dominican republic 2015

Transcription

DIPLOMACY | ECONOMY | FINANCE | ENERGY & MINING | INDUSTRY | TELECOMS & IT | MARITIME |
TRANSPORT | REAL ESTATE & CONSTRUCTION | AGRICULTURE | HEALTH & EDUCATION | TOURISM
DOMINICAN
REPUBLIC 2015
In This Issue
DIPLOMACY
INSIDE PERSPECTIVE
ONE FOR ALL
H.E. Danilo Medina
Sánchez, President of the
Dominican Republic, on
the country’s education
revolution
12
ECONOMY
INTERVIEW
A WORLD OF SUPPORT
McDonald Benjamin,
Country Manager of The
World Bank, on sharing
the spoils of increased
productivity
26
FINANCE
FOCUS: EQUITY MARKET
DR’s VERY FIRST IPO
Preparing for a new
phase of growth and
development
50
MARITIME
REVIEW
ALL ABOARD!
Investments in ports
and FTZs boost the
Dominican Republic’s
status as a regional hub
83
£75 | ¤95 | $130 | CDN $140 | AUD $137 | SGD $162
LA AUTORIDAD EN
PERIODISMO DE NEGOCIOS EN
REPÚBLICA DOMINICANA
REVISTA
Contents DOMINICAN REPUBLIC 2015
21 ECONOMY
21 More that glitters • REVIEW
39 Dear prudence • REVIEW:
BANKING
24 The Hon. Juan Temístocles
Montás Domínguez, Minister
of Economy, Planning and
Development • INTERVIEW
42 Héctor Valdez Albizu, Governor
of the Central Bank of the Dominican
Republic (Banco Central) • INTERVIEW
26 McDonald Benjamin, Country
Manager of the World Bank
• INTERVIEW
28 Jean Alain Rodríguez, Executive
Director of the Center for Export
and Investment of the Dominican
Republic (CEI-RD) • INTERVIEW
29 Sadala Khoury, President of
ADOEXPO • INTERVIEW
30 Ready to go • FOCUS: EXPORTS
32 Pedro José Pérez González,
President of the Santo Domingo
Chamber of Commerce and
Production • INTERVIEW
6 On the right path • YEAR IN
REVIEW
9 DIPLOMACY
9 Island of peace • REVIEW
11 The Medina era • TIMELINE
12 HE Danilo Medina Sánchez,
President of the Dominican Republic
• INSIDE PERSPECTIVE
15 HE Joe Biden, Vice President
of the United States • GUEST
SPEAKER
17 The long haul • FOCUS: THE
DOMINICAN DIASPORA
18 HE Alejandro García Padilla,
Governor of Puerto Rico • GUEST
SPEAKER
19 HE Herman Van Rompuy, the
former President of the European
Council • GUEST SPEAKER
20 States united • FOCUS: US-DR
RELATIONS
39 FINANCE
33 Angelina Biviana Riveiro Disla,
President of the National Association
of Young Entrepreneurs (ANJE)
• INTERVIEW
34 Small but mighty • FOCUS:
DOMINICAN MSMEs
34 Issaachart Burgos García,
President of the National
Confederation of Small and Medium
Enterprises (CODOPYME)
• COLUMN
35 Salvador J. Demallistre B.,
Executive Director of ASIEX
• INTERVIEW
44 Manuel A. Grullón, President of
Banco Popular • INTERVIEW
45 Local solutions • B2B: LOCAL
BANKS
46 Listing to float • REVIEW:
CAPITAL MARKETS
48 Felipe Amador, CEO of the
Dominican Republic Stock Exchange
(BVRD) • INTERVIEW
49 Sound investments • B2B:
INVESTING IN CAPITAL MARKETS
50 DR’s very first IPO • FOCUS:
EQUITY MARKET
51 The premium sector • REVIEW:
INSURANCE
52 Carlos Ramón Romero B.,
Executive President, Seguros SURA
• COLUMN
53 Zanoni Selig, CEO & Chairman of
WorldWide Group • INTERVIEW
54 Rafael Nolasco, President of
PATRIA Compañía de Seguros
• INTERVIEW
55 A safe haven • VOX POPULI:
INSURANCE
56 ITB Berlin 2015
• COMMUNIQUÉ
36 Reasons to be cheerful • FORUM:
WHY THE DOMINICAN REPUBLIC?
38 Patricia de Moya, Editor-in-Chief
of Mercado Media Network
• INTERVIEW
In partnership with:
The Center for Export & Investment
of the Dominican Republic
4
THEBUSINESSYEAR
DOMINICAN REPUBLIC 2015
57 ENERGY
& MINING
57 Watts up? • REVIEW: ENERGY
59 The Hon. Pelegrín Castillo
Semán, Minister of Energy and
Mining • INTERVIEW
60 The Hon. Dr. Bautista Rojas
Gómez, Minister of Environment and
Natural Resources of the Dominican
Republic • INTERVIEW
61 Waiting for the sun • B2B: SOLAR
ENERGY
62 Rain or shine • FOCUS:
RENEWABLES
71 INDUSTRY
71 Spring board • REVIEW
72 Luis Fernando Enciso, General
Manager, BON • COLUMN
73 Alberto Nogueira, Manager/CEO
of BEICA • INTERVIEW
74 Free for all • FOCUS: FTZ
75 The finer things in life
• B2B: CIGARS
76 Mícalo Bermúdez, President of
Tamboril Free Zone Park
• INTERVIEW
77 TELECOMS
64 Marcelo Aicardi, General
Manager of EGE Haina
• INTERVIEW
& IT
65 What lies below • REVIEW:
MINING
78 Erik Pérez Vega, President,
Cluster of Contact Centers and
Business Process Outsourcing from
the Dominican Republic • COLUMN
67 Alexander Medina Herasme,
General Director at the Mining
Management Office of the Dominican
Republic • INTERVIEW
68 The gold rush • FOCUS: GOLD
70 Julio Espaillat, President & CEO
of GoldQuest Mining Corporation
(GQC) • INTERVIEW
77 It can be achieved • REVIEW
80 Rudy A. Ganna, President & CEO
of LAURUS INTERNATIONAL
• INTERVIEW
81 Stuart J. Cranston, CEO of United
Nearshore Operations (UNO)
• INTERVIEW
82 Wireless • FOCUS: MOBILE
TELEPHONY
83 MARITIME
91 TRANSPORT
83 All aboard! • REVIEW
91 Delivering the nation • REVIEW
85 Karsten H. Windeler, President of
the Board of Directors of MARITIMA
DOMINICANA • INTERVIEW
95 Franklin Avendaño, Regional
Manager for the Dominican Republic
and Puerto Rico for Avianca
• INTERVIEW
86 Luis M. Bogaert, President of
Caribe Trans • INTERVIEW
87 Ewald Th. Heinsen, President
of E.T. Heinsen & the Shipping
Association of the Dominican
Republic (ANRD) • INTERVIEW
88 Hub-ready • FOCUS:
DOMINICAN PORTS
89 Morten Johansen, Executive
Director of DP World Caucedo
• INTERVIEW
90 Erik Alma, President, Chairman
& CEO of Haina International
Terminals • INTERVIEW
96 Move it, move it • FOCUS:
THIRD-PARTY LOGISTICS
SERVICES
96 Olman Castillo, Country Manager,
DHL Dominicana • COLUMN
98 Angel Terrero, Caribbean
Regional Manager for YOBEL Supply
Chain Managment (SCM) • REVIEW
99 Alexander N. Schad, Executive
President of Schad • INTERVIEW
100 Unplug and go • FOCUS:
HYBRIDS
102 Take your foot off the gas
• B2B: HYBRIDS
THEBUSINESSYEAR
5
Managing Editor
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Country Editor
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Transcribers
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Pronto Publishing Services
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Cover Illustration
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PR Manager
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HR Executive
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The Business Year is published by The Business Year International, Trident Chambers,
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103 REAL ESTATE
119 HEALTH
103 Property, Inc. • REVIEW
119 Doctor's here • REVIEW:
HEALTH
& CONSTRUCTION
104 Elíseo Cristopher, President,
COPYMECON • COLUMN
106 Jorge Aguayo Saladin, General
Director, INDUSTRIAS AGUAYO
• COLUMN
107 Raúl Nazario Rizek, President of
CONSTRUCTORA RIZEK
• INTERVIEW
108 Álvaro Peña, President of
Codelpa • INTERVIEW
109 Due north • B2B:
CONSTRUCTION IN THE NORTH
& EDUCATION
121 Wendy Sánchez Imbert,
Director of Health Tourism
Department, Ministry of Tourism
• INTERVIEW
122 Dr. Alejandro Cambiaso Rathe,
President and Founder of the
Dominican Association of Health
Tourism • INTERVIEW
131 TOURISM
123 Treatment abroad under any
condition • FOCUS: MEDICAL
TOURISM
132 Valerie Sergienko; General
Director, Val’s Weddings • COLUMN
110 Concrete steps • FOCUS:
CEMENT
124 Dr. Luis B. Rojas Grullón,
President of Clínica Abreu
• INTERVIEW
110 Julissa A. Báez, Executive
Director, ADOCEM • COLUMN
125 A cure for your ills • B2B:
PHARMA
111 AGRICULTURE
126 Learning for the future
• REVIEW: EDUCATION
111 A bit more agro • REVIEW
114 Anyelo Rodríguez, General
Director of AGRODOSA
• INTERVIEW
115 Gabriel León Roig Alfaro, VicePresident—Export of Roig AgroCacao S.A. • INTERVIEW
116 Wake up and smell, the
Dominican coffee • FOCUS: COFFEE
118 José Fermín Núñez, Executive
Director of the Dominican Coffee
Council (CODOCAFE) • INTERVIEW
127 Ignacio Santoni, Executive
Director, ADEN International
Business School • COLUMN
129 Fostering the future • VOX
POPULI: UNIVERSITIES
130 Marilu Bobadilla de Villanueva,
General Director of St. Patrick
School • INTERVIEW
131 Having it all • REVIEW
134 Getting away from it all • VOX
POPULI: BOUTIQUE HOTELS
135 Efrén Garcia-Estrada, Director
of the Punta Espada Golf Club
• INTERVIEW
136 Golf in paradise • FOCUS: GOLF
137 Lush, lush • PHOTO ESSAY:
SAMANÁ PENINSULA
139 When in the Dominican
Republic...
6
THEBUSINESSYEAR
YEAR IN REVIEW
ON THE
RIGHT PATH
There is no doubt that a decade of
political stability has provided the
fertile economic environment for
sustainable growth and national
development.
I P Puerto Plata
I
Santiago De
Los Caballeros
I Cibao
HAITI
DOMINICAN REPUBLIC
Santo
Domingo
I P
Haina
Occidental P
P Cabo Rojo
P
Port
I
International Airport
Punta Cana I
San Pedro de
Macoris
Multimodal
Caucedo
P
I La Romana
P
THEBUSINESSYEAR
HAVING CELEBRATED four decades of
political life in 2013, in mid-2014, the ruling
Dominican Liberation Party (Partido de la Liberación Dominicana, PLD) also cut the cake on
a full decade in power, initially led by Leonel
Fernández, and subsequently by incumbent
head of state Danilo Medina. His administration has governed during a period where the
country has come into sharp relief, regionally
and in the wider world, both as an address for
investment and increasingly, a venue for tourists. The political stability afforded the country
by the Medina administration, which garnered
70.2% of the vote back in 2012, has undoubtedly underpinned investor confidence.
2014 is generally characterized by growth.
The economy shot up 7.2% for 1H2014 using
the 2007 statistical base, although the Ministry of Economy, Planning, and Development
calculation points to more modest 5.2% GDP
growth. Double-digit growth contributors over
1H2014 were minerals (20.1%), financial intermediaries (14%), hospitality (12.6%), and construction (10.3%). These sectors all sign point
vibrant activity in the second largest economy
in the Caribbean after Jamaica. Another encouraging metric was consumer price inflation
(CPI), which had beaten a retreat to 2.9% in YoY
terms in October 2014, having touched close to
8% at end-2011. Prudent monetary policy of
the Central Bank—CBDR—aimed at stabilizing
the currency against the dollar has faced the inescapable burden of fuel import costs and dependence on reasonable oil prices. The CBDR
calculates that should the oil price remain at
an average of $74 per barrel for 2015, the Dominican Republic’s fuel import bill would decline by $1.2 billion, all but resulting in a current account surplus. CBDR data confirms that
the banking system, too, has had a good year,
where as of August 2014, the Ps1,142,723 million total assets of financial intermediation institutions marked nominal YoY growth of 8.6%.
Meanwhile, lateral thinking among sector players—notably the use of mobile technology—is
gradually increasing the banked population,
and thereby the registered economy, too. Elsewhere in the Dominican capital markets, 2014
saw two historic moments. In April the nation
sold a record volume of $1.25 billion in its first
offering since 1994 of 30-year dollar debt. The
stock market (BVRD) has thus far been the exclusive domain of bonds. This is no longer the
case, as the year’s second landmark was the
approval of the country’s pioneering Initial
Public Offering (IPO). The shares of Santo Domingo-based securities broker CCI Puesto de
Bolsa become open for trading on the BVRD
in 1Q2015. A thriving economy sparks greater
need for insurance coverage.
Fundamental to all government policy is
ICT, starting with education, and encompassing the e-Dominicana program of placing the
state and public online. Telecoms watchdog
INDOTEL in 2014 took the first important step
since 2011 toward improving local communications. In May it sold spectrum in the 17002100MHz and 941-960MHz bands to Orange
Dominicana and Claro Dominican Republic,
the spoils of which will in part fund the national shift to digital TV. The state has already
begun distributing one million decoders to
facilitate the transition. Over 60 call centers
resident in the Dominican Republic make the
business the leading growth industry after
tourism, rendering the republic the principle
call center and business process outsourcing
(BPO) hub of the Caribbean.
The Free Trade Zones (FTZs) continue to
house hundreds of multinational companies
involved in the production of pharmaceuticals, medical devices, textiles and apparel,
cigars, and electronics, among many other
smaller enterprises. Data for 1H2014 puts
overall exports up 2.48% YoY to $5.01 billion,
with the free zone percentage declining to
50.39% on weaker textile performance. Meanwhile, the nation’s 55 free industrial zones
(FIZs) employ 140,000 people—virtually half
of the total manufacturing workforce. In the
year to June 2014, FIZs were exporting around
$4.12 billion worth of goods, or 54% of Dominican exports. Overall the zones stump up 2.9%
of GDP, account for 8.1% of FDI, and have
successfully and sustainably generated trade
from industry. Meanwhile, the growth of Dominican shipping shows no signs of slowing,
and completion of the Panama Canal expansion will only highlight the Republic’s crucial
regional role. It is expected to undertake a
greater volume of smaller vessel-based local
shipping.
2015, then, will likely be no less demanding
of Danilo Medina’s PLD administration than
last, with energy imports and the budget deficit to grapple with. This said, diplomacy with
regional partners and the positive contribution of the Republic’s FTAs will be tangible.
Meanwhile, the onward march of the Dominican tourism industry will keep revenues arriving, while near shore BDO and ICT-related
businesses will leverage the nation’s status as
an ICT hub.
It appears that on the very last day of 2014
the Dominican Republic experienced a 3.6
magnitude earthquake. Fortunately, this was
a small tremor, and one can but hope that the
only seismic occurrences of 2015 will be of positive aspect, and felt widely across the terrain of
industry and commerce. ✖
For the Dominican
Republic,
2014 is generally
characterized by
growth.
7
8
THEBUSINESSYEAR
DOMINICAN REPUBLIC
LENGTH OF
POLITICAL
LAND BORDERS
388
STRUCTURE
AREA
Representative
Democracy
48,320
km
km2
LEGISLATIVE
POWER
HEAD OF STATE
President
Danilo Medina
Sánchez
National Congress
The Senate and
the House of
Representatives
TOTAL
10.53
POPULATION
LIFE EXPECTANCY
73
GDP GROWTH
Billion USD
Source: The World Bank
UNEMPLOYMENT RATE
15 %
CURRENCY
Dominican Peso
(DOP)
INFLATION RATE
4.8%
GDP NOMINAL
61.16
70
60
50
Billion USD
40
30
CURRENT ACCOUNT
DEFICIT
803.6
20
10
0
2006
2007
2008
2009
2010
2011
2012
2013
2014
Million
Million USD
THEBUSINESSYEAR
12
15
19
HE Danilo Medina Sánchez,
President of the Dominican
Republic, on health, education,
and advancing the country.
HE Joe Biden, Vice President
of the United States, on
Washington’s well-established
relations with Santo Domingo.
HE Herman Van Rompuy, the
former President of the EC, upon
signing the National Indicative
Programme 2014-20.
9
Diplomacy
REVIEW
The Dominican Republic is enjoying a period of unprecedented political
stability, with investors and local business leaders alike benefiting from
the favorable environment.
I
n mid-2014, the
Dominican Liberation Party (Partido
de la Liberación
Dominicana, PLD) celebrated
a decade in power, first under
Leonel Fernández, and then
under incumbent head of state
Danilo Medina. The PLD commemorated its 40th anniversary in 2013, and has emerged as
the dominant political party in
the Caribbean nation. The party has controlled the presidency for 16 of the past 20 years,
deftly parrying attacks from the
country’s other major political
force, the Dominican Revolutionary Party (Partido Revolucionario Dominicano, PRD).
In contrast to the Dominican
Republic’s turbulent first hundred years of statehood, this
administration is overseeing
an era characterized by stable internal political developments and neutral diplomatic interactions with regional
powers and, increasingly, Asia.
BEGINNING OF
BIRTH PAINS
The Samaná Bay in the north
was the last port of call during
ISLAND OF PEACE
Dominican diplomatic initiatives are
moving from strength to strength. The
key policy of encouraging FDI through
Free Trade Agreements (FTAs) and
Free Trade Zones (FTZs) has generated
promising results.
Christopher Columbus’ first
voyage to the New World.
Previously inhabited by the
Taíno people, the Spanish
soon established the island of
Hispaniola, which consists of
modern-day Dominican Republic and its neighbor to the
west, Haiti, as its colonial base
in the region. However, as vast
swathes of commodity-rich
South and Central America
came under control of the
Spanish crown, Hispaniola
and other countries in the Antilles became increasingly disregarded by colonial authorities. In the late 18th century,
the French Revolution and the
subsequent redefinition of European territories around the
world led to Spain ceding control of its part of the island to
France and its Haitian colony.
The area that now constitutes the Dominican Republic
swapped hands for a further
half century, variously controlled by France, Spain, and
the independent Republic
of Haiti. Exploitation on the
part of the latter ultimately
brought competing Dominican factions together in a
sense of national unity. Under
10
THEBUSINESSYEAR
the guidance of Juan Pablo Duarte, Francisco
del Rosario Sanchez, and Ramon Matias Mella, independence was declared in 1844, with a
constitution inspired by that of the US.
Arguably, the beginning of Dominican democracy began over 100 years later, with the
assassination of Rafael Trujillo in 1961 and the
resultant end of his dictatorship. The PRD, a
dissident political party working from exile in
nearby Cuba, assumed control of the country through the democratic election of noted
polymath Juan Bosch. However, Bosch was
soon ousted by a military junta, and he separated from the PRD to found the PLD in 1963.
His leftist policies helped to redefine public
service in the country after the Trujillo era,
ushering in the Dominican political culture
that remains today.
STRONG CONSTITUTION
The first national constitution outlined a governmental structure divided among executive,
legislative, and judicial branches. Numerous
amendments and the promulgation of new
constitutions over the subsequent century and
a half have demonstrated the multitude of competing interests present in the country. Most
recently, a new constitution in 2010 delineated
the role of the various arms of government, and
re-established the rights and civil liberties of
Dominican citizens.
The executive branch of government, the
presidency, performs the roles of head of state,
head of government, and commander-in-chief
of the military. The current administration of
President Medina and running mate Margarita Cedeño de Fernández, previously first lady
under the Leonel Fernández government, has
identified key strategic goals for which it will
utilize its executive powers. The stated focus of
all presidential policies in the 2012-2016 period
is the eradication of poverty and the bolstering
of the middle class, along with concerted efforts to improve education, health services, the
pension and social support system, and an effective program to combat discrimination and
advance social cohesion.
The legislative branch comprises two houses:
the Senate, or upper house, with 32 deputies,
and the Chamber of Deputies with a total of 183
members, all representing part of the country's
32 provinces and federal district. The houses of
the legislature are ostensibly equal in importance, though their duties and areas of responsibility are different. The former makes decisions related to treaties and the appointment
of the president, while the Chamber of Deputies votes on a range of other bills and holds
the power to impeach the head of state. The
32 deputies in the Senate serve staggered fouryear terms, while congressional elections have
traditionally occurred mid-way through the
presidential term. As per the 2010 constitution,
from 2016, elections to the presidency and the
legislature will take place simultaneously. Following the 2010 congressional elections, 31 of
the 32 senators are from the PLD, with a single
Social Christian Reformist Party seat rounding
off the total. Meanwhile, 105 PLD members, 75
PRD or PRD-allied members, and three Social
Christian Reformist Party deputies were elected
to the Chamber of Deputies for a final six-year
term, prior to the 2016 transition to concurrent
presidential and congressional elections.
The highest element of the judiciary is the
Supreme Court of Justice, composed of 16
magistrates. This court selects judges for the
lower courts. The Constitutional Court rules on
matters relating to the constitution and oversees amendments to articles and the passing
of new legislation. Judges from both courts are
selected by the president, the heads of both
chambers of congress, a non-governing representative from congress, and the president of
the Supreme Court. Other subordinate courts
include the Contentious Administrative Court,
appeal courts, courts of first instance, and
courts dedicated to land or labor issues.
INTRIGUING TIMES
Recent years have proven that the political system has developed to become one of the most
robust and dynamic in the region. In 2012, President Medina was elected with 51.24% of the
popular vote, with a turnout of over 70%. Continued widespread support for his administration bespeaks the success of the government's
official strategy for economic development, but
also indicates the difficulties currently being
experienced by the rival PRD.
The PRD last held power from 2000 to 2004
under Hipólito Mejía, though the term was
marred by economic failure. The PRD continued to suffer from the effects of a widening internal rift over the subsequent decade, culminating in the September 2014 split of the party
along factional lines. Mejía now leads the Modern Revolutionary Party (PRM), and has announced his candidature in the 2016 elections,
with Miguel Vargas Maldonado remaining as
chairman of the PRD. By year-end 2014, over 30
PRD deputies had officially changed allegiance
to join the PRM.
Dominican diplomatic initiatives are moving
from strength to strength. The key policy of encouraging FDI through the expansion of Free
Trade Agreements (FTAs) and the development
of Free Trade Zones (FTZs) has generated largely promising results. As a signatory on several
prominent international trade pacts, the Dominican Republic has embraced the interest of
larger markets in the productive capacity of the
Caribbean and its enviable location between
North and South America, and en route to the
Panama Canal from Europe or other markets
around the world. ✖
Continued widespread
support for his
administration
bespeaks the success
of the government's
official strategy
for economic
development, but
also indicates the
difficulties currently
being experienced by
the rival PRD.
Diplomacy
THEBUSINESSYEAR
11
THE MEDINA ERA
A voyage through the turbulent, yet bountiful, seas of Dominican history.
1492
1808
1821
1842
1844
Christopher Columbus
alights on the island
Britain and Spain defeat
France in the Revolutionary
Wars, returning the country
to Spanish rule
Dominican Republic gains
independence from Spain
The Spanish arrive
Dominicans victorious in
the Dominican War
of Independence
November 6, 1844
1930-61
1961
1965
1983
Dominican Republic’s first
constitution is adopted
The “Trujillo Era”: Rafael
Trujillo’s dictatorship brings
stability and economic
growth but a lack of civil
liberties
Trujillo is assassinated
Civil war
Haina Port reopens as
the largest in the country,
marking a new era of
maritime trade
1986-96
1996
1998
2000
2004
Joaquín Balaguer is
president for three terms,
yet his rule is authoritarian
Leonel Fernández of the
Dominican Liberation Party
(PLD) party becomes first
elected president
One of the worst natural
disasters recorded,
Hurricane Georges kills
more than 380 and causes
$1.2 billion of damage
Hipólito Mejía wins the
election
Leonel Fernández is
re-elected
August 5, 2004
2008
2012
2013
2014
CAFTA-DR free trade
agreement signed with
the US
GDP grows by more than
10%
Danilo Medina, also of the
PLD, becomes President,
winning 51% of the vote
and setting the country on
a course of prosperity
Population passes the 10
million mark
GDP reaches $60 billion,
re-affirming DR’s place
as the second largest
economy in the Caribbean
and Central America
12
THEBUSINESSYEAR
INSIDE PERSPECTIVE
one for ALL
HE Danilo Medina
Sánchez, President
of the Dominican
Republic, on the
country’s education
revolution, health
strategies, and how
the government is
ensuring no one is left
behind.
BIO
A graduate of Economics
from the Santo Domingo
Institute of Technology
(INTEC), Danilo Medina
Sánchez revealed an
early interest in politics,
establishing the San Juan
de la Maguana branch of
the Frente Revolucionario
Estudiantil Nacionalista at
the Autonomous University
of Santo Domingo (UASD).
He has been a member of
the Dominican Liberation
Party (PLD) since its
inauguration in 1973.
Having sat on the Central
Committee since 1983
he entered Congress as
a deputy in 1986. Danilo
Medina has held the
presidency of the Dominican
Republic since the August
16, 2012 presidential
elections.
The Dominican Republic is achieving new
and transcendental conquests. We have
taken great strides that help our citizens to
achieve new levels of independence. We are
making efforts to ensure that their rights are
recognized, so that the same access to opportunities and progress may be achieved for all
of our citizens. We are progressing continuously so that all Dominicans can enjoy true
freedom; the sort of freedom that only comes
about when a nation lives without fear, without poverty, and without ignorance. With the
fulfillment of the commitments and goals
that Dominicans demand and deserve, we
have strengthened the most important link
that can unite a government with the people:
trust. In this way, we have seen growth and
development, as we had promised, and the
greatest transformation of the Dominican
Republic in its recent history.
Our greatest task has been to open doors
and eliminate the barriers to building a
country for all—a nation where no one is left
behind. And we have accomplished this because of that inner unstoppable force that is
only possible when the government and the
people advance hand in hand in the same direction. We are, together, creating a greater
Dominican Republic, because our nation will
be stronger with our people more united, and
more involved in building the country’s future. The projects and works that this government has launched have been many, and we
will initiate many more for the duration of the
present term. Along this road, we have kept
a cool head to take the best decisions, even
amidst strong pressures. But we have also
placed our heart into forcefully defending
our national sovereignty and the interests of
the Dominican people when it has been necessary. The government is fully dedicated to
setting the base for a new phase in our country’s history, and in building a Dominican
Republic for all. This is the most important
message that I want to communicate today.
We are committed to a development model
where people, families, and communities are
at the center of all policies. We have committed ourselves to placing the economy at the
service of the people and never the other way
around, and to create an economic fabric that
is less vulnerable and more capable of producing goods and services. As I said earlier,
overcoming social exclusion and progressing
toward equality is the social revolution that
is needed and possible in today’s Dominican
Republic. It is the battle for true independence that we need to wage in the 21st century. The time has come for universal access
to progress and guaranteed rights for the vast
majority of those who have been excluded,
but who live in harmony with responsibility
and respect for the law.
LEARNING CURVE
In the Dominican Republic we are experiencing an authentic educational revolution. For
a long time quality education has been a privilege that only those with purchasing power
could afford. And so, the hopes of millions of
poor families for the future of their children
were relegated to oblivion. But we all know
that quality public education is the most
powerful tool we have in our hands to ensure
that all children, regardless of their social origin, have access to the same opportunities.
Diplomacy
We needed to break down these barriers, and
after we first met the promise to allocate 4%
of GDP to education, we called on society as
a whole to participate in a broad Education
Pact, to make everyone a stakeholder in ensuring that the budget allocation, penny by
penny, funds the kind of quality education
we want. This process, with the participation of thousands of contributions from organizations, professionals, students, and
citizens, has shown us that Dominicans are
determined to raise the flag of education to
the highest point in the Republic. In parallel,
we decided to undertake what has been the
greatest expansion of school infrastructure
in the country’s history. To achieve this, we
have made progress in the construction of
more than 10,000 classrooms, dining rooms
and their corresponding kitchens. In addition, to ensure that all students are well fed
with nutritious food, we have doubled the
budget for the procurement of these foods
from local producers.
In 2014, the Ministry of Science and Higher Education and Technology has awarded
more than 20,000 scholarships for higher
learning. Among these, more than 18,000 dis-
Danilo Medina is sworn in
as President in 2012 in the
Hall of Ambassadors at the
National Palace
advantaged youths received scholarships to
study at local universities. But we could not
talk about the education revolution without
mentioning our teachers. I assure you that we
will always be at the side of teachers, who are
the soul of this educational revolution. We
are committed to promoting authentic recognition of the dignity of their work, and we
have already taken significant steps in this direction. The first of these steps was to provide
for the greatest wage increase that has been
assigned to this group in the past 15 years,
and that, on average, involves a raise of 40%.
This means the days of poverty wages in our
schools are over. We have provided a historic
raise in the pensions of retired teachers, in appreciation of their years of dedication to education. As far as teacher training concerns,
we have been aware that a considerable effort was needed for this to meet international
quality standards. All Dominicans are uniting
around this education revolution. This is especially evident when considering the success the literacy plan “Quisqueya Learns With
You” has already had. We are getting closer to
overcoming illiteracy in our country for ever.
What a year ago seemed like a dream is now
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13
Our greatest task has
been to open doors
and eliminate the
barriers to building
a country for all—a
nation where no one
is left behind... All
Dominicans are uniting
around this education
revolution. This is
especially evident
when considering the
success the literacy
plan “Quisqueya
Learns With You”
has already had. We
are getting closer to
overcoming illiteracy
in our country for ever.
14
THEBUSINESSYEAR
INTERVIEW
The creation of the Single Network Health Services and the
decentralization it will bring will mean that in the near future
it will not be the patient who approaches the healthcare
system, but the healthcare system that reaches out to our
people. Human capital is a central element in this process, as
we know that the essence of a successful health system lies
in the people.
a reality with thousands of men and women
now able to read and write, a scheme we continue to pursue.
HEALTHY PROSPECTS
Another area that is also essential in breaking the barriers of inequality and exclusion
is public health. For too long we have accepted that families with fewer resources remain
at the mercy of their fate or charity when an
illness or accident brings tragedy home. To
ensure free and universal access to health
services, as an inalienable right for all Dominicans, we are committed to developing
a single network of Public Health Services,
to extending social security services to all,
and to improving facilities and services under the subsidized health regime. Our target
is to provide 100% medical care coverage of
the population under the subsidized scheme.
Another great barrier we have taken down
that impeded access to health for poor people is the recovery quota at public hospitals.
A government fund of 352 million pesos has
ensured that worrying about payment for services rendered will no longer be an issue when
seeking care at a public hospital. We have also
worked to reach out to groups of patients that
traditionally had difficulty in accessing the
care they needed. To this end, we have allocated 2 billion pesos for a Catastrophic Illness Fund, as pledged. This has meant that
8,900 patients have not had to face the high
cost of their specific drugs alone. The same
has been the case with HIV-AIDS patients,
who are now guaranteed free treatment, for
which an investment of over RD$79 million
in anti-retrovirals has been made. Vaccination coverage exceeds 95%, and our country
can be regarded as free of illnesses such as
diphtheria, neonatal tetanus, wild poliovirus,
measles, rubella syndrome, and congenital
rubella. In terms of new health infrastructure,
we are taking great strides to bring it closer
to the people, with 34 new primary care units
scattered nationwide.
While all of these indicators are important,
perhaps the most profound change we are
making in the area of health is the least visible, namely the transformation of the care
model. The creation of the Single Network
Health Services and the decentralization it
will bring will mean that in the near future it
will not be the patient who approaches the
healthcare system, but the healthcare system
that reaches out to our people. Human capital is a central element in this process, as we
know that the essence of a successful health
system lies in the people.
As part of this initiative to bring health to
our people, to date, an investment of more
than Pe57 million has been made to hire
1,500 health promoters, who are leading prevention and education campaigns to bring
information on healthy habits to all corners
of our country. We have made significant
progress in one of our main objectives for the
government and the country. Improvements
in obstetrics emergency services have seen a
reduction in child mortality of 18%, and maternal mortality of 4%. In addition, we have
other positive indicators for mothers and
children, including the steady decline in child
malnutrition that has enabled us to meet the
Millennium Development Goal for this area,
and the inclusion of rotavirus and pneumococcus vaccines in the national vaccination
plan—both of vital importance to the protection of children.
YOUTHFUL OUTLOOK
We are proud that our country has been chosen by the Ibero-American Youth Organization as the Ibero-American Youth Capital,
in recognition of the projects underway by
the country's youth, as in the case of Young
Community, a struggle against illiteracy, and
pursuant of job placement, widespread participation, and public policy processes. In
2014, the Ministry of Youth has made significant progress in the formation of the National
Youth System, which already brings together
25,000 young people in 70 municipalities nationwide.
The government has proposed that no-one
be left behind. This is the government by all,
with all, and for all. The best part of this project has yet to come. We will continue to build
together, and will continue meeting goals,
transforming the Dominican Republic, and
showing the world that we can do what has
never been done before. ✖
Diplomacy
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GUEST SPEAKER
PLOWING
common ground
HE Joe Biden, Vice President of the United
States, on Washington’s well-established
relations with Santo Domingo, and moving
forward in mutual understanding.
BIO
Joseph Robinette Biden,
Jr. graduated from the
University of Delaware and
Syracuse Law School and
served on the New Castle
County Council. Then, at
age 29, he became one of
the youngest people ever
elected to the United States
Senate. As Chairman or
Ranking Member of the
Senate Foreign Relations
Committee since 1997,
then-Senator Biden played
a pivotal role in shaping US
foreign policy. He has been
at the forefront of issues
and legislation related to
terrorism, weapons of mass
destruction, post-Cold
War Europe, the Middle
East, and Southwest Asia.
Vice President Biden’s
formidable foreign policy
experience assists the
President on a multitude
of international issues. He
helped secure the Senate’s
approval of the New START
nuclear arms reduction
treaty with Russia, together
with significant new funding
to maintain our nuclear
laboratories.
As pointed out to me by President Danilo Medina, I was the first Vice President to visit the
Dominican Republic since 1980. And I came
here for a simple reason, on behalf of the President of the United States, because like President Medina, we believe very, very deeply in
the importance of the relationship. I’ve said
throughout the hemisphere that it is no longer the United States, and this administration
is looking to the hemisphere, looking to the
Dominican Republic and setting out what can
we do for you.
We have an inordinate respect for your
democracy, respect for the President, and
respect for the people. And this is about
equals—equal sovereign nations dealing with
one another. We agree on almost everything.
Where we disagree, we have an opportunity
to tell each other where and when we disagree. We’re not there yet so far. But the truth
of the matter is this is the relationship that is
based on mutual respect. And they’re not just
words. That is what our policy is about; it’s
mutual respect.
We can see how close we are. We have a million and a half Dominicans, many of whom
are my friends and constituents, who live in
the United States of America. And there are
more than a million tourists that flock here.
And there is baseball, which is the sinew that
holds us together at the end of the day. We
have so much in common that it’s only natural that our interests and our values overlap
with one another.
The President and I discussed all that he
said, and I’m hopeful we’re going to be able to
discuss more. With regard to trade, we spoke
about trade between our countries. And since
the Central American and Dominican Republic Free Trade Agreement, it has grown
to $11.5 billion. And the President and I discussed what the next steps are in fully implementing CAFTA-DR, including efforts to provide predictable business environment under
the rule of law, as well as to put in place protections for intellectual property, labor and
the environment. They’re essential elements
of that agreement, and very, very important to
the United States, and I’m sure to the Dominican Republic.
These aren’t just the terms of the trade
agreement, they’re the ingredients for future
growth. They are the basis for future growth.
Where there is not labor protection, environmental protection and protection of intellectual property in this 21st century, there’s not
likely to be growth consistent with capability.
The other ingredient to growth is education. My wife is a professor and teaches fulltime while being Second Lady. And she has
an expression. She says, show me a country
that out-educates you, and I will show you a
country that out-competes you. And it’s obvious that President Medina understands that;
it is part of his DNA. I applaud him for his robust investment in education, including the
constitutional mandate for a minimum share
of the budget devoted to education. That is
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I was the first Vice President to visit
the Dominican Republic since 1980.
And I came here for a simple reason,
on behalf of the President of the
United States, because like President
Medina, we believe very, very deeply
in the importance of the relationship.
remarkable, and we wish the President every
success in that regard. The Ambassador and I
discussed ways in which we think we can. But
it’s up to President Medina to decide whether
we can be a value-added.
On security, the President and I also spoke
about our countries’ shared efforts to protect our citizens from crime. We’re working
together to reduce illicit drug trafficking, increasing public safety and security, and to
promote social justice, human rights, and
the rule of law because security depends on
much more than arrest and confiscation of
contraband.
I spent the bulk of my professional life on
the security side of this arrangement when I
was Chairman of the Judiciary Committee,
which has control over our criminal justice
system. And I know we share a common sense
of what need be done, and we’re prepared to
be of help.
And to give one small example, President
Medina mentioned that together we’ve now
put in place 911 emergency response for Santo Domingo. We see no reason why that cannot be—if you decide that's what you want—
extend this to the whole country. There is no
reason why it has to be limited to Santo Domingo. We’re prepared to work with you to
expand the 911 system. And we hope your
government shares our view that it should be
expanded to your entire country. But that’s for
you to decide, not for us to decide.
The President and I also spoke about energy. The central issue for the Caribbean economies that are the most dependent in the hemisphere on energy imports that affects the lives
of families and drains government budgets. It
holds back economies, and people feel it. People feel it.
We also talked about regional issues. At least
I will ask to talk more about it, about Venezuela and our mutual interest in bringing greater
political inclusion, stability, and protection of
basic human rights beyond the issue of energy
production and availability.
We discussed immigration at some length.
In my country, we’re working to bring about
change for 11 million undocumented women,
men and children, and to bring them out of
the shadows of American life and give them
the dignity that they deserve.
We also are aware that it is also in our economic interest to do that. Every independent
study shows when we do that, our economy
actually grows. Our deficit shrinks. Our security system—our Social Security system gains
additional leverage. And so as I told the President, I personally think that one of the secrets
to America’s ability to constantly renew itself
is a consistent flow of immigration and integration into our population.
This is difficult, but we consider it a matter
of economic self-interest, as well as a moral imperative. And the Dominican Republic
faces its own challenge of improving the conditions of Haitian migrants and descendants
who were born here in the Dominican Republic. I congratulated the President on the
swift and decisive way and the overwhelming
support he received in the legislature, in the
Dominican Congress for the passage of a new
naturalization law that is a serious piece of
business.
And now it’s about implementation. And
we’re confident that it will be implemented,
and I spent time telling the President how
pleased and quite frankly how surprised I
was that he was able to act so swiftly in dealing with your Supreme Court decision. And it
took a bold step that required bold leadership,
which the President exercised. Implementation will be equally as important.
We had a wide-ranging and full discussion
reflecting the close ties between our people,
and the wide range of issues that connect us.
Rest assured that we—the United States—value this relationship. We value it very highly,
and make no mistake about it, we view the
President and the country with great respect,
as a sovereign nation that is equal in every
discussion that takes place between us. I look
forward to continuing our conversation. ✖
Diplomacy
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THE DOMINICAN DIASPORA FOCUS
THE LONG HAUL
The Dominican diaspora have long served as the country’s
cultural ambassadors, while their remittances negate the
effects of high unemployment. In addition, they have
increased investment in physical and human capital through
greater spending on education, health, and nutrition.
AS OF 2014, the Ministry of External Relations (MIREX) had diplomatic missions representing the Dominican Republic in 45 countries. These encouraging numbers are evidence
that the country has moved past its isolationist
past to establish itself in the international arena as a democratic contender for influence and
trade. These missions are playing a crucial role
in establishing ties with countries like China
that seek to leverage the Dominican Republic’s
strategic positioning to access larger markets to
the north and west. Yet as the country works to
establish its diplomatic ties with other states,
its unofficial ambassadors—the Dominican Diaspora—have a storied history of establishing
economic and cultural ties with other states.
This significant group of émigrés—numbering close to 1 million in the US alone—has also
made notable contributions to the societies in
which they take up residence. Dominican authors such as Junot Díaz and athletes including
David Ortiz and Manny Ramirez are household
names amongst bibliophiles and baseball fanatics respectively (or alike). Prior to the two
major waves of Dominican migration to the US
between 1983 and 1992, and 1996 to 2005, the
UK was the major destination. From 1959 to
1962, the country recorded an unprecedented
wave of migration to the UK before the British
authorities imposed immigration restrictions
from the Caribbean in 1964. With the UK restricted, migration routes turned to North
America, specifically New York and, to a lesser
extent, Massachusetts and Florida.
The case of remittances sent to the Dominican Republic by expatriated Dominican nationals unpacks the economic relationship between
the expatriate community, its adopted country
of residence, and its Dominican homeland.
At the opening of the “First Dominican Policy
Forum” in January 2015, President Danilo Medina pointed out that remittances to the country from the US were nearly twice that of FDI
received over the last three years—only $7.5
billion. Remittances, meanwhile, totaled $13
billion, representing a critical source of revenue
for an economy that measured a GDP of $106.2
billion in 2013. Importantly, these remittances
are increasing from $4 billion in 2012, to $4.3
billion in 2013, and up to $4.6 billion in 2014.
According to Pew Research Center, the per capita remittances per adult migrant were $3,076
in 2012—far less that the $5,558 sent home per
year by Guatemalans living in the US during
the same year but well above other Caribbean
counterparts. While no single factor explains
why remittances vary across nationalities, evidence points to levels of integration, as well as
length of stay.
According to the US Census Bureau, 63% of
Dominican immigrants residing in the US arrived before 2000, with many having made the
journey decades earlier in the 1980s. In 2012,
99% of Dominican lawful permanent residents
(LPRs) residing in the US were immediate relatives of U.S. citizens or other family-sponsored
immigrants. This remarkable statistic leads to
two possible conclusions; the Dominican community is highly integrated into US society and
yet, still economically and socially integrated
with its country of origin (or their parent’s).
These remittances have helped improve the
Dominican Republic’s development prospects,
buffered external shocks, and maintained macroeconomic stability. Remittances have also
negated the effects of high unemployment. In
addition, they have increased investment in
physical and human capital through increased
spending on education, health, and nutrition.
In light of this, banks and government institutions are working to make sure that this vital
inflow of capital is invested successfully. ✖
18
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GUEST SPEAKER
open
CHANNELS
HE Alejandro García Padilla,
Governor of Puerto Rico,
on bilateral trade with the Dominican
Republic and the mutual benefits of
boosting cultural exchange.
BIO
It was a privilege to be able to
visit the Dominican Republic
once again. As soon as I arrived I felt at home, as indeed
I also want all Dominicans
to feel at home when visiting Puerto Rico. We have had
fruitful business meetings
with the ambassador and
President Medina. Bilateral
ties have been highly significant and I want to strengthen
that link between the Dominican Republic and Puerto
Rico. For example, President
Medina attended the inauguration of my term in January
2013, a year in which trade
between both countries was
valued at $700 million, a rather small amount taking into
account that in the 1980s, the
figure had stood at $2 billion.
We want to raise trade figures
to those levels again. Over the
past 20 months, we have already increased trade activity
to $500 million. Moreover,
we have taken positive steps
within the free trade business
for the Dominican people
in Puerto Rico. These measures have been focused on
respecting Dominicans and
other foreign communities in
our country. For example, we
pulled down social barriers
when it comes to the migratory status of people and are
the only country providing
people with a driving license
regardless of their migratory
status. I passed this new law
in August 2014 and more
than 100 Dominicans have
already obtained a license.
We have also held talks with
President Medina on the importance of increasing educational support and scholarships for higher education
students from both countries
and increasing exchange
programs, especially for
post-graduate students. Several of my colleagues in our
office completed their higher
education in the Dominican
Republic. We also need to
strengthen cultural exchange
and increase cooperation in
security matters. The latter
is one of our top priorities in
Puerto Rico, and I am proud
to say that we have reduced
the murder rate by 30%. This
has been possible thanks to
the Anticrime Strategic Plan,
which provided police forces
with more equipment and
resources. We are ready to
share this with the Dominican Republic in order to fight
crime and drug cartels. We
Alejandro García Padilla
was born in 1971 and
attended college and law
school in Puerto Rico
before clerking on the
Appellate Circuit, serving as
a legislative aide, directing
the Association of General
Contractors, and practicing
law at a well-reputed firm,
focusing on contracts
and real estate. He went
on to serve as Secretary
of the Department of
Consumer Affairs, where
he championed the rights
of ordinary Puerto Ricans.
His work kept gas prices
in check during critical
periods of the Iraq War,
with the Commonwealth
having the lowest prices of
any US jurisdiction, despite
international turmoil
and the higher costs of
bringing fuel to an island
market. In 2008, Alejandro
was elected to the
Commonwealth Legislature
with the most votes of any
senator from either party.
In 2011, after announcing
his intention to run for
Governor of Puerto Rico, he
was unanimously elected
President of the Popular
Democratic Party.
need to increase our efforts
to fight drug cartels; they are
the main source of crime in
both countries. Thanks to
the Anticrime Strategic Plan,
we have also increased drug
seizures at borders, airports,
and ports by 300%. We have
also opened dialog with the
Dominican Republic to increase tourism cooperation,
as we have an important flow
of citizens from Puerto Rico
visiting the Dominican Republic. I took the opportunity
on this visit to stay for some
days in this beautiful country. I want my children to feel
the kinship that exists between our two countries, too.
As we become more effective in protecting the La
Mona Canal, we will discourage people from using this
channel to illegally enter the
country. For us, the main issue is the safety of all people
who that risk their lives by
transiting the La Mona Canal.
We feel a brotherhood with
the Dominican Republic, and
this is not a migratory status
issue; we do not even like the
term “illegal immigrant.” We
consider our government to
have a human face, as our
focus is on dealing with our
social and economic problems for the benefit of our
people. It is difficult to get a
figure for the number of Dominicans to have benefited
from our new social policies.
For me, the most important
consideration is that all Dominican expatriates in Puerto Rico feel safe and comfortable, that a woman about to
give birth has the certainty of
being able to go to a hospital, and that when someone
needs emergency medical
attention, they can comfortably do so. We have many
more social policies to be implemented in the near future
to assist expatriates living in
Puerto Rico. ✖
Diplomacy
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19
GUEST SPEAKER
the hand of
FRIENDSHIP
HE Herman Van Rompuy, the former President
of the European Council, discusses his meeting
with President Danilo Medina, on the occasion
of the signing ceremony of the National
Indicative Programme 2014-20.
BIO
Elected as the first full-time
President of the European
Council in November 2009,
Herman Van Rompuy took
office when the Lisbon
Treaty came into force on 1
December 2009. In 2012,
he was re-elected for a
second term starting on 1
June 2012 and running until
30 November 2014. At the
time of his first election,
Herman Van Rompuy was
Prime Minister of Belgium.
Prior to that he had served
in Belgium as Speaker of the
House of Representatives
(2007-08) and in numerous
government positions,
including as Vice-Prime
Minister and Minister
of Budget (1993-99),
Minister of State (2004),
and Secretary of State
for Finance and Small
Businesses (1988). A former
economist at the National
Bank of Belgium, he began
his political career in 1973
as national vice-president
of his party’s youth council.
He has held various
responsibilities within his
party and in the Belgian
Parliament, serving in turn
as Senator (1988-95) and
Member of Parliament
(1995-2009).
The Dominican Republic is
well known throughout Europe. More than 1 million of
our citizens visit this beautiful
country every year, and many
have chosen to live there.
They go to the Dominican Republic for its stunning scenery, historical sites, and the
well known Dominican hospitality. I went to there to mark
the importance the European
Union attaches to its relations
with the country, and by extension, to its relations with
the Caribbean and Central
America.
The Dominican Republic
enjoys a double affiliation.
It is an active member of the
Central American Integration
System (SICA), and as such
contributes to its integration process. Equally, it is an
important actor within the
Caribbean, notably through
the Caribbean Forum (CARIFORUM). As an innovator of
regional integration processes, the EU is convinced of the
virtues of systematic regional
cooperation, based on the acknowledgement of common
interests, as a means to overcome rivalries, defeat challenges, and generate prosperity. There is no doubt that the
Dominican Republic plays a
crucial bridge-building role
between Central America, the
Caribbean, and Europe. The 25th anniversary of
Dominican accession to the
Cotonou agreement offers
an unparalleled occasion to
highlight these facts and give
renewed impetus to our relations. These are the questions
I reviewed with President
Medina during my visit, and
we noted that our bilateral
relationship was based on
a joint commitment to democracy and human rights.
We have agreed to continue
nourishing it through regular
political dialogue. We have
also agreed that the Economic Partnership Agreement,
signed between the EU and
CARIFORUM, should be utilized in order to promote the
trade and investments that
are so important for the future
of the country. The National Indicative Programme for
cooperation, which we have
just signed, adds further substance to these efforts, most
notably through its support
for education and vocational
training as a means of contributing to social integration.
In addition, we have seen
that important challenges require improved regional and
inter-regional
cooperation.
I am referring concretely to
the fight against organized
crime and the strengthening
of resilience in the face of natural disasters, including those
produced by climate change.
With this very purpose the EU
has just finalized a “Strategy
on Citizen Security in Central
America and the Caribbean.”
The tragedy experienced by
Haiti in 2010 put our regional
and international solidarity to
the test. Without doubt, the
Dominican Republic responded swiftly and was among the
first to offer support, demonstrating the goodwill and
sympathy of the Dominican
people. The European Union
and its member states were
also quick to follow, and billions of euros worth of international assistance have
been invested over the past
four years in humanitarian
support and reconstruction
efforts in Haiti. No country
can be more concerned about
the future of Haiti, nor can
benefit more from its stability, and a re-launch of its economic growth, than its closest
neighbor, the Dominican Republic. As an important partner of both countries, the EU
remains ready to assist in the
strengthening of Haitian-Dominican relations.
The EU was honored to
have been invited to participate in this bilateral dialogue
as an active observer. It brings
to the table its long experience in regional cooperation
and in cementing reconciliation and friendship among
neighboring countries. This
is the essence of the EU. We
wholeheartedly support this
dialogue; it has the potential to
bring greater regional stability
and shared prosperity for the
benefit of both countries and
their peoples. The EU is ready
to step up its action, as and
when our Dominican and Haitian friends take further steps
in their cooperation. We as the
union match our words with
deeds by providing substantial
financial support to bilateral
cooperation in areas such as
economic development, infrastructure links, public health,
and the environment.
and Haiti have already reached
bilateral agreements to improve security, combat drug
trafficking, protect natural resources, and stimulate trade.
The EU is ready to share its
experience on migration, customs, border management,
trade, health, and the environment to continue providing assistance for the implementation of the agreements
reached in the framework of
the high-level bilateral dialog,
as it merits our support. The
European Union will continue
to support both states in their
efforts to enhance cooperation and deepen their neighborly relationship. ✖
20
THEBUSINESSYEAR
FOCUS US-DR RELATIONS
STATES
UNITED
Over the past few decades, USDominican Republic trade and
investment links have seen an
increase, first as a result of US trade
preference programs, and then
CAFTA-DR.
The Dominican Republic enjoys a strong and
long-lasting relationship with the United
States, evidenced by extensive socioeconomic,
political, and cultural ties. Diplomatic relations
between the two nations were established on
March 26, 1884, when John M. Langston presented his credentials as American Charge
d’Affaires to the Dominican Government. The
strength of the US-DR relationship stems from
the countries’ geographic proximity, as well
as personal ties that many Dominicans have
with the US (the Dominican diaspora in the
US, clustered predominantly in New York and
Florida, amounts to 1.5 million people). On the
other hand, approximately 250,000 US citizens
live in the Dominican Republic, with 1.5 million visiting the country each year. And seeking ways to extend mutually-beneficial trade
and investment, the two nations work together
both bilaterally and through the CAFTA-DR
agreement.
CAFTA-DR
Along with Costa Rica, El Salvador, Guatemala,
Honduras, and Nicaragua, the US and the Dominican Republic are parties to the Dominican
Republic-Central America-United States Free
Trade Agreement (CAFTA-DR), the first free
trade agreement between the US and a group
of smaller developing economies.
The CAFTA-DR, signed on August 5, 2004,
eliminates tariffs, reduces barriers to services,
promotes transparency, and creates new economic opportunities. By facilitating trade and
investment among its members, CAFTA-DR
promotes and stimulates regional integration.
Under CAFTA-DR, 100% of US industrial
and consumer goods will enter the Dominican
Republic duty free by 2015, and nearly all US
agricultural exports will obtain duty free access
to the Dominican Republic by 2020. Since the
agreement went into effect in 2007, US exports
to the Dominican Republic have seen substantial growth of 34.5%.
TRADE
Over the past few decades, US-DR trade and
investment links have seen an increase, first
as a result of U.S. trade preference programs
and then CAFTA-DR. The US is, by far, the Dominican Republic's most important trading
partner, with two-way trade totaling more than
$11.5 billion in 2013, and accounting for over
65% of the Dominican Republic’s total trade.
The Dominican Republic is currently the US’s
44th largest goods trading partner. In 2013, US
goods exports to the Dominican Republic totaled $7.2 billion and goods imports amounted
to $4.3 billion.
The Dominican Republic was the US’s 38th
largest goods export market in 2013; US goods
exported to the Dominican Republic saw a
3.2% increase in comparison to 2012, amounting to $7.2 billion. The largest export categories were: mineral fuel ($1.4 billion), electrical
machinery ($588 million), machinery ($534
million), articles donated for relief and returns
($499 million), and plastic ($419 million). US
exports of agricultural products to the Dominican Republic in 2013 amounted to $1.1 billion.
Top categories included: soybean meals ($174
million), wheat ($153 million), tobacco ($97
million), and dairy products ($88 million).
In 2013, the Dominican Republic was the
US’s 52nd largest supplier. Dominican goods
exported to the US totaled $4.3 billion, denoting a 2.5% decline from 2012. The five leading
categories in 2013 included: optical and medical instruments ($722 million), tobacco ($496
million), electrical machinery ($482 million),
knitted apparel ($373 million), and jewelry
components ($358 million). Meanwhile, Dominican exports of agricultural products to the
US totaled $354 million, with top categories including raw beet and sugar ($56 million), cocoa
beans ($53 million), and fresh vegetables ($47
million).
A NEW FACILITY
The new facility, which opened its doors in
June 2014, was constructed at a cost of $193
million. The compound hosts the US embassy
and personnel of close to 700 representing 18
US Government agencies, previously scattered
in separate facilities. The incumbent US Ambassador to the Dominican Republic, James
(Wally) Brewster, who was officially sworn in
by Vice President Joe Biden on November 22,
2013, highlighted the facility’s role, which, in
his opinion, “symbolizes not only the strength
and meaning of our current relationship, but
also represents a tangible symbol of our commitment to continue our relations in the area
of education, environment, energy, trade, human rights, citizen security and consular affairs, among others.” ✖
The US is, by far, the
Dominican Republic's
most important
trading partner, with
two-way trade totaling
more than $11.5
billion in 2013, and
accounting for over
65% of the Dominican
Republic’s total
trade. The Dominican
Republic is currently
the US’s 44th largest
goods trading partner.
THEBUSINESSYEAR
26
29
34
McDonald Benjamin, Country
Manager of the World Bank, on
sharing the spoils of increased
productivity.
Sadala Khoury, President of
ADOEXPO, on the benefits of
being a member and the current
regulatory environment.
The country’s MSMEs generate
over 2.1 million jobs, 27% of
GDP, and represent 97% of the
600,000 Dominican companies.
21
Economy
REVIEW
The Dominican Republic is looking to make use of the current
economic juncture to get its finances in order.
T
he main engines
of the Dominican
Republic appear to
have been primed
well over 2014, with the IMF
reporting in November that
GDP growth over the first
three quarters of the year
came in at a healthy 7%. The
year-end figure (estimated
at some 6%) will likely remain slightly above the 3%
to 5% annualized long-term
growth band sought by the
Central Bank of the Dominican Republic (CBDR), with
even it estimating real economic growth of 7.2% over
1H2014. At the heart of this
story lies a combination of
reliable industries, such as
construction, tourism, and
agriculture, and a major new
addition to the mix—gold
mining. Under the administration of President Danilo
Medina, the country has seen
a resurgence in exports, with
the current account deficit
(CAD) narrowing as exports
grew, tourism receipts improved, and revenues from
the gold industry buoyed
business confidence. As the
largest economy in Central
MORE THAT
GLITTERS
America and the Caribbean,
at some $60.8 billion according to the IMF for FY2013, the
Dominican Republic is also
playing an increasingly larger
role in regional trade, especially for its island neighbors.
However, despite the healthy
growth of the country’s economy, concerns over how to
ensure that the newly generated wealth can penetrate
to the lower levels of society
and help to create a more
vivid economy remain, while
the old bugbears of transport
infrastructure and electricity
supplies still act as an anchor
on the economy.
SUNNY SIDE
Over 2013, the Dominican Republic
managed to achieve real GDP growth of
4.1%, according to the IMF, slightly up on
the 3.9% recorded a year earlier.
Over 2013, the Dominican
Republic managed to achieve
real GDP growth of 4.1%, according to the IMF, slightly
up on the 3.9% recorded a
year earlier. In broad terms,
the economy is split between
services (52.2%), industry
(25.8%), the so-called “taxes
less subsidies on products”
category (14.4%), and finally
agriculture (7.6%). The longterm GDP growth rate for
the country over the 1991-
22
THEBUSINESSYEAR
Tourism has long
been a key contributor
to the Dominican
economy, providing
some 14.7% of all
FDI in the country,
the third largest after
retail and wholesale
trade (20.5%), and
the mining industry
(15.6%), according to
preliminary figures
from the CBDR for the
end of 2013.
2013 period averaged out at 5.7% according to
World Bank figures, exceptional not just in the
Latin America region, but in the frontier market universe as a whole. This is not to say that
all things have gone swimmingly over that period. In 2003 a banking crisis erupted, that saw
the Dominican peso (RD$) collapse, banks go
out of business, and public debt double. In
many ways, the crisis acted as a reality check
on some of the excesses of the late 1990s,
when high-digit growth rates were seemingly
de rigueur; cooler heads have helped move the
economy forward at a more sober pace since.
