DOMINICAN REPUBLIC In This Issue DIPLOMACY | ECONOMY | FINANCE | ENERGY & MINING | INDUSTRY | TELECOMS & IT | MARITIME | TRANSPORT | REAL ESTATE & CONSTRUCTION | AGRICULTURE | HEALTH & EDUCATION | TOURISM 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 2015
Transcript
DOMINICAN REPUBLIC
In This Issue
DIPLOMACY | ECONOMY | FINANCE | ENERGY & MINING | INDUSTRY | TELECOMS & IT | MARITIME |
TRANSPORT | REAL ESTATE & CONSTRUCTION | AGRICULTURE | HEALTH & EDUCATION | TOURISM
DIPLOMACYINSIDE PERSPECTIVE
ONE FOR ALLH.E. Danilo Medina Sánchez, President of the Dominican Republic, on the country’s education revolution12
ECONOMYINTERVIEW
A WORLD OF SUPPORTMcDonald Benjamin, Country Manager of The World Bank, on sharing the spoils of increased productivity26
FINANCEFOCUS: EQUITY MARKET
DR’s VERY FIRST IPOPreparing for a new phase of growth and development50
MARITIMEREVIEW
ALL ABOARD!Investments in ports and FTZs boost the Dominican Republic’s status as a regional hub83
£75 | ¤95 | $130 | CDN $140 | AUD $137 | SGD $162
2015
LA AUTORIDAD EN PERIODISMO DE NEGOCIOS EN REPÚBLICA DOMINICANA
103 REAL ESTATE & CONSTRUCTION 103 Property, Inc. • REVIEW
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
110 Concrete steps • FOCUS:
CEMENT
110 Julissa A. Báez, Executive
Director, ADOCEM • COLUMN
111 AGRICULTURE 111 A bit more agro • REVIEW
114 Anyelo Rodríguez, General
Director of AGRODOSA
• INTERVIEW
115 Gabriel León Roig Alfaro, Vice-
President—Export of Roig Agro-
Cacao 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
119 HEALTH & EDUCATION119 Doctor's here • REVIEW:
HEALTH
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
123 Treatment abroad under any
condition • FOCUS: MEDICAL
TOURISM
124 Dr. Luis B. Rojas Grullón,
President of Clínica Abreu
• INTERVIEW
125 A cure for your ills • B2B:
PHARMA
126 Learning for the future
• REVIEW: EDUCATION
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 TOURISM131 Having it all • REVIEW
132 Valerie Sergienko; General
Director, Val’s Weddings • COLUMN
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...
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Y E A R I N R E V I E W
DOMINICAN REPUBLIC 2015
There is no doubt that a decade of political stability has provided the fertile economic environment for sustainable growth and national development.
ON THE RIGHT PATH
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Puerto Plata
Multimodal Caucedo
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HAITI
Punta Cana
Cibao
Cabo Rojo
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For the Dominican Republic, 2014 is generally characterized by growth.
HAVING CELEBRATED four decades of political life in 2013, in mid-2014, the ruling Dominican Liberation Party (Partido de la Lib-eración 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 administra-tion 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 tour-ists. The political stability afforded the country by the Medina administration, which garnered 70.2% of the vote back in 2012, has undoubted-ly underpinned investor confidence.
2014 is generally characterized by growth. The economy shot up 7.2% for 1H2014 using the 2007 statistical base, although the Minis-try 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 inter-mediaries (14%), hospitality (12.6%), and con-struction (10.3%). These sectors all sign point vibrant activity in the second largest economy in the Caribbean after Jamaica. Another en-couraging 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 in-escapable burden of fuel import costs and de-pendence on reasonable oil prices. The CBDR calculates that should the oil price remain at an average of $74 per barrel for 2015, the Do-minican Republic’s fuel import bill would de-cline by $1.2 billion, all but resulting in a cur-rent account surplus. CBDR data confirms that the banking system, too, has had a good year, where as of August 2014, the Ps1,142,723 mil-lion total assets of financial intermediation in-stitutions marked nominal YoY growth of 8.6%. Meanwhile, lateral thinking among sector play-ers—notably the use of mobile technology—is gradually increasing the banked population, and thereby the registered economy, too. Else-where 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 ex-clusive 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 Do-mingo-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 encompass-ing 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 communi-cations. In May it sold spectrum in the 1700-2100MHz and 941-960MHz bands to Orange Dominicana and Claro Dominican Republic, the spoils of which will in part fund the na-tional 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 pharmaceuti-cals, 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. Mean-while, 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 Domin-ican 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 Do-minican shipping shows no signs of slowing, and completion of the Panama Canal expan-sion 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 defi-cit to grapple with. This said, diplomacy with regional partners and the positive contribu-tion of the Republic’s FTAs will be tangible. Meanwhile, the onward march of the Domin-ican tourism industry will keep revenues ar-riving, 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 pos-itive aspect, and felt widely across the terrain of industry and commerce. ✖
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GDP GROWTHBillion USD
2006 2007 2008 2009 2010 2011 2012 2013 2014
70
60
50
40
30
20
10
0
D O M I N I C A N R E P U B L I C
LENGTH OFLAND BORDERS
GDP NOMINAL
POLITICAL STRUCTURE
388 km
73 15 %
61.16 Billion USD
803.6 Million USD
Representative Democracy
LIFE EXPECTANCY UNEMPLOYMENT RATE
4.8%
INFLATION RATE
CURRENT ACCOUNT DEFICIT
President Danilo Medina Sánchez
HEAD OF STATENational Congress
The Senate and the House of
Representatives
LEGISLATIVE POWER
10.53 Million
TOTALPOPULATION
48,320km2
AREA
CURRENCY Dominican Peso (DOP)
Source: The World Bank
THEBUSINESSYEAR 9
R E V I E W
Diplomacy
19 15 12 HE Herman Van Rompuy, the former President of the EC, upon signing the National Indicative Programme 2014-20.
HE Joe Biden, Vice President of the United States, on Washington’s well-established relations with Santo Domingo.
HE Danilo Medina Sánchez, President of the Dominican Republic, on health, education, and advancing the country.
I
Dominican diplomatic initiatives aremoving from strength to strength. The key policy of encouraging FDI through Free Trade Agreements (FTAs) and Free Trade Zones (FTZs) has generated promising results.
n mid-2014, the Dominican Libera-tion 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 com-memorated its 40th anniversa-ry in 2013, and has emerged as the dominant political party in the Caribbean nation. The par-ty has controlled the presiden-cy for 16 of the past 20 years, deftly parrying attacks from the country’s other major political force, the Dominican Revolu-tionary Party (Partido Revolu-cionario Dominicano, PRD). In contrast to the Dominican Republic’s turbulent first hun-dred years of statehood, this administration is overseeing an era characterized by sta-ble internal political develop-ments and neutral diplomat-ic interactions with regional powers and, increasingly, Asia.
BEGINNING OF BIRTH PAINSThe Samaná Bay in the north of the Dominican Republic was the last port of call during
The Dominican Republic is enjoying a period of unprecedented political stability, with investors and local business leaders alike benefiting from the favorable environment.
ISLAND OF PEACEChristopher 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 Re-public 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 An-tilles became increasingly dis-regarded by colonial author-ities. In the late 18th century, the French Revolution and the subsequent redefinition of Eu-ropean territories around the world led to Spain ceding con-trol of its part of the island to France and its Haitian colony.
The area that now consti-tutes the Dominican Republic swapped hands for a further half century, variously con-trolled by France, Spain, and the independent Republic of Haiti. Exploitation on the part of the latter ultimately brought competing Domin-ican factions together in a sense of national unity. Under
THEBUSINESSYEAR10 DOMINICAN REPUBLIC 2015
the guidance of Juan Pablo Duarte, Francisco del Rosario Sanchez, and Ramon Matias Mel-la, independence was declared in 1844, with a constitution inspired by that of the US.
Arguably, the beginning of Dominican de-mocracy 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 coun-try through the democratic election of noted polymath Juan Bosch. However, Bosch was soon ousted by a military junta, and he sepa-rated 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 CONSTITUTIONThe first national constitution outlined a gov-ernmental 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 com-peting 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 Margar-ita 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 ef-forts to improve education, health services, the pension and social support system, and an ef-fective 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 impor-tance, though their duties and areas of respon-sibility are different. The former makes deci-sions related to treaties and the appointment of the president, while the Chamber of Dep-uties 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 four-year 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. Fol-lowing 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 over-sees 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 repre-sentative 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 TIMESRecent years have proven that the political sys-tem has developed to become one of the most robust and dynamic in the region. In 2012, Pres-ident Medina was elected with 51.24% of the popular vote, with a turnout of over 70%. Con-tinued widespread support for his administra-tion 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 contin-ued to suffer from the effects of a widening in-ternal rift over the subsequent decade, culmi-nating in the September 2014 split of the party along factional lines. Mejía now leads the Mod-ern Revolutionary Party (PRM), and has an-nounced 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 en-couraging FDI through the expansion of Free Trade Agreements (FTAs) and the development of Free Trade Zones (FTZs) has generated large-ly promising results. As a signatory on several prominent international trade pacts, the Do-minican 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.
THEBUSINESSYEAR 11Diplomacy
1492
Christopher Columbus alights on the island
1808
Britain and Spain defeat France in the Revolutionary Wars, returning the country to Spanish rule
1930-61
The “Trujillo Era”: Rafael Trujillo’s dictatorship brings stability and economic growth but a lack of civil liberties
1996
Leonel Fernández of the Dominican Liberation Party (PLD) party becomes first elected president
2008
GDP grows by more than 10%
1821
Dominican Republic gains independence from Spain
1961
Trujillo is assassinated
1998
One of the worst natural disasters recorded, Hurricane Georges kills more than 380 and causes $1.2 billion of damage
2012
Danilo Medina, also of the PLD, becomes President, winning 51% of the vote and setting the country on a course of prosperity
1842
The Spanish arrive
1844
Dominicans victorious in the Dominican War of Independence
1983
Haina Port reopens as the largest in the country, marking a new era of maritime trade
2004
Leonel Fernández is re-elected
2014
GDP reaches $60 billion, re-affirming DR’s place as the second largest economy in the Caribbean and Central America
November 6, 1844
Dominican Republic’s first constitution is adopted
1986-96
Joaquín Balaguer is president for three terms, yet his rule is authoritarian
August 5, 2004
CAFTA-DR free trade agreement signed with the US
1965
Civil war
2000
Hipólito Mejía wins the election
2013
Population passes the 10 million mark
A voyage through the turbulent, yet bountiful, seas of Dominican history.THE MEDINA ERA
THEBUSINESSYEAR12 DOMINICAN REPUBLIC 2015
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.
I N S I D E P E R S P E C T I V E
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 oppor-tunities and progress may be achieved for all of our citizens. We are progressing continu-ously so that all Dominicans can enjoy true freedom; the sort of freedom that only comes about when a nation lives without fear, with-out 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 be-cause of that inner unstoppable force that is only possible when the government and the people advance hand in hand in the same di-rection. We are, together, creating a greater Dominican Republic, because our nation will
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.
BIO
be stronger with our people more united, and more involved in building the country’s fu-ture. The projects and works that this govern-ment 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 nec-essary. The government is fully dedicated to setting the base for a new phase in our coun-try’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 commit-ted 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 pro-ducing 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 indepen-dence that we need to wage in the 21st cen-tury. 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 CURVEIn the Dominican Republic we are experienc-ing an authentic educational revolution. For a long time quality education has been a priv-ilege 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 or-igin, have access to the same opportunities.
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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 en-suring that the budget allocation, penny by penny, funds the kind of quality education we want. This process, with the participa-tion of thousands of contributions from or-ganizations, 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 addi-tion, 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 High-er Education and Technology has awarded more than 20,000 scholarships for higher learning. Among these, more than 18,000 dis-
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 rec-ognition of the dignity of their work, and we have already taken significant steps in this di-rection. 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 ap-preciation of their years of dedication to ed-ucation. As far as teacher training concerns, we have been aware that a considerable ef-fort was needed for this to meet international quality standards. All Dominicans are uniting around this education revolution. This is es-pecially evident when considering the suc-cess 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
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.
Danilo Medina is sworn in as President in 2012 in the Hall of Ambassadors at the National Palace
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I N T E R V I E W
a reality with thousands of men and women now able to read and write, a scheme we con-tinue to pursue.
HEALTHY PROSPECTSAnother area that is also essential in break-ing the barriers of inequality and exclusion is public health. For too long we have accept-ed 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 Do-minicans, 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 un-der 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 peo-ple is the recovery quota at public hospitals. A government fund of 352 million pesos has ensured that worrying about payment for ser-vices 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 allo-cated 2 billion pesos for a Catastrophic Ill-ness 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. Vaccina-tion 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 vis-ible, 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 capi-tal 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 pre-vention 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 ma-ternal 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 pneumo-coccus vaccines in the national vaccination plan—both of vital importance to the protec-tion of children.
YOUTHFUL OUTLOOKWe are proud that our country has been cho-sen by the Ibero-American Youth Organiza-tion 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 par-ticipation, and public policy processes. In 2014, the Ministry of Youth has made signifi-cant progress in the formation of the National Youth System, which already brings together 25,000 young people in 70 municipalities na-tionwide.
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 proj-ect 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. ✖
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.
THEBUSINESSYEAR 15Diplomacy
G U E S T S P E A K E R
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.
BIO
As pointed out to me by President Danilo Me-dina, 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 Pres-ident of the United States, because like Presi-dent Medina, we believe very, very deeply in the importance of the relationship. I’ve said throughout the hemisphere that it is no lon-ger 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 dis-agree. 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 mil-lion 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 nat-ural that our interests and our values overlap with one another.
HE Joe Biden, Vice President of the United States, on Washington’s well-established relations with Santo Domingo, and moving forward in mutual understanding.
PLOWING common ground
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 Re-public Free Trade Agreement, it has grown to $11.5 billion. And the President and I dis-cussed what the next steps are in fully imple-menting CAFTA-DR, including efforts to pro-vide predictable business environment under the rule of law, as well as to put in place pro-tections 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 Domin-ican 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, environ-mental protection and protection of intellec-tual property in this 21st century, there’s not likely to be growth consistent with capability.
The other ingredient to growth is educa-tion. My wife is a professor and teaches full-time 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 obvi-ous that President Medina understands that; it is part of his DNA. I applaud him for his ro-bust investment in education, including the constitutional mandate for a minimum share of the budget devoted to education. That is
THEBUSINESSYEAR16 DOMINICAN REPUBLIC 2015
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 pro-tect our citizens from crime. We’re working together to reduce illicit drug trafficking, in-creasing 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 San-to Domingo. We see no reason why that can-not 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 Do-mingo. 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 ener-gy. The central issue for the Caribbean econo-mies that are the most dependent in the hemi-sphere on energy imports that affects the lives of families and drains government budgets. It
holds back economies, and people feel it. Peo-ple feel it.
We also talked about regional issues. At least I will ask to talk more about it, about Venezue-la 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 eco-nomic interest to do that. Every independent study shows when we do that, our economy actually grows. Our deficit shrinks. Our secu-rity system—our Social Security system gains additional leverage. And so as I told the Presi-dent, I personally think that one of the secrets to America’s ability to constantly renew itself is a consistent flow of immigration and inte-gration into our population.
This is difficult, but we consider it a matter of economic self-interest, as well as a mor-al imperative. And the Dominican Republic faces its own challenge of improving the con-ditions of Haitian migrants and descendants who were born here in the Dominican Re-public. 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 deal-ing with your Supreme Court decision. And it took a bold step that required bold leadership, which the President exercised. Implementa-tion 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—val-ue 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. ✖
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.
THEBUSINESSYEAR 17Diplomacy
AS OF 2014, the Ministry of External Rela-tions (MIREX) had diplomatic missions repre-senting the Dominican Republic in 45 coun-tries. These encouraging numbers are evidence that the country has moved past its isolationist past to establish itself in the international are-na 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 Di-aspora—have a storied history of establishing economic and cultural ties with other states.
This significant group of émigrés—number-ing close to 1 million in the US alone—has also
THE LONG HAULThe 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.
made notable contributions to the societies in which they take up residence. Dominican au-thors such as Junot Díaz and athletes including David Ortiz and Manny Ramirez are household names amongst bibliophiles and baseball fa-natics 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 re-stricted, migration routes turned to North America, specifically New York and, to a lesser extent, Massachusetts and Florida.
