4.0 l.5

17.6 1.l 1.9

3.2

l.7

t.6 2.0

661.1 ·16.7

1450.7 lZS1 .2

0.9 l.9

·17.7 41.5 41.0 SJ.5 n.o 17 .1

7.2

5.8

8.0 6.6

762.l ·59.7

1446.2 1202.5

·l.6 ·5.J 9.5 8.2

10.4 ·37.11

8.7 ·1.2

1.1

·O.Z

·0.1 • 1.5

791.4 711.8 ·81.1 58.1

JH2 .1 1526.5 lJ81.7 Jl511.9

17.6 20.0 1.5

·18.l ·18.2 ·20.5

1.1 19.1

4.J

6.4

l.7 5.8

·15.l ·17.6

2.9 9.8

10.4 ·11.9 11.2

·14.3

·5.1

·4.9

· 1.l ·0.8

················-···········-·············-····-·············-------------------------------------------··· ··------------------Source: Ctntrat Danie of the Domlnlcnn Rrpubl le anrl Rank ~•nff r~I im~1r•.

1ab\e J.1: IXMllllUll Rll'UBLIC. BALANCE OF PAYMCNIS, 1980·90 IOlficlal)

hports of goods I llF s ~rchemiae

lion· feet or service•

l11poru of goods I llfS MnchendlH

llon·fector 1ervlce1

lttource lelence

let f11etor Inc:-. fector recelpta fector ,..,_,,,,

llet Private Tr-ftra

Current ACCIQ'lt lat anc:e

••t direct lnwatlll!l1t Official transfera llet MLT l-

Dhbur1ewnt1 Mort h1tlon (IChe.l.iled)

htra·ordlnary fl-.:lng leacheclll ed debt Arre.ra <e•ct. Central lank)

Other Caplt1I 1/

Short·tena capital

Capital Acc!Q'lt

Other, Incl errora & OlllHlont

Overall l•lanc:e

flr..ntlng

let fonlgn useu use of hrd tredlt

A.rre1n Other, Incl rest of ti.nk Ing 1y1tM1

1980

127\.J

961.9

309.4

1918.7

1519.7

399.0

·647.4

·210.2 41.8

nz.o

Ul!.1

·674.S

62.7

4.7

25?.7 182.2 129.S

0.0

11.0 103.2

454.J

112.9

·107.]

107 .]

107 .3

·75.8 106.2

76.9

1981

1512.6

11811.o ]24.6

18111.4

1451.7

366.7

·305.8

·291.1

11.11

J04.9

116.3

·422.6

19.1 16.1

153.6 120.2 166.6

o.o

7.S

·!8.4

219.1

9J.9

·109.6

109.6

109.6

·25.5

166.11

·:U.7

(Milt Ions of USS)

1982

1'0.8

767.7 314.1

1514 .6

12'>7.]

l11.J

·)92.11

·2'>4. 1 4.4

258.S

190.0

·456.9

·1.4 15.0

192.11

355.8 161.0

0.0

-1'>.0

·2.8

1118.6

·89.0

·lH.J

J57.J

]57.l

48.b

119.9

188.8

198}

1?19.11

785.2

444.6

1568.11 12112.2

286.6

.)]9.0

-297. I

6.9 J~.o

195.0

·441.'

n.o 20.0

2.1 226.7

224.6

294.S 15L9

142.6

·16.0

·81.2

241.4

14'.S

·511.2

!18.2

~8.2

'74.6

·67.4

·49.0

........................ -.... -- -- ................. -............................... -................ .

1964

1lJ6.9 llJ5.4

501.5

15'>6.6 11\7.1

299.5

·219.7

·157.7

5.tl 36}.5

205.0

·l72.4

68.5 60.0

ll.11

281 .4

2511.6

210.6

210.6

-~l.6

·0.1

.l56.2

108.4

9l.2

·92.2

·91.1

·25.0

29.0

·96.2

19115

Ull.8 7111.5

584.J

1560.4

1165.9

274.S

·ZJ7.6

·ll9. 1 21.6

140.7

242.0

·314.7

l7.0 114.l

·112.6

2~.7

lSll.l

219.l

561.2

·341.9

·711.6

o.o

IS9.4

245.5

90.2

·90.2

·90.2

75.11 ·41.0

·125.0

11 Includes c-rcl•l benlr.s, 90\d _,\let Ion and rev•luet Ion lf"d veluat 1on <hang~.

Source: tentrel Bent. of tht OMlinican R~thl ic, IB~D and IMF.

19116

1408. 1

72l.1

6116.0

1616.0

1]51.7

284.J

·227.9

·244.11 17.0

261.8

242.0

·2J0.7

50.0

29.0 ·llil.6

1611.2

398.11

241.2

117.0

66.2

·14.0

-~11.0

29.6

292.2

91.1

·91. 1

·91. 1

7.J

·25.11 ·11.6

19117

1559.6

711.J

8411.J

1952.0 1591.5

160.5

-392.4

-299.0 tl.6

.l10.6

260.0

-01.4

119.0

95.4

·104.6

90.0

394.6

'1.l.9

210.0 191.9

·0.8 -n.o

234.9

111.11

• 114. 7

114.7

114.7

·20.5 ·4.2

119.4

191111

11116.0

11119.7 9,6.]

1974.11

1608.0

366.11

·138.8

·321.4

8.5 J29.9

2811.11

·171.4

106.1 64.11

·212.6 Ill.]

10.9

3'2.6

16J. 7 1711.9

·511.9

·l2.5

219.S

111.5

129.6

·129.6

·179.6 ·6J.1

24.4 ·90.9

1989

2067.9

924.5 11U.4

24211.6

1963.11 464.11

·360.7

·JJ5.7 10.0

~5.7

]00.5

·]95.9

110.0

8l.ll

·40.9

242.0

282.9

119. 1

65.6 273.5

·2.5 25.4

514.9

·231.4

·112.4

112.4

112.4 ·98.0

1.2 207.2

,rel. 1990

19n.o 704.0

1269

1156 . .l 11107. 1

449.2

·2!lJ.]

·149.1

1t.8

360.9

]14.11

·!17.6

Ill.II 91.5

·291.1

141.J U2.4

5112. 7 6J.1

519.6

·29.J

·11.2

475.4

·82. 1

75.7

·15.1

·75.7 ·76.8

111.J ·110.2

6/0J/91

,Page 1 of· 2 Table l.2: OCltlNICAN REPUBLIC · EXPORTS OF PRINCIPAL CCltM<X>ITIES, 1980·90 ............

(Millions of USS)

·····-······-·-···········-----------------------------------------------------------····--···-········---------····------·-··· Prel.

1980 '1981 1982 19113 19M 1965 1986 1987 1968 1989 1990

····-···-·······-------------·-·-···------------------·-------------·----------------------------------------------------------Total Exports, f.o.b. 961.9 1188.0 767.7 785.2 815.4 738.5 722.1 711.l 889.7 924.5 704.0

---------------------Raw Sugar

value 290.2 513.2 26C:.5 261.6 271.9 158.5 1ll.8 127.1 121.2 157.1 1'2.7 Volune 802.0 847.5 9:n.1 917.7 828.4 655.2 449.2 551.1 513.9 490.5 354.9 Unit Value (100 lbs,> 16.5 27.5 14.5 11.0 14.9 10.6 1l.5 10.4 10.9 14.5 18.2

Refined Sugar Value 0.0 o.o 0.0 o.o 11.6 21.7 2.3 2.8 5.l l.O 1.7

Unprocessed Coffee Value 51.8 62.2 90.6 76.l 95.1 86.1 112.8 61.l 66.5 63.8 46.5 Volune 19.7 26.8 34.0 29.7 34.6 30.2 30.4 29.7 27.2 32.4 31.9 Unit Value (100 lbs.) 119.6 105.2 120.8 116.5 124.5 129.4 167.9 96.6 111. 1 89.3 66.2

Processed Coffee Value 25.0 tl.6 5.0 o. 1 0.0 4.5 l.O 0.0 0.0 0.0 0.1

Raw Cocoa Velue 51.1 44.8 52.9 55.5 70.0 58.1 58.9 66.3 64.0 41.0 41.3

Voh111e 21.5 27.2 38.7 34.4 12.l 31.l 35.9 38.9 46.7 40.6 45.8

Unit Value (100 lbs.) 98.7 74.6 62.0 73.1 98.l M.1 74.l n.2 6~.2 48.0 40.8

Processed Cocoa Value 4.7 5.3 6.1 5.4 6.7 7.0 8.8 8.6 5.9 4.9 4.8

Tobacco leaf Value 34.8 65.6 21.4 21.8 24.2 17.6 18.6 14.2 18.3 10.6 16.2

Vo lune 21.8 39.2 12.t 13.5 16.2 13.9 15.5 10.9 15.1 8.2 15.1 .. Unit Value (100 lbs.) 72.4 76.0 80.6 71.3 67.8 57.7 54.4 58.7 55.0 58.7 48.7

Tobacco Products Value 0.8 1. 7 2.6 2.2 6.2 5.3 7.1 S.4 S.7 3.6 5.7

···-·················----··--------·-------------------------------------------------------------------------------------------

Page 2 of 2 Table 3.2: OC»llNICAN REPUBLIC · EWPORfS OF PRINCIPAL COMMCOITIES, 1980·90 -. -... -...

(Millions of USS)

····-··--·--···----··-·-·······-·····--···-------------------------------------------------------------------------------------Prel.

1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990

··················-···-·-----------------------------------------------------------------------------------········------------

BaWIHe Value 16.5 ~5.7 5.3 0.0 0.0 0.0 o.o 4.1 1.7 0.9 0.5 Vo lune 605.8 457.2 140.6 0.0 0.0 0.0 0.0 328.0 199.9 174.9 76.5 Unit Value (ton) 27.3 34.4 37.4 0.0 0.0 0.0 0.0 12.5 8.3 5.2 6.7

Ferronickel Value 103.3 110.5 24.2 83.5 108.5 120.7 77.B 115.3 308.8 371.9 249.1 Yohn 48.6 49. 1 14.2 53.B 62.4 67.9 53.9 78.4 82.9 81.9 78.1 Unit Value (ton) 221~.1 2252.6 1709.6 1550.8 1740.2 1778.0 1443.4 1471. 7 3726.5 4544. 1 3189.1

Gold Value 225.5 186.4 146.6 149.5 122. 1 104.0 104.5 112.5 89.0 66.0 53.6 Vohne 369.6 407.6 386.3 354.0 338.3 328.0 285.5 250.7 203.7 1n.2 140.0 Unit Value Couice) 610.2 457.2 379.6 422.3 360.9 317.1 366. 1 448.5 436.9 383.3 382.9

Silver Value 34.0 21.5 17.0 15.0 9.7 9.6 7.3 7.6 9.1 3.8 3.5 Vohne 1622.6 2033.6 2197.7 1328.1 1204.5 1581.' 1356.2 1092.9 1419.5 700.4 735.0

Unit Value Couice> 20.9 10.6 7.7 11.3 8.1 6.0 5.4 7.0 6.4 5.4 4.7

Other Exports Value 124.3 147.4 130.4 112.4 109.4 145.4 187.2 184.1 192. 1 195.9 1385.8

••••••••••••••••••••••••••••••••••••••••••••••••••·•••••••••••••••••r••••-••·•••••••••••••••••••••••·-·-•••••••••••••••••••••••

source: Centr1l Bank of the Dominican Republic. 5/27/91

Table 3.3: DOMINICAN REPUBLIC · lXPORTS BY DESTINATION, 1980·90

(Millions of USi)

······---···········-·--------------------------------------------·-------------------------------------

1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 Prel. 1990

···········-··········-------------------------------------------------------------------------------------------------------------T~tet EMports, f.o.b.

North Amedee United States Puerto Rico Cenede

LA FT A

Venezuela Others

Other Latin America i Ceribbeen

EEC B.?lglun France The Netherlands United Kingdom Other

Other Europe Spain Sweden Swi tze.-tend Other

Asfe Japan

Other

Afr Ice

Algeria Morocco Other

Rest of the World

961.9 1188.0

505.5 444.6 58.0 2.9

88.5 87.1

1.4

24.1\

79.8 21.6 l.2

48.1 1.2

5.7

229.l 15.1

0.0 204.5

9.7

8.7 8.7 0.0

25.5 7.0 1.7

16.8

':.O

810.2 741.l 54.0 14.9

79.5 71.4 8.1

30.1

73.6

25.5 4.5

26.9 12.7 4.0

161.8 43.2 3.4

103.0 12.2

15.2 15.1 0.1

17.6 10.7 2.5 4.4

0.0

767.7

437.2 385.4 44.0

7.8

19.8 19.l 0.5

52.8

53.0 23.4 3.5

21.5 0.9 3.7

170.0 11.1 0.0

89.9

69.0

6.0 5.9 0.1

16.1

0.0 12.9 3.2

12.8

785.2 835.4

570.4 503.6 32.4 34.4

5.7 3.7 2.0

15.7

62.8 2~.4

1.2

31.4 3.1 0.7

105.4 16.8 0.0

43.3 45.3

9.8 7.0 2.8

11.l 0.0 6.5 4.8

4.1

689.7 626.0 43.1 20.6

17 .5 13.0 4.5

27.4

85.0

11. 7 0.4

60.4

0.6 11.9

23.6 12.8 2.0

0.1 8.7

15.9 15.1

0.8

8.9 0.0

8.9

0.0

738.5

578.4 508.6 52.1 17.7

2.5 1.8 0.7

2~ .0

81.1 20.0 2.0

53.0 0.7 5.4

34.1 10.9 0.0 0.2

23.0

13.6 13.2

0.4

0.8 0.0 0.8 0.0

3.0

722.1

593.6 504.9 76.1 12.6

1.2 1.0 0.2

22.0

63.1 23.8 0.9

31.2 0.5 6.7

18.8

12.2

0.0 1.8 4.8

9.4 9.3 0.1

6.2 1.5 4.3 0.4

7.8

711.3 889.7 924.5 104.0

557.2 584.0 468.0 c _:, 64.1 75.6 25.1 19.8

1.8 1.6 1.0 0.6 0.8 1.0

25.5 27.2

64.6 151.7 30.0 36.8 0.3 0.3

29.8 105.1 o. 7 5.1 3.8 4.4

24.5 62.9 7.4 16.9 o.o 0.0 0.3 0.4

16.6 45.6

10.7 49.7 9.8 42.4 0.9 7.3

18.6 12.6 5.0 5.8

10.9 6.D

2.7 0.8

6.4 0.0

551.2 501.5 467.3 431.8 65.7 57.8 18.2 11.9

13.1 13.8 9.8 0.6 3.3 13.2

24.5 14.9

185.9 127.8 10.8 13.5 0.4 1.2

166.7 106.9 0.5 1.2 7.5 5.0

44.1 23.9 10.0 15.9 o.o 0.0

0.1 0.2 34.0 7.8

97.0 48.9

54.2 14.9 42.8 34.0

8.6 3.6 0.0 0 8.3 3.6 O.l 0.0

0.1

················-··-·········-------------------------·----------------------------------------------------------------------------Source: Central Benk of the Dominican Republic. 5/27/91

Table l.4: DOMINICAN RlPUBllC · IMPORTS, 1980·90 ......... ----.....

(Miiiions of USS) ············-·········--····--·--···-······-·····-·-···-····--········-····--·-·-··-······-···---·····-··--·--·-·······-------···-·

Est. 1980 1981 1982 1983 1984 1985 1986 ~987 1988 1989 1990

·-·--------········-··-················-········--···············-·--·--·--------·--········------------·-·------------------------By economic cl1s1lflcatlon: 1/ -~----···-·········-········--

Total fll'fXlrts, c.l.f. 1519.7 1451.7 1257.3 1282.2 1257. 1 1285.9 1351. 7 1591.5 1608.0 1963.8 1807.1 ·············--······

Conslllll!r Coods 339.0 325.8 247.6 268.9 216.6 254.2 392.0 Petroleua and Derlv1Slves 448.8 497.4 449.5 461.3 504.7 426.8 253.8 377.9 337.8 405.0 50l!.7 Intermediate Coods 490.3 399.1 381.2 399.3 394.5 395.0 403.l Cap I tel Goods 241.6 229.5 179.1 152.7 141.3 209.9 302.6

(percent of total)

----------------Total lll'f>Orta, c.l.f. 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 .••..................

Conslllll!r Goods 22.3 22.4 19.7 21.0 17.2 19.8 29.0 Fuell 29.5 34.3 35.8 36.0 40.1 33.2 18.8 23.7 21.0 20.6 28.l lntel'llledlate Goods 12.1 27.5 30.l 31.1 31.4 30.7 29.8 Capital Goods 15.9 15.8 14.2 11.9 11.2 16.3 22.4

By prOt\Jct cla11tflc1tton: b/ •.•.........•..••........•... Total h1port1, c.l.f. 1519.7 1451.7 1257.1 1282.2 1257.1 1285.9 1351. 7 1591.5 1608.0 1963.8 1807.1 ····················-

Petroleuw Ind •rlvatlves .. .. .. . . 504.7 426.9 253.8 1n.9 332.11 405.0 508.7 Coal .. .. .. . . 2.ft 9.6 4.1 10.4 9.3 22.0 5.0 llESPRE cCllllOdltte1 .. .. .. .. 78.3 48.1 44.9 24.2 48.9 54.5 50.l Mollnoa DOlllnlcanos . . . . .. . . 28.7 31.5 29.0 10.3 34.9 31.1 33.0 Other .. . . .. . . 642.8 767.8 1019.9 :138.7 1132.1 1451.2 t210.1

(percent of total) -······---------

Total hrporta, c.l.f. 100.0 100 ... 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 ·-·-·················

Petroteua and •rlvatlve1 .. .. .. .. 40.1 33.2 18.8 23.7 20.7 20.6 28.2 .. Coal .. .. .. . . 0.2 0.7 0.3 0.7 0.6 1.1 0.3 INESPRE cOlllllOdltles . . .. .. . . 6.2 3.7 3.3 1.5 l.O 2.8 2.8 Mol Inoa Dontlnlcanos . . .. .. . . 2.l 2.6 2.1 2.5' 2.2 t.6 1.8 Other .. .. .. . . 51.1 59.7 75.5 71.5 73.5 73.9 67.0

·····-················-·-······--·-·······-----------------------------------------------------------------------------············ a/ Based on customs data. 5/27/91 b/ Based on balance of payments data • •• Not available

Source: Central Bank of the Dominican Republic.