Since 2003, when per capita GDP fell to just
$2,344, the figure had more than doubled to
$5,822 by 2013, demonstrating the fast pace of
development the island nation of 10.4 million
has experienced.
However, 2014 appears to be a year when
growth is on a charge, with 7.2% reported
over the first half of the year, when using the
2007 statistical base. The Ministry of Economy, Planning, and Development outlined a
lower figure of 5.2% GDP growth when using
an earlier 1991 statistical base, with the key
growth sectors over 1H2014 including minerals (20.1%), financial intermediaries (14%),
hospitality (12.6%), construction (10.3%), and
commerce (5.5%).
Other key indicators are also heading in a
sound direction. Consumer price inflation
(CPI) has calmed down significantly from the
7.8% seen at end-2011 to 2.9% in YoY terms
in October 2014. In response to the improved
performance of the tourism and gold mining
sectors, the country’s current account deficit
(CAD) has fallen from 8.4% of GDP in 2010 to
some 4.2% by end-2013, much on the back of
a surge in gold exports, which now make up
2% of GDP according to the IMF. Unemployment has also responded, falling from 7% at
YE2013 to 6% in October 2014. The Medina
administration has set itself the target of creating 450,000 new jobs before its term expires
in 2016, and credits itself with the creation of
over 250,000 since returning to office in 2012.
The late 2014 fall in the global oil price should
also come as welcome news to the Dominican
Republic, as much of its power generating
needs are reliant on fuel oil and, to a lesser extent, gas and coal. In FOB terms over 2013, the
two main fuel categories for refined and raw
products formed some 31.39% of the country’s
total bill ($4.36 billion), making it the largest
import category by far. In a late-2014 report,
the CBDR estimated that should the oil price remain at an average of $74 per barrel for the 2015
period, the Dominican Republic’s fuel import
bill will fall by $1.2 billion, nearly bringing the
country into current account surplus territory.
The strength of free zones on the manufacturing side also shows up in the balance of
payments figures. Of the total $9.65 billion in
exports recorded by the CBDR in 2013, some
$5.03 billion (or 52.1%) emerged from the Dominican Republic’s 57 free zones. Initial figures from 1H2014 show exports up 2.48% to
$5.01 billion in YoY terms, with the free zone
percentage of exports slipping to 50.39%, indicating a potential softening in the export textile sector. The Dominican Republic is hoping
that a combination of geographic centrality
and low-cost workforce will combine with its
network of free trade agreements (FTAs) to
boost its manufacturing potential through its
free zones. Agreements such as the Central
American-Dominican Republic Free Trade
Agreement (CAFTA-DR) with the US and FTAs
with other countries in the region through
CARIFORUM as well as the EU via the European Association Agreement (AAE) are also helping to bolster exports.
Tourism has long been a key provider to
the Dominican economy, contributing some
14.7% of all FDI in the country, the third largest after retail and wholesale trade (20.5%),
and the mining industry (15.6%) according to
preliminary figures from the CBDR for the end
of 2013. In terms of arrivals by foreigners and
non-residents alone, their numbers grew from
4.56 million in 2012 to 4.69 million in 2013,
with 2014 shaping up to follow this growth
trend. The Medina administration plans to
increase tourist numbers to 10 million by the
end of the current decade.
Another major source of funding for the Dominican Republic is the remittances sent from
expatriates overseas, which were worth $3.33
billion to the local economy over 2013. The
Inter-American Development Bank (IDB) estimated that the Dominican Republic was the
fifth largest receiver of remittances in the Latin
American region, with migrants in the US being the source of around three-quarters of the
money sent home.
Communications also feature as a key sector of the local economy, representing 16.2%
of GDP in 2013 according to the CBDR,
and featuring as the largest component of
the service economy. The government announced in early 2014 that it would be looking to install a national broadband network
over the coming five years to cover 3,000
square kilometers, in an effort to improve internet access for SMEs and lower and middle
income earners, especially for those in provincial areas. With most of the telecoms sector in private hands, it will be of interest to
see how this new network architecture will
be handled by the public sector.
Economy
CPI Trends (end period)
National & Free Zone Exports (millions)
Source: CBDR
Source: CBDR
8
10000
THEBUSINESSYEAR
23
7
8000
6
5
6000
4
4000
3
2
2000
1
0
0
2010
2011
2012
2013
3Q2014E
Although showing strong growth over
1H2014 of 14%, the finance sector has a long
way to go before it can act as a more effective
part of economic development. In 2013, the
finance sector represented just 4.4% of GDP,
under even the 4.9% recorded for real estate or
transport and storage, let alone that for hotels,
bars, and restaurants (6.3%).
DIG FOR ENERGY
Mining is proving to be one of the more interesting, if controversial, growth sectors. According to the CBDR, mining activity accounted for $1.41 billion in export revenues, with
gold accounting for $1.19 billion of that. The
rest is split between silver ($60.28 million), and
the Dominican Republic’s more traditional
mining resource ferronickel ($157.41 million).
The Pueblo Viejo gold mine, joint operated
by Barrick Gold and Goldcorp of Canada, has
revolutionized the local mining industry, and
provided some much needed revenues for
the state’s coffers. More importantly, the gold
mining project represented the largest quantity of FDI to come into the country for a single-ticket item—some $4 billion. The creation
of a Ministry of Energy and Mines as well as
the rejection of national park status in an area
with extensive ferronickel deposits—Loma
Miranda—also boosted investor sentiment
over 2014.
The new Ministry of Energy and Mines has
another problem that it and the administration will have to deal with: payments to private
electricity generators. In December 2014, the
Dominican Electrical Industry Association
(ADIE) claimed that the government now
owed the generators $1.05 billion in arrears
for energy provided to state-owned energy
company, the Dominican Corporation of State
2009
2010
2011
2012
2013
1H2014
Electricity Companies (CDEEE). The CDEEE is
set to pay the energy companies $400 million
in back payments, more than covering the bill
for 2014 and helping to pay off the overhang
from previous years.
As well, the government is looking to resolve
another energy-related issue—it hopes to repurchase some $4 billion in debt the Dominican Republic owed Petróleos de Venezuela
(PDVSA) for past concessional oil purchases
through the launching of a $1.7 billion international bond with the current debt holders,
Goldman Sachs. As the Dominican Republic’s
economy is on the rise, this may be the right
move to bring down consolidated public debt,
which was set to rise above 50% of GDP at end2014, by giving it a $2.3 billion haircut. As the
debt only attracted a 2% interest rate under
the old PDVSA terms, even Goldman Sachs
may look upon this deal with favor.
Any reduction in consolidated public debt
will be welcome, as it has risen some 18 percentage points since 2008. In 2012 the public sector’s consolidated deficit represented
7.9% of GDP in a single year, much because
of disputes over royalties issues with the new
gold mining consortium. By 2013, this public
spending position had repaired to represent
just 5% of annual GDP that fell into deficit,
with the government aiming to reduce that
figure, and the 50% plus worth of public debt
in GDP terms on its books, through targeted
fiscal policies that only ring fence education
spending. And with the Medina administration hoping to increase education spending
from the current 2.8% of GDP to 4% to improve the potential of the Dominican Republic’s future workforce, it will need all the good
winds emerging from a low oil price environment that can arrive. ✖
GDP Breakdown
(end-2013)
Source: CBDR
Agriculture
7.60%
Industry
25.80%
Services
52.20%
Taxes Less Subsidies 14.40%
on Products
24
THEBUSINESSYEAR
INTERVIEW
leading
THE FIELD
TBY talks to The Hon. Juan Temístocles Montás
Domínguez, Minister of Economy, Planning
and Development, on the medium-term
growth outlook and the national strategy for
development.
The Dominican Republic is one of the fastest
growing economies in the region, with a constant GDP growth average of 5.5% over the past
20 years. What is your medium term outlook for
the economy and for 2015?
The macroeconomic framework developed
by the Ministry of Economy, Planning and
Development serves as the economic policy
guideline for the short and medium term,
forecasts growth for the 2015-18 period at
around the potential economic growth of the
country, namely 5%. This potential growth
considers the projected demographic trends
of the country, as well as investment growth
and productivity similar to that presented
over the past decade.
One of the sectors enjoying robust growth is
tourism. In 2013 the country hosted 4.7 million
visitors. Since 1980, the first year that the Central Bank reported tourism statistics, related
revenues have risen from barely $172 million to
$5 billion in 2013. Which sectors of the Dominican economy, besides tourism, hold the most
potential for development?
One sector of remarkable growth is mining,
which grew by 20% in 1H2014 as compared to
2013. Growth of this sector is mostly a result
of the commencement of operations of mining a company, Barrick Gold. Additionally,
this administration has emphasized developing MSMEs, for which were allocated resourc-
es and efforts and to formalize and develop
the companies of this nature. The government developed a comprehensive plan that
covers the promotion of formalization, market access for MSMEs, financial development,
business development, and the promotion
of entrepreneurship. On the other hand, we
have made progress in the agricultural sector because of a series of actions and policies
implemented and promoted by the State,
through the Special Fund for Agricultural Development (FEDA), with the aim of boosting
agricultural production, encouraging and
expanding exports of agricultural goods and
increasing food security for the population.
Within these measures we can highlight the
support for land preparation services and
technical assistance to producers, in addition to financial support through increased
financing tools and channels, something that
is reflected by the disbursements of the Agricultural Bank, which grew by 6.5% in September 2014.
How far has the Dominican Republic gone with
its National Development Strategy 2010-2030?
Which of its goals have been achieved, and what
are the main challenges the government is facing in its implementation?
In general, two years after the promulgation
of the Law on the National Development
Strategy 2030, we have achieved at least one
BIO
Juan Temístocles Montás
Domínguez is a university
professor, renowned
politician, and author
of various books on the
electricity sector, politics,
and economy in the
Dominican Republic. He
has completed a number of
post-graduate programs in
the Dominican Republic and
Spain, and has distinguished
himself in international
conferences with the
World Bank, the IMF,
and the British Chamber
of Commerce, among
others. He has held various
positions related to the
Dominican economy.
Economy
measure of policy in almost 45% of all proposed lines of action.
During the first year, we put great emphasis on preparing regulations to implement
the strategy and interagency coordination.
Following this, we proceeded to meet the
proposed lines of action for which policy
measures were adopted to achieve the following objectives. These featured participatory democracy and responsible citizenship,
the rule of law and public safety, health and
universal social security, macroeconomic
drivers, competitiveness and innovation, a
sector and territory-integrated production
structure, and adequate adaptation to climatic change.
In general, one of the main challenges facing
the National Development Strategy was thecontinuity of efforts without pause, to move
forward in implementing policy to achieve
the objectives outlined.
What are the main advantages of the Dominican
Republic as an FDI destination, what is the government’s strategy to boost its flow, and what
would be your message to potential investors
seeking opportunities in the Caribbean?
Much of the government’s strategy to stimulate FDI has been supported in the process
of comprehensively institutionalizing the
country, and having the required institutions
in operation to create a favorable business
Mr. Domínguez meets
with Angel Gurría, OECD
Secretary-General at the OECD
Headquarters, Paris, France
climate for FDI. Some of the initiatives and
goals of the Administration are to realize the
outlined fiscal consolidation process in pursuit of a substantial reduction in the primary
deficit, the implementation of prudent and
stable macroeconomic policies that prevent
abrupt fluctuations, greater transparency of
government operations, a state law reaffirming legal certainty, and pro-competition legislation.
What are the main advantages of the Free
Trade Agreements (FTAs) signed with the US
and EU for the development of the Dominican
economy?
The advantage of having such FTAs is duty
free access to the largest consumer markets with greater purchasing power. Furthermore, these facilities place us on equal
terms with Central American countries, with
which we would be at a disadvantage. Also,
these treaties provide an environment of
greater legal certainty, which is an incentive
for investment. Looking ahead, treaties can
be beneficial, to the extent that domestic
producers improve their ability to compete
by offering products meeting higher quality standards demanded by these countries,
which would increase exports and employment. In the agricultural sector, for example, there is still room to reap the benefits of
these treaties. ✖
Image: OECD
THEBUSINESSYEAR
Created in 2006
through Law No.
496-06
Its mission
is to lead and
coordinate the
formulation,
management,
monitoring, and
evaluation of
macroeconomic
policies and
sustainable
development
The country
has recently
adopted
its National
Development
Strategy 2030
with the passage
of Law No. 1-12
25
26
THEBUSINESSYEAR
INTERVIEW
a world of
SUPPORT
TBY talks to McDonald Benjamin, Country
Manager of the World Bank, on sharing the
spoils of increased productivity and a new
metric in the Doing Business rankings.
Even though the Dominican Republic is one of
the fastest growing economies in its region, with
average 5.7% GDP growth over the past two decades, poverty remains a core issue. What initiatives have to be taken to improve the conditions of
those in greatest need?
BIO
McDonald Benjamin
currently serves as the
Country Manager of
the World Bank for the
Dominican Republic. His
experience with the World
Bank covers the entire
world, including Africa,
Latin America, North
Africa, East Asia, and South
Asia. Before coming to the
Dominican Republic, he
served as Deputy Director
for nine countries in Africa.
From 2004 to 2008, he
was Sector Manager of
the World Bank for social
development in Latin
America. Benjamin holds
a Master’s degree and
PhD in Economics from
Georgetown University,
Washington, DC, and
a Bachelor’s degree in
Philosophy, Politics, and
Economics (PPE) from the
University of Oxford, UK.
If there is one message regarding the Dominican Republic, it is that it has truly been a high
flyer, an achiever in terms of economic growth
in the region. From 1991 to 2013, it grew at
5.7% per year. In 2011 GDP per capita was 50%
above that of 2000, whereas in Latin America,
on average, GDP per capita rose 26% over the
same period. The Dominican Republic, along
with Panama and Peru, has been among the
most rapidly growing economies in the region
in recent years. The difference between the region and here is that the Dominican Republic’s
high growth rate has not led to the same level
of poverty reduction. Whereas in Latin America more than 70 million people have been
lifted out of poverty since 2003, here in the DR
we have a poverty rate today exceeding that
of 2000. Four out of 10 Dominicans still live in
poverty, and almost one in 10 lives in extreme
poverty. Therefore, there is still clearly much
work to do in spite of the high growth rates, to
generate more and better jobs for faster poverty reduction.
What is the World Bank’s role in supporting national development?
Our role as the World Bank is to be on the
one hand a trusted advisor and a provider of
knowledge services, that the government can
turn to and count on, bringing insights from
experiences in other countries that the government can then use to determine the program it
wants to put in place. The second role we play
concerns financing development projects with
a focus on better services and opportunities for
the poor. Thirdly, we provide support in such
areas as bringing together diverse actors, both
nationally and internationally, to exchange
ideas. The World Bank Group’s key mission
is the elimination of extreme poverty by 2030
at a global level, meaning no more than 3% of
people around the world living in extreme poverty by 2030. This is consistent with the government’s own vision of just 2% or less of the Dominican population living in extreme poverty
by 2030.
What is your assessment of the achievements of
the Dominican government in that regard?
The vision for 2030 is a state vision, one of the
people and one that has been consulted with
thousands of Dominicans. It is a vision that
has been enacted into law and that goes beyond any given government, and hopefully will
guide all administrations between now and
2030. I think there are certain areas where clear
progress is being made: one important area
is social protection. If we go back to the 2003
to 2004 period, there was no social safeguard
in place at the time of the severe banking and
macroeconomic crisis. Inflation rose, real wages did not keep up, unemployment rose, poverty climbed from 32% to almost 50%, and there
was no safety net to protect the poor. Yet today
there is a social safety net in place that reaches
over 800,000 Dominican households, and at a
reasonably low cost as a share of GDP. Moreover, an increasing share of this program is
being carefully targeted, and more importantly
being conditioned on actions that increase the
human capital of the poor and strengthen their
health and the education of their children, so
that it is not just a handout, but rather, an investment in human capital.
Economy
In the newly released Doing Business report, the
Dominican Republic was in 84th place. Could you
interpret the result of the rankings as well as the
country’s performance over recent years?
The Dominican Republic is one of the two
economies that has introduced the most reforms in the Caribbean region in recent years.
Only Jamaica has done more. The DR advanced
significantly during the 2005-2009 period and
has again taken several steps more recently to strengthen its position. The Dominican
Republic ranks 84th in the world among 189
economies. It is encouraging that it is focusing
on strengthening the investment climate, and
indeed it has a dynamic program underway to
continue strengthening its reforms, particularly through the Ministry of Economy, Planning
and Development, but also through several
other entities within the state and the private
sector. In fact it took steps over the past year
to reduce the number of forms needed for importing and exporting and that contributed to
its strong position. There are other areas where
it took steps this past year: for example, the protection of personal information through Law
172-13, which was important because it covers credit information, and therefore access to
credit. In addition, the country has taken steps
to strengthen the laws relating to transparency, governance, and the protection of minority shareholders. In the area of trading across
borders, the Dominican Republic is now in 24th
place and therefore among the top countries in
the world. It is also among the top 50% in the
world in 6 out of 10 indicators. The latest Doing
Business report introduced an important concept this year called “distance to the frontier.”
This metric enables you see an absolute measure of how far you are from the best practice in
the world on a given Doing Business indicator
and on aggregate across all 10 indicators. The
Dominican Republic is among the top third of
countries in the world this year in terms of its
improvement on the aggregate ‘Distance to the
Frontier’ measurement.
What sectors of the Dominican economy hold the
most potential for further development?
One concern over the past decade was that in
the rest of the region around 42% of people
were upwardly mobile, rising from poor to vulnerable, from vulnerable to middle-income, or
from middle-income to upper income, while in
the Dominican Republic only 2% of the population moved up an income class. In fact one in
five, 19%, moved down an economic class. So
THEBUSINESSYEAR
27
Lifting children out of poverty is
at the heart of the World Bank's
policies in the country
the real challenge is addressing the underlying
cause of that. What we observe from Central
Bank and other data is that there had been a
large increase in productivity, which is 40%
higher today than in 2000, but this has been
accompanied by a decline in real wages. There
are sectors that have done well in growth, such
as telecommunications, which rose from 8% to
23% of the economy, and mining, which has
recently been significant in terms of its contributions to growth and to improving the country’s export performance. Yet neither of these
sectors has generated significant employment,
while many jobs have been lost since 2004 in
the Special Economic Zones. The country has a
number of areas of potential beyond the above
sectors, including tourism and agriculture. For
example, the Cibao valley is highly fertile and
there is tremendous potential for adding value
to that agricultural production and generating
more jobs by linking it more to global markets.
This involves strengthening phytosanitary
standards, grading, cold chains, storage facilities, and financing for agriculture to get more
high-quality Dominican products into a global
value chain, as well as investing in agri-business to generate greater added value and employment here in the country. ✖
IN NUMBERS
World Bank
The Dominican
Republic ranks
84th
in the Doing Business
report
The Dominican
Republic ranks
24th
in trading across
borders
28
THEBUSINESSYEAR
INTERVIEW
effective
commercial
BREAKS
TBY talks to Jean Alain Rodríguez, Executive Director of the Center
for Export and Investment of the Dominican Republic (CEI-RD), on
maximizing the machinery of export, and the Dominican Republic’s
continued appeal as an FDI address.
According to the Central Bank,
Foreign Direct Investment
(FDI) in the Dominican Republic
has risen 245.5% over the past
decade. Which factors underlie this and what sectors of the
economy hold the greatest potential for further growth?
The attractive business climate, the political and economic stability that characterizes the country, its strategic
location, as well as a solid legal
framework for foreign investment, have been the main
factors in maintaining the
Dominican Republic’s position as one of the principal
addresses for (FDI) in the Caribbean region, and among
the top five recipients in Latin
America for nine consecutive
years. Over the past two years,
FDI in the Dominican Republic has reached $5.13 billion,
receiving 45% and 50.4% of
the total flows of foreign capital registered in the region in
2012 and 2013, respectively.
Investments have mainly been
in the energy, commercial,
real estate, and tourism sectors. FDI in 2014 reached $2
billion. Finally, strengthening
the agribusiness sector as the
essential basis of the Dominican economy has been one of
the main goals of this administration, and the government
has been implementing strategies to position our products in international markets,
which is a key consideration
for economic and social development nationwide.
How can the Dominican Republic improve its balance of trade?
The Dominican Republic has
reduced the deficit in its balance of trade by 15.3% (from
2012 to 2013) and by a total
of $1.534 billion. The strategy
that has successfully achieved
this reduction has included an
increase in national production and attempts to reduce
imports and increase exports.
The latter has augmented considerably (12.3% in 2012; 11.9%
in 2013; and 6.39% by October
2014), and we have worked this
out through improved training
programs for exporters and
producers with export potential. We have also arranged for
the financing of export projects
and other initiatives, such as
the creation of the Export Development Bank (BANDEX),
so that Dominican producers
can borrow at a competitive
interest rate, presenting greater opportunities and prospects
for consolidating the export
sector. Similarly, the CEI-RD
is currently working in cooperation with producers from
different areas of the export
sector in order to create a better-integrated national export
culture, arranging a number
of workshops for certification
to meet the requirement of
potential export markets. We
are also improving our logistics and cold chain structure
for the export of fruit and vegetables, to guarantee the quality of our products until they
reach the final destination.
Which export items hold the
most potential for growth, and
which new markets offer the
best opportunities?
is currently exporting 3,700
lines of merchandise to more
than 60 countries around the
world. In many of these markets, Dominican products
have good potential for increased sales. The country’s
main commercial partners are
currently the US and various
EU countries, as well as Haiti
and Canada. Current projects
aim to introduce Dominican
products into new markets in
which they could be significantly competitive, including
the markets of the Caribbean,
Russia, and China. In addition, the country has a growing demand for fresh pineapple, citrus, passion fruit and
melon, offering higher quality
products than other countries, and providing faster logistics services, mainly due to
our strategic location and robust infrastructure.
What are the major advantages
of investing in the Dominican
Republic, and what is your message to would-be international
investors?
The Dominican Republic offers competitive operational
costs for doing business, and
an established network of
support industries and services for the development of
the different economic sectors as well as the improve-
ment of the competitiveness
level in the country. The Dominican Republic is ranked in
first position in Latin America
and the Caribbean with regard to the time required for
the export of containers, and
is second in imports. It offers
some of the best transport
infrastructure
throughout
the entire region, and boasts
plentiful natural resources
and an efficient workforce.
Meanwhile, the President has
provided comprehensive support and technical assistance
required for the development
of businesses. In short, this is
the best time to invest in the
Dominican Republic. ✖
BIO
Dr. Jean Alain Rodríguez
has long experience in
both the public and private
sectors, specializing
in international law,
regulations, and commerce
law, and is a distinguished
spokesman and promoter
on the international
scene. From 2005 until
appointment to his current
position in 2012, he was
the Executive and Legal
Director of Domicem and
Managing Partner of law
firm JAR & Associates,
specializing in investment,
trade, and industry. On the
academic front, he was
Professor of Commercial
Law at Universidad
Iberoamericana (UNIBE)
and at the Pontificia
Universidad Católica Madre
y Maestra (PUCMM),
remaining in the latter as
an active teacher for more
than a decade. He holds
a PhD in Law from the
University of Rome.
Economy
THEBUSINESSYEAR
29
INTERVIEW
TBY talks to Sadala Khoury, President of
ADOEXPO, on the benefits of being a member
and the current regulatory environment.
OPEN
club
What is the average profile of
ADOEXPO’s members and how
do you attract the companies to
join?
Our membership is made up
of a diverse set of small, medium, and large export companies, as well as associations
and federations of different
export sectors of our country,
including the agricultural, industrial, and services sectors.
To attract these companies,
we perform activities to sup-
BIO
Sadala Khoury graduated
in Industrial Engineering
at the Technological
Institute of Santo Domingo
(INTEC) in 1988, where
he also completed his
studies in Management,
Marketing and a Diploma
in International Trade in
2007. In 2008, he was
recognized by the INTEC
as outstanding graduate for
his good performance at the
professional level.
He began his business
career 24 years ago in
the city of Barahona, in a
company dedicated to the
manufacture of blocks for
construction. Working hard
with the entrepreneurial
spirit that characterize
him and keen vision, has
made this company the
one that today we know
as Block Khoury; The Eco
Block, which has become
the leader in the export of
materials construction to
the Caribbean Islands.
port the sector, such as trade
shows, seminars, training,
lunch-conferences, and other
events. These serve not only
to make ADOEXPO better
known, but also to promote
the growth of Dominican exports. Among the benefits we
offer to affiliates are the financing of services to exporters or companies with export
potential through PRO-EXPORTA POPULAR, a program
in partnership with Banco
Popular Dominicano, which
allows clients to get to know
the steps involved in successfully completing the export
process with specialized support, prime rate financing for
the acquisition of machinery
and raw materials, collection
services and the transfer of international remittances.
What are the main highlights
of the training program for entrepreneurs that was initiated
by ADOEXPO and the National
Institute of Technical Training
(Infotep)?
The main objective of the interagency agreement signed
in August 2014 is to strengthen and improve inductions
in our ADOEXPO Training
Program, through the intervention of facilitators with the
kinds of advanced teaching
skills that our teachers from
INFOTEP have. Likewise,
through this program, our
members have as a facility to
receive inductions in-house,
for all employees in the different courses and technical careers that allow them to build
capacity, improve processes,
and achieve more to become
more competitive entities. In
principle the trainings conducted under this agreement
such as the Good Manufacturing Practices (GMP) and
International
Negotiation
Strategies are most of interest
to our membership. We have
established this from the results of surveys carried out to
ascertain their needs for continuous improvement of the
export of goods and services.
Even though the Dominican
Republic is strategically located in the center of the Americas, and has signed trade
agreements that provide privileged market access to the
US, Europe, Central America,
and the Caribbean, the country has a persistently negative
balance of trade. I believe that
our trade deficit is the result of
several factors, including the
low level of emphasis placed
on the promotion of an export
culture in our country. We
are importing more than we
export and we are a country
with great potential, not only
because of our climate and its
fertile soil, but also because of
our geographical location in
the center of the Caribbean.
done informally, with few unstable regulations for the flow
of trade between the two.
The Dominican Republic is a
member of the Association of
Caribbean States, which set the
development of greater trade
between the nations as one of
its primary goals. Has the Dominican Republic fully exploited
the potential coming from this
agreement?
What are your main priorities as
the new president of ADOEXPO
for the coming two years?
Not really, and I think that
even though Haiti is one of
our major trading partners
and exports some products to
neighboring islands such as
Trinidad & Tobago and Barbados, among others, there
should be more integration to
facilitate trade in those markets. They have few products
and as a result need to import
many goods for their people.
In the case of Haiti, is now
What is your assessment of
the current regulatory environment and what changes would
you like to see in the regulatory framework that could help
further export growth? How far
along is the implementation of a
single window for foreign trade?
Currently the incumbent government of President Danilo
Medina has introduced some
positive changes for export
through the financing of associations of small producers of
goods with export potential.
We should check some regulations on trade and focus them
on ensuring positive results in
our trade balance. Regarding
the establishment of a Single
Window for Foreign Trade
(VUCE) and according to what
was discussed with the current
Director of Dominican Customs, Mr. Fernando Fernandez, at our last lunch-conference of the General Director
of Customs (DGA); the Single
Window initiative is expected
to be formally implemented
by early 2015.
During my presidency I have
prioritized the training of
SMEs, which account for 27%
of GDP, and which represent
97% of the 600,000 Dominican
companies and generate about
2.1 million jobs in our country.
Second, the technical strengthening of ADOEXPO staff: in
addition to our ISO 9001-2008
certification, which has greatly improved our processes,
our team will receive training from partner institutions.
I will also focus my efforts on
the facilitation of trade in the
Dominican Republic in coordination with government initiatives. ✖
30
THEBUSINESSYEAR
FOCUS EXPORTS
READY TO GO
The Dominican Republic exports approximately 3,700 lines
of merchandise to more than 60 countries around the world.
The US is, by far, the country’s main export partner, followed
by Haiti, China, Canada, the UK, the Netherlands, and Spain.
According to Jean Alain Rodríguez, CEI-RD’s Executive
Director, in many of these markets, Dominican products
“have high probabilities of increasing their sales.”
The Dominican Republic’s exports averaged
$540.41 million from 1997 until 2014, reaching an all-time high of $949.50 million in
May 2013. The reduction of the persistently
negative balance of trade became one of the
priorities of the Dominican Republic’s government, which have already seen the first
results of their work. In 2013 alone, the country reduced its trade deficit by over $1.5 billion, which represents a decrease of 15.3%, in
comparison to 2012.
The Dominican Republic exports approximately 3,700 lines of merchandise to more
than 60 countries around the world. The US
is, by far, the country’s main export partner,
followed by Haiti, China, Canada, the UK, the
Netherlands, and Spain. According to Jean
Alain Rodríguez, CEI-RD’s Executive Director,
in many of these markets, Dominican products “have high probabilities of increasing
their sales.” Sadala Khoury, ADOEXPO’s president, shares Rodríguez’s position and believes
that “products such as rum, which are popular in the European market, and fresh tropical
fruits that are characteristic of our country,
such as mangoes, bananas, and pineapples all
have strong potential for increased export.”
The Dominican Republic’s top export
categories include: ferronickel, cigars, plastic, electrical equipment, bananas, jewelry,
medical equipment, clothing, scrap metals,
and beverages. Furthermore, the country is
currently the largest exporter of cigars to the
US and the second largest exporter of cocoa
in Latin America and the Caribbean. While
the Dominican Republic’s primary trading
partner is, by far, the US (56% of total exports), the country aims to diversify its exports portfolio and expand trade throughout
the world. In the words of Khoury, the Dominican Republic is “a country with great
potential, not only because of the climate
and fertile soils, but also because of its geographical location in the center of the Carib-
bean,” and “should make maximum use of
the adjacent islands, the countries of Latin
America, Canada, and of course the rising
Asian markets.” In addition to these export
categories, CEI-RD has recently observed a
growing demand for pineapples, citrus fruits,
passion fruits, and melons—products that
the Dominican Republic is able to deliver at
higher quality than other countries, mainly
due to its location allowing the country to
shorten logistics transport by up to 3 days.
EXPORT AND INVESTMENT
The Center for Export and Investment of the
Dominican Republic (CEI-RD) is the agency
responsible for the promotion of international trade and FDI. The agency was created after
the merger of the Dominican Center for Export
Promotion (CEDOPEX) and the Office for the
Promotion of Investment (OPI-RD), as stated
in Law 98 03, effective as of June 17th, 2003.
CEI-RD’s mandate regarding exports focuses on increasing training programs for exporters and producers with export potential. This
entails export project financing and initiatives
such as the creation of the Export Development Bank (BANDEX), whose mission is the
development and financing of export-focused
production.
DOMINICAN EXPORTERS'
ASSOCIATION (ADOEXPO)
ADOEXPO is an association created to promote
the growth of Dominican exports by training
exporters and performing activities supporting the sector, such as trade shows, seminars,
trainings, workshops, and lunch-conferences.
Its membership is made up of a diverse set
of small, medium, and large export companies, as well as associations and federations
of different export sectors of the Dominican
Republic, including agriculture, industry, and
services sectors.
ADOEXPO also offers financing services
to exporters and companies with export potential through its Pro-Exporta Popular program, an initiative launched in partnership
with Banco Popular. This strategy is designed
to supply companies with knowledge of the
export process, in tandem with specialized
support in financing machinery and raw materials, collection services, and the transfer of
international remittances. ✖
Economy
MAIN EXPORT DESTINATIONS
USA - HAITI - CHINA
>65%
of DR's Trade
THEBUSINESSYEAR
31
3,700
LINES OF MERCHANDISE TO
MORE THAN 60 COUNTRIES
>$11.5
Billion two-way trade total
EXPORTS ALL-TIME HIGH
$949.50
Million in May 2013
Source: TBY Research
EXPORT DESTINATIONS
THE LARGEST EXPORTER
OF CIGARS
NORTH
AMERICA
ASIA
EUROPE
TO THE US
THE LARGEST EXPORTER
OF RUM
TO SPAIN AND CHILE
THE SECOND LARGEST
EXPORTER OF CACAO
CIGAR
EXPORTS
FROM DR
$600
Million in 2013
IN LATAM & CARIBBEAN
ASIA
NORTH
AMERICA
EUROPE
SOUTH
AMERICA
IMPORT ORIGINS
BANANA
EXPORTS
FROM DR
SUGARCANE
EXPORTS
FROM DR
330k
228k
Tons in 2013
Tons in 2013
32
THEBUSINESSYEAR
INTERVIEW
POWERED
up engine
Santo Domingo is the country’s
primary economic motor, the
city with the lowest unemployment rate, as well as the lowest
level of poverty and disease.
What is the contribution of its
business community to the
overall development of the Dominican Republic?
The city of Santo Domingo is
the most important economic
center of the Dominican Republic. Currently in our country, there are around 950,000
companies, of which more
than 600,000 where registered
in the city of Santo Domingo;
this means that more than
60% of all formal enterprises
are currently operating in the
city. The largest trading houses and financial centers in the
country are located in the city
of Santo Domingo. This is the
reason why the business community of this city produces
the most significant contributions to the development of
the Dominican Republic.
BIO
Pedro José Pérez González
was born in 1964 and
graduated in Economics in
1987 from the Universidad
Nacional Pedro Henríquez
Ureña (UNPHU). He has
been the President of the
Santo Domingo Chamber of
Commerce and Production
since July 2013.
How significant is the Santo
Domingo Chamber of Commerce and Production within the Dominican Republic’s
economy?
The Santo Domingo Chamber of Commerce and Production (CCPSD) maintains a strong influence in
strengthening and promoting economic activities within the city of Santo Domingo,
but with an important impact on the entire national
economy. Some examples
of important contributions
throughout the history to
the economy of the Dominican Republic, carried out in
order to boost and promote
the business sector of the
country, include; managing
the construction of irrigation
infrastructure, highways and
roads with the Government;
engaging in a continuous
search for alternatives to
promote commercial industry, and creating other agencies and institutions that
support the strengthening
of the various stakeholders
and sectors of commercial interest. Some of these
stakeholders include: The
National Council of Private
Businesses (CONEP), The
Association of Industrialists
(AIRD), The Stock Market
(BVRD), The University Action Pro Education and Culture (APEC), and the Council
of Conciliation and Arbitration, among many others.
and workshops, promoting
discussions that enable the
commercial sector to keep
up with market reality, offering Business Consulting
services, and fostering new
business opportunities for
the business sector of the
country—particularly
for
small and medium-sized enterprises (SMEs).
TBY talks to Pedro
José Pérez González,
President of the Santo
Domingo Chamber
of Commerce
and Production,
on the city’s
broader economic
contribution,
promoting
enterprise, and trade
opportunities.
Currently, 97% of the Dominican
Republic’s enterprises are MSMEs, which generate more than
2 million jobs and account for
30% of GDP. How does the Santo Domingo Chamber of Commerce and Production support
the MSME sector?
According to the FondoMicro 2013 survey, there were
791,236 micro, small, and
medium-sized
enterprises
in total. These companies
employ a total of 2.2 million
people, which represent 46.2
% of the economically active
population of the country
and 54.4 % of the total employment in the economy.
The Santo Domingo Chamber of Commerce has undertaken several initiatives
to support the business development of SMEs, such as
managing and promoting
the participation of entrepreneurs to international
trade fairs and trade missions, providing courses
The Santo Domingo Chamber of
Commerce and Production has
recently signed an agreement
with the Chamber of Qatar. What
are the main highlights of this
partnership and how will the
Dominican companies benefit
from it?
We can identify two major
points of relevance of this macro agreement signed between
the parties, which are the promotion, development and
diversification of trade and
economic cooperation to the
benefit of the entrepreneurs of
both countries and the promotion and development of trade
and economic cooperation.
What other achievements has
the Santo Domingo Chamber of
Commerce and Production registered in 2014 and what are its
main objectives for 2015?
2014 has been a year of great
transformations, in which
we have achieved important
goals, for the sake of encouraging the production and the
development of business, not
only in the city of Santo Domingo, but throughout the
Dominican Republic. What’s
more, we connected even
more Dominican entrepreneurs with business opportunities at a global level. For
2015, we are will continue to
promote trade and production
through various mechanisms.
We aim at a greater participation in the national and
international media, to disseminate the opportunities
that can be used to enhance
businesses around the country
and in international markets
to further drive the economic
development of our country. ✖
Economy
THEBUSINESSYEAR
33
INTERVIEW
TBY talks to Angelina
Biviana Riveiro
Disla, President of the
National Association of
Young Entrepreneurs
(ANJE), on getting the
business environment
right, raising the
efficiency of public
institutions, and sectors
to watch.
YOUNG
at heart
Could you talk us through ANJE’s background?
BIO
Angelina Biviana Riveiro
Disla is the President of
the National Association of
Young Businessmen (ANJE)
and founding partner of
legal firm Grupo Legalia.
She was a graduate with
Magna Cum Laude honors
from the PUCMM School
of Law in Santo Domingo in
2002. Other qualifications
include a Master’s Degree
in Corporate Business Law
and Postgraduate Degree
in Economics for Business.
Her legal career began in
2000 as a Paralegal, which
was followed by diverse
positions including Legal
Advisor for the Management
of Regulatory Policies
and the Management of
International Affairs of
the Instituto Dominicano
de Telecomunicaciones
(INDOTEL). In 2010
she founded Grupo
Legalia, where she works
as a lawyer. She is an
arbitrator of the Chamber
of Commerce of Santo
Domingo.
ANJE was founded on the
idea that certain changes or
reforms were required in the
economy. The relationship
between the public sector and
the private sector was very
tense at that time, 36 years ago.
ANJE’s founder believed that
businesspeople needed to promote the necessary reforms on
the economy to increase the
level of private sector participation, and also to strengthen
our public sector. A key role
that ANJE plays is to adopt a
critical view on certain issues
that are affecting the economy
and social development, including services, the regulatory framework, and national as
well as foreign investment.
What are the main benefits of
being a member of ANJE and
what activities are you currently
involved in?
One of the benefits of being a
member is preferential access
to certain activities, not only
those of ANJE, but also training activities that academic
and other institutions offer.
Another benefit is having the
opportunity to participate in
public debates and impact
the public agenda through
many initiatives such as the
National Development Strategy. We have collaborated
with Congress to incorporate
our ideas on improving both
the efficiency and the transparency of our public insti-
tutions. Now we have an information-based society that
facilitates this somewhat. We
are also in favor of modifying
our labor code to incorporate
more flexible norms, both in
terms of the major topics under public scrutiny and also in
terms of implementation improvements, especially those
related to process. With the
labor code, you have to find
the right balance between
workers and employers to
increase employment rates,
improve the labor market and
to make it a driver of legality,
prosperity and equality. There
are many issues to be solved
and we are pleased that the
dialogue between employers,
workers, and the government
has been restarted. We really
hope that we can have a more
flexible and modern labor
code in the future.
What is your general outlook
for the Dominican Republic’s
economy and in what sectors
do you see the greatest growth
potential?
We are concerned about the
commercial sector, especially
retail, which is one of the sectors that used to have a very
big influence in the economy
for many years. We think that
current growth is heavily affected by the impact that the
mining sector has had on the
economy. We have to be prepared for what we are going
to do when the mining sector
leaves the country in 20, or
maybe less, years. Mining is a
sector where there is adverse
public opinion, which I think
is normal. However, we will
not be able to sustain our min-
ANJE
represents
young Dominican
entrepreneurs
ing sector over the long term
because it is a finite resource.
I think that the economy is
improving; nevertheless ANJE
is concerned about the public debt. The Senate just approved a deficit budget again
and there are some points that
I think as a country we need to
review, such as the price of oil
and the electricity sector subsidy. And even though the judicial system’s budget has increased slightly, I believe the
government hasn’t supported
that sector properly. It is one
of the most important sectors
because it creates the right
balance of power between the
legislature and the executive
branch of government. I also
think we have to support the
industrial sector more. We
have to address the issues that
are affecting our industrial
sector to increase productivity, competitiveness and make
our economy one that is able
to export more rather than
import. Tourism and the commercial sector are also vital.
Technology is a less explored
sector, but we have advanced
in this area over the last ten
years. The telecommunications sector has always been
one of the main drivers. ✖
34
THEBUSINESSYEAR
FOCUS DOMINICAN MSMES
SMALL BUT MIGHTY
As the Dominican Republic’s MSMEs generate over 2.1 million jobs, account
for 27% of GDP, and represent 97% of the 600,000 Dominican companies,
targeting them has become a focal point of the Dominican government’s
strategy and is expected to sustain country’s economic growth.
According to the FondoMicro 2013 survey, there
are 791236 micro, small, and medium-sized enterprises (MSMEs) in the Dominican Republic.
These companies employ over 2.1 million persons, who represent 46.2% of the economically
active population, and 54.4 % of the total employment in the country. The MSMEs sector is
pivotal for the Dominican Republic’s economy,
as MSMEs account for 27% of country’s GDP,
and represent 97% of 600,000 Dominican companies.
LOCAL INITIATIVES
In accordance with Law No. 488-08, enacted on
December 30, 2008, which establishes the regulatory regime for the development and competitiveness of Dominican MSMEs, and President
Medina’s strategic development guidelines, the
Dominican Republic is focused on promoting
opportunities for MSMEs, and small business
development centers (SBDC), which aim to facilitate their insertion into global markets. This
promotion strategy includes initiatives such as:
financing, integration, associative practices,
and capacity building.
The Dominican government has assigned the
responsibility of designing and implementing the respective work plans among different
public institutions; the Ministry of Industry and
Commerce (MIC), through its Vice-Ministry of
National Council of Promotion and Encouragement of Micro, Small, and Medium Enterprises (PROMIPYME), as well as the Export and
Investment Center of the Dominican Republic
(CEI-RD), are the key institutions responsible
for introducing the necessary programs on
entrepreneurship, competitiveness, market
access, ICT, as well as the implementation of
quality systems, international negotiations,
and technical assistance.
Moreover, several private organizations, such
as: National Confederation of Small and Medium Enterprises (CODOPYME), Association of
Industries of the Dominican Republic (AIRD),
National Confederation of Small and Medium
Construction Enterprises (COPYMECON), and
the Santo Domingo Chamber of Commerce
(CCPSD) are also strongly engaged in activities
to strengthen the role of MSMEs sector.
ONE-STOP WINDOW
In October 2013, the Government has launched
a one-stop window in order to facilitate starting new businesses and formalizing the exist-
ing ones. "Our goal is to promote the creation
and formalization of small, micro and medium-sized businesses, taking into account that
this sector represents 96% of the companies
in the country and contributes 27% to GDP,"
noted the Minister of Industry and Commerce,
José del Castillo Saviñón. Previously the formalization process lasted approximately a month,
and involved seven transfers, three forms, and
four visits to different administrative units.
“Now, through www.formalizate.gob.do, the
process to form company is done in only seven working days, and only one transfer to the
Chamber of Commerce.”
FOREIGN SUPPORT
In January 2014, the Inter-American Development Bank (IDB) approved a loan of up to
US$30 million to help expand access to credit
for Dominican MSMEs. The initiative seeks to
increase their productivity by facilitating access
to medium- and long-term credits through intermediate financial institutions. By financing
investment projects, permanent working capital, and technical assistance, the project attempts to increase labor productivity and sales
among Dominican MSMEs. The IDB loan has a
term of 25 years, a grace period of 5 years, and
an interest rate based on the London Interbank
Offered Rate (LIBOR).
Furthermore, in July 2014, the Inter-American Investment Corporation (IIC) approved a
US$3 million loan to Banco Múltiple Santa Cruz
to finance 200 loans to the Dominican Republic’s MSMEs, primarily for foreign trade operations and working capital. “The purpose of this
operation is to strengthen ties between the IIC
and Banco Santa Cruz to continue developing
the Corporation’s lines of business geared to
SMEs in the Dominican Republic and help diversify their sources of medium- and long-term
financing,” commented Sandra Reyes Correa,
IIC’s senior investment officer. This loan was
the IIC’s second operation with Banco Santa
Cruz. The first one benefited 70 Dominican
MSMEs. “The experience acquired through
the IIC in global best practice has substantially improved our internal practices, enabling
us day by day to strengthen our competitive
advantages,” said Rafael Jiminian, Banco Santa Cruz’s executive vice president for business.
“The funding approved will likewise enable us
to continue our aggressive pursuit of business
in our main segment, SMEs.” ✖
ISSAACHART
BURGOS
GARCÍA
President, the
National
Confederation of
Small and Medium
Enterprises
(CODOPYME)
What is your opinion on the
regulations for micro credit?
These have become more
flexible over the years, although
there are still some issues to resolve. Today, 57% of Dominican
SMEs are informal companies,
which makes relations with
commercial banks difficult. We
can see that many informal
companies also take credit lines
from the informal market, which
in turn prevents the establishing
of a credit history that would
facilitate dealings with commercial banks. The government
should take the initiative to set
up a guarantee fund that would
give an endorsement to banks
when doing business with SMEs.
What other challenges are
Dominican SMEs facing?
The growth of SMEs in our
country is to a certain extent
limited; we still have problems
with access to credit. Less than
5% of the credit granted here
goes to SMEs. Another difficulty
for the development of SMEs
concerns market competition,
as the economy is structured
in a way that does not allow
SMEs to grow. Meanwhile, there
are many issues with electrical
energy, particularly the fact
that not everybody receives the
same quality of energy at the
same price.
Economy
THEBUSINESSYEAR
35
INTERVIEW
ON THE UP
FDI in the Dominican Republic
has increased by 245.5% over
the past decade. What factors
drove that expansion and what
sectors of the economy hold the
greatest potential for growth?
TBY talks to Salvador
J. Demallistre B.,
Executive Director of
ASIEX, on FTAs, PPP
and goals for 2015.
For the last 35-40 years, the
Dominican Republic has seen
political stability. And while
as a developing nation we still
have numerous issues that
need addressing, we enjoy
liberty and democracy, which
is conducive to investment.
Also, in the Dominican Republic there is no restriction
on the movement of currency,
which is an issue in certain
other countries. Furthermore,
as a country we are strategically well located, close to
the US as well as Central and
Latin America. Moreover, the
Dominican Republic has advantageous trade agreements
with the European Union,
Central America, and the US.
These factors combined make
the Dominican Republic a
choice investment address.
Have the free trade agreements
(FTAs) allowed the Dominican
Republic to fully exploit its potential as an investment destination?
BIO
Salvador Jose Demallistre
B. has been Executive
Director of ASIEX (Foreign
Investment Association of
the Dominican Republic)
since 2010. Before that he
was CEO of Grupo Bon from
2000 to 2006, and Country
Manager for DHL Worldwide
Express from 1989 to 1998.
He is a certified public
accountant with a Master’s
degree in Marketing.
I would say yes, but even
though we have had that possibility for many years, we
have yet to take full advantage. The country would be
better positioned if we had a
greater focus on the potential
benefits of FTAs.
Republic and what would be
your message to potential international investors seeking opportunities in the region?
Most importantly, we have a
country with laws protecting
foreign corporations. Also,
even though we still have the
opportunity to improve our
education system, the country
has really addressed the issue
by increasing the expenditure
for education, and there are
a lot of entrepreneurs getting
involved in education. That
means we are addressing the
issue, which eventually is going to increase productivity.
Also, there is a major discussion between labor unions and
business on the potential revision of the labor code to foster
greater competitiveness.
for foreign investment in the
Dominican Republic together.
We work with over 35 lawyers
in our legal community and
have already assigned four
of them to work directly with
CEI-RD in revising the law on
foreign investment. I believe
that doing this will bring numerous benefits for both the
private and public sectors, in
combining their unique international experience.
What is the role of public-private
partnerships (PPP) in the development of the economy, and
what initiatives has the Dominican Foreign Investment Companies Association (ASIEX) taken to strengthen the investment
climate and promote the country as an FDI destination?
How would you rate the regulatory efficiency in the Dominican
Republic in terms of incorporating a business?
One of the major challenges
faced by the country is the
need to broaden public-private relations. I would say
that this could be a true instrument of progress, which
somehow our country has
been reluctant to utilize. I
have seen PPPs that eventually benefit the country because of the synergy between
the knowledge and capacity of
the private corporates and the
balance that the government
or public brings into that relationship. ASIEX as an organization doesn’t have this as its
vision or mission. Basically,
we work with companies that
have already been established
in this country. One promise
we made to the President was
that since many corporates
and institutions that belong to
ASIEX have offices around the
world, we could work together
to develop a solid strategy for
the international promotion
of the Dominican Republic.
This is a work-in-progress.
We have a firm relationship
with the Export and Investments Center of the Dominican Republic (CEI-RD) and
will eventually revise the law
I would say that we are making progress, although there is
still ground to cover. Indeed,
we are working with the CEIRD on revising the foreign investment law. We still believe
there will be great opportunities for the country to develop if we expedite the process,
which the President appears
keen to do.
The Dominican Republic ranked
117 out of 189 countries in the
Doing Business 2014 survey,
declining five places since 2013.
What factors led to that drop
and what initiatives have to be
taken to strengthen the Dominican Republic’s position in the
rankings?
There are many areas of the
survey in which we lag significantly. My perception,
again, is that if we continue
to strengthen the relationship
between the public and private spheres, we can advance
up the rankings.
What goals has ASIEX set for
2015?
We are set to focus on several areas, including mining, foreign investment law, and the strengthening of our international
competitiveness to do business.
We also intend to work with
the government on a means of
reducing the tax level. ✖
36
THEBUSINESSYEAR
FORUM WHY THE DOMINICAN REPUBLIC?
REASONS
to be
cheerful
Across the spectrum of
industry from FMCGs to
transportation and logistics,
companies have found their
local voice and developed their
businesses.
ERIK PÉREZ VEGA
President, Cluster of
Contact Centers and
BPO from Dominican
Republic
T
he main benefit of investing in ICT
in the Dominican Republic is employee loyalty. Despite significant
rotation, it is higher in a call center than in
many other industries because of the type
of work. There are tax incentives because of
the free zones. The business environment in
the country is conducive to foreign investment. Another factor is the location; we are
merely a two-hour flight from Miami, and
our natural market is the US. Moreover,
the government has heavily supported the
industry, while the presence of free trade
zones (FTZs) is another factor. With the
FTZs come numerous incentives to seek out
productive and well skilled people in a solid
business environment. Thus, the only thing
that we are lacking is the English language
capability. This said, the Ministry of Higher
Education is working on the issue; it is running an English immersion program, which
has graduated almost 50,000 people who are
working nationwide at call centers, mostly
concentrated in Santo Domingo, Santiago,
Puerto Plata, and La Romana. Companies
in Puerto Rico would rather hire call centers
here in Santo Domingo than in Puerto Rico
because it is cheaper and more efficient.
PEDRO JOSÉ PÉREZ
GONZÁLEZ
President, Santo
Domingo Chamber
of Commerce and
Production
T
he business climate in the Dominican Republic presents great
opportunities for the development
of commercial projects, as well as challenges to overcome in providing the resources
essential to the successful performance. We
have a stable economic and political system,
reflected in substantial economic progress
achieved in recent years. We have a regulatory system that clarifies the business environment and prevents international disputes.
We have five operational trade agreements,
which allow us to reduce and eliminate, in
some cases, the tariff barriers imposed by
many countries. Moreover, the telecommunications system that our country counts on
facilitates communication between Dominican businesses and international markets. In
terms of what needs to be done to enhance
the commercial environment, we should
reorient credit towards the productive sectors, to balance private consumption with
industrial production. This is a prevalent issue for Dominican entrepreneurs of all sizes,
especially SMEs. We should also support the
establishment of a tax regime supportive of
small and medium-sized enterprises.
Economy
ANGEL TERRERO
JULIO ESPAILLAT
Caribbean Regional
Manager, YOBEL
Supply Chain
Management (SCM)
President & CEO,
GoldQuest Mining
Corporation (GQC)
T
he Dominican Republic today is
our largest operation in the Caribbean, although Puerto Rico
and Panama feature, too. For this year and
the next year the Dominican Republic will
maintain the leadership of our corporation
in the Caribbean, but Panama is experiencing rapid growth and I believe that by 2016,
it will have become the company leader. For
the corporation, the Dominican Republic is
very strategic because from there we handle,
manage, and assume all regional operations.
In Puerto Rico, the Dominican Republic, and
Panama the market is in continual growth.
We don’t have a sizable market share currently, but we are expecting this to change,
and are confident of growth in the Dominican Republic. Today we have notable demand from the pharmaceutical industry;
they have recognized our expertise and
unique solutions for the sector. We have implemented a strong quality system for that
sector and have considerable experience
with consumer goods, cosmetics, technology, and food and beverage, so the business
in the Dominican Republic is important and
has a wide portfolio of services the corporation is offering to the market and industries.
Our biggest market is the multinationals.
H
istorically, the presence of gold
on the island was well known. For
example, Pueblo Viejo, the largest gold mine in Latin America, was known
about back in colonial times. Hence, there
is a history of sizable gold production here.
That means that the Dominican Republic
is attractive for anyone keen on gold exploration work, including GoldQuest. Initially
we came here based on Pueblo Viejo, the
well-known deposit. But on top of that there
were other smaller deposits, and we decided it was a good time and place to do some
exploration. We came and initiated regional
exploration in a totally new area, which is
the southern part of the Cordillera Central.
Most of the deposits I am talking about are
in the northern part of the Cordillera Central.
We recognized that the rock in the southern
part of the Cordillera Central was similar to
that in the northern section, but no one was
looking in the southern part. So we were the
group that initiated exploration in that location. Discovering something in geology and
mining doesn’t happen very often and it usually takes several years. Therefore, initially we
were undertaking highly regionalized work.
We did not invest or explore significantly
until 2010 when we decided to probe deeper
into those areas where we found anomalies.
In 2012 we made a major discovery, making
us the most successful junior company in the
world that year. We believe there is huge potential in the Dominican Republic and Haiti
for mineral exploration and development.
THEBUSINESSYEAR
37
FRANKLIN
AVENDAÑO
Regional Manager
for the Dominican
Republic and Puerto
Rico, Avianca
A
ctually, the Dominican Republic
is the biggest market for Avianca
in the Caribbean. It is the country
that issues the most tickets and transports
the most passengers. Within the Caribbean,
we have operations in San Juan, Puerto Rico,
Aruba, Curaçao, and Cuba, but the Dominican Republic is still the biggest market. It is
also significant for us because we have had
a great increase in business. We started this
operation with three flights a week and now
we have daily flights. We have increased our
operations to Lima too. We only had two
flights to begin with and currently we have
four flights per week to serve directly the Peruvian market. In the Dominican Republic,
We have between a 75% and 85% load factor
in the low season and 100% occupation load
factor in high seasons. Avianca is particularly satisfied with the airport services at Santo
Domingo’s airport and in Punta Cana, where
we operate. However, as with everything in
life, there is room for improvement. For
example, we could improve quality, infrastructure, technology, as well as passenger
services to facilitate the flying experience;
this in addition to improvements in immigration and customs. Meanwhile, I do think
the Dominican Republic has considerable
potential as a hub because of its geographical location at the heart of the Caribbean.
38
THEBUSINESSYEAR
INTERVIEW
“EXTRA,
EXTRA”
TBY talks to Patricia de Moya, Editor-in-Chief
of Mercado Media Network, on its readers,
international franchises, and the challenges and
opportunities posed by social media.
Do you plan to launch any new
special editions in the near future?
The range of publications
available in the Dominican
Republic has been growing
consistently over the course
of the past decade. Coverage of specific niches of the
market by special editions
was required by the key sectors of the national economy.
Through strategic planning,
the Mercado Media Network
has developed special editions that have become key
reference guides of great value
to the business community of
our country.
BIO
Patricia de Moya is the
Editor-in-Chief of Mercado
Media Network, a company
that creates and publishes
publications for the world
of business. She injects her
personal style into each
publication, and Mercado
has secured interviews
with personalities such
as Steve Forbes, Hillary
Clinton, Donald Trump,
Gustavo Cisneros, and
Oscar de la Renta.
your readers?
Revista Mercado has two public objectives, the first of which
is directed at executives and
entrepreneurs, decision makers who need up-to-date information of the highest quality.
Our secondary target demographic is young people at university or college studying in
the field of business, and who
see our editorial content as the
best tool to help them advance
in the world of business.
How do you attract, train, and
maintain the most talented human resources and how many
people work for the firm?
In the 21 years of constant
expansion that our company
has seen, we have never failed
to maintain the international
standards that befit business
publications. Along with the
excellence we expect of our
committed editorial staff, we
have also succeeded because
of a marketing department
that has in many ways surpassed local standards. Our
company currently has 80
employees across our editorial, art, marketing, sales, distribution, circulation, and administrative departments. Our
team’s talent is continuously
evolving, and is always guided by the enthusiasm, dedication, and leadership passed
on by the heads of the various
departments.
Has signed
an alliance with
Bloomberg LTD
Employs
a staff of 80
Mercado Media Network has
signed a number of prominent international publishing
alliances with The Economist,
Advertising
Age,
Harvard
Business School, Suzy & Jack
Welch, John Tscholtz, Richard
Branson, and CNN/Expansion.
Do you plan further such expansion?
Our most recent success in
this area was the signing of
our alliance with Bloomberg
LTD, which reaffirms our
leadership among business publications. This will
not be our last such agreement however. We have also
worked with the Time Inc.
brand Sports Illustrated.
Through these understandings we achieve an editorial
mix that offers the best of
domestic and international
content. Beyond our national presence, we have subscribers in Miami, New York,
and Puerto Rico, and are
planning to expand our circulation in these areas over
this year.
How has social media affected the news industry, and how
has Mercado Media Network
responded to recent trends
and technologies?
The social media revolution
is a reality, and the world of
publishing has definitively
changed in that regard. The
interconnectivity of information and platforms is what
allows publications to stay
current and generate reader interest. Mercado Media
Network is already prepared,
offering added value to all of
our editorial content through
social media platforms, including the content from our
international partners.
What is Mercado Media Network's medium term development strategy, and what are its
main focuses for the coming
year?
The development strategy
is to reinforce our position
as the market leader in publishing, while also launching
new products that permit us
to enter other segments of
the market. For this year, the
optimization of our services
through a new entity called
the Mercado Exchange will be
a major focus. Toward those
ends we have created a highly professional team focused
on developing strategies and
corporate services that complement our portfolio. ✖
THEBUSINESSYEAR
39
44
46
53
Manuel A. Grullón, President
of Banco Popular, on financial
inclusion and the bank’s 50th
anniversary.