The case of remittances sent to the Domini-can Republic by expatriated Dominican nation-als 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 Me-dina pointed out that remittances to the coun-try 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 cap-ita 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, evi-dence 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 ar-rived 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 rela-tives of U.S. citizens or other family-sponsored immigrants. This remarkable statistic leads to two possible conclusions; the Dominican com-munity 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 mac-roeconomic 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 institu-tions are working to make sure that this vital inflow of capital is invested successfully. ✖
T H E D O M I N I C A N D I A S P O R A F O C U S
THEBUSINESSYEAR18 DOMINICAN REPUBLIC 2015
It was a privilege to be able to visit the Dominican Republic once again. As soon as I ar-rived I felt at home, as indeed I also want all Dominicans to feel at home when visit-ing Puerto Rico. We have had fruitful business meetings with the ambassador and President Medina. Bilateral ties have been highly signifi-cant and I want to strengthen that link between the Do-minican Republic and Puerto Rico. For example, President Medina attended the inaugu-ration of my term in January 2013, a year in which trade between both countries was valued at $700 million, a rath-er 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 al-ready 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 mea-sures have been focused on respecting Dominicans and other foreign communities in our country. For example, we pulled down social barriers
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.
BIO
HE Alejandro García Padilla, Governor of Puerto Rico,
on bilateral trade with the Dominican Republic and the mutual benefits of
boosting cultural exchange.
open CHANNELS
when it comes to the migra-tory 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 im-portance of increasing edu-cational support and schol-arships for higher education students from both countries and increasing exchange programs, especially for post-graduate students. Sev-eral 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 Domini-can Republic in order to fight crime and drug cartels. We
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 in-crease tourism cooperation, as we have an important flow of citizens from Puerto Rico visiting the Dominican Re-public. I took the opportunity on this visit to stay for some days in this beautiful coun-try. I want my children to feel the kinship that exists be-tween our two countries, too.
As we become more ef-fective in protecting the La Mona Canal, we will discour-age people from using this channel to illegally enter the country. For us, the main is-sue 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 prob-lems for the benefit of our people. It is difficult to get a figure for the number of Do-minicans to have benefited from our new social policies. For me, the most important consideration is that all Do-minican expatriates in Puer-to Rico feel safe and comfort-able, that a woman about to give birth has the certainty of being able to go to a hospi-tal, and that when someone needs emergency medical attention, they can comfort-ably do so. We have many more social policies to be im-plemented in the near future to assist expatriates living in Puerto Rico. ✖
G U E S T S P E A K E R
THEBUSINESSYEAR 19Diplomacy
G U E S T S P E A K E R
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).
BIO
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.
the hand of FRIENDSHIP
The Dominican Republic is well known throughout Eu-rope. 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 Re-public for its stunning scen-ery, historical sites, and the well known Dominican hospi-tality. I went to there to mark the importance the European Union attaches to its relations with the country, and by ex-tension, 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 integra-tion process. Equally, it is an important actor within the Caribbean, notably through the Caribbean Forum (CARI-FORUM). As an innovator of regional integration process-es, the EU is convinced of the virtues of systematic regional cooperation, based on the ac-knowledgement of common interests, as a means to over-come rivalries, defeat chal-lenges, and generate prosper-ity. 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 rela-tions. 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 de-mocracy and human rights. We have agreed to continue nourishing it through regular political dialogue. We have also agreed that the Econom-ic Partnership Agreement, signed between the EU and CARIFORUM, should be uti-lized in order to promote the trade and investments that are so important for the future of the country. The Nation-al Indicative Programme for cooperation, which we have just signed, adds further sub-stance to these efforts, most notably through its support for education and vocational training as a means of con-tributing to social integration. In addition, we have seen that important challenges re-quire 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 nat-ural 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 respond-ed swiftly and was among the first to offer support, demon-strating the goodwill and sympathy of the Dominican people. The European Union and its member states were
also quick to follow, and bil-lions of euros worth of in-ternational 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 stabili-ty, and a re-launch of its eco-nomic growth, than its closest neighbor, the Dominican Re-public. As an important part-ner of both countries, the EU remains ready to assist in the strengthening of Haitian-Do-minican relations.
The EU was honored to have been invited to partici-pate in this bilateral dialogue as an active observer. It brings to the table its long experi-ence in regional cooperation and in cementing reconcili-ation 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 Hai-tian 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, infra-structure links, public health, and the environment.
The Dominican Republic and Haiti have already reached bilateral agreements to im-prove security, combat drug trafficking, protect natural re-sources, and stimulate trade. The EU is ready to share its experience on migration, cus-toms, border management, trade, health, and the envi-ronment to continue provid-ing assistance for the imple-mentation 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 coopera-tion and deepen their neigh-borly relationship. ✖
THEBUSINESSYEAR20 DOMINICAN REPUBLIC 2015
F O C U S U S - D R R E L A T I O N S
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 pre-sented 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 mil-lion visiting the country each year. And seek-ing ways to extend mutually-beneficial trade and investment, the two nations work together both bilaterally and through the CAFTA-DR agreement.
CAFTA-DRAlong with Costa Rica, El Salvador, Guatemala, Honduras, and Nicaragua, the US and the Do-minican 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 eco-nomic 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 substan-tial growth of 34.5%.
Over the past few decades, US- Dominican Republic trade and investment links have seen an increase, first as a result of US trade preference programs, and then CAFTA-DR.
STATES UNITED
TRADEOver 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 Do-minican 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 to-taled $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, amount-ing to $7.2 billion. The largest export catego-ries 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 Domini-can 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, denot-ing a 2.5% decline from 2012. The five leading categories in 2013 included: optical and med-ical instruments ($722 million), tobacco ($496 million), electrical machinery ($482 million), knitted apparel ($373 million), and jewelry components ($358 million). Meanwhile, Do-minican exports of agricultural products to the US totaled $354 million, with top categories in-cluding raw beet and sugar ($56 million), cocoa beans ($53 million), and fresh vegetables ($47 million).
A NEW FACILITYThe 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 Am-bassador 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 com-mitment to continue our relations in the area of education, environment, energy, trade, hu-man rights, citizen security and consular af-fairs, 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 21
R E V I E W
Economy
34 29 26 The country’s MSMEs generate over 2.1 million jobs, 27% of GDP, and represent 97% of the 600,000 Dominican companies.
Sadala Khoury, President of ADOEXPO, on the benefits of being a member and the current regulatory environment.
McDonald Benjamin, Country Manager of the World Bank, on sharing the spoils of increased productivity.
T
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.
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 re-main slightly above the 3% to 5% annualized long-term growth band sought by the Central Bank of the Domin-ican Republic (CBDR), with even it estimating real eco-nomic 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 adminis-tration of President Danilo Medina, the country has seen a resurgence in exports, with the current account deficit (CAD) narrowing as exports grew, tourism receipts im-proved, and revenues from the gold industry buoyed business confidence. As the largest economy in Central
The Dominican Republic is looking to make use of the current economic juncture to get its finances in order.
MORE THAT GLITTERS
America and the Caribbean, at some $60.8 billion accord-ing to the IMF for FY2013, the Dominican Republic is also playing an increasingly larger role in regional trade, espe-cially for its island neighbors. However, despite the healthy growth of the country’s econ-omy, concerns over how to ensure that the newly gen-erated wealth can penetrate to the lower levels of society and help to create a more vivid economy remain, while the old bugbears of transport infrastructure and electricity supplies still act as an anchor on the economy.
SUNNY SIDEOver 2013, the Dominican Republic managed to achieve real GDP growth of 4.1%, ac-cording to the IMF, slightly up on the 3.9% recorded a year earlier. In broad terms, the economy is split between services (52.2%), industry (25.8%), the so-called “taxes less subsidies on products” category (14.4%), and finally agriculture (7.6%). The long-term GDP growth rate for the country over the 1991-
THEBUSINESSYEAR22 DOMINICAN REPUBLIC 2015
2013 period averaged out at 5.7% according to World Bank figures, exceptional not just in the Latin America region, but in the frontier mar-ket universe as a whole. This is not to say that all things have gone swimmingly over that pe-riod. In 2003 a banking crisis erupted, that saw the Dominican peso (RD$) 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 Econo-my, 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 min-erals (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. Unemploy-ment has also responded, falling from 7% at YE2013 to 6% in October 2014. The Medina administration has set itself the target of cre-ating 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 ex-tent, 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 re-main 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 manufac-turing 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 Do-minican Republic’s 57 free zones. Initial fig-ures 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%, indi-cating a potential softening in the export tex-tile 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 Europe-an Association Agreement (AAE) are also help-ing 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 larg-est 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 Do-minican 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) es-timated that the Dominican Republic was the fifth largest receiver of remittances in the Latin American region, with migrants in the US be-ing the source of around three-quarters of the money sent home.
Communications also feature as a key sec-tor 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 an-nounced in early 2014 that it would be look-ing to install a national broadband network over the coming five years to cover 3,000 square kilometers, in an effort to improve in-ternet access for SMEs and lower and middle income earners, especially for those in pro-vincial areas. With most of the telecoms sec-tor in private hands, it will be of interest to see how this new network architecture will be handled by the public sector.
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.
THEBUSINESSYEAR 23Economy
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 ENERGYMining is proving to be one of the more in-teresting, if controversial, growth sectors. Ac-cording to the CBDR, mining activity account-ed 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 quan-tity of FDI to come into the country for a sin-gle-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 administra-tion 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
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 re-purchase some $4 billion in debt the Domin-ican Republic owed Petróleos de Venezuela (PDVSA) for past concessional oil purchases through the launching of a $1.7 billion inter-national 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 end-2014, 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 per-centage points since 2008. In 2012 the pub-lic 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 administra-tion hoping to increase education spending from the current 2.8% of GDP to 4% to im-prove the potential of the Dominican Repub-lic’s future workforce, it will need all the good winds emerging from a low oil price environ-ment that can arrive. ✖
CPI Trends (end period)Source: CBDR
8
7
6
5
4
3
2
1
0
2009 2010 2011 2012 2013 1H2014
National & Free Zone Exports (millions)Source: CBDR
10000
8000
6000
4000
2000
0
2010 2011 2012 2013 3Q2014E
GDP Breakdown (end-2013) Source: CBDR
Agriculture 7.60%
Industry 25.80%
Services 52.20%
Taxes Less Subsidies 14.40%
on Products
THEBUSINESSYEAR24 DOMINICAN REPUBLIC 2015
I N T E R V I E W
The Dominican Republic is one of the fastest growing economies in the region, with a con-stant 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 Cen-tral Bank reported tourism statistics, related revenues have risen from barely $172 million to $5 billion in 2013. Which sectors of the Domin-ican 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 min-ing a company, Barrick Gold. Additionally, this administration has emphasized develop-ing MSMEs, for which were allocated resourc-
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.
BIO
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.
leading THE FIELD
es and efforts and to formalize and develop the companies of this nature. The govern-ment developed a comprehensive plan that covers the promotion of formalization, mar-ket access for MSMEs, financial development, business development, and the promotion of entrepreneurship. On the other hand, we have made progress in the agricultural sec-tor because of a series of actions and policies implemented and promoted by the State, through the Special Fund for Agricultural De-velopment (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 addi-tion to financial support through increased financing tools and channels, something that is reflected by the disbursements of the Ag-ricultural Bank, which grew by 6.5% in Sep-tember 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 fac-ing 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
THEBUSINESSYEAR 25Economy
measure of policy in almost 45% of all pro-posed lines of action.
During the first year, we put great empha-sis 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 fol-lowing objectives. These featured participa-tory 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 cli-matic change.In general, one of the main challenges facing the National Development Strategy was the-continuity 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 gov-ernment’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 stim-ulate FDI has been supported in the process of comprehensively institutionalizing the country, and having the required institutions in operation to create a favorable business
climate for FDI. Some of the initiatives and goals of the Administration are to realize the outlined fiscal consolidation process in pur-suit 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 reaffirm-ing legal certainty, and pro-competition leg-islation.
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 mar-kets with greater purchasing power. Fur-thermore, 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 quali-ty standards demanded by these countries, which would increase exports and employ-ment. In the agricultural sector, for exam-ple, there is still room to reap the benefits of these treaties. ✖ The country
has recently adopted its National Development Strategy 2030 with the passage of Law No. 1-12
Its mission is to lead and coordinate the formulation, management, monitoring, and evaluation of macroeconomic policies and sustainable development
Created in 2006 through Law No. 496-06
Image: OECD
Mr. Domínguez meets with Angel Gurría, OECD Secretary-General at the OECD Headquarters, Paris, France
THEBUSINESSYEAR26 DOMINICAN REPUBLIC 2015
I N T E R V I E W
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 de-cades, poverty remains a core issue. What initia-tives have to be taken to improve the conditions of those in greatest need?If there is one message regarding the Domini-can 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 re-gion and here is that the Dominican Republic’s high growth rate has not led to the same level of poverty reduction. Whereas in Latin Amer-ica 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 pover-ty reduction.
What is the World Bank’s role in supporting na-tional 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 govern-ment can then use to determine the program it wants to put in place. The second role we play concerns financing development projects with
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.
BIO
a world of SUPPORTTBY 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.
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 pov-erty by 2030. This is consistent with the govern-ment’s own vision of just 2% or less of the Do-minican 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 be-yond 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 wag-es did not keep up, unemployment rose, pover-ty 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. More-over, 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 in-vestment in human capital.
THEBUSINESSYEAR 27Economy
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 re-forms 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 recent-ly 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, particular-ly 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 im-porting and exporting and that contributed to its strong position. There are other areas where it took steps this past year: for example, the pro-tection of personal information through Law 172-13, which was important because it cov-ers credit information, and therefore access to credit. In addition, the country has taken steps to strengthen the laws relating to transparen-cy, governance, and the protection of minori-ty 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 con-cept this year called “distance to the frontier.” This metric enables you see an absolute mea-sure 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 vul-nerable, from vulnerable to middle-income, or from middle-income to upper income, while in the Dominican Republic only 2% of the popu-lation moved up an income class. In fact one in five, 19%, moved down an economic class. So
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 contri-butions to growth and to improving the coun-try’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 facili-ties, and financing for agriculture to get more high-quality Dominican products into a global value chain, as well as investing in agri-busi-ness to generate greater added value and em-ployment here in the country. ✖
IN NUMBERSWorld Bank
The Dominican Republic ranks
84thin the Doing Business report
The Dominican Republic ranks
24thin trading across borders
Lifting children out of poverty is at the heart of the World Bank's policies in the country
THEBUSINESSYEAR28 DOMINICAN REPUBLIC 2015
I N T E R V I E W
According to the Central Bank, Foreign Direct Investment (FDI) in the Dominican Republic has risen 245.5% over the past decade. Which factors under-lie this and what sectors of the economy hold the greatest po-tential for further growth? The attractive business cli-mate, the political and eco-nomic stability that character-izes the country, its strategic location, as well as a solid legal framework for foreign invest-ment, have been the main factors in maintaining the Dominican Republic’s posi-tion as one of the principal addresses for (FDI) in the Ca-ribbean region, and among the top five recipients in Latin America for nine consecutive years. Over the past two years, FDI in the Dominican Repub-lic has reached $5.13 billion, receiving 45% and 50.4% of the total flows of foreign cap-ital registered in the region in 2012 and 2013, respectively. Investments have mainly been in the energy, commercial, real estate, and tourism sec-tors. FDI in 2014 reached $2 billion. Finally, strengthening the agribusiness sector as the essential basis of the Domini-can economy has been one of the main goals of this admin-istration, and the government has been implementing strat-egies to position our prod-ucts in international markets, which is a key consideration for economic and social de-velopment nationwide.
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 of the Dominican Republic 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.
BIO
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.
effective commercial
BREAKS
How can the Dominican Repub-lic improve its balance of trade?The Dominican Republic has reduced the deficit in its bal-ance 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 produc-tion and attempts to reduce imports and increase exports. The latter has augmented con-siderably (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 poten-tial. We have also arranged for the financing of export projects and other initiatives, such as the creation of the Export De-velopment Bank (BANDEX), so that Dominican producers can borrow at a competitive interest rate, presenting great-er opportunities and prospects for consolidating the export sector. Similarly, the CEI-RD is currently working in coop-eration with producers from different areas of the export sector in order to create a bet-ter-integrated national export culture, arranging a number of workshops for certification to meet the requirement of potential export markets. We are also improving our logis-tics and cold chain structure for the export of fruit and veg-etables, to guarantee the qual-ity 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? The Dominican Republic is currently exporting 3,700 lines of merchandise to more than 60 countries around the world. In many of these mar-kets, Dominican products have good potential for in-creased 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 signifi-cantly competitive, including the markets of the Caribbean, Russia, and China. In addi-tion, the country has a grow-ing demand for fresh pineap-ple, citrus, passion fruit and melon, offering higher quality products than other coun-tries, and providing faster lo-gistics services, mainly due to our strategic location and ro-bust infrastructure.