Table l.5: OC»llNICAN REPUBLIC · SUGAR EXPORTS AND PETROLEUM IMPORTS, 1974·90

(Millions of USS) ····················································-···--·----------------------------··------------------------·-···--·-------·--------·········-······--·--······-···

Prel. 1974 1975 1976 1977 1978 1979 1980 1981 1982 1981 1984 1985 1986 1987 1988 1989 1990

····-~---·········-·-······-···············--·-···---------------------------------------------------------------------------------------------------------------------· SUGAR EXPORTS a/ ········-······

Volune <thous. inetrlc tons) 1018.6 970.4 978.5 1098.8 904.7 992.1 802.0 847.7 81J.3 917.7 828.4 655.2 449.2 551.1 511.9 (90.5 154.9 Value (USS) 340.2 577.2 269.3 231.6 172.0 190.9 290.2 513.2 265.5 261.6 271.9 158.5 Ul.8 127.1 123.2 157.1 142.7

as percent of GOP official exchange rate 11.6 16.0 8.8 5.0 l.6 3.5 4.4 7.1 l.3 3.1 2.6 3.5 2.4 2.4 2.6 2.l 2.CI parallel exchange rate 11.6 16.0 :'.8 5.0 3.6 3.5 5.5 9.0 4.8 4.8 7.3 l.5 2.4 2.4 2.6 2.5 3.1

PETROlEUM IMPORTS b/

-----·····-----···--Vohne (11lns. barrels> 13.4 1Z.1 12.2 12.1 11.6 12.6 15. 1 14.9 14.3 16.l 18.2 16.1 18. t 21.1 21.4 22.2. 22.1 Value (USS) 155.0 171.1 171.1 187.8 201.0 118.5 448.8 497.4 451.6 461.3 525.0 426.8 253.8 377.9 332.9 405.0 508.6

es percent of GOP off lclal exchange rate 5.3 4.8 5.6 4.1 4.3 5.8 6.8 6.8 5.7 5.3 5.1 9.5 4.6 7.2 7.1 6.0 1.0 ~rallel exchange rate 5.3 4.8 5.6 4.1 4.l 5.8 8.5 0-. 7 8.2 8.5 14.0 9.5 4.6 7.2 7.1 6.4 10.9

--·----·-·-···--------------------------------------·--------------·-·----·---------·--··----·-----·-·-----------------------·-------------------------~----------------a/ Raw sugar. 5/27/91 b/ lq:iorta of crude petroleu11 and derivatives.

Source: Central Danit of the Dominican Rep.tillc.

T•ble 3.6: Domlnic•n RePlolblic - Net lntern.tfon.l Reserves, 1980·90•

Cln millions of US doll•rs) ·········- •.........•.........•.......•••••.....•.••.•..•................••.....••••............................................

Oectl!Oer 31 .••.•......••..•.....•.....................••••.....••.•.........••••............................ 1980 1981 1983 1984 1985 1986 1987 1988 1989 1990

················-··············-································································································· Total ·240.2 ·391.1 ·701.8 ·741.6 ·362.5 ·225.4 ·170.7 ·259.8 ·69.9 ·179.9 ·133.3

Central Bank ·212.7 ·322.3 ·679.6 ·698.8 ·335.9 ·245.7 -175.9 ·290.7 ·161.1 -273.S ·197.7

Assets Gold Si9ht deposits & currency Time deposits 108 bonds USAlD letters of credit Jtems in tr•nsit SOR holdings IMF reserve tranche Bilateral •greements

Li •bi l it i es Arrears Letters of credit 3/ Bilateral •;reements Santo Domingo agreement Use of IMF credit IDB deposits 4/ Central banl'.s Foreign cormiercial banks Central Bank of Venezuela 5/ Ven. Jnvest. Fund d~posit Banco de Mexico,SA Other 6/

Conmercial Banks

Asseb 71 Liabilities

275.2 72.8

157.7 16.2 1.8 1.6

24.5

0.6 ·487.9 ·47.5

·102.1 ·105.7

·48.5 ·15.8 -64.2

• 104. 1

·27.5

283.5 58.7

142.4 49.0 1.8 0.6

28.5 1.9

0.6 -605.8 -62.7

-253.7 ·89.8 ·26.8 ·23.0

·61.0 ·88.8

·68.8

172.4 43.7

103.5 4.0 1.8

17.7 0.6

1. 1 -852.0 • 182. 2 -254.1 -110.8 •31 .6 ·71 .6

·51. 7 -65.0 -85.0

·22.2

127.3 272.5 291.9 ·154.8 ·341.3 ·314.1

1/ Reclassified to si9ht deposits in 1990.

204.3 31 .3 60.5 72.6 1.8

26.0 0.2 7.7 4.2

·903.1 ·78.2

·270.7 ·119.3 ·31 .6

·246.2

·47.1 ·34.8 ·59.6 ·15.0

·42.8

42.8 ·85.6

268.0 7.9

176. 1 62.1

1.8

17.9 0.4

1.8 ·603.9 ·107.2

·83.6 ·31 .6

·221.2

·46.7 ·4.8

·93.9

·9.6 ·5.3

·26.6

58.S -85.1

356.4 5.9

262. 1 36.2

1. 7

17.8 31.6

1.1 ·602.1 •66.2

·77.6 ·23 ..

·297.0

·30. 1 ·4.8

·103.2

20.3

59.3 ·39.0

359.3 7.2

334.8 3.4 0.9

13.0

·535.2 ·40.3

·34.0 • 17.8

·304.3

·23.9 ·4.8

·109.4

-0.7

5.2

88.9 ·83.7

149.3 8.9

108.7 20.4

1.3

9.6 0.4

·440.0 ·36.2

·73.0 ·17.S

·283.6

·23.9 ·4.8

·0.7

30.9

123.6 ·92.7

2/ Recl•ssified •s part of the reciprocal credit •;reement •nd included •s part of other li•bilities.

208.5 7.7

142.3 25.4

1 .0

31.3 0.8

·369.6 ·35.8

·65. 1 ·16.7

·220.5

·22.3 ·4.8

·4.4

91.2

161.8 ·70.6

3/ Amounts owed to loc•l c011111ercial banks by the Central Bank for letters of credit which h•ve been paid by head offices or correspondent banks •broad.

4/ Advance depo&ih made from the Venezuel•n Investment Fund. 5/ Oat• in 1986 was converted to• rnediun·tenn liability in Deceri:ler 1987, 6/ Includes reciprocal credit egreements, obligations to BLADEX •nd special aeposits for the •cquisition

of foreign eKchange. 1/ Includes 91T!Ounts due to the banks by the Centr•l Bank, es explained in footnote 3.

Sources: Centr•l B•nk of the 0.;)lllinican Republic; and F~ staff estimates.

122.S 7.5

31.8 52.0

1. 0

25.4 s. 1

·396.3 ·30.9

·57.0 -11. a

·122.5

·n.c

• 161.,

93.6

123.5 ·29.9

68.8 7.0

3C.8 :;1.0

·266.5 ·26.5

·0.7 2 • 11.8 ·71. 7

• 13. ~

·142.8

64.4

131.3 ·66.9

6/11/91

I'

DATE

Tnhlc 11.l

SERVICE PAVMfNTS, COMMITMfNT';, l>l'">llllllSrMrNrS ANO OllT'">TANOIHG AMOOtHS OF ()(TfRtll\L PIJOLIC OEOT PllOJf.CTIONS OA\lO UN lltlll OU1~1ANOING INUUlllHG UNUISllllflS£0 AS OF OEC JI, 1990

IN(.l.U!lf.S ONLY llr:llT l"OMMlfTlll 000000 - llf.C JI, 1990 OLllf llll'AYAlll I: IN rour 11.N tlllWI NCY AHIJ (;OUIJS

(IN TllUIJSANl>S Of U.S. OOLLANS) • • • TAOLE T01AL • • •

DEBT OUTSTANDING AT 1 T A A H S A C T J O N S 0 U R l H G P E R 1 0 0 : OTHER CHANGES· EHO Of PERIOD

-----------1---------------------------1-----------------------------------------------------------:-----------------------

198012 198112 19R212 198312 198412 198512 198612 19871:1 1988t2 190912 199012

199112 199212 199312 199412 199512 l99fJ12 1997 \2 199812 199912 200012 :100112 200212 200312 2004l2 200512

0ISOURSEO 1 INCLUDING : COMMIT- : OISRURSE- : S E R V l C E P A V M E N T S : CANCEL- 1 AOJUST-OHLV 1 UNOISBURSEO 1 MENTS : MENTS 1-----------1-----------:-----------: LATIOHS • 1 MENT ••

1 1 : : PRINCIPAL : INTEREST : TOTAL : : (I) : (2) : (3) : (4) : l5) : (6) : (I) : (8) : (9)

1,219,730 1,400,278 I ,666,465 '1, 20 I ,865 2,364,308 2,692,208 2,887,310 3, 173,853 3,237,147 3,280,505 2,737,518

2,499,061 2,763,587 2,032,054 1, 'tO I ,630 I ,575,220 I ,377 ,540 '. 182 ,463

997. 105 828,962 690,462 601 ,812 518,268 442,432 368,480 302 ,877

I ,851, 190 2,084,660 2,20R,9ll 1,970,677 3,034,843 J,4f10,090 3 ,5!i5, 24 I 3,747,939 3,171,427 3, 7:16.849 3,033, 157

2,689,711 2,385,114 2,106,769 1,044,671 1,597,0JO 1,385,561 1,184,776

997, ltO 828,968 690,468 601 ,877 518,273 442,436 360,484 302,880

510,629 365,400 369,762 333,8R6 418,316 346,810 t45,346 191, IAJ 167,015 136,951

414,054 292,JGt; 415, 797 7 :·"' • 90'> 305,045 2114,901 19!>, J;J I 159,401 163,496 1911. 11' 12:J,023

f>I ,540 109 ,072 141,990 114. fi'll 61. 99"1 71 ,076 96,933 09,720 911,161

Hll ,570 372, IOI

92,178 120,011 100, lfi5 1116. 5111 100,642 179, 3~· • 1lfi,018 94,677

144,909 75,!)12

105,941

• • • THE FOLLOWING FIGURES ARE PROJECTED • • •

105,788 68,31" 46,822 31,613 20,4:10 13. !'>1:111 6. 709 2,300

2!'14,535 304,!'>UO 77ff. 3'">5 161,090 246,840 111, 1b8 201,1fl5 llH ,666 :r.o. 141 1 JI!, !.oo 811,590 83,604 7!J,OJ6 73,952 65,tiOJ

163,269 144,951 111,on 110,072 93,511 'IO. 117 65,G53 !°>1, 191 411,765 30,579 25,348 11. 112 17,790 13,698 10,329

153, 726 229,090 156, 155 771. '1J9 tG7,639 100,428 272,950 IR4,J97 :M3, 170 171,.,82 SS0,042

457 ,004 449,539 405,377 372, 120 340,350 209,495 166,838 239,963 708,408 169,000 I 13,939 104,716 93, 134 81. 650 75,931

94,144 13,611

'"'· 194 2,253

157,292 7,390

89,504 157,787 32,172 27,761 29,713

-8. 146 -3,375

414,775 -94 ,810 176,903 115, 141 249,022 -9,053

-52. 197 -291,070

-40,909 I

0

0

0

• Includes Wrlteoffs; Projected amounts In this column aro amounts e•clur.Jed frorn proJecllons tJue lo unknown terms.

•• This column shows the arnoun' of arlthrnellc lrnh;ilence In the arnount outslan<lln<1 Including un1llshursed from one period to the neat. The most common causes of lrnbalances 1;1re chanues In e•..:han~e r<ttes and transfers of tlebts from one cateuory to another In the tabla.

Note: SeTVice payments for 1990 are recorded on accrual basis; actual payments were lower and debt outstanding at end 1990 is therefore ~igher. See text Table 4.2 for end 1990 DOD.

. I

DATE

Tal!.l_P_!~JL (cont' cl) •

SERVICE l'AVMF.NTS. COMMllMPns. orsnun<;FMl:NTS ANO 011r•.TANOING AMOUNTS or EXTERNAL PllAI IC DEBT PROJECT IONS BA'>t-0 ON lllllT OUTSTANOING INCi uouu; llNOJSOllHSfU AS OF Ul:C JI. 1990

INCllll>fS CINI V lll:.OT tOMMITHO 0000110 - OEC JI. 1990 OE.8 T REl>AVAlll I It~ HlRCI GN r:unnENCV ANO GOODS

(IN lllllll'>ANIJS Of U.S. UOllllRS) CHllll IOH lVl'f : MULTll.ATlHAL LOANS

• • • TOTAL • • • DEBT OUTSTANDING AT : T R A N S A C T I 0 N S 0 U R I N G P E R J 0 0 : OTHER CHANGES

END OF PERIOD -----------:---------------------------:-----------------------------------------------------------:-----------------------

198012 198112 198212 198Jl2 198412 198512 198612 198712 19ea12 198912 199012

199112 199212 199312 199412 199512 199612 199712 19981.2 199912 200012 200112 200212 200312 200412 200512

DISBURSED ONLY

( I)

203,255 27&,r9S 347,269 414,042 444,901 563,806 648,939 751, 770 744, 147 782,929 806,484

825. J 15 814,292 786,447 741, 231 691.~15 637,571 582,141 530, 156 480,580 431,332 384,851 342,913 302,538 262,336 225,771

INCLUDJNG UNDISBURSED 1

( 2 J

582,967 699,587 800,357 952. 174 IJ66,2J9

1 ,075,R71 1 ,036,506 1,069,286 1,111,526 1,094,606 1,032,319

976,86J 914,059 849, 122 1'18,822 712 ,811 646,591 584,45J 530, 160 480,584 431,336 384,855 342,917 302,541 262,339 225, 774

COMMIT­MENTS

(3)

109,500 119,000 105,078 157, 100 114,500 191 ,600

18,000 141,378 105,000 37,820

Ol'iBURSE­MlNTS

(4)

90,053 75, 715 73,042 7' .o 17 1'1. 583

HIS ,3'14 7'1 ,48 I 60,078 52,855 81 ,8'14 86.696

S E R V I C E P A V M E N T S :-----------:-----------:-----------:

PRINCIPAL (5)

2, 177 2,318 2,372 4,047

",516 12,700 21 • 7'15 21. 763 3 I ,3J5 37,856 51,544

INTEREST (6)

4, 195 8,660

1'1. 174 13,914 "'. 269 18. 193 28. 374 30,753 34,991 33,491 40,060

TOTAL (7)

6,372 11 ,038 14,546 17,961 25. 785 J0,893 50.049 !>1,516 66,326 71. 347 91,604

• • • THE FOLLOWJNG FIGURES ARE PROJECTED • • •

74,347 51. 782 31 ,092 25,0RJ 16. 285 11, 281 6, 709 2,308

55,517 62,805 64,937 70. 299 66,001 66,231 62. 138 54.19J 49,575 49,248 46.481 41,939 40,31'.) 40,103 36,565

41. 252 41 .65J 40,752 38,414 35,5'13 32,461 29, 131 25,RJil 22,764 19,821 16,949 14. 195 11,833

9 ,5'13 7,303

96,768 104,457 105,689 108,714 IOI ,545 9R,692 91 ,269 80. 170 72 ,340 69,070 63,330 56, 133 52,208 49. 115 43,868

CANCEL­LATIONS •

(8)

1,966 5J9

157,082 821

70,919 152,619

1,999 12,386

ADJUST­MENT ••

(9)

-1 JO

-698 -31,836

31 ,553 J5,?79 65,784

-29,426 -4.49S

-10,682

0

• Includes Wrtteoffa; Projected amounts In this column are amounts e•clucter1 from projections rtue to unknown terms.

29 0512J/91 08: 14:03

•• Thts column shows the amuunt or arithmetic lmhalance In the amuuul outstan1lln~ lnc.lu<.llnlJ rnuJlsbursetl from one perlod to the ne•t. The most common causes of lmtJalances are chanyes In e~c.ha .. ue ro1tes an<J transfers of del.Jts from one cateyory to another in the table.

DATE

~E'._}1...J_ (cont'd)

SERVICE PAYMENTS, COMMtTMfNTS, OIS81JRSFMrN1S ANO OllTSTANOING AMOUNTS OF EXTFRNAL PUBLIC DEBT PROJECTIONS BASEO ON UEAT OUISlANlllNG INflUOING UNOISHURSlO AS OF DEC 31, 1990

INCLUllES ONI V 111.IJT COMM! fHO 000000 - UCC 31, 1990 DEBI REJ>AYAULf IN FOREIGN LURRlNCY ANO GUUOS

(IN ltlllUSANOS Of U.S. UOLLAHS) CttEUllOR TYPE : BILATERAL LOANS

• • • TOf AL • • • DEBT OUTSTANDING AT : T R A N S A C T J 0 N S 0 U R I N G P E R I 0 0 : OTHER CHANGES

END OF PERIOD -----------:---------------------------:-----------------------------------------------------------:-----------------------

1980\2 198112 198212 198312 198412 198512 198612 198 7 l2 198812 198912 199012

199112 199212 199312 199412 199512 199612 199712 199812 '99912 200012 200112 200212 200312 200412 200512

DISBURSED : INCLUDING ONLY 1 UNOISBURSEO 1

(1)

599.395 735. 163 984,643

t ,on, 736 t,t36,945 1,312,184 1,404,658 1,552,355 1.580,683 1 ,594,927 1, 165,326

1,010,212 878,466 762,708 664,007 569.789 508,632 450,658 398.580 348,382 259, 130 217,021 '75.355 139.894 106, 144 77, 105

(2)

830.661 965.905

1,145,791 t,t87,258 1,309,515 1,513, 775 1,582,410 I ,691,926 1. 692. 7 27 1 ,697 ,947 I, 220,938

1 ,042,095 897,548 773,615 669, 151 570,991 508,634 450,659 396,582 348,384 259, 132 217,022 175,356 139,894 106,145 11, 106

COMMIT­MENTS

(3)

324,890 225.600 262,925 151 , 175 216,501 132,732 83,461 30, 705 36,275 99, 131

DISBURSE­MENTS

(4)

247, 214 208,478 330,All3 1'1"i. 704 714.719 10,493 113,926 76,551 61 ,J19 96, 164 28,955

S E R V I C E P A Y M E N T S :-----------:-----------:----------

PRINCIPAL (S)

26,915 71 ,598 80.012

103, 178 47.047 55,690 62. 269 60,872 60,531 41 ,904

217,757

INTEREST (6)

21 ,586 4 I 0 056 37 .~01 44, 133 17 .981 20,932 20,682 20,283 31,456 28 ,927 67,778

TOTAL ( 7)

48,561 112,656 117,579 147,411 G'i.078 76,612 82,951 81, 155 91 ,987 76,831

285,535

• • • THE FOLLOWING FIGU~ES ARE PROJECTED • • •

- 2:1.779 141 ,597 53,5A4 195, I 76 - 17.000 144,546 45.591 190. 137 - ff. I 76 113,933 36,930 160,863 - 5. 163 104,464 30. 190 134,654 - 3,941 98, 1!>9 24,215 172 ,374 - \ I: 199 62,356 19,410 81,766 - 51 ,974 16,988 74,962 - - 54 .077 14.793 69,961 - - 4R, 1'18 17,797 60,980 - - 89,251 10,158 100,010 - - 42. 109 8,500 50,601 - 4 I, 6t;6 6,910 48,584 - - 35,461 5,464 40,926 - - 33,749 4. 175 3 1, 924 - - 29,039 3,026 32,065

CANCEL­LATIONS •

(8)

94, 128 IJ,611

363 1, 714

40 813

I ,354 J,810

226 10. 117 18,856

ADJUST­MENT ••

(9)

-4,045 -2,603 -4,715

-57, 155 127 ,982 47,746

143.493 25,283

-35,888 -240,395

-37,250

0 0

0

• Includes Wrtteoffs; Projected amounts tn this column are amounts e•cludetJ from projections due to unknown terms.