Restructuring at the Dominican
Republic’s Stock Exchange is
increasing access to liquidity and
investment.
Zanoni Selig, CEO & Chairman
of WorldWide Group, on the
impact of FTAs and trends in the
insurance market.
Finance
REVIEW BANKING
The Dominican Republic’s banking universe is hallmarked by pragmatic
regulation and a healthy print across vital metrics—although low
penetration needs to be addressed.
W
ith the May 20,
2012 victory of
Danilo Medina at
the presidential
elections, continuing Dominican Liberation Party (PLD)
rule, dating back to 2004,
came renewed confidence
in political stability. This has
reflected in the banking sector, then comprising 10 commercial
banks—although
two have since merged—and
roughly 40 savings and credit
banks and savings and loan
associations. Prior to this particular tonic the Central Bank
(CBDR) had proven its mettle, with a monetary stance
squarely aimed at curtailing
fiscal deficit that had reached
around 4.3% of GDP. Higher
rates among the banks have
remained in evidence, with
the benchmark rate static at
6.5% since 2H2013 (as of print
at 6.25% according to Trading
Economics data), whereby the
knock-on effect on lenders
pressures consumer lending.
The Dominican benchmark
interest rate saw an average of
8.20% between 2004 and 2014,
peaking at a historic high of
DEAR PRUDENCE
The efficiently regulated Dominican
banking sector has sustained decent
solvency levels, capitalization, and
profitability, as well as a long foreign
currencies position.
50% in February 2004, and a
historic trough of 1% in January of the same year 2004. The
CBDR justified its decision
to keep rates on hold earlier
in June of 2014, “in light of
a growing economy, low exchange rate pressures, inflation projected to be near the
goal, and an improved labor
market…”
The efficiently regulated
Dominican banking sector
has sustained decent solvency levels, capitalization, and
profitability, as well as a long
foreign currencies position.
Scotiabank research reveals
that the total assets of the financial sector had climbed
from 38% to 45% of GDP over
the past five years as of June
2014. Moreover, the healthy
asset quality of the deposit-taking institutions is confirmed by the halving of systemic non-performing loans
(NPL) to 1.9% in 2014 from 4%
in 2009. In a TBY interview,
Central Bank Governor Héctor Valdez Albizu provided an
encouraging birds-eye tour
of the banking sector. Among
the key metrics highlighted,
as of August 2014, were total
40
THEBUSINESSYEAR
assets of financial intermediation institutions
of Ps1,142,723 million, marking nominal YoY
growth of 8.6%. Indicative of a vibrant economy,
the second largest in the Caribbean after Jamaica, “total loans of the financial sector, commercial banks concentrated 86.9%. Indeed, the loan
portfolio of multiple banks totaled Ps586,693.2
million in August 2014, up 12.8% YoY.” Meanwhile, public deposits in the financial sector in
August 2014 reached Ps935.674 million, on a
10.4% YoY climb. The public sector is a major
force in financial intermediation, and stateowned Banco de Reservas boasts one-third of
banking system assets on a respective 38% and
32% share of loans and deposits according to
official data as of August 2014.
Elsewhere, domestic currency deposits outperformed their 2013 print by, 12.9%, while
foreign currency deposits rose just 3.6% for the
period. In August 2014, the share of domestic
currency deposits among total deposits in the
system was 74.6%, up 1.7 percentage points
on August 2013 (72.9%), on the decline in the
share of FX deposits from 27.1% to 25.4%. “An
important element worth noting is that during
the period of August 2013 to August 2014, financial intermediaries decreased their exposure
to credit risk by maintaining the downward
trend in NPL ratio, which dropped from 2.9%
to 2.2%, driven by lower coefficients shown in
commercial banks and savings and loans,” the
Governor added. Of note, banking delinquencies rates shed 1pp to 1.9%, while the provision
coverage of nonperforming loans markedly
rose from 117.0% to 164.3%. The sector’s solvency ratio posted at 18.18% in July 2014, thus
far above the stipulated 10% minimum, and the
respective return on assets (ROA) and average
equity (ROE) for August 2014 was 2.02% and
18.33% for the month. “Meanwhile, the commercial banks posted ROA of 2.05% and ROE of
21.45%,” he concluded.
NEW SHOOTS
The Dominican Republic has been active in fostering economic conditions amenable to business, both local and FDI through prudent use
of facilities extended by a range of international agencies. According to Nearshoreamericas.
com, since it partnered the International Finance Corporation (IFC) back in 1961, the latter
had invested $962.9 million in the nation’s private sector by 2013. And recently, the Dominican government also negotiated a $250 million
loan with the Inter-American Development
Bank (IDB), to enhance the investment climate and foster productivity, particularly that
of SMEs, which account for 97% of all Domin-
The percentage of banked adults remains low, at around 38%, short
of the emerging market average of 42% and developed market
average of 89%. Yet mobile penetration has leveled out at around
90%, which has prompted financial institutions to leverage mobile
banking to boost financial inclusion. Mobile payment is today a
serious facilitator for the world’s unbanked, as well as a multifaceted convenience for those who are.
ican enterprises and 30% of GDP. The IDB has
laid out recommendations that the Caribbean
nation is advised to follow, which include facilitating SME access to financing in order to bring
them increasingly into the formal economy.
SELECTED PLAYERS
Penetration of Bank
Accounts Among Adults in
Latin America (%)
Source: BN Americas
Latin America
The top-three players in the highly concentrated Dominican banking sector approximately
claim a 60% market share, according to the IFC.
Established in 1963, Banco Popular Dominicano, a subsidiary of local Grupo Popular, is the
main force in the local market, on roughly a
one-third share of total assets. The leading issuer of debit and credit cards, it has a nationwide
branch network of around 200 and over 700
ATMs. In June of 2014, it introduced the Popular ProExporta platform in partnership with the
Dominican Exporters Association (ADOEXPO)
to avail exporters of beneficial rates in export
factoring, among other facilities.
In terms of performance, for FY2013 total
assets were robust at Ps251.8 billion ($5.84
billion), up YoY from Ps223.5 billion. Total deposits saw a minute appreciation from Ps34.4
billion in 2012 to Ps35.7 billion ($827 million).
Meanwhile, the net loan portfolio saw slower
YoY growth to Ps156.4 billion ($3.63 billion)
from Ps143.9 billion. Over 2013 the return on
assets (ROA) stepped down a rung to 1.83%
from 1.92%, while the return on equity (ROE)
metric, at 20.19%, barely budged from the
20.18% print of 2012, both down from 22.40% in
2011. Provisions for NPLs declined to 197.12%
coverage from 198.99% a year earlier.
World
BANK TO BANK
Paraguay
Banco BHD was the second largest privately
held bank in the Dominican Republic ahead of
its merger with Banco León in 2014, then the
fourth largest privately held bank. The merged
entity has been renamed Banco BHD-León,
with combined assets exceeding $4.33 billion, rendering it the fifth-largest bank Central
Developing Economies
High Income Economies
Argentina
Bolivia
Brazil
Chile
Colombia
Costa Rica
Dominican Republic
Ecuador
El Salvador
Guatemala
Haiti
Honduras
Jamaica
Mexico
Nicaragua
Panama
Peru
Uruguay
Venezuela
0 20 40 60 80 100
* COUNTRY/REGION Proportion of adults with
a bank account
Finance
America. As at June 30, 2014, Banco BHD had
total assets of Ps132,891,924,864, and total liabilities of Ps119,402,014,258.
The sole foreign banking presence in the Republic boasting retail outlets, and one of Latin
America’s most widely present financial institutions, Scotiabank, with a branch network of
close to 100, is the fourth largest bank in the
Dominican Republic by total assets. It has risen
from fifth, it’s ranking after growing more than
two fold following its 2003 partial purchase of
collapsed Banco Intercontinental (Baninter
Bank), which had collapsed that year.
Incidentally, the state’s decision, at the time,
to take over that sole failed bank led to a subsequent deficit of around 15% of the GDP. Over
2012, the gradual appreciation of Scotiabank’s
total assets to $124.6 million confirmed the
aforementioned prudence of Dominican bankers during what was an election year. For 2013
total assets rose by 6.6% YoY from Ps49.8 billion
to Ps53 billion thanks to the rise in loan portfolio to Ps34.9 billion from Ps32 billion.
ON THE MOVE…
The percentage of banked adults remains low,
at around 38%, short of the emerging market
average of 42% and developed market average
of 89%. Yet mobile penetration has leveled out
at around 90%, which has prompted financial institutions to leverage mobile banking
to boost financial inclusion. Mobile payment
is today a serious facilitator for the world’s
unbanked, as well as a multi-faceted convenience for those who are. According to digital
security giant Gemalto, global transactions
by mobile payment via NFC-enabled phones
could exceed $426 billion in 2015.
Banco Popular explained to TBY the outcome
of its pioneering 2012 launch of a mobile app.
“This app has the ability to trace ATMs, Popu-
lar branches and businesses with special offers
for our customers via an augmented reality
interface and GPS, and had been downloaded
over 160,000 times, by June 2014 registered a
volume of over 398,000 transactions and over
$65 million settled, on a rise of 297% in transactions and over a 305% in the amount of these
transactions,” bank President Manuel A. Grullón explained. And in 2014 Banco Popular Dominicano and local telco Orange Dominicana
launched the Orange m-weight, a virtual prepaid card facilitating mobile banking transactions.
THEBUSINESSYEAR
41
Regional Credit Card
Distribution in Dominican
Financial System as of
Sept. 2014
Source: Superintendency of Banks
…AND MICROBANKING
Credit and savings financial institutions (bancos de creditos y ahorros) are essential financial institutions in the Dominican Republic
when considering the stunted participation
rate in financial instruments, be it mortgages
or regular retail banking. Industry research
reveals that in the Dominican Republic, 70%
of internal production stems from micro businesses, where fewer than 10% of those people
are banked. According to Mixmarket, in 2012
microfinance loans amounted to approximately Ps610 million.
One notable local player is Banco Ademi, 64
branches has bumped up its portfolio by 14%
in 2014. Executive President Guillermo Rondón
told TBY in conversation of an, “…aggressive
strategy in the micro credit segment; we have
increased our take in agricultural micro credit
and we see this sector as one of the main driving forces for the bank in this segment. We also
see a great potential in agribusiness.”
Yet he rounded off by stressing the need for
greater formalization of micro-industry. “Micro companies represent around 30% of GDP,
which implies huge potential for us and for the
country.” ✖
Metropolitan Territory
72%
Northern Territory 16.30%
Eastern Territory
6.90%
Southern Territory
4.20%
Bank Capital to Assets
Ratio (%) in Dominican
Republic
Source: Trading Economics
10
9.8
9.6
9.4
9.2
9
8.8
2006 2007 2008 2009 2010 2011
2012
42
THEBUSINESSYEAR
INTERVIEW
central FOCUS
TBY talks to Héctor Valdez Albizu,
Governor of the Central Bank of
the Dominican Republic (Banco
Central), on the policies behind
recent success stories of the
Dominican economy.
Foreign Direct Investment (FDI) in the Dominican
Republic has increased in 245.5% in the last decade. What factors drove that expansion and what
are the sectors with the greatest potential?
BIO
Héctor Valdez Albizu was
born in 1947 and graduated
in Economics in 1971 from
the Autonomous University
of Santo Domingo. He began
his career at the Central
Bank of the Dominican
Republic (BCRD) in 1970
as a Technical Assistant
in the Economic Research
Department. Having risen
through the ranks, he first
became Governor in 1994.
He was reconfirmed in that
office in August 1996 by
the then President Leonel
Fernandez Reyna, and
appointed Cabinet Minister,
occupying that position until
August 16, 2000. Again, on
August 16, 2004, President
Reyna, appointed him
Governor of the BCRD. He
was reconfirmed in the role
in 2006, 2008, and 2010,
and again in August 2012 by
the new President, Danilo
Medina.
FDI, over the last decade, went from $ 7.684 million in 2004 to $26,549,000 at the end of 2013, an
increase of $18,865,000, an increase of 245.5%
in 10 years. This significant increase represents
an average annual flow around $ 2,000 million.
The main factors that have influenced this increase in FDI are:
• The country’s macroeconomic stability characterized by sustained economic growth, low
inflation and relative stability of the exchange
rate and a healthy financial, liquid, solvent and
well capitalized system.
• The FDI Act provides facilities and guarantees
to foreign investors, equal to the Dominicans,
which gives legal security, with clear rules and
regulations with incentives for investors in different sectors.
• In addition, we have political stability and social peace, marked by a rule of law that prevails
in free enterprise and democratic rule of long
standing.
• The geographical location the country enjoys,
and central proximity to the US, a feature that
makes it an excellent destination for FDI.
• The country's participation in major trade
agreements like DR-CAFTA, the Economic
Partnership Agreement (EPA) with the EU,
among others, makes us an investment destination that can take advantage of these agreements.
• The existence of an excellent road, port and
airport infrastructure network, the latter with 8
international airports.
• A world class telecommunications system.
Diversification in target sectors of FDI is another factor that has contributed to the increase in
investment flows. In 2000, four sectors, Electric
energy, Telecommunications, Trade and Tourism, accounted for 82% of FDI. Thirteen years
later (2013) the spectrum of sectors expanded,
appearing with great preponderance additional
sectors such as: Real Estate, Construction and
Finance. Of the sectors, to our knowledge, that
has great potential for future growths for foreign investment are mining, agriculture, energy
and tourism.
What has been the impact of the normalization of
the US monetary policy in the Dominican Republic?
Undoubtedly, the process of normalization
of US monetary policy will influence in an increase of interest rates internationally, affecting
capital flows and changing liquidity conditions
that have operated in the international financial markets during years. The Dominican Republic is no exception to this international reality. However, we understand that the country
is better prepared to face any effect arising from
this situation, given the early stage of development of our capital markets and strong fundamentals of our economy, as evidenced in 2013
with the first indications of the Federal Reserve
United States that would be a withdrawal of
monetary stimulus. The behavior of markets,
at that time, showed that internationally the
Dominican economy is linked to the group of
emerging economies with sound macroeconomic fundamentals, as is the case in Colombia, Chile, Mexico, and Peru in Latin America.
In addition, several studies in international
organizations like the International Monetary
Fund (IMF) and the Inter-American Development Bank (IDB) suggest that the effects of this
normalization would be different in two groups
of countries in Latin America. For example,
countries that in addition to the US as their
main trading partner and have an incipient development of their financial markets, among
which are Dominican Republic, tend to benefit
more from the real effects of monetary normalization, given the highest economic growth in
the US, what could be affected by the tightening
of international financial conditions. However,
the central bank remains aware of these events
to react in time when the balance of risks points
to possible deviations from its inflation target
and thus take the necessary measures to ensure
the maintenance of macroeconomic stability in
our country.
What is your evaluation of the level of assets and
deposits of Dominican banks in 2014?
As of August 2014, total assets of Financial Intermediation Institutions totaled Ps1,142,723
million, a nominal growth rate of 8.6% (an
increase of Ps90.915 million), relative to the
amount recorded on the same date the year before. If you compare this August to December
2013, assets totaled Ps54.074 million, ie 5.0%.
Finance
This growth is mainly explained by the behavior of the loan portfolio, which in August this
year totaled Ps667,927,000, a variation of 12.5%.
Significantly, of the total loans of the financial
sector, commercial banks concentrated 86.9%.
Indeed, the loan portfolio of multiple banks
totaled Ps586,693.2 million in August 2014, a
variation of 12.8%. Meanwhile, public deposits
in the financial sector in August 2014 reached a
total of Ps935.674 million, an annual increase of
10.4%, equivalent to Ps87,762,000.
The domestic currency deposits grew faster
compared to the same period of the previous
year, 12.9%; while foreign currency deposits
increased by only 3.6%. In August 2014, the
share of domestic currency deposits in total deposits in the financial system was 74.6%, up 1.7
percentage ratio to that shown in August 2013
(72.9%) points, reflecting a decline in the share
of foreign currency deposits, which went from
27.1% to 25.4% during the period. An important element worth noting is the fact that during
the period August 2013 to August 2014, Financial Intermediaries decreased their exposure to
credit risk by maintaining the downward trend
in its NPL ratio, which went from 2.9% to 2.2%,
driven by lower coefficients shown in commercial banks and savings and loans.
In particular, multiple banking delinquencies rates fell from 2.9% to 1.9% and provision
coverage of nonperforming loans increased
from 117.0% to 164.3 percent. Overall, the Dominican financial system has adequate liquidity, profitability and capital strengthening. The
solvency ratio remained above the 10% minimum required, reaching 18.18% in July 2014,
last available figure, while the return on assets
(ROA) and average equity (ROE) for August
was 2.02% and 18.33% respectively in the same
month. Commercial Banks showed levels of
2.05% ROA and ROE of 21.45%. This behavior of
the entities of the Dominican financial system
is mainly due to the implementation of bylaws
and regulations, by the Monetary Board, in line
with the Basel core principles and international
best practices.
In the recently celebrated Invest in DR Summit,
the central bank estimated that the national economy would grow between 5.5% and 6% in 2014,
quadrupling Latin American growth. What are the
main growth drivers?
During the period January-June 2014, the performance of the Dominican economy as measured by Gross Domestic Product (GDP) in
real terms (reference year 2007), recorded an
annual increase of 7.2%. This trend allows forecasting growth for the year 2014 between 5.5%
and 6.0%, higher than originally envisaged in
the macroeconomic framework of a real GDP
growth of 4.5%. The driving forces of economic growth expected for 2014 are agricultural,
mining, construction, trade and hotels, bars
and restaurants, due to the dynamism exhibited since late last year. In the case of Latin
America, Consensus Forecast predicts average
growth of 1.4% for 2014, figures that have been
revised downwards during the year due to decreases in estimates of growth in several of the
largest economies the region, such as Mexico,
Brazil, Chile, Argentina and Venezuela. For the
last two year changes in Real GDP at end-2014
of -1.6% and -2.6% respectively are forecast, reducing the average growth in the region.
What are the main policies the Central Bank is to
implement in 2015 to boost investment and commerce?
The central bank’s policies to encourage investment are aimed at ensuring macroeconomic stability, which the country enjoys. In
this sense, from January 2012, the central bank
adopted an Inflation Targeting Scheme as a
transparent and modern way to make monetary policy, consistent with the mandate of
maintaining price stability established in the
Constitution of the Republic and the Monetary
and Financial Law 183-02. Under this scheme,
the central bank will continue its proactive
and vigilant monetary policy of external and
internal shocks that may affect its inflation
target, maintaining proper coordination with
fiscal policy, in order to promote certainty for
economic operators and a climate favorable
investment. Another important aspect is to
ensure relative exchange rate stability under
the managed floating exchange rate regime
that the country possesses. For this, the central
bank will continue to monitor fluctuations in
the exchange rate, so that when sudden movements act are verified in the rate that may affect the expectations of economic agents, and
ensuring that the real exchange rate, as so far,
stay aligned with the macro fundamentals of
the Dominican economy.
What’s your general outlook for the economy of
the Dominican Republic in 2015?
According to estimates of Macroeconomic
Framework, the Dominican economy would
grow at around 5.0% in 2015, with an inflation
rate that point to the center of the target range
of 4.0% ± 1% of the central bank. This is accompanied by a relative stability of exchange
rate, since the strengthening of international
reserves that are expected to hold a minimum
of 3 months of imports of goods and services
associated with larger flows of foreign exchange
by the improved performance of the external
sector. Indeed, in a preliminary way, the projections indicate that by 2015 deficit on current
account is expected around 4.0% of GDP, and
future estimates downward, in line with the historical average of 3.5%. ✖
THEBUSINESSYEAR
43
The central bank's
policies to encourage
investment are
aimed at ensuring
macroeconomic
stability, which the
country enjoys. In this
sense, from January
2012, the central bank
adopted an Inflation
Targeting Scheme as a
transparent and modern
way to make monetary
policy, consistent
with the mandate
of maintaining price
stability established
in the Constitution of
the Republic and the
Monetary and Financial
Law 183-02.
44
THEBUSINESSYEAR
INTERVIEW
people’s
CHOICE
TBY talks to Manuel A. Grullón, President
of Banco Popular, on 50 years of serving
Dominicans, financial inclusion, and financing
the country’s tourism sector.
Banco Popular celebrated its
50th anniversary in 2014, highlighting its leading position in
the Dominican market. How has
the bank grown since its foundation and what do you consider
its landmark achievement?
Banco Popular has always
worked side by side with
Dominicans,
contributing
and accompanying national
growth and development over
the past 50 years. Our institution rose from the Asociación
para el Desarrollo, Inc. (APEDI), whose management was
led by Alejandro E. Grullón E.
and a group of accomplished
professionals and businessmen from the city of Santiago.
These men also created other
national development institutions across the economic,
regulatory, social, educational, and cultural spheres. Banco Popular opened its doors
to the public on January 2nd
1964. It was inaugurated as
the country’s first commercial
private bank and, thus, began an outstanding trajectory
of contributions in favor of
economic growth, democratization of financial services,
diversification and modernization of products and banking services.
The banking sector in the Dominican Republic is developing into intensively competitive
market with many well-established local and international
players. How does Banco Popular distinguish itself from the
competitors and what market
segments are you targeting?
Throughout Banco Popular’s
50 years it has cultivated deeps
roots in the Dominican people. It has grown organically
with the industry and has established a vast customer base
throughout the years. The
institution caters its services
to all segments within the industry, from children with a
savings account to multinational companies seeking new
investments. Over the past
decade the country has grown
significantly, and with this
growth a large number of international capital has found
opportunities to invest within
BIO
Manuel A. Grullón was
born in Santiago de los
Caballeros in 1953. He
obtained a degree in
psychology from Tulane
University in New Orleans,
and completed his master’s
degree in business
administration at New York
University. Mr. Grullon has
been involved with Banco
Popular Dominicano for
more than 30 years and has
held the presidency of the
Dominican French Chamber
of Commerce, and presided
over the Dominican Young
President’s Organization
Chapter (YPO) from 1993
to 1996. He is currently
a member of the World
President’s Organization
(WPO), an international nonprofit organization dedicated
to forging better leaders
through the exchange of
knowledge and ideas.
the country. Banco Popular
recognized this change and
has adapted to the current
landscape creating different
business segments within
their structure. Among many
areas in which we have introduced innovations is tourism
where a division is focused
solely on the industry catering
to the needs of this demanding segment. Institutional
Banking is an area catering
solely to local and international regulated industries
and government entities. Corporate Banking is a division
focused on high net-worth
clients of more than $5 million
in revenue. Investment Banking is the newest division with
three years in effect, and is responsible for several projects
involving local and international investors. Some of their
biggest international projects
include M&A, interest rate
swap, and syndications and
debt issuance of major multinationals within the tourism
and oil industries. Our Subagente Popular network is a
pioneering new channel for
financial inclusion, allowing
hundreds of thousands of
Dominicans access banking
services. Currently, we have a
network of nearly 300 banking subagents throughout the
country. Other financial inclusion initiatives have involved
work with country’s main telephone companies, where we
have implemented the option
of card-free ATM withdrawals,
or without a pre-paid virtual
account, by means of a mobile
phone, which allows thousands of people to have a bank
account and withdraw money
without a card, and without
having to be a customer of the
formal financial system. Impulsa Popular is our end-toend support initiative for the
SMS sector, which includes
a range of financial products
and services, and training
programs, discussion forums,
and digital tools that promote
them, regardless of whether
or not they are a client of Banco Popular. The object of this
initiative is to strengthen this
sector, which is essential for
the sustainable development
of the Dominican economy.
This initiative has been recognized by the Asociación
de Industrias de la República
Dominicana (AIRD), which is
the Dominican Association of
Industries. Meanwhile, ProExporta Popular is a groundbreaking proposal to comprehensively support Dominican
exporters, especially SMEs
that seek an international
presence. In addition to the
financial tools that assist exports, we offer support and
advice throughout the whole
internationalization process
as well as training workshops
and educational materials.
What is Banco Popular’s role in
the development of the Dominican tourism industry?
Ever since its creation half a
century ago, Banco Popular
has developed and supported the industry’s growth. In
fact, for many years our institution was the first and only
bank which loaned funds to
the Tourism industry. In 2007,
we created a ground-breaking
area specialized in catering to
the specific needs of this thriving industry. In 10 years, Banco Popular has financed over
Ps1.4 billion. In 2013, Banco
Popular was responsible for
over 61% of credits to this sector with a nominal amount of
$13.5 million. In 2014, the Asociacion de Hoteles y Turismo
de la Republica Dominicana
(ASONAHORES), which is the
Hotel and Tourism Association in the Dominican Republic, recognized our institution
as the tourism bank. ✖
Finance
THEBUSINESSYEAR
45
LOCAL BANKS B2B
local
SOLUTIONS
GUILLERMO
RONDÓN
AQUILES
HERNÁNDEZ BONA
Executive President,
Banco Ademi
President, Banco
Providencial
What role does innovation and
technology play in your operations?
our customers that render us as
a more competitive bank. We
have robust internet banking
services, whereby our customers can consult all movements
in their account, or from their
credit card. Transactions and
payments can be made from
their smartphones, in a system
that is active 24 hours a day, and
seven days a week.
GUILLERMO RONDÓN New
technologies are vital to our internal systems and the services
we offer to our clients. Indeed,
our regular investments are
one of the main reasons why
we have achieved our leading
position today, with a portfolio
of Ps12 billion. We have tools in
place for our agents to capture
information in all of the villages and neighborhoods in which
we operate. Our investment
in technologies in the field of
operations has given us great
results. We have also leveraged
technology to be closer to our
clients across alternative channels, including e-banking, mobile banking, and sub-banking
agents. As such, it underpins
our strategy.
AQUILES HERNÁNDEZ BONA
Banking has been moving more
toward the electronic model in
which the customer need not
visit a bricks-and-mortar branch
to take out a loan or transaction. They increasingly want to
realize transactions from the
comfort of their home, personal computers, or smartphone.
Banco Providencial is active in
this area, creating solutions for
What is your outlook for the
national economy and the evolution of the finance sector?
Which other trends have you observed in recent years?
GR The banking industry’s private portfolio grew by 12% in
2014, and we consider this to be
a healthy and stable sector, and
one that is strongly regulated.
The private sector grew slightly
more than its public counterpart. Overall, the finance industry is a key contributor to the
national economy. Over the past
couple of years, we have seen a
strong expansion of the micro
credit segment, which has become increasingly competitive.
The current government has put
the development of SMEs at the
forefront of its national plan. The
potential within this segment is
huge as over 90% of Dominican
companies are SMEs. Current
official reports put the growth
Two locals from the Dominican
banking firmament talk
technology, new banking trends,
and helping out the small
businessman.
potential for the segment at Ps36
billion. And in terms of national
potential, I think one of the main
challenges to overcome is in increasing exports.
AHB M-banking, or mobile
banking, is becoming widespread, as mobile payments are
related to smartphones, which
are commonplace these days.
Therefore, this is an obvious
medium to explore given the
large potential customer network. There are many alliances
between communication companies trying to motivate their
customers to adopt solutions
available via mobile phone. Responding to new trends, Banco
Providencial is continuing the
process of launching innovative
products to benefit customers,
in addition to making strategic
alliances with other sectors of
the economy, and by increasing
its presence in the market and
cutting costs.
What is your strategy for 2015,
and in which sectors do you
see the greatest potential for
growth?
GR We want to strengthen our
work on banking channels and
new technologies and become
more efficient, to further democratize banking products
and services. We will also continue implementing an aggressive strategy in the micro credit
segment; we have increased
our take in agricultural micro
credit and we see this sector as
one of the main driving forces
for the bank in this segment.
We also see great potential in
agribusiness. Micro companies
represent around 30% of GDP
and that is why there is a huge
potential there for us, and for
the country. However, we need
to work toward reducing informality levels here.
AHB We believe that the basic
elements of the economy are
well managed. Our geographic location at the center of the
Americas puts us in a strategic
position that connects us to
everyone easily. With stable
macroeconomic
indicators
and positive growth throughout the continent, we foresee
continued growth over the
coming years. The service sector is important, particularly
tourism, and work is underway
to develop the coast and make
the most of our island’s natural
beauty. Meanwhile, our strong
port infrastructure, and 10 international airports ensure that
the Dominican Republic is well
connected with the region and
the world. ✖
46
THEBUSINESSYEAR
The Bolsa de Valores de la República Dominicana (BVRD) has seen
a tentative step toward widening its menu.
Review
C A P I TA L M A R K E T S
LISTING TO FLOAT
The capital markets of many emerging economies resemble the Voyager Mars Mission
in terms of their ardent quest for liquidity. A
change has occurred at the Dominican Republic’s Stock Exchange, or Bolsa de Valores
de la República Dominicana (BVRD) that may
yet change the game. The BVRD arose from
the collective efforts of businessmen in the
late 1980s, and was inaugurated by Presidential Decree No. 554-89 of February 20, 1989.
The underlying motive behind the BVRD,
while straightforward in message, was tough
in execution; namely to promulgate a sophisticated and modern money market of diverse
instruments in a nation where commercial
enterprises were traditionally family-owned.
The capital generated by the trading of these
instruments, the idea went, would spur further investment in national growth. So far so
logical—and certainly an idea being set to
motion across the emerging markets today.
Yet, in truth, the BVRD remains embryonic—equity trading has been conspicuous in
its absence—albeit perhaps now in its 2nd trimester, having sprouted its first IPO, of which
more later.
From October 10, 2003 to April 18, 2005,
market restructuring prompted a suspension of trading. Today, the BVRD trades from
Monday to Friday, but briefly from 10 a.m. to
12am. Its central depository is CEVALDOM,
through which all transactions are processed,
and since 2011, is electronically traceable.
According to the bourse approximately 75%
of trades comprise cross transactions where
buyer and seller are clients of the same brokerage company, of which there are 20 certified to operate at the BVRD. The next, rather
delayed, step in formalizing the bourse came
in 2000 with Securities Market Law 19-00 that
created the securities market watchdog, the
Superintendence of Securities (SIV). Market
activity is also monitored by the National
Securities Council. The former body is autonomous, yet subordinate to the Monetary
Board, and is the body mandated to regulate
Dominican monetary and financial systems.
In regulating the BVRD it approves offerings
and systematically publishes comprehensive
market information to promulgate a climate
of transparency. Meanwhile, the seven-member National Securities Council features representatives of the Central Bank, the Ministry
of Treasury, the Chair of the Superintendent
of Securities, and four members from the private sector. The Council publishes monthly
securities market reports, and among other
roles, mediates in any dispute arising among
market participants, and hears appeals
against any punitive decisions of the Superintendency of Securities.
There are a number of incentives for foreign investment in the BVRD, in that interest
and dividends on traded securities are untaxed. Furthermore, Dominican law allows
for the sale of securities in foreign currency,
with dividends paid in the currency of the respective certificate transacted.
2013 Transaction Value in
Primary and Secondary
Markets (%)
Source: BVRD
Primary Market94.85%
Secondary Market
5.15%
Finance
A STOCK TURNING POINT
The recent healthy liquidity of the money
markets has perhaps ironically curbed potential interest in listing. Bank financing being readily available has meant that the only
appealing feature of going public was the
accompanying prestige, which the well-established family-owned entities, already long
reputable, found irrelevant. Yet listing had to
happen if only to slightly tip the scales away
from fixed instruments. And now, the BVRD
has seen the approval of its pioneering Initial Public Offering (IPO). Accordingly, the
shares of Santo Domingo-based securities
broker CCI Puesto de Bolsa become open for
trading on the BVRD in 1Q2015. Time will tell
whether the temptation of pursuing accountability, transparency and corporate integrity
will spread to other companies. Any entity, be
it a company or individual, planning to offer
securities on the BVRD is required to become
a corporation (sociedad anónima, or S.A.) in
line by Company Law No. 479-08, and is then
screened for adequate capitalization as a precursor to becoming listed.
PERFORMANCE
Bonds remain the primary instrument at the
BVRD, and by 2011, the corporate bond market had risen to 1.3% of GDP from just 0.1%
in 2005. And 2014 proved to be a memorable
year on that front. The Caribbean nation sold
a record volume in its first offering of 30-year
dollar debt since 1994. In April 2014, $1.25
billion of securities due in 2044 were issued
at a yield of 7.45%, according to Bloomberg.
Goldman Sachs Group Inc. and JPMorgan
Chase & Co. arranged the transaction.
BVRD data for 2013 puts combined trade
at the primary and secondary markets at
Ps9,799,937,615.20. Overall trading volume for all instruments in 2013 stood at
$116,800,968,466.91, where Special Investment Certificates claimed the lion’s share
at 57.8% of the total, at $67,452,769,972.79.
Debt bond 131-11 at 14.9 billion, accounting
for 12.7%, was next in line. Meanwhile, more
recent data for November 2014 reveals that
overall instruments traded in the primary
market stood at Ps44,425,654, and in the secondary market at Ps2,067,301,015.
The broadening of the Dominican equity
market ultimately requires IPO pioneers and
a paradigm shift in terms of corporate self-reflection. Government issuances in the debt
market are subject to effective regulation,
yet a wider range of instruments to entice
investors would foster greater transparency,
boost liquidity and by extension stimulate the
broader economy. ✖
THEBUSINESSYEAR
47
The underlying motive
behind the BVRD,
while straightforward
in message, was
tough in execution;
namely to promulgate
a sophisticated and
modern money market
of diverse instruments
in a nation where
commercial
enterprises were
traditionally familyowned.
48
THEBUSINESSYEAR
INTERVIEW
money BAGS
TBY talks to Felipe Amador,
CEO of the Dominican Republic Stock
Exchange (BVRD), on comparisons with
regional competitors and market trends.
How would you characterize the
Dominican Republic’s capital
market in comparison to other
countries in the region?
a deep fixed income capital
market, yet we lack activity
in the equity market, which
differentiates us from other
countries within the region.
However, given recently developed regulatory frameworks, the Dominican Republic will be entering a new
growth phase expected to
boost a stronger development
of the local equity capital
market. In 2013, for example,
we had the first Closed-Ended Fund trading on the exchange, and we are expecting
several other listings of mutual funds and investments
trusts throughout the coming
months. In terms of common
equity public offerings, this
year the securities regulators
approved the first ever IPO,
which is expected to be traded on the Exchange by early
2015. Moreover, there is an
interesting pipeline of large
market-cap companies soliciting approval to go public in
2015. Likewise, we are excited
about the prospect of several
government sponsored entities attempting to source
financing for specific infrastructure projects through the
equity markets.
It is a financing model that
we have observed in countries
like Russia, Turkey, Colombia, and Chile, which prompt
the development of their
local capital markets while
achieving an efficient capital
budgeting for project financ-
ing. Furthermore, we strongly
support this type of initiative,
which confirms the government’s commitment to the
promotion of the capital markets, as a means to achieve
sound economic growth and
development.
What activities is the BVRD currently focusing on?
The exchange has a threepronged strategy focusing
on providing state-of-theart infrastructure, engaging
in developing new markets/
services and taking on significant efforts to improve
the investment culture in the
Dominican Republic. Within
the strategy, we are focused
on new and existing issuers,
our market participants, and
local and international investors. In 2014, we successfully launched a new stateof-the-art trading platform
that will help develop new
products and markets as well
provide broker-dealers with
straight-through-processing
in the trading, clearing and
settlement value chain. We
have also launched the first
official Dominican government bond index (GOBIX)
which will help investors get
a real-time sentiment of the
fixed-income market and
structure new products and
investment vehicles. On the
primary market, we were concerned with the lack of significant growth given the nascent
state of our market; therefore,
over the past year, we have developed a join program with
the International Finance
Corporation
(IFC/World
Bank) to promote best practices of corporate governance
in Dominican companies, and
provide those companies with
training in finance, strategy,
and the possibility of going
public, among other topics.
During the second half of the
year, fixed income issuance
has more than doubled the
yearly amounts accounted in
prior years, and we feel that
2015 should be a year of significant growth as well.
In April 2014, the Dominican
Republic sold a record volume
of bonds, at $1.25 billion of securities due in 2044 at a yield of
7.45%. What is the significance
of this sale for overall national
development and what sectors
will benefit the most?
When you look back 15 years,
the longest part of the local
yield curve in the Dominican
Republic was less than a year,
and local investors were not
willing to go further into the
yield curve. Nowadays, the
government has been issuing
bonds at thirty years, in the
global markets and up to 15
years of maturity in the domestic market, at historical
low yields, which is being impressive given the recent evolution of the Dominican capital market. These bonds are
trading above par and with a
spread over treasuries tighter
than those of many countries
in the region, demonstrating
a positive surge of investor’s
confidence in the stability of
the political and macroeconomic outlook of the Dominican Republic. In addition, the
country’s economic performance over the past decade
has been widely recognized,
attracting a more sustainable
FDI flow. Correspondingly,
these global bonds are being used as a market gauge
to define the cost of capital
for many projects in the Dominican Republic, allowing
investors to have a better
benchmark to define trading opportunities in the local
market.
How dependent is the Dominican economy on international
trends?
The financial crisis in the US
did not hit us hard. We suffered in terms of real estate
because potential clients
lacked the income to buy a
second or third home in the
Caribbean. That type of activity might be affected, but in
terms of growth and stability
we have made significant advances. Our financial industry is stronger than 10 years
ago and public financial and
monetary policy is focused
on achieving the right balance
between growth and inflation.
However, we are sensitive to
foreign exchange fluctuations
give our net importer position. Nevertheless, I believe
we are reasonably isolated
from those global shifts. Finally, our dependence on oil
and on contracts with entities
such as PetroCaribe are being
constantly monitored to determine the potential impact
on the economy as a whole. ✖
BIO
Felipe Amador was named
CEO of the Dominican
Republic Stock Exchange
in May 2012. He has over
12 years’ experience in the
financial and securities
market and before joining
the Exchange he served
as Vice President of the
Financial Sponsors Group
in the investment banking
division of Barclays Capital
where he was responsible
for the execution of over $30
billion in securities offerings
and leveraged buyouts.
Originally from Cuba,
Amador has an MBA from
Stanford Graduate School of
Business and a Bachelor’s
degree in economics with
honors from the Pontificia
y Maestra in Santo Domingo.
Finance
THEBUSINESSYEAR
49
INVESTING IN CAPITAL MARKETS B2B
sound
INVESTMENTS
GUILLERMO
ARANCIBIA
General Director,
Jamaica Money
Market Brokers S.A.
(JMMB Puesto de
Bolsa)
NINOSKA
FRANCINA MARTE
DE TIBURCIO
General Manager,
PARVAL
You are both leading companies
in the field of investments and
securities. What expertise can
your clients count on?
NINOSKA DE TIBURCIO We
were the first brokerage firm to
be registered with the Superintendency of Securities (SIV), as
well as the first to have a licensed
securities broker. Through the
years, we have become a leading brokerage firm, with a keen
and accurate vision that allows
us to manage and structure assets, as well as provide advisory
services concerning financial
operations that offer the greatest productivity and profits. Our
services stand out for their high
efficiency and ability to meet
customers’ needs. We work in
line with the best market practices and high ethical standards,
providing greater transparency,
quality, and safety.
GUILLERMO ARANCIBIA The
securities market is new and
will continue be so until all players can demonstrate the importance and relevance of the
long-term results of an active
securities market, and how it
can positively impact the state,
as well as companies and individuals, bringing prosperity and
growth to the broader economy via products and diversified
funding of investments.
Investments and securities are major growth
areas for the Dominican economy.
What are your main objectives
for 2015?
GA Unfortunately in 2015 we
foresee more of the same, as no
major or important changes will
occur. We would like to see the
securities market open to new
opportunities creating cheap
funding and being the engine to
reactivate the economy. Being
the bridge between the investors and the productive agents,
developing new businesses to
produced locally what today is
imported, with all the positive
impact on the local economy
like job creation, eliminating
the demand for cheap US dollars, and helping to increase
productivity to export excess
production.
NT We plan to continue expanding our client base and
developing new products. In
mid-2014, we created a sales
department with a team of five
people that are targeting retail/
non-institutional
customers.
This segment offers the greatest
growth potential for the coming
years. We are also evaluating the
establishment of at least one regional branch in 2015.
What strategies have allowed
you to achieve such positive financial results?
GA This can basically be attributed to diversification and
accelerated growth with macroeconomic stability, amid outstanding market conditions.
NT Competitiveness is not always or necessarily related to
interest rates in our view of the
markets and business. We have
a holistic view from the customers’ point of view, which differentiates us from the competition in the markets where we
operate.
In April 2014, the Dominican
Republic sold a record amount
of bonds—$1.25 billion with a
maturity of 2044 and yield of
7.45%. What is the significance
of this sale for overall national
development, and what sectors
will benefit the most in your
opinion?
NT The 2044 bonds were the
country’s first offering of 30year dollar debt in the past decade. It allowed the country to
take advantage of low borrowing costs. Proceeds will be used
to finance infrastructure projects and complement the national budget.
In June 2014, the Superintendency of Securities approved
your public offering of securities. Could you tell us about
your investment plans?
NT The funds obtained
through this issuance will be
invested in publicly offered
securities. This is our fourth
issuance of PARVAL Bonds.
We have already placed Ps300
million and plan to issue the
remaining Ps200 million in the
coming months. ✖
50
THEBUSINESSYEAR
FOCUS EQUITY MARKET
The Dominican Republic is going through an important inflection
point towards positive change in its financial market.
DR’s VERY FIRST IPO
FOR MANY YEARS, the Dominican Repub-
lic enjoyed a deep fixed income capital market,
nevertheless the country lacked activity on the
equity front. However, given new market trends
and a recently developed regulatory framework, the Dominican Republic will soon enter
a new growth phase, boosting development of
the equity capital market.
In 2013, the Stock Market of the Dominican
Republic (BVRD) traded the first Closed-End
Fund. Felipe Amador, BVRD’s CEO told TBY
that the Dominican stock market was, “expecting several other listings of mutual funds
and investments trusts throughout the coming
months.”
Furthermore, the very first IPO in the Dominican Republic’s history has recently been approved. This momentous IPO, undertaken by
CCI Puesto de Bolsa (a Santo Domingo-based
securities broker), is expected to be traded on
the BVRD in the first quarter of 2015, and will
undoubtedly have a transformative effect on
local securities market.
CCI Puesto de Bolsa has been represented
by Squire Patton Boggs, led by Santo Domingo-based corporate partner Awilda Alcantara-Bourdier (AAB), in securing necessary
regulatory approvals. As stated by AAB, “this
IPO demonstrates CCI Puesto de Bolsa’s commitment to the Dominican Republic, as well as
to implementing world class corporate governance standards, paving the way for other local entities to follow.” Feller Rate has rated CCI
Puesto de Bolsa’s solvency at BB with a stable
outlook. The stock issuance was authorized for
as many as 373,734 shares and according to
Andrea Rodeschini, spokeswoman for Squire
Sanders, “it is understood that the most significant aspect of this operation is that it will open
a new market for local and foreign companies
that were interested in issuing stock, but did
not want to be the first ones to do so.” Now, led
by CCI Puesto de Bolsa’s example, several Dominican companies are expected to follow; as
Amador put it, “there is an interesting pipeline
of large market-cap companies soliciting approval to go public in 2015.”
Increasing interest in corporate governance
among Dominican companies is considered
a turning point, and is expected to profoundly
change the landscape of the Dominican stock
market. Meanwhile, according to Guillermo
Arancibia, JMMB Puesto de Bolsa’s General
Director, “if these opportunities crystallize the
market will obviously change dramatically, not
because the equities will generate a high transaction volume, but because there will be a new
accurate perception in the entire market of
what the real value added of the securities market really is.” ✖
Finance
THEBUSINESSYEAR
Favorable demographics and the rise in economically productive
sectors such as tourism will see a gradual rise in the demand for
insurance coverage.
Review
INSURANCE
THE PREMIUM
SECTOR
A paradox of the nascent middle classes of
emerging markets is that amid the novelty of
disposable income, the concept of insurance
coverage—indeed saving of any kind—is often a pill too bitter to swallow. Thus, while
consumption feeds the broader economy, the
more vulnerable among the population, such
as small farmers (agriculture accounts for 11%
of GDP) especially in the natural disaster prone
Dominican Republic, bear heavy risk.
The Dominican insurance market hosts
around 40 companies, but is hugely concentrated. When adding two local reinsurance companies and brokerage houses, the number of
actors reaches close to 1,200. Yet five insurance
firms hold 80% of the overall market—between
2006 and 2013 generating premiums of approximately Ps200 billion. Industry watchdog, the
Superintendency of Insurance, indicated total
net premiums generated between January and
November of 2013 of Ps27.768 billion, up 4.83%
YoY. Meanwhile, sector potential is clearly evidenced in the growth in premiums generated of
between 8% and 20% in the 2006 to 2012 period,
and in the low 1.21% share in GDP, well short of
the 3.8% Latin American average. Meanwhile,
premium per capita is below $100, ranking the
country 30th Latin American nations.
On the positive side, a number of factors will
ultimately spur sector growth, one of which is
the republic’s close relations with the US, and
consequent pursuit of stabilizing economic
policy. The IMF estimates Dominican economic growth at a stable pace of 4% to 5% over
the 2012–2016 period. Moreover, many Amer-
icans—among other foreign nationals—opt to
retire in the country, increasing demand for
health, retirement, and home content coverage. Meanwhile, World Bank data indicates
GDP on the march, at $5,826.13 for 2013, up
from $5,059.03 a year earlier. And then of
course there is tourism, which creates employment in tangential sectors, raising both the
demand for diverse coverage, and disposable
income to pay for it.
Market Share of Total
Premiums Jan - Oct 2013
Source: CADOAR
HEALTH AND LIFE
Mandatory health insurance was introduced
by the landmark Social Insurance Act 87-01 of
2001, with the country’s Service Health Plan
(PDSS) commencing in 2007. And as incomes
gradually rise, examples from around the world
indicate that more people opt for private coverage of higher quality. Meanwhile, though health
insurers continue generate the bulk of their
premiums from social insurance. For 2013, the
health insurance market was led by Universal,
Colonial, and Seguros Banreservas on respective market shares of 28%, 18%, and 9%. For
2013 health coverage registered YoY growth of
21.83%. Pointing out another brake on to personal insurance premium growth, namely 16%
taxation, Rafael Nolasco, the President of Patria
Compañía de Seguros told TBY that, “we probably are one of the only countries in the world
to levy a tax on life insurance, which really does
not help. It’s just as well that the country has
been rather lucky that since 1998 it hasn’t seen
a hurricane affect it in the way that Hurricane
Georges did.” The 15 members of the Domin-
Seguros Universal
25%
Mapfre BHD Seguros
17%
Seguros Banreservas
16%
Seguros Sura
12%
La Colonial de Seguros
11%
Others
19%
51
52
THEBUSINESSYEAR
ican Chamber of Insurers and Reinsurers (CADOAR) manage roughly 95% of the total Dominican insurance market. Executive President
Miguel Villamán in a TBY interview Miguel Villamán put a number to the above-mentioned
loss by citing sector reports showing, “that due
to these issues we lose about $125 million of insurance products every year.”
REINSURANCE
As if the global meltdown was not enough to
rock the Dominican Republic due to its extensive trading and commercial links to the US,
the 2010 Haiti earthquake added seismic woe
to the insurance sector. This, like Hurricane
David back in 1979, brought home the vital nature of reinsurance in ensuring the continued
solvency of sector players. The Dominican Republic hosted its first international reinsurance
conference in 2012, which in a cosmic joke,
coincided with Hurricane Sandy. Main takeaways were the need to promulgate the organic growth of sector professionals, and rethink
the, some consider, punitive taxation system
to incentivize insurance participation across a
broader demographic.
MICRO INSURANCE, MACRO
AWARENESS
With so few of the Dominican Republic’s 10
million population covered by insurance, alternative paths are being followed to extend
peace of mind to a wider swathe of citizens. A
large part of this is affordable premium conditions and public understanding. Coop-Seguros
(COOP-INSURANCE) is a unique force in the
Dominican insurance sector as the sole comprehensive insurer to comprise a cooperative.
Active since 1990, its objective is to provide
coverage to social groups unable to contemplate paying insurance premiums, and moreover to inform on the benefits of insurance as
an investment instrument among cooperatives,
trades unions, and other NGOs. General Manager Ruth Soto explained how, “Education is
one of our main cooperative principles and is
part of our strategic plan to increase efforts to
further educate our market and deepen understanding.”
Another advocate of micro insurance is
Seguros Sura, which closed 1H2014 on a net
profit of $221.4 million, up 19.2% YoY. President Carlos Ramón Romero B. explained his
performance in a TBY interview thus, “The
growth of the total insurance market in terms
of written premiums was 5.8% in 1H2014. In
the Dominican Republic Sura grew by 6.5%,
and our goal for 2014 growth of 10%.” And in
terms of the motivation that underpins it he
added, “We are firm believers in what we call
‘microseguros’, selling through alternative
channels to a broader base. We have a department dedicated solely to that because we think
we should go down the pyramid so that everyone is protected. This is also a social responsibility.” In an example of the lateral approach
adopted to convert the uncovered citizen,
the company has partnered Universidad Tecnológica de Santiago, “which has 7,500 students to provide personal accident insurance,
which is not yet required by law.”
READY RECKONER
According to the Superintendency of Insurance, 1Q2014 total net premiums written
soared 8.1% YoY to Ps7.8 billion. Net non-life
premiums were at Ps6.6 billion, up 9.5% YoY
from Ps6 billion. Net total life insurance premiums rose 0.8% to Ps1.2 billion. And among
the non-life segment, Agriculture & Livestock
insurance premiums led the pack on a YoY rise
of 186%, despite holding a slender 0.4% market share. For 2013 overall, general insurance,
coughed up 75% of total premiums on a YoY
rise of 2.84%. The largest non-life premium
generator was the fire branch, with a 33.5%
stake and net premiums of Ps2.6 billion, up
8.7%. This was closely followed by motor insurance, which with a market share of 31.2%, posted quarterly revenues of Ps2.4 billion, up 6%
YoY. Miguel Villamán summarized the logjam
in automotive premium generation as follows,
“More than 60% of all the vehicles sold last year
(2013) are not actually insured. What’s more,
over 50% of registered Dominican vehicles are
motorbikes—almost 1.7 million—of which only
around 10% are insured. Regarding other vehicles (the other 50%), only around 30% is insured.”
By sector player rankings, in 1Q2014 the
top-three companies were Seguros Universal,
Mapfre BHD Cia de Seguros, and Seguros Banreservas on respective net premium readings
of Ps2.2 billion, RD$1.1 billion, and RD$1 billion. For 2013 overall, the three companies had
respective market shares of 27.6%, 14.7%, and
15.6%. Seguros Banreservas makes use of the
Bank-Assurance channel made available by its
bank, the Reserve Bank of the Dominican Republic (BanReservas) and its nationwide network of roughly 180 branches.
Consolidation has been observed in the sector, notably when in December of 2013, Mapfre
BHS, along with Banco Leon (owner of insurer
Banca Seguros), combined their entire financial operations. In consequence, Mapfre found
itself breathing down the neck of sector giant
Universal Insurance. ✖
CARLOS RAMÓN
ROMERO B.
Seguros SURA
The insurance market has
consolidated into one of the
sectors with the highest contribution to the local economy,
but is facing a tax burden that
threatens to grow over time.
What is your view on the country’s current tax framework?
The Dominican Republic is
one of a few countries in Latin
America that imposes this
tax on insurance companies.
Insurance is being treated as if
it were a luxury product when
in fact it is a necessity. This tax
is usually applied to alcohol
and cigarettes. We believe that
the tax should be eradicated.
It is a permanent issue on the
agenda of Camara Dominicana
de Aseguradores, of which I am
now president. It is an obstacle
to developing life insurance.
What is your outlook for the
future of the insurance sector
in the medium term?
All companies are now focused
on personal insurances such
as life and accident because
there is great opportunity for
growth in the DR. Still, 75% of
the market remains in property
and casualty, while life, medical,
disability, and personal accident
make up the remaining 25%.
Companies could be more
creative to maximize these latter
types of insurance since the population of the Dominican Republic is 10.4 million, while market
penetration is only 1.23%. The
opportunity for growth is huge,
and our company is focused on
this potential.
Finance
THEBUSINESSYEAR
53
INTERVIEW
TBY talks to
Zanoni Selig, CEO
& Chairman of
WorldWide Group,
on the impact of FTAs
and trends in the
market.
HEAD strong
WorldWide Group is a leader in
international health insurance
with a 70% market share. What
factors led the company to establishing such a remarkable
position in only 15 years?
WorldWide Group specializes
in major medical plans, which
differ considerably from local insurance. Normally, in
the Dominican Republic, the
problem is that most of the
market players are major US
or European companies that
normally sell offshore and
local companies don’t have
a critical mass in order to
compete with them. We have
reached this position in 15
years, because we don’t really have local competition and
we focus on major medical
plans. We cover up to $2 million per person. We have hundreds of clients in order to do
business like this. I think that
our work fights against a paradigm. People have a tendency
to think that this kind of insurance is something that has
to be bought from big names;
however, they have started to
realize that WorldWide has
the same products and the
same kind of service and coverage, which is the reason why
we have reached this position.
It is something that we did in
Panama, in the Dominican
Republic, and something that
we can do in every country.
What impact do the free trade
agreements (FTAs) with the US
and the EU have on the overall
international health insurance
sector in the Dominican Republic, and how does WorldWide
compete with the international
insurers?
FTAs have an impact, which
in our case is a positive one. I
personally think that the barriers that countries put up in
the economy are not good. I
am convinced that businesses
need to be free and compete
with each other. In our case,
we may not compete with local companies, but our competitors are large international
companies. We sell the same
products but at better prices,
and people focus on prices.
We can compete with midsize international companies.
I don’t see any problem with
that, as I see competition as a
good thing.
How have WorldWide’s regional operations evolved over the
few last years, and what have
been the company’s major milestones in 2014?
We have evolved our business
model. WorldWide employs
two different methods when
entering a market. One of
them is direct, such as in the
case of the Dominican Republic and Panama. We have an
insurance license, and we sell
directly and through brokers,
which is something we are
extremely successful in doing. Our other entry method is
through reinsurance. In some
markets, it is better for us to
enter via an indirect way. An
example of this would be Guatemala, which we will open
through this way in January
2015. In Guatemala, we will
work with a Guatemalan company that will sell our products
and are reinsured by WorldWide. These are the two different entry methods that we use
in order to cover the region.
What is your expansion strategy, and what other countries,
besides Guatemala, is WorldWide planning to enter?
We plan to expand into Costa
Rica, which is different from
the other countries because
it used to have an insurance
monopoly for many years,
and people there know little
about competitive insurance.
In this case, it is a promising
market and we will enter it indirectly by reinsuring a Costa
Rican company.
What trends do you see in demand for the international
health insurance in the Dominican Republic?
The exciting trend is in the
health sector, where people are looking for treatment
outside the country. We have
many rich and upper-middle
class Dominicans who normally go to the US looking for
better treatment; however,
there are many lower middle-class people or people
that due to their work can’t
have private insurance in
the US. They are looking for
health treatment outside the
US in places such as India,
Colombia, and Chile. There
are many people in the US
traveling to India in order to
have surgeries. Another interesting change has been
the development taking place
in the countries we cover. In
developing countries, most
people think about insurance
because they have something
to protect and they realize it is
important.
What is the importance of the
partnership with the German
Investment and Development
Company (DEG) for your company’s development?
WorldWide was founded in
1999, and at that time our partner was a local bank, BHD—a
prestigious institution in the
Dominican Republic. However, we needed a partner that
can go with us throughout the
entire region. DEG was created 50 years ago with an aim to
invest in the private sector and
in companies that promote
the development of emerging
markets. We are a company
that has to invest part of our
reserves in our countries, and
we, of course, have competitors that sell offshore. DEG
realized that this was an excellent investment in order to
help develop the economy of
Panama. ✖
BIO
Zanoni Selig is the founder
and CEO of the insurance
holding WorldWide Group.
He was born in New York
City in 1961. He started
his career working for the
Royal Bank of Canada in the
Dominican Republic while
attending college. In 1982
he earned his BA degree in
Economics. After graduation
he founded the insurance
broker company Selig &
Asociados. This company
reached a leading position
in the field of personal
insurance intermediation
market. By 1992, he had
established a general
agency representing top
insurance companies
from the United States
of America, becoming
one of the top sellers in
the Latin America region.
Zanoni Selig has been the
CEO of the company since
its foundation and also
serves as chairman of the
WorldWide Group Board.
54
THEBUSINESSYEAR
INTERVIEW
looking
AHEAD
TBY talks to Rafael Nolasco,
President of PATRIA Compañía
de Seguros, on the company’s
portfoilio and raising awareness of
products on offer.
Patria Compañía de Seguros,
S. A. was founded on July
26th, 1971. How did the concept
arise and how has the company
evolved since its foundation?
The company was founded by
my father, also named Rafael
Bolívar Nolasco. Back then,
he worked for another insurance company as the regional
manager in Santiago, but saw
that this company could have
operated a lot more efficiently. As a result, he began look-
BIO
Rafael Nolasco was born in
1979 in Santo Domingo. He
completed his Associate’s
degree in Business
Management in Tompkins
Cortland Community
College (TC3), a college
of the State University
of New York, as part of a
student program with the
local Pontificia Universidad
Católica Madre y Maestra
(PUCMM), where he
graduated with a Bachelor’s
degree in Business
Administration, and later
on completed a Master’s
Degree in Marketing on this
same university. At the age
of 21, Mr. Nolasco entered
PATRIA Compañía de
Seguros, S. A. as the VicePresident of Operations.
At the age of 26, he was
appointed as Company
President, a position that he
has held ever since.
ing for people to work on his
personal project, his dream,
and within two years found
an investor in Dr. Miguel Ángel Luna Morales. The company had its ups and downs,
as start-ups usually have,
but at around the year 1989,
Dr. Morales passed away,
and the company struggled.
For this reason, my father
had to acquire the company
in its entirety. Those were
some challenging years for
my father, trying to keep the
company afloat amongst a
lot of turmoil. Since its foundation, the company started
working in the vehicle insurance niche, where it has
positioned itself. My father
always believed in a company oriented toward helping
his family and in a family-run
model. All of my four siblings
have been or are still active in
this business, the eldest of my
brothers passed away on July
2000 while holding the position of Vice-President of the
company, and that is when
my father asked me to come
and join him.
What is the composition of your
portfolio and what sort of clientele are you targeting?