What are the major advantages of investing in the Dominican Republic, and what is your mes-sage to would-be international investors?The Dominican Republic of-fers competitive operational costs for doing business, and an established network of support industries and ser-vices for the development of the different economic sec-tors as well as the improve-
ment of the competitiveness level in the country. The Do-minican Republic is ranked in first position in Latin America and the Caribbean with re-gard 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 sup-port and technical assistance required for the development of businesses. In short, this is the best time to invest in the Dominican Republic. ✖
THEBUSINESSYEAR 29Economy
I N T E R V I E W
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, me-dium, and large export com-panies, as well as associations and federations of different export sectors of our country, including the agricultural, in-dustrial, and services sectors. To attract these companies, we perform activities to sup-
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.
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TBY talks to Sadala Khoury, President of ADOEXPO, on the benefits of being a member and the current regulatory environment.
OPENclub 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 ex-ports. Among the benefits we offer to affiliates are the fi-nancing of services to export-ers or companies with export potential through PRO-EX-PORTA POPULAR, a program in partnership with Banco Popular Dominicano, which allows clients to get to know the steps involved in success-fully completing the export process with specialized sup-port, prime rate financing for the acquisition of machinery and raw materials, collection services and the transfer of in-ternational remittances.
What are the main highlights of the training program for en-trepreneurs that was initiated by ADOEXPO and the National Institute of Technical Training (Infotep)?The main objective of the in-teragency agreement signed in August 2014 is to strength-en and improve inductions in our ADOEXPO Training Program, through the inter-vention 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 differ-ent courses and technical ca-reers that allow them to build capacity, improve processes, and achieve more to become
more competitive entities. In principle the trainings con-ducted under this agreement such as the Good Manufac-turing Practices (GMP) and International Negotiation Strategies are most of interest to our membership. We have established this from the re-sults of surveys carried out to ascertain their needs for con-tinuous improvement of the export of goods and services. Even though the Dominican Republic is strategically locat-ed in the center of the Amer-icas, and has signed trade agreements that provide priv-ileged market access to the US, Europe, Central America, and the Caribbean, the coun-try 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.
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 Do-minican Republic fully exploited the potential coming from this agreement?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 Bar-bados, among others, there should be more integration to facilitate trade in those mar-kets. They have few products and as a result need to import many goods for their people. In the case of Haiti, is now
done informally, with few un-stable regulations for the flow of trade between the two.
What is your assessment of the current regulatory environ-ment and what changes would you like to see in the regulato-ry framework that could help further export growth? How far along is the implementation of a single window for foreign trade?Currently the incumbent gov-ernment of President Danilo Medina has introduced some positive changes for export through the financing of asso-ciations of small producers of goods with export potential. We should check some regula-tions 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 Cus-toms, Mr. Fernando Fernan-dez, at our last lunch-confer-ence of the General Director of Customs (DGA); the Single Window initiative is expected to be formally implemented by early 2015.
What are your main priorities as the new president of ADOEXPO for the coming two years?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 strength-ening of ADOEXPO staff: in addition to our ISO 9001-2008 certification, which has great-ly improved our processes, our team will receive train-ing from partner institutions. I will also focus my efforts on the facilitation of trade in the Dominican Republic in coor-dination with government ini-tiatives. ✖
THEBUSINESSYEAR30 DOMINICAN REPUBLIC 2015
F O C U S E X P O R T S
The Dominican Republic’s exports averaged $540.41 million from 1997 until 2014, reach-ing 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 gov-ernment, which have already seen the first results of their work. In 2013 alone, the coun-try reduced its trade deficit by over $1.5 bil-lion, which represents a decrease of 15.3%, in comparison to 2012.
The Dominican Republic exports approx-imately 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 prod-ucts “have high probabilities of increasing their sales.” Sadala Khoury, ADOEXPO’s presi-dent, shares Rodríguez’s position and believes that “products such as rum, which are popu-lar 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, plas-tic, 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 ex-ports), the country aims to diversify its ex-ports portfolio and expand trade throughout the world. In the words of Khoury, the Do-minican Republic is “a country with great potential, not only because of the climate and fertile soils, but also because of its geo-graphical location in the center of the Carib-
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.”
READY TO GO
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 INVESTMENTThe Center for Export and Investment of the Dominican Republic (CEI-RD) is the agency responsible for the promotion of internation-al 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 focus-es on increasing training programs for export-ers and producers with export potential. This entails export project financing and initiatives such as the creation of the Export Develop-ment 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 support-ing 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 compa-nies, 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 po-tential through its Pro-Exporta Popular pro-gram, 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 ma-terials, collection services, and the transfer of international remittances. ✖
THEBUSINESSYEAR 31Economy
Source: TBY Research
EXPORT DESTINATIONS
NORTH AMERICA E
UR
OP
E
AS
IA
IMPORT ORIGINS
NORTH AMERICA S
OU
TH
A
ME
RIC
AASIA
EUROPE
CIGAR EXPORTS FROM DR
$600Million in 2013
BANANA EXPORTS FROM DR
330kTons in 2013
SUGARCANE EXPORTS FROM DR
228kTons in 2013
THE LARGEST EXPORTER OF CIGARS TO THE US
THE LARGEST EXPORTER OF RUM TO SPAIN AND CHILE
THE SECOND LARGEST EXPORTER OF CACAO IN LATAM & CARIBBEAN
LINES OF MERCHANDISE TO MORE THAN 60 COUNTRIES
MAIN EXPORT DESTINATIONS USA - HAITI - CHINA 3,700
EXPORTS ALL-TIME HIGH
$949.50 Million in May 2013
>$11.5 Billion two-way trade total
>65% of DR's Trade
THEBUSINESSYEAR32 DOMINICAN REPUBLIC 2015
I N T E R V I E W
POWERED up engine
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.
Santo Domingo is the country’s primary economic motor, the city with the lowest unemploy-ment 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 Do-minican Republic?The city of Santo Domingo is the most important economic center of the Dominican Re-public. Currently in our coun-try, 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 hous-es and financial centers in the country are located in the city of Santo Domingo. This is the reason why the business com-munity of this city produces the most significant contribu-tions to the development of the Dominican Republic.
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.
BIO
How significant is the Santo Domingo Chamber of Com-merce and Production with-in the Dominican Republic’s economy?The Santo Domingo Cham-ber of Commerce and Pro-duction (CCPSD) main-tains a strong influence in strengthening and promot-ing economic activities with-in the city of Santo Domingo, but with an important im-pact on the entire national economy. Some examples of important contributions throughout the history to the economy of the Domin-ican 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 indus-try, and creating other agen-cies and institutions that support the strengthening of the various stakeholders and sectors of commer-cial interest. Some of these stakeholders include: The National Council of Private Businesses (CONEP), The Association of Industrialists of the Dominican Republic (AIRD), The Stock Market of the Dominican Republic (BVRD), The University Ac-tion Pro Education and Cul-ture (APEC), and the Council of Conciliation and Arbitra-tion, among many others.
Currently, 97% of the Dominican Republic’s enterprises are MS-MEs, which generate more than 2 million jobs and account for 30% of GDP. How does the San-to Domingo Chamber of Com-merce and Production support the MSME sector?According to the FondoMi-cro 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 em-ployment in the economy.The Santo Domingo Cham-ber of Commerce has un-dertaken several initiatives to support the business de-velopment of SMEs, such as managing and promoting the participation of entre-preneurs to international trade fairs and trade mis-sions, providing courses
and workshops, promoting discussions that enable the commercial sector to keep up with market reality, of-fering Business Consulting services, and fostering new business opportunities for the business sector of the country—particularly for small and medium-sized en-terprises (SMEs).
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 mac-ro agreement signed between the parties, which are the pro-motion, development and diversification of trade and economic cooperation to the benefit of the entrepreneurs of both countries and the promo-tion and development of trade and economic cooperation.
What other achievements has the Santo Domingo Chamber of Commerce and Production reg-istered 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 encour-aging the production and the development of business, not only in the city of Santo Do-mingo, but throughout the Dominican Republic. What’s more, we connected even more Dominican entrepre-neurs with business oppor-tunities at a global level. For 2015, we are will continue to promote trade and production through various mechanisms. We aim at a greater partic-ipation in the national and international media, to dis-seminate 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. ✖
THEBUSINESSYEAR 33Economy
I N T E R V I E W
Could you talk us through AN-JE’s background?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 pro-mote the necessary reforms on the economy to increase the level of private sector partici-pation, 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, in-cluding services, the regulato-ry 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 train-ing 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 Strat-egy. We have collaborated with Congress to incorporate our ideas on improving both the efficiency and the trans-parency of our public insti-
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.
BIO
YOUNG at heart
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. tutions. Now we have an in-formation-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 un-der public scrutiny and also in terms of implementation im-provements, 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 sec-tors that used to have a very big influence in the economy for many years. We think that current growth is heavily af-fected by the impact that the mining sector has had on the economy. We have to be pre-pared 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-
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 pub-lic debt. The Senate just ap-proved 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 sub-sidy. And even though the ju-dicial system’s budget has in-creased 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 productivi-ty, competitiveness and make our economy one that is able to export more rather than import. Tourism and the com-mercial sector are also vital. Technology is a less explored sector, but we have advanced in this area over the last ten years. The telecommunica-tions sector has always been one of the main drivers. ✖
ANJE represents young Dominican entrepreneurs
THEBUSINESSYEAR34 DOMINICAN REPUBLIC 2015
According to the FondoMicro 2013 survey, there are 791236 micro, small, and medium-sized en-terprises (MSMEs) in the Dominican Republic. These companies employ over 2.1 million per-sons, who represent 46.2% of the economically active population, and 54.4 % of the total em-ployment 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 com-panies.
LOCAL INITIATIVES In accordance with Law No. 488-08, enacted on December 30, 2008, which establishes the regu-latory regime for the development and compet-itiveness 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 fa-cilitate 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 implement-ing 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 Encour-agement of Micro, Small, and Medium Enter-prises (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 Medi-um 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 WINDOWIn October 2013, the Government has launched a one-stop window in order to facilitate start-ing new businesses and formalizing the exist-
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.
SMALL BUT MIGHTY
F O C U S D O M I N I C A N M S M E S
ISSAACHART BURGOS GARCÍAPresident, theNational 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 re-solve. 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 com-mercial 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.
ing ones. "Our goal is to promote the creation and formalization of small, micro and medi-um-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 formal-ization 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 sev-en working days, and only one transfer to the Chamber of Commerce.”
FOREIGN SUPPORTIn January 2014, the Inter-American Devel-opment 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 in-termediate financial institutions. By financing investment projects, permanent working cap-ital, and technical assistance, the project at-tempts 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-Ameri-can Investment Corporation (IIC) approved a US$3 million loan to Banco Múltiple Santa Cruz to finance 200 loans to the Dominican Repub-lic’s MSMEs, primarily for foreign trade opera-tions 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 di-versify 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 substantial-ly improved our internal practices, enabling us day by day to strengthen our competitive advantages,” said Rafael Jiminian, Banco San-ta 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.” ✖
THEBUSINESSYEAR 35Economy
I N T E R V I E W
According to the Central Bank, 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?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 Re-public there is no restriction on the movement of currency, which is an issue in certain other countries. Furthermore, as a country we are strate-gically well located, close to the US as well as Central and Latin America. Moreover, the Dominican Republic has ad-vantageous 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 po-tential as an investment desti-nation?I would say yes, but even though we have had that pos-sibility for many years, we have yet to take full advan-tage. The country would be better positioned if we had a greater focus on the potential benefits of FTAs.
What are the major advantages of investing in the Dominican Republic and what would be your message to potential inter-national investors seeking op-portunities 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
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.
BIO
TBY talks to Salvador J. Demallistre B.,
Executive Director of ASIEX, on FTAs, PPP
and goals for 2015.
ON THE UP 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 go-ing to increase productivity. Also, there is a major discus-sion between labor unions and business on the potential revi-sion of the labor code to foster greater competitiveness.
What is the role of public-private partnerships (PPP) in the devel-opment of the economy, and what initiatives has the Domin-ican Foreign Investment Com-panies Association (ASIEX) tak-en to strengthen the investment climate and promote the coun-try as an FDI destination?One of the major challenges faced by the country is the need to broaden public-pri-vate relations. I would say that this could be a true in-strument of progress, which somehow our country has been reluctant to utilize. I have seen PPPs that eventu-ally benefit the country be-cause of the synergy between the knowledge and capacity of the private corporates and the balance that the government or public brings into that rela-tionship. ASIEX as an organi-zation 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 Invest-ments Center of the Domin-ican Republic (CEI-RD) and will eventually revise the law
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 nu-merous benefits for both the private and public sectors, in combining their unique inter-national experience. How would you rate the regula-tory efficiency in the Dominican Republic in terms of incorporat-ing a business?I would say that we are mak-ing progress, although there is still ground to cover. Indeed, we are working with the CEI-RD on revising the foreign in-vestment law. We still believe there will be great opportuni-ties for the country to devel-op 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 Domin-ican Republic’s position in the rankings?There are many areas of the survey in which we lag sig-nificantly. My perception, again, is that if we continue to strengthen the relationship between the public and pri-vate spheres, we can advance up the rankings.
What goals has ASIEX set for 2015?We are set to focus on several ar-eas, including mining, foreign in-vestment law, and the strength-ening of our international competitiveness to do business. We also intend to work with the government on a means of reducing the tax level. ✖
THEBUSINESSYEAR36 DOMINICAN REPUBLIC 2015
F O R U M W H Y T H E D O M I N I C A N R E P U B L I C ?
ERIK PÉREZ VEGAPresident, Cluster of Contact Centers and BPO from Dominican Republic
PEDRO JOSÉ PÉREZ GONZÁLEZPresident, Santo Domingo Chamber of Commerce and Production
The main benefit of investing in ICT in the Dominican Republic is em-ployee 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 invest-ment. 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 run-ning 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.
The business climate in the Do-minican Republic presents great opportunities for the development
of commercial projects, as well as challeng-es 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 regulato-ry system that clarifies the business environ-ment 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 telecommu-nications system that our country counts on facilitates communication between Domini-can businesses and international markets. In terms of what needs to be done to enhance the commercial environment, we should reorient credit towards the productive sec-tors, to balance private consumption with industrial production. This is a prevalent is-sue 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.
Across the spectrum of industry from FMCGs to
transportation and logistics, companies have found their
JULIO ESPAILLAT President & CEO, GoldQuest Mining Corporation (GQC)
The Dominican Republic today is our largest operation in the Ca-ribbean, 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 experienc-ing 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 cur-rently, but we are expecting this to change, and are confident of growth in the Domin-ican Republic. Today we have notable de-mand from the pharmaceutical industry; they have recognized our expertise and unique solutions for the sector. We have im-plemented a strong quality system for that sector and have considerable experience with consumer goods, cosmetics, technolo-gy, and food and beverage, so the business in the Dominican Republic is important and has a wide portfolio of services the corpora-tion is offering to the market and industries. Our biggest market is the multinationals.
Historically, the presence of gold on the island was well known. For example, Pueblo Viejo, the larg-
est 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 explo-ration 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 decid-ed 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 loca-tion. Discovering something in geology and mining doesn’t happen very often and it usu-ally 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 po-tential in the Dominican Republic and Haiti for mineral exploration and development.
FRANKLIN AVENDAÑORegional Manager for the Dominican Republic and Puerto Rico, Avianca
Actually, 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 Domini-can 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 Pe-ruvian 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 particular-ly 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, infra-structure, technology, as well as passenger services to facilitate the flying experience; this in addition to improvements in immi-gration and customs. Meanwhile, I do think the Dominican Republic has considerable potential as a hub because of its geograph-ical location at the heart of the Caribbean.
THEBUSINESSYEAR38 DOMINICAN REPUBLIC 2015
I N T E R V I E W
Do you plan to launch any new special editions in the near fu-ture?The range of publications available in the Dominican Republic has been growing consistently over the course of the past decade. Cover-age of specific niches of the market by special editions was required by the key sec-tors of the national economy. Through strategic planning, the Mercado Media Network has developed special edi-tions that have become key reference guides of great value to the business community of our country.