43 05123/9' 08: 14 :03

• • Th ts co I umn shows the amount of ar 1 t hme t I c lmha I enc e In t hn amount outs t anti I ru1 Inc 1.,.11119 und I stJursnd from one per I od to the ne11t. The most common causes of Imbalances are chanyes 111 eachanve rates and tre11sfers of llellts from one category to another In the table.

~~~(cont'd) 2~·

~·

SERVICE PAYMENTS, COMMITMENTS, IHSDIJRSLMLNTS ANll OIJTSTANOING AMOUNTS Of EXTERNAL Pl!IJLIC DEBT PROJE.LTIONS OAStO ON Ol:DT OUISTANOING INCLUll!Nli IJNUISllUllStO AS Of Ul:C JI, 1990

05123/91 08: 14:0J

l N(l UllE s ONL v m_ n r COMM I fl If) 000000 - (If(; 1 I • 1990 UEOT RtPAVAltl t: IN HIHflt.N t'.URRFNCV ANO GOODS

(IN TlfOUSANDS OF IJ.S. UOLl.ARS) CREDITOR TVPf : FINANCIAL INSllTUTIONS

• • • TOTAL • • • DATE DEBT OUTSTANDING AT : T R A N S A C T I 0 N S 0 U R I N G P E R I 0 D : OTHtR CHANGES

END OF PERIOD

-----------:---------------------------:-----------------------------------------------------------:-----------------------DISAURSED 1 INCLUDING I COMMIT- 1 DISBURSE.- : S E R V I C E P A V M E N T S : CANCEL- I ADJUST-

ONLY : UNDISBURSEO : ME.NTS : ME.HIS :-----------:-----------:----------- LATIONS • ME.NT •• : : : : PRINCIPAL : INTEREST : TOTAL

(I) : ( 2) : (3) : (4) : (5) : (6) : (1 J (8) (9}

199012 397,870 406,495 71,541 76,555 30,689 64,827 95,517 199111 370,079 372,010 - 6,676 33,217 69,905 102. 123 - -1. 257 199212 308,062 308,084 - 1,844 64,464 58,004 122 ,468 65 603 198312 734,270 746,360 22,090 10,021 !) • !>50 46,544 52,094 - 421, 736 198412 749,908 779,486 36,601 13,152 511 61,648 68.225 - -2,902 198512 766,384 794,308 - - 063 89,265 90, 148 3,338 19,022 198612 758,634 787,743 - - 11. 7 79 116,092 138,671 165 5,37,) 198712 756, 715 792,831 5, 100 - 4,415 42,466 46.881 - 4,403 198812 754,503 769,334 - - 4,564 77 .049 81,613 19,975 1,042 198912· 738,994 754,281 - - 15,003 13.494 28,497 2,880 2,830 199012 640,639 644,719 - I ,020 79,216 68,903 148,119 10,857 -19,488

• • • THE FOLLOWING FIGURES AR~ PROJECTED • • •

199112 569,552 572 ,051 - I ,581 71. 886 58,082 129,968 -· -781 199212 498,737 500, 165 - I ,011 71,886 49,383 121,169 199312 427.565 428,279 - 114 71,886 43,014 114,910 199412 356,087 356,393 - 4D8 71 ,886 36,639 108,525 199512 284,405 284,507 - 204 71,886 30,236 102. 122 199612 212,621 212,621 - 102 71 ,886 23,824 95,710 199712 140,743 140,743 - - 71•8 78 17,401 89,279 199812 70,369 70,339 - - 70.374 11,010 81,384 199912 - - - - 70,369 4, 119 75,088 200012 2001I2 200212 200312 200412 200512

• Includes Wrtteoffs; Projected amounts tn this column are amounts P.•cluded from projections due to unknown terms.

•• This column shows the amount of arlthmettc lmbalanr.e In the amounl nutstanflln\1 lnr.ludinq uncllshursP.d from one period to the neat. The most common causes of Imbalances are changes tn eachdnye rates and transfers of debts from one category to another tn the table.

OATE

Table 4.1 {cont'd)

SERVICE PAVMENTS, COMMITMENTS, OISOIJASEMENTS ANO OUTSTANDING AMOUNTS OF £XTEUNAL PUOLIC OEBT PROJECTIONS BASEO ON UEOT llUTSTANUING INfl.UlllNG UNl>JSllURSEO AS OF l'f.C 31. 1990

I NC l.IJllF S ONI. V OEO T COMM I T TE 0 000000 - OE<: 3 I • 1990 OEOT REPAVAOIE IN FOHEIGN CURRENCY ANO GOODS

(IN TtlOUSANOS OF U.S. OOU.ARS) CREDITOR TYPE : SUPPLIERS CREDITS

• • • TOTAL • • • DEBT OUTSTANDING AT : T R A N S A C T I 0 N S 0 U R I ~ G P E R I O C : OTHER CHANGES

ENO OF PERIOD -----------:---------------------------:-----------------------------------------------------------:-----------------------

DISBURSED 1 INCLUDING : COMMIT- : OISBURSE- : S E U V I C E P A V M E H T S : CANCEL- : ADJUST-ONLV i UKDISBURSEO : ME>HS : MEN TS :-----------:-----------:-----------: lATIONS • : MENT ••

• I : I PRINCIPAL , INTEREST 1 TOT•L : I

(I) I (2) : (3) ' (4) : (5) : (6) : (7) : (8} : (9)

198012 3,055 3,057 - 34 I ,316 251 1,567 198 I l2 1,572 22 ,372 20,800 2 I, 188 171 1,359 - -297 198212 3,676 11,676 1, 758 2,758 653 295 946 11,800 198312 10,625 13,625 3,521 8,521 I, !:>73 523 2,096 - I 1984 '2 t I ,564 58,5Q2 49,827 3, 796 2,R57 236 3,093 - -2,0'2 198512 40,450 86,8(l3 22,478 27,!>65 I ,914 678 2,502 2,384 9,950 198612 65,256 138,7~8 43,885 8,925 1,160 80 1,140 17,066 20,296 198712 IOI ,677 182,559 14,000 22,772 2,670 1,175 3,845 1,358 33,829 198812 147,268 187,294 20, 750 49,31 I I ,OJ I 1 ,413 3,244 10,022 -4, 161 198912 152,750 169, I 10 - 20,740 807 - 907 2,376 -15,000 199012 120,022 130,073 - 6,353 22,421 8,858 31. 279 - -16,6\5

• • • THE FOLLOWING FIGURES ARE PROJECTED • • •

199112 92 ,089 96,009 - 6, 131 24,336 10,083 34,470 - -9. 727 199212 70,604 71,864 - 2,660 24, 145 R, 146 31, 791 199312 54,590 55,010 - 84(1 16,954 6, 119 23,072 19941? 40,305 40,305 - 420 14, 70"1 4,737 19,442 199512 29,510 29,510 - - 10,795 3,S23 14,317 199612 18. 716 18,716 - - 10,795 2,532 13,316 199712 8,921 8,921 - - 9,795 1,533 11 ,378 199812 - - - - e,921 670 9,591 19991" 200012 200 I 12 200212 200312 200412 200512

• Includes Wrtteoffs1 Projected amounts In this column are amounts eacluded from projections due to unknown terms.

13 05123/91 08: 14:03

•• This column shows the amount of arlthmet le lmbalanr.e In the amount outstanding lnclul!lnq undlshursP.d from one period to the ne•t. The most common causes of Imbalances are chanyes In eachange rates and lransfers of debts from one category to another tn the table.

•

......................................................................................................... 191' 1985 1916 t•e1 ttaa 1989 1990 ........ ·········· .................................... ········ ········ ....... ····· .................. .

Tocel rw..,,,,. C11•rft't r.,,...,,,,. C1p 1 t1l r1¥-

Totel eape"C!tt11r• Cwrr ... t Hpetal t.,rt 1/

Capltel H~1t1.1rt

le• fetwel dtf IC it b/

i:r...,u btl"P'llll (P\etl

Da.,utic (iwtl

Tatel ,,,,,_ Cwrf"•"'t , • ..,~ C1p1 tal ,,,,_

Tatel ••1Mrclit1.1re C11rr.,..t 1ape,..,it11re 1/ C1pitel eape.-.cl1ture

leaidllll deficit b/

Ovtrell b91•~• Cc•&~ b91i&)

'""" lattrnel c"'o D-atlc (NO

1408.I 2167 .4 2167 .5 SZ1S.S 1354.1 2095.5 2121.z s121.s

54.7 71.9 · J9.S 145.1

1617.2 2762. 7 1153.1' 1922.Z 463.4 11.:.s

U22.7 4058.S 1807 .9 1UO. 1 114.I 2171.4

1249,1 S1Sl.4

110.1

60CS.9 1610.1 3386.1

7162.S 7061.8

100.7

1519.6 7•ZS .0

9•.6

1085 .9 103•8. 9 ,,01.1 5851.7 i.11:-.s 4405.Z

200.l 173.S S20.:S 1247., 2518.6 2863.7 1s~·.3

·212. 7

•201 ,0

26.9

TS6. 1

6C.O 33'.9 1Z:S .0

13.6 13., 0.5

15.6 11.,

4.5

, .o

•2.7

•Z.I

•7.6

o.s

•7.:S

7.:S

0.6 ·:s.2 1.2

•60.7 ·'6'·"' ·267.2 ·7~.- •r".1. c.:

·11.6 °2.01.1 ·~.o ·Sa.!.o ·ns.2 ·•:!

106.0 s •.•

47'9.7 10"3.8

"a.2 s:s. I 126.,

15.5 15.0 0.5

19.1 13.1 6.0

, .2

·0.5

•O. 1

1.4

•:S.4

:S.4

z.s :1.1 0.9

128.6 246.8 100.0

13.7 13.5 0.2

16.6 11.5 S.2

2.0

·Z.:S

•1.6

•6.1

O.J

•6.4

6.,

0.1 1.6 0.6

205.l

•2~.1 1n •. s ~s·.: ~2~? ·

222.0 166.l 3<02.l!

16.! 16.0 0.1

20.1 9.6

11. 2

6.4

•1.4

•0.4

•S.I

1.1

•4.7

1.1

O.t 1.1

2-' .. se3.~·

18.5 18., 0.4

21.2 9.2

11 .9

1.9

·2.7

·2.1

•7.S

1.1

•6.:S

6.S

0.1 1.0 1.,

16.0

le . ., C.2

21.2 9.0

,, .3

6.8

•C.Z

•1. 7

•:S.6

J.6

0.6 1.9 0.1

9 . .,

7.•

2.6

c 0

•C. 7

•S .3

J.3

·Z.,

2.,

0.4 0.6 1. I . ................................................................................................... .

a/ ll'IClldff l"terHt pa,...,t errea~• °" the -.di.,. ll'id lont·ttra debt of the "°""fl.....:l1l pybllc aector and the Cllfttr1l lallk; and l"ter .. t °" lntoreat 1rrear1.

bl ll'IChdta oatre·budv•tl'Y ••Plf'dltwrH rid autlatlcal dlacr..,..:leti. c/ &ricly;•• lnttrtat 1rr11r1 of the Ce11tr1l ••'* for th• ye1r1 1919 llld 1900.

Source: Mofl,,...I ludo•• Office (Olf&ll(J, Cllftfrel lent end ~f"i1try of ''"""•·

..

..

Page 1 of 6

Table 5.2: DOMINICAN REPUBLIC • SUMMARY OPERATIONS OF THE CONSOLIDATED PUBLIC SECTOR, 1984·90 I/

• .CM it lions 0

of RDS)

1984 1985 1986 1987 1988 Pre!. 19Jl9

est. 1990

......................................................................................................

Total revenue r:urrcnt revenue Capital reveriue

Total expenditure Current expenditure b/ Capital expenditure

Current account balance

Operating losses (Central B •.. i:)

Residual effect c/

Overall balance (conmitment basis)

Fina~cing

Gl'"ants Extel'"nal (net)

Drawings A~~rt!zation due Rescheduling Arrears

Domestic (net) Banking system Of which: operating l~sses

of the Central Bank INVI bonds

Total revenue Current revenue Capital revenue

Total expenditure Current expenditure

o.w.: current transfers Capital ex~iture

o.w.: capital transfers

C•Jrrert account balance

Overall balance

Grants Overall balance after ;rants

I. Consolidated Public Sector

1408.8 . 1354.1

54.7

2167.4 2095.5

71.9

2167,5 3273.'3 2128.2 3127.5

39.3 145.8

5249.1 5138.4 110.7

7162.5 7061 .8 100.7

7'519.6 7425.0

94.6

1590,3 2565.8 2568.3 3853.2 5686.3 7873.9 8379.4 1126.9 1725.3 1153.5 1674.8 2300.2 3086.1 3884.2 463.4 840.S 814.8 2178.4 3386.1 4787.8 4~95.2

227.2 370.2 374.7 1452.7 2838.2 3~75.7 35~0.8

·282.7 ·69.7 ·365.3 ·267.2 ·768.4 ·77 ,(, o.o

·291. 9 ·11.6 ·247.7 ·79.0 ·588.9 ·725.2 ·4=8.3

·756.1 ·47~·.i' ·1013.8 ·926. 1 ·1794.5 ·1514.0 ·12~8.1

7'56. 1

60.0 331.9 371.2 190.4

0.0 151.1 399.5 399.5

282.7 ·35.3

479."f 1013.8

348.2 535. 1 589.6 462.8 387.8 20.5

·378.4 ·378.4

69.7 ·25.2

128.6 246.8 346.8 693.9 384.4 209.5 645.6 645.6

365.3 ·7.2

II. General Goverrment a/

1342.5 1304.5

38.0

1428.9 1131 .9

15.5 297.0 57.6

112.6

2385.2 23Z8.6

56.6

2554.8 2036.2 539.8 518.6 174.8

292.4

2439.0 2408.7

30.l

2554.6 1925.2 295.7 629.4 230.1

483.5

926.1 1794.5 1514.0 1268.1

222.0 166.3 276.8 805.8 386.9 308.4 537.8 537.8

267.2 0.0

3387.1 3252.3

134.S

3760., 1831.5 168.9

1928.6 338.9

1420.8

240.0 277.4 579.6 821.0

o.o 518.8

1277.1 1277 .1

768.4 0.0

5267.0 517'3.7

93.3

5571.0 2627.0 340.8

2944.0 581.3

2546.7

265.0 785.0

1092.6 920.6 65.2

547.8 464.0 464.0

77.4 o.o

7243.4 7145.7

97.7

7168.7 3324.8 437.3

3843.9 669.4

3820.9

265.0 3~0.0

682.6 1453.5

82.4 1028.5 6c3.1 663. ~

o.o 0.0

7824.5 m3.4

91.1

8118.9 4268.2

417.7 3850.7 832.5

3465.2

·86.4 -169.6 ·115.6 -373.0 -304.0 74.1 ·294.4

60.0 -26.4

348.2 178.6

128.6 i3

222.0 ·151

240.0 -6/.

265.0 339.7

265.0 ·29.4

········-······-····~···-··············-········---···············-··································

P1;e 2 of 6 T1ble 5.2: DOMINICAN REPUBLIC • SUMMARY OPERATIONS OF THE CONSOLIDATED PUBLIC SECTOR, 1984•90 I/

Total revenue Current revenue Capital revenue

Tot1l expenditure Current expenditure b/

o.w.: current transfers Capital expenditure

o.w.: capital transfers

C~rrent account b1l1nce ·······················

Overall balance ................ Grants

Overall balance after ;rants ··--·················-··-···

Total revenue Current revenue

o.w.: current transfers Capital revenue

o.w.: capital transfers

Total expenditure Current expenditure Capital expenditure

Current account balance •········•·····••······

Overall balance ................

(Millions of ROS)

1984 1985 1986 1987 1988

11·•· Centr1l Coverrvnent ...............•..

. 1204.2 2228.9 2282.8 3061 .6 4891 .a 1184.3 2195.9 2266.!. 3034.S 4837.3

19.9 33.0 16.4 26.8 34.S

1281.6 2371.6 2393.9 3423.0 5134.2 1007,7 1897.4 1792.6 16.49. 9 2390.3 133.3 689.4 455.6 348.4 613.9 273.9 474.2 601.3 im.1 2743.9 147.6 276.1 327.3 534.8 747.5

176.6 298.S 473.8 1384.9 2467.0

·77.4 •142.7 ·111. 1 ·361.4 ·242.4

~o.o 348.2 128.6 222.0 240.0

·17 .4 205.S 17.S ·139.4 -2.4

11 ·b • Social Security Institute CIOSS) ...............................

61.6 62.1 76.8 120.9 192.9 61.4 62.0 76.8 120.9 192.9 o.o 0.1 0.0 o.o 15.1 0.2 o. 1 o.o 0.0 o.o 0. 1 o. 1 o.o o.o o.o

59.5 66.S 79.0 122.3 190.7 57.S 65.2 (8.6 106.4 164.0 2.0 1 .3 0.4 15.9 26.7

3.9 -3.2 ., .a 14.S 28.9

2., -4.4 ·2.2 ·1.4 2.2

1989

6?'96.3 6722.4

73.9

6597.5 2971.6 750.1

3625.9 925.1

375C.8

198.8

265.0

463.e

264.2 264.2

14.3 o.o o.o

260.5 239.6 20.9

24.6

3.7

Pre!. 1990

7233.8 7166.3

67,5

7276.6 3660.1 739.8

36~6.5

125C.C

35:6.2

·42.e

2~5.0

222.2

346.8 346.8

7.0 o.o 0.0

359.9 341.9

18.0

4.9

·13.1

·········-··········-------··-··································-·····················-···-··········

Pe;e 3 of 6 Teble 5.2: DOMINICAN REPUBLIC • SUMMARY OPERATIONS OF THE CONSOLIDATED PUB~IC SECTOR, 1984·90 1/

(Millions of RDS>

1984 198S 19S6 19Bi' 1988 Pre I. 1989

Est, 1990

·········-·································································-·························

ll•c. Local Go•~rrvnents d/ •...•.•••.•.....•

Total reven1. 1 8i'.6 109.9 109.8 144.S 191.7 236.B 251.5 C1.1rrent reven1.1e 17.1 93.8 102.3 135.4 178.1 227.1 2t.:?.5

o.w.: current trensfers 53.3 66.9 73.S 90.7 121,4 158.9 1.:.5. 0 Capital revenue 9.9 16. 1 ., • 5 9., 13.6 9.7 9.0

o.w.: c:apitel tr1nsfer11 5.0 5.3 4.8 0.4 o.o o.o o.o

Tot1l expenditure 87.2 108.0 98.0 127.3 167.0 213.5 2s2.c; C1.1rrent expenditure 72.5 92.5 87.5 108.0 142.7 185.8 2s:.i.2 C1plt1L expenditure 14.7 15.5 10.S 19.3 24.3 27. 7 23.3

Current account balance 5.2 1.3 14.B 27.4 35.4 41.3 ·16.7 ...............•.......

Overall balance 0.4 1.9 11.B 17.2 24.7 23.3 ·3 1 .c .................

Jl·d. Decentralized Goverrvnent Agencies e/ ························-········

Total revenue 196.9 235.2 226.7 435.5 429.9 514.6 732.0 Current revenue 9e.9 126.S 123.1 140.7 218.5 244.8 299.9

o.w.: current transfers 64.S 82.6 86. 1 88.8 136.6 139.6 170.1 Capital revenue 98.0 108.7 103.6 294.8 211.4 269.8 432.1

o.w.: capital transfers 84.9 95.9 92.4 195.5 166.2 255.7 417.S

Total expendi tui"e 208.4 259.6 240.8 462.9 518.4 665.7 939.S Current expenditure 112.0 130.7 126.4 146.7 203.1 240.6 329., Capital expenditure 96.4 128.9 114.4 316.2 315.3 425.1 610.4

