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A Model for the Caribbean

The Dominican Republic is the ninth-largest and fastest-growing economy in Latin America
By The News · 21 of April 2017 09:20:40
Playa Bibijagua, Punta Cana, Dominican Republic, No available, photo: Wikimedia

For a country that shares a border with the poorest nation in the Western Hemisphere and which has, in the last century, endured the humiliating indignities of two U.S. interventions, a series of military coups and the brutal eight-year oppression of Rafael Trujillo, the Dominican Republic is doing very well.

Last year, the Antillian island nation’s economy grew by 6.6 percent, and its tourism revenues increased 10 percent to $6.7 billion.

A total of six million foreign tourists visited the Dominican Republic in 2016, up by more than 400,000 compared to the previous year.

And to make sure that that growth continues, the Dominican tourism sector will be adding 6,000 new hotel beds this year, which will lead to the creation of 10,000 new jobs in the industry.

While tourism is still the Dominican Republic’s biggest industrial economic engine, the country also showed impressive growth in other sectors.

According to Dominican government sources, in 2016, the Dominican Republic registered a 26.5 percent growth in mining, an 11 percent growth in financial services and 9.6 percent growth in agriculture.

There was also a 5.3 percent growth in transportation, a 4.28 percent growth in manufacturing and an 8.8 percent growth in construction.

In fact, the DR is now the ninth-largest and fastest-growing economy in Latin America.

So how does the DR manage to do all this?

Once dependent on the exports of sugar, coffee and tobacco, the Dominican Republic has diversified, focusing on developing its service industries (including tourism) and opening free trade zones to court foreign investment.

The country is now producing low-end manufacturing of goods such as textiles, plastics and medical instruments.

Low global oil prices and a flood of remittances from a million Dominican expats working in the United States (amounting to about $67 billion a year) also help.

And a $1.9 billion debt-cancellation pact with Venezuela’s state-backed oil company in 2015 allowed the DR to wipe out borrowings worth about 3 percent of its overall GDP at a 50 percent discount.

The economic upturn in the United States has also helped, since roughly half of the Dominican Republic’s exports are earmarked for the U.S. market.

Poverty rates are down and the fiscal deficit is in check, while education spending has doubled in the last five years.

But the Dominican Republic does still face some serious challenges.

The financial disparity between the country’s rich and poor is extreme, and there are still shortages of electricity and severe regulatory inefficiencies.

Notwithstanding, the DR is a prototype model for other Caribbean nations, and some of its neighbors would be wise to follow its lead.

Thérèse Margolis can be reached at therese.margolis@gmail.com.