When I joined the company I saw that we had a strategic weakness in being a
one-product company. I suggested to my father, who was
the company president at that
time, that we should diversify
so we wouldn’t end up in a
bad position in terms of our
company image. A few years
later, I managed to convince
him because due to considerable foreign investment in the
country at the time, including
such firms as Mapfre and Seguros Constitucion, the market began to change, which
created new challenges for us
to try and remain competitive.
To be able to thrive in the new
commercial climate required
us to change the company
image, broaden our offer, and
implement changes in the infrastructure and in our computer systems.
I was appointed President
in December 2005, but back
then, our main office in Santo Domingo was located in a
building on the 4th floor , with
no parking space and no elevator. We managed to move
the office to a much more
adequate place where we had
access to our clients in Santo
Domingo, and we also transformed our image. We looked
for reinsurance companies
that could provide us with the
support we needed. Currently, our main business is still
car insurance, but within this
area we have many subcategories. Auto liability insurance is about 80% or 85% of
our business, and then there
is full auto coverage, which is
the segment that could represent the most growth in the
company, but it is also the
segment that could represent
the most claims because of
the lack of traffic education
and traffic law enforcement
in the Dominican Republic.
There is another subcategory,
which is cargo insurance, and
we have grown considerably
in this area. We did not have
that category six years ago, but
we now insure trucks for liability, as well as the container
and the cargo. That has been
one of our key growth segments. There is also liability
insurance, which we do not
usually offer as a single product, and instead if someone
wants liability insurance for
their business, we will also
offer property, theft alongside
other coverages as well. Currently, financial institutions
are requesting unemployment insurance, which is not
a product we have considered
providing, although depending on circumstances we
might enter this area in 2015.
In terms of channels and of
sales distribution, there are
many opportunities for new
sales channels for microinsurance policies. We are analyzing the possibility of offering
products in new channels the
following year.
Despite being vulnerable to
natural disasters, a significant
proportion of the population
lacks insurance. What initiatives
should be taken to raise awareness and increase up-take?
It has to start with the government insuring infrastructure. We experience
heavy rains, and flooding
is frequent, making this an
urgent area of attention. Importantly, incentives need
to be put forward to encourage the use of insurance, not
only in terms of property, but
also with life insurance. We
probably are one of the only
countries in the world to levy
a tax on life insurance, which
really does not help. People
need to be educated about
insuring their life, as well as
their cars, their homes and
their businesses. It is just
as well that the country has
been rather lucky that since
1998 it has not seen a hurricane affect it in the way that
Hurricane Georges did. ✖
Finance
THEBUSINESSYEAR
55
INSURANCE VOX POPULI
A SAFE HAVEN
The Dominican Republic’s insurance
sector is moving into new areas,
with big potential for growth in the
coming year.
JEANNIDALIA
GRULLÓN
CEO, MAX Corredores
de Seguros
T
he Dominican Republic has been the
fastest growing economy during the past 50 years.
We believe the insurance sector
will continue to grow at its historic pace in the medium run.
We wish it could be better, of
course, in terms of global expectations and GDP.
In 2013, the penetration rate
for insurance in the Dominican
Republic was 1.2%, but prior to
that it was 1.3%. Hence, it has
actually decreased as a percentage, in terms of premiums it
has increased, of course. MAX
Corredores increased the number of policies underwritten by
7% in 2013. We have forecasted
that this figure will go up to 9%
in 2014. We expect that 2015
will improve further because
of the way insurance has been
behaving, and because many
foreign companies are coming
to the Dominican Republic and
investing here.
T
oday there are around 30 insurance companies,
plus two local reinsurance companies, operating
in the Dominican market. If we include brokerage houses, the number of players in the industry rises to
almost 1,200. Yet currently, five companies hold an 80%
market share, with the leading player on 27% of the market.
These five firms handle 97% of property title insurances and
65.7% of vehicle premiums at the moment. Two of these five
leading companies are international corporations—Sura
and Mapfre. Seguros Universal is the largest Dominican insurance company in the market, followed by Seguros Banreservas (state-owned company) and La Colonial. A total of
16 insurance companies make up CADOAR. In order to be
a member of our Chamber, insurance companies have to
comply with several requirements; for example, the entire
regulatory framework. CADOAR members manage around
95% of the insurance market in this country.
MIGUEL
VILLAMÁN
Dominican
Chamber of
Insurance and
Reinsurance
Companies
(CADOAR)
RUTH SOTO
FELIPE MENDOZA
President, Segurnet
M
y belief in the promising future of the
insurance sector is
supported by the investments
being received from abroad. A
lot of companies are coming to
the country and establishing
insurance operations. Very important groups in Latin America
are looking at the Dominican
Republic as a market with potential for a profitable growth. I
think that if we bring the products to the clients instead of the
clients thinking of insurance as
something complicated, and if
we design simpler policies and
products, we could develop a
stronger market. For example,
if the insurance participation
were around 3% of the GNP, that
would mean the market would
grow in around 200% of what it
is right now. At the end of 2013,
the market closed with total premiums written at Ps30 billion,
and once we achieve higher
penetration in the economic
activity, further and promising
growth awaits.
General Manager, Coop-Seguros
T
he sector is set to rapidly grow up to
the point of becoming one of the main
economic sectors in the country. The
company will follow such trends and we will position ourselves among the top-five as a result of
our cooperative strengths.
Since we strictly comply with our two regulatory bodies, we are the only insurance company
in the country that is regulated by the Law of
cooperatives and the Law of the Superintendency of Insurance. This enables us to provide our
clients with the best and most reliable products
and services, supporting them in the moment
they need it the most. We are a cooperative insurance company; when we grow as institution,
the country grows with us.
Our growth in assets was due to the purchase of Acsel system, an intangible asset that
will amortize in 5 years. With this development,
Coop-Seguros takes an important step by implementing insurance software that guarantees the
best services to our clients.
COMMUNIQUÉ
ITB BERLIN 2015
HIGH DEMAND BY
EXHIBITORS FROM AROUND
THE WORLD
“
Booking levels are high, compared to 2014, as the world’s leading
travel trade show prepares for the new year. Many of the halls at
ITB Berlin have been booked up since early December. Demand
by exhibitors from the Arab countries and Asia is particularly high.
Africa will also be represented in large numbers at the upcoming
ITB Berlin. However, Sierra Leone is taking a one-year break from
the show due to events surrounding the Ebola outbreak. As a travel
destination Iran has become more and more popular this year and
at ITB Berlin 2015 will be occupying an entire hall on its own. Following an absence from the show, the Hilton and Hyatt hotels will
again be exhibiting in Hall 9, where the hotel industry is on display.
Mongolia is the partner country of this year’s ITB Berlin.
The range of travel technology products and services continues
to grow apace and at ITB Berlin this will be one of the largest and
will be able to briefly introduce themselves, discuss topics and busiinternationally most diverse displays anywhere in the world. For
ness, and establish initial contact. Exhibitors can meet international
the first time the Chinese companies Baidu and Qunar and a joint
bloggers dealing with a variety of topics, including adventure travel,
display of Italian startups will be exhibiting at the show. Rounding
luxury travel and family travel. The event also opens up new possioff this segment will be the eTravel World, with displays devoted to
bilities for destinations, hotels and companies to market their proddigital marketing, social media and mobile travel services. Papers
ucts and services.
on current trends in the markets of Asia and South America will
In 2015, for the first time and in partnership with National Geoalso be held there.
graphic, ITB Berlin will present the World Legacy Awards in recAccompanying the show will be the world’s largest travel industry
ognition of sustainable tourism projects. At ITB Berlin 2015 corconvention whose focus in 2015 will be on the sharing economy and
porate social responsibility and socially responsible tourism will
current forms of big data and ways to exploit it for marketing touronce again be key topics. With the ITB CSR Day at the ITB Berlin
ism. Visitors can find out even more about professional and advanced
Convention, its programme of events, and with exhibitors in Hall
training opportunities as well as about jobs in tourism than in previous
4.1 under the heading of Adventure Travel & Responsible Tourism,
years at the show. For the first time the Emirates Academy of HospiITB Berlin will be placing a focus on the topic of sustainability.
tality Management from Abu Dhabi and Hoteleducation.ch from SwitWith over 10,000 exhibitors from around 190 countries ITB Berzerland will also be taking part.
lin is the shop window of the
More and more companies
international travel industry.
are exploiting the wide-rangThe turnover by exhibitors at
ABOUT ITB BERLIN AND THE ITB BERLIN CONVENTION
ing impact of travel blogs in
the show of around 6.5 billion
th
ITB Berlin 2015 will take place from Wednesday March 4
order to target customers. At
euros is proof of the economic
to Sunday March 8th. From Wednesday to Friday ITB Berlin
the upcoming Blogger Speed
boost that ITB Berlin provides
is open to trade visitors only. The ITB Berlin Convention, the
Dating event ITB Berlin will
in its role as the industry’s platlargest event of its kind, will be held from Wednesday, 4 to
be offering members of the
form for conducting business
Saturday, 7 March 2015 alongside ITB Berlin. More details are
travel industry an opportuniand sales. A few years ago the
available at www.itb-convention.com. ITB Berlin is the global
ty to meet with experienced
introduction of the ITB Buyers
travel industry’s leading trade show. In 2014 a total of 10,147
travel bloggers from around
Circle established an exclusive
companies and organisations from 189 countries exhibited
the world for the third time.
meeting place for around 850
their products and services to 174,000 visitors, who included
During the eight to ten-minute
handpicked senior buyers from
114,000 trade visitors.
time slots both participants
the travel industry. ✖
With over 10,000 exhibitors
from around 190 countries,
ITB Berlin is the shop window
of the travel industry.
”
THEBUSINESSYEAR
59
62
68
The Hon. Pelegrín Castillo
Semán, Minister of Energy and
Mining on utilizing the country’s
resources.
The Dominican Republic aims
to obtain 25% of its energy need
from renewable power sources
by 2025.
Successful gold mining
operations, new prospects, and
an evolving business climate
make the sector appealing.
57
Energy & Mining
REVIEW ENERGY
The electricity sector in the Dominican Republic has long fallen short of
demand, hampered by inadequate infrastructure and high costs. This is
now changing, with implications for the economy.
E
nergy prices in
the Caribbean are
among the highest in the world,
and the Dominican Republic
is no exception in the region.
The country relies heavily on
fossil fuels, particularly diesel and heavy oil, for its electricity production. In the past
this has led to shortages and a
system that has been both inadequate and unreliable. The
World Bank sees reform of the
energy sector as the key to unlocking the country’s overall
economic potential, while at
the same time enabling the
Dominican Republic to break
away from the volatility of the
oil markets. Overall, energy
costs did manage to decline
in 2H2014, in line with the
cost of oil. When such markets have been high (although
the recent fall has seen prices
decline from around $120 a
barrel to just $80 in the space
of a few months), the country
has lacked any room to maneuver. High energy prices
limit economic growth, and
hamper investment and consumer spending, decelerating
economic diversification and
WATTS UP?
Image: Caribe Trans
Recent reforms have taken the form of
multifarious investment projects—
renewable energy, better engineering and
industrial infrastructure, and reforming
and modernizing the national grid.
strengthening. Until recently
a lack of reform in the energy
sector had curbed the country’s ability to benefit even
from lower priced oil.
Recent reforms have taken the form of multifarious
investment
projects—renewable energy, better engineering and industrial infrastructure, and reforming and
modernizing the national
grid, enabling more people
to access a bigger and better
power supply. This is now beginning to have a real impact,
reducing costs to the consumer and ensuring enough power is available to fuel a sparky
economy.
In many ways, 2014 was the
year that such reforms began
in earnest, and in three significant ways. First, reliance
on fossil energy has declined,
from 86% of the sector’s total
in 2006 to 74% in 2014. Aside
from efforts to open up new
fronts in renewable energies
(see below), the sector’s reforms have also led to greater efficiency, smaller scale
generator facilities and upgrades to stations. Eight micro-hydroelectric plants and
58
THEBUSINESSYEAR
three substations were completed in the year
to June 2014. Several other substations were
renovated. These new facilities give the government better capabilities in terms of monitoring—and therefore anticipating—changes
in demand day-to-day.
The National Energy Plan sets out the Government’s goals for the coming 10 years. The
Minister of Energy and Mining, Pelegrín Horacio Castillo Semán, told TBY: “In 2015, we will
have an energy efficiency and government savings law that will give access to this policy to the
entire society. We aim to substantially increase
the country’s fuel storage capacity, which is
crucial in some categories. With a consumption
of 140,000 barrels a day, it makes sense to increase the country’s refining capacity and take
advantage of our geographical location and become a center of storage, processing, mixing,
and regional and international distribution.”
Second, and in tandem with this, renewable
energy now accounts for some 15% of the country’s power supply, up from just 5% 10 years
ago. This is partly thanks to a law passed in May
2008 that committed the country to embracing
renewable energies, and setting out this commitment on the statute book. The law was reflective of the country’s commitment to green
energy, and to an open policy of following in
the US’ footsteps, as well as being reflective of
a change in the way the Dominican people saw
the issue. In short, in 2008 the environment became a priority for the government, and 2014
saw major advances on the back of the past five
or six years’ investment and policies.
Solar and wind are the mainstay of the Dominican Republic’s renewables bringing the
country’s renewable capacity to some 500 MW
by the end of 2013—representing an investment of $900 million. The Dominican Republic is committed to obtaining 25% of its energy
from renewable power sources by 2025, as part
of a wider goal to reduce greenhouse gas emissions by 25% by 2030. Plans will be announced
in 2015 for a massive wind turbine farm off the
country’s northern coast. This area, and the
border region with Haiti, is described by Mr.
Semán as having “the best solar radiation, great
wind resources, and significant potential for
marine energy.”
The Haina Electricity Generating Company
(EGE Haina) invested $100 million in the Los
Cocos Wind Farm in 2013, which came onstream last year. The farm already generates
enough wind-power to save some 200,000 barrels of oil a year.
The Dominican Corporation of State-Owned
Electricity Enterprises (CDEEE) is currently
overseeing, among other renewable-energy
projects, a number of big hydroelectric initia-
tives. Several of these have involved re-building existing dams that had fallen into disrepair.
These dams are being rehabilitated and form
an important part of the renewable energy project overall.
Third—and arguably most important, at
least in the short- to medium-term—is the
development of three hydropower plants
to cope with the country’s massive increase
in demand. These are coming on-stream in
2014-2015, generating an extra 762MW of
electricity in the coming year. These plants,
in addition to two new coal-fire plants, will go
some way to correcting the current shortfall
in the system.
As such the traditional demand-outstripping-supply scenario is at last beginning to
change, with expansion and upgrading of the
sector, together with better management, a
core government priority.
This is part of a longer-term policy to utilize
natural gas and coal over the traditional oil, alleviating the country’s reliance on an expensive
commodity, and better positioning the sector
to cope with the expected increase in demand.
Thus a long-time net importer is slowly but
surely becoming better placed to redress the
balance, and ensure that the country is able to
meet its growing demand for energy. For the
government, the prime concern is to ensure
the growing manufacturing and industrial base
is not hindered by lack of access to affordable
electricity. As a result, spending on infrastructure is of paramount importance.
One way to help ensure this is possible is
greater implementation of renewable technologies. Renewable energy has the potential to
alleviate all the problems besetting the sector.
Most obviously, it can make up for the age-old
shortfall in supply. It is also homegrown, and
comparatively cheap—both to install and to
supply. Thirdly, it neatly nudges the country off
sole dependence upon oil, and the expense and
unpredictability that goes with reliance on oil
derivatives.
According to the CDEEE the new projects
launched since 2013 have a total capacity of
1,955 MW. This is still not enough to supply
the country’s ever-increasing needs. But the
trend is headed in the right direction, and the
reforms are being implemented at the right
time. The Dominican Republic’s appetite for
energy is forecast to grow 20% YoY and it will
be challenging to maintain the level of expansion needed. Signs are, though, that the government has put in place the framework for
a national grid that is modern, efficient, and
reliable—and on a par with the country’s economic prospects. The two, after all, go hand
in hand. ✖
High energy prices
limit economic
growth, and hamper
investment and
consumer spending,
decelerating economic
diversification. Until
recently a lack of
reform in the energy
sector had curbed
the country’s ability
to benefit even from
lower priced oil.
Energy & Mining
THEBUSINESSYEAR
59
INTERVIEW
FULLY
charged
What steps is the Ministry of
Energy and Mining taking to
help the Dominican Republic
take full advantage of its mineral potential?
TBY talks to The Hon.
Pelegrín Castillo
Semán, Minister of
Energy and Mining,
on how to take
advantage of the
country’s resources.
BIO
Pelegrín Castillo Semán
graduated as a lawyer in
1978 and is the Minister of
Energy and Mining of the
assumed this post after a
successful 20 year run in
Congress, where he was
elected for five consecutive
terms since 1994. During
his congressional career,
Minister Castillo was
recognized as one of the
most active legislators,
holding the record for
having both drafted and
getting approval for his
projects. He was nominated
for president in 2012. Mr.
Castillo was part of the
Commission of Jurors for
Constitutional Reform, has
been Vice-President of the
Union of Latin American
Political Parties (UPLA)
and is currently the VicePresident of his political
party, the Fuerza Nacional
Progresista (FNP).
In many ways the Dominican Republic is a mini continent unto itself. It possesses
an amazing diversity of renewable and nonrenewable
resources, in both metallic
and non-metallic mining. We
now have greater knowledge
than before of our mineral
potential, thanks to the SYSMIN (System of Stabilization
of Export Earnings from Mining Products) Cooperation
Programme of the European
Union, which provided us
with multiple geological and
resource referenced maps,
covering approximately 96%
of the territory. It is a privilege
for our Geological Service to
hold so much information. As
a newly-created ministry we
are engaged in generating our
initial strengths as defined by
our strategic plan. As a key
part of our agenda, we will
seek to improve the overall
management of the industry,
and the defense of public interests, raising the standards
of regulation and control,
and to increase our arbitration capacity as a means of
obtaining social licenses and
attracting more qualified investments. We are integrating
a highly qualified professional team and establishing partnerships with national and
international institutions for
the training of our human resources, and establishing new
standards for exceptional service for potential investors. In
2015, we hope to promote a
multi-sectorial consultation
to improve the legitimacy
of mining activities, and we
hope to address important issues such as the definition of
investment objectives, which
must be financed with mining revenues. We must also
finish the EITI (Extractive
Industries Transparency Initiative), and establish a “winwin-win” strategy where the
state wins, the enterprises
win, and so do the communities. We are also engaged
in reviewing and updating
aspects as important as establishing the cost of exploration patents, expediting and
providing further reliability
to the Mining Cadastre, formalizing and adding value to
small-scale and community
mining, and simplifying legal
proceedings of concessions
to mining companies.
What initiatives is the Ministry
undertaking to overcome expensive imported fossil fuels and an
inability to purchase power from
neighboring countries?
The Ministry promotes an
energy security agenda that
has a strategic goal: to reduce
the dependency on imported fossil fuels, should we not
achieve self-sufficiency. We
are focused on simultaneously boosting oil exploration on
land and at sea, and also on
the state’s promotion of renewable energy.
What is your view on the transformation of the energy sector
in the Dominican Republic and
what are your prospects for the
future of clean technologies and
renewable energy production in
the drive for increased economic growth?
The energy sector in the Dominican Republic must undergo major changes, especially
in the electricity subsector.
Already the government has
arranged a great Electrical
Pact, as required by the National Development Strategy.
This would entail a change
in the nature of Dominican
capitalism, as well as the rules
of governance of public companies. Our aim is for management to be transparent,
efficient, results-oriented, and
de-politicized. We also deem
it a high priority to ensure
the conversion of the Electric
Park to natural gas, although
this cannot be done without
new infrastructure development policies and regulation
of international standards
that ensures access to third
parties, neutrality, efficiency,
and security in the installation
and operation of terminals
and pipelines. We believe in
developing a network of pipelines on the southern coast,
and also in the creation of an
energy hub that includes terminals in the Northern region,
preferably in the area of Manzanillo, near the border with
Haiti. This last point would be
of strategic value for us, Haiti,
and for the entire region. The
border area also has optimal
conditions to become a renewable energy generation area as
it has the best solar radiation
regime, great wind resources,
and significant potential for
marine energy. Marginal lands
owned by the state will be used
for the production of biofuels
and biomass.
Could you talk through the main
points of the National Energy
Plan 2010-25?
The government’s energy efficiency and savings plan is focused on achieving significant
energy savings in the public
sector with the use of various
technologies, both in terms of
fuel and electricity. In 2015,
we will have an energy efficiency and government savings law that will give access
to this policy to the entire society. We aim to substantially
increase the country’s fuel
storage capacity, which is crucial in some categories. With a
consumption of 140,000 barrels a day, it makes sense to
increase the country’s refining
capacity and take advantage
of our geographical location
and become a center of storage, processing, mixing, and
regional and international
distribution. ✖
60
THEBUSINESSYEAR
INTERVIEW
nature
KNOWS BEST
US Vice President Joseph Biden
recently visited the Dominican
Republic, in order to discuss
details of the initiative supporting the production of renewable
energy. What is your view on the
transformation of the energy
sector in the Dominican Republic, and what are the prospects
for the future of clean technologies and renewable energy production?
TBY talks to The Hon. Dr. Bautista Rojas
Gómez, Minister of Environment and
Natural Resources of the Dominican
Republic, on the need to preserve the
natural balance and active forestation.
The Dominican Republic ranks
second with respect to its
wealth of land and water biodiversity among the Caribbean
islands. It is also home to 5,600
plant and more than 300 bird
species. What initiatives is the
Ministry taking to preserve natural diversity?
26% of its geography designated as protected area, amounting to a vast area of national
parks. Therefore, protection
of the fauna, flora, and biodiversity of those areas is a core
activity of The Ministry of En-
BIO
Bautista Rojas Gómez
is a medical doctor who
specializes in pediatrics.
He began his work in
public administration in
the Assistant Pediatric
Department of Pascasio
Toribio Hospital. In 2004, he
was appointed Coordinator
of the Executive Committee
for the Reform of the Health
Sector (CERSS), and in 2005
he became the Minister of
Health and Welfare, a post
he held until August 2012.
He was appointed Minister
of Environment and Natural
Resources on August 16,
2012 by President Danilo
Medina. In his work in
Congress, he was a member
of various committees
including the discussion of
the draft Social Security
Act. He was also President
of the Senate Health
Committee.
vironment and Natural Resources. It is crucial for the Dominican Republic to preserve
such natural areas as they give
the country its unique heritage
that must be passed on to future generations.
the annual GDP growth rate in
the Dominican Republic averaged at 5.5% from 1993 until
2014. In your opinion, which
segments of the economy hold
most potential for future development?
The future growth of the economy will mostly be based on
tourism, although the agribusiness will also play an important role. The latter sector,
for example, has increased its
export figures considerably
over recent years. This growth
enables us to keep inflation
below double-digits and simultaneously achieve macroeconomic stability.
Today's world faces many environmental challenges. What issues is the Dominican Republic
currently addressing?
The main challenge we face is
the management of the watershed and river basins. Water
is an essential element for our
country for both human consumption and industrial usage; for example, to generate
electrical energy and support
farms. One of the main goals
of our Ministry is to recover
and preserve the watershed
and river basins across the
country. We have already
done some extraordinary
work with, for example, the
Yuma and Ozama rivers. This
work includes close cooperation with local communities.
I would say that deforestation
is another key challenge, especially when it comes to the
illegal trade of wood and the
search for particular plants.
Meanwhile, we continue
working towards increasing
forest cover; we had increased
it from 12% in 1967 to 39% by
2014. Our objective is to plant
70 million trees over the next
four years. To date we have
planted 25 million, and are
therefore on the right path.
The Ministry also implements
a plan to preserve beach areas
from climate change and extensive tourist activity. This is
a key project of ours, because
in order to maintain tourism
growth, we must invest in the
preservation of our beaches
and the surrounding areas.
Could you tell us more about
the situation in Loma Miranda?
How, in your opinion, can a compromise be achieved?
We first received the environmental impact report from the
company that wanted to exploit the area in 2012, and analyzed if for around 10 months.
Ultimately, the report did not
meet our expectations and we
denied the permit. Our decision was based on Law 6400
of our Constitution. That is all
I can say since we are the institution making the final decision on Loma Miranda. The
main element in this entire
process is the social license;
therefore we need to work on
better explaining to Dominican citizens the situation and
plans for the area.
We favor the implementation of renewable energy
projects as well as the transformation of the national
electrical energy matrix. I
think the government took
the right steps by opening it
to private investment, both
national and foreign. We prioritize the development of
wind and solar energy projects, two weather elements
that are widely available in
our country. We also see
as positive steps the development of less damaging
energy production projects
in the country, as the main
problem the Dominican Republic has traditionally faced
concerns its highly polluting
energy generation systems.
We also have some projects
with energy generation companies to plant mahogany
trees, which have high CO2
capture levels, around the
areas where they have production facilities. Let me add
that in the near future we will
continue leaning toward the
implementation of wind and
solar energy projects.
What are your main goals for
2015 as Minister of the Environment, and where would you like
to see the country at the end of
the year?
We are pursuing presidential goals, and expect to further advance in the recovery
of the river basins along the
Yuma and Ozama rivers,
two rivers that play an essential role in the production of water in the country.
We also want to successfully
implement the planting of
the 70 million trees I previously mentioned. I want to
increase the current 39% of
forest cover to 41%. ✖
Energy & Mining
THEBUSINESSYEAR
61
SOLAR ENERGY B2B
KARINA CHEZ
CEO, KAYA Energy
Group
KAYA has brought more than 25
years of experience in solar energy to the Dominican market,
building almost 200 installations since. What is your average client profile?
KARINA CHEZ KAYA has seen
over 120 MW of solar energy
sold and installed globally, and
can effectively fulfill the needs
of any client profile–residential,
commercial, or utility.
On the engineering side, our
team played a pioneering role in
the solar revolution in Germany. This is important because it
was the Germans who, in large
part, innovated and developed
the technology that we all depend upon today. In terms of
financial expertise, we have a
talented team in New York with
a background in private equity that focuses on developing
and financing larger projects
throughout the region. That
is one of the divisions that we
have been supporting heavily
throughout 2014. Our success in
leveraging American capital has
been instrumental in allowing
us to quickly expand throughout
the region.
IGNACIO GARCÍA
VILCHES
General Director,
Sofos Dominicana
waiting
FOR THE SUN
TBY talks to two leading lights in the solar
energy business on local advantages,
natural and regulatory investment
opportunities, and select projects.
How would you assess the current regulatory environment in
the Dominican Republic’s energy sector?
Republic’s energy sector, aside
from Law 57-07?
IGNACIO GARCÍA There is a law
in force, Law 57-07, that gives tax
credits to investors; clients get
40% of the price of solar panels
in tax credits for the next three
years. I do think that the government would do well to increase
this figure, or else better promote green energy. The same
law enables us to sell our products without VAT. Finally, there
is the Regulation on Net Measurement, effective as of 2011;
this enables companies to share
excess energy with the public
network. The legal regulation is
solid, but one of our main challenges at the beginning was to
efficiently communicate to our
clients the tax benefits they have
according to law.
KC I think a good starting point
for that question is our solar resources. Consider this: to produce 1,000 kWh in Berlin, you
would need about 62 solar panels. In the Dominican Republic,
you would need only about 30.
Half the investment, half the
equipment, and half the space.
That means any business–local
or international–that has operations in the Dominican Republic can expect huge savings over
the lifetime of the system. Moreover, those businesses with a
relatively low cost of capital, can
expect to see positive cash flow
in the first month of the solar
system’s operation. Meanwhile,
the most pronounced trend in
recent years has been the dramatic decline in the cost of solar technology. This has made
it a viable option for virtually
anybody. Much of the decrease
has registered in the solar panel
manufacturing sector, although
prices of other system components have declined too. This
means that more people can
take advantage of this, leading
to more jobs in the solar industry throughout the Caribbean
across sectors beyond construction and engineering.
Why has a Spanish company
decided to establish operations
in the Dominican Republic and
what do you consider to be Sofos’ greatest achievement?
IG Sofos was established in
Spain in 2004 to provide local
companies with solar energy
and energy efficiency services.
Growing rapidly in Spain, by
2008 we had already installed
more than 200 solar energy systems and around 20MW in the
Northeast of Spain. We then
looked into countries with energy regulatory frameworks in
which our products and services
were sufficiently competitive.
Upon extensive research we
concluded that the Dominican Republic offered among
the best market conditions and
regulatory environment in the
world. In 2010 we established
Sofos Dominicana, developing
our first project with Bank BHD.
Other notable projects by scale
include Frederic Schad Logistics, Dominican Fiesta Hotel,
and Industrias Aguayo. Frederic
Schad, undertaken in 2013, was
the largest. Its array consists of
2,048 panels of 245 Watt-peak
(Wp) and cut CO2 emissions
by 380,000kg, and generates
around 750,000 kilowatt-hours
(kWh) per year, with an installed
capacity of 501.76 KW. This array can supply around 100 families that consume around 600
kWh per month. ✖
62
THEBUSINESSYEAR
FOCUS RENEWABLES
RAIN OR SHINE
The Dominican
Republic aims
to obtain 25% of
its energy from
renewable power
sources by 2025, and
to reduce carbon
emissions by 25%
(from 2010 levels) by
2030.
Economic growth, averaged at 5.7% over the
last two decades, along with a population increase, have led the Dominican Republic to a
rise in electricity demand. The country, which
still relies on fossil fuels, mostly diesel and gas,
has already addressed the necessary steps towards reducing its dependence on costly imported energy and is now developing several
renewable energy projects.
In 2007, the Renewable Energy Law 57-07,
which grants investors several incentives, such
as tax exemptions and a feed-in-tariff (FiT),
entered into force. Besides that, the Dominican Republic is involved in the international
climate change negotiations. In August 2013,
the country became a member of the Green Climate Fund Board, and is represented by Pedro
Garcia Brito. The country aims to obtain 25%
of its energy from renewable power sources by
2025, and to reduce the carbon emissions by
25% (from 2012 levels) by 2030.
However, according to the Worldwatch Institute's sustainable energy road map, even with
the strong support for the development of renewable sources in the Dominican Republic,
there are still a few notable obstacles that the
country needs to overcome. First of all, the Dominican Republic’s grid system has one of the
highest rates of distribution losses in the world.
Power outages which are still a daily reality
throughout the Dominican Republic, are one of
the main obstacles to the country’s further development. The second problem is related to an
excessive bureaucracy; currently, green energy
project developers need to go through a several
stage, long lasting process in order to obtain a
renewable energy license. Thirdly, the majority
of local developers lack the capital necessary to
undertake renewable energy projects. Moreover, the terms offered by Dominican banks are
no more favorable than those offered to investors developing conventional power projects.
In the words of Mark Konold, Worldwatch's Climate and Energy Caribbean project manager,
“The Dominican government has already put
in place some strong mechanisms to promote
renewables growth, but it is currently not utilizing them to their potential.”
THEY ALREADY DO IT
Several private Dominican enterprises are developing their own renewable energy projects,
in order to reduce the costs and put an end to
blackouts, a regular feature of the Dominican
Republic’s daily life, constricting business’s
performance for many years.
One of the most active green energy project
developers, supporting the Dominican companies in achieving better performance is Sofos
Dominicana, a Spanish enterprise which com-
menced its operations in the Dominican Republic in 2010. Over its four years of operations,
Sofos has been engaged in solar energy projects
for companies such as Frederic Schad, Industrias Aguayo, BHD Bank, and Hotel Dominican
Fiesta, among others.
Schad’s rooftop solar panel array consisting
of 2,048 panels, with an installed capacity of
501.76 KW cuts CO2 emission by 380,000 kilos generating around 750,000 kilowatt-hours
(kWh) per year. Industrias Aguayo’s array consisting of 2,208 panels with an installed capacity of 552 KW, generates approximately 825,000
kWh annually. According to Sofos Dominicana’s CEO, Ignacio García Vilches, companies
which invest in solar energy for their own consumption obtain significant savings, and “will
greatly increase their competitiveness in the
short-term."
Up to date, the largest solar project developed
in the Dominican Republic is the project at Cibao International Airport in Santiago de los Caballeros, Dominican Republic’s second largest
metropolis. GT500 MVX grid-tie solar inverters
for 1.5 MW provide the Cibao International Airport with clean energy for approximately 50%
of its total energy needs. In the words of Cibao
International Airport’s Board Chairman, Felix
Garcia Castellanos, this solar power plant is one
of the “most economical” ways to deal with the
nation’s dependence on “costly and polluting”
imported fossil fuels.
Public authorities have also addressed the energy issue. The Dominican Republic’s National
Energy Commission leads by example and uses
Net Metering in order to reduce monthly expenses and protect the environment. Besides
that, the Commission provides surplus renewable energy to the grid, reducing the city’s total
amount of energy based on fossil fuels.
REFORMS MAKE IT POSSIBLE
The Dominican Republic, with a stated goal
of obtaining 25% of its energy from renewable sources by 2025 has a real opportunity to
renovate its floundering electricity sector. The
government has already put renewables at
the center of future planning and introduced
several mechanisms to promote renewables
growth. Besides the Renewable Energy Law 5707, in 2011, the government implemented a net
metering provision allowing customers to take
advantage of solar photovoltaic (PV) technology in order to reduce their electricity bills. A law
to incentivize the growth of renewable energy
has been passed. The regulation which waives
import duties for renewable energy equipment,
allows the writing off of 75% of tax on electricity
sales for 10 years, making the tax on equipment
deductible by up to 75% for the same period. ✖
Energy & Mining
25%
THEBUSINESSYEAR
63
25%
OF ENERGY FROM
RENEWABLE POWER
SOURCES BY 2025
REDUCTION IN
GREENHOUSE GAS (GHG)
EMISSIONS BY 2030
CO
2
CIBAO INTERNATIONAL
AIRPORT
GT500 MVX GRID-TIE SOLAR
INVERTERS FOR 1.5 MW,
PROVIDING THE AIRPORT
WITH CLEAN ENERGY FOR
APPROXIMATELY 50% OF ITS
TOTAL ENERGY NEEDS
RENEWABLE
ENERGY LAW
57-07
GRANTS INVESTORS
AND SEVERAL
INCENTIVES SUCH AS
TAX EXEMPTIONS AND A
FEED-IN-TARIFF (FIT),
CAME INTO FORCE
IN 2007
The largest solar project developed
DR
30
SOLAR PANELS
BERLIN
62
SOLAR PANELS
HUGE SOLAR RESOURCES
IN ORDER TO PRODUCE
1,000 KWH IN BERLIN, YOU
WOULD NEED ABOUT 62 SOLAR
PANELS. IN THE DR, YOU WOULD
NEED ONLY ABOUT 30. HALF
THE INVESTMENT, HALF THE
EQUIPMENT, AND HALF THE SPACE
64
THEBUSINESSYEAR
INTERVIEW
energetic
STRIDES
The Superintendency of Securities has recently approved EGE
Haina’s initial public offering,
and its outstanding corporate
bonds amount to $140 million.
What investments are being
funded at this time?
EGE Haina is currently the
largest private issuer in the
Dominican capital markets.
Over the course of its lifetime,
it has structured $280 million
in local bonds, including a
new $100 million bond that
has recently received approval from the local Securities
Exchange Commission (Superintendencia de Valores,
SIV). EGE Haina is currently
developing a new 50MW wind
project next to the existing Los
Cocos windfarm, called Larimar. The new wind farm will
be composed of 15 state-ofthe art Vestas V112 wind generators, each with a 3.3MW
capacity. This project is expected to be fully operational
by 1Q2016. In addition, we are
in the process of building a 1.5
MW solar photovoltaic plant
in San Pedro de Macorís to be
completed in 3Q2015.
What have been the highlights
of EGE Haina’s performance in
2014?
EGE Haina has had an excellent year by all metrics.
With the recent addition of
Los Cocos 2 (January 2013)
and Quisqueya 2 (December
2013), our energy generation has increased from 1,687
GWh in the first 10 months of
2013 to 2,671 GW in the same
period of 2014, on a 58% in-
What challenges is EGE Haina
facing with regard to the power sector, and what initiatives
have to be taken to improve
sector performance and competitiveness?
TBY talks to Marcelo Aicardi, General Manager
of EGE Haina, on diversified investments and a
bumper year in 2014.
crease. Year to date we have
posted a record generation of
2,953 GWh, which allows us to
provide one-fifth of the KWh
consumption of the Dominican Republic. In 2014, the
additional generation provided by the Quisqueya complex
has reduced the cost of power
in the Dominican Republic’s
wholesale market by approximately 30%, or 5¢ per KWh.
We also achieved our best
heat rate ever at an average of
8,780 BTU/KWh HHV. Similarly, with the wind power
production from Los Cocos,
EGE Haina has reduced YTD
emissions by 155,132 tons of
CO2 and has saved the country
327,286 barrels of imported
fuel. In 2014 we added 1.7 MW
of new generation at Pedernales by installing a new Hyundai engine. In terms of health
and safety, our performance
was excellent, with only two
minor lost time incidents for
the whole year. With the significant increase in production, one might expect total
operating costs to increase,
too. Yet to the contrary,
through a series of cost saving
measures and the relocation
and optimization of resources, total operating costs in the
first 10 months of 2014 were
only 1.6% higher when compared to the same period of
2013. Most notably, G&A expenses were reduced by 40%
in relation to 2013. During
2014 the company concluded the refinancing of a $175
million international bond,
which included the issuance
of a $100 million bond in the
local debt capital market.
BIO
Marcelo Aicardi has 16 years
experience in the electrical
industry in Argentina and
the Dominican Republic. He
has been General Manager
of EGE Haina since July
2013, having previously
held the title of CFO. In his
12 years in the Dominican
Republic, Aicardi has
held senior positions in
distribution and generation
companies, taking part in
unique industry milestones
such as the construction of
the Quisqueya generation
complex, Los Cocos wind
farm, AES Andres plant
and LNG terminal, and the
natural gas conversion of
Dominican Power Partners.
He has headed the launch
of the first international
corporate bonds in the
Dominican electricity
industry and issued over $1
billion in corporate debt for
electricity projects in the
country.
The principle obstacle in the
electricity sector remains
the poor operational performance of the distribution
companies, which is characterized by substantial energy losses resulting from
electricity theft by end users.
This situation has been exacerbated by the increase in
fuel prices over the past five
years, which has heavily impacted the distribution companies’ financial results and
ability to pay for energy purchases from generators, such
as EGE Haina. We believe
that tackling energy theft in
the country should be the
first priority to achieve sector
competitiveness.
As a pioneer and leader in production of renewable energy in
the Dominican Republic, could
you tell us about your view on
the transformation of the national energy sector and your
prospects for clean technologies and renewable energy
production?
Over the past 15 years, the
country’s energy matrix has
gone from being 90% dependent on foreign oil imports, to being a diversified
generation portfolio based
on water, wind, natural gas,
coal, and only 40% oil. Renewable energy is becoming
a significant source of power
for the Dominican system. In
2016, approximately 20% of
the country’s electricity will
come from renewable energy sources (mainly water
and wind). It is our hope that
clean energy will continue to
grow as a source of power for
the Dominican Republic. At
EGE Haina we are investing
significant resources in wind
and solar energy and hope to
continue leading renewable
generation in the private
sector. ✖
Energy & Mining
THEBUSINESSYEAR
65
Successful gold mining operations, new prospects, and an evolving
business climate are helping the country shake off its old reputation and
establish itself as a destination for mining firms.
Review
MINING
WHAT LIES BELOW
WITH GOLD MINING OPERATIONS
attracting over $4 billion in foreign investment,
and amounting to the largest single foreign
investment in the Dominican Republic, the
country’s reserves of other valuable minerals
are often overlooked. However, this is changing
as the government works to align regulations
with market and environmental realities to diversify operations. These developments are already changing perceptions of the Dominican
Republic as a well endowed, but complicated
investment for mining corporations, and future
prospects are positive.
As of 2014, the major mining operations in
the Dominican Republic were the Pueblo Viejo
gold mines operated by Barrick and Goldcorp,
with 9.7Moz of proven gold reserves, and the
Cerro de Maimón copper and gold mines operated by Perilya, which hosts approximately 6
million tons of open-pit copper/gold reserves.
Construction of the $69 million open pit mine,
processing facilities, and related infrastructure
started in 2006 and was completed in 2008. The
Falcondo nickel mine is operated by Xstrata
and has a production capacity of 29,000 tons of
contained nickel per annum. The Las Lagunas
project involves the reprocessing of high-grade
gold/silver refractory tailings from the Pueblo
Viejo mine by PanTerra, and finally, there is Las
Mercedes, which was formerly the Alcoa Bauxite Mine.
As mining output rallies, advanced exploration projects are the key to long-term success
and diversification away from a tourism-based
economy. In this regard, a number of exit-
ing advanced exploration and promising, yet
small operations are underway. Approximately
200km north of Santo Domingo, Unigold’s Nieta concession has been labeled a world-class
deposit and is fully permitted for exploration.
The site holds significant gold and copper resources upside, with 2Moz gold inferred resource identified at Candelones. By mid-2014,
Unigold had resumed its 5,000m drilling program at its Nieta concession. Exploration has
begun at the Loma de Montazo target, which
is 2km from Candelones, where inferred resources of 39.5Moz averaging 1.6g/t for 2Moz
of gold have been determined. The Loma de
Montazo site returned the largest and strongest
IP chargeability and resistivity response on the
property. Other firms with exiting prospects include PanTerra, which has discovered elevated
gold values along structural lineaments at La
Paciencia concession, Everton Resources at the
Pueblo Viejo Extension, and Precipitate Gold
Corp at Juan de Herrera. These prospects suggest a solid future in mining in the Dominican
Republic.
Beyond metallic mining activity, the Dominican Republic is the leading producer of
cement in the Caribbean region, and according to Alexander Medina Herasme, the General
Director of the Mining Management Office of
the Dominican Republic, “increasing export
activity on calcium carbonate…in the south
of the country,” is set to cement the country’s
regional status. On the bureaucratic front, the
Chamber of Deputies approved the creation
of the Mines and Energy Ministry in 2013. The
As mining output
rallies, advanced
exploration projects
are the key to longterm success and
diversification away
from a tourism-based
economy.
66
THEBUSINESSYEAR
ministry was further parsed into six deputy
ministries, one of which deals exclusively with
mining. Law 100-13 creating the ministry stipulates that, among other things, the ministry is
in charge of “formulating, adopting, managing
and coordinating the national policy for the
exploration, exploitation and processing of metallic and non-metallic minerals”. The law also
states that the ministry must “ensure the protection, preservation and adequate exploitation
of minerals.” In 2014, President Danilo Medina
appointed Pelegrin Castillo Seman as the country’s new Minister of Energy and Mining, who
told TBY that the Ministry planned to spend
2015 promoting, “multi-sectorial consultation
to improve the legitimacy of mining activities,
and [addressing] important issues such as the
definition of investment objectives, which must
be financed with mining revenues.”
The economic footprint of mining remains a
far cry from its heyday during the 1970s when
large ferronickel and gold-silver mines made up
5.3% of GDP. That said, recent gains represent
a massive turnaround from over a decade ago
when the key gold deposit Pueblo Viejo (then
called Rosario) lay abandoned. By 2011, mining
contributed only 0.5% of the national GDP, in
spite of encouraging indicators such as a 42%
increase in contribution to the GDP in 2012,
and a 79% increase in 2011. By 2013 however, it
became apparent that mining was reemerging
as an economic engine when during 1H, new
gold mining operations drove a 223% surge
in mining activity that contributed to a 1.6%
growth in the overall economy.
The Dominican Republic is emerging as a
major gold producer, with other minerals following suit. During 1H2013, gold exports increased by $551.9 million, and in 2014 Fitch
Ratings cited this as a major factor behind its
increase in the country’s credit rating. This has
precipitated predictions that the Dominican
Republic would be able to halve its 2012 deficit
by 2016, to 3.3% of GDP.
In order to ensure the long-term stability
of operations, a compromise will have to be
reached with opponents of mining operations.
While resistance is ostensibly over environmental issues, mining companies can point to significant environmental improvements, while
arguing that environmental degradation is a
legacy of preceding operations that are widely
acknowledged to have been poorly run in the
past. In order to attract the level of FDI required
for a sustainable and thorough extraction of
the Dominican Republic’s mineral resources,
clearly defined and fixed rules of the game need
to be applied that can guarantee investments
in the long term. For example, irrespective of
whether or not the original negotiation upheld
notions of “national sovereignty”, “justice”or
“transparency,” the renegotiated contract for
Barrick Gold cost the company more than $1
billion and is sure to make future investors
squeamish.
Organizations such as the Mining Management Office of the Dominican Republic and
the Center for Export and Investment of the
Dominican Republic are working together to
increase FDI in the mining sector, and repeat
the successes of the last half-decade. Speaking
to TBY, Alexander Medina Herasme spoke of
making “mining investment more direct and
simpler, as well as reducing bureaucratic barriers for investors.” From a legislative standpoint, mining firms are still wary, in spite of
more than $58 billion in estimated reserves.
In 2014, Bloomberg reported that the future of
Gelencore Plc’s ferro-nickel mine was in doubt
due to new legislation declaring the region surrounding the mine a national park. This change
could raise Glencore’s operating costs, and
is reminiscent of the government’s renegotiation of Barrick Gold and Goldcorp’s Pueblo
Viejo concession. This same renegotiation also
caused the Dominican Republic to fall five slots
in the World Bank’s “Ease of Doing Business”
ranking. However, in September 2014 President
Medina vetoed the measure to re-designate the
area surrounding the mine, questioning whether the national park was constitutional and citing the country’s mining laws and international
treaties. President Medina’s precedent demonstrates that the Dominican Republic is serious
about developing long-term relationships with
mining companies that take into account both
business and environmental concerns. ✖
Energy & Mining
THEBUSINESSYEAR
67
INTERVIEW
A MINE OF experience
TBY talks to
Alexander Medina
Herasme, General
Director at the
Mining Management
Office of the
Dominican Republic,
on key resources and
the promotion of the
sector to investors.
The Center for Export and Investment of the Dominican Republic (CEI-RD) and The Mining
Management Office of the Dominican Republic have recently
agreed to work together in identifying potential new markets
that could positively impact the
national mining sector. Could
you outline the specifics of this
agreement?
The Mining Management
Office of the Dominican Republic closed an agreement
with the CEI-RD in order to
create synergies to boost FDI
in the mining sector. We are
the public organization in
charge of managing the legal
framework of the national
mining industry. Therefore,
all investors must obtain mining licenses from us. Investors
do this directly after reaching the CEI-RD, which is why
we signed the partnership
to boost synergies between
both institutions. Our activity
does much to simplify mining
investment, by reducing bureaucratic barriers.
Which minerals have the greatest importance for the Dominican Republic, and which regions
benefit the most from those deposits?
a highly developed mining industry, in particular in terms
of its gold segment with the
Pueblo Viejo mine, located
approximately 100km northwest of the capital city of Santo Domingo, in the Sánchez
BIO
Alexander Medina Herasme
has around 40 years
experience in the mining
industry. Since 2012 he
has been the General
Director at the Mining
Management Office of the
holds a Bachelor’s degree in
Chemical Engineering from
Tec of Monterrey, Mexico
and an MBA from Santo
Domingo Tec (INTEC),
and also attended the
Executive Management
Course of Queens University
in Ontario, Canada. In the
academic sphere he was a
professor at the chemical
engineering school at Santo
Domingo University (UASD)
for three years. In 1975
he joined Glencore Xstrata
Falcondo nickel mine where
he worked until 2009 in
several managerial positions,
including Strategic Business
Manager, Communities and
PR Director, Project Manager
for Energy Conversion, and
Corporate Environmental
Director in Toronto, Canada.
Ramirez Province; the nickel
segment through Falcondo,
situated in the town of Bonao,
80km north of Santo Domingo; and the copper segment
through Cerro de Maimon,
located 70km northwest of
Santo Domingo, both in the
Monseñor Nouel Province.
We also have a gold recovery
unit, Las Lagunas, and bauxite production—we export
considerably through the Port
of Cabo Rojo (Pedernales) to
China. At the port, there is a
large operation for the mining industry in terms of infrastructure and vessels. We
also have some other mining
explorations with GoldQuest,
which discovered a significant
gold deposit in San Juan Province and has already engaged
exploring activities, and the
company Precipitate Gold,
with another gold discovery
in the same province. Unigold
currently develops mining
prospects for gold and copper in the Dajabon Province,
near the border with Haiti. In
terms of non-metallic mining
activity, we are a leading producer of Portland cement in
the Caribbean; we have seven cement production plants
and installed capacity exceeds
domestic demand, making
room for considerable export. I could also mention our
activity in the semiprecious
stones segment with larimar,
a unique stone in our country,
for which we have developed
a craftsman school, as well
as amber in the municipality
of El Valle, Hato Mayor, and
Puerto Plata, the latter two
being the most traditional.
We have a good production of
blue amber in those regions,
which is highly valued by the
market, fetching over $3,000
per ounce.
How would you characterize the
current investment climate in
the Dominican Republic’s mining sector?
I believe it is excellent, especially since the government
Back in the
1980s,
gold approached
sugar cane as
the Dominican
Republic’s second
largest export
earner
The mining
industry stands to
become a major
contributor to the
economy
provides full support to foreign investors through a network of public institutions that
help foreign investors arrive in
the country and set up operations. Our institution works
toward providing regulatory
advice to investors as well as
to make sure their investment
is as profitable as possible. We
promote the Dominican mining industry, and the benefits
of its regulatory framework at
international events in Canada, Australia, and Switzerland.
The most important need currently is to identify potential
areas of foreign investment.
For example, the government
asked us to identify the areas
of the country in which mining rights were not currently
exploited. This stands to both
ease and expedite the arrival
of foreign investors. We also
manage exploration requests,
and have denied over 140 to
date as those companies were
not considered fully dedicated
to the mining industry. ✖
68
THEBUSINESSYEAR
FOCUS GOLD
THE GOLD RUSH
While currently dwarfed by regional gold
producers, the Dominican gold industry stands
to become a key export vehicle.
Strategically located in the center of the
Americas, the Dominican Republic is the
second largest and most diverse Caribbean
country. Becoming one of fastest growing
economies in the region, thanks to its strong
tourism sector, it has recently commenced
developing other industries as well. Several
dynamic, foreign-operated enterprises support the country’s efforts to further develop
the mining industry and boost and diversify
its tourism-dependent economy.
The history of mining in the Dominican
Republic, began with the arrival of the first
Spaniards to the New World, who initiated
gold mining in the 1500s. By 1980 gold had
approached sugar as the second largest Dominican Republic export commodity. Currently, the gold reserves in other Latin American countries, including Chile and Peru,
dwarf the Dominican Republic’s deposits,
but the country’s mining potential has just
begun to be exploited. The Dominican Republic is ranked sixth largest gold producer
in Latin America and 20th globally, and its
mining industry stands to become a primary
contributor to the local economy, as well as
a major export vehicle. The Mining Management Office of the Dominican Republic estimates that the country has $60 billion in mineral and metal reserves, including 40 million
ounces of gold.
PUEBLO VIEJO MINE
The Pueblo Viejo Mine is located approximately 100km northwest of the capital city
of Santo Domingo. Barrick Gold acquired
a majority interest in this mine in 2006 and
manages operations through Pueblo Viejo Dominicana Corporation (PVDC), a joint
venture, in which Barrick Gold holds a 60%
stake, with Goldcorp holding the remaining
40%. The $4 billion investment that these two
Canadian companies have poured into developing the mine amounts to the largest single
FDI in the history of the Dominican Republic.
The mine, which commenced commercial
production in January 2013, had proven gold
reserves of 9.7 million ounces and a mine
life of 25 years and beyond (as of December
31, 2013). In 2013 alone the mine produced
488,000 ounces of gold.
CLEAN-UP EFFORTS
Since 2006, Barrick Gold has been correcting
significant environmental damage left by a
previous mining operator at the site, which
closed its activity in 1999 without proper environmental reclamation. Since acquisition
of the Pueblo Viejo Mine, PVDC has re-vegetated 3,500 hectares of land, built a large water treatment plant to treat water resources
on site before discharging it into the local river, and removed 180,000 cubic meters of contaminated soil left behind by a prior operator.
PVDC has also agreed to provide $75 million
to finance the clean-up of historical liabilities
that are the responsibility of the Dominican
Republic’s government. The management
plan for this clean-up phase is still awaiting
government approval.
NEW DISCOVERIES
The gold exploration industry, although active for many years, heated up in 2012, due
to the truly remarkable GoldQuest Romero
discovery, which has drawn attention to an
underexplored belt in the western part of the
Dominican Republic known as the Tireo.
GoldQuest (another Canada-based mineral
exploration company), focused on gold and
copper development in the Dominican Republic, commenced its exploration activity in
May 2001. Currently, it is the leading explorer, with marked success in discovering not
only gold, but also other metals. GoldQuest is
developing its 100%-owned Romero Project
and has initiated the 2014 exploration program for its Tireo Project. 2012 was its pivotal
year due to the discovery of Romero in May,
as well as the closing of a several million dol-
The Dominican
Republic is ranked
sixth largest gold
producer in Latin
America and 20th
globally, and its
mining industry
stands to become a
primary contributor to
the local economy.
Energy & Mining
THEBUSINESSYEAR
69
Gold Mine
SANTIAGO
DE LOS
CABALLEROS
CEVICOS
PUEBLO VIEJO
SAMANA
BONAO
MAIMON
SAN JUAN
DE LA
MAGUANA
DOMINICAN REPUBLIC
Deposits
Area Mines
lar deal totaling Ps22.8 million. In 2013 GoldQuest continued to grow the Romero mineralization, and by year-end had completed a
maiden NI43-101 mineral resource estimate
comprised of an indicated resource of 2.4
million ounces of gold. Throughout 2013 the
company expanded the ground IP coverage,
identifying new targets in the area of Romero. In early 2014, GoldQuest initiated a Preliminary Economic Assessment (PEA) for the
Romero Project, and completed an extensive
airborne electromagnetic (ZTEM) survey over
the Tireo formation. In May 2014 the company announced the results of the Romero Project PEA and commenced a 10,000m regional
exploration drill program.
Yet despite significant investments and robust production of two by the world's largest
gold mining companies, the development of the
Dominican Republic’s mining industry is still
hampered by bureaucracy and protests over
environmental contamination. The Dominican government already understands that in
order to fully exploit the country’s mining potential, its bureaucratic burden will have to be
reduced. In July 2013, the Dominican Congress
passed a law to create a new Ministry of Energy and Mines. Besides that, in order to improve
public perception of the mining industry, the
government launched an awareness campaign
highlighting the benefits of mining, such as job
creation in economically depressed regions. ✖
CARIBBEAN
SEA
A
70
THEBUSINESSYEAR
INTERVIEW
surveying
THE LAND
TBY talks to Julio Espaillat, President & CEO of
GoldQuest Mining Corporation (GQC), on the
challenges of making a discovery, and the need
to keep it clean when you do.
GoldQuest commenced exploration in the Dominican Republic in May 2001. Why has a
Canadian company decided to
locate its operations here?
Historically, the strong potential for gold on the island has
been well known. For example, Pueblo Viejo, the largest
gold mine in Latin America,
was known about during colonial times. Hence, there is a
history of sizable gold production here. This means that the
Dominican Republic is attractive for anyone keen on gold
exploration work, including
ourselves. Initially we came
here based on Pueblo Viejo,
the well-known deposit. But
on top of that there were other
smaller deposits, and GoldQuest decided it was a good
time and place to do some exploration. We came and initiated regional exploration in a
totally new area, which is the
southern part of the Cordillera
Central. Most of the deposits
I am talking about are in the
northern part of the Cordillera Central. We recognized that
the rock in the southern part
of the Cordillera Central was
similar to that in the northern
section, but no one was looking there at the time. Therefore, we were the group to initiate exploration. A discovery
is a rarity in geology and mining, and usually follows after
several years of exploration.
Therefore, we were initially
undertaking highly regionalized work. We did not invest or
explore significantly until 2010
when we decided to probe
deeper into those areas where
we found anomalies. In 2012
we made a major discovery,
whereby we became the most
successful junior company in
the world that year. We believe there is huge potential in
Haiti for mineral exploration
and development. In my opinion, the minerals that are the
most important so far are copper and gold, although there
is also silver and zinc present.
I would say those four metals
could hold the greatest potential for the island in the future.
But this will require considerable exploration by us and the
many other companies that
will likely enter the market in
the future.
Can you explain the current
technology used at your Romero
and Tireo projects? What future
innovations do you foresee?
We are using what we consider to be state of the art
technology. When we made
the discovery in 2012 we had
minimal funds available, but
we were fortunate. At that
time we became the company of choice for investors;
they invested substantially in
our company and we decided to utilize the most effective
technology. We have a substantial area of land, at 20,000
hectares, and until 2012 we
had only explored 10% of
it. This meant that we knew
nothing about the balance of
the property. In order to undertake effective exploration
work we had to resort to techniques that help investigate
large areas rapidly, which are
extremely expensive, and we
opted for an airborne survey.
This meant using a helicopter
with the relevant instrument
to fly over the property, rather than doing the task on foot.
The survey gives you an indication of whether or not there
is potential mineralization.
We chose a new Canadian
system, which is able to look
at the earth’s profile to considerable depth, whilst showing fine detail. In addition to
the airborne survey we do
ground surveying; this means
traditional mapping, and we
still have to perform the sampling and drilling. This is basically what we are using; all the
technology available to focus
on mineral deposits.
How does GoldQuest incorporate social responsibility into its
mining projects in the Dominican Republic?
Mining has to be integrated into society and has to be
conducted with a high level of
responsibility for the people
living in the area. We are carrying out all activities required
to protect the environment.
For example, we have been
carrying out water sampling
work for almost a year and a
half because we want to build
enough information so that
when we apply for the environmental permit we have
sufficient proof, historically, that we have been taking
care in our exploration work
and measuring every aspect.
At the same time we want to
prove that if we operate the
mine we will never contami-
nate it. So in other words, the
water that we are measuring
is extremely clean. The other
factor is that the communities
where we work are normally
poor. Health and education
are the basic requirements
at the moment. For this reason, we built a school in the
community and we assist the
government in paying for the
teaching staff. We also assist
with adult education in efforts
against illiteracy. Meanwhile,
we also provide two scholarships to locals to go to Instituto Tecnológico de Santo Domingo (INTEC), which is the
only university in the country
to offer geology as a discipline.