Current •ccount bal•nce ·13., •4.2 ·3.3 ·6.0 15.4 4.2 ·29.2 ···--·······-··········

Overell ~lance -11.5 •24.4 ·14., ·27.4 •88.5 •151.1 ·207.5 ................ ·····-········--·······---~·-········-·············································-·····-···········

•

P•11e 4 of 6 T•ble 5.2: DOH!NICAN REPUBLIC • SUMMARY OPERATIONS OF THE CONSOLIDATED PUBLIC SECTOR, 1984·90 1/

•ot•l revenue Current revenue

o.w.: current tr•nsfera C•piul revenue

o.w.: c•plt1l transfers

Total expenditure Current expendlt~re Capital expenditure

Current account balance ··············•· ··-··-·

Overall balance CaceruAl .. ) ···················-·-········

Total revenue Current revenue

o.w.: current transf~rs Capital revf:nue

o.w.: capital transfers

Total expenditure Current expenditure Capital expenditure

Current account balance ···················----

Ov•r1ll balance ................

(Millions of RDS)

1984 1985 1986 1987 1988

Ill. P~lic Enterprises .............. ' ...

1287.6 1765 .3 1562.7 1725.0 2831 .6

1215.8 1609.8 1437.8 1413.4 22n.1 s.o 310.9 280.S 156.7 326.8

71.8 155.S 124.9 311 .6 554.S 55.1 140.2 115.9 300.6 537.,

1382.7 1994., 1847.9 1931.C> 2964.8 1161.2 1532.0 1546.6 1381.5 1985.6 221.S 462.1 301 .3 550.4 979.2

54.6 n.8 -108.8 31.9 291.5

-95.1 ·228.8 ·285 .2 ·206.9 ·133.2

lll·a. Dominican Electricity Corporation (COE) ······························-·······

298.4 694.0 575.S 836.2 m.2 283.2 623.4 504.3 634.5 735.2

o., 242.1 72.0 54.8 153.7 15.2 70.6 71.2 201.7 44.0 15.2 66.6 66.7 200.!i 44.0

309.7 816. 1 640.7 828.7 820.8 2n.s 543.3 512.5 606.8 705.8 36.9 2n.8 128.2 221.9 115.0

10.4 80.1 ·8.2 27.7 29.4

•11.3 ·122.1 ·65.2 7.5 ·41 .6

Prel. 1989

2864.8 2352.7 238.7 512.1 509. 1

3650.9 2197.9 1453.0

154.8

·786.1

880.3 822.S 145.5 57.S 57.8

1502.8 855.1 647.7

-32.6

-622.5

Est. 1990

3662.9 3052.9 384.0 610.0 606.5

4228.3 29T'.3 1251.0

75.t

·565.4

1329.6 1124.5 287.1 f/ 205.1 205.1 f/

1717.9 1241 .8 476.1

·117.3

·388.3

·········-···········-···-·---···-··········------·································---··-············

Pa;e 5 of 6 Table 5.2: DOMINICAN REPUBLIC • SUMMAR~ OPERATIOtlS OF THE CONSOLIDATED PUBLIC SECTOR, 1984·90 a/

Total revenue Current revenue

o.w.: current transfers Capital revenue

o.w.: capital transfers

Total expenditure Current expenditure Capital expenditure

Current account balance ···--··········-·······

Overall balance ···-·····-·····

Total revenue Current revenue

(Millions of RDS>

J Prel. 19Slo 1985 1986 1987 1988 1989

lll•b, Corporation of State Enterprises (COR~E> ·····················-·········-··-·····

5.5 11.4 7.4 44.3 30.3 23.8 3., 7.8 6.1 42.9 28.8 23.3 o.o o.o o.o 37.7 10.9 0.0 2.4 3.6 1.3 1.4 1.5 0.5 o.o o.o 0.0 0.0 0.0 0.0

4.3 7.0 8.0 48., '!-4.4 29.8 3.8 4.6 4.8 42.4 26.4 16.5 o.s 2.4 3.2 5.7 8.0 13.3

·0.7 3.2 1.3 o.s 2.4 6.8

1.2 4.4 ·0.6 ·3.8 ·4.1 ·6.0

111 ·c. State Sugar Council CCEA> ························

355.7 320.7 355.5 319.6 6;z.5 84i.8 351.3 293. 1 355.5 307.S 678.2 847.e

Est. 1990

29.8 29.3 0.0 c )

c.o

33.C 17.0

16.C

12.3

·3.2

1037.2 1034~8

o.w.: :.:rrent transfers 0.0 9.9 92.8 0.0 0.0 o.o 7.0 f/ Capital revenue 4.4 27.6 0.0 12.1 14.3 o.o 2.4

o.w.: capital transfers 1.8 27.6 o.o 4.6 5.0 o.o 1 .4 f/

Total el'penditure 369.4 362.5 436.6 512.6 750.7 933.0 1108.2 Current expenditure 293.1 289.6 361.2 385.0 508.4 734.7 911 .3 Capital expenditure 76.3 72.9 75.4 127.6 242.3 198.3 196.9

Current account balance 58.2 3.5 ·5. 7 -n.s 169.8 113.1 123.5 .......................

Overall balance ·13. 7 -41 .a ·81. 1 ·193.0 ·58.2 ·85.2 ·71.0

---------------·----···················--···················-·······-----------·-····-······-------········-····-···

P•ge 6 of 6 T•ble 5.2: DOMINICAN REPUBLIC • SUMMARY OPERATIONS OF THE CONSOLIDATED PUBLIC SECTOR, 1984-90 a/

(Millions 'of RDS> ··································-··································································

1984 1985 1986 1987 1988 1989 1990 • ·············-····················-··································································

111-d • Price Stabilization Institute CINESPRE) •••........•.•...............•........

Total revenue 450., 524.7 394.S 143.4 514.4 296.S Current revenue 450.1 524.7 394.8 141.4 508.9 296.8

o.w.: current transfers 0.0 48.9 104.0 41.4 125.8 42.4 Capital revenue o.o o.o o.o 2.0 s.s o.o

0.1111.: cap it l transfers o.o o.o o.o 2.0 0.6 o.o

Total expenditure 493.3 554.6 409.6 u;.6 497.3 300.9 Current expenditure 478.4 543.6 406.9 137., 493 .1 298.2 Capital expenditure 14.9 11.0 2.7 2.5 4.2 2.7

Current account balance ·26.3 ·18.9 ·12.1 4.3 15.8 • 1.4 ········-~·-···········

Overall balance -43.2 ·29.9 ·14.8 3.8 , 7., ·4., ................

lll·e. Small Public: Enterprises g/ ·············-··-·······

Total revenue 1n.9 214.5 229.5 381.5 815.2 816., Current revenue 128.1 160.S 1n.1 287.1 326.0 362.3

o.w.: current transfers 4.9 10 11. 7 22.8 36.4 SC.8 Capital revenue 49.S 53.7 52.4 94.4 489.2 453.S

o.w.: capital transfers 38.1 46.0 49.2 93.4 487.5 451 .3

Total expenditure 206.0 253.9 353.0 402.9 861.6 884.4 Current expenditure 113.1 150.9 261.2 210.2 251.9 293.4 Cap1 tat expenditure 92.9 103.0 91.8 192.7 609.7 591.0

Current account balance 15.0 9.9 ·84.1 76.9 74.1 68.9 ....................... Overall balance -28., ·39.4 ·123.5 ·21.4 ·46.4 -68.3 ...............

a/ On cash basis. b/ In 1989 and 1990 ft includes cash interest pa')1111ents on the non-reserve liabilities of the

Central Barile. cl Includes extra-budgetary expenditures and statistical discrepancies. d/ Includes local goverrvnents and the Municipal League. e/ Includes Export Promotion Center (CEOOPEX>; Population and Family Council; Hotel Promotion

and Tourist Trade Development; Red Cross; Civil Defense; National Bureau of Parks; Agrarian Water Resources Institute; C~ity Development Office; Botanical Garden; National Zoo; Royal Houses Museun; Malaria Eradication Service; Superintendency of Banks; Superintendency of Insurance; The corporations of Hatillo, Sabana Yegua, Rincon and Sabaneta. It includes the Agriculture Development ''°""" (FEDA) since 1984 and the Northeast Development Institute since 1985.

f/ Differs from the transfers table (Table 5.6), which was reported by the Central Goverrvnent. ;/ Includes the Port Authority; Agriculture Bank; Airport Conmission; Workers Savings Bank;

Water and Sewerage Conmission for Santo Domingo; Water and Sewerage Conmission for Santiago Cooperativ~ 'evelopnent and Credit Institute; Industrial Development Corporation; National Water Institute.

Source: IMF

396.6 396.6

11.0 f/ o.o 0.0

408.7 406.7

2.0

·10.1

·12.1

86;.7 467.? 78.9

4~2.0

400.0

9!>0.5 400.5 560.0

67.2

·90.S

Table 5.3: DOMINICAN REPUBLIC • CENTRAL GOVERNMENT OPERATIONS, 1984·90 ...........

('4illfons of RDS) ···········-···········-······················································································

Prel. Est. 1984 1985 1986 1987 1988 19S9 1990

••........••.........••......•.••••..•....•.•.....•.........••................•.....••.. , .....•............... Total revenue 1Z04.2 Z228.9 2282.8 3061.6 4891.8 6796.3 7233.8 -············ Current revenue 1184.3 2195.9 2266.4 3034.8 4857.3 6722.4 7166.3

Tex revenue 1084.6 2095 .5 2146.8 2670.4 3838.4 5237. 1 6106.9 Taxes on fmcome and profits 262.0 341,7 420.0 499.7 839.4 1281.1 1569.S Taxes on property 11. 7 14.1 18.0 29.0 39.0 43.8 53.5 Taxes on goods and services 496.9 701.5 949.8 9!3.4 1247.0 1509 .1 2041.4 Taxes on internat'l trade 295.6 1016.1 127.6 1123.4 1648.3 2154.2 2400.7 Other taxes 18.4 22., 31.4 34.9 61.. 7 248.9 41.5

Nontax revenue 99.7 100.4 119.6 364.4 1018.9 14!!5.3 1C59.4 Capital revenue 19.9 33.0 16.4 26.8 34.5 73.9 67 .s

Total expenditure 1289.7 2424.6 2410.4 3542.3 5361. 7 7010.2 e::i~. 1 •.•.•.....••••... Current expenditure 1015.8 1950.4 1809.1 1769.2 2617.8 3384.3 t.3e'.".5

Salaries and wages 499.9 609.7 696.2 6n.1 955.4 1191.4 1c3S.7 Goods arid services 226.9 351.3 198,1 24!!.3 296.9 357.5 37; .8 Curr"ent transfers 234.7 809.0 588.7 423.7 78.:..3 9'-1.5 1C59.5 Interest payments 1/ 54.3 180.4 204.9 27'3. 2 460.9 688.5 9!!:.7 Other 0.0 0.0 121.2 86.9 11C.3 2~5.4 328.6

Capital expenditure 27'3.9 474.2 601.3 1m.1 2743.9 3625.9 36~6.S

Fixed investment 106.3 178.8 226.3 1137 .5 1796.5 2594. 1 23::.c Capital transfe,.s 147.6 276. 1 327.3 534.8 747.5 925.1 12SC.C Other 20.0 19.3 47. 7 100.8 199.9 106.7 66.5

Cu,.rent account balance 168.5 245.5 457.3 1265.6 2239.5 3338.1 2778. 7

-·-······-············· Overall balance Cconmittment basis> -85.5 -195. 7 ·127.6 ·480.7 ·469.9 ·213.9 ·770.3 ·················-················· Current inte,.est arrears 8., 53.0 16.5 119.3 227.5 412.7 727.5 Over"al l balance (cash basis) -77.4 ·142.7 -111. 1 ·361 .4 •242.4 198.8 ·42.8 ·······-·······-···········-

(as percent of GOP) ·················

Total reven1.1e 11.6 16.0 14.5 15.7 17.3 16.0 11.9

·······-····· Current revenue 11.4 15.7 14.4 15.5 17. 1 15.9 11.S

Tax revenue 10.5 15.0 13.6 13.7 13.5 12.4 10. 1 Nonux revenue 1.0 0.7 0.8 ~ .9 3.6 3.5 1.7

Capital revenue 0.2 0.2 0.1 0.1 o. 1 0.2 o. 1

Total expenditure 12.5 17.4 15.3 18.1 18.9 16.5 13.2 • -----············

Current expenditure 9.8 14.0 11.5 9. 1 9.Z 8.0 7.2

Capital expenditure 2.6 3.4 3.8 9., 9.7 8.6 6.0

Current account balance 1.6 1.8 2.9 6.5 7.9 7.9 4.6

············-·······---overall balance (cOll'ITlittment basis) -o.a •1.4 ·0.8 ·2.5 ·1.7 ·0.5 ·1.3

······-------------·········-····· ······-------------···········································-···················-····-···-·················· Source: IMF

T1ble 5.4: DOMINICAN REPUBLIC • CENTRAL GOVERNMENT REVENUES, 1984·91

1984 1985 1986 1987 1988 1989 ~

Prel. 1990

Budget 1991

·······················---·······························································-···················· Total revenue ••••==a•=•••= Capital revenue

Current revenue

Tax revenue

Taxes on income and profits Taxes on property Death or gift taxes Property transfers Others

Taxes on goods and services General sales tax (VAT) Selective excise taxes Excise tax on goods Tobacco products Beverages Fuel cons~tion Others

Excise tax on services Other cons1.111ption taxes

Licenses Motor vehicle & luxury items

Taxes on inter'! trade & transactions Import duties Customs duties Other char-ges

Export duties Foreign exchange surcharge

Other- taxes Stamp taxes Others

Non·taic revenue

Falconbrdge Mining Company Property income Rosario Mining C~ny Other public enterprises and

Institutions Other property income

Fees and charges Other non-tax revenues

1204.2 2228.9 2282.8 3061.6 4891.8 6796.3 7233.8 9744.0

19.9 33.0 16.4 26.8 34.5 73.9 67.5 80.0

1184.3 2195.9 2266.4 3034.8 4857.3 6722.4 7166.3 966~.o

io84.6 2095.5 2146.8 2671J.4 3838.4 5237.1 6106.9 8C~3.5

262.0 , 1. 7

2.4 9 ,

0.2 496.9 87.8

387.6 341.4

41 .5 107 .2 1n.1

15.0 46.2 21.S 6.6

14.9 295.6 276. 1 64.6

211 .5 19.5 0.0

18.4 12.2 6.2

99.7

o.o 76.8 41.9

28.8 6. 1

18.3 4.6

341.7 14.1 2.5

11.4 0.2

701.5 164.9 512.3 438.5 52.5

116.5 268.0

1.5 73.8 24.3 9.4

14.9 1016.1 428.2 92.3

335.9 40.1

547.8 22. 1

16.2 5.9

100.4

o.o 73.7 41.8

26.3 5.6

20.2 6.5

420.0 18.0 3.7

14.0 0.3

949.8 188.2 735.8 658.4 61.8

143.9 450.8

1.9 n.4 25.8 9.4

16.4 727.6 496.9 128.6 368.3 104.8 125.9 31.4 18.3 13. 1

119 .6

0.0 93.1 56.2

35.1 1.8

20.3 6.2

499.7 29.0 5.0

23.6 0.4

983.4 317.S 589.0 465.9

71 .4

174.3 218.7

1.5 123.1 76.9 12.9 64.0

1123.4 896.7 216.9 679.8 77.6

149. 1 34.9 20.2 14.7

364.4

o.o 322.9 179.7

118.3 24.9 32.3 9.2

839.4 39.0

7.7 30.8

0.5 1247.0 462.3 674.4 46~.1

1C2.3 224.8 135.6

1.4 210.3 110.3 73. 1 37.2

1648.3 1061.9 231 .9 830.0 178.7 407.7 64.7 25.7 39.0

1018.9

465.5 489.9 156.3

294.1 39.S 50.3 13.2

1281. 1 43.B 7.6

35.6 0.6

1509. 1 665.1 713.2 3e;.1 103.9 231 .8 52.3

1. 7 323.5 130.8 88.3 42.5

2154.2 1199.7 320.9 878.8 128.7 825.8 248.9 28.6

220.3

1485.3

1010.3 383.3 23.7

312.6. 47.0 69.4 22.3

1569.B 53.5 10.7

'~ .9 C.9

206.~.4

9.-S.5 911. 0 451.9 100.0 248.9 101. 7

1.3 459., 181.9 112.4 69.5

2400.7 1548.2 592.9 955.3

5.2 847.3 41.5 28.1 13.4

1059.4

590.8 303.S

3.9

2n.6 22.0

143.7 21.4

6:. 0

45.C 1. c

2:-:· .c ~3::.c , ~; .. : ~2:.:

1 ::: . c 2~-.:

1s:.: 2.C

6eS .0

135.0 75.0

3281. 0 23~S.2

939.3 1408.9

o.o 932.8 41 .5 28.1 13.4

1650.5

1137 .5 307.0

4.0

278.0 25.0

184.0 22.0

···-·····-····-·-·-----------·-···----------------·-·······-···········--·--------------------------········-· Sources: IMF

Table 5.5: DOHINICAN REPUBLIC • CENTRAL GOVERNMENT EXPENDITURES, 1984•90 .•.......

(Millions of RDS) ··············································-······················································

Prel. 1984 1985 1986 1987 1988 1989 1990

··················-·····················································-···-························ Total expenditure 1289.7 2424.6 2410.4 3542.3 5361.1 7010.2 8004.1 ....•......•..•..

Current expenditure 1015.8 1950.4 1809. 1 1769.2 2617.S 3384.3 4387.6 ··················· S1laries and wages 499.9 609.7 696.2 677. 1 965.4 1191 .4 163!!.7 Goods and services 226.9 351.3 198.1 248.3 296.9 357.5 379.8 Current transfers 234.7 809.0 588.7 483.7 784.3 941 .5 1059.6 Publ fc sector 133.3 689.4 455.6 348.4 613.9 750. 1 739.8 Private sector 100.2 118. 1 132.5 133.0 168.7 189.6 317.8 Foreign 1.2 1.5 0.6 2.3 1. 7 1.8 2.0

Interest payments 54.3 180.4 204,9 273.2 460.9 68!!.5 98C.7 Domestic 5.5 1.0 0.0 0.5 2.9 3.0 3.3 Foreign 1/ 48.8 179.4 204.9 272. 7 45!!.0 6!!5.5 977.4

Cthe,.s 0.0 0.0 121.2 86.9 110.3 205.4 32S.!!