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.
BIO
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.
“EXTRA, EXTRA”
What is the average profile of your readers?Revista Mercado has two pub-lic objectives, the first of which is directed at executives and entrepreneurs, decision mak-ers who need up-to-date infor-mation of the highest quality. Our secondary target demo-graphic is young people at uni-versity 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 hu-man 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 sur-passed local standards. Our company currently has 80 employees across our edito-rial, art, marketing, sales, dis-tribution, circulation, and ad-ministrative departments. Our team’s talent is continuously evolving, and is always guid-ed by the enthusiasm, dedi-cation, and leadership passed on by the heads of the various departments.
Mercado Media Network has signed a number of promi-nent 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 ex-pansion? Our most recent success in this area was the signing of our alliance with Bloomberg LTD, which reaffirms our leadership among busi-ness publications. This will not be our last such agree-ment however. We have also worked with the Time Inc. brand Sports Illustrated. Through these understand-ings we achieve an editorial mix that offers the best of domestic and international
content. Beyond our nation-al presence, we have sub-scribers in Miami, New York, and Puerto Rico, and are planning to expand our cir-culation in these areas over this year.
How has social media affect-ed 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 informa-tion and platforms is what allows publications to stay current and generate read-er interest. Mercado Media Network is already prepared, offering added value to all of our editorial content through social media platforms, in-cluding the content from our international partners.
What is Mercado Media Net-work's medium term develop-ment strategy, and what are its main focuses for the coming year? The development strategy is to reinforce our position as the market leader in pub-lishing, 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 high-ly professional team focused on developing strategies and corporate services that com-plement our portfolio. ✖
Has signedan alliance with Bloomberg LTD
Employs a staff of 80
THEBUSINESSYEAR 39
FinanceR E V I E W B A N K I N G
Zanoni Selig, CEO & Chairman of WorldWide Group, on the impact of FTAs and trends in the insurance market.
53 46 Restructuring at the Dominican Republic’s Stock Exchange is increasing access to liquidity and investment.
44 Manuel A. Grullón, President of Banco Popular, on financial inclusion and the bank’s 50th
anniversary.
W
The efficiently regulated Dominicanbanking sector has sustained decent solvency levels, capitalization, and profitability, as well as a long foreign currencies position.
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.
ith the May 20, 2012 victory of Danilo Medina at the presidential
elections, continuing Domin-ican Liberation Party (PLD) rule, dating back to 2004, came renewed confidence in political stability. This has reflected in the banking sec-tor, then comprising 10 com-mercial banks—although two have since merged—and roughly 40 savings and credit banks and savings and loan associations. Prior to this par-ticular tonic the Central Bank of the Dominican Republic (CBDR) had proven its met-tle, 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 PRUDENCE50% in February 2004, and a historic trough of 1% in Janu-ary 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 ex-change rate pressures, infla-tion projected to be near the goal, and an improved labor market…”
The efficiently regulated Dominican banking sector has sustained decent solven-cy levels, capitalization, and profitability, as well as a long foreign currencies position. Scotiabank research reveals that the total assets of the fi-nancial 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 depos-it-taking institutions is con-firmed by the halving of sys-temic non-performing loans (NPL) to 1.9% in 2014 from 4% in 2009. In a TBY interview, Central Bank Governor Héc-tor Valdez Albizu provided an encouraging birds-eye tour of the banking sector. Among the key metrics highlighted, as of August 2014, were total
THEBUSINESSYEAR40 DOMINICAN REPUBLIC 2015
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 Jamai-ca, “total loans of the financial sector, commer-cial banks concentrated 86.9%. Indeed, the loan portfolio of multiple banks totaled Ps586,693.2 million in August 2014, up 12.8% YoY.” Mean-while, 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 state-owned 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 out-performed 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, finan-cial 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 delinquen-cies rates shed 1pp to 1.9%, while the provision coverage of nonperforming loans markedly rose from 117.0% to 164.3%. The sector’s sol-vency 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 com-mercial banks posted ROA of 2.05% and ROE of 21.45%,” he concluded.
NEW SHOOTSThe Dominican Republic has been active in fos-tering economic conditions amenable to busi-ness, both local and FDI through prudent use of facilities extended by a range of internation-al agencies. According to Nearshoreamericas.com, since it partnered the International Fi-nance Corporation (IFC) back in 1961, the latter had invested $962.9 million in the nation’s pri-vate sector by 2013. And recently, the Domini-can government also negotiated a $250 million loan with the Inter-American Development Bank (IDB), to enhance the investment cli-mate and foster productivity, particularly that of SMEs, which account for 97% of all Domin-
ican enterprises and 30% of GDP. The IDB has laid out recommendations that the Caribbean nation is advised to follow, which include facili-tating SME access to financing in order to bring them increasingly into the formal economy.
SELECTED PLAYERSThe top-three players in the highly concentrat-ed Dominican banking sector approximately claim a 60% market share, according to the IFC. Established in 1963, Banco Popular Dominica-no, 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 issu-er 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 Popu-lar 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 de-posits 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.
BANK TO BANKBanco 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 bil-lion, rendering it the fifth-largest bank Central
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.
0 20 40 60 80 100
Penetration of Bank Accounts Among Adults in Latin America (%)Source: BN Americas
Latin America
World
Developing Economies
High Income Economies
Argentina
Bolivia
Brazil
Chile
Colombia
Costa Rica
Dominican Republic
Ecuador
El Salvador
Guatemala
Haiti
Honduras
Jamaica
Mexico
Nicaragua
Panama
Paraguay
Peru
Uruguay
Venezuela
* COUNTRY/REGION Proportion of adults with a bank account
THEBUSINESSYEAR 41Finance
America. As at June 30, 2014, Banco BHD had total assets of Ps132,891,924,864, and total lia-bilities of Ps119,402,014,258.
The sole foreign banking presence in the Re-public boasting retail outlets, and one of Latin America’s most widely present financial insti-tutions, 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 subse-quent 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 bank-ers 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 portfo-lio 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 finan-cial 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 conve-nience 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 trans-actions and over a 305% in the amount of these transactions,” bank President Manuel A. Grul-lón explained. And in 2014 Banco Popular Do-minicano and local telco Orange Dominicana launched the Orange m-weight, a virtual pre-paid card facilitating mobile banking transac-tions.
…AND MICROBANKINGCredit and savings financial institutions (ban-cos de creditos y ahorros) are essential finan-cial 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 busi-nesses, where fewer than 10% of those people are banked. According to Mixmarket, in 2012 microfinance loans amounted to approxi-mately 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 driv-ing 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. “Mi-cro companies represent around 30% of GDP, which implies huge potential for us and for the country.” ✖
Regional Credit Card Distribution in Dominican Financial System as of Sept. 2014Source: Superintendency of Banks
Metropolitan Territory 72%
Northern Territory 16.30%
Eastern Territory 6.90%
Southern Territory 4.20%
2006 2007 2008 2009 2010 2011 2012
Bank Capital to Assets Ratio (%) in Dominican RepublicSource: Trading Economics
Foreign Direct Investment (FDI) in the Dominican Republic has increased in 245.5% in the last dec-ade. What factors drove that expansion and what are the sectors with the greatest potential?FDI, over the last decade, went from $ 7.684 mil-lion 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 in-crease in FDI are:• The country’s macroeconomic stability char-acterized 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 dif-ferent sectors. • In addition, we have political stability and so-cial 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 desti-nation that can take advantage of these agree-ments. • 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 anoth-er factor that has contributed to the increase in investment flows. In 2000, four sectors, Electric
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.
BIO
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.
central FOCUS energy, Telecommunications, Trade and Tour-ism, 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 for-eign 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 in-crease of interest rates internationally, affecting capital flows and changing liquidity conditions that have operated in the international finan-cial markets during years. The Dominican Re-public is no exception to this international re-ality. However, we understand that the country is better prepared to face any effect arising from this situation, given the early stage of develop-ment of our capital markets and strong funda-mentals 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 macroeco-nomic fundamentals, as is the case in Colom-bia, Chile, Mexico, and Peru in Latin America. In addition, several studies in international organizations like the International Monetary Fund (IMF) and the Inter-American Develop-ment 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 de-velopment of their financial markets, among which are Dominican Republic, tend to benefit more from the real effects of monetary normal-ization, 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 In-termediation 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 be-fore. If you compare this August to December 2013, assets totaled Ps54.074 million, ie 5.0%.
THEBUSINESSYEAR 43Finance
This growth is mainly explained by the behav-ior 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 de-posits 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 import-ant element worth noting is the fact that during the period August 2013 to August 2014, Finan-cial 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 commer-cial banks and savings and loans.
In particular, multiple banking delinquen-cies rates fell from 2.9% to 1.9% and provision coverage of nonperforming loans increased from 117.0% to 164.3 percent. Overall, the Do-minican financial system has adequate liquid-ity, profitability and capital strengthening. The solvency ratio remained above the 10% mini-mum 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 econ-omy 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 per-formance of the Dominican economy as mea-sured by Gross Domestic Product (GDP) in real terms (reference year 2007), recorded an annual increase of 7.2%. This trend allows fore-casting 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 econom-ic growth expected for 2014 are agricultural,
mining, construction, trade and hotels, bars and restaurants, due to the dynamism exhib-ited 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 de-creases 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, re-ducing the average growth in the region.
What are the main policies the Central Bank is to implement in 2015 to boost investment and com-merce? The central bank’s policies to encourage in-vestment are aimed at ensuring macroeco-nomic 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 mon-etary 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 move-ments act are verified in the rate that may af-fect 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 ac-companied 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 pro-jections indicate that by 2015 deficit on current account is expected around 4.0% of GDP, and future estimates downward, in line with the his-torical average of 3.5%. ✖
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.
THEBUSINESSYEAR44 DOMINICAN REPUBLIC 2015
I N T E R V I E W
Banco Popular celebrated its 50th anniversary in 2014, high-lighting its leading position in the Dominican market. How has the bank grown since its foun-dation 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 institu-tion rose from the Asociación para el Desarrollo, Inc. (APE-DI), whose management was led by Alejandro E. Grullón E. and a group of accomplished professionals and business-men from the city of Santiago. These men also created other national development insti-tutions across the economic, regulatory, social, education-al, and cultural spheres. Ban-co Popular opened its doors to the public on January 2nd 1964. It was inaugurated as the country’s first commercial private bank and, thus, be-gan an outstanding trajectory of contributions in favor of economic growth, democra-tization of financial services, diversification and modern-ization of products and bank-ing services.
The banking sector in the Do-minican Republic is develop-ing into intensively competitive market with many well-estab-lished local and international players. How does Banco Pop-ular distinguish itself from the competitors and what market segments are you targeting?Throughout Banco Popular’s 50 years it has cultivated deeps
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 non-profit organization dedicated to forging better leaders through the exchange of knowledge and ideas.
BIO
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.
people’s CHOICE
roots in the Dominican peo-ple. It has grown organically with the industry and has es-tablished a vast customer base throughout the years. The institution caters its services to all segments within the in-dustry, from children with a savings account to multina-tional companies seeking new investments. Over the past decade the country has grown significantly, and with this growth a large number of in-ternational capital has found opportunities to invest within
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 intro-duced innovations is tourism where a division is focused solely on the industry catering to the needs of this demand-ing segment. Institutional Banking is an area catering solely to local and interna-tional regulated industries and government entities. Cor-porate Banking is a division focused on high net-worth clients of more than $5 million in revenue. Investment Bank-ing is the newest division with three years in effect, and is re-sponsible for several projects involving local and interna-tional investors. Some of their biggest international projects include M&A, interest rate swap, and syndications and debt issuance of major multi-nationals within the tourism and oil industries. Our Sub-agente 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 bank-ing subagents throughout the country. Other financial inclu-sion initiatives have involved work with country’s main tele-phone 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 thou-sands 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. Im-pulsa Popular is our end-to-end 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 Ban-co 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 rec-ognized by the Asociación de Industrias de la República Dominicana (AIRD), which is the Dominican Association of Industries. Meanwhile, Pro-Exporta Popular is a ground-breaking proposal to compre-hensively support Dominican exporters, especially SMEs that seek an international presence. In addition to the financial tools that assist ex-ports, 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 Domini-can tourism industry?Ever since its creation half a century ago, Banco Popular has developed and support-ed the industry’s growth. In fact, for many years our insti-tution 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 thriv-ing industry. In 10 years, Ban-co Popular has financed over Ps1.4 billion. In 2013, Banco Popular was responsible for over 61% of credits to this sec-tor with a nominal amount of $13.5 million. In 2014, the Aso-ciacion de Hoteles y Turismo de la Republica Dominicana (ASONAHORES), which is the Hotel and Tourism Associa-tion in the Dominican Repub-lic, recognized our institution as the tourism bank. ✖
Two locals from the Dominican banking firmament talk
technology, new banking trends, and helping out the small
businessman.
local SOLUTIONS
What role does innovation and technology play in your opera-tions?
GUILLERMO RONDÓN New technologies are vital to our in-ternal 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 villag-es 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 chan-nels, including e-banking, mo-bile 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 transac-tion. They increasingly want to realize transactions from the comfort of their home, person-al computers, or smartphone. Banco Providencial is active in this area, creating solutions for
our customers that render us as a more competitive bank. We have robust internet banking services, whereby our custom-ers 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.
What is your outlook for the national economy and the evo-lution of the finance sector? Which other trends have you ob-served in recent years?
GR The banking industry’s pri-vate 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 counter-part. Overall, the finance indus-try 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 be-come 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
potential for the segment at Ps36 billion. And in terms of national potential, I think one of the main challenges to overcome is in in-creasing exports.
AHB M-banking, or mobile banking, is becoming wide-spread, 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 net-work. There are many alliances between communication com-panies trying to motivate their customers to adopt solutions available via mobile phone. Re-sponding 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 de-mocratize banking products
and services. We will also con-tinue implementing an aggres-sive 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 infor-mality levels here.
AHB We believe that the basic elements of the economy are well managed. Our geograph-ic 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 through-out the continent, we foresee continued growth over the coming years. The service sec-tor 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 in-ternational airports ensure that the Dominican Republic is well connected with the region and the world. ✖
THEBUSINESSYEAR46 DOMINICAN REPUBLIC 2015
Review C A P I TA L M A R K E T S
The capital markets of many emerging econ-omies resemble the Voyager Mars Mission in terms of their ardent quest for liquidity. A change has occurred at the Dominican Re-public’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 Presiden-tial 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 sophis-ticated 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 fur-ther 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 embryon-ic—equity trading has been conspicuous in its absence—albeit perhaps now in its 2nd tri-mester, having sprouted its first IPO, of which more later.
From October 10, 2003 to April 18, 2005, market restructuring prompted a suspen-sion 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%
LISTING TO FLOAT
The Bolsa de Valores de la República Dominicana (BVRD) has seen a tentative step toward widening its menu.
of trades comprise cross transactions where buyer and seller are clients of the same bro-kerage company, of which there are 20 certi-fied 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 au-tonomous, 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-mem-ber National Securities Council features rep-resentatives of the Central Bank, the Ministry of Treasury, the Chair of the Superintendent of Securities, and four members from the pri-vate 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 Super-intendency of Securities.
There are a number of incentives for for-eign investment in the BVRD, in that interest and dividends on traded securities are un-taxed. Furthermore, Dominican law allows for the sale of securities in foreign currency, with dividends paid in the currency of the re-spective certificate transacted.
2013 Transaction Value in Primary and Secondary Markets (%) Source: BVRD
Primary Market 94.85%
Secondary Market 5.15%
THEBUSINESSYEAR 47Finance
A STOCK TURNING POINTThe recent healthy liquidity of the money markets has perhaps ironically curbed po-tential interest in listing. Bank financing be-ing readily available has meant that the only appealing feature of going public was the accompanying prestige, which the well-es-tablished 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 Ini-tial 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 account-ability, 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 pre-cursor to becoming listed.
PERFORMANCEBonds remain the primary instrument at the BVRD, and by 2011, the corporate bond mar-ket 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 vol-ume for all instruments in 2013 stood at $116,800,968,466.91, where Special Invest-ment 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 sec-ondary 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-re-flection. 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. ✖
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.