These students will hopefully
return to their community to
work upon graduation. Furthermore, there was no health
unit in the area we operate in,
so we created one for the benefit of both the community,
and our own staff. We offer
comprehensive
healthcare
and security for workers and
their families. ✖
BIO
Julio Espaillat has over
25 years experience in
the mining industry. From
2000 to 2011, he served
as the Vice President of
Exploration at GlobeStar
Mining Corporation, with
responsibility for technical
and financial administration
of the company's
properties in the Dominican
Republic, including the
acquisition, development,
and construction of the
Cerro de Maimón massive
sulphide deposit, where
production commenced
in October 2008. Espaillat
formerly spent 12 years
at Falconbridge Limited
in various roles in the
Dominican Republic and at
Timmins, Ontario. Prior to
leaving Falconbridge, he was
Senior Geologist in charge of
exploration activities in the
Dominican Republic.
THEBUSINESSYEAR
73
75
76
Alberto Nogueira, Manager/CEO
of BEICA, on its new white rum,
markets and sales volumes, and
the company’s museum.
Leading cigar makers from the
Dominican Republic talk about
the industry and the challenges it
faces today.
Mícalo Bermúdez, President
of Tamboril Free Zone
Park, on jobs for locals and
accommodating new clients.
71
Industry
REVIEW
The sustained focus on SMEs, coupled with the traditional bedrock of free
industrial zones (FIZs), bodes well for 2015—and beyond.
T
he Dominican Republic’s industry
rests on the dual
foundations of free
industrial zones (FIZs) and
SMEs. In fact, the latter make
up almost 90% of Dominican
industry. Meanwhile, FIZs
are aiding the manufacturing, agricultural, technology,
transportation, and maritime sectors, in promoting
exports and raising employment levels. FIZs encourage
exports, and exports of goods
and services made up 26% of
GDP in 1H2014, according to
the World Bank. Overall, total
exports in 1H2014 came to
$10.14 billion, up from $8.93
billion in 2011.
Hand-in-hand with FIZs are
the SMEs, for whom the zones
often give a new lease on life,
by exposing them to larger
overseas customers. In 2013
President Medina described
SMEs as “the strategic axis of
the commercial and industrial sectors.” In 2014-15, these
areas are being targeted for
renewed growth. Loan restrictions to SMEs have been eased
and banks are encouraged to
support applications for start-
SPRINGBOARD
Image: MATASA
Hand-in-hand with FIZs are SMEs,
for whom the zones often give a new
lease on life, exposing these smaller and
medium-sized enterprises to larger and
overseas customers.
up and growth funds in 2015.
In addition, the micro-firms
and SMEs are often integral to
the operations of large corporations, many of whom work
alongside the SMEs in successful partnerships that work
to mutual benefit.
The development of SMEs,
together with the expansion
of the free zones strategy is
also having a positive effect
on the country’s workforce.
Gradually the number of Dominicans who are employed
informally is falling as more
employees obtain papers and
official status.
Industry in 2014 registered
strong growth in two particular areas, the first being automotive. A large automobile
and machinery manufacturing sector has found a new
lease of life, as a burgeoning
middle-class, middle-income
population finds itself with
more disposable income. The
overall automobile market, including parts and services, is
estimated to total $183 million
in 2014, up from $178 million
in 2013, and a considerable
rise on 2012’s $174 million.
This healthy level of growth is
72
THEBUSINESSYEAR
In the year to June 2014, FZIs were
exporting around $4.12 billion worth
of goods, or 54% of the country’s
exports. The zones account for 2.9%
of GDP and 8.1% of FDI. In a short
space of time, FZIs have proven a
sound means of generating trade
from industry.
also aided by the FIZs and particularly strong
trade with the US, largely as a result of the 2004
Dominican Republic-Central America Free
Trade Agreement (CAFTA-DR).
Growing overseas trade, notably with Asia
(and China in particular) is buoying the Dominican Republic’s traditional and most renowned industries. Cigars, rum, and sugar exports are all markedly up year-on-year. Cigar
manufacturing dates back to the 17th Century,
and sugar was the very backbone of the country’s industry from the first mill opening in 1516
well into the 20th Century. In recent years sugar
production has decreased, due to a decrease in
global demand. But processing is now picking
up again and the decline is likely to have been
a blip in the longer-term trajectory. The level of
production, currently at around 687,000 tons,
is expected to continue rising steadily for the
foreseeable future. Moreover, the global price
of sugar has remained consistently high for
several years, which should in turn bring fresh
investment.
Sales of cigars are, dependably, in fine fettle.
The commodity accounts for some 9% of government revenue from merchandise taxation,
and makes up around 6% of total exports. The
Dominican Republic’s cigars occupy a highend niche in the market, and while sales can
be difficult to sustain, the recent upturn in the
global economy overall should help. The luxury
and upmarket sector is thriving, with demand
particularly strong in China and, to some extent, America, the Dominican Republic’s principle trade partner.
Rum—perhaps the second most famous Dominican product—is appreciated even more
at home. Exports generate only around $140
million worth of sales each year, while the domestic rum industry is estimated to be worth
almost $1 billion. That being said, exports to
certain markets are growing strongly, with demand in China comfortably up YoY, in addition
to strong demand from Russia.
Coffee is another robust commodity, and
one for which the world’s thirst shows no sign
of abating. More than 2.5 million hectares of
inland hillside are dedicated to growing coffee plants, which together yielded more than
31,000 tons of beans in 2012-13. In 1H2014, a
$677,000 fund was set up to regenerate aged
or neglected plantations, and some additional 5,000 hectares have already been restored.
Cocoa, too, is an important crop. In 2013, the
country produced more than 55,000 tons—the
largest harvest in the Caribbean.
If there is one single factor, though, that has
single-handedly diversified, developed, and
strengthened Dominican industry it is the free
industrial zones (FIZs), first established in the
country in 1969 and run as public-private partnerships (PPPs). In good times these zones are
the engine room of the economy—and in bad
times they offer shelter from the storm. The
original FDI idea was expanded and amended
in 2013, streamlining the administration and
cutting the prevalence of unfair advantage that
blighted some trade, thereby helping SMEs.
The 55 FIZs currently employ 140,000 people—almost 50% of the total manufacturing
workforce.
In the year to June 2014, FZIs were exporting
around $4.12 billion worth of goods, or 54%
of the country’s exports. Overall the zones account for fully 2.9% of GDP and 8.1% of FDI.
In a relatively short space of time, FZIs have
proven a sound means of generating trade from
industry. There is every sign that the idea has a
long way to run yet.
The second key industry also notable for its
successes over the past few years is mining.
Dominican Republic is rich in minerals, in particular gold. Global demand for gold has helped
the sector grow almost 10 fold over the past two
years. Other notable minerals mined extensively in the country are nickel, bauxite, and silver.
Non-metals that are quarried also include gemstones, gypsum, and various limestones.
For gold mining, the Barrick Pueblo Viejo
mine is the most extensive, and is estimated to
contain 23.7 million ounces of gold—enough
to sustain the mine for a further 20 years. With
the price of gold currently lower, yet stable, at
around $1,180 per ounce, the government is
forecast to earn around $8.9 billion over the
same period.
A consequence of the mining sector’s health
is a strong demand for machinery, with mining currently accounting for around 35% of the
machinery sector. This sector has also benefitted from growing household income in recent
years, giving people money to spend on such
high-end items as new cars (sales of these are
up 20% again) and so-called white and electrical goods.
Indeed, household spending may well prove
to be the real underlying driver of industrial
growth in the long term. The increased spending power of the middle classes will fuel demand at home and this, coupled with good
trading links abroad and the long-established
FIZs, should ensure industrial growth is assured a gleaming future. ✖
LUIS FERNANDO
ENCISO
General Manager,
BON
What factors have led to BON’s
success and how do you intend
to grow the business?
We started in 1972 with the
principle of contributing to the
development of the country
and its people, and that has
remained at the heart of what
we do. For the better part of our
history, the DR has been our only
country of operation; however
today, we export our products
to international markets, such
as Barbados and Curaçao. BON
should be present in 10 different
countries within the next five
years, including Jamaica, Trinidad and Tobago, Haiti, Puerto
Rico, and the Bahamas. There
are 26 countries in the region.
We would ultimately like to cover at least 50% of that territory.
How does BON select suppliers to ensure the highest
quality ingredients?
It is important to know what
is going on behind the scenes
at our suppliers. We place a
premium on fair trade values
and practices, as well as being
aware of our CSR. Our purchasing department reviews every
potential supplier for suitability.
We visit at least 80% of our
suppliers’ plants to review their
production processes. Some 5060% of our suppliers are overseas businesses and our focus
for the near future is to develop
local suppliers, so we can better
contribute to the development of
the economy.
Industry
THEBUSINESSYEAR
73
INTERVIEW
that’s the
SPIRIT
TBY talks to Alberto Nogueira, Manager/CEO
of BEICA, on the release of its new white rum,
markets and sales volumes, and the company’s
new tour and museum.
Could you elaborate on the newly released Barceló Blanco Añejado? What are the trends in demand and what was the overall
reaction of the market?
The new product was
launched in April 2014, catering to the huge market in the
Dominican Republic, where
standard white accounts for
50%. We basically needed
something to compete in the
white segment, but we were
driven to do it with a product
with unique characteristics
that coincides with our innovative philosophy and the
consumers’ appreciation for
value-added attributes. In
our case an avant-garde packaging and a perfect blend of
naturally aged rums became
our milestone. Our purpose is
to reach a leading position in
this segment and, therefore,
match our heritage obtained
in the premium dark segment.
What other milestones has BEICA reached in 2014?
Becoming the fifth brand
by volume in the global rum
market, within a decade has
been our biggest satisfaction.
To sustain and improve this
position is our most inspiring challenge. It is relevant to
highlight that the most significant rum players are Indian
and Philippine rum brands
that are produced exclusively
for domestic consumption.
Respectively, the second and
third biggest rum brands
by volume are sold in these
two countries. However,
due to their value positioning and lack of international
Ron Barceló
is among the 10
brands chosen
by International
Wine and Spirits
Research (IWSR)
to join the
exclusive Elite
Brands List
exposure we do not consider them as our competitors.
Amongst other significant
achievements, we attained
80% of the premium market
in the Dominican Republic,
achieved a leading position in
Spain and Chile, and are the
only Dominican rum brand
to have a fully integrated production process starting with
the harvest of our own sugar
cane and ending with internationally awarded spirits.
We have reached export levels of 1.5 million cases, which
makes Ron Barceló the fourth
largest export rum brand in
the world.
What are your main exports
markets at present?
We export 60% of our production, and of the products
dedicated to exports 50% go
to Spain, while Chile is the
second market. In both these
markets, Ron Barceló occupies a leading position. The
US, Russia, Peru, Germany,
and Honduras are also major export destinations in our
portfolio. For the moment, we
are not looking for new markets, specifically, but rather
we are focused on improving
our standing in markets in
which we are already present.
We are more motivated to attain a solid position in the US,
Russia, Germany, Canada,
and China. These are five key
markets that we would like to
add to the pillars of our international distribution.
You mentioned that 40% of production is consumed in the Dominican Republic. Do you see
the room for the further growth
of local demand?
The rum market in the Dominican Republic has been
stable in terms of volume
for the past few years. Even
though the whiskey market
has decreased against premium rum preference I do not
really think that the Dominican Republic can consume
much more rum than it does
today. The Dominican Republic ranks fifth in the world
in absolute numbers. Just after the US, India, the Philippines, and Cuba. In per capita terms, it occupies second
place after Cuba.
How is BEICA responding to
positive trends in the Dominican
Republic’s tourism industry?
We cater to tourists through
our “Barceló Route,” which
enables visitors to be exposed
to the complete process of
Ron Barceló production.
From the sugar cane plantation, through to how it is cut,
how alcohol is obtained out
of sugar cane juice, the processes of fermentation, distillation, and the art of natural
aging. The tour starts in our
distillery where an original
sugar cane cart, adapted to
accommodate our visitors,
does a 20-minute ride, while
our personnel explain the
particularities of production.
This ride is followed by a walk
through our Ron Barceló Museum, which is a permanent
exhibition of antique and
modern tools, machinery,
and techniques open to the
public five days per week. Our
museum is located within our
elaboration plant facilities, so
visitors are also introduced to
the manufacturing process. ✖
BIO
Born in 1965, Alberto
Nogueira graduated
in Business from the
Universidad de Madrid. From
1988 to 1992 he worked in
the Sales Department at
Procter & Gamble before
becoming Regional Director
of northern Spain at Leche
Pascual. From 1998 to 2002
he was Director at Varma.
Nogueira is currently the
CEO of BEICA.
74
THEBUSINESSYEAR
FOCUS FTZs
FREE FOR ALL
The Dominican Republic’s strategic location in the center of the
Americas is considered paramount to the country’s investment pull.
The country enjoys one of the most dynamic and successful free trade
zone networks in the region; a network which continues to provide an
impetus for foreign direct investment in multiple areas.
There are currently 55 free trade zone (FTZ)
industrial parks operating in the Dominican
Republic, tailored to a number of sectors including: textiles, footwear, jewelry manufacturing, assembly of electronic components,
medical and pharmaceutical products, tobacco processing, and telecommunications,
among others.
The Dominican Republic’s FTZs can be divided into three main categories:
• Free Industrial Zones (FIZs) or services FTZs,
located in specific non-metropolitan areas.
• Border FTZs, located on the border with Haiti,
which are given special incentives such as: tax
exemption for a 20-year period, application of
preferential treatment and rates at the time of
granting the funds for financing, lower rental
rates for facilities, and preferential treatment
for goods subject to import quotas in certain
countries.
• Special FTZs, located outside Free Trade Zone
parks, are enabled only in cases when their
nature requires exploitation of immovable resources, for which processing would be difficult
if not located near the sources of raw materials.
LEGAL FRAMEWORK
Foreign companies, investing in the Dominican Republic do not require a local partner, and
their investments are not restricted in terms of
participation in the organization’s capital, except for a few sectors, such as air transport and
broadcasting.
The Dominican Republic’s FTZs are regulated by Law 8-90, enacted on January 15, 1990,
which aims is to promote the establishment of
new zones and further growth of the existing
ones, and the corresponding regulations of Decree No. 366.97, issued on August 29, 1997. The
official authority responsible for ensuring the
correct application of Law 8-90 is the National
Export Free Zone Council (CNZFE).
FTAS
As part of its international integration strategy,
the Dominican Republic has negotiated several
bilateral and regional trade agreements, such
as Partial Scope Agreement with Panama, the
Free Trade Agreement between the Domin-
ican Republic, Central America, and the US
(DR-CAFTA), and the Economic Partnership
Agreement between the EU and CARIFORUM
(CARICOM and the Dominican Republic),
which have been a key factor in FTZ sector development.
EXPORTS
Registration of exporters in the Dominican Republic is not compulsory, however, as stated in
Law No. 84-99 on boosting and promoting exports, exporters who wish to benefit from the
incentives afforded by this Law must request
their classification and registration license
from The Centre for Export and Investment
of the Dominican Republic (CEI-RD). Additionally, all export transactions in the Dominican Republic, including the ones from FTZs,
require the submission of the Single Customs
Declaration for the Dominican Republic
(DUA) to the Dominican Republic’s Directorate-General of Customs (DGA).
INTO LABOR
Several manufacturing firms established in the
Dominican FTZ have voluntary codes of conduct including worker rights protection clauses
aligned with the International Labor Organization (ILO). Article 41 of Law 8-90 states that
“operators and enterprises installed in the Free
Zone under the protection of this Law, should
obey all the laws, rules and current dispositions
of the Work Code and labor laws. Likewise, they
should satisfy the established duties stipulated
by Social Insurance Law No. 116, which creates
the National Institute for Technical Professional Education (INFOTEP), the international
agreements subscribed to and rectified by the
Dominican government and the Sanitary Laws
for the industrial infrastructures.” Additionally, companies established is the Dominican
Republic’s FTZs pay 1% of their monthly payrolls to INFOTEP. This obligation is imposed on
FTZ-based companies in Article 41 of Law 8-90,
under which these companies are also subject
to all work and social security related matters
such as: work contracts, work conditions, labor
unions, economic conflicts, strikes, remuneration, and collateral benefits. ✖
Industry
THEBUSINESSYEAR
75
CIGARS B2B
THE FINER
things in life
HENDRIK KELNER
MANUEL QUESADA
Vice-Chairman,
TabaDom Holding
& President of
PROCIGAR
President, MATASA
How do you fit into the Dominican
Republic’s tobacco industry and
how have the Free Trade Zones
assisted in your development?
great-grandfather and his brother set out in business in 1876.
They were buying tobacco from
the farms, processing, packing,
and then selling it to factories
around the world. In 1960, we
relocated to the Dominican
Republic as we had been going
there since 1939 to buy tobacco. We were in the leaf business
until 2002. Since 1974, we have
been in the manufacturing of
premium cigars as a company
that started as MATASA and now
operates as Quesada Cigars.
HENDRIK KELNER For almost
20 years, we have been the
number one hand made cigar
manufacturer and number one
exporter of handmade cigars in
quantity and value terms. From
2009, the country exported approximately 950 million cigars
and every year this quantity grew
until 2014 when we reached the
amount of 3.6 billion.
The reason for this growth is
that in Santiago, especially in
the free trade zone (FTZ), we
have created the most complete tobacco cluster in the
world. We have companies that
produce the supplies we need
like boxes, cigar rings, cellophanes, machines, tobacco
bovines, and others with the
capacity to supply the tobacco
blends ready for elaboration—
all without the need to await
imported products.
MANUEL QUESADA In 1972,
the free zones (FZs) were
launched in the Dominican
Republic, the first being located in La Romana. And the first
cigar factory to be established
there was the Aldatis of today.
In 1974, we were approached
by US investors regarding the
establishment of a cigar factory. We were not cigar makers in
Cuba, but leaf brokers, and my
What is your view on the current regulatory and fiscal
environment in the Dominican Republic and how does it
affect the tobacco industry?
HK The tobacco industry has
many enemies, especially the
FDA, which is concerned about
the health issue. Current regulations do not excessively impact
the industry worldwide. Australia is a case in point, where the
introduction of generic packaging of the same color and design
two years ago has not reduced
cigar consumption. Most cigar smokers are low consumer
adults, who enjoy perhaps three
cigars per week.
Leading cigar makers from the
Dominican Republic talk about the
industry, the challenges it faces today,
and the secret of a great cigar.
MQ We face a number of challenges, I can mention taxation
and prohibition. Prohibition is
a major challenge, but smokers
somehow manage to find that
extra 25 or 35 cents to buy a Dominican cigar, even if they cut
their consumption down from
five cigars a month to four. The
greatest concern is prohibition,
because if a smoker buys a cigar
but cannot smoke it anywhere,
he will stop buying them. Tobacco prohibition in our major
market, the US, runs from city to
county, and from state to federal level, making it a four-tiered
affair. These restrictions do not
have a uniform strictness, and so
must be challenged individually.
Can you tell us about the cigars
you produce?
HK TabaDom has been growing
for the past two years. We now
produce 120,000 cigars a day by
hand. That is something like 26
million handmade cigars a year.
We employ 1,500 people, and the
Davidoff brand sees daily production of 60,000 units. We also
have a new professional team
running the company in Switzerland. They had the idea to create
a Davidoff Nicaragua, but produce it in the Dominican Republic with Nicaraguan tobacco. The
Davidoff Nicaragua is rather different, in that it is not too strong,
but more of a complex blend.
Nicaragua has a solid reputation,
and the Davidoff Nicaragua has
registered considerable success.
MQ There are two ways to
make a premium cigar. First
a “Puro,” which means that
a cigar has to have all fillers,
binders and wrapper from
one country only. The countries that we use the most are
the Dominican Republic, Nicaragua, and Honduras, but
we also have to mention that
we use tobacco from Mexico,
Ecuador, the US, Indonesia,
Brazil, Peru, Costa Rica, Cameroon, and Colombia. The second way to make a premium
cigar is to make a blend, this
means that you have materials from different countries
put together as one. A good
example of a blend is to take
Dominican and Nicaraguan
fillers, Honduran binder, and a
US wrapper. In the blends we
make, the tobaccos that we use
are mostly from the Dominican Republic, Nicaragua, Honduras, Mexico, Ecuador, and
the US. When making a blend
you have the option to combine different tobaccos to create a unique cigar that using
only tobacco from one country
cannot accomplish. ✖
76
THEBUSINESSYEAR
INTERVIEW
in the ZONE
TBY talks to Mícalo Bermúdez, President of
Tamboril Free Zone Park, on jobs for Santiago
locals, expanding the Zone’s infrastructure for
new clients, and the positive affect of CAFTA-DR.
How does Tamboril Free Zone
Park complement other free
zones in the Dominican Republic, and what is its contribution
to the socioeconomic development of Santiago?
BIO
Mícalo Bermúdez studied
Economics at Hofstra
University, US, and
graduated from Pontificie
Universidad Catolica Madre
y Maestra in Santiago,
Dominican Republic. He has
over 25 years of experience
in the free zone industry and
shoe manufacturing sector.
Currently he is President
of the Tamboril Free Zone
Park, and Vice-President of
both the Board of Directors
of the National Banreservas
Bank and of the Editora
Listin Diario. At the same
time, he is a well-recognized
sponsor and promoter
of sport academies for
kids and professional
teams. Mr. Bermúdez is
an active member of the
new generation of business
leaders of the Cibao region.
We have 5,800 employees at
the moment, with a goal of
getting to 6,000 by the end of
2014. This number of people
contributes
approximately
Ps100 million a month in revenues, salaries, and expenses to the Santiago province.
Our workers are, on average,
22 years old. Around 55% are
women, and we have been
growing at a rate of 50% every
year for the past four years,
mainly as a result of the shoe
industry. We have been expanding our capacity in construction, and currently have
23 buildings, and more than
93,000 sqm in area terms. At
the moment, we are a combination of a real estate firm
providing the buildings and
all the necessary infrastructure, and a logistics and service company through our
support for clients who want
to set up their own factories
by themselves. We have another model that allows us to
also become part of the business, and help them to create
and develop the factory. We
can do this efficiently because
of our extensive experience in
the sector, and our 20 years of
experience in the shoe industry. I come from the manu-
Tamboril Free
Zone Park
• Founded in 1997
• Specialized in
footwear industry
facturing industry and have
been making shoes in the free
zone for the past 25 years. We
are using a combination of attracting customers with an offer of state-of-the-art facilities
to set up their own factories,
and strategic partnerships to
make and develop shoe factories in a joint venture model.
What is the importance of hosting companies such as Taiwanese Hong Fu, the producer of
Vans?
Having a corporation like
Hong Fu as a contractor for
Vans or the VF Corporation
has caused a dramatic change
in our business, for a variety
of reasons. First of all, it is
the first time there has been
a shoe investment project
in the Dominican Republic since the country signed
the Central America Free
Trade Agreement (CAFTADR). We participated in the
CAFTA-DR negotiations, representing the private sector,
specifically the shoe sector.
I had the opportunity to be
part of the committee representing the country, thanks
to the Minister of Industry at
the time, Sonia Guzmán. She
did a tremendous job in negotiating the agreement, by
including the private sector
as an important player in the
negotiation. By doing this, we
acquired a regulation, which
is called “a flexible rule of origin,” which means that we can
make shoes in the Dominican
Republic from raw materials
coming from any part of the
world. We only need what is
called “simple transformation,” which means that if we
buy materials from any part
of the world, including the
Far East, just by transforming
them into a finished product,
the merchandise can claim
Dominican origin. By doing
that we received interest from
companies from the Far East,
and also from the US. We can
offer a competitive labor rate,
a skilled workforce, proximity to the US market and, of
course, duty free status. The
Hong Fu Group is the largest
vulcanized shoe producer in
the world, with more than 14
factories in three countries
and more than 60,000 employees. This is bringing the
attention of other companies
to the Dominican Republic.
Becoming a strategic partner with a company like this
has been important for us.
We are a partner here helping them to set up the facility, training the personnel,
controlling the costs, and
working with the technical
staff. We are involved in the
logistics of bringing materials in and shipping products
to the US. We also help them
gain duty-free status because
you have to apply and receive
certification stating that the
product is made in the Dominican Republic, in compliance with the CAFTA-DR requirements. ✖
THEBUSINESSYEAR
77
80
81
82
Rudy A. Ganna, President &
CEO of Laurus International, on
customized solutions for clients
and retaining the best staff.
Stuart J. Cranston, CEO of United
Nearshore Operations (UNO), on
tailoring support solutions for the
customer base.
The Dominican Republic has an
88% wireless lines teledensity,
with over 9.2 million mobile
phones in use.
Telecoms & IT
REVIEW
In a holistic action plan, ICT has become the driving force behind the
Dominican Republic’s stake in the information economy, from education
and e-government, to commerce and ultimately greater social inclusion.
IT CAN BE ACHIEVED
A
ccording to internet security giant
Kaspersky, 70% of
emails sent globally in 2013 were spam. And
now the good news. The twinning of technology and commerce, the paradigm shift to
business process outsourcing
(BPO) solutions, and the rise
of the cloud over traditional
indentured IT systems, has
seen positive development
and exponential growth of
the global services sector.
In fact, industry experts assert that by 2020 the global services sector, today at
20% of world trade, will have
claimed a huge 55%. The Dominican Republic, and its Caribbean neighbors, is aware
of the need to plug competitively into this new economy,
and develop an information
society of raised education
levels, and a skilled workforce
for sustainable economic development. This conforms to
the government’s ICT4D digital strategy—a catchy acronym—the last two characters
of which mean “for development.” Furthermore, by extension, technology, notably
By 2020 the global services sector,
today at 20% of world trade, will have
claimed a huge 55%. The Dominican
Republic is aware of the need to plug
competitively into this new economy and
develop an information society.
mobile telephony, is being
creatively shoehorned into financial processes to raise inclusion levels and extend the
registered economy. In light
of these tendencies, and to diversify the economy beyond
tourism, the government has
positioned the country as a
regional IT hub by leveraging
the commercial advantages of
its various trade agreements,
thus consolidating its export
platform that encompasses
48 markets, to the benefit of
state coffers and citizen alike.
The latest available figures
reveal that in 2012 ICT service exports as a percentage
of total service exports stood
at 4.35%, fractionally up YoY
from 4.3%, but down from the
2010 print of 4.52%, the peak
of the past decade.
Domestically, the Dominican Chamber of ICT
(CÁMARA TIC) fosters the
sustainable growth of the republic’s technological backbone, while stimulating the
competitiveness of the local
ICT sector. Formed by sector
players, it seeks to make sure
that the sector maximizes its
78
THEBUSINESSYEAR
ICT Service Exports
(% of Service Exports, BOP)
Source: Trading Economics
5
4.5
4
3.5
3
2.5
2
2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012
contribution to the national economy and at
the public sector level, that the government’s
eDominicana program turns plain sailing into
brain sailing.
PLUGGED IN, SWITCHED ON
The Dominican Republic emerged from the
global crisis rather strongly on growth of 3%
in 2009, in stark contrast to the average 2%
shrinkage of neighboring Caribbean economies. This breathing space enabled sustained
investment in the national backbone for wireless broadband, on which all above-mentioned business opportunities are predicated.
Local Telecoms regulator INDOTEL declared that the Dominican Republic had attained a 100% teledensity as of March 2010
based on the 8,775,500 mobile phone lines
and 987,586 landlines registered, which in
tandem made up a teledensity ratio of 100.2%.
Yet national access was patently uneven, giving rise to initiatives such as the opening of
1,000 broadband digital centers nationwide to
narrow the digital divide, particularly in rural
communities. World Bank funding has enabled the building of the national fiber-optic
backbone. This drive also gave rise to the goal
of “eDominicana,” namely steps to get both
state and citizen online. The government’s primary ICT-related goal today is to advance local
expertise and employment, the latter in large
part accounted for by the call-center business
providing near shore services.
JUST GOOGLE IT
The Internet Society’s report—Global Internet Report 2014—indicates that the world is
today approaching 3 billion internet users.
Accordingly, for 2013 the Dominican Republic ranked 85th nation by internet penetration
on 45.9%, fractionally above China (45.8%)
and below Costa Rica (46%). Households with
internet access rose to 12% from 8%, and mobile broadband subscriptions, also on a rising
trend, registered at 8% from 5% in 2012 according to the World Economic Forum Global
IT Report 2013. According to Reuters, as of July
2013 America Movil's Claro held 51.2% of the
wireless market compared to Orange’s 38.4%,
7.4% for Viva, and 3% for Tricom. Broadband
penetration currently stands at just over 5%,
while the number of internet users is around 4
million. In 2013, Claro introduced ClaroVideo,
pioneering online video service in the country.
Meanwhile, resumed momentum from INDOTEL in selling-off frequencies, suspended
since 2011—will boost local communications.
In May 2014 it sold spectrum in the 17002100MHz and 941-960MHz bands to Orange
Dominicana and Claro Dominican Republic,
with revenue generated to in part fund the national shift to digital TV. The government has
already begun handing out one million decoders to ease the transition.
ON THE GO
For 2013 according to BuddeComm, while the
Republic had just 5.1% broadband penetration and a fixed-line print of just 10.7%, SIM
penetration was at 91.3%. The Dominican
Republic’s mobile service providers are Claro
República Dominicana, which operates the
Claro brand and is a subsidiary of América
Móvil, Trilogy International Partners, operating under the Viva brand, Telecable de Tricom,
which operates the Tricom brand, and Orange
Dominicana, a subsidiary of France Télécom.
Price is a determining factor in selection of
a mobile company. According to INDOTEL
data, as of December 2013 of the 9.2 million
mobile lines in the republic, the vast majority, at around 7.5 million were prepaid, while
around 1.7 million were postpaid lines.
A benchmark of a competitive mobile market, number portability (NP) in the republic
commenced at the end of September 2009,
although the Free Trade Agreement signed be-
ERIK PÉREZ
VEGA
President, Cluster
of Contact
Centers and
Business Process
Outsourcing from
the Dominican
Republic
Could you tell us the idea behind establishing the Cluster?
The Cluster began in 2011 as
business had started growing
in the country. The industry has
grown rapidly since 2005-2006
when we rose from 2,000-3,000
employees to over 30,000.
There was a palpable lack of
order in the industry, and it was
in our common interest to be organized, while having a common
country agenda also underpinned the decision to launch
the Cluster. The Center for
Export and Investment of the
Dominican Republic (CEI-RD),
and the Center For Competitiveness funded our start up. We
now have 40 members including
call centers, industry-related
businesses, and universities.
How would you rate the attractiveness of the Dominican Republic as an FDI destination?
The main benefit of investing in
ICT here is employee loyalty.
The business environment overall in the country is conducive to
FDI. Another factor is location;
we are a two-hour flight from
Miami, and our natural market is
the US. Moreover, the government has heavily supported
the industry. With the free
trade zones come numerous
incentives to seek out productive
and well skilled people in a solid
business environment.
Telecoms & IT
tween Dominican Republic, Central-America,
and the United States (DR-CAFTA) in 2005,
had stipulated NP between signatory nations.
Yet the prevailing environment of price-oriented competition has dented average revenue per user (ARPU) over the years. Price
competition, of course, is rarely sustainable,
and also a curb on infrastructure investment.
Duly, mobile phone subscription declined
from 90% in 2012 to 87% in 2013, with consolidation ensuing. Mobile network operator
Orange Dominicana, which launched the first
LTE network in the Dominican Republic in
mid-2012, providing peak data speeds of up
to 100Mb/s, was a case in point. Late in 2013
Orange Group, having sunk approximately
US$150 million into its local network, sold Orange Dominicana to Altice Group as part of a
withdrawal from non-strategic markets. The
latter also purchased integrated telecoms services provider Tricom Telecom.
INDIA IN THE CARIBBEAN
The Dominican Republic has galvanized the
private sector, universities and software entities into ClusterSoft, an NGO geared at promoting the Dominican Republic as the preferred
near-shore IT outsourcing destination as a regional rival to the familiar Indian call center,
today a staple of popular culture. The country’s IT sector revolves around software development and a vibrant market for near-shoring
services. Over 60 resident call centers in the
Dominican Republic make the business the
fastest growing industry after tourism, and the
republic the principle call center and business
process outsourcing (BPO) hub of the Caribbean. Capital city Santo Domingo holds 78%
of the contact center market. Figures from the
Dominican Republic Center for Export and
Investment (CEI-RD) puts the number of call
center related jobs created at over 32,000 by
2012. The industry, however, anticipates this
rising to 56,000 by 2016.
There is, of course, a social dimension to the
call center industry, where centralized location is not essential so long as a local skilled
workforce is at hand at locales beyond major
urban areas. Companies like Laurus International provide a full array of domestic, nearshore, and off-shore call center and business
process solutions. Company President & CEO
Rudy A. Ganna explained to TBY that: “The
general trend is people migrating from rural
areas to capital or major cities. This is a problem in cities such as Santo Domingo, that are
often not designed to accommodate the resulting level of density; in our case four million
people. In response, we are trying to create call
center jobs in rural areas, and this is why we
chose San Juan.”
Providing technical support, acquisitions,
and customer support, with: “Approximately
85% of our business [being] in those service
verticals,” is United Nearshore Operations
(UNO). Alluding to the educational knock-on
effect of ICT, CEO Stuart Cranston told TBY
that: “One of the initiatives we have been
taking since 2006 is the English Emersion
program, a joint mission of the Dominican
call-center industry and the government… to
train 100,000 young students in the English
language. UNO has an English language university where 600 students graduating every
semester. Approximately 40% of each graduating class decides to work for UNO.”
Also in the field, Erik Pérez Vega is the President of the Cluster of Contact Centers and
Business Process Outsourcing of the Dominican Republic. He explained how: “The Center
for Export and Investment of the Dominican
Republic (CEI-RD), and the Center For Competitiveness basically funded us to start up as
a Cluster.” Harnessing business to education,
the Cluster has 40 members, roughly 20 of
which are call centers, “…and the rest industry-related suppliers, or industry-related supportive companies,” while “Universities such
as Instituto Tecnológico de Santo Domingo
(INTEC) and Universidad Iberoamericana
(UNIBE) belong to the Cluster because we
need educational support for our managers
and supervisors, as well as at lower levels.”
INCUBATION HATCHES THE NATION
On around 111,500 sqm of area for development, Parque Cibernético, established in 2000,
is the Dominican Republic’s ICT vision made
flesh. A free zone, it services IT and BPO firms,
hosting many of the country’s call centers
and BPO enterprises, as well as many of its 50
software developers, and also features a film
school. It serves as an incubator for economically productive businesses that receive incentives relative to their anticipated contribution
to the local economy. ✖
THEBUSINESSYEAR
79
The Dominican
Republic and its
Caribbean neighbors
are aware of the need
to plug competitively
into this new economy,
and develop an
information society
of raised education
levels, and a skilled
workforce for
sustainable economic
development.
80
THEBUSINESSYEAR
INTERVIEW
on CALL
What technologies has Laurus
introduced to increase its
agents productivity and customer satisfaction?
TBY talks to Rudy A.
Ganna, President
& CEO of LAURUS
INTERNATIONAL, on
customized solutions
for clients, leading
edge call center
technology, and the
key to attracting and
retaining the best staff.
BIO
Rudy A. Ganna received
his degree in ElectroChemistry and Biology in
Switzerland in 1985. In
2003, he established Pyhex
Ventures with the main
objective of incubating
new technological ideas to
assist in the economic and
development of nations. At
Pyhex he develops strategic
solutions for governments
and private companies
in the fields of health,
migration, taxes, fraud
control, contact centers,
education, and virtualization.
Under Pyhex, Ganna
successfully launched
Laurus International, which
was the first of three call
centers in the Zona Franca
Special Economic Zone.
When we acquire a new client, we do not initially focus
on productivity or quality initiatives. Every client and program is unique, and we need
to understand the program.
Hence, we normally contractually agree that we own the
program for the first 90, days
during which time we develop an understanding for the
company, its customers and
the program. Once we gain
insights into the program and
identify areas of opportunity,
either in efficiency or quality, we apply our strengths in
customer care and technical
support experience to develop
solutions. We have highly experienced development and
IT teams that have designed
and developed automation
solutions that eliminate handling time in the majority of
cases, and operate an internal
process to monitor quality.
In our experience, US clients
want quality first and efficiency a close second. We have developed software, and hardware with special keyboards,
that allow quicker access to
key systems and information
for our agents. Beyond technology and innovation, we
also invest heavily in our employees through our recruiting and retention initiatives.
We have the lowest rate of
attrition for both English and
Spanish-speaking agents.
your workers?
Around 58% of our workers are
female, which is not common
in the Dominican Republic as
most call centers in general,
employ primarily men. We
want to change this, and we
believe that by having more
women in our centers, we can
encourage strong work ethics, respect, productivity, and
challenge the current culture
that dominates in many industries. Laurus International
offers equal work and career
opportunities for everybody.
Another interesting consideration is the number of students who join us straight
from universities. Approximately 30% of our employees
are students. Many of these
workers join and remain with
us because they discover call
centers offer excellent careers
and financial opportunities
unmatched in other industries with similar experience.
It is difficult to find a job in the
Dominican Republic that pays
Ps30,000 or more. In the summer, with overtime, people
were making up to Ps90,000 a
month, which is uncommon.
However, it is not just about
money. Laurus is an enjoyable
place to work with excellent
benefits and advancement
opportunities.
What differentiates Laurus
International from other call
centers?
There are several elements
that set us apart from other
companies. The largest loss
in a call center is the attrition.
In every call center worldwide
you will find the same thing; a
huge building full of people,
but just a couple of people in
HR. We took a different route,
and rented space initially
from multiple call centers to
compare working models.
Then, we built our call centers
in a different way. We saw a
need in the areas of recruiting, managing, retaining, and
rewarding employees. Ultimately, the industry’s primary asset is its human capital.
We set up Working Bees, our
HR department, as an inte-
Fully virtualized
environment
with biometric
access control
throughout the
facility, including
agent desktops
grated but separate division
focused solely on recruitment,
retention, and employee development. It is housed in a
separate building and maintains responsibility for all recruiting and retention of our
employees. We have a 90-day
guarantee period for every
new recruit, meaning if they
are fired before this time, the
HR department gets a reduced
bonus. Our dedication and focus on constant improvement
makes us the most respected and best performing call
center in the region. We also
offer the best healthcare plan
available, and have three fully
bilingual doctors on rotation
from 6:00 am to 5.30 pm seven
days a week. We have our own
pharmacy, so not only is there
a doctor free of charge, but we
also have the medicines available immediately. Another
area we are exploring is food.
Our goal is to give free food to
employees during work time.
At the moment, we provide
half of their meals. ✖
Telecoms & IT
THEBUSINESSYEAR
81
INTERVIEW
WE ARE
here for you
TBY talks to Stuart J. Cranston, CEO of United
Nearshore Operations (UNO), on the valuable
human resources the Dominican Republic has to
offer, providing customized support solutions to
clients, and the scope for further growth.
How has UNO evolved since its
establishment and why did you
decide to start operations here
in the Dominican Republic?
In 2004, our Board decided to
set up here in Santiago, based
on the availability of skilled resources and the need for such
services globally. Santiago’s
population and the local education system rank among
the key reasons for establishing the operations. We are an
experienced global management sector team. I brought
my personal experience of 27
years in the technology industry, and we had around
20 employees at UNO at that
point. Then, in the first year
we grew by 900%. We continue to develop our company
by keeping ahead of the game
when it comes to processes.
The other reason for setting
up here was the wealth of
educated resources in Santiago in different business
sectors, such as HR, IT, marketing, and business development. There were so many
untapped resources back in
2005. Santiago has a talented
and well educated workforce.
These people were looking
for a future and more importantly a career. Since 2005,
the continued support from
the country’s administration
has helped us strengthen our
position in the marketplace.
One of our initiatives since
2006 is the English Emersion
Program, which is a joint
mission through the call-center company industry in the
Dominican Republic and the
government. Our aim was
to train 100,000 young students in the English language.
UNO has an English language
university, and we have 600
students graduating every semester. Approximately 40% of
each graduating class decides
to work for UNO. They can develop different careers with us
in customer Service, IT support, HR, quality assurance,
marketing, and even business
development.
UNO offers
free English
language classes
to students in
Santiago and
surrounding areas
My strategy for 2011 was to
implement security standards based on my previous
experience in IT technology—I had federal and commercial clients that demanded the highest level of data
security; therefore, we started
initiating the PCI DSS process
in 2009. We hired consultants
to walk us through the process, but ultimately received
accreditation by undertaking
the work internally. We have
never had a breach of security, or had a complaint filed
against us by any of our clients. We do not actually store
the data here, but ensure that
any data transmitted is encrypted.
The call center industry has
generated more than 32,000 positions over the past few years,
with 56,000 posts anticipated
by 2016. How does UNO plan to
respond to that upward trend?
What types of operations is UNO
involved in?
There are three core services
we provide today, technical
support, acquisitions, and
customer support. Approximately 85% of our business
is in those service verticals.
Other services we provide include BPO, quality assurance,
and application support and
maintenance. UNO has provided custom solutions for
each of our client partners,
resulting in relationships that
extend beyond eight years.
We understand our clients
must remain competitive and
this drives change. UNO has
to provide flexibility in our
service delivery model to embrace our clients’ needs. This
is the primary reason we have
been successful. We support
clients in Asia, the US, Europe,
and Latin America.
UNO obtained PCI Data Security Standard (Level 1) in June
2011. What is the importance
of this certification in terms of
building customer trust?
BIO
Stuart J. Cranston is a 28year veteran in a diverse mix
of information technologies
and telecommunications
based industries. He has
a proven track record and
global experience leading
business activities in Europe,
Asia, and the US. He started
with UNO in 2005 and
has been the driving force
behind its growth, internal
development, and strategic
marketing ever since. He
has lead and grown the
company from a start-up
with 20 employees to over
1,300 staff.
Our goal is to grow by 35% per
year. Our growth is driven by
our attention to quality. Every
UNO client is provided with
a bespoke solution so there
is no cookie-cutter solution,
such as with multinational
companies. We want to take
our brand to the highest level, but it is my responsibility
as CEO to set our strategy and
differentiate our brand. Our
geographic location works to
our advantage. We can offer
world-class services at competitive rates. Many clients
can’t afford to commute on
long haul flights anymore as
it effects their productivity.
We have over six airlines that
provide more than 20 flights a
day into Santiago from the US,
and we are a two-hour drive
from Santo Domingo. UNO is
an award winning call center
company, and we are recognized internationally. ✖
82
THEBUSINESSYEAR
FOCUS MOBILE TELEPHONY
WIRELESS
The Dominican Republic has an 88% wireless lines teledensity, with over
9.2 million mobile phones in use. The market is currently disposed toward
pre-paid lines, with more than 7.5 million users opting for this service.
Being one of the fastest-growing segments in the telecom industry,
wireless telephony is expected to be the driver of sector growth.
The telecommunications industry of the Dominican Republic is fully private and has experienced remarkable growth over the past
few years, positioning the country among
those with the most advanced telecommunications infrastructures in Latin America.
Mobile telephony penetration is high, with
over 9.2 million mobile phones in use. The
market is currently disposed toward pre-paid
lines, with more than 7.5 million users opting
for this service. The Dominican Republic has
an 88% wireless lines teledensity, which is
nine times higher than fixed-line teledensity.
Being one of the fastest-growing segments
in the telecom industry, mobile telephony
is expected to be the driver of further sector
growth.
LEGAL FRAMEWORK
The Dominican Republic has an excellent legal framework for the telecom sector, based
on Law No. 153-98 (General Law of Telecommunications), Law 126-02 on Electronic Commerce and Digital Signature, Law 53-07 on
High Tech Crime, as well as several complementary laws, and considerable rules and regulations underpinning the business climate.
The state telecoms regulatory entity, Instituto Dominicano de las Telecomunicaciones
(INDOTEL), supervises the provision of services in the industry and oversees the application of telecommunications laws. Founded in
1999, INDOTEL, besides its regulatory function, is also legally recognized as the arbitra-
tor in conflicts related to telecommunication
services. Another role of INDOTEL is facilitating access to ICT in rural and lower-income
communities through projects funded by its
Communications Development Fund (FDT),
as well as the promotion of socially beneficial
services within the framework of free, fair,
and effective competition.
The Dominican Republic uses the same call
system as the US, and has three area codes,
namely 809, 829, and 849. The country’s main
mobile service providers include Claro Dominicana, which operates the Claro brand
and is a subsidiary of América Móvil and Orange Dominicana, which used to be a subsidiary of France Télécom until late 2013, when
in accordance with the agreement signed on
November 26, 2013 between Orange and Altice, Orange completed the sale of 100% of Orange Dominicana to Altice Group at the cost of
$1.42 billion.
In 2009, the Dominican Republic applied
phone number portability, allowing users to
keep their phone numbers when changing
service suppliers. This step has significantly
strengthened the country’s telecom sector, by
leading to increased investments, higher quality of service, offer diversification, and lower
service fees. However, due to frequent misuse
of emergency services, a new law has been
passed, and since June 2014, all mobile phone
lines must be registered. Consequently unregistered SIM cards can no longer be purchased
on the high street. ✖
THEBUSINESSYEAR
83
85
87
88
Karsten H. Windeler, President
of the Board of Directors of
Maritima Dominicana, on
expanding services.
Ewald Th. Heinsen, President of
E.T. Heinsen and the ANRD on
passing the right laws to boost
trading volume.
The commercial success of ports
lies not only in their location
and productivity, but also in
value-added logistics services.
Maritime
REVIEW
The Dominican Republic has long been a key regional player in
transshipments and cargo. Recent investments in infrastructure and ports
are now taking this to new levels.
W
ith its prime location in the Caribbean Sea, midway between the
US and Latin America, the
Dominican Republic is the
most important shipping hub
in the region. More than half of
all exports, 50.8% in 2013, are
bound for the US, with total
exports worth $8.54 billion in
the same year. The Dominican Republic is a net importer,
with total imports coming to
$11.3 billion in the year to January 2014. The vast majority
of trade is sea-bound, and the
Dominican Republic is well
placed to increase its share still
further in the coming years.
Central to this has been a
significant investment, since
2010, in sea ports, cargo terminals, and in infrastructure in and around the ports.
These have been crucial both
to the efficiency of shipping
operations in the country, and
also to the ability to absorb
increased maritime traffic,
and the subsequent need for
greater capacity.
Much of this is continuing an already healthy trend.
Over the past four years, the
ALL ABOARD!
Image: Caribe Trans
According to the World Bank,
the number of TEUs increased from
1,461,492 in 2012 to 1,519,952 in 2013.
volume of trade has sharply
increased. According to the
World Bank, the number of
twenty-foot equivalent units
(TEUs), which is the official
measurement of container
port traffic, increased from
1,461,492 in 2012 to 1,519,952
TEUs in 2013.
has seven sea ports and six
container terminals at strategic locations mainly on the
country’s northern and southern coasts. Many of these have
undergone redevelopment in
the past few years.
The biggest and most important port is Rio Haina,
managed under a 30-year
contract by Haina International Terminals, located just
west of the capital. By 2013,
the port was handling some
70% of all maritime cargo
coming into the country via
its 15 berths, excluding that
processed via the free trade
zones (FTZs). Haina International has invested more than
$70 million over the past four
years, greatly increasing the
handling capabilities of the
port, and has installed stateof-the-art cargo processing
84
THEBUSINESSYEAR
Perhaps the most challenging thing
now is to sustain the current levels of
growth in the Dominican Republic’s
maritime sector. Yet the government
is putting in place decent measures
to facilitate future expansion. These
include further investment—many of
the ports are scheduled for further
upgrades in the coming years, at a
cost of more than $70 million.
plants. This has given the port a significant advantage, and processing turnaround times have
increased by 20%.
The redevelopment of Haina has resulted
in almost 3,000m of berth and 250,000 sqm
for cargo handling and storage. The port has a
capacity of some 25 movements per hour in a
container yard with the capacity to process up
to 15,000 TEUs a day. In 2013, Haina processed
489,682 TEUs—a 24% increase on the year before. More than 2,000 vessels used the port in
the year to June 2014.
The Port of Caucedo is a cargo terminal and
logistics center, and also an FTZ. It boasts the
country’s only deep-water harbor and handles
some 87% of exports that fall under the free
trade agreement (FTA) with the US. Following
the completion of Phase II of the facility in 2011,
the port’s capacity increased to 1.25 million
TEUs and an extra 300 meters of deep-water
berthing was augmented. Run as part of the DP
World Group, it is both port and free zone, just
25km outside the capital. As it enters its second
decade of operations, this private enterprise
is ever expanding to facilitate the heavy trade
between the US and the Central American and
Caribbean parties to the CAFTA-DR. The US
exported $29.5 billion to these markets in 2013,
making it the third largest trading partner of
the US in Latin America. Similarly, goods produced in Dominican FTZs are overwhelmingly
exported to the US.
Puerto Plata dominates maritime trade in
the north-east of the country. The third biggest
port by cargo trade, it has recently also been
extensively rebuilt to cater for cruise liners.
Puerto Plata port managed to increase its cargo
volumes five-fold between 2011 and 2013, handling more than 298,000 TEUs.
The port of Santo Domingo, closest to the
capital, is built for transit vessels, with a dual-terminal structure. The first terminal, Don
Diego, serves transit arrivals, and houses an
820-sqm customs hall. The second, San Souci,
is a multi-purpose private port which can handle almost 5,000 passengers and crew each day,
as well as accommodating cruise ships. The recent upgrades have significantly increased capacity at both.
Smaller ports such as Puerto Viejo de Azua,
Barahona, and Cabo Rojo cover the country’s
south and south-western coasts. The east is
served by the big sea ports of Samana, La Romana, and San Pedro De Masan.
Perhaps the most challenging thing now is to
sustain the current levels of growth in the Dominican Republic’s maritime sector. Yet, the
government is putting in place decent measures to facilitate future expansion. These include further investment—many of the ports
are scheduled for further upgrades in the coming years, at a cost of more than $70 million.
The country is also expanding its FTZ policy
and seeking to increase, via the FTZ agreement,
its trade with the US. With the American economy picking up speed again in 2014, the Dominican Republic is superbly placed to benefit from
its northern neighbor.
The maritime sector will play a vital role in
the reviving parts of the country’s tourism industry. In October 2014, Carnival Corp. announced an ambitious project to build new
ports in the Dominican Republic and Haiti. Together the two would involve an investment of
$70 million, totaling six new berths within 100
nautical miles of one another. Amber Cove is
opening as a cruise port in 2015 which, together
with the other new cruise ports opening in the
region as part of the project, will transform the
country’s cruise tourism industry.
Amber Cove has a budget of $85 million as
part of a joint venture between the Dominican
Republic’s Rannik family and Carnival. Amber
Cove Cruise Center, near Puerto Plata, will have
two berths.
The local area has huge tourism potential,
with spectacular green mountains running
down to unspoilt beaches, whale-watching and
the nearby historic attractions of Puerto Plata. With the first cruise liners due to dock later
in 2015, the area is well placed to develop still
further. The government is, though, mindful of
sustainable tourism, and measures are being
taken to protect the pristine environment so
attractive to holiday-makers.
In time, Amber Cove will further integrate
the Dominican Republic’s trade and tourism
industries with those of the region, continuing a timeless tradition of seafaring and freight
that has underpinned the country’s growth for
so long. This island nation looks set to continue its upward trajectory for many more
years to come, as the recent expansion of the
main ports increases capacity and turnaround
times. With the US economy back on form, and
those of Latin America now growing apace, the
Dominican Republic will reap the benefits of
its focus on maritime trade and tourism in the
years ahead. ✖
TONY VASQUEZ
President,
The Dominican
Association of Air
and Maritime
Shipping Agents
(ADACAM)
The logistics sector
accounts for up to 20%
of the GDP of countries
like the UAE or Singapore.
Here, it accounts for about
10%, but we foresee
improvement leading
to growth, which would
in turn generate more
employment and account
for a larger slice of GDP.
However, this can only
come with improved
competitiveness. The
Dominican Republic can
become a hub for larger
ships, which could offload
cargo and passengers
to then be transported
throughout the region
on smaller vessels. Our
country is ready to meet
this need and to become
a regional center in that
sense, mainly because
we have a strong tourism
sector.
Maritime
THEBUSINESSYEAR
85
INTERVIEW
TBY talks to Karsten
H. Windeler,
President of the
Board of Directors
of MARITIMA
DOMINICANA, on
expanding services
and challenges in the
market.
PASS ports
Maritima Dominicana has recently met with the Vice-President of the US, Joseph Biden,
to discuss the details of the initiative supporting the production of renewable energy. What
is the importance of having
such support, and what is your
view on the transformation of
the energy sector in the Dominican Republic?
The shipping sector is looking
at options to provide more
environmentally acceptable
vessel fuels. Maritima Dominicana, as a service provider to
both the shipping industry
and local industry, is also focused on more efficient energy production, and ways
in which we can provide our
own services, for example
warehousing, in a more environmentally acceptable way.
This is why, three years ago,
we were the first company
to install solar panels on the
roof of our warehouse. The US
Vice President wanted to have
a look at those because the
message to the whole country
is that everyone should focus
on environmental initiatives.
We are also ISO14001 and
ISO40001 certified as part of
our efforts to protect the environment.
In 2014 you mentioned that
Maritima Dominicana planned
to expand its business to supply
chain management. How far has
this initiative advanced, and to
what extent do you want to expand your services?
We have been working on that
subject for the last 12 months.
Caucedo Port, which is next
to the airport, is going to construct a logistic free zone to facilitate supply chain management, and to help Caucedo
become a hub for the supply
of materials and merchandise
to the eastern Caribbean for
both ships and airplanes. It is
similar to Dubai, which has
become an important hub
in the Middle East because
you can send spare parts,
materials, and merchandise,
both by ship and plane. The
implementation of the new
logistic free zone will be in
2015, which is something we
are looking forward to. Furthermore, the transformation
of the customs legal structure
that we have been discussing
with the government intensely over the past 12 months will
be brought in too.
Maritima Dominicana has recently participated in the leading international maritime trade
fair in Hamburg. What is the
significance of these kinds of
events for the development of
the sector and for recognition of
the Dominican Republic internationally?
The Hamburg event that is
held every two years is fo-
cused on shipbuilding, ship
repairs, and the sale of spare
parts to the shipping sector.
In the case of the Dominican
Republic, we have our ship
repair yard, Ciramar Shipyards, and that has a stand at
the Hamburg fair. We have
quite a number of ships that
are being repaired at Ciramar;
hence, there is an important
relationship between them, as
the ship repair facility and us
as the ship agent. Facilitating
this relationship is always an
important aspect of our work
and this is what we did when
we were in Hamburg. And, in
2014 the event had the largest
number of companies attending and the largest number of
visitors ever. This was partly because the challenge of
transforming the propulsion
systems of ships from heavy
fuel to other alternatives was
being discussed and that is
quite complicated technology.
Does that mean that you are
seeing a regional and international willingness to address
these new challenges?
Absolutely, because under
new shipping laws countries'
ship owners and companies
will have to comply with these
requirements and, therefore
they will have to find solutions
to be able to comply. And this
is a challenge because the
conversion of a traditional
compulsion system to the new
system involves difficult technology. Not only that, but right
now the US and Europe have
very few LNG terminals that
provide the fuel; therefore,
ships that call at the larger
ports such as Bremen, Hamburg, and Rotterdam cannot
find the fuel that they need.
The suppliers themselves are
also facing a challenge. Hamburg Port in Germany is the
first port to purchase an LNG
barge to supply this fuel to
shipping lines.
A challenge that many shipping
companies have expressed concerns about is the negative balance of trade in the Dominican
Republic. What is your view on
this situation and how does it affect the industry?
With a balanced trade a country has the most competitive
freight rates in the market.
For every three containers,
we import, we only export
one in return, which means
that two containers have to be
shipped back out empty. And,
that means the income for the
shipping lines for these two
empty containers is non-existent. It is just a cost. Therefore, the struggle for each
nation to balance its trade is
an opportunity to be more
competitive. They are looking for incentives, particularly
in connection with the legal
structure, so that the Dominican Republic, its free zones,
and its agricultural producers,
can export more volume compared to what we have done
in the past, and reach a more
balanced exchange of trade. ✖
BIO
Karsten H. Windeler was
born in Germany and
began his career in the
maritime business with a
traineeship at a shipping
agency company in Bremen,
and was later certified
as a shipping agent/
broker by the Chamber of
Commerce in Bremen. In
1966, he was appointed
Owner’s Representative
of Continental Lines
responsible for the
Caribbean, Central America,
and Venezuela. In 1971,
he founded MARITIMA
DOMINICANA in the
Dominican Republic, and in
1973 founded Caribetrans,
an international freight
forwarder. He also cofounded Lineas Maritimas
de Santo Domingo in 1975,
operating up to seven
bulk carriers in the Gulf
of Mexico, the Caribbean,
Central America, and
the north coast of South
America.
86
THEBUSINESSYEAR
INTERVIEW
shipping
lines
TBY talks to Luis M. Bogaert, President
of Caribe Trans, on knowledge transfer,
innovation, and investment.
Caribe Trans is a member of
several associations, including FIATA, IATA, and ADACAM. How does the company
benefit from this, especially
in terms of exchanging expertise and know-how with other
associates?
We are members of FIATA
and IATA, and these two organizations were created
long ago in order to regulate
business activity in the air
cargo transportation (IATA)
and freight forwarding (FIATA) segments. These associations offer regular training
and education programs for
their members, and also lobby governments to recognize
the association’s concerns,
initiatives, and proposals.
Throughout the years, both
have become leading institutions in their areas. With the
Dominican Association of Air
and Maritime Cargo Agents
(ADACAM), we tried to take
the best from both of these
organizations and integrate
it internationally as an association that will look after all
of our associates involved
in the supply chain management industry. The Dominican Republic’s logistics
industry lacked such a common vision, and as the country raised its profile as a third
party logistics provider clients required a complete and
fully integrated logistics service. One of the goals of the
association is to make of the
logistics service a one-stop
shop where clients can find
everything, and at the same
time tailoring all the services
to the need of the clients. Our
company provides third party
logistics services, but we also
handle air cargo in collaboration with American Airlines,
Copa Airlines, Air France, Air
Canada, and Amerijet. We
handle air cargo with these
companies mainly in Santo
Domingo, Santiago, Puerto
Plata, and Punta Cana. We
also have a project forwarding division. More recently,
we have focused on green
energies, especially wind
energy, and we had a major
contract with one of the largest suppliers. We also have
customs brokerage services
as an Authorized Economic Operator (OEA), and we
offer a team of experienced
technicians to perform all the
processes related to imports,
exports, and logistics in general. We also have our own
warehouses operating in the
major airports in the country. In addition, we are part
of a larger logistics project for
the development of the new
Haina logistics center. Lately,
we have noticed that customers are starting to understand
they could have a lean management model implemented
in their companies by reaching out to third-party logistics
providers, who already have
the warehouse and personnel
capabilities. In this sense, we
are able to go to our customers
and offer them an integrated
third-party logistics solution
thanks to our partnerships
and capabilities. We have the
technology and know-how,
which makes us one of the
most reliable and strongest
players in the industry.