Capital expenditure 273.9 474.2 601.3 1m.1 2743.9 3625.9 36~6.5 ................... Fixed investment 106.3 178.8 226.3 1137. 5 1796.5 25 1'4. 1 2300.0 Capital transfers 147.6 276.1 327.3 534.B 747.5 925.1 125C.O Others 20.0 19.3 47.7 100.8 199.9 106.7 66.5

1/ Includes interest payment arrears on medi1.111 end long term external debt.

Sources: IMF

..

Table 5.6: DOl'!INICAN REPUBLIC • CENTRAL GOVERNMENT TRANSFERS, 1984·90 ........•

(Millions of RDS) ···········-······················-···········-····-- .....•.•......•....•.....••••..•....••.........

Prel. 1984 1985 1986 1987 1988 ' 1989 1990

·······-···························----~·····-··-···············-········-···························

1. Current Transfers ·····-·······-···

Publ le sector 133.3 689.4 455.6 348.4 613.9 750.1 739.8 •...........•

Consolidated 122.8 460.5 440.4 336.2 599.9 551.5 715.0 ............. Social Security Institute CIDSS) 0.0 0.1 o.o 0.0 15.1 14.3 7.0 Local governments 53.3 66.9 73.8 90.7 121 .4 158.~ 1.:.s .o Decentralized agencies 64.5 82.6 86.1 88.8 136.6 139.6 170., PYblic enter~rises 5.0 310.9 280.5 156.7 326.8 238.7 3i;2.9 Large enterprises o. 1 300.9 268.8 133.9 290.4 1!7.9 31.:..c Electricity Corporation (COE) 0.1 242.1 72.0 54.8 15).7 145.5 3.:lC.O Price Stabilization Inst. ClNESPRE) 0.0 48.9 104.0 41.4 125.8 42.4 1.:. .0 State Su;ar Council (CEA> 0.0 9.9 92.S 0.0 o.o 0.0 0.0 State Enterprises Corp. (CORDE> 0.0 o.o o.o 37.7 10.9 c.o o.c

Smalt enterprises 4.9 10.0 11. 7 22.8 36.4 so.a 7e.9

Nonconsolidated 10.5 228.9 15.2 12.2 14.0 198.6 24.8 ................

11. Capital Transfers ···-·············

Public sec: tor 147.6 276.1 327.3 534.S 747.5 ~25.1 12SC.O ..............

Consolidated 145.1 241.5 213.1 496.5 703.3 764.S 1C37.5 -··········· Social Security Institute ClOSS) 0.1 0., o.o 0.0 o.o o.o 0.0 Local ;overNnents 5.0 5.3 4.8 0.4 0.0 o.o o.o Decentralized agencies 84.9 95.9 92.4 195.5 166.2 255.7 417.5 Public enterprises 55. 1 140.2 115.9 300.6 537.1 509.1 620.0 Large enterprises 17.0 94.2 66.7 207.2 49.6 57.S 220.0 Electricity Corporation (COE) 15.2 66.6 66.7 200.6 44.0 57.8 220.0 1/ Price Stabilization Inst. <lNESPRE) 0.0 0.0 o.o 2.0 0.6 o.o o.o State Sugar Council (CEA) 1.8 27.6 o.o 4.6 5.0 0.0 o.o 1/ State Enterprises Corp. (CORDr> o.o 0.0 o.o 0.0 0.0 o.o 0.0

Slnall enterprises 38.1 46.0 49.2 93.4 487.5 451 .3 400.0

Nonconsol idated 2.5 34.6 114.2 38.3 44.2 160.3 212.5 ••....•...••... ····························-···················-···········-··············-···················-····· 1/ Differs from the report of the Electricity Corporation. The Electricity Corporation

reported 205.1 million Dominican pesos as capital transfers from the Central Government for the year 1990. The State Suser Council (CEA) had also reporied a 1.4 million pesos capital transfer from the Central Governnent in 1990 which was not reported by ONAPRE.

Source: IMF

Page 1 cf 4 T•ble 6.1: DOMINICAN REPUBLIC • ~RY ACCOJNTS OF THE BANKING SYSTEM, 1980·90 1/

(Milli~ of Dominic•n peso)

Decent.er 31 • ·································-··-·············-······-·················

1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 ····················································-·····································································

I. Central Bank

~et international reserves ·213 ·322 ·679 ·428 ·335 ·722 ·518 ·1428 ·1020 ·1732 ·221•

Assets Liabilities

Arrears LC in arrears to local banks Other

275 284 ·488 ·606

·48 ·63 • 102 ·254 ·338 ·289

172 204 ·85, ·632 ·182 ·78 ·254 ·415 ·554

269 1048 1056 733 1320 m 771 ·604 ·1770 ·1574 ·2161 ·23.00 ·2509 ·29eS ·107 ·195 ·119 ·178 ·384 ·401 ·1663

·497 ·1575 ·1455 -1983 ·1956 -21oe -1322

Net domestic credit 1064 1376 1816 2165 2391 4807 2781 3532 4492 7093 1027:

Net claims on the 1)1.lblic sector 525 Central goverrvnent (net) 325

Claims 2/ 325 Deposits Cbud;etary reserve)

Other central goverrvnent (net) 90 Counterpart funds for foreign aid 3/ ·10 Debt payment deposit account Falconbridge tax deposit Deposits of U.S. grants (Plan Reagan 84·85) Public financial institutions 124 Rest of public sector (net) 4/ ·3 Operating losses of the Central Bank Payments of interest on external debt 5/

Official capital and surplus •47 Credit to conrnercial banks 326 Credit to rest cf the financial system 115 Nonmonetary int'l organizations 16 Net unclassified essets 3/ 128

Revaluation Account

Counter!)lrt 1111req. foreign exchange 6/

Of idlich: revaluation of gold M&L·term foreign liabilities

Refinancing with foreign conrnercial banks Other 71

Liebilities ~o conrner~i ·l banks

97

63 188

188

287

688 443 443

100 ·6

147 5

·29 445 133 19

121

82

43 259

259

388

Cash in v•ults 75 72 Reserve deposits 275 484 Speci•l deposits 8/ 87 148 Arrears and LCs in arrears to local banks 9/ ·149 ·316 Stabilization Bonds

Lieb. to other financial institutions 10/

Liabilities to the private sector

Currency in circulation Demand deposits

279

275 4

325

324 1

971 621 621

118 ·8

151 87

·29 530 158 20

167

81

43 359

359

335

74 329 368

·436

363

1224 1699 1251 1982 2675 3872 720 790 756 820 860 126'. 720 790 786 820 1125 12{>.:.

·265 146 178 198 236 275 312 ·31 ·2 ·68 ·51 ·198 ·110

·69 -14 ..

·50 ·351 ·143 ·88 ·62 150 148 156 157 180 260 238 258 209 151 535 541

377 447 812 1111 1880

·66 ·121 ·47 ·51 ·57 ·61 599 563 569 664 708 779 191 215 257 312 313 393 18 21 58 59 85 86

197 14 ·420 ·185 ·192 ·577

4518 5480 1286 13: .. 1291 13c ..

·5 331 2"'­·51 ·35 • 16 • 32

. 171 ·36

223 121! 5e2 120~

1957 1957 377 665 ·62 ·57

1124 1589 519 ~3

86 156 908 2453

3014 3388 5420 7777 8144 14~v2

79

37 808

454 354

427

72 297 136 ·78

423

81 149

33 34 869 2665

498 371

463

99 324 150

·119 8

643

1464 1201

574

12~

362 228

·195 55

697

32 ·399 ·221 • 73 ·270

35 ~7

3408 5785

2164 1243

1262

177 978 133

·126 101

3473 2312

818

231 425 185

·179 156

36 36 36 7359 8286 15527

4477 2882

2224

232 1762 246

·227 211

4477 7923 3809 7604

2185 2668

507 992 756

·196 126

383

m 1442 608

·297 138

401

949 1321 1886 2723 4022

357 415 6 ·- 8

593 50

677 20

937 11

1313 8

1876 2665 3717 10 58 305

·-·-········-··-······-······--·-············-·-·········-············--·····-··············----·-························

•

Page 2 of 4 Teble 6.1: DOMINICAN REPUBLIC· SUMMARY ACCOUNTS OF THE BANKING SYSTEM, 1980·90 1/

(Millions of Dominican p&so) .....••........•.....................•...•.•.•...•.•.. : ...•...•..........•.••.....•••...••. ..-. ............................ .

Net international reserves

Assets 8/ Liabilities

Monetary reserves and currency holdings

Cash in vaults Reserve depcsits Sp&cial depcsits 6/ Arrears and LCs in arrears St1biliz1tion Bonds

Net domestic assets

Net claims on the public sector Central ;overl'Yllent (net)

Claims Oepcsits

State and local goverrvnents (net) Public financial institutions (net) Rest of public sector

Official capital and surplus Credit to rest of financial system Credit to private sector Net U'1Classified assets Net interbank float

Revaluation Account

Liabilities to ....,netary authorities

Liabilities to rest of fin system

Liabilities to the private sector

Demand deposits Time and savings depcsits Other liabilities (net)

Other liabilities 10/ Arrears

Oeclftt>er 31

1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 .

·1

12 ·20

66

·12

52 ·64

21

29 27 42 28 7 20

• 11 ·53

488 686

124 69

123 ·54 13 27 15

·61 8

373 47 ·3

258

11

278

70 105 103 110 ·7

302 83

122 ·39

15 44

161 -n

8 381

72 ·0

364

24

306

61 117 128 134 ·5

·0

52 ·53

13

24 6

54 ·71

747

410 86

144 ·58 14 47

264 ·81

10 366

42

446

33

280

51 132 98

132 ·34

·39

17 ·56

59

21 ·59 112 ·15

740

412 48

144 ·97 15 49

300 ·91

15 390

14

421

35

304

14 133 157 172 ·15

JI. Reserve Bank

·23

18 ·41

98

26 ·7

100 ·21

851

49

126 ·n

240

31 121 85

·35 39

737

469 303 93 ·11

178 170 ·d5 ·181

11 9 51 45

314 261 ·99 ·117

11 12 428 490 44 48 ·3 0

473

50

404

72 168 164 184 ·21

·32

454

15

526

101 174 251 286 ·35

9

73 ·64

369

39 280 7;

·28

836

81 311

139 480 ·57 • 169

2n 542

452

515 ·63

607

680

680

810

47 46 163 238 182 465 347 515 92 83 14CI 149

·43 ·52 ·52 ·92

949 1181 1308 1038

404 3n 53.:. 611 533 ·33 ·121 .3 .. 2 ·249 ·302 380 205 215 206 296

·413 ·326 ·557 ·455 ·598 7 6 3 5 ·5

136 214 159 33 12 294 278 714 822 828

·123 ·122 ·16C •470 ·517 12 4 11 5 50

494 640 894 1132 1408 49 46 ·98 28 ·248

·6

555

42

610

139 228 243 272 •28

8

·65 ·262 ·376 ·385

565 572 614 419

26 35 45 35

652 1165 1332 1689

156 268 228 271 ·43

343 509 313 365 ·52

391 583 529 785 412 321 464 413 ·52 ·92

-·-·················--·················-~-----------······················-··-··························--·············--·

..

Page 3 of 4 Teble 6.1: DOMINICAN REPUBLIC • SUMMARY ACCOUNTS OF THE BANKING SYSTEM, 1980·90 1/

Net internetional reserves

Assets 8/ L iebil it ies

Monetary reserves end curr holdings

CISh in vaults Reserve deposits Special deposits 5/ Arrears and LCs in 1rrears Stebilizetion Bonds

Net domestic assets

Net cloims on the public sector Central goverrwnent (net)

Clair.IS Oeposits

State end local goverrwnents (net) Public financial institutions (net> Rest of public sector

Credit to rest of financial system Credit to private sector Net unclassified assets Net interbank float

Revaluation Account

Liabilities to monetary euthorities

Liabilities to rest of financial system

Liabilities to the private sector

Demand depos i ts Time end sevings deposits Other liebilities (net>

Other liebilities 10/ Arrears

Privete capital and surplus

(Millions of Oominican peso>

DecetN>er 3J

1980 1981 1982 1983 1984 1985 1986 1987 19SB 1989 1990

·20

115 ·135

63

44 211 85

·Zn

924

3 10 10

·O ·6 ·1 43

672 89

·22

70

26

872

206 393 151 194 ·43 122

III. Private Conrnerciel Banks

·56 ·22

221 240 -2n ·261

367 317

·13

26 ·38

390

·4

41 ·45

439

46 57 51 73 429 304 297 300 154 326 110 155

·263 ·370 ·69 ·98 8

758 883 1006 1111

5 11 11 ·0 ·O ·7 1

34 639 94

·16

83

28

·2 9

10 ·1 ·O

·12 1

30 748 111 ·3

86

48

26 11 11 ·0 •O 4

11 38

871 79 ·2

97

67

18 15 17 ·2 ·0 ·2 5

48 985

75 ·16

97

107

11 6

49 188 ·38 • 182

489 896

71 266

468 544 ·398 ·278

635 1724

141 ·67

267 712 · 126 -n9

1906 1878

93 139 181 208 344 56; 322 739 326 1265 932 1141 218 115 264 426 n.. 373

·160 ·98 ·136 ·175 ·14~ -2:s 16

1446 2533 3228 4348 673: 968>

14 16 20 ·5 0

·9 8

64 1249

155 ·36

·7

133

115

70 57 68

·12 ·1 • 1 15

119 2163 208 ·27

·4

127

278

1 9

10 • 1 ·1

·14 7

166 2684 393 ·17

·3 9

9 ·O ·3 ·6 ·3

133 3451

791 ·24

26 , , 11

·1 17 .,

205 5569 932

16 ,, , 1

• 18 4

19 267

7346 2071

·56 ·224 ·411 ·403

140 215 396 799

318 279 421 482

957 1045 1219 1342 1691 3025 3419 5621 7549 9816

240 437 145 206 •61 135

289 531 87

239 ·152 138

318 587 154 217 •63 161

426 612 123 215 •92 182

497 742 197 357

·160 254

749 1662 234 331 ·98 381

993 1616 293 429

·136 517

1862 2337 595 no

-n':.i 827

1901 3647 896

1040 ·144 1105

2485 5032 695 900

·205 1604

•••••••••••••••••v•b••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••

•

················•·•··········•··•····••·••·····•······•·••·········•···•••••····•••••·•·•·•••··•·•••·········•·········· Otelllber J1

••.......................••..•....••••.....••••.........•..•...•......... ,980 1981 1982 19al 1984 '985 ,9116 1987 1988 1989 199

·······································"••·············································································· IV. CONol idlltld lrilne 1 ... ttlll

Ntt lnter111tiatWl rt1erve1 ..... A11tt1 LllbHitit1

,03 5S6 ""' •643 ·947 •1165

247 S28 1223 1J17 1J.l.O ll44 1559 216: ·126 ·'89 .1aas ·1121 ·2616 ·2187 ·2698 -m •.

Net cl1i111 on the Pllblic ttctor Centr1t 90verPMnt (nttl

Cllillll DtPOtiU

Other ctntr1l 1overl"lllftlt (net) Counttrpert flrds for foreign 1id Deposit& Jf US 9r111t5 (Pl1ns R1191n 8'o·85> Stitt 11'1d IOC:ll 9over,,.,..t1 (f"lft)

Pi.t>lic fir111l'W:i1I ll'lltitutiOtll (net)

••st of public ltctor Oper1ting lo11t1 of the Ctntr1l link P1Y'lt'ltl of lntere1t on ••ttr111l Ol'bt

Officl1I c1pit1I end 1urplus Credit to rest of fi111nci1l system Cred•t to tht privltf sector Normontt1ry interl'lltiorwil or91niz1tiOl'IS llet lllClHSified HUU

llitt i nttrti.nk fl 01 t

653

"'' '58 •54 90

·10

13 145 12

·108 167

1045 16

264 •45

996 537 51'5 •39 100 ·6

15 184 167

•106 176

1020 19

287 ·19

1319 717 175 ·SS 118 ·II

14 187 :ssz

·110 198

1114 20

!20 ·10

1662 m 176 •91 1"6 •31

15 203 S49

·157 243

1261 18

290 97

2116 198 114 ·87 118 ·2

·50 11

198 517 Jn

·:zo 2?'5

1413 21

133 49

1695 ?'91 916

• 1116 198 •68

·351 9

191 '?8 447

• 16'. J33

1139 58

·217 101

2456

""' 1268 ·424 236 ·51

·'43 5

292 460 812

·174 '43

2657 59 1'2

·43

J053 748

1J.l.O ·592 27'5

·198 ·88

5 J8; ezc

1111

• 17'9 483

!324 85

2-8 85

'403 931

1488 ·557

98 . 110

·62 ·0

4~3

1252 188:

·221 53•

43~5

86 116

11

sm 1048 1soe •460 14• ·SI

4

2n 14C3 19F 377

·532 72;

67:· 86

186! i..:.z , ..

'•

0 0 0 0 o 2975 3378 530~ n9: ns· 13~:-

97 112 81 111 11.9 32 ·:s~ -2z· ·73 .z-:

Of Miiich: rev1luetion of gold 63 43 43

188 259 359 1108 169 2665 3408 5185 1359 9z~ mr

Ref1111nc:i1'19 ~ith foreign comnerci1l bllnks OU1er

Li1bilities to rest of fin tystem

188 259

37 52

JS9

82 103

498 311

156

1~

1201

130

2164 1243

320

3413 2312

4417 2882

314

44T7

380~

8io9

Li1bilities to the priv1te secto• 1429 1588 1688 ,946 2389 2914 ,514 5392 8613 11604 15527

Currency in circulltion Dlllllnd deposits TiM Ind HVinQS ~sic. Other l ilbl l I ties (net>

Other ll1bllitits Arrt1rs

Privett Ctpltel end surplus

21'5 280 499 253 304 ·!11 122

324 303 553 213 340 •61 135

J57 J.1.6 663 185 371