THEBUSINESSYEAR48 DOMINICAN REPUBLIC 2015
I N T E R V I E W
How would you characterize the Dominican Republic’s capital market in comparison to other countries in the region?The Dominican Republic has 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 de-veloped regulatory frame-works, the Dominican Re-public 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-End-ed Fund trading on the ex-change, and we are expecting several other listings of mu-tual 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 trad-ed on the Exchange by early 2015. Moreover, there is an interesting pipeline of large market-cap companies solic-iting approval to go public in 2015. Likewise, we are excited about the prospect of several government sponsored en-tities attempting to source financing for specific infra-structure projects through the equity markets.
It is a financing model that we have observed in countries like Russia, Turkey, Colom-bia, and Chile, which prompt the development of their local capital markets while achieving an efficient capital budgeting for project financ-
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 Universidad Católica Madre y Maestra in Santo Domingo.
BIO
TBY talks to Felipe Amador,CEO of the Dominican Republic Stock Exchange (BVRD), on comparisons with regional competitors and market trends.
money BAGS
ing. Furthermore, we strongly support this type of initiative, which confirms the govern-ment’s commitment to the promotion of the capital mar-kets, as a means to achieve sound economic growth and development.
What activities is the BVRD cur-rently focusing on?The exchange has a three-pronged strategy focusing on providing state-of-the-art infrastructure, engaging in developing new markets/services and taking on sig-nificant 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 in-vestors. In 2014, we success-fully launched a new state-of-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 govern-ment 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 con-cerned with the lack of signifi-cant growth given the nascent state of our market; therefore, over the past year, we have de-veloped a join program with the International Finance Corporation (IFC/World Bank) to promote best prac-tices 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 sig-nificant growth as well.
In April 2014, the Dominican Republic sold a record volume of bonds, at $1.25 billion of se-curities 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 do-mestic market, at historical low yields, which is being im-pressive given the recent evo-lution of the Dominican cap-ital 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 macroeco-nomic outlook of the Domin-ican Republic. In addition, the country’s economic perfor-mance over the past decade has been widely recognized, attracting a more sustainable FDI flow. Correspondingly, these global bonds are be-ing used as a market gauge to define the cost of capital for many projects in the Do-minican Republic, allowing investors to have a better
benchmark to define trad-ing opportunities in the local market. How dependent is the Domini-can economy on international trends?The financial crisis in the US did not hit us hard. We suf-fered in terms of real estate because potential clients lacked the income to buy a second or third home in the Caribbean. That type of ac-tivity might be affected, but in terms of growth and stability we have made significant ad-vances. Our financial indus-try 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 posi-tion. Nevertheless, I believe we are reasonably isolated from those global shifts. Fi-nally, our dependence on oil and on contracts with entities such as PetroCaribe are being constantly monitored to de-termine the potential impact on the economy as a whole. ✖
THEBUSINESSYEAR 49Finance
I N V E S T I N G I N C A P I T A L M A R K E T S B 2 B
NINOSKA FRANCINA MARTE DE TIBURCIOGeneral Manager, PARVAL
Investments and securities are major growth areas for the Dominican economy.
sound INVESTMENTS
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 Superin-tendency of Securities (SIV), as well as the first to have a licensed securities broker. Through the years, we have become a lead-ing brokerage firm, with a keen and accurate vision that allows us to manage and structure as-sets, as well as provide advisory services concerning financial operations that offer the great-est 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 prac-tices and high ethical standards, providing greater transparency, quality, and safety.
GUILLERMO ARANCIBIA The securities market is new and will continue be so until all play-ers can demonstrate the im-portance 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 indi-viduals, bringing prosperity and growth to the broader econo-my via products and diversified funding of investments.
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 inves-tors 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 dol-lars, and helping to increase productivity to export excess production.
NT We plan to continue ex-panding 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 re-gional branch in 2015.
What strategies have allowed you to achieve such positive fi-nancial results?
GA This can basically be at-tributed to diversification and accelerated growth with mac-roeconomic stability, amid out-standing market conditions.
NT Competitiveness is not al-ways or necessarily related to interest rates in our view of the markets and business. We have a holistic view from the custom-ers’ point of view, which differ-entiates us from the competi-tion 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 30-year dollar debt in the past de-cade. It allowed the country to take advantage of low borrow-ing costs. Proceeds will be used to finance infrastructure proj-ects and complement the na-tional budget.
In June 2014, the Superintend-ency of Securities approved your public offering of secu-rities. 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. ✖
THEBUSINESSYEAR50 DOMINICAN REPUBLIC 2015
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 frame-work, 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, “ex-pecting several other listings of mutual funds and investments trusts throughout the coming months.”
Furthermore, the very first IPO in the Domin-ican Republic’s history has recently been ap-proved. 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 Domin-go-based corporate partner Awilda Alcan-tara-Bourdier (AAB), in securing necessary regulatory approvals. As stated by AAB, “this IPO demonstrates CCI Puesto de Bolsa’s com-mitment to the Dominican Republic, as well as to implementing world class corporate gover-nance standards, paving the way for other lo-cal 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 signifi-cant 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 Do-minican companies are expected to follow; as Amador put it, “there is an interesting pipeline of large market-cap companies soliciting ap-proval 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
DR’s VERY FIRST IPO
The Dominican Republic is going through an important inflection point towards positive change in its financial market.
F O C U S E Q U I T Y M A R K E T
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 trans-action volume, but because there will be a new accurate perception in the entire market of what the real value added of the securities mar-ket really is.” ✖
THEBUSINESSYEAR 51Finance
Review I N S U R A N C E
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 of-ten 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 concentrat-ed. When adding two local reinsurance com-panies 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 approx-imately 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 evi-denced 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 eco-nomic growth at a stable pace of 4% to 5% over the 2012–2016 period. Moreover, many Amer-
THE PREMIUM SECTOR
Favorable demographics and the rise in economically productive sectors such as tourism will see a gradual rise in the demand for insurance coverage.
Market Share of Total Premiums Jan - Oct 2013 Source: CADOAR
Seguros Universal 25%
Mapfre BHD Seguros 17%
Seguros Banreservas 16%
Seguros Sura 12%
La Colonial de Seguros 11%
Others 19%
icans—among other foreign nationals—opt to retire in the country, increasing demand for health, retirement, and home content cover-age. 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 employ-ment in tangential sectors, raising both the demand for diverse coverage, and disposable income to pay for it.
HEALTH AND LIFEMandatory 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 cover-age 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 respec-tive market shares of 28%, 18%, and 9%. For 2013 health coverage registered YoY growth of 21.83%. Pointing out another brake on to per-sonal insurance premium growth, namely 16% taxation, Rafael Nolasco, the President of Patria Compañía de Seguros told TBY that, “we prob-ably 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-
THEBUSINESSYEAR52 DOMINICAN REPUBLIC 2015
CARLOS RAMÓN ROMERO B.Executive President, Seguros SURA
The insurance market has consolidated into one of the sectors with the highest con-tribution to the local economy, but is facing a tax burden that threatens to grow over time. What is your view on the coun-try’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 pop-ulation of the Dominican Repub-lic 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.
ican Chamber of Insurers and Reinsurers (CA-DOAR) manage roughly 95% of the total Do-minican insurance market. Executive President Miguel Villamán in a TBY interview Miguel Vil-lamán put a number to the above-mentioned loss by citing sector reports showing, “that due to these issues we lose about $125 million of in-surance products every year.”
REINSURANCEAs if the global meltdown was not enough to rock the Dominican Republic due to its exten-sive 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 na-ture of reinsurance in ensuring the continued solvency of sector players. The Dominican Re-public hosted its first international reinsurance conference in 2012, which in a cosmic joke, coincided with Hurricane Sandy. Main take-aways were the need to promulgate the organ-ic growth of sector professionals, and rethink the, some consider, punitive taxation system to incentivize insurance participation across a broader demographic.
MICRO INSURANCE, MACRO AWARENESSWith so few of the Dominican Republic’s 10 million population covered by insurance, al-ternative paths are being followed to extend peace of mind to a wider swathe of citizens. A large part of this is affordable premium condi-tions and public understanding. Coop-Seguros (COOP-INSURANCE) is a unique force in the Dominican insurance sector as the sole com-prehensive insurer to comprise a cooperative. Active since 1990, its objective is to provide coverage to social groups unable to contem-plate paying insurance premiums, and more-over to inform on the benefits of insurance as an investment instrument among cooperatives, trades unions, and other NGOs. General Man-ager 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 under-standing.”
Another advocate of micro insurance is Seguros Sura, which closed 1H2014 on a net profit of $221.4 million, up 19.2% YoY. Presi-dent 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 depart-ment dedicated solely to that because we think we should go down the pyramid so that every-one is protected. This is also a social responsi-bility.” In an example of the lateral approach adopted to convert the uncovered citizen, the company has partnered Universidad Tec-nológica de Santiago, “which has 7,500 stu-dents to provide personal accident insurance, which is not yet required by law.”
READY RECKONERAccording to the Superintendency of Insur-ance, 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 pre-miums 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% mar-ket 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 insur-ance, which with a market share of 31.2%, post-ed 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 ve-hicles (the other 50%), only around 30% is in-sured.”
By sector player rankings, in 1Q2014 the top-three companies were Seguros Universal, Mapfre BHD Cia de Seguros, and Seguros Ban-reservas on respective net premium readings of Ps2.2 billion, RD$1.1 billion, and RD$1 bil-lion. 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 Re-public (BanReservas) and its nationwide net-work of roughly 180 branches.
Consolidation has been observed in the sec-tor, notably when in December of 2013, Mapfre BHS, along with Banco Leon (owner of insurer Banca Seguros), combined their entire finan-cial operations. In consequence, Mapfre found itself breathing down the neck of sector giant Universal Insurance. ✖
THEBUSINESSYEAR 53Finance
I N T E R V I E W
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.
BIO
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 es-tablishing such a remarkable position in only 15 years?WorldWide Group specializes in major medical plans, which differ considerably from lo-cal 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 real-ly have local competition and we focus on major medical plans. We cover up to $2 mil-lion per person. We have hun-dreds of clients in order to do business like this. I think that our work fights against a para-digm. People have a tendency to think that this kind of in-surance 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 cov-erage, 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 Repub-lic, 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 bar-riers 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 lo-cal companies, but our com-petitors are large international companies. We sell the same products but at better prices, and people focus on prices. We can compete with mid-size international companies. I don’t see any problem with that, as I see competition as a good thing.
How have WorldWide’s region-al operations evolved over the few last years, and what have been the company’s major mile-stones 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 Repub-lic and Panama. We have an insurance license, and we sell
directly and through brokers, which is something we are extremely successful in do-ing. 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 Gua-temala, which we will open through this way in January 2015. In Guatemala, we will work with a Guatemalan com-pany that will sell our products and are reinsured by World-Wide. These are the two differ-ent entry methods that we use in order to cover the region.
What is your expansion strat-egy, and what other countries, besides Guatemala, is World-Wide 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 in-directly by reinsuring a Costa Rican company.
What trends do you see in de-mand for the international health insurance in the Domini-can Republic? The exciting trend is in the health sector, where peo-ple are looking for treatment outside the country. We have many rich and upper-middle class Dominicans who nor-mally go to the US looking for better treatment; however, there are many lower mid-dle-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 in-teresting 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 compa-ny’s development?WorldWide was founded in 1999, and at that time our part-ner was a local bank, BHD—a prestigious institution in the Dominican Republic. Howev-er, we needed a partner that can go with us throughout the entire region. DEG was creat-ed 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 compet-itors that sell offshore. DEG realized that this was an ex-cellent investment in order to help develop the economy of the Dominican Republic and Panama. ✖
THEBUSINESSYEAR54 DOMINICAN REPUBLIC 2015
I N T E R V I E W
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 insur-ance company as the regional manager in Santiago, but saw that this company could have operated a lot more efficient-ly. As a result, he began look-
TBY talks to Rafael Nolasco, President of PATRIA Compañía de Seguros, on the company’s portfoilio and raising awareness of products on offer.
looking AHEAD
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 Vice-President of Operations. At the age of 26, he was appointed as Company President, a position that he has held ever since.
BIO
ing for people to work on his personal project, his dream, and within two years found an investor in Dr. Miguel Án-gel Luna Morales. The com-pany 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 foun-dation, the company started working in the vehicle in-surance niche, where it has positioned itself. My father always believed in a compa-ny 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 posi-tion 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 clien-tele are you targeting? When I joined the compa-ny I saw that we had a stra-tegic weakness in being a one-product company. I sug-gested 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 consider-able foreign investment in the country at the time, including such firms as Mapfre and Se-guros Constitucion, the mar-ket 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 in-frastructure and in our com-puter systems.
I was appointed President in December 2005, but back then, our main office in San-to Domingo was located in a building on the 4th floor , with no parking space and no ele-vator. 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 trans-formed our image. We looked for reinsurance companies that could provide us with the support we needed. Current-ly, our main business is still car insurance, but within this area we have many subcat-egories. Auto liability insur-ance is about 80% or 85% of our business, and then there is full auto coverage, which is the segment that could rep-resent 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 lia-bility, as well as the container and the cargo. That has been one of our key growth seg-ments. There is also liability insurance, which we do not usually offer as a single prod-uct, and instead if someone wants liability insurance for their business, we will also offer property, theft alongside other coverages as well. Cur-rently, financial institutions are requesting unemploy-ment insurance, which is not a product we have considered providing, although depend-ing 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 microinsur-ance policies. We are analyz-ing 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 aware-ness and increase up-take?It has to start with the gov-ernment insuring infra-structure. We experience heavy rains, and flooding is frequent, making this an urgent area of attention. Im-portantly, incentives need to be put forward to encour-age 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 hurri-cane affect it in the way that Hurricane Georges did. ✖
THEBUSINESSYEAR 55Finance
I N S U R A N C E V O X P O P U L I
The Dominican Republic’s insurance sector is moving into new areas, with big potential for growth in the coming year.
A SAFE HAVEN
JEANNIDALIA GRULLÓNCEO, MAX Corredores de Seguros
RUTH SOTOGeneral Manager, Coop-Seguros
MIGUEL VILLAMÁNExecutive President, Dominican Chamber of Insurance and Reinsurance Companies (CADOAR)
FELIPE MENDOZA President, Segurnethe Dominican Re-
public has been the fastest growing econ-
omy during the past 50 years. We believe the insurance sector will continue to grow at its his-toric pace in the medium run. We wish it could be better, of course, in terms of global expec-tations 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 percent-age, in terms of premiums it has increased, of course. MAX Corredores increased the num-ber 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 broker-
age 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 in-surance company in the market, followed by Seguros Ban-reservas (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.
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y belief in the prom-ising 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 im-portant groups in Latin America are looking at the Dominican Republic as a market with po-tential for a profitable growth. I think that if we bring the prod-ucts 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 pre-miums written at Ps30 billion, and once we achieve higher penetration in the economic activity, further and promising growth awaits.
M
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 po-sition ourselves among the top-five as a result of our cooperative strengths.
Since we strictly comply with our two regula-tory bodies, we are the only insurance company in the country that is regulated by the Law of cooperatives and the Law of the Superintenden-cy 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 in-surance company; when we grow as institution, the country grows with us.
Our growth in assets was due to the pur-chase of Acsel system, an intangible asset that will amortize in 5 years. With this development, Coop-Seguros takes an important step by imple-menting insurance software that guarantees the best services to our clients.
T
“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. Fol-lowing 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 internationally most diverse displays anywhere in the world. For the first time the Chinese companies Baidu and Qunar and a joint display of Italian startups will be exhibiting at the show. Rounding off this segment will be the eTravel World, with displays devoted to digital marketing, social media and mobile travel services. Papers on current trends in the markets of Asia and South America will also be held there.
Accompanying the show will be the world’s largest travel industry convention whose focus in 2015 will be on the sharing economy and current forms of big data and ways to exploit it for marketing tour-ism. Visitors can find out even more about professional and advanced training opportunities as well as about jobs in tourism than in previous years at the show. For the first time the Emirates Academy of Hospi-tality Management from Abu Dhabi and Hoteleducation.ch from Swit-zerland will also be taking part.
More and more companies are exploiting the wide-rang-ing impact of travel blogs in order to target customers. At the upcoming Blogger Speed Dating event ITB Berlin will be offering members of the travel industry an opportuni-ty to meet with experienced travel bloggers from around the world for the third time. During the eight to ten-minute time slots both participants
HIGH DEMAND BYEXHIBITORS FROM AROUND THE WORLD
C O M M U N I Q U É
will be able to briefly introduce themselves, discuss topics and busi-ness, and establish initial contact. Exhibitors can meet international bloggers dealing with a variety of topics, including adventure travel, luxury travel and family travel. The event also opens up new possi-bilities for destinations, hotels and companies to market their prod-ucts and services.