What role do technology and
innovation play in Caribe Trans’
operations?
Our aim is to become an IT
company that provides third
party logistics services, not
the other way around. This is
something I try to highlight
to all our employees. In this
sense, we invest heavily in IT.
This year we are facing a major challenge with the revamp
of our IT system in the company, this step will make us
stronger for the benefit of our
customers and principals. In
general, we like to work with
consultants, as they teach
you how to better implement
processes and systems for
the benefit of the company
and customers alike. In this
sense, we are always keen to
achieve international industry standards such as the ISO
9001:2008, BASC, ISSAGO,
and the OEA.
What is the significance of the
$5 billion investment in the expansion of the Panama Canal
for Caribe Trans, and for the
overall logistics sector in the
Dominican Republic?
The Panama Canal is a crucial gateway to our part of the
world, and its expansion will
mean an influx of greater cargo volumes into the region.
much to offer, with the Caucedo Port serving as a hub targeting South America, Europe,
and Haina Port which handles
a great volume of the US cargo
plus having the great advantage of being inside the city
and closer to the logistics centers that currently operate. Our
connectivity is one of the most
competitive in the region. We
have a 10-day transit time from
Europe, and less than three
days from Panama and the US,
which is extremely competitive. The government is aware
of the country’s potential in
this area, and has publicly declared support for its development. We need to work swiftly,
otherwise other countries will
take that position before us.
We have the infrastructure in
place, with a strong network
of ocean ports and airports between Punta Cana, Santiago,
and Santo Domingo, and we
also have the capabilities and
the potential. ✖
BIO
Luis M. Bogaert was born in
Santo Domingo in 1958. He
was awarded his Doctorate
from the Universidad
Catolica Madre y Maestra
in 1983 and an MBA from
the Instituto Tecnológico
de Santo Domingo, INTEC,
in 1987. Before joining
Caribetrans Mr Bogaert
was with Minnesota Mining
& Manufacturing Co. in
Sales and Marketing. He
became Executive V.P. at
Caribetrans S.A. in 1987 and
was promoted to President
in 2008.
Maritime
THEBUSINESSYEAR
87
INTERVIEW
E.T. Heinsen, through sister
company Transporte Impala,
also provides inland transport
services. What importance
do you give to that part of the
business?
DELIVERING
the goods
TBY talks to Ewald Th. Heinsen, President of E.T. Heinsen and the
Shipping Association of the Dominican Republic (ANRD), on passing the
right laws to boost trading volume and expanding the offering.
E.T. Heinsen SAS celebrates
its 90th anniversary in 2014.
What do you consider the company’s landmark achievement?
The main landmark has been
the transfer of control within
the family to the fourth generation. That alone is quite an
achievement and something
that is looked up to by the
many companies that struggle to survive beyond the first
generation of ownership.
The strength of our company
stems from our people, which
today are a world away from
the previous generation in
technological terms.
BIO
Ewald Th. Heinsen was born
in Puerto Plata, Dominican
Republic, in 1954. He
graduated with a Master’s
degree in Germany in 1977
and worked for a Hamburg
container handling company
from 1977 to 1979, before
joining E.T. Heinsen in 1979.
He is currently President
of the Board of Directors
and Vice President of Haina
International Terminals,
and sits on the board
of several Dominican
companies.
What is your own experience
of the Dominican Republic’s
2014 economic performance?
From our perspective, we
expect to be ready for the
Canal expansion, as we have
the Caucedo Port investing
at least $200 million over
the next four years, which
will enable it to manage
large vessels over 350 feet in
length. Further good news
is that the shipping sector is
working on appropriate laws
or decrees allowing us to
become a more competitive
market even than Panama
or Colombia. The new laws
will allow goods to enter the
country in certain areas taxfree and be exported without
incurring additional fees.
Moreover, when you consider north/south business,
the Dominican Republic is
between Brazil and Argentina, and the US and Canada,
which means considerable
traffic going from north to
south, which could easily stop here and distribute
goods into Central America,
by taking advantage of the
transshipment port. And
when considering Europe
and the Dominican Republic, you see that the first port
of call to any service between
the two continents is the Dominican Republic, which is
also an attractive proposition for transshipments.
For 2015,
we forecast
generating
at least 15%
greater revenue
than today. The
primary goal is to
keep costs low
The Dominican Association
of Air and Maritime Shipping
Agents (ADACAM) and the
Shipping Association of the Dominican Republic (ANRD) are
considering the formation of a
transportation logistics cluster.
Can you talk us through this
idea?
We are exploring this idea
closely, and have tasked an
international expert to provide a thorough perspective
of what a cluster should be,
and which cluster we should
try to become. The National
Association of Consolidators
and Freight Forwarders is interested, as is the government
and, of course, ourselves. We
hope to see the cluster up and
running in 1H2015.
The biggest problem in the
Dominican Republic with
regards to logistics is the monopoly on in-land transportation. We are not members
of Fenatrado and can distribute in containers and chassis
anywhere in the Dominican
Republic. Soon, we will enter
other markets, and are already
building our strategy accordingly, and also undertaking
local distribution between
industries. Industries that engage heavily in distribution are
trying to outsource their transportation, which is why we
provide a truck and personnel
exclusively for them, and they
ultimately save money.
What are Heinsen’s current development strategy and key objectives for 2015?
For 2015, we forecast generating at least 15% greater revenue than today. The primary
goal is to keep costs low, increase productivity, and register better results. But each
individual line of our business
has its own goals. In the shipping and transportation sectors, we want to expand and
post a better bottom-line. At
the airports, we want additional representation from the US.
On the logistics side, we are
keen to enter more into warehousing, which is important,
as it is a totally new business
line. Meanwhile, we are a major stakeholder in the Port of
Rio Haina, and are not only
upgrading operational software, but also expanding our
capacity as a logistics operator. For example, grain coming from New Orleans to the
Dominican Republic in huge
bulk carriers is actually discharged in a well-mechanized
system that bags and stores it
in the warehouse, or directs
it to containers, and from
this port, we are distributing
bagged grain worldwide. ✖
88
THEBUSINESSYEAR
FOCUS DOMINICAN PORTS
HUB-READY
In today’s world, the commercial success of ports lies not
only in their location and productivity in traditional cargohandling services, but also in value-added logistics services.
THE DOMINICAN REPUBLIC has a great advantage coming from its strategic geographic location in
the center of the Americas. The country’s connectivity
is one of the most competitive in the region, with an
average 10-day transit time to/from Europe and less
than a three-day transit time to/from Panama and the
US. However, in today’s world, the commercial success of ports lies not only in their location and productivity in traditional cargo-handling services, but also
in value-added logistic services. Therefore, in order to
bring the country closer to achieving the strategic goal
of becoming a regional hub, Dominican ports are undergoing significant developments.
Rio Haina, located just 10km away from Santo Domingo, which is currently the Dominican Republic’s
main and busiest port, handling approximately 60% of
all cargo, focuses mainly on regional trade, specifically
with the US. The port’s operator, Haina International
Terminals (HIT), which invests heavily in security and
innovative technologies, was the first company in the
Dominican Republic to be certified as an authorized
economic operator by the World Customs Organization. Besides, according to Erik Alma, HIT’s President,
Haina has “the best CCTV system in the country: more
than 130 cameras with a world-class monitoring center.” Following its recent development strategy, the
port is currently in the latest stages of implementing
biometric access control in all restricted areas.
The country’s second busiest port, Caucedo, is a
world-class marine terminal and free zone, located
in Boca Chica, just 25km from the city of Santo Domingo. The port started its operations in December
2003, providing the necessary infrastructure to allow
Post-Panamax ship operations. Caucedo forms part of
the DP World portfolio of marine terminals, and was
built with the objective of projecting the Dominican
Republic as a strong competitor in the international market. Responding to new market trends arising
from the Panama Canal’s expansion, Caucedo will
soon start dredging from 13.5 to 15m. Recognizing
that the world’s most successful ports attract clients
by offering industrial and logistics activities in the very
same place, Caucedo will soon introduce its new logistics center with one-stop shopping services to further
facilitate international commerce and bring the Dominican Republic a significant competitive advantage
over other regional players. ✖
Maritime
THEBUSINESSYEAR
89
INTERVIEW
TBY talks to Morten Johansen, Executive Director of DP World
Caucedo, on maximizing the logistics offering, the advantage of
automation, and the issue of security.
UNLOADING
the hub
logistics center with one-stop
shopping services you are currently developing, and what are
the prospects for this initiative?
BIO
Morten Johansen held
the position of Executive
Director and Vice-President
of ZFMC since November
2011, having implemented
numerous successful and
timely changes at the
terminal. Prior to joining DP
World Caucedo, Johansen
had occupied a wide range
of positions within the
maritime arena. He was
the head of APM Terminals
for global design and
operations in The Hague,
Holland. He also served
as Managing Director in
Sociedade Gestora de
Terminais, Angola, starting
a joint venture company
with Angolan partners.
Subsequently, and under
Johansen’s management,
the terminal was awarded
the APM Terminals “Best
Project Implementation of
the Year and Best Terminal
of the Year.”
The Caucedo Logistics Center
has actually been a part of our
business plan from the outset.
We have now been operating
for 11 years and there have
been many phases of development of the port, although
this marks the next major
step in its growth. The idea of
building the logistics center
is to attract greater volume
into the Dominican Republic,
which will help to grow the local economy and create jobs.
Today we employ around
1,000 people in the port, but
at the logistics center, there is
the potential for huge growth
in the economy and in employment. We have an area
of land of about 40 hectares
currently being developed.
We have the option to develop a further 80 hectares making a total of 120 hectares. We
see this as an opportunity to
develop growth and further
promote the Dominican Republic as a cargo hub. We
have been highly successful
over the past 11 years, having
started out with a port that
basically only handled local
cargo, which we have transformed into a hub. Today
there is roughly a 50:50 split
between transshipment and
local cargo. In 2015 we expect
to grow volumes even further,
which will facilitate international commerce.
How do you evaluate Caucedo’s
performance in 2014 and its contribution to the local economy?
We are a key point in the local economy. On a national
basis, about 60% of the cargo
going in and out of the country comes through here. In
the captive market, we handle about 64.5% of the cargo.
This is also able to attract international businesses on the
strength of our sizable port. In
terms of performance, we are
in the top tier and we can offer world-class infrastructure
with the same capacities you
would find in the US, Europe
and Asia. We have automated
certain functions to expedite
business with Caucedo, and
to migrate away from manual and paper-based work to
the online environment, all to
make it easier for our customers to do business with us, and
the Dominican Republic more
competitive.
partnership with DP World, one
of the largest maritime terminal
operators in the world?
I consider ours a good combination. DP World operates
more than 60 ports around the
world and we bring the knowhow on operating the port,
while it is also a challenge for
a global company to enter and
manage 60 different local cultures or environments. As a
result, having a local partner is
extremely important. We contribute equally to the partnership and success of Caucedo.
What role does security play at
Caucedo?
We now hold all possible certifications. Security in this
region is an important topic,
and we are all unfortunately challenged by a certain
trade in illegal commodities,
which we actively seek to
prevent. We enjoy close cooperation with the local authorities and US authorities,
with both being present at
the port, and we are, again,
fully certified. One difference
here is that we are part of the
container security initiative.
We are the only Port in the
Dominican Republic to have
a scanner to check cargo for
contraband and illegal commodities, and are looking to
enhance our scanning capabilities to the point where
the latest technology allows
us to penetrate the entire
container to identify suspicious materials. Early in 2015
we will have in place one of
the most efficient and modern scanners available on the
market today, increasing the
number of scanners in Caucedo to two.
What other plans are set for
2015?
The key considerations for
us are developing the Port
Community System, continuing to grow our Cacuedo
Logistic Center, and further
preparing the Port for the
opening of the Panama Canal. In 2015 we will deepen
the current draft of the port
from 13.5m to 15m, which
will enable the port to the receive larger vessels once the
Panama Canal expansion is
completed. On smaller projects, we seek ways to reduce
our CO2 footprint and save
energy. ✖
90
THEBUSINESSYEAR
INTERVIEW
TBY talks to Erik
Alma, President,
Chairman & CEO of
Haina International
Terminals, on
maintaining security,
preparing for greater
trade volumes and the
benefits of PPPs.
keep it SAFE
How is Haina adapting to the
expansion of the Panama Canal, and how will it impact the
shipping industry in the Dominican Republic?
Haina
is
the
largest
multi-purpose port in the
country handling around
60% of total maritime traffic,
which includes container,
bulk, general cargo, and other types of vessels. Our focus
is on intra regional trade, especially with the US, and on
serving feeder vessels that
come from other transshipping hubs in the Caribbean,
and that in turn connect us
to the rest of the world. The
canal expansion impacts, for
the most part, what are called
long-haul routes, for example the Far East to North
America, whereby the immediate direct impact for Haina
will be limited. The expansion of the Canal is expected
to reduce logistics costs due
to the economies of scale of
the much larger vessels that
will now be able to cross, although that does not directly translate into increased
regional trade as some have
suggested. The reality is that
growth in maritime trade is
driven mainly by the economic development of the individual countries. There will
be an increase in demand for
transshipment services for
the larger vessels, and multiple countries including the
Dominican are competing to
capture it.
Haina was the first Dominican
Port to receive ISO9001-2008
certification and the first company in the country to receive
Authorized Economic Operator
certification. What role does security play in your operations?
Security is of the essence. The
port is ISPS-certified by the International Maritime Organization, and any terminal active
in the global market requires
this security certification. We
BIO
Erik Alma completed his
undergraduate studies in
Industrial Engineering at
the Instituto Tecnológico de
Santo Domingo (INTEC) and
holds an MBA from Harvard
Business School. He started
his career in the medical and
pharmaceutical industries.
In 2005 he returned to the
Dominican Republic, and
joined Cemex, the largest
cement manufacturer in
the country. Since 2010
he has been running Haina
International Terminals, the
largest multi-purpose port in
the country. He is President
of the local chapter of the
Business Alliance for Secure
Commerce (BASC), a nonprofit private organization
focused on increasing
security in the total supply
chain. He also sits on the
board for the Dominican
Shippers’ Association.
were also certified as compliant with the Customer-Trade
Partnership against Terrorism
program (C-TPAT) by the US
Customs and Border Patrol in
2011, only the fifth port outside the US to be certified. We
have also been certified by the
Commerce (BASC), which is a
global non-profit organization
driven by the private sector
that develops and sets worldclass standards for security.
We were the first company in
the Dominican Republic to be
certified as an authorized economic operator (AEO), which
is a security certification provided by the World Customs
Organization. All of this has required substantial investment
in basic infrastructure and
technology, as well as establishing rigorous control processes. We have the best CCTV
system in the country with
more than 130 strategically
located cameras and a modern monitoring center, and
we maintain recordings for at
least three months. We are in
the late stages of implementing biometric access control in
all restricted areas of the port.
In addition we also use the NAVIS terminal operating system,
globally the most widely used.
What is your assessment of the
country’s potential to become a
future regional hub in the Caribbean?
We have been taking advantage of our privileged geographic location ever since
the colonization of the island;
the Spanish crown used the
Dominican Republic as a hub,
and much cargo came from
South and Central America
to be shipped to Europe from
here. Today, we have nine international airports, 13 maritime ports, three of them of a
major scale, and an extensive
highway system. What we
need is the legal framework
to be able to receive, manage,
and re-export cargo that is in
transit within a no tax regime.
This will allow us to perform
value-added activities for that
cargo such as re-packaging or
re-labeling.
Created
in October 2000
by a group of
businessmen
from the shipping
sector, with
the purpose of
modernizing
Rio Haina Port’s
operations
Major
Dominican port,
handling approx.
60% of total
cargo
What is the importance of public–
private partnerships (PPP) for the
further development of the Dominican maritime industry?
Within the context of a port,
one sees the complex intersection of diverse stakeholders, both private and public.
Haina International Terminals is an excellent example
of what can be achieved when
a PPP works correctly. This
port used to be a government-run facility, but unfortunately investment had not
kept pace with growth, and
infrastructure had suffered
notably. Under the umbrella
of private investment, Haina
has become a world-class port
and not only survived, but
also thrived. Meanwhile, our
port operating committee allows stakeholders to focus on
continuous improvement at
monthly structural meetings.
This is one of the reasons we
can achieve such results as
60-minute turnover times to
pick up cargo. ✖
THEBUSINESSYEAR
91
95
98
100
Franklin Avendaño, Regional
Manager of Avianca, on passenger
routes and the importance of the
Dominican market.
Angel Terrero, Caribbean Regional
Manager of Yobel, on the supply
chain management business and
being a regional player.
The Dominican Republic’s car
dealers have started to introduce
hybrid cars to a still traditional
Dominican market.
Transport
REVIEW
By dint of its geographical location alone, the Dominican Republic can
expect sustained traffic growth, by both air and sea in the commercial and
touristic arenas.
T
he Dominican Republic’s transport
sector has been
gaining strength
with the dual support of public and private investment,
although its share of GDP
as of 2012 had declined YoY
to 4.5% from 4.7%. Its comprehensive road network
linking the major and minor
conurbations, along with 36
airports flesh out Caribbean nation’s comprehensive
infrastructure offering. Indeed, the historic connection
to the sea harks back to the
earliest days of transatlantic marine travel, and it is in
shipping that Dominican
transportation infrastructure
truly comes into its own. A
key element of the Ministry
of Economy, Planning, and
Development’s 2030 National Development Strategy is
improved promotion and encouragement of competition
in the transport sector. In
line with this strategy, a fuller
integration of the provinces
with industrial centers and
the maximization of of international connections is systematically being executed.
DELIVERING
THE NATION
WHEN THE BOAT
COMES IN
Image: DHL Dominicana
Shipping in the Dominican Republic
has seen consistent growth over recent
years, as investment from international
firms continues to inject capital into the
sector and free zones expand.
Shipping in the Dominican
Republic has seen consistent
growth over recent years, as
investment from international
firms continues to inject capital into the sector and free
zones expand. A total of 4.2
million metrics tons of cargo was loaded in Dominican
ports in 2012, while over 13.7
million tons was unloaded
over the same period. According to World Bank sources, 1.5
million TEUs passed through
the port system in 2012, compared to 1.4 million in 2011.
The oldest port in the socalled “New World,” situated
on the mouth of the river Ozama and docked at by Christopher Columbus is part of Dominican maritime heritage.
Today it serves a wide range
of purposes, including general cargo and fuel handling,
and hosts two cruise ship
terminals at Don Diego and
Sans Souci. Both are managed
by Sans Souci Ports S.A. and
have recently undergone extensive refurbishing. The Don
Diego terminal pier is 400m
in length, while Sans Sou-
92
THEBUSINESSYEAR
3.00
Republic can become a hub for larger ships,
which could offload cargo and passengers to
then be transported throughout the region on
smaller vessels. Our country is ready to meet
this need and to become a regional center in
that sense, mainly because we have a strong
tourism sector.”
2.00
CAUCEDO
Transport Sector Share of GDP (2007-12)
Source: Central Bank of the Dominican Republic
5.00
4.00
1.00
0
2007
2008
2009
2010
2011
2012
The State of Main Roads as of 2012
Source: Ministry of Public Works and Communications of DR
Deficient
16%
Regular
49%
Good
35%
ci serves as a homeport for prominent cruise
lines. Over 350 ocean-going ships utilized Santo Domingo’s ports in 2012, 13 of which were
cruise vessels.
Haina, located 11km from Santo Domingo,
is the preeminent Dominican port, and accounts for around 70% of all cargo handled. It
consists of 15 ship berths, which can take liquid and dry bulk containers, roll on/roll off, and
general break bulk cargo. The facility is divided
in two by the Haina river, which separates the
docks into Haina Oriental, the larger of the two,
and Haina Occidental, on the west bank of the
waterway. During the first six months of 2013,
148,812 TEUs were handled at the twin port,
marking 2.3% YoY growth from 145,426 TEUs.
Maritima Dominicana S.A.S. data for that year
put the number of oceangoing vessels visiting
the facilities at 1,686.
PIISA is a major industrial park of close to
150,000 sqm located less than 10 km from the
port, in the southwest of Santo Domingo. It has
been providing internationally certified services
and space to multinational firms since 1985.
Other prominent harbors are AES Andres’ LNG
import terminal at Boca Chica, the Complejo
GNL del Este in San Pedro de Marcoris, and the
Punta Nizao Oil terminal between Santo Domingo and Barahona. A major new maritime development, the $65 million Amber Cove cruise center near Puerto Plata, will become a key regional
center for the tourism segment, and is expected
to transform the area and dramatically increase
tourist numbers when opened for business in
October 2015. According to USA Today, the 30acre Amber Cove, forecasts hosting 100,000 passengers in its first year.
There remains considerable potential for
the Dominican maritime industry to exploit.
Tony Vásquez, President The Dominican Association of Air and Maritime Shipping Agents
(ADACAM) explained how: “The Dominican
The massive port of Caucedo handles 85% of
exports that fall under the free trade regime
with the US. Completion of Phase II of the facility in 2011 lifted port capacity to 1,250,000 TEU,
while an extra 300m of deepwater berthing was
introduced. Run as part of the DP World group,
it is both port and free zone, located just 25km
from the capital. It hosts key enterprises such
as China Shipping Hapag Lloyd, Evergreen,
NYK, Yang Ming, and Hanjin. As it moves into
its second decade of operations, this private enterprise is ever expanding to facilitate the heavy
trade between the US and the Central American
and Caribbean parties to the CAFTA-DR Free
Trade Agreement. Official US figures put US exports to these markets in 2013 at $29.5 billion,
making it the third largest trading partner of
the US in Latin America. Similarly, goods produced in Dominican FTZs are overwhelmingly
exported to Puerto Rico and the US. Caucedo
could increase in importance with the completion of a third set of locks in the Panama Canal,
which will ultimately increase traffic through
the waterway by allowing ‘post-Panamax’ size
vessels through. Ewald Th. Heinsen B., President of E.T. Heinsen and Shipping Association
of the Dominican Republic (ANRD), told TBY
that: “the Caucedo Port [was] investing at least
$200 million over the next four years [which ]
will bring it to a capacity able to manage large
vessels over 350 feet in length.”
The potential for logistics firms is clear, and
this expansion of the world-famous canal will
certainly increase cargo passing through the
country. However, executives involved in the
logistics sector understand that more needs to
be done. Indeed, both ANRD and the Dominican Association of Air and Maritime Shipping
Agents (ADACAM) have undertaken preparatory work for the formation of a transportation
logistics cluster. According to Ewald Th. Heinsen B.: “The National Association of Consolidators and Freight Forwarders is interested, as
is the government, and of course, ourselves,”
continuing that, “Now it is a question of going
forward and we hope that for 2015 it should
be up and running, hopefully in the first half
of the year.” Tony Vásquez depicted the status
quo in figures: “The logistics sector accounts
for up to 20% of the GDP of countries such as
the UAE (Dubai) or Singapore. Here it accounts
for about 10%, but we foresee improvement
leading to growth, which would in turn generate more employment and account for a larger
slice of GDP. However, this can only happen if
we improve our competitiveness.”
JOSÉ PEGUERO
KNIPPING
General Manager,
Autogermánica,
and Spokesperson
for Pellerano Nadal
Grupo Pellerano Nadal
is a group of automotive
companies, individually
incorporated, with over
50 years of experience in
the Caribbean. Our main
advantages are a strong
product portfolio and
business experience. BMW
is the leading provider of
premium products and
services for personal
mobility worldwide,
and we bolster this
competitive advantage
with our extensive
aftersales services.
YOUR SATISFACTION
IS OUR GOAL
Nelly Rent A Car: Quality and Service at the Best Possible Prices.
We want to ensure our
customers have access to
the best rental car hire
services at the lowest
possible prices in the
Dominican Republic.
Our customers can have
confidence that they are
getting excellent value
for money, as well as great
service.
www.nellyrac.com
Plaza Galerías Punta
Cana, Car Rental
Center. Carretera
aeropuerto Punta
Cana
T 829 292 3029
Santo Domingo
T 809 687 79 97
Zona Oriental
T 809 593 79 97
Santiago
T 809 582 79 97
Aeropuero Int.
Las Américas
T 809 549 05 05
Aeropuerto Int.
del Cibao
T 809 233 81 77
Aeropuero Int.
La Union
T 809 586 05 05
NellyRentCar
94
THEBUSINESSYEAR
COME FLY WITH ME
The country boasts 36 airports, eight of which
serve international destinations. Six of these
are managed under a Build-Operate-Transfer
(BOT) model by Aeropuertos Dominicanos Siglo XXI (AERODOM), which is working to profitably modernize and improve the network.
The government target for 2022 is to receive 10
million arrivals. Meanwhile, a total of 5,163,682
passengers arrived through the Dominican Republic’s efficient airports in 2013, Punta Cana
International Airport, serving a distinguished
tourist location in the east of the country, received over 66% of the 2.6 million arrivals by air
in 1H2014.
several road projects are being actively expanded. These include the Cibao-Sur highway, the
Vial del Este circuit (Romana, Boulevard del
Este, Bávaro-Uvero Alto-Miches-Sabana de la
Mar ringroad), and the Avenida La Américas
entrance section. Maintenance of smaller roads
across 27 provinces in the country has been
contracted to local firms with a view to improving infrastructure in rural areas. ✖
ON THE ROAD
Since the completion of the first highway in the
Dominican Republic, “la Duarte,” in 1922, the
importance of roads for the economic development of the nation has grown. Decisions on
where to lay down roads were logically based
on the economic significance of the various
regions of the country, with Duarte connecting
Santo Domingo and Cibao, the richest part of
the interior. The road system that developed
from then on became a core driver of economic
growth, and remains an essential component
of the national transport matrix. DR-1 to 5 are
the principal highways in the state. As part of
the Ministry of Economy, Planning, and Development’s 2030 National Development Strategy,
PAUL GUERRERO
MELO
Executive Vice-President,
Caribe Tours
We prioritized the concept that quality transport services have
nothing to do with social status. The incorporation of Caribe Tours
was a turning point in the development of the transport industry
in our country. We have also developed a strong network of
international partnerships with tour operators, and have become a
well-known brand for the Dominican Republic.
Transport
THEBUSINESSYEAR
95
INTERVIEW
TBY talks to Franklin Avendaño, Regional
Manager for the Dominican Republic and
Puerto Rico for Avianca, on passenger routes,
the importance of the Dominican market in
terms of ticket sales, and the advantages of
having a modern aircraft fleet.
Avianca is the world’s second
oldest continuously operating
airline. How has the company
developed since its foundation?
Actually, Avianca is the commercial brand, and is the
holding company for all Avianca carriers, which include
TACA International Airlines,
Trans American Airlines in
Peru, LACSA in Costa Rica,
and AeroGal in Ecuador.
Yet in terms of a commercial brand, you will only see
Avianca. We have a little
over 19,000 employees, who
are renowned for providing
world-class customer service.
Besides passengers, we also
transport cargo as we handle Avianca Cargo under the
commercial name of Tampa
Cargo. We fly to almost 100
destinations across America,
and three in Europe—Madrid, Barcelona, and London, with the latter launched
in summer 2014. We have
a modern aircraft fleet of
about 168 short-, medium-,
and long-haul range aircraft.
Back in 2012, we joined Star
Alliance, which is the largest
alliance of the three in the industry. We also have over 5.4
million subscribers to our LifeMiles loyalty program.
Avianca’s flights departing from
Santo Domingo and Punta Cana
connect more than 10 countries
in South America in addition to
Mexico, Panama, and Spain.
Dominican Republic for Avianca’s operations?
Actually, it is important because the Dominican Republic is the largest market for
Avianca in the Caribbean. It
is the country that issues the
most tickets and transports
the most passengers. Within
the Caribbean, we have operations in San Juan, Puerto Rico,
Aruba, Curaçao, and Cuba,
but the Dominican Republic
is still the biggest market. It is
also significant for us because
PROCEED to gate
A workforce
of over 19,000
employees,
serving 98 direct
destinations in
26 countries
throughout the
Americas and
Europe
BIO
Franklin Avendaño has more
than 15 years experience in
the business travel industry,
all with the airline. He has
worked in many different
areas, giving him a wideranging perspective on the
air travel business. Avendaño
has worked in various
positions related to airports,
ticketing offices, direct
channels sales strategy,
key accounts management,
e-commerce, and field sales
force administration for
Central America, Mexico, and
the Caribbean. Nowadays,
he leads the commercial
operation for Avianca in the
Dominican Republic and
Puerto Rico.
we have had a great increase
in business. We started this
operation with three flights a
week, and now we have daily
flights. We have increased our
operations to Lima, too. We
only had two flights to begin
with and now we have four
flights per week to directly
serve the Peruvian market. In
the Dominican Republic, We
have between a 75% and 85%
load factor in the low season
and 100% occupation load
factor in high seasons.
How does Avianca distinguish
itself from its competitors, and
what have been the highlights
for the company in 2014?
I think one of the key reasons passengers might chose
Avianca over other airlines
is our level of service, then I
would say it is our fleet. We
have, on average, five-yearold aircraft, which is new,
and most of these planes
have onboard personalized
entertainment systems. We
also have numerous programs for companies, such
as leisure packages or corporate fares, where we give
companies discounts for
every purchase. In terms of
highlights for 2014, these
were the launch of the new
route to London; the launch
of the new ATR 72-600 aircraft in Central America, and
the addition of the first Airbus A321 for Colombia.
In August 2014, Avianca
Holdings and its subsidiaries
carried more than 2.3 million
passengers. That accounts
for a 6.6% increase over the
same period in 2013. What
destinations have enjoyed the
greatest popularity and what
was the Dominican Republic’s
performance?
In the domestic markets of
Colombia, Peru, and Ecuador, Avianca transported
more than 1.3 million passengers, which was an 8.7%
increase in comparison to
August 2013. The seat capacity increased as well by
7.8% and as a result of this,
the occupation was 78% of
the load factor, which is impressive. For international
markets, Avianca transported one million passengers
on international routes, on
a 3.8% increase, while the
seat capacity rose by 3.4%.
For the Dominican Republic, the passenger increase
was 22%, versus August 2013,
while revenues substantially
increased by around 20%.
We currently have one daily
flight to Bogotá from Santo Domingo and flights four
times a week to Lima, in addition to daily flights from
Punta Cana to Santo Domingo. In the commercial area,
we have nine employees, but
if we include the airports in
Punta Cana and Santo Domingo, it is around 45. ✖
96
THEBUSINESSYEAR
FOCUS THIRD-PARTY LOGISTICS SERVICES
The Dominican Republic is fully dedicated to transforming itself into a
regional hub and is already undergoing significant developments in its
logistics infrastructure.
MOVE IT, MOVE IT
THE FM GLOBAL RESILIENCE INDEX
2014, which ranks 130 countries according to
their business resilience, and aims at helping
businesses to better manage supply chain risks,
lists the Dominican Republic as a country still
highly susceptible to supply chain disruption.
Yet even though the Dominican Republic is
located on an island exposed to natural disasters, the country enjoys constant GDP growth,
political stability, and robust socioeconomic
development.
According to Jonathan Hall, FM Global’s
Executive Vice-President, supply chain management is “becoming more global, complex
and interdependent,” and “it is essential for
decision makers to have concrete facts and intelligence about where their facilities and their
suppliers’ facilities are located.” Both the Dominican Republic’s authorities and the private
sector representatives have already realized the
importance of having well developed and competitive infrastructure and are fully dedicated to
transforming the country into a regional hub.
Angel Terrero, Yobel’s Regional Director told
TBY that his company “operates within a supportive environment of political and economic
stability, which greatly impacts both economic
development and international trust.
Alexander Schad, Schad’s Executive President, believes that the Dominican Republic has
“adequate and comparatively modern infrastructure, namely ports, airports, and roads.”
Olman Castillo, DHL’s Country Manager, is
also pleased by the quality of local infrastructure, “roads, subway and ports are remarkably
good, as well as the quantity and quality of airports for passenger traffic.” According to Castillo, the Dominican Republic holds the potential
to become a hub in the Caribbean, but “must
improve warehouses and security infrastructure, and ensure that a constant source of electricity is available.”
Local third-party logistics providers are conscious of the importance of introducing new
technologies and innovations in their operations and are set to take advantage of new
opportunities. Luis M. Bogaert, Caribe Trans’
President told TBY that his company’s “aim is to
become an IT company that provides third party logistics services, not the other way around.”
Caribe Trans is not the only third-party logistics services provider to invest heavily in
technology. Schad, one of the market leaders,
is currently implementing an automated warehouse management system controlled by radio
frequency, providing immediate data and inventory visibility, as well as an electronic document
storage and retrieval system, which aims to improve the company’s overall process efficiencies.
In order to meet the challenges coming
from the expansion of the Panama Canal and
be able to compete in the global marketplace,
the Dominican Republic has been focused not
only on raising the quality of trucking services
and strengthening its policy coordination, but
also on improving its intermodal road and port
network infrastructure. Overall, Post-Panamax
vessels will profoundly transform the dynamics of international freight transportation, as
ports are now expected to handle grater cargo
volumes in a more efficient and timely manner.
Instead of handling small cargo loads in multiple locations, the Post-Panamax vessels will
now be serviced in larger hubs.
Rising to the challenge, one of the most important ports, Caucedo, which neighbors Las
Americas Airport, will soon start the construction of a Logistic Free Zone (LFZ) in order to
further facilitate supply chain management.
According to Karsten H. Windeler, Maritima
Dominicana’s President of the Board of Directors, the new Logistic Free Zone will help the
Caucedo Port to, “become a hub for the supply
of materials and merchandise to the eastern
Caribbean for both ships and aircraft.” ✖
OLMAN
CASTILLO
Country Manager,
DHL Dominicana
What strategies does the
company implement to better
serve the Dominican Republic’s SMEs?
Key to providing this service is
our comprehensive nationwide
coverage stretching from Puerto
Plata to Punta Cana, the two
extremes of the country. We
cover the main cities directly
and in the more rural areas we
work with partners to support
our customers' requirements.
Our call center supports and
enables customers to monitor
their shipments.
How does DHL attract and
retain a talented workforce?
Employees in the Dominican Republic undergo the same training
as those in Costa Rica, China, or
Uruguay. We also pay close attention to feedback to maximize
staff motivation, and we are
investing in facilities and equipment. In 2013, we celebrated
the 25th anniversary of DHL’s
presence in the DR by investing
$400,000 in our facilities.
transport infrastructure and its
potential to become a regional
hub in the Caribbean?
The quality of the local roads
and ports is remarkably good,
as are the airports. The country
has the technology to become a
hub for the Caribbean. However,
they must improve warehouses
and security infrastructure, and
ensure a constant source of
electricity.
Transport
THEBUSINESSYEAR
Getting Around
PUERTO PLATA
PUERTO PLATA
MONTE CRISTI
LUPPERON
ATLANTIC
OCEAN
MAO
DAJABON
97
CIBAO
MOCA
SALCEDO
SABANETA
NAGUA
SAMANA
EL CATEY
JARABACOA
HAITI
BONAO
COTUI
CONSTANZA
ELIJAS PINA
MONTE PLATA
SAN JUAN
DOMINICAN REPUBLIC
JIMANI
SANTO DOMINGO
NEYBA
EL SEIBO
HATO MAYOR
AZUA
PUNTA CANA
HIGÜEY
LA ROMANA
SAN CRISTOBAL LAS AMERICAS
BROHANA
BANI
SANTO DOMINGO
LA MONA CANAL
MARIA MOTEZ
Highway
PEDERNALES
CARIBBEAN
SEA
Main Road
Cruise Port
International
Airport
A total of
Over
4.6 14.7
Million metric
tons of cargo
was loaded
at Dominican
ports (2013)
Million tons of
cargo was was
unloaded over
the same period
(2013)
DR1
connects Santo Domingo to
the fertile Cibao region
DR2
gives Santo Domingo a direct
link to the mid-sized cities
DR4-DR8-DR6
provide alternative routes or work as auxiliary routes
DR3
connects Santo Domingo
to the main tourist towns
DR5
connects main routes to
smaller-sized cities
98
THEBUSINESSYEAR
INTERVIEW
TBY talks to Angel Terrero, Caribbean
Regional Manager for YOBEL Supply Chain
Managment (SCM), on the supply chain
management business, being a regional
player that understands the market, and the
leading role of the Dominican Republic in the
company’s operations.
ever flexible
Yobel has become one of the
leading South American companies offering outsourcing services in supply chain management. What factors have led to
this success?
BIO
Angel Terrero was born
in 1979 and is Caribbean
Regional Manager of
Yobel Supply Chain
Management, overseeing
Yobel SCM’s operations in
the Dominican Republic,
Puerto Rico and Panama.
He has more than 15 years’
experience working in the
manufacturing and supply
chain industries. Mr. Terrero
is an industrial engineer
and has a Master’s degree
in Business Administration
from The Pontificia
y Maestra in Santo Domingo.
He sits on the board of
Asociación de Empresas
Industriales de Herrera y
Provincia de Santo Domingo
(AEIH) and is a member of
Asociación de Empresas
de Inversión Extranjeras
(ASIEX) and the American
Chamber of Commerce of
the Dominican Republic
(AMCHAM).
We are highly flexible and design all our infrastructure and
service platforms based on
our customers, and they leverage our technologies and operational know-how. We have
implemented a world-class
warehouse management system, and our executive staff
are certified in Lean Six Sigma,
which we are going to extend
to the entire organization in
2015. Another relevant factor
is that, as a subsidiary company of a Peruvian corporation,
we have vast knowledge of the
Latin American market. These
factors are differentiators for
us because most players in
this industry are from Europe, the US, or Asia, or have
partnerships with local companies, while we are proudly
Latin American and operate
our own branches.
Yobel offers services in supply
chain management in 11 countries throughout the Americas.
What role does the Dominican
Republic play within your international portfolio?
The Dominican Republic today is our largest operation
in the Caribbean, although
Puerto Rico and Panama feature too. For 2015, the Dominican Republic will maintain a
leadership role for Yobel in the
Caribbean, but Panama is experiencing rapid growth, and
I believe by 2016 it will have
become the company leader. The Dominican Republic
is strategic for us because we
manage all our regional operations from here. In Puerto
Rico, the Dominican Republic, and Panama the market
is in continual growth. We
don’t have a sizable market
share currently, but we are
expecting this to change, and
are confident of growth in the
Dominican Republic. Today,
we have notable demand from
the pharmaceutical industry. We have implemented a
strong quality system for that
sector and have considerable
experience with consumer
goods, cosmetics, technology, and food and beverages;
hence, business in the Dominican Republic is important,
and there is a wide portfolio of
services on offer. Our biggest
market is the multinationals.
How does the regulatory environment in the Dominican
Republic affect Yobel’s performance and the logistics industry as a whole?
Our business operates within
a supportive environment of
political and economic stability; the country has a stable growth rate of over 5.5%,
while inflation is within the
acceptable range, and the currency is stable, although we
face other challenges. I consider the labor law compli-
cated, for example. There is a
movement among the private
sector to propose its amendment, which goes beyond
our industry. The employee is
currently over-protected under this law, giving a company little space for negotiation
when it comes to a dispute.
This is something that hinders
the normal development of
operations and is a sensitive
issue among many sectors
nowadays. This factor can be
seen as favorable for our business since our customers may
avoid those complexities by
contracting our third-party
logistics services.
How would you rate the quality
of the infrastructure in the Dominican Republic?
It is adequate for the market in terms of warehousing
and roads. Yet, any serious
attempt to transform the Dominican Republic into a hub
will demand more modern
infrastructure and a regulatory law. For example, the Port
of Caucedo being constructed in partnership with DP
World is building some infrastructure for our business to
establish logistics centers in
the port.
What impact will the Panama
Canal expansion have on the
Dominican logistics industry?
The canal expansion will help
us because it will increase the
traffic of goods; however, it is
a challenge, too. In the same
way, we must ensure our regulatory environment, because
Panama has many laws that
assist companies not based in
Panama. So, it is not only the
expansion of the canal, it is
also the integration of policy
that must be checked. Yobel
grows in Panama by approximately 30% yearly, which is a
huge figure. In the Dominican
Republic, we grow by 20%25% annually, which presents
an opportunity, although it is
a challenge for the country to
maintain its competitive advantage in the region. ✖
Transport
THEBUSINESSYEAR
99
INTERVIEW
TBY talks to Alexander
N. Schad, Executive
President of Schad, on
being in partnership
with DHL, and the
need for better
transport and logistics
regulation.
THERE first
In what sectors are Schad’s
services most required, and
what customers are you targeting?
Schad mainly serves the
consumer goods, food and
beverage, pharmaceuticals,
technology, and telecommunications industries. Our
motto is “get there first.” So,
for example, pharmaceuticals
is an important sector for us
because of the time-sensitive
focus. We are also active in
the free zone manufacturing sector, which has a large
component of medical device
firms. In term of clients, we
focus on multinationals and
large national companies,
mainly because these are the
organizations that are more
advanced in their logistics
planning and are willing to
outsource.
What is the importance of your
partnership with Deutsche Post
DHL, and its role in the overall
development of Schad?
DHL Global Forwarding has
been our partner for more
than 40 years. Branding-wise,
it is important for us because
DHL is the number-one logistics company in the world.
However, more important
than this is the network that
DHL has. While Schad’s presence is in the Dominican Republic, we have access to the
offices of DHL everywhere in
the world, permitting us to
serve customers along the entire global supply chain, from
origin all the way to the end
consumer.
What innovations and technologies is Schad using for its operations?
We are implementing automated warehouse management systems that are controlled by radio frequency,
which gives us immediate
data and inventory visibility.
Within the transport sector,
we have an in-house Transportation Management System that controls our 250
trucks while being monitored
by GPS. In 2014, we are also
implementing a business
process management system
as well as an electronic document storage and retrieval
system, which aims to improve our overall process efficiencies.
What have been the major milestones for Schad in 2014?
During 2014, we have consolidated our trucking network to
provide daily coverage to all
the municipalities of the Dominican Republic. Our logistics operation in the eastern
part of the island was consolidated, and now offers customs brokerage, warehous-
ing, and distribution from our
center in Punta Cana, mainly
to serve the tourism sector.
These services guarantee our
customers same-day deliveries with over 99% accuracy.
Looking to reduce risks, several projects were successfully completed ending with our
Commerce certification.
In August 2013, SOFOS unveiled the country’s biggest
rooftop solar panel array, at
your logistics complex. What
is the importance of this investment for the development of
the country’s energy sector?
We feel good that our green
energy production is equivalent to the consumption of
over 100 homes. It is also a
sound economic decision
earning a positive return on
investment. The Dominican
Republic has long had a problem regarding electricity,
with high costs, irregular production, and blackouts. We
are heading in the right direction to improve that. We applaud the government’s decision to provide incentives
to ensure more green energy
is produced. Schad also has
a second such facility, which
came online in July. The new
project is in our truck terminal, and is about half the size
of the first one.
How would you assess the current condition of the logistics
sector in the Dominican Republic and the country’s potential
to become a future regional
hub?
I think, as a country, we have
an adequate and comparatively modern infrastructure.
Established service providers
such as airlines, ocean cargo
liners, land transport companies, logistics operators,
and warehousing companies,
offer multiple competitive
services. The Dominican Re-
public just needs two more
things, the first being the legal framework that will enable the country to become
a hub. Under the current
framework, it is too expensive and time consuming to
import and export products
as a transshipment hub. We
are already working with the
presidency and the customs
authority on a new regulatory framework. Secondly,
regarding education, we still
need quite a bit more development. There is a need for
more in-depth specialized
training in our industry. Currently, almost everyone in
this sector learns on the job.
The academic sector offering
is a necessary ingredient for
the competitiveness of the
Dominican Republic. ✖
BIO
Alexander N. Schad was
born in 1971 and is currently
the Executive President of
Frederic Schad, SAS with
over 20 years experience in
the transportation industry.
He has a Bachelor’s
degree in Finance from the
University of South Carolina
and a Master’s degree in
Business Administration
from the Kellogg Business
School at Northwestern
University. Alexander is
the former President of
the Dominican Freight
Forwarder’s Association
and current Treasurer of the
Latin American Logistics
Operators Association.
He is also Vice-President
of the Trade Facilitation
Committee at the American
Chamber of Commerce of
100 THEBUSINESSYEAR
FOCUS HYBRIDS
UNPLUG
& GO
As electric and plug-in
hybrid automobiles
have dominated the
automobile news in
the past few years, the
Dominican Republic’s
car dealers have
started to introduce
this new trend to a still
traditional Dominican
market.
COSTS
The purchase price of a hybrid vehicle is indeed
more expensive than its conventional gasoline
counterpart. However, with the current cost of
gasoline, hybrid technology offers much better
value, especially for vehicles operating in urban areas. Due to significant fuel savings, the
payback on hybrids usually takes three to five
years. In the words of Nelson Peña, CEO of Peravia Motors, “the car essentially pays for itself.
The down payment is expensive, but within five
years driving is almost free as you use neither
gasoline nor oil.” But the reduction of fuel costs
is not the only advantage of investing in hybrid
vehicles; hybrids are also better for the environment, as well as the bottom line of a fleet.
PLUG-INS
The potential of hybrid technology has expanded significantly in the last few years
mostly due to the inclusion of plug-in hybrid
electric vehicles (PHEV), hybrid electric vehicles with rechargeable batteries that can be
restored by connecting a plug to an external
electric power source. PHEVs share the characteristics of both, conventional and hybrid
electric automobiles, having electric motors
along with internal combustion engines. Plugin hybrid technology allows the user to reduce
costs and exposure to the volatile oil market
by powering automobiles from electricity
grids. The CEO of Peravia Motors, “considers
dual-mode vehicles to be the most appropriate currently as they do not require a recharging station. (…) People can charge them
at home, where the car recharges in 3 to 4
hours.” PHEVs are also a good option because
the price of electricity is more stable and much
easier to predict. Moreover, PHEVs eliminate
the “range anxiety” often associated with electric cars. Their combustion engines work as a
backup when the batteries deplete.
SALES
To date, approximately 9 million hybrids have
been sold worldwide. Among all hybrid vehicles, the Toyota Prius has been an absolute
number one seller. This hybrid is now the fifth
best-selling car in the world, which is a truly
promising signal for the hybrid segment. The
US is currently its largest market with more
than 3 million hybrids, followed by Japan with
sales exceeding 2.6 million units.
ENHANCING THE IMAGE
In the words of Alfredo Najri, the General
Manager of Delta Comercial, “people are still
not aware of their (hybrids) sheer advantages,
but we are working to enhance the image. We
staged a photo opportunity with our first customer, and people have come to hear about
these vehicles through the grapevine.” Nelson
Peña also claims that “penetration is low, because people are not familiar with these technologies.” That is why Peravia Motors’ main
marketing strategy is for people to drive the
car when they visit the dealer’s showroom.
Both companies have told TBY that they see
potential for growth in the hybrid sector in the
long term.
DONATION
In March 2014, the Ministry of Economy, Planning and Development of the Dominican Republic announced that the country received a
$5 million donation from the Japanese Government for the purchase of 125 hybrid vehicles.
The vehicles have been assigned to 16 Dominican Ministries and will be delivered in the mid2015. Japanese Embassy commercial attaché
Yuji Takeya said that “the donation of the new
generation vehicles forms part of his country’s
efforts to bolster the friendly relations and cooperation between the two countries.” He also
added that “the vehicles have a low environmental impact and consume less fuel, which in
his view contributes to Dominican Republic’s
sustainable development, reducing pollutants
and greenhouse gas emissions.”
EXPECTED GROWTH
The number of hybrid vehicles is likely to further grow because of three main reasons:
• Firstly, due to increasing awareness among
customers who are becoming more familiar
with this technology and developing positive
attitudes towards hybrid vehicles.
• Secondly, because the quality of hybrid technology has significantly improved over the
years and the number of product offerings
keeps growing. There will be more hybrid options in more vehicle classes and styles in the
near future.
• And last but not least, the hybrid sector is likely to grow because of rising concerns over the
environment and the favorable economics of
this technology. ✖
Bumper years, growth years, record-breaking
years, challenging years. The key players and
their stories are all in The Business Year.
The Business Year is also available on tablet, giving you
an insider track into the country’s most dynamic
sectors—in the palm of your hand.
w w w. thebu sin essy ea r. com
102 THEBUSINESSYEAR
B2B HYBRIDS
ALFREDO NAJRI
NELSON PEÑA
Genaral Manager,
LEXUS (Delta
Comercial S.A.)
President, Peravia
Motors
How would you describe the
current Dominican Republic
vehicle market and what trends
are you seeing?
NELSON PEÑA Our country is
traditional. Dominican people
use only diesel and gasoline vehicles, and mostly pick-ups and
trucks, with SUVs being the most
demanded vehicles, representing approximately 44% of the
market. People only began using
natural gas as a fuel two or three
years ago. Then, they began to
import used vehicles fitted for
natural gas consumption. However, since the price of natural
gas has been rising, people have
started to think that it might not
be the optimum solution. Our
company considers dual-mode
vehicles to be the most appropriate currently as they do not require a recharging station; people can charge them at home.
In the city, people general don’t
drive more than 70km a day; they
just go to the office or school and
back home, which is around
30km or 40km. Then, you plug
the car in at your home, and the
car recharges in three to four
hours. You rarely use gasoline,
but if you do exceed 70km, the
gasoline engine kicks in. When
you drive, for example, down a
hill, it recharges using the brake
system; it is a thoroughly modern system, and the most advanced technology available in
the world.
ALFREDO NAJRI This is an
SUV-orientated market, and
the middle class is looking for
a good quality car in a modern
style. I hope the growth of these
sections of society will increase
interest in the premium sector
and our Lexus sales, which are
the next step up. I believe that
the middle class customer is
more likely to upgrade to a larger SUV before opting for a Lexus,
as the cheapest Lexus can cost
$80,000. Another trend gradually emerging in the Dominican Republic is that for hybrid
vehicles, that we were the first
to introduce them. People are
still not aware of their sheer advantages, but we are working to
enhance the image. We staged
a photo opportunity with our
first customer, and people have
come to hear about these vehicles through the grapevine. The
Dominican Republic does not
have charging stations yet but
they will come soon.
take your foot
OFF THE GAS
TBY talks to two Dominican Republic car
dealers about changing consumer tastes and
encouraging vehicle purchasers to go greener.
Delta Comercial was founded
in 1962 by the Peynado family. Why did Najri Group decide
to purchase the company and
what was the impact of the acquisition?
AN When I joined Delta Comercial in June 2001, it was already
an established company. It
was the first in the Dominican
Republic to import Japanese
cars, as well as being about the
fourth-oldest Toyota distributor in the Americas. Toyota has
always been a big seller in the
Dominican Republic because
of its traditional association
with quality products. That is
why acquiring Delta Comercial
was a strategic move for Najri
Group. We hold the distribution
and importing rights for Toyota
vehicles in the Dominican Republic, and over the past decade
have become a market leader in
sales and service.
What is Peravia Motors’ target
market today?
NP Over the past 40 years, we
have focused on trucks; however, today we represent Chinese brands and deal in all segments of vehicles: automobiles,
mini-vehicles, buses, trucks,
and light trucks, although the
principal focus is on hybrid
vehicles. Peravia Motors introduced the dual-mode vehicle
to the Dominican Republic.
We represent Chinese brand
BYD, which employs the most
advanced technologies in electric and dual-mode vehicles.
And our strategy is to introduce
additional dual-mode cars to
the market in order to build
customer trust. For now, there
is no demand for this type of
vehicle. My expectation is that
people will, however, be won
over by the new SUV. It will be
the only SUV in the world that
consumes just half a gallon per
100km. People need to come
to terms with judging a vehicle by the cost of electricity,
rather than gasoline. The car
essentially pays for itself. The
down payment is expensive,
but within five years driving is
almost free as you use neither
gasoline nor oil. ✖
THEBUSINESSYEAR
103
107
109
110
Raúl Nazario Rizek, President
of Constructora Rizek, on how
big infrastructure projects are
helping the economy.
Two senior figures in the
Dominican construction industry
discuss the construction boom in
the north of the country.
One of the strongest and best
established sectors, the cement
industry is thriving, not least in
the export markets.
Real Estate & Construction
R E V I E W R E A L E S TAT E
Real estate continued to experience strong demand in 2014, with the
domestic house market expanding markedly, and ever greater interest
from the tourism sector. Despite pressure on house prices, the market
shows no sign of cooling, while the construction industry is almost back to
its pre-crisis heyday.
A
cross the property
market, Dominican real estate
is riding a wave
of popularity—continuing
a trend that began at the
turn of the century, and one
which was largely unaffected
by the global financial crisis
of 2008. The continuing success is partly attributable to
the boom in tourism over
the past few years, and to
the mushrooming of luxury
international and boutique
hotels across the country.
Almost 5 million tourists visited the Dominican Republic last year, a country with
a population of just 10 million. It is no surprise, then,
that it has the highest rates
of hotel construction in the
Caribbean, and demand for
both short- and long-term
accommodation
remains
high year-round.
In the domestic market,
too, there is an increase in
demand, as the country’s
youthful populace (35% are
aged under 35) reach an age
where they are wanting to get
a foot on the property ladder.
This, and the changing life-
PROPERTY, INC.
Image: Codelpa
In the domestic market, too, there is
an increase in demand, as the country’s
youthful populace (35% are aged under
35) reach an age where they want to get
a foot on the property ladder.
styles of today’s young people, means more properties
are needed to cater to singletons and young couples as
yet without children.
The consequence of all this
has been a surge in construction, particularly in coastal
areas and in towns which
just 10 years ago were fishing
villages. A government program has ensured that a certain quota has remained as
social housing. Nonetheless,
the average price of accommodation has risen to $2,078
per sqm. Since 2005 the Dominican Republic has been
attracting more tourists than
any other Caribbean country—attracting more than 5
million in the year to June
2014, according to data from
the World Bank. This number of visitors, in a country
of only 10 million, puts considerable pressure on property prices in general. At the
same time as boosting the
local economy, many visitors
are second-home owners, or
else stay in up-market hotels.
Tourism generated $5 billion
in 2013, up 6.3% on the previous year.
104 THEBUSINESSYEAR
The cumulative effect on property prices
has been considerable, as they are up 7.5%
YoY according to the Global Property Guide.
Cumulative price increases since 2008 come
to 11% YoY. The Dominican Republic, then,
is a place where tourism and real estate are
inextricably linked.
FROM OLD KENT ROAD TO MAYFAIR
A huge rise in the number of so-called investment properties has fueled the rise in house
prices. The average price of an apartment in
desirable Puerto Plata has soared by 23% over
the past 18 months. Larger apartments have
risen further still as demand at the top end
of the market has surged. In 2014, a 200 sqm
apartment in a plush neighborhood of Puerto Plata cost on average $2,426 per sqm. The
average price for a house in Puerto Plata is
$1,689 per sqm, reflecting the rise in demand
at the upper end of the market, with sea-view
“loft” style luxury apartments in particular
demand in upscale parts of towns such as Sosua and Cabarete.
One of the biggest changes in recent years
has been the rise of luxury developments
along the coast, particularly in and around
the capital, Santo Domingo. In fact, though,
overall real estate in the Dominican Republic
has remained relatively affordable, and the
country is still one of the least expensive markets in the Caribbean.
COMMUNITY CHEST
It is in Santo Domingo, though, where the
prime real estate lies. This is hardly surprising. The country’s capital city boasts excellent infrastructure links, internationally and
domestically, with road, air, and maritime
transport all fully integrated, making the city
an important hub for the region. Santo Domingo is also the most historic in the Caribbean, with an attractive walled harbor and
old town alongside modern offices and retail
parks. A prime location in the Caribbean is,
then, an attractive place to live for many.
This all makes for a sustained rise in property prices—a trend that is expected to continue for the foreseeable future, with ample opportunity for lucrative returns on investment.
Luxury beach villas near to Santo Domingo
already fetch a handsome $7 million with relative ease on the international markets.
The majority of buyers are from the US and,
increasingly, Canada, as northerners seek a
home, sometimes second, sometimes retirement, in what is to many nothing short of a
tropical paradise. To help clients achieve their
dreams, Sotheby’s International Realty has
been operating in Santo Domingo since 2013.
The legal structure of the Dominican Republic is highly conducive to foreign investment, encouraging some 20% of the wealth
of high net worth individuals (HNWs) to be
invested in property. The system also facili-
It is in Santo
Domingo, though,
where the prime real
estate lies. This is
hardly surprising.
The country’s capital
city boasts excellent
infrastructure links,
internationally and
domestically, with
road, air, and maritime
transport all fully
integrated, making the
city an important hub
for the region.
ELÍSEO CRISTOPHER
President, COPYMECON
What is the average profile of COPYMECON
members?
COPYMECON unites associations, federations, and
chambers from the construction sector under one
umbrella. Our members are themselves organizations formed by construction SMEs from across
the country. We do not accept individual members,
only federations, associations, and other such
organizations. Geographically, we currently cover
80% of the country with our members, although
we shortly plan to have a presence in every region
of the Dominican Republic. Our idea is to have an
extensive network that extends from COPYMECON, to associations, chambers, and federations,
right down to medium and small constructors.
What is the importance of education in the
overall activities of COPYMECON?
We have several agreements with local universities that have put in place several programs. For
example, one of the programs we have in action is
“Formalize Yourself Now”, the main aim of which
is to reduce current informality levels among
small and medium sized construction companies,
which currently stands at around 60%. This is
even higher for the overall construction sector.
This program offers technical and professional
support to builders in these informal companies
so that they can formalize their situation. We allocate notable resources to this program, at almost
no cost to the companies themselves.
tates the property market, making it easier
for estate agents. To this end, the sector has
quietly, but radically, transformed from being the traditional terrain of banks to one in
which the private individual is king. Hence
the luxury market—and the construction that
goes with it—is booming.