•116 138

415 341 719 Sit J89 ·18 161

593 548 180 216 399

·113 1112

617 618 917 '48 643

·195 254

931 199

1890 4T7 603

·126 3111

1313 1157 18113 521 700

•11'9 517

1876 2215 2146 909

1135 •227 127

2665 2350 4176 1308 1504 ·196 1105

3717 3313 5817 1016 1313 ·297 1604

1/ foreign curreney trena1ctions cOl'!Vtrteo ~t tllt foll1111ing each1nee r1tt1 (IDS/US doller>: 19S5·1Dl3.06; 19116·2.94; 1987·aDl4.91; 1988 end 1989·1DS6.33; end 1990·1Dl11 .20

2/ Include• ldvll'W:~ for the eaterntl debt aervict of the Ctntr1l Goverrwiient. J/ Thia ec:c°"'t repre1tnt1 the Oo.i11fc1n peao dlflmir111ted depopaita of PL•410, lftd other U$ aid proer-. 41 Inch•• IDIZSO •Ill Ion pe~t on ec:c-t of the lend purch1Hd fr• CIA by the Ctt1trel lltlk f11 1'87 • 5/ The 111,._,,u of fnterHt on th• Hter111t debt correspond to tht net foreign l11ter11t Oii a cUh basis used to c1lcul1t

th• C1t1tral llflt IOHH fr• 19116·118. To Identify thtll 11 eapl lclt 11 they are Oii th• fl1e1l aceeu1u tn 1989 end 19~ tht 111,...,,u of fntereat Oii the eatrrt11l debt wre eulwded fr• the Centre! lltlk lOHtl end hive been atperet9d in t -tlry ICC-ti fn those t..O ye1ra.

61 lrclUllH fl'lter all• al loutlon of SDR1 end veluetlon edj""t~tl of 1old, foreign e11chqe, and fi.nf ecc°"'u relit iv to pr11tt1t1tion In centr•l 11111< bll""' ah"t.

11 Includes errHr1 Oii lntere1t pe,._,,t, Oii reHrvt l ilbll ltle1 aftd Mdi1111· ard lone te,.. li8bll !ties. 8/ Include• forelen pc:hqe cl•i• Oii tllt Centr1I lri to rellilurao hHd offic:ta of correspondent bents for pey111ents o,..

cC111111trci1l letters of credit -.di by th .. lbrOld. 9/ lncl!Adea Clepollt1 corr1apondi119 to errear1 end to letters of credit 1ubj1c:t to prepe)llleflt.

10/ The lilt>iliti" of the centrel llnk to other fiP11111Ci1l i111titutiona wre ctesaifild previoualy ~r li1biliti15 to cC111111ercl1l blnks. These lilbilitiH art"°" aeperlted into those with c0111111rci1l banks Ind those with other fintncial institutions.

Source: IMF

..

Page 1 of 3 Teble 6.2: DOMINICAN REPUBLIC • SUMMARY ACCOUNTS OF THE NON·BANK FINANCIAL INSTITUTIONS, 1980·90

(Millions of Dominicen peso) ············••·•··•···••••·•·•······••••••·····•···••·············•······•··•··•••••••·••··•··••··••·•····················

Oeclll'ber 31 ,

1980 1981 1982 1983 1984 1985 1986 1987 198B 1989 1990 ••··•·•·······•·•······•············•··•················ ·································-·-·····························

Foreign e11ets

Domestic essets

Liquid cleilns on banks Deposits with sevings & loan associations Credit to sevings & loan essociations Credit to private sector Official cepital end surplus Other essets

M&LT foreign liebilities

Liabilities to banking system

Liabilities to savings & loan associations

Deposits Other liebilities

Liabilities to private sector

Mortgage bonds Other liabilities

D0111estic essets

Liquid cleims Oil banks Credit to the National Housing Bank Deposits with the National Housing Bank Credit to the privete sector Other essets

Liabilities to the National Housing Bank

Liabilities to private sector

Sevfngs deposits Other liebilities Prfvete capit•l end surplus

I. National Housing Bank

1.9 1.9 3. 1 2.7 0.7 0.3 0.1 0., 0. 1 0.1

114.7 134.8 155.0 171.1 190.2 204.3 245.5 263.1 271.5 332.7 403.9

11.3 41.6 67.3 4.3

·12.5 2.7

18.1:: 52.3 78.0 4.2

·13.8 ·4.,

19.0 53.2 95.5 5.4

·15.6 ·2.5

i!5.8 55.0

103.9 6.3

-16.3 ·3.6

34.3 28.7 53.7 54.7

106.3 118.3 11.0 12.8

·15.6 ·19.2 0.5 9.0

38.5 51.8

113.0 24.5

·22.7 40.4

so. 1 70.0 95. 1 137.7 52.3 56.5 56.5 56.8

107.3 90.7 102.9 97.5 24.4 31.9 58.0 92.0

·32.3 ·50.7 ·71.1 -9~.7

61.3 73.1 91.3 11.:..6

17.2 14.1 11.1 10.0 10.6 11.0 11.0 10.9 10.8 1i.2 12.4

21.1 31.1 41.8 48.5 52.4 66.1 67.5 67.0 59.0 88.6 87.1

14.8 20.2 32.6 37.0 44.3 42.3 51.8 63.7 75.2 88.5 107.1

11,0 16.2 28.6 32.3 40.1 38.1 47.6 59.5 3.8 4.0 4.0 4.7 4.2 4.2 4.2 4.2

71.0 4.2

84.3 102.9 4.2 4.2

63.5 71.3 71.4 78.7 85.6 85.6 115.5 121.6 126.6 144.5 197.4

59.5 63.9 65.7 74.6 80.5 4.0 7.4 5.7 4.1 5.1

79.6 106.2 115.0 117.6 136.3 183.4 6.0 9.3 6.6 9.0 8.2 14.0

11. Savings end Loan Associetions

476.3 544.7 665.0 769.3 880.7 1091.6 1553.2 1939.5 2426.5 3149.6 3954.1

32.4 3.8

17.0 429.5 ·6.4

30.1 4.1

31.8 498.8 ·20.,

61 .2 93.3 4. 1 4. 1

46.3 52.1 570. 1 638.~

·16. 7 ·18.5

117.2 4.2

60.2 717.4 ·18.3

147.3 376.3 391.1 511.2 616.7 631.1 4.2 4.2 4.2 4.2 4.2 4.2

3!.1 47.6 59.4 72.1 84.3 102.9 908.0 1127.0 1463.5 1814.8 2410.0 311,.8

•6.0 -1.9 21.3 24.2 34.4 101.1

110.0 119.0 148.4 158.3 157.9 180.0 173.0 165.9 145.9 158.0 159.6

366.3 425.7 516.6 611.0 '722.8 911.6 1380.2 1773.6 2280.6 2991.6 3794.5 ...... ·--··· ......•..... -····· -----· ......•.•...•..... ······ ..... . 233.1 264.7 318.3 362.4 431.0 466.6 619.8 804.4 1056.8 1292.0 1508.6 114.2 139.0 112.2 218.8 254.S 394.8 668.2 813.7 1012.3 1382.8 2005.8 19.0 22.0 26.1 29.8 37.3 50.2 92.2 155.S 211.S 316.8 280.1

---············-··-········-·---···········-······--·-··········································----······················

Page 2 of 3 Table 6.2: DOMINICAN REPUBLIC . SUtti!ARY ACCOUNTS OF THE NON·BANIC FINANCIAL INSTITUTIONS, 1980·90 ...•......

CMilll~s of Dominican peso) ···························-····················-········································-································

Dec:efli)er 31 ····•••··············•····••···•····•·········••···········•·•············· 1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990

···•······••·······•·······•·······•·•···········•·•···•············•······•·······•·•···············•··•················· 111. Mortgage Banks

................ Domestic Hsets 113.6 238.0 316.0 387.4 481.9 682.9 954.0 1316.4 1570.0 2035.1 2310.3 ................ . .... . ..... . ..... . .... Liquid claims on banks 10.8 17.S 27.9 20.4 30.3 43.9 , 19. 1 97.5 163.1 217.8 226.0 Credit to the private sector 157.7 213.0 283.2 361.3 441.2 609.7 825.9 1159.0 1368.2 1769 .4 2152.4 Other as.sets 5.1 7.5 4.9 5.7 10.4 29.:r 9.0 59.9 38.7 47.9 -~.1

Liabilities to banking systl!4TI s.o 5.1 7.2 13.3 22.3 21..8 18.2 22.3 66., 10: .6 106.3 ..•......................•...

Liabilities to private sector 168.6 232.9 308.8 374.1 459.6 658.1 935.8 1294.1 1503.9 1933.5 220.:..c ············-················ ...... . .... Time and savings deposits 14.5 18.4 23.4 15.0 15.0 42.8 54.2 167.9 93.4 67.5 82.6 Mortgage bonds 110.0 159.6 215.0 274.0 335.8 456.8 689.7 876.0 1006.9 129C.9 1489.5 Private capital and surplus 39.6 so. 1 63.8 75.4 97.4 130.2 172. 7 219.7 281 .6 387.7 405.8 Other 1 iabil it ies 4.5 4.8 6.6 9.7 11.4 28.3 19.2 30.5 122.0 187.4 226.,

IV. Private Development Banks •..•.•..•.....•.•.....•••

Domestic: assets 1n.8 197.9 219.3 256.9 305.9 401 .4 554.7 716.4 987.1 1405.8 1714 .4 ............... Liquid claims on banks 4.6 5.1 6.7 8.7 10.7 23.0 46.0 49.0 64.8 80.5 98.4 Credit to the private sector 158.8 179.5 205.6 239.2 280.3 365.0 489.4 653. 1 885.9 1303.4 16S6.2 Other assets 14.4 13.3 7.0 9.0 14.9 13.4 19.3 14.3 36.4 21.9 ·70.2

M&LT foreign liebil ities 11.5 9.9 9.7 7.8 5.7 9.0 8. 1 11. 7 0. 1 o.z 0.2 -······-················ Liabilities to banking system 100.9 111.5 126.2 143.2 157.6 190.6 236.6 265.3 376.0 530.6 813.6 ··-·······-··············-···

Liabilities to private sector 65.4 76.5 83.4 105.9 142.6 201.8 310.0 439.4 611.0 875.0 900.6 ···········--················ Bonds 18.3 22.5 36.1 51.8 71.3 113.8 184.2 258.8 352.6 470. 1 543.3 Other l iabil it ies 13.9 15.1 3.6 4.0 6.1 10.5 20. 1 33.6 56.0 137.8 64.5 Private capital and surplus 33.2 38.9 43.7 50.1 65.2 77.5 105.7 147.0 202.4 267.1 292.8 ·········································-·········-·················-··································-····-············

..

•

Page 3 of 3 Table 6.2: DOMINICAN REPUBLIC • SUMMARY ACCOUNTS OF THE NO..·BANK FINANCIAL INSTITUTIONS, 1980·90

Foreign 11sets

Domestie assets

Liquid elaims on banks Credit to private sector Offieial capital surplus Other assets Net float

M&LT foreign liabilities

Liabilities to banking system

Liabilities to private sector

Time and savings deposits Bonds Other liabilities Private capital and surplus

Source: IMF

• (Millions of Dominiean peso>

Oeeerreer 31

1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 199~

V. Consolidated Non·Bank Financial Institutions

1.9 1.9 1.9 3.1 2.1 0.7 0.3 0.1 0.1 0 .1 0.1

817.6 976.2 1174.3 1389.4 1656.5 2157.9 3082.6 4005.8 5034.0 6676.7 8116.0

59.1 750.3 ·12.5 15.8 4.9

28.7

127.0

663.8

247.6 1!7.8 136.6 91.8

70.9 114.8 148.2 192.5 242.9 S79.9 587.7 809.1 1010.1 1093.2 895.5 1064.3 1245.1 1449.9 1895.5 2466.S 3300.0 4100.8 5540.8 7045.4 ·13.8 ·15.6 ·16.3 ·15.6 ·19.2 ·22.7 ·32.3 ·50.7 ·71.1 ·94.7 ·3.4 ·7.3 ·7.4 7.5 45.7 66.8 156.8 172.4 195.5 77.4 27.0 18.1 19.8 22.2 ·7.0 ·8.2 ·6.4 2.4 1.4 ·5.3

24.0 20.8 17.8 16.3 20.0 19. 1 22.6 10.9 11.4 12.6

147.7 175.2 205.0 232.3 281.5 322.3 354.6 501.1 72G.8 1CC7.0 ........ . ... -..

806.4 980.2 1169.7 1410.6 1857.1 2741.5 3628.7 4522.1 5944.6 7096.5 ..... . .... ····· . . ... .. . ......

283.1 341. 7 377.4 446.0 509.4 674.0 972.3 1150.2 1359.5 1591.2 246.0 316.8 400.4 487.6 650.2 980.1 1249.8 1477.1 1897.3 2216.2 166.3 188.1 236.6 277.1 439.6 716.8 884.4 1199.3 1716.2 2310.4 111." 133.6 155.3 199.9 257.9 370.6 522.2 695.S 971.6 978. 7

6/04/91

Table 6.3: COMMERCIAL 8ANK CREXU:T ANO DEPOSITS (•ill Ion• of RDI)

• 198' uas UH U87 1981 UH

• I . R!::SERVE BANI(

Caah H 11 H 47 <48 183 Centl'al Bank den1•nd depo•lt• 93 2H au 274 648 388

(•) Legal r•••rve• .. 7 121 299 182 486 348 (b) Specie I Uf IS 19 92 13 38

Net credit publlc ••c:'tol' 489 ae. 4~ <4114 949 <471

Credit private ••ct.or 421 .. .,, 4~ 7'3 92S 1,252

Oem•nd depo•lt.e private ••ct.or 72 111 139 182 <428 <49'9

T•l'll d•poelt.e pl'lvate •.et.or 181 17' 221 2H &21 SH

Other oblt9atlon1 to private ••ct.or 184 288 272 271 HS 378

Borrowlna frOlll Centr1I Bank 473 <454 SH SU 6(13 <479

rr. PRIVATE COMME~CIAL BANKS

c .. h 73 H 13'1 1ee 21'7 238 Centr•I Bank deai•nd d•poeita 465 '"" IS" 498 1,899 1,&71

(a) Legal reaervea IH 122 739 12• 1,484 960 (b) Special 16& 218 11& 28 .. .C28 821

Net credit public aector 18 14 79 11 -18 -17

Credi~ priv1te ••ct.or 98& 1,249 2,153 2,HS 3, °"" 6,498

D•m•nd depo1it• priv1te eector <428 .CSl7 749 993 2,86' 2,.C83

Ter• depo1ita private •ect.or 812 742 1,882 1,819 2,u .. 3,944

Cther obligation• to priv•te ••et.or 215 867 131 .CH en 859

Borrowin9 fro• C•ntr•I Bank 97 133 127 1"9 317 .C89

III. CCNSOLIOATED COMME.~CIAL SANKS

CHh 09 124 171 227 263 &99 Central Bank d91111end depoeit.e ,,, 7"4 1,213 772 2, .. 31 1,9&7

(•) Legal reeerv•• 291 4<43 1,119 SH 1,Sl29 1,298 (b) Special 255 183 19-4 ass SP'SI SH

Net cr-.:!it public ••ctor 487 111 474 496 9•4 464

Cr.cl it prt vat. •ect.or 1,413 1,739 2,857 3,398 "·"'" 8,7se

• Deftllnd d•po•it• private ••C°tor 491 198 ... 1,156 2,'47S 2,971

r.,.. depoeita prtvate •ector 719 118 1,H8 1,184 2,185 a,eee

Other obli9•tion• to prlvate ••C°tor Ht 843. .e1a 879 1,e~s 1,247

!orro•ing frOll Centrel Bank 179 187 ee2 7tl 181 . , ... ..

· .. · ... . .. -. ' ..

~: IMF ~

.·•

.. .; .. Table 7. I --

page 1 of 3

DOMINICAN REPUBLIC - AGRICULTURAL PRODUCTION OF SELECTED PR<X>UCTS, 1986-1990

(1980 cor-•ant Prices) ·······················--·--················-··--·-·········------------------------···---·-· --~-----------·----------------------·-----····················-····--·

1986 1987 1988 1989 1990 Unit Quantity Value Quant lty Value Quantity Value Quantity Value Quantity Value

·····--·--·-----············--··--·-···--·············-------------······-··--·-------------·----------------------------------------···----·-···----------··------· TOJAL AGRICULTURE t2,T2l,009 11?" .• 7 13,268, 185 1205.7 13,098,656 1199.9 4,830,491 1202., 10,965,038 1108.8 ·--······--·-···· ................ . .................. . ...................... ..................... ........................ ------- ---------- ------· ---------- ------I. Cereals 591,448 155.7 614,308 16Z.6 546,978 144.9 564,7n 148.0 498,737 130.5 -·-···· .......... .. --.. -.. - ... . ............ - ... -........... .......... -- ..... .. -...... . -..... -- .. - ......... -------- -.. --Brown rice Metric Tons 486,907 137.4 517,181 146.0 460,Z06 129.9 461,587 130.l 405,388 114.4 Corn kernels Metric Tons 58,956 11.7 48,143 9.6 47,310 9.4 52,300 10.4 50,490 10.0 Sor11ht11 Metric Tons 45,585 6.5 48,784 7.0 39,442 5.7 50,885 7.l 42,BS9 6.1

II. Industrial Crops for E•port 11,407,646 576.4 8,727,002 ~92.5 11,580,300 5119.4 208,987 567.8 6,622,892 S10.4 ........................................... ·--------- ...................... ..... -.. -...... -... ................ -- ....................... .. ............. ---------- ------· ··-------- ------Sugarcane Metric Tons ll,208,4ZO 131.0 8,525,375 136.1 8,374, 964 133.7 7,856 125.4 6,'41,687 102.8 Tobacco Metric Tons Z5,987 Z6.4 28,664 29.1 27,976 Z8.4 29,682 30.2 19,291 19.6

Coffee Metric Jons 137,008 34Z.J 134,268 33S.4 135,879 319.5 129,ZZ1 lZZ.8 118, 755 296.7 Cocoa Metric Tons 36,211 76.7 18,695 81.9 41,481 87.8 42,228 89.4 43, 157 91.l

II I. 0111 47,291 14.1 44,867 13.4 33,821 10.1 36,074 10.7 30,311 9.0 ...... .. .......... - ............... .. . -........... ........... -..... .. ............. - -... --- -------- ----- -------- ----Pea,.,ts Metric Tons 46,585 14.0 44, 1ZO 13.2 13,0YO 9.9 35,Z74 10.6 29,489 8.8 Seseme Metric Tons 297 0.1 314 0.1 305 0.1 325 0.1 334 O.t Castor Metric Tons 409 0.1 433 0.1 426 0.1 475 0.1 488 o. 1

IV. Textiles 5.n6 ~ -..I•,,,~ 1,534 5.2 8,227 5.6 8,638 5.9 7,965 5.5 ······-· ... . . . ............... -.............. ................. .. ................ ... --... .. ................ ----- .. ............... .. -.. -Cotton Metrk TOM s,s.:.5 3.8 7 I 3'.i3 5.0 8,029 5.5 8,430 5.8 7,755 5.l Sis~l Metric icr.~; 171 0.1 181 0.1 198 0.1 208 0.2 210 0.2