In 2015, for the first time and in partnership with National Geo-graphic, ITB Berlin will present the World Legacy Awards in rec-ognition of sustainable tourism projects. At ITB Berlin 2015 cor-porate social responsibility and socially responsible tourism will once again be key topics. With the ITB CSR Day at the ITB Berlin Convention, its programme of events, and with exhibitors in Hall 4.1 under the heading of Adventure Travel & Responsible Tourism, ITB Berlin will be placing a focus on the topic of sustainability.
With over 10,000 exhibitors from around 190 countries ITB Ber-lin is the shop window of the international travel industry. The turnover by exhibitors at the show of around 6.5 billion euros is proof of the economic boost that ITB Berlin provides in its role as the industry’s plat-form for conducting business and sales. A few years ago the introduction of the ITB Buyers Circle established an exclusive meeting place for around 850 handpicked senior buyers from the travel industry. ✖
ABOUT ITB BERLIN AND THE ITB BERLIN CONVENTIONITB Berlin 2015 will take place from Wednesday March 4th to Sunday March 8th. From Wednesday to Friday ITB Berlin is open to trade visitors only. The ITB Berlin Convention, the largest event of its kind, will be held from Wednesday, 4 to Saturday, 7 March 2015 alongside ITB Berlin. More details are available at www.itb-convention.com. ITB Berlin is the global travel industry’s leading trade show. In 2014 a total of 10,147 companies and organisations from 189 countries exhibited their products and services to 174,000 visitors, who included 114,000 trade visitors.
ITB BERLIN 2015
With over 10,000 exhibitors from around 190 countries, ITB Berlin is the shop window of the travel industry. ”
THEBUSINESSYEAR 57
Energy & MiningR E V I E W E N E R G Y
68 62 59 Successful gold mining operations, new prospects, and an evolving business climate make the sector appealing.
The Dominican Republic aims to obtain 25% of its energy need from renewable power sources by 2025.
The Hon. Pelegrín Castillo Semán, Minister of Energy and Mining on utilizing the country’s resources.
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Recent reforms have taken the form ofmultifarious investment projects—renewable energy, better engineering and industrial infrastructure, and reforming and modernizing the national grid.
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.
nergy prices in the Caribbean are among the high-est in the world,
and the Dominican Republic is no exception in the region. The country relies heavily on fossil fuels, particularly die-sel and heavy oil, for its elec-tricity production. In the past this has led to shortages and a system that has been both in-adequate and unreliable. The World Bank sees reform of the energy sector as the key to un-locking 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 mar-kets 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 ma-neuver. High energy prices limit economic growth, and hamper investment and con-sumer spending, decelerating economic diversification and
WATTS UP?strengthening. Until recently a lack of reform in the energy sector had curbed the coun-try’s ability to benefit even from lower priced oil.
Recent reforms have tak-en the form of multifarious investment projects—re-newable energy, better engi-neering and industrial infra-structure, and reforming and modernizing the national grid, enabling more people to access a bigger and better power supply. This is now be-ginning to have a real impact, reducing costs to the consum-er and ensuring enough pow-er is available to fuel a sparky economy.
In many ways, 2014 was the year that such reforms began in earnest, and in three sig-nificant 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 re-forms have also led to great-er efficiency, smaller scale generator facilities and up-grades to stations. Eight mi-cro-hydroelectric plants and
Image: Caribe Trans
THEBUSINESSYEAR58 DOMINICAN REPUBLIC 2015
three substations were completed in the year to June 2014. Several other substations were renovated. These new facilities give the gov-ernment better capabilities in terms of mon-itoring—and therefore anticipating—changes in demand day-to-day.
The National Energy Plan sets out the Gov-ernment’s goals for the coming 10 years. The Minister of Energy and Mining, Pelegrín Hora-cio Castillo Semán, told TBY: “In 2015, we will have an energy efficiency and government sav-ings 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 in-crease the country’s refining capacity and take advantage of our geographical location and be-come 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 coun-try’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 com-mitment on the statute book. The law was re-flective 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 be-came 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 Do-minican Republic’s renewables bringing the country’s renewable capacity to some 500 MW by the end of 2013—representing an invest-ment of $900 million. The Dominican Repub-lic is committed to obtaining 25% of its energy from renewable power sources by 2025, as part of a wider goal to reduce greenhouse gas emis-sions 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 on-stream last year. The farm already generates enough wind-power to save some 200,000 bar-rels 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-build-ing existing dams that had fallen into disrepair. These dams are being rehabilitated and form an important part of the renewable energy proj-ect 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-outstrip-ping-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, al-leviating 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 infrastruc-ture is of paramount importance.
One way to help ensure this is possible is greater implementation of renewable technol-ogies. 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 expan-sion needed. Signs are, though, that the gov-ernment has put in place the framework for a national grid that is modern, efficient, and reliable—and on a par with the country’s eco-nomic 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.
THEBUSINESSYEAR 59Energy & Mining
I N T E R V I E W
Pelegrín Castillo Semán graduated as a lawyer in 1978 and is the Minister of Energy and Mining of the Dominican Republic. He 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 Vice-President of his political party, the Fuerza Nacional Progresista (FNP).
BIO
TBY talks to The Hon. Pelegrín Castillo Semán, Minister of Energy and Mining, on how to take advantage of the country’s resources.
FULLYcharged What steps is the Ministry of Energy and Mining taking to help the Dominican Republic take full advantage of its min-eral potential?In many ways the Domini-can Republic is a mini conti-nent unto itself. It possesses an amazing diversity of re-newable and nonrenewable resources, in both metallic and non-metallic mining. We now have greater knowledge than before of our mineral potential, thanks to the SYS-MIN (System of Stabilization of Export Earnings from Min-ing 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 in-terests, raising the standards of regulation and control, and to increase our arbitra-tion capacity as a means of obtaining social licenses and attracting more qualified in-vestments. We are integrating a highly qualified profession-al team and establishing part-nerships with national and international institutions for the training of our human re-sources, and establishing new standards for exceptional ser-vice 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 is-sues such as the definition of investment objectives, which
must be financed with min-ing revenues. We must also finish the EITI (Extractive Industries Transparency Ini-tiative), and establish a “win-win-win” strategy where the state wins, the enterprises win, and so do the commu-nities. We are also engaged in reviewing and updating aspects as important as es-tablishing the cost of explora-tion patents, expediting and providing further reliability to the Mining Cadastre, for-malizing 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 expen-sive 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 import-ed fossil fuels, should we not achieve self-sufficiency. We are focused on simultaneous-ly boosting oil exploration on land and at sea, and also on the state’s promotion of re-newable energy.
What is your view on the trans-formation 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 econom-ic growth?The energy sector in the Do-minican Republic must under-go major changes, especially in the electricity subsector. Already the government has arranged a great Electrical Pact, as required by the Na-tional Development Strategy. This would entail a change in the nature of Dominican
capitalism, as well as the rules of governance of public com-panies. Our aim is for man-agement 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 develop-ment 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 pipe-lines on the southern coast, and also in the creation of an energy hub that includes ter-minals in the Northern region, preferably in the area of Man-zanillo, 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 renew-able 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 effi-ciency and savings plan is fo-cused 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 effi-ciency and government sav-ings law that will give access to this policy to the entire so-ciety. We aim to substantially increase the country’s fuel storage capacity, which is cru-cial in some categories. With a consumption of 140,000 bar-rels a day, it makes sense to increase the country’s refining capacity and take advantage of our geographical location and become a center of stor-age, processing, mixing, and regional and international distribution. ✖
THEBUSINESSYEAR60 DOMINICAN REPUBLIC 2015
I N T E R V I E W
The Dominican Republic ranks second with respect to its wealth of land and water bio-diversity 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 nat-ural diversity?The Dominican Republic has 26% of its geography designat-ed as protected area, amount-ing to a vast area of national parks. Therefore, protection of the fauna, flora, and biodi-versity of those areas is a core activity of The Ministry of En-
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.
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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.
nature KNOWS BEST
vironment and Natural Re-sources. It is crucial for the Do-minican Republic to preserve such natural areas as they give the country its unique heritage that must be passed on to fu-ture generations.
According to the Central Bank, the annual GDP growth rate in the Dominican Republic aver-aged at 5.5% from 1993 until 2014. In your opinion, which segments of the economy hold most potential for future devel-opment?The future growth of the econ-omy will mostly be based on tourism, although the agri-business will also play an im-portant 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 si-multaneously achieve macro-economic stability.
Today's world faces many envi-ronmental challenges. What is-sues is the Dominican Republic currently addressing?The main challenge we face is the management of the water-shed and river basins. Water is an essential element for our country for both human con-sumption and industrial us-age; 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 coopera-tion with local communities. I would say that deforestation is another key challenge, es-pecially 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 ex-tensive 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 com-promise be achieved?We first received the environ-mental impact report from the company that wanted to ex-ploit the area in 2012, and ana-lyzed if for around 10 months. Ultimately, the report did not meet our expectations and we denied the permit. Our deci-sion was based on Law 6400 of our Constitution. That is all I can say since we are the in-stitution making the final de-cision on Loma Miranda. The main element in this entire process is the social license; therefore we need to work on better explaining to Domini-can citizens the situation and plans for the area.
US Vice President Joseph Biden recently visited the Dominican Republic, in order to discuss details of the initiative support-ing the production of renewable energy. What is your view on the transformation of the energy sector in the Dominican Repub-lic, and what are the prospects for the future of clean technolo-gies and renewable energy pro-duction?We favor the implementa-tion of renewable energy projects as well as the trans-formation 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 pri-oritize the development of wind and solar energy proj-ects, two weather elements that are widely available in our country. We also see as positive steps the devel-opment of less damaging energy production projects in the country, as the main problem the Dominican Re-public has traditionally faced concerns its highly polluting energy generation systems. We also have some projects with energy generation com-panies to plant mahogany trees, which have high CO2 capture levels, around the areas where they have pro-duction 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 Environ-ment, and where would you like to see the country at the end of the year?We are pursuing presiden-tial goals, and expect to fur-ther advance in the recovery of the river basins along the Yuma and Ozama rivers, two rivers that play an es-sential role in the produc-tion of water in the country. We also want to successfully implement the planting of the 70 million trees I previ-ously mentioned. I want to increase the current 39% of forest cover to 41%. ✖
THEBUSINESSYEAR 61Energy & Mining
S O L A R E N E R G Y B 2 B
KAYA has brought more than 25 years of experience in solar en-ergy to the Dominican market, building almost 200 installa-tions since. What is your aver-age 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 Germa-ny. This is important because it was the Germans who, in large part, innovated and developed the technology that we all de-pend upon today. In terms of financial expertise, we have a talented team in New York with a background in private equi-ty 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.
KARINA CHEZCEO, KAYA Energy Group
IGNACIO GARCÍA VILCHESGeneral Director, Sofos Dominicana
TBY talks to two leading lights in the solar energy business on local advantages,
natural and regulatory investment opportunities, and select projects.
waiting FOR THE SUN
How would you assess the cur-rent regulatory environment in the Dominican Republic’s ener-gy sector?
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 govern-ment would do well to increase this figure, or else better pro-mote green energy. The same law enables us to sell our prod-ucts without VAT. Finally, there is the Regulation on Net Mea-surement, 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 chal-lenges at the beginning was to efficiently communicate to our clients the tax benefits they have according to law.
What are the major advantages of investing in the Dominican Republic’s energy sector, aside from Law 57-07?
KC I think a good starting point for that question is our solar re-sources. Consider this: to pro-duce 1,000 kWh in Berlin, you would need about 62 solar pan-els. 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 opera-tions in the Dominican Repub-lic can expect huge savings over the lifetime of the system. More-over, 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 dra-matic decline in the cost of so-lar 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 compo-nents have declined too. This means that more people can take advantage of this, leading to more jobs in the solar indus-try throughout the Caribbean across sectors beyond construc-tion and engineering.
Why has a Spanish company decided to establish operations in the Dominican Republic and what do you consider to be So-fos’ 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 sys-tems and around 20MW in the Northeast of Spain. We then looked into countries with en-ergy regulatory frameworks in which our products and services were sufficiently competitive. Upon extensive research we concluded that the Domini-can 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 Logis-tics, 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 ar-ray can supply around 100 fam-ilies that consume around 600 kWh per month. ✖
THEBUSINESSYEAR62 DOMINICAN REPUBLIC 2015
F O C U S R E N E W A B L E S
Economic growth, averaged at 5.7% over the last two decades, along with a population in-crease, 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 to-wards reducing its dependence on costly im-ported 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 Domini-can Republic is involved in the international climate change negotiations. In August 2013, the country became a member of the Green Cli-mate 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 Insti-tute's sustainable energy road map, even with the strong support for the development of re-newable sources in the Dominican Republic, there are still a few notable obstacles that the country needs to overcome. First of all, the Do-minican 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 de-velopment. 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. More-over, the terms offered by Dominican banks are no more favorable than those offered to inves-tors developing conventional power projects. In the words of Mark Konold, Worldwatch's Cli-mate 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 utiliz-ing them to their potential.”
THEY ALREADY DO ITSeveral private Dominican enterprises are de-veloping 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 compa-nies in achieving better performance is Sofos Dominicana, a Spanish enterprise which com-
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.
menced its operations in the Dominican Re-public in 2010. Over its four years of operations, Sofos has been engaged in solar energy projects for companies such as Frederic Schad, Indus-trias 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 ki-los generating around 750,000 kilowatt-hours (kWh) per year. Industrias Aguayo’s array con-sisting of 2,208 panels with an installed capaci-ty of 552 KW, generates approximately 825,000 kWh annually. According to Sofos Domini-cana’s CEO, Ignacio García Vilches, companies which invest in solar energy for their own con-sumption 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 Ci-bao International Airport in Santiago de los Ca-balleros, Dominican Republic’s second largest metropolis. GT500 MVX grid-tie solar inverters for 1.5 MW provide the Cibao International Air-port 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 en-ergy issue. The Dominican Republic’s National Energy Commission leads by example and uses Net Metering in order to reduce monthly ex-penses and protect the environment. Besides that, the Commission provides surplus renew-able energy to the grid, reducing the city’s total amount of energy based on fossil fuels.
REFORMS MAKE IT POSSIBLEThe Dominican Republic, with a stated goal of obtaining 25% of its energy from renew-able 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 57-07, in 2011, the government implemented a net metering provision allowing customers to take advantage of solar photovoltaic (PV) technolo-gy 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. ✖
THEBUSINESSYEAR 63Energy & Mining
OF ENERGY FROM RENEWABLE POWER
SOURCES BY 2025
25%
CO2
REDUCTION IN GREENHOUSE GAS (GHG) EMISSIONS BY 2030
25%
57-07RENEWABLE ENERGY LAW
GRANTS INVESTORS AND SEVERAL
INCENTIVES SUCH AS TAX EXEMPTIONS AND A FEED-IN-TARIFF (FIT),
CAME INTO FORCE IN 2007
HUGE SOLAR RESOURCESIN 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
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
The largest solar project developed
BERLIN
DR 30
62
SOLAR PANELS
SOLAR PANELS
Source: TBY Research
THEBUSINESSYEAR64 DOMINICAN REPUBLIC 2015
I N T E R V I E W
The Superintendency of Securi-ties 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 approv-al from the local Securities Exchange Commission (Su-perintendencia de Valores, SIV). EGE Haina is currently developing a new 50MW wind project next to the existing Los Cocos windfarm, called Lari-mar. The new wind farm will be composed of 15 state-of-the art Vestas V112 wind gen-erators, each with a 3.3MW capacity. This project is ex-pected 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 ex-cellent year by all metrics. With the recent addition of Los Cocos 2 (January 2013) and Quisqueya 2 (December 2013), our energy genera-tion 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-
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.
BIO
TBY talks to Marcelo Aicardi, General Manager of EGE Haina, on diversified investments and a
bumper year in 2014.
energetic STRIDES
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 Domin-ican Republic. In 2014, the additional generation provid-ed by the Quisqueya complex has reduced the cost of power in the Dominican Republic’s wholesale market by approx-imately 30%, or 5¢ per KWh. We also achieved our best heat rate ever at an average of 8,780 BTU/KWh HHV. Sim-ilarly, 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 Pederna-les by installing a new Hyun-dai engine. In terms of health and safety, our performance was excellent, with only two minor lost time incidents for the whole year. With the sig-nificant increase in produc-tion, 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 resourc-es, total operating costs in the first 10 months of 2014 were only 1.6% higher when com-pared to the same period of 2013. Most notably, G&A ex-penses were reduced by 40%
in relation to 2013. During 2014 the company conclud-ed the refinancing of a $175 million international bond, which included the issuance of a $100 million bond in the local debt capital market.