DO PASS GO
Constructora Rizek is one of the largest construction companies in the Dominican Republic, and is behind many of the major infrastructure projects in the country. The Santo
Domingo Ring Road, described to TBY by the
company’s President, Raúl Nazario Rizek
Rueda, as “the most important road project
in the country… [it] connects all main Santo
Domingo roads.” Indeed, the long-awaited
project has transformed the efficiency of the
island—vastly improving journey times to
neighboring Haiti, for example—and is giving
easy access to vital ports and airports in the
north of the country also.
But behind the infrastructure and luxury
housing success stories lies a very real deficiency in low- to middle-income accommodation. By some measures the deficiency is
thought to be as severe as 600,000 homes—
some of which are existing structures in need
of renovation. One of the reasons for this is
the severity of the climate: the country has
been repeatedly hit by hurricanes, while
damage from winds and flooding has exacerbated the shortage. It follows that low- to
middle-income housing is likely to be the
worse affected by tropical storms.
The government has pledged a commitment, with the costs met by public-private
partnerships (PPPs), to construct up to 40,000
new homes a year through newly set out social housing programs. These new affordable
homes form a longer-term target of 400,000
such dwellings by 2023, in an effort to redress
the balance and respond to changes in living
patterns as well as the current shortage.
Many of these homes are being pioneered
by Cemex and Constructora Rizek, the two
largest construction companies in the Dominican Republic, whose social housing programs often see solar power facilities built
in as standard, and social amenities such as
sports centers and sustainable waste management systems.
BUILDING BLOCKS
Despite the efforts of central government—
and the very real demand for housing at both
ends of the social spectrum—the construction sector is still relatively far from regaining
its 2005-06 peak of around $2.3 billion. Current figures put the industry at $2.3 billion,
though this is expected to continue growing
in 2015-16, superseding its 2005 high-water
mark over the coming two to three years. In
2014, the construction sector accounted for
7.3% of Dominican GDP.
For a time, cement prices were outstripping demand, rising more than 8% YoY in
2013. This is now leveling off, with supply
and demand on an even keel, and the growing market cooling prices. This is helped by a
healthy overseas market, particularly among
neighboring Caribbean countries (the Dominican Republic is a net exporter of cement,
adjusting its exports according to domestic
demand, with some 300,000 tons exported
THEBUSINESSYEAR
105
ANGEL GARCÍA
CRESPO
FERRETERIA
AMERICANA
We deal essentially in
hardware, while IKEA is
mostly about furniture.
And while we do compete
for furniture customers,
IKEA being next door
makes this an address
where people procure all
their furniture needs. For
our hardware sales, our
main advantage is the
leading brands in their
categories that we have
represented for many
years.
106 THEBUSINESSYEAR
to Haiti and Caribbean islands in 2013 and
2014). Nonetheless, cement producers have
invested well over $1 billion in the domestic
construction sector over the past 15 years.
Constructora Rizek and ADOCEM, and the
association of cement producers, have seen
an increase in foreign investment in 2014, as
growth in the new homes market continues.
New projects are also a big part of the government’s ambitious push for more health and
education facilities, as Julissa A. Báez, Executive
Director of the Dominican Association of Cement Producers (ADOCEM), explained to TBY:
“The government plans to build 18,000 schools
over [the next] two to three years. For years we
have not seen an increase in demand, but in
2013 it was at 16%, mainly due to government
investment in the building of schools.”
Developing the Dominican mortgage market is expected to boost real estate in the coming years.
As reported in Fitch’s Construction Sector
in the Dominican Republic—Challenges and
Opportunities, the sector is highly sensitive to
changes in the economic cycle. From 2003 to
September 2013, the Dominican Republic’s construction sector registered an average growth of
2.4% and high volatility, reflected in a standard
deviation of 10.3%. Therefore, according to
Fitch, the sector’s performance, in the short- and
medium-term, will depend on the state’s capacity to invest in infrastructure, as well as on the
implementation of public policies to encourage
private investment in the sector.
In 2012, the Dominican Republic enacted Law No. 189-11, aimed at supporting the
country’s efforts to expand its housing stock
and helping the Dominican Republic’s mortgage market to develop while providing significant opportunities for investors. In order
to promote private sector participation in
low-cost housing projects, the new Law on
Mortgage Market Development and Trusts
provides several tax incentives and exemptions. Moreover, it established the Trust as a
legal instrument in the Dominican Republic’s
legal framework. Therefore, legal entities incorporated to manage assets, banks, investment fund managers, stock brokers, and other financial intermediaries, authorized by the
Monetary Board of the Dominican Republic,
hold the right to act as trustees. As stated by
Jorge Yanes, Director in Fitch’s Latin America
Group, “The implementation of the Law for
the Development of the Mortgage Market and
Trust is expected to help boost the sector in
the medium- and long-term, and to mitigate
the increased housing deficit in the country.”
Infrastructure projects in the Dominican
Republic remain highly attractive for private
capital, both from construction and financing
standpoints. The country continues to improve its sanitation system, water and energy distribution, as well as roads, bridges and
similar infrastructure items; therefore the investment in the construction and real estate
is expected to see an increase in the shortand medium-term. ✖
The government
has pledged a
commitment, with the
costs met by publicprivate partnerships
(PPPs), to construct
up to 40,000 new
homes a year through
newly set out social
housing programs.
These new affordable
homes form a
longer-term target
of 400,000 such
dwellings by 2023, in
an effort to redress
the balance and
respond to changes
in living patterns as
well as the current
shortage.
JORGE AGUAYO SALADIN
General Director, INDUSTRIAS AGUAYO
Aguayo has recently inaugurated a power plant
consisting of over 2,000 solar panels. What is its
significance for your company and the national
energy sector?
The reasons we embarked on this recently
completed investment are twofold; this was first
done to reduce the cost of energy through 100%
renewable free fuel, and additionally because the
government is notably incentivizing the installation
of energy solutions. Incentives are in place to
such projects through tax exemptions, and we use
what we call bi-directional monitors, whereby any
excess energy production is injected back into the
system. While we are demanding less energy from
the system, which means fewer subsidies for the
government to pay, we also inject our own overproduction back into the system. With this installation
we are able to reduce emissions of CO2 to the
atmosphere at a rate of 419,202 per year.
What new products have you brought to the
market?
As a company we try to diversify our offerings to the
market, as we do not like to remain static. We do not
solely manufacture cement blocks, but also provide
solutions for our customers and partners. We have
been able to develop many solutions for different
types projects, from airports and highways to schools
and chic hotels in the colonial district. This has given
us a unique leadership position in the market.
THEBUSINESSYEAR
107
INTERVIEW
HIGH ways
Constructora Rizek has over
40 years of experience in the
Dominican market. How has
the company evolved since its
foundation and in which sectors are you most active?
TBY talks to Raúl
Nazario Rizek,
President of
CONSTRUCTORA
RIZEK, on how big
infrastructure projects
are helping the
economy.
Constructora Rizek is a market leader in the construction industry in the Dominican Republic. We have vast
experience of over 40 years
of continuous service in the
country. Our success is built
on three pillars: quality work,
efficiency in delivery times,
and competitive prices for
construction services. Constructora Rizek has high-level resources for the execution
of its projects. Our engineering team has vast experience
in planning and execution,
and we have specialized in
the construction of roads
and housing for many years.
We now plan to start actively
developing commercial projects as well.
What are some of the key
projects you are currently involved in?
BIO
Raúl Nazario Rizek holds
a Civil Engineering degree
and a Postgraduate
Degree in Construction
Management. He has more
than 25 years of experience
in heavy construction,
infrastructure development
and residential real estate
development. Coming from
a second generation of
Civil Engineers, he is the
founder of Constructora
Rizek, holding the position
of CEO since its beginnings.
During the past 10 years he
has successfully completed
projects for clients such
as Barrick Gold, IADB,
Dominican Government,
Punta Cana Airport,
along with more than five
residential developments.
The Santo Domingo ring
road is the most important
highway project in the country, as it impacts both Santo
Domingo as and the broader country. It connects all
main Santo Domingo roads,
and is a long-awaited project
and we are extremely proud
about our involvement in it.
The project is divided in two
parts, and we are involved in
the second, a 36-km section
set for partial completion in
February 2015. The Dominican government finances
the project. The Southern
Highway Corridor is another
of the main projects we are
currently developing. This
project is being financed by
the International Development Bank (IADB) and involves the reconstruction of
over 120 km of the road that
links the Dominican Republic with Haiti.
Could you talk about the Barrick Gold project?
We participated as one of the
first contractors, taking on
considerable responsibility.
Quality, safety, and timing
were the main drivers of this
project, and these considerations were met despite
our working 24/7 in shifts to
complete it. We learned a lot
from this project, as it came
from a major Canadian mining company, which insisted
on meeting extremely high
standards. Thanks to our
work we have contributed
to a wide range of economic
sectors in our country: mining, road, housing, and also
tourism, among others. We
were part of the construction team building the Punta Cana Airport, constructing the taxiway and landing
strips. This project involved
the implementation of new
technologies to meet the demands of the project and its
tight deadlines. We also have
several other projects within
the tourism industry.
How do you ensure the use of
high quality machinery?
We managed to impress Barrick Gold engineers with the
high quality level of our machinery, as we use the latest
and most advanced technology in the industry and this sets
us apart from the competition. We recently implemented GPS system technology in
our excavators, so when using
it, excavators know what they
need to do with no need to
rely on topographic measurements. This tool makes the
work more efficient and raises
the quality level. Before, you
needed four people plus the
driver, but with this new system, only the driver is needed.
How do you assess the workforce of the sector?
There are no institutions or
education and training cen-
ters for our industry in the
Dominican Republic. People
are not sufficiently prepared
for the work at hand, which
is why we provide training.
We have a highly experienced operations manager,
who is the main person involved in training our workers. Training is also related to
safety, so we have developed
our own training resources.
the development of the infrastructure sector in the Dominican Republic, and what role
do public-private partnerships
(PPPs) play in that context?
PPPs are the future of the
sector; however, the country
is yet to fully exploit the benefits of them, despite some
successful cases in the construction of maritime and
airport facilities. The implementation of these project
schemes requires time and
PPPs will definitely become a
useful tool in the country, especially for the development
of infrastructure projects.
There have also been positive steps regarding the regulatory framework for these
projects.
What are the greatest challenges facing the infrastructure industry in the Dominican
Republic and what is your outlook for its future?
We need to raise the level of
security on our roads, as we
have a number of dangerous
highways. We also need to
amend current legislation,
as another major challenge
for the country is the rapid
urban development of cities. Dominican cities require
considerable additional services and infrastructure.
How would you assess the
overall investment environment in the country?
Political and economic stability are on the rise, as is legal security for investors. The
government supports and
respects private investment,
and I believe that the investment environment today is
better than ever. ✖
108 THEBUSINESSYEAR
INTERVIEW
building
reputation
TBY talks to Álvaro Peña, President of
Codelpa, on leveraging the growth in
tourism, shaping the right and potential
growth sectors.
What factors helped Codelpa to
establish a leading position in
the Dominican Republic’s construction sector in just two decades?
BIO
Born in Santiago in 1961,
Álvaro Peña graduated
in Civil Engineering from
the Pontificia Universidad
Catolica Madre y Maestra
(PUCMM). He has been
at Codelpa for over two
decades, and is President
of the firm, operating in
Previous positions have
taken him to Jamaica and
Haiti.
Following the expansion of
the tourism sector, we decided to focus on construction,
and today we are the foremost builder of hotel facilities.
Codelpa currently has over
10,000 beds in its portfolio of
built and renovated hotels.
We have also benefited from
the conditions that foreign investors enjoy here, which has
brought many foreign companies to the Dominican Republic to build hotels. As business
expanded, we expanded operations to other countries; for
example, in 2005 we entered
the Jamaican market to open
a couple of new hotels. We
believe that Jamaica has great
potential within the tourism
industry. Codelpa has also
developed industrial projects
in Haiti, and will explore new
markets in the near future.
Could you tell us more about
your current projects, such as
Terminal A at Punta Cana Airport?
We have two projects in
Punta Cana, which we built
within six months. They are
breath-taking projects that
are in line with the style we
have established over the
years. Our projects are always
completed on time, and one
of our greatest advantages is
our team of young and talented professionals. We have
invested considerable time
and resources in our people
and processes; we are fully
certified with ISO 9001 and
have played an active role in
industrializing the national
construction sector. Codelpa
has also invested in many facilities and processes related
to the construction sector.
For example, we are self-sufficient in cement blocks and
concrete.
Who are Codelpa’s main clients?
Barcelo Hotels is one of our
major clients today. We have
also built for Grupo Martinón,
Royalton, NH Hotels, and Bahia Principe, among many
others. This confirms our flexibility and ability to meet international standards. Regarding
our business activity, in 2014
we focused on strengthening
our HR department in order
to improve the training of our
professionals. We have also
built bridges with the higher-education sector to provide
our staff with other development opportunities. In addition, closer ties with universities will allow us to identify
new professional talent.
In October 2013, Codelpa was
recognized as the best construction company in the tourism sector for the 2005-2012
period. What is the contribution
of such an award to customer
confidence and attracting new
clients?
These are two key important elements of our business.
This award was bestowed by
the Chamber of Construction, based on our impact on
the tourism industry; making
us the most important local
company in this regard. The
Association of Hotels also reinforced the prestige, by highlighting how we conduct our
operations from a business
perspective. Over the years,
we have partnered with European, Canadian, and US firms,
meaning that we know how to
adapt our work to their expectations; we are a hugely flexible company.
Since 1980, revenues generated by the tourism sector have
increased, from barely $172
million to $5 billion in 2013.
How does Codelpa plan to respond to that upward trend and
what industry segments do you
see the most opportunities in?
The economy must be
prepped for the growth of
tourism. However, we also
need to further diversify our
business activity. There is
also great potential in some
segments of the tourism industry as this has evolved
over the past few years. We
now target a more high-end
audience, rather than solely
the all-inclusive market. For
example, there is great potential in the luxury and ecotourism segments. Health tourism could also bring some
interesting
developments
and in my opinion, this may
take place sooner than people expect Finally, we still
need to explore the second
residence segment within the
tourism sector, and take full
advantage of our proximity to
the US and Canada. We have
taken some steps in this regard, but we have yet to fully
exploit it. ✖
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109
CONSTRUCTION IN THE NORTH B2B
due NORTH
CAMILO E.
HURTADO IMBERT
MAIRENÍ
BOURNIGAL R.
Vice-President,
Constructora Hurtado
President, Grupo
Atlántico RD
What significant projects have
you developed recently?
Grupo Atlántico RD has almost
30 years experience of the Dominican market. How has the
company evolved and in which
sectors are you most active?
CAMILO E. HURTADO IMBERT
In terms of recent projects, we
have been working on several
residential developments, as
well as the Watermark Hotel
in Cabarete, and Playa Laguna
in Sosúa. We also worked with
Davidoff Cigars, and on the
Hacienda Resort in the North
Coast, a key project in the area
featuring villas, apartments, and
restaurants. I personally consider Watermark the most important project. Sara Garcia, the
architect of Hotel Colonial, did
the designs for this project and
Hurtado did the infrastructure
construction. It was a project
where we had to keep a number of issues in mind, especially the fact that it was luxurious
boutique hotel by the beach.
2014 has also been important
for us because we started acquiring ISO certification for
our processes, and our next big
goal is to obtain ISO 9011 and
9001 certification. Right now,
our main clients are from the
tourism industry and we want
to continue contributing to the
development of the tourism and
construction industries in Puerto Plata, where 80% of our work
is currently located.
MAIRENÍ BOURNIGAL R. We
started in 1985 as a partnership
between an engineer and an architect. We came to Puerto Plata
to ride the construction boom
that was started by the tourism
industry in 1980, and entered
industrial and hotel construction. But business opportunities
and destiny have taken us on a
different path. Today we are a
construction group, but have
moved more into the industrial
and retail segments of the construction area. We saw the problems in the industry and went
into business to give the service
we thought was needed.
TBY talks to two senior figures in the
Dominican construction industry on key
schemes in their portfolios, riding the
construction boom in the north of the
country, and government incentives to
fuel development.
How would you assess the Dominican Republic’s overall investment environment?
What projects do you consider
to be Grupo Atlántico’s greatest
achievements?
CEHI I think the current government has done a great deal, and
that the “one stop window” system is a great tool for investors,
easing the process. It will definitely boost development and
boost investment. The government has also taken key steps in
terms of tax advantages in several sectors of the economy. We
work with many Canadians and
I think the country should pay
more attention to Canadian investors. For example, Canadians
are the second most important
tourists in the north of the country and contribute substantially
to the development of the area.
In 2014, the government has
played a larger role in terms of
investment as well. We have
seen highly positive trends and
I think we should extend greater facilities to foreign investors.
The country has much tourism
potential, especially in Puerto
Plata, an area of lower prices,
rich, too, in interesting history,
and holding much potential. For
example, Puerto Plata is the best
area for cruises to operate in.
MBR We are a quality-oriented
company, so I would say the
building of Casa Colonial, which
is a five-star boutique hotel in
Playa Dorada in Puerto Plata is
one of our major achievements.
We have also built most of the
Iberostar Group hotels in Puerto Plata and Punta Cana. The
last one, the Iberostar Grand,
is an icon in the Punta Cana
area, and we are very proud to
have participated in that. Also,
in the commercial construction segment, I would say that
Agora Mall is the landmark of
Santo Domingo right now. We
are proud to have participated
in that. Another highlight is our
service as a concrete producer.
We have served the cruise ship
terminal with excellent results.
We had to work to the highest
level with companies from the
US and from other parts of the
world, and our people did a
great job. ✖
110
THEBUSINESSYEAR
FOCUS CEMENT
One of the strongest and best established sectors, the cement
industry is thriving, not least in the export markets.
CONCRETE
STEPS
THE DOMINICAN REPUBLIC is one of the
fastest growing economies in the region, with
a constant GDP growth averaged at the rate of
5.5 % over the last 20 years. The sector enjoying the most impressive, robust growth in the
Dominican Republic is tourism—only in 2013,
the country received 4.7 million visitors. The
Dominican Republic is currently undergoing
several development projects due to its National Development Strategy 2010-30 and the strategic vision of becoming a regional hub in the
Caribbean.
The Dominican Republic’s cement industry
is one of the most consolidated sectors in the
country, contributing $110 million to the local economy, and creating more than 35,000
indirect and direct jobs. The industry is very
competitive with 7 cement producers that have
combined installed capacity of 7 Mt. The main
contributors to the growth and development
of the local cement industry are: Cementos Cibao, DOMICEM, CEMEX, ARGOS, and Cemento Panam. The work and dedication of these
companies allowed the Dominican Republic
to become the number one exporter of cement
in the Caribbean, with output for sale abroad
amounting to approximately 1.4 Mt.
Currently, approximately 30% of the Dominican Republic’s cement is dedicated for export.
The Dominican cement primarily heads to Jamaica, the Virgin Islands, Guyana, and Haiti,
which is still undergoing the reconstruction
process after the earthquake that struck the
country in 2010. According to Julissa A. Báez,
Executive Director of the Dominican Association of Cement Producers (ADOCEM), “the
Dominican Republic has the necessity to export
more, because the storage capacity in the country is huge, compared to larger countries, such
as Mexico or Brazil. The Dominican Republic
has a capacity of 7 million tons, and therefore
we need to export this excess and that is why we
are always on the lookout for new markets.”
The local demand for cement has also grew
in the past years. In 2013 the cement industry
has noted local sales of 3 Mt, reflecting a significant increase of about 16% in reference to
2012. According to Julissa A. Báez, the increase
was led mostly by government’s investment in
building new schools, “with government investment we have noticed a big change, and
that is because the construction sector is very
reliant on government decisions to invest in infrastructure projects”.
ADOCEM was founded to regulate the sector, disseminate good practices, conduct research and training programs, and promote
improved equipment in the Dominican Republic’s cement industry. Over the years,
ADOCEM has managed to encourage the
modernization and expansion of several local
cement plants, which now have a combined
installed capacity of 7 Mt, exceeding the local
demand by 60%.
The cement industry strongly supports the
development of the construction sector in the
country and remains its main driver. ADOCEM is working intensively on promoting the
use of cement. According to ADOCEM’s president, Carlos González, “it’s the best time for
the country to increase its cement consumption, since its price is 40% lower than in the
entire region, resulting from greater competition, since Dominican Republic boasts more
producers than Mexico.” Currently a bag of
cement in the Dominican Republic costs between RD$255 and RD$260, including tax, in
comparison to RD$310-RD$315 in 2012. The
Dominican Republic’s cement market’s high
volume means that cement producers have
to compete in a dynamic manner, not only in
prices but also in quality.
The Dominican Republic is currently a country of great opportunities in the construction
sector. The country has 1 million-unit deficit of
social housing, increasing by 30,000 each year.
Cement companies have already responded to
the challenge, significantly increasing the capacity and lowering the prices of cement.
Currently local roads are paved with asphalt,
but due to Dominican Republic’s geographical
location and weather conditions, the roads last
only three to four years. As ADOCEM intensively promotes the usage of cement instead
of the lower-quality local alternative, asphalt,
investors can expect to see more activity in the
cement and road construction industry in the
near future. ✖
JULISSA A.
BÁEZ
Executive Director,
ADOCEM
Currently, approximately 30%
of the Dominican Republic’s
cement is dedicated to the export market. What are the most
successful export channels?
Our main market is Haiti because of its geographical proximity. They have a huge demand
for cement, not as much as we
expected after the earthquake,
but it is still our main market.
Then we have the other islands
in the Caribbean that have no
plants. We need to export more
because the storage capacity in
the country is limited compared
to larger countries, such as Mexico or Brazil. We have a capacity
of 7 million tons, and therefore
need to export the excess, and
that is why we are always on the
lookout for new markets.
In what sectors of the economy do you see the most potential for the cement industry?
We are working to promote the
use of cement. We have the
construction of roads and social
housing; we have a deficit in
social housing of one million
houses, and the number is rising
by 30,000 every year, which is
significant. Huge investment
is needed in this area, but the
decision rests with the government. We have, therefore, been
working to convince the Minister
of Public Works to invest in the
sector, and also to prove that
cement can work on roads, and
the challenge continues.
THEBUSINESSYEAR
114
115
116
Anyelo Rodríguez, General
Director of AGRODOSA, on
supporting farmers and sectoral
growth.
Gabriel León Roig Alfaro,
Vice-President—Export of
Roig Agro-Cacao, on the cocoa
industry and the export market.
On the eastern part of
Hispaniola Island each day
starts with that strong coffee
aroma.
111
Agriculture
REVIEW
The Dominican Republic’s agricultural sector is vital both in generating
export revenue from cash crops such as sugar, and for domestic food
security. The challenge ahead for the country is to balance this food
basket equation.
A
ccording to the
World Bank, agriculture accounts
for 11% of the Dominican Republic’s GDP and
employs 15% of the country’s
workforce. With such a sizeable chunk of the labor force
and revenue tied into primary production activities, it is
clearly vital that the government has the right policies
and technical knowhow in
place to protect and develop
the industry. Moreover food
security aimed at widening
the domestic population’s
access to healthy, safe, and
high quality produce is an
imperative. Currently, roughly 24% of the population is
undernourished according to
UN Food and Agricultural Organization (FAO) measures,
while the main agricultural
crops being produced are
cash crops destined for export. In particular, the Dominican Republic’s biggest
commercial crop is sugarcane
with the country producing
around 630,000 tons a year,
an increase YoY but significantly down on its 1 milliona-year heyday in the 2000s.
A BIT MORE AGRO
is in fact the second-largest
producer of sugarcane in
the Caribbean behind Cuba.
Some of the country’s other
main agricultural products
such as coffee, tobacco, and
cocoa are also cash crops
destined for export. In the
case of cocoa, exports in
2013 were worth $214 million to the country with
69,000 metric tons being sent
to markets overseas. In fact,
according to the Ministry of
Agriculture, some 40% of the
nation’s cocoa production is
categorized internationally
as either ‘fine’ or ‘aromatic,’
putting it in the top echelon
of producing nations.
ECONOMIES OF SCALE
Image: MATASA
Some of the country’s main
agricultural products, such as coffee,
tobacco, and cocoa, are cash crops
destined for export.
So how is the Dominican Republic’s agricultural sector
faring against this backdrop
of food insecurity at home
and heavy reliance on cash
crops for much needed export revenue? It has been
argued by a number of commentators that improving the
agricultural sector to support
domestic consumption needs
is still playing second fiddle
112
THEBUSINESSYEAR
Greener Fields
PUERTO PLATA
MONTE CRISTI
DAJABON
ATLANTIC
OCEAN
MAO
SABANETA
NAGUA
MOCA
SALCEDO
SAMANA
JARABACOA
HAITI
ELIJAS PINA
SAN JUAN
BONAO
CONSTANZA
DOMINICAN REPUBLIC
JIMANI
NEYBA
COTUI
MONTE PLATA
SANTO
DOMINGO
AZUA
HATO
MAYOR
SAN CRISTOBAL
BROHANA
PEDERNALES
EL SEIBO
PUNTA CANA
HIGÜEY
LA ROMANA
BANI
LA MONA
CANAL
Low to medium climatic production potential
Low soil suitability
CARIBBEAN
SEA
Severe and very severe land degradation
Steep slopes and mountains
High climatic production potential
to both exporting, and to the tourism industry. The government has invested heavily in
tourism and associated infrastructure projects. This is understandable when you consider that tourism is the country’s single biggest
earner at over $4.5 billion per annum, with the
Dominican Republic being the leading tourist
destination in the Caribbean.
But there have also been other complicating
factors that the agricultural sector has had to
battle with in order to move forward, including droughts, hurricanes, and price fluctuations on the world market. The World Bank
estimates that in particular, Hurricane George,
which hit the Dominican Republic in 1998,
caused economic losses equivalent to 16.1%
of the country’s GDP. And Tropical Storm Federico in 1979 resulted in a loss of 18.4% of GDP.
These natural disasters hit small-scale farmers
the hardest according to the World Bank, and
in the Dominican Republic smallholder producers, working less than 3.13 hectares of land,
make up 72% of the country’s total number of
farmers and account for 28% of agricultural
land. This is where insurance becomes key to
protecting the agricultural industry. However,
according to the World Bank, “with the exception of the banana industry in the eastern
Caribbean and a public insurance company in
the Dominican Republic, agricultural insurance against natural disasters is non-existent
in the region.” And for the Dominican Republic’s many small-scale farmers, natural disas-
ter insurance is simply unaffordable in any
case. In response to this problem, the World
Bank has set a goal of increasing productivity
and reducing the vulnerability of some 2,300
small-scale farmers in the poorest areas of
the country. The plan also includes incentives
to encourage the purchasing and use of new
technology by these farmers.
And yet it is not all doom and gloom for the
industry. In October 2013, the then Minister
of Agriculture, Luis Ramon Rodriguez, noted during his speech at World Food Day that
in recent years, the country has managed to
increase the production of major agricultural commodities, which has strengthened the
food security of the population. The Poultry
Site reported the Minister’s comments that the
“country's rice, banana and egg production
rose 100%, beans rose 76%, and beef, chicken,
and pork production rose by 98%, 96% and
88% respectively.” Further Mr. Rodriguez noted that “through the timely agricultural public policies implemented by President Danilo
Medina, the country will, in the near future,
reach a level of excellence in food.”
IN GLASS HOUSES
One segment of the agricultural industry that
has seen substantial growth during 2014 is
greenhouse vegetables. In November Dominican Today reported that the country had
exported $111.6 million in vegetables during
the year to date, some $15 million more than
CARLOS
SEGURA FOSTER
General
Administrator,
Banco Agrícola
The agricultural sector
as a primary activity
represents 6.9% of GDP,
but if we take into account
the directly related
activities of agroindustry,
the figure reaches
20%. The Dominican
Republic is divided into
155 municipalities, in
133 of which agriculture
and agribusiness are the
key economic activities.
geographically is prone
to cyclones and extreme
weather systems, which
is why one of our priorities
has been the insurance of
agricultural activities and
areas.
Agriculture
in 2013. This amounted to 63.5 million kilograms of produce being grown under protected environments, compared to the 55.4 million kilograms grown in greenhouses during
2013. The Ministry of Agriculture attributed this jump in part to 933.6 million sqm of
new nurseries and market gardening coming
into production particularly in the south and
greater Santo Domingo area, as well as in the
north-west of the country. This broadening
of the country’s agricultural base will ensure
Dominicans are less reliant on expensive imports in the future. The agriculture sector will
have more control of its crops and commodities and will, in turn, be able to recruit more
Dominicans into farming.
GROWING GREEN
In December 2014 Ministry of Agriculture,
European Union, and Export and Investment
Center (CEI-RD) officials met with fruit and
vegetable producers from the Central Cibao
region to confirm the industry’s willingness to
adopt new pesticide standards. In particular,
the industry has come on board with the Ministry and CEI-RD’s proposals regarding safe
pesticides for fruits and vegetables destined for
export markets. These exports represent a vital
Agricultural Land (% of total)
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113
Workforce Employed in
Agriculture (% of total)
16
52
14
51.5
51
12
50.5
10
50
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
and growing market for some 5,000 farmers and
45 agricultural companies, and are worth over
$75 million annually. The goal for the industry
is to produce uniform and healthy crops with
negligible levels of chemicals as soon as possible in the hope of capitalizing on an already
important source of income. This policy sits
comfortably alongside green initiatives in the
country’s energy sector, and forms part of an
over-arching priority at central government
level for environmentally friendly policies. ✖
2005 2006 2007 2008 2009 2010 2011 2012
114
THEBUSINESSYEAR
INTERVIEW
field of
dreams
TBY talks to Anyelo Rodríguez, General
Director of AGRODOSA, on supporting farmers,
agricultural investments, and sectoral growth.
What is the composition of
AGRODOSA’s portfolio and what
is the average client profile?
BIO
Born in Manuel Bueno,
Anyelo Rodríguez graduated
in 1994 from San Ignacio
De Loyola, and later went on
to obtain his post-graduate
Degree in Agriculture and
Environment from Alicante
University. He then attended
Barna Business School
to study Management
Development. In 2002, he
founded his first company,
which has become a
consortium of companies
dedicated to the agricultural
sector and the production
and import and export of
agricultural goods and
services. In September
2012, he was appointed
the Regional Director of
the Ministry of Industry
and Trade, North Region,
based in Santiago de los
Caballeros.
AGRODOSA is a joint enterprise involving the Dominican government and the
private sector, acting as a private company. The aim of the
company is to provide market security by insuring the
agricultural and agribusiness
sectors. Our company has revalorized itself since President
Medina assumed office. Under his administration, a new
Law on Agricultural Insurances was passed, setting a legal
framework that allowed the
agricultural insurance sector
to better manage future risk.
Moreover, the government
has been subsiding the purchase of certain insurance premiums for small producers, as
high risks and costs prevail in
that sector. This support goes
well beyond 25% (in some cases even 50%) of the insurance
costs for small producers, who
cannot afford it. This support
has also enabled producers to
have a small reserve set aside
in the event of a natural disaster. I also believe it has helped
to reduce poverty levels in
the rural areas of the country. AGRODOSA has worked
closely with the state, in facilitating this payment/subsidy.
At the same time, we have
particular agreements with all
state institutions present in
the agricultural industry such
as the Banco Agricola, the Institute of Tobacco, and FEDA.
We have set up joint efforts to
launch new insurance products; health insurance, life
insurance, and other related
coverage. We are also studying the possibility of insuring
agricultural producers against
terminal illnesses. AGRODOSA has already established
international
partnerships
in this field and we will soon
launch a new product linked
to terminal illnesses. We want
to further democratize these
insurance tools, thus contributing to the reduction of poverty levels in the country.
Agricultural Policy Program,
supported by the Inter-American Institute for Cooperation in
Agriculture, with an investment
of more than Ps480 million
donated by the European Union towards enhancing regional capacities for small-scale
farmers?
is a small country in which
agricultural reform began in
1982. That marked a turning
point in the development of
the sector, yet taking into account global technological,
chemical, and agricultural
developments, the agriculture sector in our country
has not kept pace. There are
two key requirements for
transforming the Dominican
agricultural sector; financing and organization, which
is contingent on the level of
cooperation. This is vital for
our country since we have
neither the economic resources, nor the level of expertise of many of our competitors in the international
market. These developments
will be necessary before we
can compete on the international stage. This kind of
economic support definitely
helps to professionalize the
activity of many small and
medium-sized
producers,
transforming their activity
and boosting market cooperation. These elements will
help us to raise both production volumes and quality.
In 2013 the Dominican agricultural sector recorded growth of
16.5% compared to 2012. What
factors led to this and what are
your expectations for 2014?
Up until 2012, only the elite
among the Dominican agricultural sector had access
to financial tools, and small
producers were completely
neglected. The newly-appointed ministers and public
officers implemented changes in this regard; they allocated Ps6 billion in 2013 to small
producers. These financial
tools have transformed the
agricultural sector, in part
by boosting cooperation
between producers. For example, over 30,000 farmers
and small producers became
part of the production chain
thanks to this support. It goes
without saying that we also
benefited from that. There
have been other changes
as well; in 2002, there were
400,000 sqm of greenhouses, while the goal is to reach
10 million sqm in the near
future. The government has
ramped up spending in education, as well. ✖
Agriculture
THEBUSINESSYEAR
115
INTERVIEW
better differentials, and better
margins, which translates into
better prices for the farmer—
in short, positively impacting
the entire chain. That was
also where we entered the, at
the time embryonic, organic
market.
TBY talks to Gabriel
León Roig Alfaro, VicePresident—Export of
Roig Agro-Cacao S.A.,
on the Dominican
cocoa industry,
sectoral strategy, and
the export market.
What key steps should be taken
to boost the development of the
Dominican Republic’s cocoa industry?
SWEET success
Founded in 1967, Roig Agro-Cacao, S.A. soon became one of
the country’s leading exporters
of cocoa beans and one of the
largest organic cocoa exporters in the world. What factors
led the company to claiming its
position?
BIO
Gabriel León Roig Alfaro
was born in 1972. His early
studies were at Carol
Morgan School in Santo
Domingo. He graduated
with a BA (Hons) degree
in Science and Economics
from the Wharton School
at the University of
Pennsylvania. He has been
in the cocoa business for
more than 20 years, and is
currently Vice President of
Roig Agro-Cacao SA.
From the outset, our key
strength has been the ability to establish relations with
farmers, the suppliers, that
stretch back for generations. I
started my professional life in
the main cocoa growing area
of San Francisco de Macoris.
It took me eight years to establish these relationships and a
climate of mutual trust.
In 1998 we suffered hurricane George, prior to which
most of the beans exported
from the Dominican Republic
were of the Sanchez variety; a
non-fermented bean. Essentially starting from scratch after the hurricane, we started
experimenting with fermentation. Considering we are a low
volume country compared to
the African producers, and in
the interests of competitiveness against far larger players,
we set about fermenting to
attract high quality companies, mainly in Europe and
Japan, where we could enjoy
From my point of view today
there are two key aspects to
consider. We need to improve our genetic material,
which we are already at work
on. We embarked on this
both at a private and government level and the results
have been highly encouraging. The minister has extended full support.
Another key consideration
is the need to improve sanitary controls at airports to
safeguard against diseases.
We are working to develop an
emergency team to undertake
this responsibility, and we are
in the process of developing
protocols on how to handle
emergencies.
What are Roig’s medium-term
development strategies and objectives for 2015?
Currently, we are squarely focused on quality. As for the future, there are different steps
to be taken, one being to experiment further with flavor.
In the fermenting process the
yeast that affects the flavor of
cacao is in the pod. And if you
are able to identify the specific
yeast that promotes a specific
flavor, be it the floral aroma,
the nutty or the plum flavor,
and you are able to cultivate
that yeast, you reproduce it
and pour it over the cacao
during the fermenting process, which can have interesting results. That is one plan we
are working on.
Plan II we started two years
ago, when we built a distillery
Roig runs a
cocoa nursery
in San Francisco
de Macoris with
an average output
of 600,000 cocoa
plants per year
Roig supplies
international
corporations such
as Mars, Nestlé,
General Cocoa,
and Mitsubishi
operation at the factory. What
we are doing is collecting the
pulp and juices from farms
and other operations. When
you ferment the beans, all the
material drains out through
specific piping. It is pasteurized, distilled, and exported to
the US. We and our local partners are partnered with a US
company called Solbeso that
is promoting and distributing
the product. They have developed the brand which is currently being sold in New York,
Miami and, soon, in London.
The idea is to transform
waste into revenue. It will also
lead to additional income for
the farmer, and seems to have
some potential, being a beverage made from 100% alcohol
derived from organic cocoa
beans. In nature it resembles
something, I would say, between tequila and vodka, and
is flexible enough to use in a
wider range of cocktails such
as margaritas. ✖
116
THEBUSINESSYEAR
FOCUS COFFEE
WAKE UP AND SMELL
THE DOMINICAN COFFEE
On the eastern part of
Hispaniola Island each
day starts with that
strong coffee aroma.
Local offices do not
open their doors
before preparing the
black stimulant.
The Dominican Republic is well known around
the world, not only for its talented baseball
players and playful meringue rhythm, but also
for its high-quality coffee and cacao. The coffee
and cacao industries play an important role in
the agriculture sector, employing nearly 40%
of the sector’s workforce, with a multitude of
families depending on coffee bean cultivation
for their livelihood. Coffee has been a source
of national pride and an important part of the
Dominican lifestyle and culture since 1735. In
the Dominican Republic, a cup of coffee manages to cross all barriers of class and wealth, and
is equally adored by all Dominicans despite of
their affluence. The Dominican coffees can be
identified by their exceptional flavors, with delicate dark chocolate aroma and citrus notes, as
well as perfectly balanced bright acidity. Their
smooth but deep taste delights the most experienced coffee connoisseurs, who admire the
variety and quality of the Dominican coffee
beans.
HARVEST
Dominican coffee is grown in the highlands of
the Cordillera Central, Barahona, Cibao, and
Cibao Altura, in addition to Sierra de Neyba and
Valdesia. The coffee grows at between 400msl
and 1,500msl. Given the diversity of the Dominican Republic’s microclimates and topography,
coffee is being picked virtually year-round, depending on the region, although the peak harvest takes place between November and May.
Most of the 50,000 Dominican coffee producers
are small-scale farmers. According to ADOEXPO, 92% of them cultivate the coffee beans in
areas smaller than three hectares. The majority (98%) of Dominican coffee is shade-grown,
often under a canopy of pine, macadamia, and
guava trees.
EXPORTS
Thanks to the Dominican coffee’s exceptional
quality as well as the country’s strategic geographic location, the Dominican Republic has
become a quintessential provider of coffee to
other Caribbean islands where coffee is not cultivated. Besides that, the country exports small
amounts to more distant nations, such as Japan, Canada, the United States, Italy, Germany,
and France.
CODOCAFE
For more than a decade, the Dominican Republic’s coffee industry has been supported by
the Dominican Coffee Council (CODOCAFE).
Founded in 2000, with the aim of planning,
implementing and executing the industry development policy, CODOCAFE represents the
interests of the coffee growers. Over the past
14 years, the Council has launched several programs supporting the development of the coffee industry and the improvement of farmers’
livelihood.
FIGHTING THE RUST
The Dominican Republic’s coffee industry has
recently been blighted by coffee rust, resulting
in huge financial losses. The South has been the
most affected, with infestation varying between
17% and 47%, followed by the Cibao with an
infestation rate of between 9.7% and 16.4%. In
response to the alarming situation, controlling
the disease became CODOCAFE’s chief priority. The Council has signed an agreement with
the National Institute of Hydraulic Resources
(INDRHI) to monitor the situation. In the words
of José Fermín Núñez, CODOCAFE’s executive
director, “CODOCAFE implemented an Early Warning Program in coordination with the
Bureau of Meteorology and the support of the
Organization for Food and Agriculture (FAO).”
Mr. Núñez informed TBY of 223 meteorological
stations located in rural areas throughout the
Dominican Republic. “Through them we get
information about the climate that favors the
growth and progression of the disease, allowing
us to monitor the levels of incidents and make
recommendations for treatments to reduce
and eliminate the fungus affecting plantations
simultaneously.”
FUTURE POTENTIAL
The coffee industry has deep social value, contributing to the conservation of the environment, as well as sustaining 45,000 Dominican
families, who according to Rufino Herrera
Puello, the president of the Dominican Coffee
Confederation (Concafed), depend on it for
their living. But even though Dominican farmers produce between 350,000 and 500,000 bags
of coffee per year, currently, less than 20% of
this volume is exported. This is partly because
of high domestic consumption reaching almost
3kg per capita, as well as decreased production due to coffee rust. But despite recently lost
share in the international market, the Dominican Republic retains enormous export potential due to its exceptional coffee quality and
numerous free trade agreements providing the
country with privileged market access to the
US, EU, Central America, and the Caribbean. ✖
Agriculture
Coffee rust is a significant
challenge for the industry, with
the Dominican Coffee Council
working hard to fight the blight
THEBUSINESSYEAR
117
118
THEBUSINESSYEAR
INTERVIEW
TBY talks to José
Fermín Núñez,
Executive Director
of the Dominican
Coffee Council
(CODOCAFE), on the
importance of coffee
to the agricultural
sector, and its future
prospects.
(INDRHI) for controlling the
disease in the Dominican Republic?
COFFEE to go
What is the level of competitiveness in the Dominican coffee industry at the moment?
The competitiveness of the
coffee industry in the Dominican Republic is great,
especially when we refer to
foreign markets. This is because coffee of Dominican
origin is appreciated by the
large consumers in the coffee
market for its attributes; it is
unmatched for its excellent
quality. This level of competitiveness will improve substantially over the coming years
as we see the results of the
Plantation Renewal Program
with vegetative materials, and
due to the high genetic quality
that the government has been
sponsoring through the Dominican Coffee Council.
BIO
José Fermín Núñez
completed his studies in
Agronomy at the Instituto
Agronómico Salesiano.
Since 2012, he has work
as Executive Director of
the Dominican Coffee
Council (CODOCAFE), and
led the Project to Rescue
the Production Capacity of
Coffee Plantations in the
Dominican Republic through
a social, economic, and
environmental approach.
Most of the Dominican Republic’s producers are smallholders. Moreover, the more than
45,000 Dominican families producing coffee depend on it for
their living. What support can
the small-scale farmers count
on in the Dominican Republic?
Producers will continue to
have the support that allows
them to organize in cooperatives, associations, and clusters that promote partnerships
and thereby allow them to become micro entrepreneurs in
the sector. There are coffee
systems and technical assistance to qualify and orientate
them in the management of
their plantations to achieve
higher yields. They are offered
support such as the provision
of bags and seeds, fertilizers
and tools, and advice on the
establishment and production of coffee plants in nurseries. These plantations have
coffee rust disease resistance,
high production capacity, and
good quality. Road improvement programs in production
areas and support in post harvest processes have benefited
production.
Coffee rust has recently impacted on the entire coffee population in the Dominican Republic
causing huge financial losses.
agreement that CODOCAFE
signed with the National Institute of Hydraulic Resources
With this agreement, CODOCAFE implemented an Early
Warning Program in coordination with the Bureau of
Meteorology and with the
support of the Food and Agriculture Organization (FAO).
We have 223 weather stations at our disposal across
all rural areas. Through
these we get information
about weather that favors
the growth and progression
of the disease, allowing us to
monitor the incident levels,
and make timely recommendations for treatments to reduce and eliminate the fungus that affects plantations
simultaneously. And we are
able to do this in real time
through mobile phones that
record the weather data and
incidences.
What other challenges is the
coffee industry in the Dominican
Republic facing?
The biggest challenge we
have is to raise the level of
productivity for the coffee
plantations that right now are
around 101 acres in size. We
need to raise their technical
performance levels, which
means renewing plantations
with coffee varieties of high
production capacity that are
resistant to diseases, and are
adaptable to climate change.
We also need to improve the
planting density, have timely funding for the work, and
maintain continued technical
assistance and support.
Do you see the potential for
the DR to expand in the coffee
market?
The Dominican Republic,
although it has lost a significant share in the international market as a result of
the decrease in production,
retains enormous potential
due to the exceptional quality of Dominican coffee. The
government’s Plantation Renewal Program implemented
through CODOCAFE contributes greatly to the expansion
of production, and with that
the country will be able to recover much of its lost ground.
The high quality that Dominican coffee displays is more
than enough to penetrate
any discerning and demanding market today. Ultimately,
Dominican coffee has significant potential because of its
undisputed quality, coupled
with the set of actions that
are being implemented to
further increase its quality
to satisfy both domestic consumption and the international market.
What does the Dominican Republic offer in terms of quality
and variety of coffee beans?
The quality of Dominican
coffee has been steadily improving. We offer an interesting variety of coffees depending on the region, including
Cibao Altura, Barahona, and
Ocoa.
What are some of the actions
that need to be implemented to
increase exports?
Exports will increase to the
extent production also increases in the country. To
date we have renewed about
2,260 hectares of plantations.
Domestic consumption has
increased as reflected in reduced exports that are being
processed by the local industry instead. The DR exports
organic, roasted, and ground
coffee to meet commitments
in the existing markets held
by several Dominican coffee
brands and types. These have
been recognized for their
quality and flavor. We have
excellent soil and climate for
the production of high-quality coffee. With the policy of
attracting investment to the
country, this can be exploited
to install large plantations and
facilities. ✖
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119
122
123
126
Dr. Alejandro Cambiaso Rathe,
President and Founder of the
Dominican Association of Health
Tourism, on recent developments.
The country holds great potential
to become a future medical hub
due to its high quality medical,
dental, and welfare services.
Having faced educational
challenges in the past, the
republic is set to address
previous systemic shortcomings.
Health & Education
R E V I E W H E A LT H
A well-administered public health system, working on a three-tiered
organizational structure and supported by six separate vice-ministries,
addresses the many needs of the Dominican Republic’s most
disadvantaged and works to assure that no citizen is left behind.
T
he current public
health care system
in the Dominican
Republic is based
largely on the General Health
Law, which was enacted in
2001, and the Law Establishing the Dominican Social
Security System, which was
enacted that same year. These
reforms laid the groundwork
for universal coverage, and
ushered in a system that promoted insurance coverage
through contributions by the
state, employers, and workers. In the years that followed,
financial turmoil and political
developments made achieving universal coverage an ongoing struggle, but over time,
significant progress was made.
Between 2007 and 2009 alone,
insurance coverage rose from
27% of the population to 40%.
Types of insurance include
worker-employer prepayment
schemes, such as the Social
Security Dominican Institute,
prepaid private health insurance, self-managed insurance, and private providers.
With a universal coverage
mandate on the books, the
government’s share of health-
DOCTOR'S HERE
With a universal coverage mandate
on the books, the government’s share of
health care coverage extended to around
75% of the population in 2013, while the
private sector generally provides services
to the more affluent segments of the
population.
care coverage extended to
around 75% of the population
in 2013. With many public sector patients uninsured, the private sector generally provides
services to the more affluent
segments of the population.
While the state has assumed
responsibility for the majority
of healthcare recipients in the
country, their share of health
care expenditures has risen
over the past decade. According to World Bank Indicators,
this percentage rose from
43.4% in 2010 to 50.9% in 2012.
While healthcare spending as
a percentage of overall government spending fell from
15.9% in 2000 to 14% in 2010,
this is more reflective of the
country’s rising GDP and tax
base than a lack of political
will. This said, the WHO has
called for increased attention
to the sector, and stressed
that further healthcare reform
and progress must be framed
within the country’s macroeconomic context. In doing
so, comprehensive coverage
and services will underscore
improved equity, quality, and
financial protection for the
Dominican population.
120 THEBUSINESSYEAR
The percentage of
overall government
spending fell from
15.9% in 2000 to
14% in 2010, but this
is more reflective
of the country’s
rising GDP and tax
base than a lack of
political will. This
said, the WHO has
called for increased
attention to the sector,
and stressed that
further health care
reform and progress
must be framed
within the country’s
macroeconomic
context.
The public sector consists of the Ministry of
Public Health and Social Welfare, the National
Health Council, the National Health Insurance
program (the DR’s principal public insurer),
and the National Health Council. The Ministry of Health operates on a three-tiered organizational structure—central, regional, and
provincial. At the central level, the office of the
minister is supported by six vice-ministries: Administration and Finance, Planning and Development, Public Health, Quality Assurance, the
Directorate for Strengthening Regional Health
Services, and Social Welfare. In 2012, the Ministry was composed of a network of 1,853 facilities made up of 1,703 primary care units and
another 150 specialized treatment centers.
These specialized centers entail 15 specialized hospitals—such as advanced cardiac and
oncology institutes—20 provincial hospitals,
11 regional centers, and 104 municipal hospitals. Standards of accreditation, regulations,
and good practice have been established for
health facilities, laboratories, and pharmaceutical companies, although regulatory processes
are still needed to improve the quality of care,
quality control and biosafety. In the past few
years, the physical infrastructure of the health
services network has improved and expanded,
both in the public and private sectors, with the
introduction of new technologies.
FOOTING THE BILL
The Pan American Health Organization estimates that in 2008, health expenditures in the
DR stood at $560 million, or 5.5% of the GDP.
In 2012, this figure was slightly down at 50.9%,
however with a GDP increase from $45.8 billion
to $58.92 billion over the same time period, this
translates into a significant overall increase in
healthcare spending, reaching $552 per person. Between 2002 and 2010, per capita health
expenditure rose by 190%. This is in line with
increasing public healthcare expenditures as
a percentage of total spending, where government operations see lower margins. For example, in 2004, the government’s percentage
was 28.7%, but eight years later in 2012, the
percentage was 50.9%, reflecting a growing
state role in healthcare provisions. Moreover,
increased government spending is translating
into important healthcare gains for the country. Life expectancy has risen to 73.2 years for
2012, with the latest WHO estimates at birth being 76 years for males and 78 years for females.
Another indicator that public health services
are gaining on the private sector is that 95% of
births among the poorest 20% are attended by a
skilled professional, whereas this rate stands at
99.1% for the richest 20% of the population—a
discrepancy of just over 4%. This suggests that
even the poorest members of Dominican society have improved access to quality natal
care, compared to other countries in the region
where such rates are much lower.
From the private sector side of the equation,
the Dominican Republic is also importantly the
regional base for various top medical technolo-
gy companies, which have chosen the country
as a hub for developing, manufacturing, and
marketing a wide range of medical products.
The country forms one of the largest clusters
for healthcare manufacturing in the Caribbean
and the Central American region. The medical
device industry represents 6% of free zone exports, valued at $286 million, whose main export market is the US. Importantly, this industry
as a whole employs approximately 9,000 skilled
workers, providing a level of human resource
skill that competes solidly at a global level.
THE ROAD AHEAD
Dominican health policy is guided primarily
by the government’s Ten Year National Health
Plan for 2006-15 (NHP), which serves as both
a road map for the future and a diagnosis of
the present. The NHP outlines nine strategic
objectives for strengthening the health sector:
(1) provide effective government stewardship;
(2) strengthen patient care; (3) enhance public health; (4) develop the social health insurance system; (5) ensure necessary financing;
(6) develop the health civil service system; (7)
develop information and surveillance systems
to tackle problems; (8) strengthen the role of
local communities in health; and (9) develop
integrated approaches specific to women’s
health. These strategic objectives map out
and address the major gaps that prevent the
Dominican Republic—especially its poor and
vulnerable populations—from achieving better
health outcomes by improving equitable access to health services, reducing out-of-pocket
costs, and strengthening the health system. The
long-standing challenges are linked to poverty
and include issues closely aligned with larger
international priorities, such as HIV prevention, maternal and child health, tuberculosis,
malaria, and improved nutrition.
In terms of developing local solutions to
global problems, the Dominican Republic is
actually punching well about its weight. The
incidence of HIV prevalence in the country
appears to have stabilized to between 0.8
and 1.1% in the general population. Poor Dominicans comprise 36% of the general population, but almost 48.4% of the HIV positive
population. TB also remains endemic to the
Dominican Republic, with an incidence of 70
per 100,000 persons. Case detection rates and
cure rates remain below government targets
at 60% and 75% respectively, and government
effort is focused on bring these numbers to
targeted levels.
Public health preparedness is also an important issue for the Dominican government.
Natural events such as hurricanes and earthquakes have the potential to divert the focus of
the health sector from existing efforts at disease
prevention to dealing with emergency response
issues. Yet with a clear health plan in place, the
combined efforts of different sectors of society,
and support from international partners, the
country is not only keeping abreast of challenges, but also keeping ahead of events. ✖
Health & Education
THEBUSINESSYEAR
121
INTERVIEW
DESTINATION,
health
What role do Public-Private-Partnerships (PPPs) play
in the development of the sector?
TBY talks to Wendy
Sánchez Imbert,
Director of Health
Tourism Department,
Ministry of Tourism,
on medical tourism
and the Dominican
Republic’s growing
role as a destination.
Medical tourism is a highly
profitable global phenomenon
with a tremendous potential for
further growth. How would you
assess its development in the
Dominican Republic?
BIO
In 1991, Wendy Sánchez
Imbert attended Pontificia
Universidad Católica
Madre y Maestra (PUCMM)
to study Business
Administration before
going to the Univeristy of
Quebec to obtain her MBA.
In 1997, she began working
for Sabre Travel Network
as an Account Executive
where she soon started to
move up the ranks. In 2004,
she became a business
consultant, and in 2007
the sales manager, before
becoming the Director of
Sales in 2009. In 2013,
Sánchez took on her current
role as Director of the
Health Tourism Department
at the Ministry of Tourism.
has a huge potential in the
medical tourism sector and
I see more and more people
coming here for treatment.
In November, I attended
the Global Medical Tourism Conference organized
by the authorities of all the
Caribbean countries to discuss the potential of developing the region as a health
tourism destination. At that
conference I realized that
our country has all it takes in
terms of infrastructure and
potential, and that we simply
need to promote this to the
world. The key factor now is
quality and the players in the
national project. We are set
to promote the country as a
whole, rather than specific
hospitals. Therefore, we need
to monitor the quality levels
of participants. Currently we
are formulating the certification processes for hospitals
and clinics. Some of the criteria we prioritize include having an international department, where the staff speaks
English, and so on.
Cooperation between the
public and the private sectors
is key for the development of
the health tourism sector. The
tourism board has considerable resources in terms of
branch network and a robust
promotion chain. And once
we integrate medical tourism
as part of our promotional
goals, the field will become
much clearer to navigate. The
private sector, meanwhile,
has the facilities, knowledge,
technology and qualified staff.
I think the success of the medical tourism sector depends
upon cooperation between
the public and private sector.
This will also show foreign
investors that we are willing
to help each other to achieve
common goals.
What strategies and initiatives
are being implemented to promote the Dominican Republic as
a medical destination?
We do not implement specific actions, because we are in
the process of giving a framework to the participants of
this nationwide project and
setting up quality levels.
However, we have plans to
promote the country and
medical tourism across four
areas: dentistry, plastic surgery, orthopedics, and bariatric surgery. At the same
time, we want to position
the Dominican Republic as
the second home for medical
visitors. We want, essentially, to exploit the friendliness
of Dominicans and the natural wonders of our country
as a tourism destination. We
initially target Dominicans
residing in the US, as we
know they want to come here
for treatment. In New York
alone there are over one mil-
The Ministry
aims to promote
the Dominican
Republic,
especially
in dentistry,
plastic surgery,
orthopedics, and
bariatric surgery
lion Dominicans. We believe
the slogan “you feel at home”
will work perfectly with this
target audience.
What are the main guidelines of
your three-year plan?
One of the goals is to sign a
partnership with the Medical Tourism Association. We
plan to carry out a feasibility
study to determine our main
expenses over the next six
months; we know we have
the potential, and plan to better target our audiences. As I
said, our first target audience
is Dominican expatriates.
This would represent phase
one of the plan. In phase two,
we want to invest in training, and we foresee the creation of a dedicated cluster.
This is foreseen materializing
within around a year’s time,
and should raise the level of
quality and technology of our
industry. We also have a program to develop health and
clinical programs, in which we
will work toward education
and promotion of the country.
Finally, phase three will see
the creation of a destination
guide from the Dominican
Republic to promote the industry abroad, and we plan to
participate in numerous trade
shows and fairs. ✖
122 THEBUSINESSYEAR
INTERVIEW
TBY talks to Dr. Alejandro Cambiaso Rathe,
President and Founder of the Dominican
Association of Health Tourism, on developing
medical tourism in the Dominican Republic and
the state of the sector.
PRESCRIPTION
for growth
Medical tourism is a highly profitable global phenomenon with
tremendous potential for further growth. As an expert in the
field could you talk us through
this new global trend?
Medical tourism is the segment seeing the most growth
within the health industry,
of 25% a year. It represents
at least 2.5% of travelers per
plane, and the figures differ
depending on the source. The
Medical Tourism Association
(MTA), which is based in the
US, claims that about $60 billion is generated by medical
tourism. That includes not
only medical care, per se, but
also odontology and wellness
at facilities such as spas. Medical tourism is growing rapidly
because the world population
is aging and becoming more
affluent at rates that surpass
the availability of quality
health care resources. Additionally, the long waiting lists
in countries like the US and
Canada, and the high cost of
medical treatments are problematic—the leading cause
of bankruptcy for individuals
in the US is health problems,
making up 50% of cases.
The Government has been focused on developing the tourism industry, but will this make
a difference in the medical tourism segment?
Medical Tourism is a segment
that helps to grow and diversify the offer. The key factors
are quality, safety, certifications, JCI and ISQUA accreditation, and health centers of
excellence. Not everybody
can be a candidate to offer
medical tourism services, as
international criteria must be
met. First, you have to comply with local criteria, such
that the center needs to be
licensed by the Ministry of
Public Health and the professionals should be part of
the medical college and their
medical specialty society. In
addition, the hospital should
be certified and have international departments that
manage the entire patient
experience, and optimally
accredited by the joint commission international (JCI).
In the Dominican Republic,
there are three centers working towards the accreditation
process (Hospital General de
la Plaza de la Salud, HOMS,
and CEDIMAT).
Along with the above, what opportunities do you see in the
Dominican Republic?
Medical tourism brings opportunities for raising the
bar on quality, and the need
for certifications and accreditations will positively
impact locals and health
indicators. This will also
create new jobs and attract
foreign investment to the
country. On a larger scale,
legal security is required
such that if a foreign company is going to invest in the
country, their investment
is secure in the long term.
That is an important area for
us to work on. Another area
of importance at present is
public and private alliances.
The Center for Exportation
in the Dominican Republic
(CEI-RD) has an initiative
to create an investment exequatur with the ministry
of health and Dominican
Medical College, namely a
license that international
health professionals could
obtain to practice medicine
in the Dominican Republic.