Y. L eguaes 90,454 68.3 88,408 69.5 101,698 75.1 109,138 84.0 110,061 78.5 ............ . ............ ---........... . ........... - ........ --..... ... .... -.... -.. ............ --- --·- ... --..... - .. ............. --- -Beans Metric Tons 49, 170 50.6 52,169 53.7 52,795 54.4 54,273 55.9 53,134 54.7 Gua~les (green garbanzo) Metrtc Tons 27,Z48 10.6 Z1,389 8.3 34,222 13.l 39,834 15.5 41 ,825 16.2 Other beans Metric Tons 1, 744 0.8 1,845 0.8 1,667 0.8 2,095 0.9 2, 143 0.9 . Garbanzos Metric Tons Z48 o.z Z62 0.3 265 0.3 270 5.3 275 0.3 LI 1111 beans Metrtc Tons 10,941 5.2 11, 576 5.5 11,400 5.4 11,476 5.4 11,487 5.4 Peas Metric Tons 1,103 0.9 1, 167 1.0 1,149 0.9 1, 190 1.0 1, 197 1.0

VI. aoot crops 347,303 107.4 345,638 108.4 362,775 111.5 1n,676 113.5 37'J,065 113.8 .. ... . . . .. .. . ....... -...... ...... -.. - . .. -.......... . -- .......... --· ............ .. .. -.... -·--·--- -..... - ............... . ......... Potatoes Metric Tons 16, 111 4.9 15,026 4.5 15,342 4.6 17,Z60 5.2 16,327 4.9 S11eet potetoH Metric Tons 75,678 12.8 72,100 12.3 71,360 1Z.1 72,930 12.4 70,815 12.0 Tue a Metric Tons 143,105 39.2 142,908 39.1 157, 199 43.0 158, 771 43.4 161,470 44.Z Name Metric Tons 17,900 5.0 18, 172 5.1 18,898 5.J 19,427 5.4 . 19,019 5.3 Yautla (squash) Metric Tons 55,386 16.7 56,051 16.9 59,246 17.9 63,215 19.1 60,686 18.3 Onions Metric Tons 20, 132 10.5 21,300 11. 1 21,405 11.1 Z2,050 11.5 22, 134 11.5 Scallions Metric Tons 9,114 8.6 9,875 9.2 10,052 9.3 10,078 9.3 10, 109 9.4 Garlic Metric Tons Z,942 8.3 l, 113 8.8 2,31'> 6.7 2,015 S.7 2,400 6.8 Mapuey Metric Tons 3,126 0.8 l,l07 0.9 3,122 0.9 l,350 0.9 3,490 0.9 Ginger Metric Tons 1,389 0.5 l,S86 0.6 3,576 0.6 3,580 0.6 3,615 0.6 ..................................................................................................................................................................................................................................................................

•

Tnhle7.l --page 2 of J

O<J41NICAN REPUBLIC • AGRICULTURAL PRIX>UCTION OF SELECTED PRa>UCTS, 1986·1990

(1980 Constant Prices) ··································································································-··-····-------···-------------··--·····--···-·················· VII. Frulh 1,697,976 82.5 1,796,817 87.6 1,818,624 89.7 1,lll2,35l 92.0 1,851,499 93.2 ···-·· .............. . ................ . ................. . .............. ................. -·----- ---------- ------· ··-----·-- ···---Gui MOS 000 B~hH 19,091 17.6 20,555 18.9 21,377 19.7 22,871 21.0 23,307 21.4 Grepdrults ooo•s 10, 114 0.9 10. 722 0.9 12,814 1.1 12,1178 1.1 11, 148 1.1 PIMapplH ooo•s 18,852 4.9 19,945 5.2 19, 713 5.1 19, 784 5.2 20,219 5.2 Sweet oranges ooo•s 277 ,011 1.6 293,078 8.0 294,836 8.1 296,600 8.1 301,932 8.J Avocados ooo•s 388,294 16.8 410,815 17.7 412,510 17.8 413, 189 '7.11 415,387 17.9 Mangoes ooo•s 699,341 18.2 739,903 19.3 749,521 19.5 751,269 19.6 7511,075 19.8 Coccn.its ooo•s 105,03.3 6.7 111,125 7.1 116,056 7.4 117,200 7.4 119,427 7.6 Guanabanas ooo•s 10,o41 3.1 11,258 3.2 12,268 3.5 13,495 J.9 13,751 4.0 Papayas ooo•s 5,475 1.9 5,791 2.1 6,546 2.3 6,640 2.4 6,166 Z.4 Sweet lemons OO(l•s 29,302 1.0 31,002 1.1 29,989 1.0 31,236 1.1 11,829 1.1 Bitter lemons ooo•s 8,842 1.6 9,355 1. 7 9,392 1.7 10,Jl2 1.9 10,528 1.9

Bitter orangH ooo•s 114,717 1.1 121, 371 1.2 121,480 1.2 122,087 1.2 125,994 1.Z Tamarind Metric Tons 1,769 0.5 1,872 0.5 1,931 0.5 2, 109 0.6 2, 162 0.6 Zapotes ooo•s 2,847 0.1 3,012 0.1 3,020 0.1 3,12'> 0.2 3,435 0.2 Cajulle ooo•s 2,884 0.3 3,051 0.3 2,985 0.3 2,990 0.3 l,071 ll.i3 Jagtnt ooo•s 405 o.o 428 o.o 460 o.o 475 0.0 488 0.0 Medlars ooo•s 2,755 0.1 2,915 0.1 2,940 0.1 2,963 0.1 l,044 0.1 Melons ooo•s 583 fl. 1 617 0.1 786 0.2 908 0.2 936 0.2

VIII. Vegetables 230,640 67.7 237,238 69.9 221,609 65.1 233,564 68.4 77,lr.76 62.~ . --........... ·------- . .. -.. -... - .. ----....... ... .. -..... -.. -------- . --... - ............... ----- -------- .. ---Carrots Metric Tons 679 0.2 718 0.2 653 0.1 730 0.2 760 o.z Tomatoes Metric Tons 170,003 43.5 173,084 44.3 162,699 41.6 1n,949 44.2 15,llOO 37.1 Cabbage Metric Tons 4,717 2.1 4,991 2.2 4,452 2.0 4,565 2.0 4,733 2.1 Sugar beets Metric Tons 2,752 0.7 2,912 0.8 2,4~ 0.7 2,575 0.7 2,670 0.7 Radjshes Metric Tons 370 0.2 391 0.2 360 0.2 374 0.2 388 0.2 Cuclllt>ers Metric Tons 1,536 0.6 1,625 0.6 1,414 0.5 1,531 0.6 1,579 0.6 Molodrone Metric Tons 5,675 2.7 6,004 2.8 5, 163 2.4 5,324 2.5 5,520 Z.6 lettuce Metric Tons 4,571 2.8 4,836 3.0 4,~3 3.0 4,907 3.1 5,086 3.3 Auyama (squash) Metric Tons 10,820 5.3 11,448 5.6 10, 188 5.0 10,293 5.1 10,673 5;2 Peppers Metric Tons 18,507 5.2 19,580 5.5 18,650 5.2 19, 142 5.4 19,640 5.5 Oregano Metric Tons 889 0.8 941 0.9 950 0.9 975 0.9 997 0.9 Chayote Metric Tons 6,585 1.6 6,967 1.7 6,410 1.5 6,525 1.6 6,672 1.6 Eggplants Metric Tons 3,536 z.o 3, 741 2.2 3,442 2.0 3,674 2.1 3,~6 2.2

IX. Other 1,304,535 98.8 1,406,373 106.8 1,424,624 108.6 1,464,289 111.7 1,394,032 105.6 -...... ........ --.... - .................... . ....... -....... -... ---------- -.... --....... -- ------- ---------- ------- ---------- ............ Plantains ooo•s 1,090,638 91.6 1, 180,070 99.1 1,206,011 101.3 1,242,212 104.l 1,167,627 98.1 Rulos 000 BWl<:hes U9,317 3.3 147,419 3.5 145,610 3.4 147,859 3.5 151,260 3.6 Ana to Metric Jons 657 O.l 695 0.3 597 O.l 628 O.l .. 641 0.3 Pal• Metric Tons 73,90.J .J.6 78, 189 3.8 72,386 3.6 73,590 1.6 74,502 3.7

···········-··················---····--·-·---------------··-------------------------------------------------------------······--········-·····-------··--···--------

~

Tahle 7.1

peve l of 3

OCJllNICAN REPUBLIC • AGRICULTURAL PRIX>UCTION OF SELECTED PRIX>UCTS, 1986·1990

(1980 Constant Prices) ························································-·-------·······-·------·----··-·········--·-----··--------------------------·····-······-·--·------TOlAL LIVESTOCK 914, 780 450.9 915,600 457.5 914,429 460.0 967,674 478., 999,0M ••············· -........ -... --- ..... -.. . ............ .... -........ .............. .. ..... - ........... ----- --· ...........

8Hf Metric Tons 76,501 172.7 n,121 175.5 78, 737 1n.1 81,099 181.1 82,214 Pork Metric Tons 8, 180 15.8 8,998 17.4 9,429 18.2 8,505 16.4 8, 126 Sheep Metric Tons 1,901 4.1 2,011 4.l 1,996 4.3 2,025 4.3 2, 135 fowl Metric Tom 82,789 116.9 87,tn 1".2 86,392 142.9 90,280 149.3 93,079 Milk 000 Liters 327,140 92.2 304,240 85.7 307,587 86.7 329,733 92.9 342,922 Eggs ooo•s 416,426 26.8 433,499 27.9 428,297 27.6 453,995 29.2 468,523 Beeswax Metric Tons 188 1.7 411 1.8 427 1.9 462 2.0 465 Honey 000 liters 1,453 0.7 1,517 0.7 1,564 0.8 1,575 0.8 1,580

TOTAL FORESTRY ANO FISHING 1,673, 120 56.7 1,697,555 58.2 1,902,209 60.1 1,732,784 61.2 1,768, 12] .............................. . .............. ........ -..... . . -.............. ............... . ....... -......... - ·------ ---------- ------· ----------Tlnt>er (lnckntry) Metric Tons 115,065 1.7 3'j4,499 1.8 364,257 1.9 369,681 1.9 379,568 Ylllf>er (personal) Metric Tons 1,242,96'j 4.1 1,246,694 4.1 1,249, 187 4.1 1,266,675 4.2 1,290,742 ProcesHd coal Metric Tons 75,444 12.8 76,048 12.9 76,276 13.0 74,521 12.7 75, 117 Fish Metric Tons 19,646 38. 1 20,J14 39.4 212,489 41.2 21,907 42.5 22,696

TOTAL AGRICULTURE, LIVESTOCK, FISHING, FORESTRY 15,310,909 1682.3 15,881,340 1721.4 15,915,294 1no.o 7,530,949 1741.3 13,732,225 ·--·-·········-·····-··-·······-······--·····-- ............... .. ................. .. ....... -...... ·- ---------- --.... -.. -...... ·------ ---------- ------- -------- .. -···········----------·--------------------·····················-----·----------------------------··- .. ·------------------------------------------------------Source: Secretarl• de Eatedo de Agriculture, Banco Agricola, INESPRE, tEA.

Table 7.2 p.;e 1 of 3

DOMINICAN REPUBLIC • SUPPLY AND DEMAND FOR SELECTED CROPS, 1987·91

Unit 1987 1988 1989 1990 a/ 1991 a/! l······································································································I I I SUGAR , .....

Harvested 1rea Tarea 3,248,717 3, 101 ,838 2,909,524 2,385,810 2,259,136 Rent MT/tarea 2.7 2.7 2.7 2.7 2.7

S~ly 1,139,147 1,095,760 1,057,372 883,983 799,231

Existing stocks Metric tons 238,000 238,009 219,27'9 199,831 176,816 National production b/ Metric tons 901,147 857,751 838,093 656,423 622,415 lll'pOrts Metric tons 0 0 0 27I129 0

Demand 1, 139, 147 , ,095 '760 1,057,372 823,983 799,231

Domestic cons1611'tion Metric tons 341, 744 351,654 361,852 339,082 336,023 Investment 0 0 0 0 0 Final stock Metric tons 238,009 219,279 199,831 176,816 53 I 193 Exports Metric tons 559,394 524,827 495,689 368,oes 41C,01~ I

I COFFEE , ...... Harvested area Tarea 2,428,418 2,428,418 2,428,418 2,285,000 2,285,000 Rent QC/TA 0.61 0.62 0.59 0.57 0.53

Supply 67,134 86,330 104,239 111,113 115,335

Existing stocks Metric tons 18,391 39,628 51I735 60,113 National production Metric tons 67, 134 67,939 64,611 59,378 55,222 lll'pOrts Metric tons 0 0 0 0 0

Demand 67,134 86,330 104,239 111,113 115,335

Domestic cons1611'tion Metric tons 19,000 19,551 20,118 21,000 21,600 Investment 0 0 0 0 0 Final stock Metric tons 18,391 39,628 51. 735 60, 113 68, 735 Exports Metric tons 29,743 27, 151 32,386 30,000 25,000

-·•••'••····----------·-----·-····--·--·-------·····················-······························-··

Table 7.2 pa11• 2 of 3

DOMINICAN REPUBLIC - SUPPLY AND DEM.AND FOR SELECTED CROPS, 1987·91

' ···········-·······························--·-·················-·-·························-·········

Unit 1987 1988 1989 199D a/ 1991 a/! l···················-·················-························---··---·····-·-··············--········t I I

TOBACCO

Harvested area Tarea 370,946 362,042 380,000 250,000 254,203 hnt CIQ/TA 1.7 1.7 1. 72 1.73 1.73

Supply 29,331 39,198 46,211 48,431 45,85C

histing stocks Metr-i c tons 667 11,222 16,57.Q ~\" ·- -National pr-ocluc: t i on Metric tons 2!,664 42'7 c;ii., t . "_z;~ 21,608 lq>orts Metr- I c cons " 0 0 0 I

Demand 29,331 39, 198 46,211 4e,431 45,850

Domestic c:ons~tion c/ M1Hric tons 7,166 7,554 8,905 9, 189 9,455 Investment 0 0 0 0 c Final stoc:k Met l"i c tons 11,222 16,529 29, 138 24,21.2 2c,3;5 Exports Metl"ic tons 10,9~3 15,115 8, 168 1~ 000 16,0CC

I COCOA , ..... I Har-vested area Tarea 1,866,240 1,866,240 1,866,240 1,866,240 1,866,240 I Rent CIQ/TA 0.54 0.66 0.68 0.69 0.62

Su~ly 45,200 56,000 60,439 72,504 73,323

Existing stocks Metr-ic tons 2,862 13,777 13,323 National production Metr-ic tons 45,200 56,000 57,577 58,727 60,0CO lq>orts Metric tons 0 0 0 0 0

Demand 45,200 56,000 60,439 72,504 73,323

Domestic cons~t ion Metric tons 6,286 6,468 6,662 6,862 7,068 Investment 0 0 0 0 0 Final stock Metric tons 2,862 13,777 13,323 16,255 Exports Metric tons 38,914 46,670 40,000 52,319 50,000

-················-··············-·-·······-·············-·-···········································

•

Table 7.2

page 3 of 3

DOMINICAN REPUBLIC: • SVPPLY AND DE"4AND FOR SELECTED CROPS, 1987•91

···-·-················-···············································································

Unit 1987 1988 1989 1990 a/ 1991 a/! ··················•································································•··················I

CORN

Harvested are& Tarea 549 450 467 474 700 Rent QQ/TA 1 .9 2.3 2.5 2.4 2.3

Supply 7,571 8,363 9,268 10, 128 11,126

bisti"9 stocks Metric: tons 438 455 502 579 62'.

National production Metric: tons 1,066 , ,043 1,153 1,113 1 ,63:: lft1)0rts Metric: tons 6,067 6,865 7,613 8,436 8, 87'5

Demand 7,571 8,363 9,268 10,128 11,126

Domestic: c:onsU!ption Metric: tons 7,116 7,861 8,689 9,507 9,875 lnvest~nt 0 0 0 0 Q I

Final stock Metric: tons 455 502 579 62~ 1, 25. bports Metric: tons 0 0 0 0 c

IRIC:E I····

Harvested area 000 Tarea 1 ,814 1,812 1,937 1 ,995 2, 107 Rent QQ/TA 4.0 3.9 3.6 3.6 3.6

$1,1pply 8,501 7,399 7,856 7,681 7,623 I

Existi~ stocks Metric: tons 734 1,200 1,135 722 247 I National production Metric tons 6,961 6,199 6,280 6,959 7,376 lft1)0rts Metric tons 800 0 441 0 0

Demand 8,501 7,399 7,856 7,681 7,623

Domestic conSU!ption Metric tons 7,301 6,264 7, 134 7,434 7,600 lnvestl!llflt 0 0 D 0 0 Fi~al stock Metric tons 1,200 1,135 722 247 23 Exports Metric: tons 0 0 0 0 0

··-·······································································------------···-·--·····-··· •• Not evailable. •I Projections. b/ Includes refined sugar. c/ According to INTABACO, domestic cons~tion represents about 30X of the netfonal production.

Source: Sec:reteria de Estado de Agriculture, Bal'\Co Agricole, JNESPRE, CEA •

• •

page I of 2

Table 8.1

DOMINICAN REPUBLIC · TllJRISM RECIEPTS AND EXPENDITURE, 1976·89

1976 19n 1978 1979 1980 1981 1982

I. RECEIPTS 72,105,841 92,275,952 92,273,739 123,917,274 172,569,563 206,329,262 266,067,669 ..... -.... .. .. -...... -...... .. ............... - ............. -..... - ........ -- ..... -- .................... .. ........................................ A. FOREIGNERS 55,837,854 68,889,233 70,091,994 95,180,285 121,975,516 135,664,491 207,361,700

1. Arrivals by airplane. 216,580 262,434 257, 107 286,573 301,442 339,936 340,850 Average experdlture 250.8 255.5 262.4 320.6 393.2 390.3 600.0 Total experditure 54,318,264 67,056,506 67,464,877 91,887,626 119;531,061 112,669,134 204,510,000

b. Arrivals by ship 101,306 111,265 155,912 195,410 182,987 162,438 142,585 Average e•perditure h.O 13.8 16.9 16.9 18.8 18.4 20.0 Total experdlture 1,519,590 1,832, 727 2,627, 117 l,292,659 3,438,454 2,99S,357 2,851,700