What challenges is EGE Haina facing with regard to the pow-er sector, and what initiatives have to be taken to improve sector performance and com-petitiveness? The principle obstacle in the electricity sector remains the poor operational perfor-mance of the distribution companies, which is char-acterized by substantial en-ergy losses resulting from electricity theft by end users. This situation has been ex-acerbated by the increase in fuel prices over the past five years, which has heavily im-pacted the distribution com-panies’ financial results and ability to pay for energy pur-chases 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 pro-duction of renewable energy in the Dominican Republic, could you tell us about your view on the transformation of the na-tional energy sector and your prospects for clean technol-ogies and renewable energy production?Over the past 15 years, the country’s energy matrix has gone from being 90% de-pendent on foreign oil im-ports, to being a diversified generation portfolio based on water, wind, natural gas, coal, and only 40% oil. Re-newable 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 en-ergy 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. ✖
THEBUSINESSYEAR 65Energy & Mining
Review M I N I N G
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.
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 di-versify operations. These developments are al-ready 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 op-erated 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 Baux-ite Mine.
As mining output rallies, advanced explora-tion projects are the key to long-term success and diversification away from a tourism-based economy. In this regard, a number of exit-
WHAT LIES BELOWing advanced exploration and promising, yet small operations are underway. Approximately 200km north of Santo Domingo, Unigold’s Ni-eta concession has been labeled a world-class deposit and is fully permitted for exploration. The site holds significant gold and copper re-sources upside, with 2Moz gold inferred re-source identified at Candelones. By mid-2014, Unigold had resumed its 5,000m drilling pro-gram at its Nieta concession. Exploration has begun at the Loma de Montazo target, which is 2km from Candelones, where inferred re-sources 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 in-clude 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 sug-gest a solid future in mining in the Dominican Republic.
Beyond metallic mining activity, the Do-minican Republic is the leading producer of cement in the Caribbean region, and accord-ing 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 long-term success and diversification away from a tourism-based economy.
THEBUSINESSYEAR66 DOMINICAN REPUBLIC 2015
ministry was further parsed into six deputy ministries, one of which deals exclusively with mining. Law 100-13 creating the ministry stip-ulates 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 me-tallic and non-metallic minerals”. The law also states that the ministry must “ensure the pro-tection, preservation and adequate exploitation of minerals.” In 2014, President Danilo Medina appointed Pelegrin Castillo Seman as the coun-try’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 fol-lowing suit. During 1H2013, gold exports in-creased 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 environmen-tal issues, mining companies can point to sig-nificant 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 Manage-ment 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 bar-riers for investors.” From a legislative stand-point, 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 sur-rounding the mine a national park. This change could raise Glencore’s operating costs, and is reminiscent of the government’s renegoti-ation 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 wheth-er the national park was constitutional and cit-ing the country’s mining laws and international treaties. President Medina’s precedent demon-strates that the Dominican Republic is serious about developing long-term relationships with mining companies that take into account both business and environmental concerns. ✖
THEBUSINESSYEAR 67Energy & Mining
I N T E R V I E W
The Center for Export and In-vestment of the Dominican Re-public (CEI-RD) and The Mining Management Office of the Do-minican Republic have recently agreed to work together in iden-tifying 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 Re-public 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 min-ing licenses from us. Investors do this directly after reach-ing 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 bu-reaucratic barriers.
Which minerals have the great-est importance for the Domini-can Republic, and which regions benefit the most from those de-posits?The Dominican Republic has a highly developed mining in-dustry, in particular in terms of its gold segment with the Pueblo Viejo mine, located approximately 100km north-west of the capital city of San-to Domingo, in the Sánchez
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 Dominican Republic. He 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.
BIO
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.
A MINE OF experienceRamirez Province; the nickel segment through Falcondo, situated in the town of Bonao, 80km north of Santo Domin-go; 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 baux-ite production—we export considerably through the Port of Cabo Rojo (Pedernales) to China. At the port, there is a large operation for the min-ing industry in terms of in-frastructure and vessels. We also have some other mining explorations with GoldQuest, which discovered a significant gold deposit in San Juan Prov-ince 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 cop-per in the Dajabon Province, near the border with Haiti. In terms of non-metallic mining activity, we are a leading pro-ducer of Portland cement in the Caribbean; we have sev-en cement production plants and installed capacity exceeds domestic demand, making room for considerable ex-port. 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 min-ing sector? I believe it is excellent, espe-cially since the government
provides full support to for-eign investors through a net-work of public institutions that help foreign investors arrive in the country and set up oper-ations. 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 min-ing industry, and the benefits of its regulatory framework at international events in Cana-da, Australia, and Switzerland. The most important need cur-rently is to identify potential areas of foreign investment. For example, the government asked us to identify the areas of the country in which min-ing 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. ✖
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
THEBUSINESSYEAR68 DOMINICAN REPUBLIC 2015
F O C U S G O L D
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 sup-port 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 Do-minican Republic export commodity. Cur-rently, the gold reserves in other Latin Amer-ican 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 Re-public 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 Manage-ment Office of the Dominican Republic esti-mates that the country has $60 billion in min-eral and metal reserves, including 40 million ounces of gold.
PUEBLO VIEJO MINEThe Pueblo Viejo Mine is located approxi-mately 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 Vie-jo 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 devel-oping the mine amounts to the largest single FDI in the history of the Dominican Republic.
THE GOLD RUSHWhile currently dwarfed by regional gold producers, the Dominican gold industry stands to become a key export vehicle.
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 EFFORTSSince 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 en-vironmental reclamation. Since acquisition of the Pueblo Viejo Mine, PVDC has re-vege-tated 3,500 hectares of land, built a large wa-ter treatment plant to treat water resources on site before discharging it into the local riv-er, and removed 180,000 cubic meters of con-taminated 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 DISCOVERIESThe gold exploration industry, although ac-tive 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 Re-public, commenced its exploration activity in May 2001. Currently, it is the leading explor-er, 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 pro-gram 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.
THEBUSINESSYEAR 69Energy & Mining
lar deal totaling Ps22.8 million. In 2013 Gold-Quest continued to grow the Romero miner-alization, 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 Rome-ro. In early 2014, GoldQuest initiated a Pre-liminary Economic Assessment (PEA) for the Romero Project, and completed an extensive airborne electromagnetic (ZTEM) survey over the Tireo formation. In May 2014 the compa-ny announced the results of the Romero Proj-ect PEA and commenced a 10,000m regional exploration drill program.
Yet despite significant investments and ro-bust 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 Domini-can government already understands that in order to fully exploit the country’s mining po-tential, its bureaucratic burden will have to be reduced. In July 2013, the Dominican Congress passed a law to create a new Ministry of Ener-gy 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. ✖
DOMINICAN REPUBLIC
SANTIAGO DE LOS
CABALLEROS
BONAO
SAN JUAN DE LA
MAGUANA
CEVICOS
SAMANA
ATLANTIC OCEAN
CARIBBEAN SEA
MAIMON
PUEBLO VIEJO
Gold MineSource: TBY Research
Deposits
Area Mines
THEBUSINESSYEAR70 DOMINICAN REPUBLIC 2015
I N T E R V I E W
GoldQuest commenced explo-ration in the Dominican Re-public in May 2001. Why has a Canadian company decided to locate its operations here?Historically, the strong poten-tial for gold on the island has been well known. For exam-ple, Pueblo Viejo, the largest gold mine in Latin America, was known about during co-lonial times. Hence, there is a history of sizable gold produc-tion here. This means that the Dominican Republic is attrac-tive 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 Gold-Quest decided it was a good time and place to do some ex-ploration. We came and initi-ated 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 Cordille-ra 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 look-ing there at the time. There-fore, we were the group to ini-tiate exploration. A discovery is a rarity in geology and min-ing, and usually follows after several years of exploration. Therefore, we were initially undertaking highly regional-ized work. We did not invest or explore significantly until 2010 when we decided to probe deeper into those areas where
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.
BIO
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.
surveying THE LAND
we found anomalies. In 2012 we made a major discovery, whereby we became the most successful junior company in the world that year. We be-lieve there is huge potential in the Dominican Republic and Haiti for mineral exploration and development. In my opin-ion, the minerals that are the most important so far are cop-per and gold, although there is also silver and zinc present. I would say those four metals could hold the greatest poten-tial for the island in the future. But this will require consider-able 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 con-sider 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 com-pany of choice for investors; they invested substantially in our company and we decid-ed to utilize the most effective technology. We have a sub-stantial 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 un-dertake effective exploration work we had to resort to tech-niques 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, rath-er than doing the task on foot. The survey gives you an indi-cation 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 con-siderable depth, whilst show-ing fine detail. In addition to the airborne survey we do ground surveying; this means traditional mapping, and we still have to perform the sam-pling and drilling. This is basi-cally what we are using; all the technology available to focus on mineral deposits.
How does GoldQuest incorpo-rate social responsibility into its mining projects in the Domini-can Republic?Mining has to be integrat-ed into society and has to be conducted with a high level of responsibility for the people living in the area. We are car-rying 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 envi-ronmental permit we have sufficient proof, historical-ly, 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 rea-son, 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 scholar-ships to locals to go to Institu-to Tecnológico de Santo Do-mingo (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. Fur-thermore, there was no health unit in the area we operate in, so we created one for the ben-efit of both the community, and our own staff. We offer comprehensive healthcare and security for workers and their families. ✖
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R E V I E W
Industry
76 75 73 Mícalo Bermúdez, President of Tamboril Free Zone Park, on jobs for locals and accommodating new clients.
Leading cigar makers from the Dominican Republic talk about the industry and the challenges it faces today.
Alberto Nogueira, Manager/CEO of BEICA, on its new white rum, markets and sales volumes, and the company’s museum.
T
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.
The sustained focus on SMEs, coupled with the traditional bedrock of free industrial zones (FIZs), bodes well for 2015—and beyond.
he Dominican Re-public’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 manufactur-ing, agricultural, technology, transportation, and mari-time sectors, in promoting exports and raising employ-ment 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 industri-al sectors.” In 2014-15, these areas are being targeted for renewed growth. Loan restric-tions to SMEs have been eased and banks are encouraged to support applications for start-
SPRINGBOARDup and growth funds in 2015. In addition, the micro-firms and SMEs are often integral to the operations of large corpo-rations, many of whom work alongside the SMEs in suc-cessful 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 Do-minicans who are employed informally is falling as more employees obtain papers and official status.
Industry in 2014 registered strong growth in two partic-ular areas, the first being au-tomotive. A large automobile and machinery manufactur-ing 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, in-cluding 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
Image: MATASA
THEBUSINESSYEAR72 DOMINICAN REPUBLIC 2015
LUIS FERNANDO ENCISOGeneral 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, Trin-idad and Tobago, Haiti, Puerto Rico, and the Bahamas. There are 26 countries in the region. We would ultimately like to cov-er at least 50% of that territory.
How does BON select sup-pliers 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 purchas-ing department reviews every potential supplier for suitability. We visit at least 80% of our suppliers’ plants to review their production processes. Some 50-60% of our suppliers are over-seas businesses and our focus for the near future is to develop local suppliers, so we can better contribute to the development of the economy.
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 Do-minican Republic’s traditional and most re-nowned industries. Cigars, rum, and sugar ex-ports are all markedly up year-on-year. Cigar manufacturing dates back to the 17th Century, and sugar was the very backbone of the coun-try’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 gov-ernment revenue from merchandise taxation, and makes up around 6% of total exports. The Dominican Republic’s cigars occupy a high-end 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 ex-tent, America, the Dominican Republic’s prin-ciple trade partner.
Rum—perhaps the second most famous Do-minican product—is appreciated even more at home. Exports generate only around $140 million worth of sales each year, while the do-mestic rum industry is estimated to be worth almost $1 billion. That being said, exports to certain markets are growing strongly, with de-mand 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 cof-fee 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 addition-al 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 part-nerships (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 peo-ple—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 ac-count 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 par-ticular gold. Global demand for gold has helped the sector grow almost 10 fold over the past two years. Other notable minerals mined extensive-ly in the country are nickel, bauxite, and silver. Non-metals that are quarried also include gem-stones, 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 min-ing currently accounting for around 35% of the machinery sector. This sector has also benefit-ted 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 electri-cal goods.
Indeed, household spending may well prove to be the real underlying driver of industrial growth in the long term. The increased spend-ing power of the middle classes will fuel de-mand at home and this, coupled with good trading links abroad and the long-established FIZs, should ensure industrial growth is as-sured a gleaming future. ✖
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.
THEBUSINESSYEAR 73Industry
I N T E R V I E W
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.
BIO
Could you elaborate on the new-ly released Barceló Blanco Añe-jado? What are the trends in de-mand and what was the overall reaction of the market?The new product was launched in April 2014, cater-ing 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 in-novative philosophy and the consumers’ appreciation for value-added attributes. In our case an avant-garde pack-aging 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 BEI-CA 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 inspir-ing challenge. It is relevant to highlight that the most signif-icant 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 position-ing and lack of international
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.
that’s the SPIRIT
exposure we do not consid-er 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 pro-duction process starting with the harvest of our own sugar cane and ending with inter-nationally awarded spirits. We have reached export lev-els 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 pro-duction, and of the products dedicated to exports 50% go to Spain, while Chile is the
second market. In both these markets, Ron Barceló occu-pies a leading position. The US, Russia, Peru, Germany, and Honduras are also ma-jor export destinations in our portfolio. For the moment, we are not looking for new mar-kets, specifically, but rather we are focused on improving our standing in markets in which we are already present. We are more motivated to at-tain 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 inter-national distribution.
You mentioned that 40% of pro-duction is consumed in the Do-minican Republic. Do you see the room for the further growth of local demand?The rum market in the Do-minican Republic has been stable in terms of volume for the past few years. Even though the whiskey market has decreased against premi-um rum preference I do not really think that the Domin-ican Republic can consume much more rum than it does today. The Dominican Re-public ranks fifth in the world in absolute numbers. Just af-ter the US, India, the Philip-pines, and Cuba. In per cap-ita 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 planta-tion, through to how it is cut, how alcohol is obtained out of sugar cane juice, the pro-cesses of fermentation, distil-lation, 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 Mu-seum, 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. ✖
Ron Barceló is among the 10 brands chosen by International Wine and Spirits Research (IWSR) to join the exclusive Elite Brands List
THEBUSINESSYEAR74 DOMINICAN REPUBLIC 2015
F O C U S F T Z s
There are currently 55 free trade zone (FTZ) industrial parks operating in the Dominican Republic, tailored to a number of sectors in-cluding: textiles, footwear, jewelry manufac-turing, assembly of electronic components, medical and pharmaceutical products, to-bacco processing, and telecommunications, among others.
The Dominican Republic’s FTZs can be di-vided 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 re-sources, for which processing would be difficult if not located near the sources of raw materials.
LEGAL FRAMEWORKForeign companies, investing in the Domini-can Republic do not require a local partner, and their investments are not restricted in terms of participation in the organization’s capital, ex-cept for a few sectors, such as air transport and broadcasting.
The Dominican Republic’s FTZs are regulat-ed 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 De-cree 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).
FTASAs 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-
FREE FOR ALLThe 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.
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 de-velopment.
EXPORTSRegistration of exporters in the Dominican Re-public is not compulsory, however, as stated in Law No. 84-99 on boosting and promoting ex-ports, 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). Addi-tionally, all export transactions in the Domin-ican Republic, including the ones from FTZs, require the submission of the Single Customs Declaration for the Dominican Republic (DUA) to the Dominican Republic’s Director-ate-General of Customs (DGA).
INTO LABORSeveral manufacturing firms established in the Dominican FTZ have voluntary codes of con-duct including worker rights protection clauses aligned with the International Labor Organi-zation (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 Profes-sional Education (INFOTEP), the international agreements subscribed to and rectified by the Dominican government and the Sanitary Laws for the industrial infrastructures.” Addition-ally, companies established is the Dominican Republic’s FTZs pay 1% of their monthly pay-rolls 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, remunera-tion, and collateral benefits. ✖
THEBUSINESSYEAR 75Industry
C I G A R S B 2 B
How do you fit into the Dominican Republic’s tobacco industry and how have the Free Trade Zones assisted in your development?