This initiative would consist of investors coming to
the Dominican Republic to
establish health centers of
excellence. They might well
already have a special permit, but first, it has to meet
established criteria, preferably regarding technology
that we lack in the country,
which will promote knowledge transfer, and sustained
medical education, creating
employment and opportunities for the local community.
Thirdly, it should not create
unequal competition for local physicians. Essentially,
the establishing of international centers of excellence
is geared at helping to differentiate us in the medical
tourism industry and also
raise the bar on quality and
top-notch procedures. ✖
BIO
Dr. Alejandro Cambiaso
Rathe is one of the pioneers
of preventative medicine in
the Caribbean, and is the
president and founder of the
Dominican Republic Health
Tourism Association. He is a
Medical Doctor, specialized
in Family Medicine and
Preventive care, holds
an MBA with a focus on
Hospital Administration
(Unibe-FIU), a Specialist
in Quality in healthcare,
an ISO 9001 Certified
International Quality
Auditor, a Specialist in
Medical Tourism certified
by the MTA, has a postgraduate Diploma in Social
Security, an Internal
Medicine certification at
Harvard University, is a
Medical Associate of the
Cleveland Clinic Global
Physician Program, and
works as the chief of
international and preventive
services at Hospital General
de la Plaza de la Salud.
Health & Education
THEBUSINESSYEAR
123
MEDICAL TOURISM FOCUS
TREATMENT ABROAD
UNDER ANY CONDITION
Medical tourism is a highly profitable global phenomenon with tremendous potential
for further growth. According to Dr. Alejandro
Cambiaso Rathe, the president and the founder
of Dominican Association of Health Tourism,
“medical tourism is the sector that is growing the
most within the health industry, by 25% a year. It
represents at least 2.5% of travelers per plane.”
Growing demand for health services is directly linked to economic development, generating
higher incomes and better access to education.
Demographic changes, such as aging populations along with epidemiological changes, like
the rising incidence of chronic conditions, raise
the demand for more advanced health services.
Long waiting times, as well as high. Yet increasing costs of health services in developed countries, coupled with the availability of receiving
alternative treatments at lower prices in developing ones, is leading more and more patients
to seek treatment overseas.
GOVERNMENT PRIORITY
The Dominican Republic is the most popular
vacation destination in the Caribbean. In 2013
alone, the country received 4.7 million foreign
visitors. President Danilo Medina’s National
Strategic Plan envisages boosting the number
of international tourists to 10 million by 2022.
And within this, developing medical tourism
has recently become one of the government’s
top priorities. The Dominican Republic is set
up for success, as the country already has the
largest number of international airports in the
Caribbean, Free Trade Zones (FTZs), and numerous specialists in fields such as: cardiology, cosmetic surgery and dentistry, as well as
multiple wellness and spa/recovery services
providers.
ADTS
The Dominican Association of Health Tourism
(ADTS), founded and chaired by Dr. Alejandro
Cambiaso Rathe, a board certified medical tourism expert on prevention and management of
health centers, is a nonprofit organization promoting the Dominican Republic as an ideal destination for medical tourism. However, ADTS’s
aim is not only to attract new international patients, but also to ensure a positive experience
and good treatment results. The Association
focuses on encouraging best industry practices,
safety of care, and the promotion of appropriate endorsements, accreditations, and certifications for specialists and medical centers.
The Dominican
Republic is set for
success, with the
development of
medical tourism
being one of the
government’s top
priorities. The country
holds great potential
to become a future
medical hub due to its
high quality medical,
dental, and welfare
services and costeffectiveness.
STATISTICS
There are no clear statistics regarding the number and origin of medical tourists visiting the
Dominican Republic. In the words of Dr. Cambiaso Rathe, “last year (2013) we saw at least
5,000 patients here.” But these patients were not
necessarily all medical tourists; some of them
could have come to the Dominican Republic
with a different aim and subsequently required
immediate medical treatment. Medical tourism
is defined as the process of traveling beyond
the country of residence with a clearly defined
purpose of receiving medical care, whereby
travelers receiving treatment abroad as a consequence of sudden medical conditions are not
considered medical tourists. The Dominican
authorities are now working to compile reliable
medical tourism statistics. During an interview,
Dr. Cambiaso Rathe informed TBY that ADTS is
“gathering with the authorities so we can have
clearer statistics enabling us to pursue plans
based on more solid data.”
DOMINICAN CLINICS
The leading Dominican medical centers are
certified by the Dominican Republic’s Ministry of Health. Besides that, several clinics
are in the process of obtaining accreditation
through the Joint Commission International.
A few Dominican clinics have also signed strategic international alliances, and have quality
committees and special departments responsible for assigning a care coordinator to international patients. Those clinics already meet
international standards and offer hospitality
and financial services, logistics support, and
translators. HGPS, for instance, has signed
collaboration agreements with several prestigious universities and hospitals in the US and
Europe, such as Harvard University (Massachusetts), Jackson Medical Center (Alabama),
Brigham and Women’s Hospital (Massachusetts), and Oslo University and Hospital Clinic
(Norway), among others.
The country has taken the steps needed to
strengthen its position in the competitive international health market and is in the process of
creating incentives for medical tourism, as well
as a favorable legal environment. Additionally,
the country has some of the world’s most beautiful beaches, numerous hotels and golf clubs,
and a culture of hospitality and warmth, which
add to the recovery process. And it is easy to access: citizens from the US, Canada, and Europe
require no visa. ✖
124 THEBUSINESSYEAR
INTERVIEW
general
HOSPITAL
Inaugurated
its new surgical
floor in May 2014
TBY talks to Dr. Luis B. Rojas Grullón,
President of Clínica Abreu, on the growth of
the clinic, and the expansion of its areas of
specialization.
The clinic has recently made
significant investments in infrastructure and built a new surgical floor. Could you tell us more
about its main highlights and
facilities?
BIO
Dr. Luis B. Rojas Grullón
is a gynecologist and
oncologist with some 25
years’ experience. He is
Professor and Chairman
at the Obstetrics and
Gynecology Department
at the Medical School
of the Univesidad Pedro
Henriquez Urena (UNPHU).
He is also President of the
Accreditation Committee
of the American College
of Obstetricians and
Gynecologists (ACOG).
I arrived at Clínica Abreu in
1982, the year that the previous surgical ward was built.
We have now rebuilt it and
relocated the surgical facilities
to the 3rd floor following an investment in new equipment of
over $1 million. We have four
brand new surgical operating
rooms equipped with the best
devices, and we specialize in
digestive surgery, which has
been a popular and consistent
service in the history of Clínica Abreu. The clinic has long
been a prominent institution
for surgical services, which is
why we completed the joint
venture in 2008 with our
Venezuelan partners (Grupo
CDD Global), during which
I insisted on focusing on rebuilding the surgical facilities
and developing a new service
for cancer patients, the radiotherapy division. We have
the best linear accelerator on
the market for the treatment
of diverse cancers, and have
the only training program for
radiotherapy specialists in the
country, as no other program
is training specialists in managing cancer with the right radiation therapy.
Clinica Abreu works in partnership with Grupo CDD Global.
Why did you sign this agreement
and what are the main benefits
coming from it?
I assumed the management of
Clínica Abreu in 2000, replacing Dr. Jordi Brossa after his
43 years as head of the clinic.
Even though we have tremendous prestige, including
in terms of services offered to
diplomatic delegations from
abroad, I concluded that if we
continued using the same administrative system we would
fail to advance. I therefore
decided to seek a potential
partnership and for this reason began making contacts
in Venezuela. We now have
a joint venture that has been
extremely positive in terms of
the growth of this institution.
We have been growing because of the presence of the
Venezuelan investors, and
have already closed a business
operation and purchased a
new property in the north part
of the city. We have 6,000 sqm
dedicated to the new Clínica
Abreu, and the project is ready
to commence in January of
2018. The clinic will offer 160
specialist outpatient services,
with the best divisions and advisors available, especially in
surgical services, which have
traditionally been strong at
our institution.
The only clinic
in the DR
to provide a
training program
for radiotherapy
specialists
The clinic is mostly known for
its excellent cancer treatment
center. Can you tell us more
about its facilities and the technologies used?
The linear accelerator that we
have is extremely advanced
technology. We acquired that
through our Venezuelan partners because they have four
or five cancer centers in Venezuela and three in Colombia. They have tremendous
expertise, and because of my
30-year experience in a public
hospital managing the gynecological cancer department,
I decided to find information
on those companies adept
at cancer management. This
cancer center has had phenomenal success, and opened
another identical branch on
October 30th in La Romana.
We have set up a CCD radiotherapy center. It is a great
pleasure to have had the opportunities I have had over the
past 30 years, to help women
with cancer. I have a preference for looking after cancer
patients, which is why I have
been pushing my partners to
do so. That is my main goal,
and I think that Clínica Abreu
is heading in that direction. ✖
Health & Education
THEBUSINESSYEAR
125
PHARMA B2B
A CURE
for your ills
FERNANDO J.
ESPINAL
BENJAMIN
BEN-DAVID BONETTI
Executive VicePresident, INFACA
President, Medek
Pharma
current regulatory framework
and what steps are necessary
to encourage the further development of the pharmaceuticals
sector?
process is currently flowing
more smoothly. Markets and
market trends change, and the
regulatory framework should
also be swift and flexible to accommodate this. The markets
are regulated, which is good, but
there is still some work to do.
FERNANDO J. ESPINAL The
regulatory framework is a long
way from working the way that
it should. We are struggling
and the authorities are collaborating on efforts to change the
industry. We have a long list of
registrations that are long overdue, but still pending. However,
current efforts are headed in the
right direction; the government
has designated a body to work
with the sector by prioritizing
different products and organizing a different strategy regarding
the approvals process.
BENJAMIN
BEN-DAVID
BONETTI This has been one
of the main headaches for the
pharmaceutical sector. In many
cases, this has been delayed
and the system has been slow.
The pharmaceutical sector is,
in many ways, similar to the IT
sector, and by this I mean that
it is subject to constant change.
Therefore, I consider efficiency
in the registration process for
new products to be very important, because companies and
patients may lose out because
products aren’t in the market.
However, I do note improvement. For example, authorities
have been extremely demanding in terms of quality and the
What is the composition of your
portfolio?
FJE Infaca is divided into five
business units. We produce
our own product line as well as
manufacture for other firms.
Our marketing strategies are
all devised in-house, and we
handle marketing operations
for international firms as well.
Then we have institutional sales,
which are conducted directly
with the government. However,
the most important business for
us is the private sector. We have
our own product line, which is
the core of our business. The
fifth leg of our business is joint
ventures. We have a joint venture with a Spanish laboratory,
Laboratorios Juste from Madrid.
Our 50/50 partnership is an important asset.
TBY talks to two major players in the
Dominican pharmaceuticals sector about
the current regulatory framework and their
growth strategies in the market.
BBDB We have a wide variety
of products. For example, in
the injectable segment we have
hospitals and clinic cores. We
divide the market into four segments: government institutions,
Program of Essential Medicines
(PROMESE/CAL),
branded
products, and generic products.
We regularly visit government
institutions, but we do deal in
many over the counter (OTC)
products; we do not sell to pharmacies. We have our own brand
of medical generics.
What is your growth strategy,
and what are your goals for
2015?
FJE We indirectly export to the
US, but it is not as formal as we
would want it to be. Infaca is in
the process of trying to register
certain products for the Dominican Community in the US. We
are investigating the potential
venture into other markets, not
only in Central America, but
also South American countries.
Infaca also has a regional agreement with Swiss company Vifor
International, a part of Gallenica
Group. We took one of the active
principles that they have in an
iron product and created a formulation of it. Based on this, we
developed a new product with
vitamins, which today is one
of the more interesting items
in our product line. Most Latin
American partners are also interested in having this product
for their markets.
BBDB In our generic business
line, we have a long-lasting partnership with our suppliers. In
our new lines, we have a policy
of working with very few people and target market leaders.
We choose who we work with
very carefully. We are open to
new partnerships, but we won’t
enter in to any partnership that
would represent competition to
our current partners. In 2015,
we will continue to market
new products and expect to do
much better. We plan to launch
new products that are currently
undergoing registration. If we
manage to do so, it would prove
to be an amazing year for us. For
example, we foresee a 20% increase in government spending
on the treatment of catastrophic
diseases. There are plans to centralize more purchases through
tenders. In the private sector,
I foresee many niche markets,
such as cancer and kidney disease, to grow. And meanwhile,
in terms of international expansion, we work with Haiti,
while prioritizing growth in the
Dominican Republic, as there is
much to do here. That said, we
do target international expansion for the future. ✖
126 THEBUSINESSYEAR
Although the Dominican Republic has faced many educational
challenges in the past, a new and tightly focused government initiative
is set to address previous systemic shortcomings in an aggressive and
effective fashion.
Review
E D U C AT I O N
LEARNING
FOR THE FUTURE
Coming in at 143rd out of 144 countries in education in the 2013 Global Competitiveness
Report—just above Haiti—the drastic reforms implemented by President Danilo Medina represent a no-holds-barred response to
the country’s educational crisis. By mandating that 4% of the GDP be spent on education
(around $2.5 billion), and a slew of other stipulations, the Medina administration hopes
to propel the country’s educational system
into the ranks of more advanced countries,
end illiteracy, create over 400,000 jobs and
ultimately spur national development. This
enhanced funding is an essential element of
these reforms. The funds will be distributed
between the construction of new schools, the
hiring of more teachers, and the extension of
school days. The government has announced
ambitious plans to build an additional 28,000
classrooms to accommodate the country’s
swelling numbers of students. But with these
developments grabbing headlines, a closer
look at both the challenges and successes of
the country’s educational system shows that
the Dominican Republic is well positioned for
a bright future in all areas of education, from
early childhood up to the tertiary levels.
Theses educational reforms are not simply
directed towards improving the sector, but
are part of an integrated national vision of
enhancing the prosperity of the entire society and building the framework of the future.
As McDonald P. Benjamin, Country Manager
of the World Bank, tells TBY, “Today there is
a social safety net in place that reaches over
A major focus of the government
is on a massive expansion of the
education system
Image: INTEC
800,000 Dominican households, and at a reasonably low cost as a share of GDP. Moreover,
an increasing share of this program is being
carefully targeted, and more importantly being conditional on actions that increase the
human capital of the poor and strengthen
Health & Education
A major priority for the Dominican
government in regard to secondary
and post-secondary reform is to
improve and build the capacity for
effective and standardized vocational
education and training. In addition,
the government has set a target of
increasing participation in higher
education to 50% of the college age
population by 2018.
their health and the education of their children, so that it isn’t just a handout but rather
an investment in human capital.”
A STRONG FOUNDATION
The starting point for educational success begins in the earliest years. Between 2008 and
2012, the gross enrollment rate for pre-primary school was 37.3% for males, and 38.4%
for females, according to the most recent
UNICEF data. Moving on to primary school
participation rates, gross enrollment rose to
112.1% for males, and 101.5% for females for
the same time period. However, since this
statistic factors in late enrollment, early enrollment, and repetition, the overall enrollment rates for males, and even more so for
females in this demographic, were low. For
males, the net rate was 93.3%, while females
were only 91%. Put another way, during the
sample time period, around 10% or more of
primary school aged girls in the Dominican
Republic did not receive formal education
during a critical time period for personal development. Boys fared only slightly better.
To understand why the Dominican Republic has the second lowest rate of early childhood education in Latin America—30 points
behind the regional average according to the
Programa de Promoción de la Reforma Educativa en América Latina y el Caribe (PREAL)—the World Bank cites the lack of full-day
programs, low levels of spending, and limited
access to programs. This trend was especially
pronounced amongst poorer and often rural
communities, and had future implications
when marginalized children entered the
primary and secondary grades lacking the
requisite skills. This in turn caused increasing dropout rates as incomes fell and grade
levels increased. Two factors suggest that
early childhood education is set to improve
across the demographic spectrum. When
early childhood education rates increased
from 35% to 40% between 2004 and 2007, the
World Bank credited the rise of private sector services. While private enrollment grew
by 21,000 during this time period, the public
sector only rose by 8,000 students according
to PREAL. The fortunes of such private sector
providers have improved along with national
economic growth. One 2005 UNESCO survey
found that the Dominican Republic had significant differences in attendance based on
income; essentially only those who could afford it received quality education. This means
that the shortage lies in the public sector, and
given the current administration’s efforts,
access is predicted to improve for poorer students in the near future. A major part of the
government educational reforms is the construction of new schools and classrooms in
underserved rural areas—where private institutions are less common.
THEBUSINESSYEAR
127
IGNACIO
SANTONI
Executive
Director, ADEN
International
Business School
SCHOOL'S IN
How would you characterize
the business education environment?
Having worked in Panama and
Argentina for ADEN, what distinguishes the Dominican Republic
is the way in which executives
are willing to improve their employability level through higher
education programs. Nowadays,
being part of an MBA course
means sharing the same professional and personal background
with your classmates. The
Dominican Republic has a high
level of young and talented professionals in charge of recruiting
and training processes.
According to official statistics, between 2008
and 2012, only 74.8% of primary school participants successfully completed their programs and moved on to the secondary level,
although UNICEF data places this number at
a slightly higher 78%. For secondary school,
the rate of attrition is even higher, with the
net attendance ratio for makes at 51% and
for females, 64.9%. Moreover, a 2012 UNESCO study found that 70% of children with
disabilities were not in school. A 2007 study
found that mathematics teachers on average
only understood 42% of the material they
were required to teach. These statistics both
indicate major shortcomings; however, given that the government has identified a lack
of facilities and teachers as the main culprit,
the situation can be corrected with the right
policies. One such policy, which educators
favor strongly, is making the didactic professions appealing to college graduates—which
it currently is not.
As of 2014, the base salary of teachers was
estimated to be $344 per month, whereas the
What have been the landmark
achievements of ADEN in the
Dominican Republic and how
do you see the institution’s
future in the country?
The year 2011 represented a
turning point in the development
of our operations in the Dominican Republic; since that time we
have set up several post-graduate programs, we expanded our
profile, and strengthened our
offering and partnership portfolio. We plan to offer even more
post-graduate courses starting
in 2015. ADEN is in the process
of establishing itself as the
leading business school in the
country, and we will continue to
invest in the quality of our services and products. We expect
to increase our turnover in the
country by 40% by 2015.
UPWARDS AND OUTWARDS
Enrollment in university studies in the Dominican Republic is predominantly built at
the undergraduate level. In 2009, 94% of the
372,433 students in the tertiary system were
studying at the undergraduate level, with just
2.5 and 1.7% in graduate and higher technical
education respectively. Women accounted
for 64% of the total higher education enrollment between 2006 and 2009. Beyond simple numbers, the government is currently focused on improving the quality of university
education. Undergraduate studies predominantly train graduates for what the OECD
describes as “administrative functions.” According to the OECD, deficiencies in the Dominican system begin with poor quality and
significant drop out rates at the secondary
level. Nonetheless, the participation rate of
29% among college-age citizens represents
significant enrollment growth over the past
30 years. In this sense, the country is on par
with the global average. Unfortunately, the
Primary school enrollment, 1995-2013, %
120
115
110
105
100
95
90
2012
2011
2010
2009
2008
2007
2006
2005
2004
2003
2002
2001
2000
1999
1998
1997
85
1996
average university educated worker could expect to make around $565 per month. That
means that entering the teaching profession
could cost graduates 60% of their potential
earnings, thus deterring numerous qualified graduates. Further straining teaching
resources, classrooms in schools with over
500 pupils have an average of 78 students to
every teacher, which accounts for 60% of total enrollment in public schools. This means
that in addition to building 28,000 more
classrooms by 2016, as the government has
promised, the government must attract more
teachers to the profession. The National Pact
for Education Reform, signed in April 2014,
provides the platform from which to launch
these pressing reforms. The pact establishes
a common commitment on the part of the
government, the main political parties, and
private and civil society actors, to prioritize
educational reform regardless of political
outcomes. A major priority for the Dominican
government in regard to secondary and postsecondary reform is to improve and build the
capacity for effective and standardized vocational education and training. In addition,
the government has set a target of increasing
participation in higher education to 50% of
the college age population by 2018, which
will entail the enrollment of approximately
660,000 students.
1995
128 THEBUSINESSYEAR
relatively high university enrollment rate is
modified significantly by an average dropout
rate of almost 50%. Problematic questions of
educational effectiveness across the country
mean that too many students are entering
university without the proper preparation;
yet the renewed focus on education as a critical aspect of national development is foregrounding this concern, and seeking to address existing deficiencies head on. To take
one example, institutions of higher education
looking to improve their levels of quality are
expanding their international student bodies
in both directions. Such institutions might
look at opportunities at the graduate level
among Dominican students, and branding
the Dominican Republic for its internationalization potential. As the university system
both takes in and sends out more students
regionally and globally, the country can expect to develop itself as both an educational
and eventually economic hub; a virtuous cycle with a clear and well-established record of
success. ✖
Health & Education
THEBUSINESSYEAR
129
UNIVERSITIES VOX POPULI
A
PEC University was
created by the business community and
has kept this relationship going.
In our Schools of Marketing and
International Business, we have
Advisory Councils comprised
of people from the industry. In
the area of engineering, too, we
have an Advisory Board comprised of industry figures. This
board plays a major role in defining the characteristics of the
school. They participate in the
design of the curriculum, based
on the tangible needs of industry. We have a proud scholarship
program in addition to which
the group of businessmen who
founded our university founded
a second institution called the
Fundación de Crédito Educativo. It is a foundation providing
loans to students who are unable
FOSTERING
THE FUTURE
The leaders of three Dominican Republic universities
explain how with help from the business community and
government, they are fostering the development of young
citizens to improve the country’s future.
I
to pay for university study. That
is part of our philosophy. That
foundation not only gives loans
to students who come to our university, but also to those going to
any other local university. Our
strategic plan 2013-18 is based
on the concept of a university of
equality but with equity.
RADHAMÉS MEJÍA
Rector, APEC
University
ROLANDO M. GUZMÁN
am committed to enhancing the social
functions of UNPHU,
improving its quality assessment, and instigating more international cooperation. The
University also needs to throw
its support behind better educational programs for doctors,
which is necessary for this region. Another matter of importance is fostering innovation
and entrepreneurship, which
involves supporting the different projects of the Inter-American Organization (OUI). The
Ministry of Higher Education,
Science, and Technology has
raised standards for education
throughout the country. The
Ministry also recently created
a fund for research, allowing
graduate studies for hundreds
of young professionals and students in Europe, as well as in the
US. Many of these young people
are studying in disciplines that
are not present in our country.
These developments, with the
assistance of the private sector,
should lead to a better education, embracing a larger number
of students.
MIGUEL R. FIALLO
CALDERÓN
Rector, Universidad
Nacional Pedro
Henriquez Ureña
(UNPHU)
Rector/President, INTEC
I
NTEC began as a
graduate level university, but expanded to
accommodate the undergraduate level. We realized that the
Dominican Republic was in
need of high quality education
at all levels, and that our academic model had the opportunity and the moral obligation to
contribute with a wider scope.
Our institutional vocation has
always been to respond to the
needs of the productive sector
and government, and the fruitful relationship with them is a
valuable asset of this university.
Our different departments are
complementary. Engineering
and technology are useful tools
for health studies, and the business topics are a critical part
of the training for engineering
and health professionals. Ul-
timately, education is about
more than training professionals in specific specializations,
it is also a matter of creating
well-rounded citizens, and to
provide tools for adaptation to
different needs. Our schools
pay close attention to the needs
and ideas of the business sector
and, at the same time, we try
to generate our own proposals
for it.
130 THEBUSINESSYEAR
INTERVIEW
CLASS act
TBY talks to Marilu Bobadilla de
Villanueva, General Director of St.
Patrick School, on the role of the school
in educating Dominicans for the future
and sectorial trends.
Core Standards. Smartboards,
projectors, and computers
have been installed in most
classrooms to provide time
and space for innovative and
interactive teaching.
What is St. Patrick School’s midterm development strategy?
BIO
Marilu Bobadilla de
Villanueva has been the
General Director of St.
Patrick School of Santo
Domingo since 2007, and
a founding member since
2005. Her higher education
began at the Pontificia
Universidad Católica
Madre y Maestra, leading
to a Bachelor’s Degree in
Business Administration
Cum Laude. She then
earned a Certification in
Banking Management,
and she currently attends
Universidad Iberoamericana
(UNIBE), pursuing a
Master’s Degree in
Educational Management.
With her vast experience,
she has assembled a
team of professionals to
develop the growth and
consolidation strategies
of her company in the
Dominican market. Her
formative experience
in management and
leadership has motivated
changes in Saint Patrick
School’s mission and
vision statements; creating
new enterprising leaders,
capable of contributing
innovatively to the country
and the wider world.
St. Patrick School has existed in
Santo Domingo since 2005. How
did the idea of its establishment
arise and how has the School
evolved over the years?
St. Patrick School of Santo Domingo, was founded
on March 17, 2005. The idea
came from the need to provide an integral, modern education for students from
preschool all the way to high
school. In 2007, motivated by
the need to continue promoting the strong principles that
underpin our educational beliefs, we adopted the Catholic
identity and included specific
subjects in our curriculum,
as well as special activities to
promote the highest human
values that frame our identity
as a school: integrity, loyalty,
and commitment. Recently
we launched our new mission
and vision, and three new values necessary for the 21st Century: leadership, innovation,
and respect. St. Patrick School
is currently in its 10th year.
What standards does St. Patrick
School follow to ensure that its
students will be well prepared
to enter colleges and thrive in a
constantly changing world?
As a preparatory school, St.
Patrick School is committed
to offering a program based
on the Common Core Stan-
dards that has consistently
high standards that provide
students with a set of clear
expectations to ensure that
they all have the skills and
knowledge necessary to succeed in the 21st century, be
it at college, in a career and
in wider life upon graduation
from high school, regardless
of where they live. The standards promote equality by
ensuring all students are well
prepared to play leading roles
and collaborate with their
peers in the Dominican Republic and abroad.
What role do technology and
innovation play at St. Patrick
School?
Our school provides teachers
and students with a secure
WiFi network where they can
safely navigate and use their
tablets to get access to different digital tools like Schoology, Dropbox, Kahn Academy,
and other sites. The publishing houses with which the
school has signed contracts
provide a platform for teachers and students to interact
even when they are not in
school. St. Patrick School
strongly believes in innovation, as demonstrated in our
updated curriculum which
paves the way for facilitators
to plan based on the Common
We recently opened our new
preschool, in order to satisfy
the demands of the community. This school year SPS has
embarked on achieving on a
new objective: the transformation of our mission and
vision, to ensure our best intentions are actively pursued
and realized. We need a true
mission and vision, focused
on leadership culture, which
is applicable to all aspects
of the school. It has been an
adventure and taken much
work to capture the essence
of what we, and the country,
truly need. St. Patrick School
enables its students to develop skills such as leadership,
creativity, emotional intelligence, negotiation, effective
communication, teamwork,
analytical thinking, self-motivation,
decision-making,
positive attitude, proactivity, and entrepreneurship,
among others.
Our true mission is to contribute, from our classrooms,
to the students’ development
and acquisition of knowledge
and capabilities. We want to
improve their surroundings,
and help them to become
enterprising leaders. Though
this may not be a fashionable
term, we believe it is a skill
which correctly channeled
can be fruitful. ✖
THEBUSINESSYEAR
131
136
137
140
With 28 golf courses to choose
from, the Dominican Republic
aims to become the premier golf
destination in Latin America.
Mother Nature has been
particularly generous to the
island of Hispaniola, especially its
eastern territory.
Some survival tips that will help
get you through your first few
days in the Dominican Republic,
for business, or pleasure.
Tourism
REVIEW
The Dominican Republic is the undisputed champion when it comes to
tourism in the Caribbean, with visitor numbers continuing to climb. The
government has set a target to reach 10 million annual visitors within the
next decade and is on track to fulfill this ambition.
H
eading into 2015
the Dominican Republic remains the
leading player in
the Caribbean tourism sector a position it has held now
for several years. In 2013 the
country welcomed nearly 4.7
million tourists arriving by air,
some 1.9 million more than
its nearest rival Cuba, with Jamaica taking third place. And
the Dominican Republic’s
2013 visitor numbers were a
healthy YoY increase of 3.6%
over the previous year. This
strong positive trend looks set
to continue for the foreseeable
future. According to the latest
statistics from the Caribbean
Tourism Organization, the
Dominican Republic again
enjoyed the highest number
of tourist arrivals by air in the
Caribbean region for 1H2014
at 2.6 million. This represents
a 8.5% increase in visitor
numbers over the same period in 2013. Of these tourists,
66% arrived at the privately
owned Punta Cana International Airport, which is the
second busiest airport in the
Caribbean. It currently plays
host to 53 airlines and has
HAVING IT ALL
Image: Sirenis Resort Punta
Cana Casino & Aquagames
In 2013 the country welcomed nearly
4.7 million tourists arriving by air, some
1.9 million more than its nearest rival
Cuba, with Jamaica taking third place.
And 2013's visitor numbers were a
healthy YoY increase of 3.6%
been experiencing an almost
20% increase in traffic YoY. If
this trend continues, aircraft
movements at Punta Cana are
predicted to double within the
next five years. The Dominican Republic has a further five
international airports, which
in descending order of visitor
numbers for 1H2014 are—
Santo Domingo (16%), Puerto
Plata (10%), Santiago (3.3%),
La Romana (2.8%), and Samaná (1.6%).
Added to arrivals by air,
cruise passenger visitor numbers were up 12.3% in 1H2014
over 1H2013. This figure is
particularly heartening for
the cruise ship segment of the
industry, as it suffered during
the latest world economic
recession. Cruise passenger
arrival numbers for the Dominican Republic slumped
by a hefty 29% back in 20092010. The latest figures, however, show that this downturn is reversing. The cruise
lines calling at Dominican
ports include heavyweights
in the market, such as Royal Caribbean International,
Norwegian Cruise Line, Costa
Cruises, Princess Cruise Line,
132 THEBUSINESSYEAR
DR Average Monthly Temperature (Celsius)
Source: World Bank
26
25
24
23
22
Jan
Feb
Mar
Apr
May
Jun
Jul
Aug
Sep
Oct
Nov
Dec
DR Average Monthly Rainfall (mm)
Source: World Bank
250
200
150
100
50
0
Jan
Feb
Mar
Apr
May
Jun
Jul
Aug
Sep
Oct
Nov
Dec
Tourist Arrivals by Main Markets-1H2014
Source: Caribbean Tourism Organization
US
931,220
Canada
462,582
Europe
614,029
Other
661,794
European Tourist Arrivals by
Main Markets-1H2014
Source: Caribbean Tourism Organization
and Holland America. And the country has the
infrastructure to attract these players in the
lucrative cruise trade. The three main Dominican ports of Santo Domingo, La Romana, and
Samaná in the North, all have the necessary
facilities to receive modern, mega cruise ships.
In particular, Santo Domingo Port has two new
cruise terminals, Don Diego Terminal with 400
meters of piers, and Sans Souci Terminal which
can handle nearly 400,000 passengers.
The country is obtaining valuable revenue
and new employment opportunities from
these cruise visitors coming ashore for day excursions to historic monuments, golf courses,
beaches, and various nature spots. Some of the
highlights are Colonial City, Teeth of the Dog
Golf Course, and El Limon Falls just to name a
few of the attractions accessible to day visitors.
The cruise segment of the tourism industry
is set for further expansion too. In January 2014
Carnival Cruise Lines unveiled a new private
cruise port development on the Dominican Republic’s northern coast near Puerto Plata. The
$65 million Amber Cove Cruise Center project
is a two-berth port capable of accommodating
two post-Panamax cruise ships, equivalent to
around 10,000 passengers a day, according to
the company’s own press releases. The project
is scheduled for completion in 2015.
Naturally enough, the US and Canada continue to be the biggest source of inbound tourists to the Dominican Republic given their
geographic proximity. In 2010 North America
accounted for 45.7% of the country’s tourists, and by 2014 this figure had risen to 60%.
In 1H2014 931,220 tourists from the US and
462,582 tourists from Canada visited the Dominican Republic up 12.1%, and a modest 0.8%,
respectively on 1H2013. The next largest source
of inbound tourists is Europe, with 1.1 million
Europeans visiting the Dominican Republic in
2013. In 1H2014 some 614,029 European tourists entered the country, representing an increase of 7.6% over the same period in 2013. Of
these countries, the largest number of visitors
comes from France, followed by Germany, and
then Spain. The German market in particular
is on the rise, up 14% for 1H2014 compared to
2013 figures for the same period.
A PLACE TO LAY YOUR HEAD
UK
France
56,020
131,164
Germany 118,776
Italy
44,429
Netherlands 15,379
Sweden
Spain
9,316
61,862
At present the Dominican Republic has in excess of 70,000 rooms in its hotel stock ranging
from budget through to five-star resorts. This
number is more than any other Caribbean
country. According to Travel Weekly, a further
2,467 rooms are currently under development
either to expand the portfolio of existing brands,
or to accommodate new entrants to the hotel
market. Even with this high level of hotel stock,
occupancy rates are extremely high at around
87.3%, according to the Ministry of Tourism.
VALERIE
SERGIENKO
General Director,
Val’s Weddings
How important is the Dominican Republic’s wedding industry to the tourism sector?
The wedding industry is strong
in the Dominican Republic, with
some 70% of the tourists that
come here using services in one
way or another. In Punta Cana
alone, over 6,000 official weddings take place annually. If you
include the ceremonial ones, it is
thousands. When clients come
to a gorgeous country, there are
things they expect besides the
view and the sand; they want
someone to care for them.
Could you tell us about the
importance of having an international team?
Having an international team
brings a variety of ideas, solutions, and creative thinking to
the business. We have a Russian
team responsible for the Russian market, and likewise for the
US, because they understand
the particular needs and expectations. Plus, native speakers
make the couples feel more
comfortable.
the local infrastructure?
In the last four years I have
noticed an incredible growth in
the numbers of tourists coming
here. There are new high-end
hotels being built and the new
roads make it easier to visit. As
such people have the confidence
that this is a safe place, where
they can relax.
Tourism
TOTAL NUMBER OF
TOURISTS ARRIVING
BY AIR (2013)
4.7
THEBUSINESSYEAR
133
AVERAGE LENGTH OF STAY
9 NIGHTS
Million
HOTEL STOCK
CRUISE SHIP
VISITORS (2013)
70,000
ROOMS
423,910
PURPOSE
OF VISIT
95%
HOLIDAY
MANY BASKETS
So what is the country’s recipe for tourism success? Obviously there are numerous natural
advantages that allow the Dominican Republic
to pull in tourists, including its enviable climate
and 1,200 km of coastline containing a significant number of desirable beaches. But these
natural advantages are not the whole story. The
country has worked hard to refine its tourism
infrastructure through building projects, regulatory incentives, and good planning. Furthermore, the government’s own investment in
infrastructure projects, such as its 2012 Coral
Highway linking Punta Cana to Santo Domingo, have been supplemented by significant
foreign investment. For example, hotel chains
from Germany, Spain, and France have added
a FDI boost to the tourism industry in the Dominican Republic. This has been helped along
by the fiscal incentives on offer, which create a
welcoming investment climate. At the moment
the government provides a 15-year tax exemption to hotels, resorts, and tourist related activities. Further, for existing hotels and resorts of at
least 15 years old that remodel or rebuild more
than 50% of their facilities there is a 100% tax
exemption on offer.
Importantly, the country has managed to
make itself appealing to a very broad range of
tourists. Visitors span all categories, including
high-end luxury, romantic get-aways and weddings, golf and water sports, through to families
looking for a safe, friendly, reasonably priced
beach holiday. And being able to cater to all
these categories had proved to be a winning
formula for the Dominican Republic. According to the latest quarterly survey undertaken by
the country’s Central Bank, 96.6% of all tourists visiting the Dominican Republic in 2013
said that they would return to the country. And
90% said that their expectations were fully met.
These are impressive results that the country
can be proud of. The food quality, accommodation, hotel facilities, local transportation, as well
as the beaches and entertainment also fared
well. Between 69%-65% of the tourists surveyed
rated these facilities as excellent or very good.
In its 2014 marketing campaign the Ministry of
Tourism used the slogan—Dominican Republic Has It All—and this does indeed appear to be
the case as the tourism industry continues to go
from strength to strength. ✖
LUIS GONZALEZ
LOPEZ
Operations Manager,
Sirenis Resort Punta Cana
Casino & Aquagames
People here are very friendly and direct, as well as being
hardworking. However, they are not well prepared for the job.
Having said that, the government and educational authorities are
increasing their efforts to prepare future professionals to enter the
tourism job market. In this context, there are certain types of jobs
that do not require degrees and our efforts in that field are focused
on trainings and workshops. We also work with governmental
departments and authorities to train professionals within the service
industry.
134 THEBUSINESSYEAR
VOX POPULI BOUTIQUE HOTELS
W
e decided to turn
Rancho Platón into
an eco-lodge. We finished the construction of all of
our current cabins in 2011. We
focus on nature lovers; people who appreciate the peace
of natural surroundings, and
also those who like adventure.
We offer numerous activities,
including a water slide and
horseback riding. Many Dominicans stay here, but we are
also focusing on international
clients, especially Europeans.
Our dining area is surrounded by trees and natural pools
where our guests are able to
taste great national and international cuisine. And we especially pay attention to the quality of ingredients. All products
that can be are bought locally,
from fruits and vegetables to
fish. Moreover, all of our employees are from the area, including the chef. We use the
energy provided by our five hydroelectric power plants that
work simultaneously using the
surrounding rivers. Therefore,
we do not need electricity from
the national grid. Moreover, all
of our pools are natural, and
we do not use chemical treatment water. They are designed
to allow water to flow naturally
to the Río Nizao. We also have
our own independent water supply system that brings
pure, high- quality water directly from the spring.
GETTING AWAY
FROM IT ALL
Local boutique hotel operators explain how they
offer top-quality services to international guests
looking for a unique Dominican experience.
C
LAURA TORAL
General Manager,
Rancho Platón
asa Bonita was built
in the 1970s on a site
that used to be a cattle
ranch belonging to my grandfather. In 1990 my parents decided to add 12 rooms and converted the house into a country inn.
They were looking to provide a
place to stay for visitors to this
remote area, where even now
there are limited places to stay.
Within the past eight years we
have been renovating and updating our facilities to make
Casa Bonita attractive to upscale
clientele. Today in Casa Bonita
you will have an experience that
blends health and wellbeing services, adventure activities, and
gastronomy, with the ambiance
of rustic elegance. Guests that
come to Casa Bonita are normally individual travelers looking for a quiet place to stay but
who also want to remain active
by doing adventure sports and
visiting pristine natural sites.
Birdwatchers, mountain bikers,
surfers, and nature enthusiasts
are among our most frequent
repeat visitors. Couples and
honeymooners enjoy the sense
of privacy we offer too. The gastronomy experience at Casa Bonita is one of our cornerstones.
Aiming to provide a sustainable
experience, we source most of
our ingredients from our garden
and other local organic sources.
and the facilities are authentic
but at the same time classy. We
use natural materials—wood,
thatch, and volcanic stone,
and our guests come to unwind on our beautiful beach.
They also nourish their soul
with our complete wellness
program, including yoga every
morning, meditation classes,
and long walks on our deserted
beaches. Our strategy at Zoëtry
Agua is based on the increas-
ing numbers of tourists in the
country. For the past 25 years
the Dominican Republic was
a synonym for all-inclusive
resorts with large numbers of
guests. High-class hotels such
as Zoëtry are proof that this
country has much more to offer
to the world. Not only does the
country have miles of beautiful
white sand beaches, but it also
has well-trained staff with a tremendous sense of hospitality.
POLIBIO
SCHIFFINO
General Manager,
Casa Bonita
LIONEL GÓMEZ
General Manager, Zoëtry Agua Punta Cana
Z
oëtry Agua Punta
Cana is all about the
details. As one of the
most luxurious boutique hotels
on the island, we are proud to
offer exclusive services to go
the "extra mile" for our guests.
Our professional staff work
not only at the highest standard of four-diamond service,
they are also 100% committed
to guest satisfaction. We offer
an eco-friendly environment,
Tourism
THEBUSINESSYEAR
135
INTERVIEW
TEE time
TBY talks to Efrén Garcia-Estrada, Director of
the Punta Espada Golf Club, on the course’s
beautiful location, the international visitors that
play there, and the further untapped potential of
golf for the country’s tourism sector.
What are the main features and
facilities of Punta Espada Golf
Club?
We have 18 holes and a clubhouse. It is an operation that
is oriented at servicing the
golfer and the main feature
is the golf course. We have a
wonderful design, and a wonderful location. It is difficult
to find a more beautiful destination. We have eight holes
on the oceanfront, where you
can almost feel the waves.
We also have the advantage
of having a small bluff running through the property
so that there are some holes
on top of that bluff that have
wonderful ocean views as
well. Its location, design, and
maintenance keep the course
at the best possible level. It is
really a factor that separates
us from the rest. It is expensive, but we want to have the
course as close to what the
pros would play on as possible. We have already hosted three Champion’s Tour
events, so we know what
their demands are and we are
very close to that on a day-today basis.
Punta Espada’s guests?
The main client is a North
American, usually from the
US. Quite a few Canadians
come as well, but the main
clients are from the US East
Coast, where they have the
most direct flights to and
from the Dominican Republic. That is where we see the
biggest impact. The average
Listed among
the world’s
finest courses,
and ranked
number one in
the Caribbean
and Mexico by
Golfweek for the
last seven years
age is usually between 35 and
60. We are also starting to see
some Latin American activity
and we always see some European activity too.
How popular is golf among Dominicans?
Due to our environment and
business model our operation
caters to a high-end residential and tourist resort customer. We are less geared toward
servicing the local Dominican golfer. We are seeing an
increased interest and more
players coming up the ranks.
FEDOGOLF is doing a good
job of developing golf locally,
but that is really not our target
client. We depend on the international golfer, but we still
do some local tournaments
in the summer. We try to take
advantage of the low season to
host some local tournaments
that attract the local golfers to
come out and play.
How does Punta Espada contribute to the local economy?
We will do approximately
15,000 rounds this year. In
the high season, a client of
ours that is not a member, or
a guest of a member, will pay
$375 to play on this course,
plus they will tip the caddies,
buy beverages and lunch, and
so on. The client is spending
around $450 on a day of golf,
money that stays here in the
local economy.
I also think there is huge
potential for growth. The Dominican Republic currently attracts approximately 100,000
golfers and this number is not
close to the potential for what
we have on offer already on
the island. Promotion to position the Dominican Republic
as a golf destination is still required in order to potentially
triple that number in a fiveyear span, if the marketing
dollars are put behind that
campaign. That would impact
the economy because 100,000,
(and Punta Cana will have 1.6
million tourists in 2015), does
not represent a big piece of the
pie. But, if you take what they
spend locally, then this represents a much bigger piece
than just in terms of volume.
the Dominican Republic’s infrastructure?
It is constantly improving. The
roads are fantastic. Last year
we saw part of the impact of the
new road that connected the
Punta Cana area to La Romana
and Casa de Campo, and now
that word is spreading and we
are seeing more and more golf
groups coming over to play at
Punta Espada. Some of our clients also attend Casa de Campo so it works both ways. Not
only is the Punta Cana airport
growing, but it is now ready
for 5 million passengers. There
are three international airports
within an hour and a half car
drive. ✖
BIO
Efren Garcia-Estrada was
born and raised in the
Canary Islands, Spain,
before going abroad to
finish his education. He
holds a degree in Business
Administration from the
University of Rhode Island
where he was also part
of the golf team. Upon
returning to Spain he
founded a golf event and
services company that
ultimately brought him to
the Dominican Republic
as Tournament Director of
the first ever PGA TOUR’s
Champions Tour event, The
Cap Cana Championship,
held in the country from
2008 – 2010. Since 2009
he has overseen the golf
operation as the Director
of the highly regarded
Punta Espada Golf Club
in Cap Cana, which is
internationally recognized
as one of the finest golf
courses in the world.
136 THEBUSINESSYEAR
FOCUS GOLF
With 28 golf courses to choose from, the Dominican Republic
aims to become the premier golf destination in Latin
America.
GOLF IN PARADISE
With an increasing number of world-class golf
courses created by some of the most prized golf
course designers such as Pete Dye, Jack Nicklaus, Greg Norman, Tom Fazio, Robert Trent
Jones Sr., and Gary Player, the Dominican Republic really justifies its reputation. With its
beautiful natural settings and ideal tropical
climate, which blesses golfers all year round,
the country has already established itself as the
Number 1 destination for golf in the Caribbean.
da, which saw the first putt in 2006, is a real high
flyer in the Caribbean rankings. The legendary
Golden Bear who managed to incorporate the
breathtaking, natural coastal topography into
the design, has placed eight holes on the layout
along the shoreline, allowing its players enjoy
the spectacular ocean view. Punta Espada hosted the Cap Cana Championship, an official PGA
TOUR’s Champions Tour event, between 2008
and 2010.
CASA DE CAMPO, LA ROMANA
CORALES, PUNTA CANA
Casa de Campo, with its famous Teeth of the
Dog, designed by Pete Dye, is considered one
of the best golf destinations not only in the
Dominican Republic, but in the entire Caribbean. "The opportunity to carve out Teeth of
the Dog was a once-in-a-lifetime experience,"
Dye wrote in Bury Me in a Pot Bunker. "Without proper heavy machinery to crack the coral,
the tireless Dominican crew used sledgehammers, pickaxes and chisels." The course, which
opened its green in 1971 has already proven itself among golf lovers from all over the world.
The Teeth of the Dog, the Links, and Dye Fore
courses, also designed by Dye, as well as a variety of water sports, tennis, shooting, polo, marina, and lovely Altos de Chavon make Casa de
Campo Caribbean a most complete resort.
Created by Tom Fazio, Corales Golf Course
ranks among the top golf courses in the Dominican Republic. Inaugurated in 2010, Corales is
the second ocean-front course at Punta Cana
Resort & Club. Thanks to its distinctive design
with six oceanfront holes nestled between cliffs
and coral reefs of the Caribbean Sea, Corales
has quickly established itself as one of Dominican Republic’s must-play courses.
PUNTA ESPADA, CAP CANA
Another famous Dominican Republic golf destination is an 18- hole Punta Espada Golf Course
at Cap Cana, the first Jack Nicklaus’ signature
course in the Dominican Republic. Punta Espa-
PLAYA DORADA, PUERTO PLATA
Designed by Robert Trent Jones Sr., the 18-hole
course laid out amidst more than 50-year old
palm trees, offers golfers incredible views of
the mountains surrounding Puerto Plata. This
well-maintained course, which dates back to
the 1970s, was one of the first golf courses in the
Dominican Republic. Playa Dorada features
lush terrain, sloping hillsides, wide fairways,
sand bunkers, and is known for its exceptional
beauty of coconut palms, mahogany trees, almond trees, and the sublime royal Poinciana
trees. Time to find that caddy. ✖
JUAN COHEN
President, Dominican Golf Federation (FEDOGOLF)
What is the origin of foreign golf players visiting
the Dominican Republic?
Overseas players usually come from the US and
Europe. This is possibly because of increasing
efforts by the Ministry of Tourism and other institutions such as FEDOGOLF. According to research
from the Ministry of Tourism, in 2013 a total of
102,000 foreign players came to the country and
they generated $200 million. The country wants to
attract 10 million tourists and if the golf industry
manages to represent 10% of that figure, we would
be generating $2 billion.
What is the potential of the golf industry in the
Dominican Republic?
We already have the resources—27 golf courses
with unique designs. This industry already generates
$75 billion every year and this is much more than
other more popular industries. We already have
talented players and our country is the champion
in the Caribbean. We need to increase our efforts to
promote golf and consolidate our market by organizing more tournaments and events. We are a leading
golfing destination in Latin America, but still have
more to do to realize the huge potential.
Tourism
THEBUSINESSYEAR
137
D E S T I N A T I O N P H O T O ES SAY
SAMANÁ
PENINSULA
different landscapes to suit all
tastes and desires
LUSH,
LUSH
Mother Nature has been
particularly generous to the island
of Hispaniola, especially its eastern
territory.
Visitors never fail to be amazed by the magnificent beauty and diversity before them as they
arrive. While mass tourism has built up mostly
in Puerto Plata and Punta Cana, Samaná Peninsula still remains relatively untouched, retaining the traditional charm of its virgin rainforests, creeks, and some of the world’s best
beaches. Its capital, Santa Bárbara de Samaná,
overlooking the Bay of Samaná, is home to numerous welcoming cafés, vibrant streets ringing to the rhythm of merengue, and a multitude of candy-colored houses, similar to those
in Costa Nova in Portuguese Aveiro. Between
January and March the town receives 30,000
visitors, keen to spy the humpback whales that
swim all the way from the Polar Regions during
their mating season. During the rest of the
year, when the waters are quieter, it is worth
heading across the Bay of Samaná to see Taino
Indian drawings that have been etched into
the limestone caves and grottos at Los Haitises National Park. A scenic boat ride across the
Bay will land you at the Park with spectacular
mangroves swamps, sea grass beds, and numerous islets.
CAYO LEVANTADO
Those who have had the chance to visit Samaná Peninsula claim that all tropical fantasies come true at Cayo Levantado, a tiny, private island in Samaná Bay. Cayo Levantado,
with its pale sands washed by turquoise water
Image: Dominican Republic Ministry of Tourism
138 THEBUSINESSYEAR
and hills covered in emerald palm groves is often called a “Bacardi Island” thanks to being
the location for numerous TV commercials.
The island has three beaches; two of them located on the south side for the exclusive use
of guests at the only hotel located on the island, the five-star Gran Bahia Principe. These
breathtaking and surprisingly quiet beaches
are dotted with sun loungers and white cabanas, and washed by gently rolling waves.
On the north coast of the island is the public
beach, Playa Grande, where freshly grilled fish
and Caribbean-style clapboard shacks can be
found brimful with souvenirs.
Houses add a touch
of Caribbean flavor to
American-style villas
LAS TERRENAS
Accessed via mountain roads, Las Terrenas
occupies a tiny corner of country’s northeastern coast. Over the years, Las Terrenas has
transformed itself from a small, dilapidated
fishing village into the address of choice for
sophisticated visitors from all over the world.
Just over two decades ago, an influx of European nationals arrived as tourists, but unable
to resist its charm, failed to leave their newly
discovered paradise. Their refined taste for
interior design and gourmet food has left its
mark all over the city. In Las Terrenas you will
readily come across Italian delis and French
bakeries, as well a Turkish sauna and art galleries of eclectic décor. But even though so
many have arrived, the city has succeeded in
remaining tucked away retaining its quiet city
beach adorned with palm trees, coral reefs,
and charming, pastel-painted fishing boats.
And if your hunger for exploration yearns for
more, a 30-minute drive west of the main town
beach will get you to the aptly named Playa
Bonita. For and even more serene experience,
Playa Cosón takes the lead; situated among
leaning coconut trees, it is a priceless venue
for peaceful relaxation.
The countryside is
only ever a short
drive away
EL SALTO DEL LIMÓN
In the heart of the Samaná Peninsula is El
Salto del Limón, a spectacular 150-foot waterfall camouflaged by surprisingly rough
landscape, and encircled by peaks covered
in dense greenery. After less than a 30 minute horseback ride from the small town of
El Limón you can enjoy an invigorating dip
in Limón’s refreshing, crystalline waters. It
is hard to disagree with Christopher Columbus ,who called Samaná Peninsula the fairest
land on the face of the Earth. ✖
Tourism
THEBUSINESSYEAR
139
WHERE TO STAY
SANTO DOMINGO
LA ROMANA
01 Hotel Embajador
Av Sarasota no. 65 Bellavista,
Santo Domingo, Republica
Dominicana
T +1 890 221 2131
www.occidentalhotels.com
03 Hotel Casa de Campo
Casa de Campo
La Romana
T +1 800 877 3643
www.casadecampo.com.do
Rooms 278 rooms varying
between standard, superior, club
ambassador, and royal club.
Guest Services Casino, pool,
business center, room service, gym,
gardens, 2,000 person capacity
conference room, private parking,
club ambassador, and a shopping
arcade. Dining Jardin Restaurant
for international gourmet food,
while the Porches Restaurant
with views of the gardens has
international and local food. Parrots
provides snacks by the hotel pool.
02 Hotel JW Marriott
Avenida Winston Churchill 93,
Ensanche Piantini, Santo Domingo
T +1 809-955-3081
www.marriott.com/hotels/
travel/sdqjw-jw-marriott-hotelsanto-domingo
Rooms The newest luxury Santo
Domingo hotel is perched above
the also newly opened Blue Mall.
It offers 122 rooms and 28 suites.
Executive guest rooms give
access to an Executive Lounge
with 3 food presentations daily.
Guest Services Wi Fi, Outdoor
Pool, Fitness Center, Kitchen/
Kitchenette in selected rooms,
Convention Center and Meeting
Space. Dining Winston Grill &
Patio for International Cuisine and
Vertygo 101 Lounge & Bar at the
hotel. Alternatively, dine at Blue
Mall: Hard Rock Café and Chilli’s
Grill & Bar for American Cuisine,
Casa Avila for Spanish Cuisine, La
Mansion Steakhouse and SBG for
International Cuisine.
Rooms 186 elite new rooms.
Guests can also hire a private villa
of three to eight rooms. Guest
Services LCD TVs, blu-ray player,
and room service. Dining The
Beach Club by Le Cirque and La
Cana by II Circo highlight dining
at Casa de Campo.
PUNTA CANA
04 Zoetry Agua Punta Cana
Playa de Uvero Alto, Higuey, La
Altagracia, Punta Cana 23000,
Dominican Republic
+1 809 468 0000
www.zoetryresorts.com/agua/
Rooms Luxury all-inclusive
wellness and spa resort in Uvero
Alto Beach. A sanctuary of
serenity and seclusion, the resort
has a limited 51 exclusive suites
with oceanfront settings. Guest
Services Outdoor pool and
beach access. A full service spa,
biking, snorkeling, kayaking, and
fishing. Tours to El Seibo, "The
Chocolate Route." Dining Resort
Zoetry Agua has 3 gourmet a la
carte restaurants. Olena offers
world fusion and vintage wines.
Amaya provides traditional
Dominican flavour. Indigo offers
an ocean view.
5
SANTIAGO
Hotel Hodelpa
Gran Almirante
Av. Estrella Sadhalá, Santiago
de los Caballeros, República
Dominicana
T +1 809 580 1992
www.hodelpa.com
06
Rooms 155 finely decorated
rooms. Guest Services Gym,
6
Rooms Casa Bonita Hotel is a
luxurious lodge surrounded by
tropical forest, and overlooking the
Caribbean Sea. A former private
retreat of 12 cabana-style rooms
where picture windows frame
ocean and forest views. Guest
Services Meeting rooms and
banquet facilities, free parking,
and a spa.
PUERTO PLATA
07 Casa Colonial Beach & Spa
Playa Dorada, Puerto Plata
T +1 809-320-3232
www.casacolonialhotel.com
Rooms Casa Colonial Beach &
Spa is a colonial mansion, where
old world charm meets modern
sensibility. 50 suites, from Junior
to Presidential, each elegantly
decorated in contemporary
furnishings. Guest Services Own
beach spa, water sports, golf,
as well as meeting and wedding
services. Casa Colonial is the
first and only member of Small
Luxury Hotels of the World in the
country. Dining Lucia features an
extensive selection of Caribbean
fusion dishes.
BARAHONA
05 Hotel Casa Bonita
Km. 17 Carretera de la Costa,
Barahona, Barahona
T +1 800 525 4800
casabonitadr.com
jacuzzi, pool, sauna, casino,
convention center, private parking,
cigar store, and free airport
shuttle. Dining Boka Restaurant,
a la carte menu with a Spanish
patio for buffet breakfast.
1
4
140 THEBUSINESSYEAR
HELPFUL HINTS
Useful Numbers
EMERGENCY & HEALTH
Some survival tips that will help get you through
the first few days in the country
EMERGENCIES 911
TOURIST POLICE
www.politur.gob.do
HOSPITAL GENERAL DE LA
PLAZA DE LA SALUD
www.hgps.org.do
CLÍNICA ABREU
www.clinicaabreu.com.do
HOSPITAL METROPOLITANO
DE SANTIAGO
www.homshospital.com
CAR HIRE
AVIS www.avis.com.do
EUROPCAR DOMINICAN REPUBLIC
There are many street sellers and
windshield washers, especially
in busy intersections of Santo
Domingo. Remember to keep
some change in the car.
There are public taxis that run
along specific routes, with four
spots for sale in the backseat and
two in the front.
Most Dominicans believe in God
and when speaking will often use
the phrase Si Dios quiere; if God
wishes it.
www.europcar.com.do
HERTZ www.hertz.com
NATIONAL www.nationalcar.com
NELLY www.nellyrac.com
CHAMBERS OF COMMERCE
AMERICAN CHAMBER
www.amcham.org.do
BRITISH CHAMBER
www.britchamdr.com
SANTO DOMINGO CHAMBER
www.camarasantodomingo.do
GOVERNMENT
PRESIDENCY
www.presidencia.gob.do
MINISTRY OF FOREIGN AFFAIRS
Coffee is strong and served in a
small, espresso-sized cups with
heaps of sugar. Refusing an offer
may be considered ungracious.
US-style 110v plugs are used
in the DR. Remember to bring
a surge protectors for sensitive
devises as power outages are
common.
Dominicans love baseball, a good
topic for small talk before getting
down to business.
www.mirex.gob.do
MINISTRY OF TOURISM
www.sectur.gob.do
THE EXPORT AND INVESTMENTS
CENTER OF THE DOMINICAN
REPUBLIC
www.cei-rd.gov.do
CENTRAL BANK
www.bancentral.gov.do
NATIONAL STATISTICS OFFICE
www.one.gob.do
EMBASSIES AND
CONSULATES
USA
www.santodomingo.usembassy.gov
MEXICO www.embamex.sre.gob.mx/
republicadominicana
Many Dominicans have the
mañana attitude. Be prepared to
wait for meetings.
Taxis in the Dominican Republic
do not use a meter. It’s advised to
settle on the price beforehand to
avoid unnecessary confrontations.
Drink bottled water and be careful
to use clean water when washing
fresh fruit and vegetables or
consuming ice.
BRAZIL
www.embajadadebrasil.org.do
CHILE
www.chileabroad.gov.cl/santo-domingo

dominican republic 2015

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