8. llON·RESIDENT DOMIMICANS 16,267,987 19,986,719 20,781,745 26,916,989 47,029,464 65,761,617 51,959,010

a. Arrivals by airplane. 43, 183 47,025 47,JOJ 56,005 81,909 111,273 118,561 Average experditure 375.6 421.6 438.6 480.4 573.6 590.41 4J5 Total expenditure 16,219,535 19,919,790 20,747,096 26,904,802 46,983,002 65,696,692 51,574,015

b. Arrivals by ship 129 158 79 67 81 110 885 Average experdlture 375.6 423.6 418.6 480.4 573.6 590.41 435.00 Total experditure 48,452 66,929 34,649 32, 187 46,462 64,945 384,975

C. STll>ENTS .. 3,400,000 1,400,000 1,800,000 3,564,583 4,903, 1l4 6,746,959

II. EXPENDITURES 90,131,100 102,223,405 126,319,267 158,156,853 165,854,805 127,820,057 87,286,088 . . . . . -......... . -. --... -..... --.. -.... -.... .. .. .. -....... -.... .. .. -.. -............ ...................... ---------- ..................... A. RESIDENT~

205,081 214,656 246,018 277,790 256,815 197,222 194,999 Nurber · Average experdlture 439.5 468.l 501.7 560.7 636.l 636.J 435 Total expenditure 90,131,100 100,523,405 121,919,267 155,756,853 163,411,385 125,492,359 84,824,565

I. Slll>ENTS Total experdlture .. 1, 700,000 2,400,000 2,400,000 2,443,420 2,127,698 2,461,521

Ill. BALANCE (18,027,258) (9,947,453)(34,045,527)(34,Zl9,579) 6,714,759 78,509,205 178,781,581 ····-····· ... -..... -. ·······-·· ---------- -......... -. -... . ............ -----------

................................................................................................................................ Source: Central lenlt of the D1111inican Republic.

&

page 2 of 2 Table 8. l

· OQMINICAN REPUBLIC · TOURISM RECIEPTS AND EXPENDITURE, 1976·89

·························-·-······················---····-------·-·······-······-·······-·····-········--·-···············

I. RECEIPTS

A. FOREIGNERS

a. Arrivals by airplane.· Average expenditure Total expenditure

b. Arrivals by ship Average expenditure Total expenditure

I. NON·RESIOENT O<ltlNltANS

a. Arrivals by airplane. Average expenditure Total expenditure

b. Arrivals by ship Average expenditure Tote\ expenditure

C. Slll>ENTS

II. EXPENDITURES

A. RESIDrNri; NllliJer· Average expenditure Total expenditure

8. STtJ>ENTS Total expenditure

111. BALANCE

1983 1984 1985 1986 1987 1988 1989

320,456,949 370,601,153 450,973,766 506,329,809 571,218,777 768,286,372 893,933,978

256,105,718 252,141,60Z 326,745,613 346,709,208 390,808,069 583,328,159 692,298,000

370,909 415,546 497,280 556,954 661,380 835,714 1,000,000 685.3 600.9 652.9 618.0 585.4 695.3 690.0

254,181,938 249,695,317 324,683,713 344,173,066 387,193,016 581,030,159 690,000,000

96,089 20.0

1,921.780

105,081 23.3

2,446,286

89,726 23.0

2,061,903

110,363 23.0

2,536, 142

157,313 23.0

l,615,051

100,000 23.0

2,298,000

100,000 2J.O

2,298,000

52,233,200 106,609,368 112,486,680 148,348,788 169,589,768 174,570,110 191,247,875

130,538 155,848 162,931 210, 18t 240,922 280,650 300,000 400 677.5 677.5 6n.s 677.5 621.9 637.38

52,215,200 105,587,020 tt0,385,753 142,397,628 163,224,655 17~,536,235 191,214,000

45 1509 3t01 8784 9395 50 50 400 677.5 677.5 677.5 677.5 677.5 677.5

18,000 1,022,348 2,100,928 5,951, 160 6,365,113 31,875 33,875

12, 118,031 11,850, 183 11, 741,473 11,271,814 10,820,91.1 10,388, 103 10,388,103

87,873,644 89, 106, 130 83,492,066 89,243,653 95,398,556 127,199,774 138,600,000 ------·---· ··------··· -----···--- ----------· ----------- ----------- -----------

210,924 218, 161 205,827 220,23'i 235,651 252,146 275,000 400 400 400 400 400 500 500

84,369,600 87,264,400 82,330,800 88,094,000 94,26'>,400 126,073,000 137,500,000

3,504,044 1,841, 730 1,161,266 1,149,651 1, 138, 156 1,126,774 1,100,000

232,583,305 281,495,023 367,481,700 417,086,156 475,820,221 641,086,598 755,333,978

························--············-··---·-······----------------------------------------------------------------------Source: Central link of the Omfnlcen Repj,lic.

..

..

Table 9.1: DOMINICAN REPUBLIC. GROSS DOMESTIC PRODUCT OF THE FREE ZONES ••••••••• (RDS Millions)

1970 1971 1972 1973 1974 1975 1976 19n 1978 1979 1980 1981 1982 1983 1984 1985 1986 1987 1988

Gross Domestic Prod\.ct

(Current Prices>

1485.5 1663.3 1987.4 2344.8 2922.6 3599.9 3951.5 4587 .1 4734.4 5498.8 6630.7 7266.9 7964.5 8623.2

10355.3 13972.4 15780.3 19425.6 28270.0

Source: Central Bank •

of which Manufacturing Free Free Zone/ (Current Prices) Zone GDP

275.4 1.4 0.09 306.2 2.8 0.17 347.3 4.7 0.24 398.9 5.3 0.23 541.7 9.8 0.34 752.9 14.7 0.41 814.8 19.5 0.49 870.6 26.4 0.58 879.7 32.7 0.69 928.6 40.0 0.73

1015.4 44.5 0.67 1133.1 57.6 0.79 1454.9 61.1 o.n 1527.5 61.9 0.72 1708.0 n.1 0. 74 2197.6 137.S 0.99 2362.5 254.9 1.62 3271,6 342.4 1.76 4541.2 n8.8 2.75

Free Zone/ Manv~act.

0.51 0.91 1.35 1.33 1.81 1.95 2.39 3.03 3. 72 4.31 4.38 5.08 4.20 4.05 4.51 6.27

10.79 10.47 17.15

~

• ~

Table 9.2: DOMINICAN REPUBLIC · FREE ZONE EXPORTS ......................... (USS)

------------·····---------------------------------------···--------------------------------------------·----------------1981 1982 1983 1984 Value X total Value X total Value X total Value X totet

··----····---------·--··---------···-····----------------·-----------------------·--·-----------------------------------AGIUCUL TURE 2,358,202 1.8 3,349,289 2.2 3,340,679 1.9 400,224 0.2 -----------AGRO· JllOUSTRY 2,549,644 2.0 3,393,963 2.2 2,531,224 1.5 1,682,250 0.9 ..................... JllOUSTRY 123,250,288 96.2 148,395, 109 95. 7 168,229,299 96.6 193,568,223 98.9 ··------

Clothing 42,261,946 33.0 53, 755 ,576 34.7 58,956,595 33.8 81,099,933 41.4 Ccnutadores y lnterrup. 4,890,829 3.8 5,043,644 3.3 1, 715,574 1.0 18,224,247 9.3 Tobacco 41,709,089 32.5 56,097,642 36.2 56,016,375 32.2 39,918,978 20.4 foot..ear 8,175,327 6.4 8,452,453 5.4 16,485,878 9.5 21, 124, 167 10.8 Fereec. ouv. y Suero 0 0.0 0 0.0 0 0.0 0 0.0 leather 0 0.0 0 o.o 0 0.0 412,296 0.2 Gold Necklace 3,413 o.o 1,645 0.0 549,941 0.3 1,581,891 0.8 Gold Bracelet 0 0.0 0 0.0 0 0.0 34,994 0.0 C~ter Perts 7,276,608 5.7 7,556,158 4.9 11,983,339 6.9 10,804,871 5.5 Alee y Pan Etec 3,724 0.0 0 o.o 0 0.0 0 0.0 Betee Med. Papel 6,287,500 4.9 6,643,671 4.3 8,589, 172 4.9 8, 191,286 4.2 Leather Articles 3,614,886 2.8 2,534,860 1.6 1,917,029 1.1 1,925,768 1.0 Furro Table Planchar 0 0.0 0 0.0 0 o.o 0 0.0 Grapes 2,358,315 1.8 2,293,590 1.5 4,012,888 2.3 3,410,713 1.7 Brushes 2,917,661 2.3 2,577,061 1.7 2,978,048 1.7 1,098,on 0.6 Telephones 0 0.0 0 0.0 0 0.0 0 0.0 OiMOnds 0 o.o 0 0.0 0 0.0 0 0.0 Pieles C~rt. 5,756 0.0 31,624 o.o 1,273,363 0.7 2,268,613 1.2 Rrids 1,229,031 1.0 1,430,962 0.9 1,573,668 0.9 1,308,098 0.7 Other 2,516,203 2.0 1,976,023 1.3 2, 177,429 1.2 2, 164,276 1.1

OTHER 0 0.0 0 0.0 102,637 0.1 58,616 o.o ---.. TOTAL 128, 158, 134 100.0 155,138,361 100.0 174,203,839 100.0 195,709,313 100.0

------···---------------------------------------------------------------------------------------------------------------Source: Central Bent.

' , • '-

Table 9.2: DCJllNICAN REPUBLIC · FREE ZONE EXPORTS .............. ---.... (USS)

-------------------------------------·-------·-----------··------------·------------------------------------------------1985 1986 1987 1988

Value X total Value X total Value X total Value X total ··------------------------------------------------------·---·----------··---------------------·-------------------------AGRICULTURE 2,114,517 3.1 1,936,318 2.3 1,474,030 1.7 1,056,392 1.2 ....................... AGRO· INDUSTRY n,no 0.1 183,446 0.2 409,623 0.5 507,633 0.6 -------------INDUSTRY 66,694,749 96.5 80,897,424 97.1 84, 738, 735 97.5 83,397,678 97.2 -------·

Clothing 23,935,853 34.7 31,199,055 37.5 33,361,030 38.4 30,525,551 35.6 Coautedores y lnterrup. 3,991,893 5.8 3,828,935 4.6 9,535, 154 11.0 13,968,088 16.3 Tobacco 13,313,674 19.3 15,815,039 19.0 12,484, 174 14.4 8,256, 713 9.6 Footwear 8, 967,321 13.0 8,958, 149 10.8 8,201,314 9.4 7,449,439 8.7 Fareac. Ouv. y Suero 0 0.0 0 0.0 0 0.0 6,356,387 7.4 Leather W3,356 1.4 2,578,700 3.1 1,839, 170 2.1 2,977,661 3.5 Gold lecklace 4,073,790 5.9 5,366,520 6.4 6,392,797 7.4 2,040,754 2.4 Gold Bracelet 136,852 0.2 175,967 0.2 n,101 0.1 1,840,370 2.1 C~ter Parts 2,668,395 3.9 1,067,660 1.3 2,748,345 3.2 1,320,355 1.5 Alee y Pan Elec 0 0.0 2,030,186 2.4 1,532,138 1.8 1,315,646 1.5 Batea Med. Papel 3,890,515 5.6 4, 186,377 5.0 936,684 1.1 1,235,241 1.4 Leather Articles 581,034 0.8 864,531 1.0 1,677,368 1.9 906,527 1.1 Furro Table Planchar 0 0.0 0 0.0 890,963 1.0 761, 150 0.9 Grapes 1,267,725 1.8 1,345,207 1.6 1,240,691 1.4 680,369 0.8 Brushes 713,122 1.0 763,013 0.9 1,315,513 1.5 563,711 0.7 Telephones 0 0.0 0 0.0 0 o.o 541,817 0.6 Oiemonis 0 o.o 0 o.o 0 o.o 478, 701 0.6 Pleles Cort. 343,511 0.5 678,811 0.8 597,271 0.1 261,209 0.3 Rods 541,291 0.8 398,321 0.5 94 o.o 96,651 0.1 Other 1,296,418 1.9 1,640,953 2.0 1,913,722 2.2 t,821,337 2.1

OTHER 191,898 0.3 280,086 0.3 284, 131 0.3 881,719 1.0 -..... --TOTAL 69,078,884 100.0 83,297,275 100.0 86,906,519 100.0 85,843,422 100.0

------------··----------------------------------------------------------------------------------------------------------Source: Central Banlc.

..

• Table 9.3: DOMINICAN REPUBLIC • LOCAL EXPENDITURES Of FREE ZONE ENTERPRISES, 1984·88 •••••••· ·•••••••••••• (USS Millions)

1984 1985 1986 1987 1988 ·········································-·························-················

Raw Materi11ls o.o 5401.5 3502.4 3945.6 5256. 1 Wages and Salaries 34236.3 22629.4 54n1.3 60324.6 80360.7 Water, Llgnt, Telephone 3094.4 2395.9 5260.4 5793.7 n18.o COMPRA MATERIALES 1789.3 866.6 1722.5 1897.2 2527.3 Rent of Building 2109.4 1342.2 2272.6 2503.0 3334.3 COMBUSTIBLE, REP Y MA~T. o.o 1208.1 3551. 7 3911.8 5211.1 Travel and Representation 0.0 319.9 714.5 787.0 1048.4 Freignt and Transportation 0.0 431.9 1587.4 1748.4 2329. 1 Otner 10913.7 10021.3 15004.6 16525.9 22014.8

TOTAL 52143.1 44616.8 88387.4 97437.3 129800.0

Source: Central Bank •

..

• { "'

Table 9.4: DOMINICAN REPBULIC - FREE ZONE REVENUE, BY ZONE -··---·-- (USS Millions)

1978 1979 1980 1981 1982 1983 1984 1985 1986 1987

-------·-----------------------------------------------------------------·--------------------------------------------------------

La Romana 12,522 16,470 20,017 26,305 24,755 22,n6 18,951 15,007 23,700 22,619 San Pedro de Macor;s 4,070 5,507 5,914 7,941 8,852 10,059 10,785 8,789 23,119 33,437 Santiago 5,332 7,883 10,319 11,n5 16,733 16,104 16,289 13,894 26, 110 30,211. Puerto Plata 0 0 0 0 0 251 653 528 936 1,316 Especial es 10,796 10, 163 8,257 9,595 11,070 12,660 5,466 4,804 8,971 1,719 San Cristobal 0 0 0 0 0 0 0 1,429 5,235 6,789 Bani 0 0 0 0 0 0 0 30 308 668 La Vega 0 0 0 0 0 0 0 55 87 468 San Isidro 0 0 0 0 0 0 0 0 0 206

TOTAL 32,nO 40,023 44,507 57,567 61,409 61,850 52, 143 44,536 88,467 97,437

----------------------------------------------------------------------------------------------------------------------------------Source: Central BanJc.

( ~ •

Table 9.5: DOMINICAN REPUBLIC - FREE ZONES: NUMBER OF FJR"S, E"PLOYEES AND AVERAGE SALARIES

Nllli>er of Firms Nl.llt>er of En.,t oyeH En.,toyees/firms <X> Total Wages Wages/Eq>I oyee Average monthly salary

9ia

61 13,480

221

1979

72 16,095

224

Source: Secreary of Industry end Conmerce.

1980 1981 1982 1983

76 89 98 110 18,339 20,520 19,629 22,272

241 231 200 202

1984 1985 1986 1987 1988

120 144 168 179 236 27, 126 35,720 51,231 60,538 85,468

226 248 305 338 362

50,669,741 22,702,888 55,154,278 71,741,294 80,093,770 1867.9 635.6 1076.6 1185.1 937.1

156 53 90 99 78

•

Table 10 .1

DOMINICAN REPUBLIC • CONSUMER PRICE INDEX

(Base· May 1, 1976·April 30, 1977•100> ·················································-·············································

TOTAL

GROUPS OF GOODS ANO SERVICES ··············-·········································! FOOO, BEVERAGES

& TOBACCO HOUSING CLOTHING

ETC. OTHE~

!······· ······························-························································ 136.5 139.7 127.8 133.9 139.8

1981 146.8 140.3 156.0 144.S 153.8 1982 158.0 151 .4 170.7 158.8 159.8 1983 169.0 161.2 184.7 181. 7 166.4 1984 210.3 196.6 224.5 266.8 212.2 1985 289.2 273.8 272.0 419.7 290.0 1986 317.4 315. 7 296.9 484.6 295.2 1987 367.8 381.0 336.2 542.6 316.5 1988 'i31.2 584.2 452.2 782.5 403.2 1~89 772.6 865.7 624.0 1257.4 548.8

January 664.5 758.9 523.6 1037. 5 463.2 ' Febual'y 670.0 755.S 533.2 1087.8 472.9 Mal' ch 681.6 76~.7 547. 1 1118.6 486.2 I Apl'i l 696.0 779.3 561.9 1147 .s 492.2 May n1.6 825.6 ST.5.8 1182.3 507.0 June 751.7 858.7 588.8 1223.0 511.5 I July 766.2 870.0 615.5 1244.S 517.5 August 786.4 882.5 645.5 127C.. 7 544,6 I September 822.8 913.7 699.3 1335.7 563.6 October 874.4 959.4 713.3 1435.4 665.7 Noveneer 899.6 989.4 134.3 1480.1 676.8 Dec~r 929.8 1031. 9 751 .1 1526.2 684.6

1990 January 946.7 Febuary 952.9 March 972.3 April 998.7 May 1019.8 June 1044.2 July 1096.4 August 1257.5 Septel!Cer 1313.2 October 1536.7 November 1711 .9 Decenb!r 1865.9

·········-·················--················································-···············-· Source: Central Bank of the Dominican Republic.

Table 10.2

DOMINICAN REPUBLIC • MINIMUM SALARIES

• ··············-······-····························-·······-··

PESOS INDICE REAL 1980•100

•....•..•....•......••.................•.••.......•.......... , 1980 125.0 100.0 125.0 1981 125.0 107.S 116.2 1982 125.0 115.7 108.0 198.3 125.0 123.8 101.0 1984 158.3 154.0 102.8 1985 212.5 211.8 100.3 1986 250.0 232.4 107.6 1987 275.0 269.4 102.1 1988 425.0 389. 1 109.2 1989 533.3 565.8 94.3

····················-························-····-······----Source: Secretary of Labor and Centr1l Bank of the Dominican Republic.