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 ap-proximately 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 com-plete tobacco cluster in the world. We have companies that produce the supplies we need like boxes, cigar rings, cello-phanes, 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 locat-ed 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 facto-ry. We were not cigar makers in Cuba, but leaf brokers, and my
Leading cigar makers from the Dominican Republic talk about the
industry, the challenges it faces today, and the secret of a great cigar.
THE FINER things in life
MANUEL QUESADA President, MATASA
HENDRIK KELNER Vice-Chairman, TabaDom Holding & President of PROCIGAR
great-grandfather and his broth-er 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 tobac-co. 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.
What is your view on the cur-rent regulatory and fiscal environment in the Domini-can 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 regula-tions do not excessively impact the industry worldwide. Austra-lia is a case in point, where the introduction of generic packag-ing of the same color and design two years ago has not reduced cigar consumption. Most ci-gar smokers are low consumer adults, who enjoy perhaps three cigars per week.
MQ We face a number of chal-lenges, 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 Do-minican 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. To-bacco prohibition in our major market, the US, runs from city to county, and from state to feder-al 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 pro-duction of 60,000 units. We also have a new professional team running the company in Switzer-land. They had the idea to create a Davidoff Nicaragua, but pro-duce it in the Dominican Repub-lic with Nicaraguan tobacco. The Davidoff Nicaragua is rather dif-ferent, 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 coun-tries that we use the most are the Dominican Republic, Nic-aragua, and Honduras, but we also have to mention that we use tobacco from Mexico, Ecuador, the US, Indonesia, Brazil, Peru, Costa Rica, Cam-eroon, and Colombia. The sec-ond way to make a premium cigar is to make a blend, this means that you have materi-als 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 Domini-can Republic, Nicaragua, Hon-duras, Mexico, Ecuador, and the US. When making a blend you have the option to com-bine different tobaccos to cre-ate a unique cigar that using only tobacco from one country cannot accomplish. ✖
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I N T E R V I E W
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.
BIO
in the ZONETBY 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 Repub-lic, and what is its contribution to the socioeconomic develop-ment of Santiago?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 rev-enues, salaries, and expens-es 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 ex-panding our capacity in con-struction, and currently have 23 buildings, and more than 93,000 sqm in area terms. At the moment, we are a com-bination of a real estate firm providing the buildings and all the necessary infrastruc-ture, and a logistics and ser-vice company through our support for clients who want to set up their own factories by themselves. We have an-other model that allows us to also become part of the busi-ness, 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 indus-try. I come from the manu-
facturing industry and have been making shoes in the free zone for the past 25 years. We are using a combination of at-tracting customers with an of-fer of state-of-the-art facilities to set up their own factories, and strategic partnerships to make and develop shoe facto-ries in a joint venture model.
What is the importance of host-ing companies such as Taiwan-ese 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 Repub-lic since the country signed the Central America Free Trade Agreement (CAFTA-DR). We participated in the CAFTA-DR negotiations, rep-resenting the private sector, specifically the shoe sector.
I had the opportunity to be part of the committee repre-senting the country, thanks to the Minister of Industry at the time, Sonia Guzmán. She did a tremendous job in ne-gotiating 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 ori-gin,” 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 transforma-tion,” 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, proxim-ity 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 em-ployees. This is bringing the attention of other companies to the Dominican Republic.
Becoming a strategic part-ner with a company like this has been important for us. We are a partner here help-ing them to set up the facil-ity, training the personnel, controlling the costs, and working with the technical staff. We are involved in the logistics of bringing materi-als 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 Do-minican Republic, in compli-ance with the CAFTA-DR re-quirements. ✖
Tamboril Free Zone Park • Founded in 1997 • Specialized in footwear industry
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R E V I E W
Telecoms & IT
82 81 80 The Dominican Republic has an 88% wireless lines teledensity, with over 9.2 million mobile phones in use.
Stuart J. Cranston, CEO of United Nearshore Operations (UNO), on tailoring support solutions for the customer base.
Rudy A. Ganna, President & CEO of Laurus International, on customized solutions for clients and retaining the best staff.
A
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.
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.
ccording to inter-net security giant Kaspersky, 70% of emails sent glob-
ally in 2013 were spam. And now the good news. The twin-ning of technology and com-merce, 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 as-sert that by 2020 the glob-al services sector, today at 20% of world trade, will have claimed a huge 55%. The Do-minican Republic, and its Ca-ribbean neighbors, is aware of the need to plug competi-tively into this new economy, and develop an information society of raised education levels, and a skilled workforce for sustainable economic de-velopment. This conforms to the government’s ICT4D dig-ital strategy—a catchy acro-nym—the last two characters of which mean “for develop-ment.” Furthermore, by ex-tension, technology, notably
IT CAN BE ACHIEVEDmobile telephony, is being creatively shoehorned into fi-nancial processes to raise in-clusion levels and extend the registered economy. In light of these tendencies, and to di-versify 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 ser-vice 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 Do-minican Chamber of ICT (CÁMARA TIC) fosters the sustainable growth of the re-public’s technological back-bone, while stimulating the competitiveness of the local ICT sector. Formed by sector players, it seeks to make sure that the sector maximizes its
THEBUSINESSYEAR78 DOMINICAN REPUBLIC 2015
ERIK PÉREZ VEGAPresident, Cluster of Contact Centers and Business Process Outsourcing from the Dominican Republic
Could you tell us the idea be-hind 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 or-ganized, while having a common country agenda also under-pinned the decision to launch the Cluster. The Center for Export and Investment of the Dominican Republic (CEI-RD), and the Center For Competitive-ness funded our start up. We now have 40 members including call centers, industry-related businesses, and universities.
How would you rate the attrac-tiveness of the Dominican Re-public as an FDI destination?The main benefit of investing in ICT here is employee loyalty. The business environment over-all 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 govern-ment 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.
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 ONThe 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 econo-mies. This breathing space enabled sustained investment in the national backbone for wire-less broadband, on which all above-men-tioned business opportunities are predicated.
Local Telecoms regulator INDOTEL de-clared that the Dominican Republic had at-tained 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, giv-ing 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 en-abled 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 pri-mary 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 ITThe Internet Society’s report—Global Inter-net Report 2014 —indicates that the world is today approaching 3 billion internet users. Accordingly, for 2013 the Dominican Repub-lic 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 mo-bile broadband subscriptions, also on a rising trend, registered at 8% from 5% in 2012 ac-cording 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 IN-DOTEL in selling-off frequencies, suspended since 2011—will boost local communications. In May 2014 it sold spectrum in the 1700-2100MHz and 941-960MHz bands to Orange Dominicana and Claro Dominican Republic, with revenue generated to in part fund the na-tional shift to digital TV. The government has already begun handing out one million decod-ers to ease the transition.
ON THE GOFor 2013 according to BuddeComm, while the Republic had just 5.1% broadband penetra-tion 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, operat-ing 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 majori-ty, at around 7.5 million were prepaid, while around 1.7 million were postpaid lines.
A benchmark of a competitive mobile mar-ket, number portability (NP) in the republic commenced at the end of September 2009, although the Free Trade Agreement signed be-
ICT Service Exports (% of Service Exports, BOP)Source: Trading Economics
5
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THEBUSINESSYEAR 79Telecoms & 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-ori-ented competition has dented average rev-enue 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 con-solidation 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 Or-ange Dominicana to Altice Group as part of a withdrawal from non-strategic markets. The latter also purchased integrated telecoms ser-vices provider Tricom Telecom.
INDIA IN THE CARIBBEANThe Dominican Republic has galvanized the private sector, universities and software enti-ties into ClusterSoft, an NGO geared at promot-ing the Dominican Republic as the preferred near-shore IT outsourcing destination as a re-gional rival to the familiar Indian call center, today a staple of popular culture. The coun-try’s IT sector revolves around software devel-opment 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 Carib-bean. 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 loca-tion is not essential so long as a local skilled workforce is at hand at locales beyond major urban areas. Companies like Laurus Interna-tional provide a full array of domestic, near-shore, 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 prob-lem in cities such as Santo Domingo, that are often not designed to accommodate the re-sulting 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 uni-versity where 600 students graduating every semester. Approximately 40% of each graduat-ing class decides to work for UNO.”
Also in the field, Erik Pérez Vega is the Pres-ident of the Cluster of Contact Centers and Business Process Outsourcing of the Domini-can Republic. He explained how: “The Center for Export and Investment of the Dominican Republic (CEI-RD), and the Center For Com-petitiveness 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 indus-try-related suppliers, or industry-related sup-portive 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 NATIONOn around 111,500 sqm of area for develop-ment, 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 economi-cally productive businesses that receive incen-tives relative to their anticipated contribution to the local economy. ✖
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.
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Rudy A. Ganna received his degree in Electro-Chemistry 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.
BIO
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.
on CALLWhat technologies has Laurus introduced to increase its agents productivity and custom-er satisfaction?When we acquire a new cli-ent, we do not initially focus on productivity or quality ini-tiatives. Every client and pro-gram is unique, and we need to understand the program. Hence, we normally contrac-tually agree that we own the program for the first 90, days during which time we devel-op 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 quali-ty, we apply our strengths in customer care and technical support experience to develop solutions. We have highly ex-perienced development and IT teams that have designed and developed automation solutions that eliminate han-dling time in the majority of cases, and operate an internal process to monitor quality. In our experience, US clients want quality first and efficien-cy a close second. We have de-veloped software, and hard-ware with special keyboards, that allow quicker access to key systems and information for our agents. Beyond tech-nology and innovation, we also invest heavily in our em-ployees through our recruit-ing and retention initiatives. We have the lowest rate of attrition for both English and Spanish-speaking agents.
What is the average profile of 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 eth-ics, respect, productivity, and challenge the current culture that dominates in many in-dustries. Laurus International offers equal work and career opportunities for everybody. Another interesting consid-eration is the number of stu-dents who join us straight from universities. Approxi-mately 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 indus-tries with similar experience. It is difficult to find a job in the Dominican Republic that pays Ps30,000 or more. In the sum-mer, 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 recruit-ing, managing, retaining, and rewarding employees. Ulti-mately, the industry’s prima-ry asset is its human capital. We set up Working Bees, our HR department, as an inte-
grated but separate division focused solely on recruitment, retention, and employee de-velopment. It is housed in a separate building and main-tains responsibility for all re-cruiting 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 fo-cus on constant improvement makes us the most respect-ed 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 avail-able 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. ✖
Fully virtualized environment with biometric access control throughout the facility, including agent desktops
THEBUSINESSYEAR 81Telecoms & IT
I N T E R V I E W
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 re-sources and the need for such services globally. Santiago’s population and the local ed-ucation system rank among the key reasons for establish-ing the operations. We are an experienced global manage-ment sector team. I brought my personal experience of 27 years in the technology in-dustry, and we had around 20 employees at UNO at that point. Then, in the first year we grew by 900%. We contin-ue 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 San-tiago in different business sectors, such as HR, IT, mar-keting, and business devel-opment. 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 impor-tantly 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
Stuart J. Cranston is a 28-year 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.
BIO
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.
WE AREhere for you
mission through the call-cen-ter company industry in the Dominican Republic and the government. Our aim was to train 100,000 young stu-dents in the English language. UNO has an English language university, and we have 600 students graduating every se-mester. Approximately 40% of each graduating class decides to work for UNO. They can de-velop different careers with us in customer Service, IT sup-port, HR, quality assurance, marketing, and even business development.
What types of operations is UNO involved in?There are three core services we provide today, technical support, acquisitions, and customer support. Approxi-mately 85% of our business is in those service verticals. Other services we provide in-clude BPO, quality assurance, and application support and maintenance. UNO has pro-vided 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 em-brace 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 Secu-rity Standard (Level 1) in June 2011. What is the importance of this certification in terms of building customer trust?My strategy for 2011 was to implement security stan-dards based on my previous experience in IT technolo-gy—I had federal and com-mercial clients that demand-ed the highest level of data security; therefore, we started initiating the PCI DSS process in 2009. We hired consultants to walk us through the pro-cess, but ultimately received accreditation by undertaking the work internally. We have never had a breach of secu-rity, or had a complaint filed against us by any of our cli-ents. We do not actually store the data here, but ensure that any data transmitted is en-crypted. The call center industry has generated more than 32,000 po-sitions over the past few years, with 56,000 posts anticipated by 2016. How does UNO plan to respond to that upward trend?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 lev-el, 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 com-petitive 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 recog-nized internationally. ✖
UNO offers free English language classes to students in Santiago and surrounding areas
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F O C U S M O B I L E T E L E P H O N Y
The telecommunications industry of the Do-minican Republic is fully private and has ex-perienced remarkable growth over the past few years, positioning the country among those with the most advanced telecommu-nications 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 FRAMEWORKThe Dominican Republic has an excellent le-gal framework for the telecom sector, based on Law No. 153-98 (General Law of Telecom-munications), Law 126-02 on Electronic Com-merce and Digital Signature, Law 53-07 on High Tech Crime, as well as several comple-mentary laws, and considerable rules and reg-ulations underpinning the business climate.
The state telecoms regulatory entity, Insti-tuto Dominicano de las Telecomunicaciones (INDOTEL), supervises the provision of ser-vices in the industry and oversees the applica-tion of telecommunications laws. Founded in 1999, INDOTEL, besides its regulatory func-tion, is also legally recognized as the arbitra-
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.
WIRELESS
tor in conflicts related to telecommunication services. Another role of INDOTEL is facilitat-ing 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 Do-minicana, which operates the Claro brand and is a subsidiary of América Móvil and Or-ange Dominicana, which used to be a subsid-iary of France Télécom until late 2013, when in accordance with the agreement signed on November 26, 2013 between Orange and Al-tice, Orange completed the sale of 100% of Or-ange 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 qual-ity 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 unreg-istered SIM cards can no longer be purchased on the high street. ✖
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Maritime
The commercial success of ports lies not only in their location and productivity, but also in value-added logistics services.
Ewald Th. Heinsen, President of E.T. Heinsen and the ANRD on passing the right laws to boost trading volume.
Karsten H. Windeler, President of the Board of Directors of Maritima Dominicana, on expanding services.
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According to the World Bank, the number of TEUs increased from 1,461,492 in 2012 to 1,519,952 in 2013.
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.
ith its prime lo-cation in the Ca-ribbean Sea, mid-way 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 Domini-can Republic is a net importer, with total imports coming to $11.3 billion in the year to Jan-uary 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 ter-minals, and in infrastruc-ture 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 continu-ing an already healthy trend. Over the past four years, the
ALL ABOARD!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.
The Dominican Republic has seven sea ports and six container terminals at stra-tegic locations mainly on the country’s northern and south-ern coasts. Many of these have undergone redevelopment in the past few years.
The biggest and most im-portant port is Rio Haina, managed under a 30-year contract by Haina Interna-tional 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 Interna-tional has invested more than $70 million over the past four years, greatly increasing the handling capabilities of the port, and has installed state-of-the-art cargo processing
Image: Caribe Trans
THEBUSINESSYEAR84 DOMINICAN REPUBLIC 2015
TONY VASQUEZPresident, 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.
plants. This has given the port a significant ad-vantage, 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 be-fore. 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 pro-duced 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, han-dling more than 298,000 TEUs.
The port of Santo Domingo, closest to the capital, is built for transit vessels, with a du-al-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 han-dle almost 5,000 passengers and crew each day,
as well as accommodating cruise ships. The re-cent upgrades have significantly increased ca-pacity 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 Ro-mana, and San Pedro De Masan.
Perhaps the most challenging thing now is to sustain the current levels of growth in the Do-minican Republic’s maritime sector. Yet, the government is putting in place decent mea-sures to facilitate future expansion. These in-clude further investment—many of the ports are scheduled for further upgrades in the com-ing 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 econo-my picking up speed again in 2014, the Domin-ican 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 in-dustry. In October 2014, Carnival Corp. an-nounced an ambitious project to build new ports in the Dominican Republic and Haiti. To-gether 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 Pla-ta. 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, continu-ing a timeless tradition of seafaring and freight that has underpinned the country’s growth for so long. This island nation looks set to con-tinue 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. ✖
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.
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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 co-founded 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.
BIO
Maritima Dominicana has re-cently met with the Vice-Pres-ident of the US, Joseph Biden, to discuss the details of the ini-tiative supporting the produc-tion 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 Domin-ican Republic?The shipping sector is looking at options to provide more environmentally acceptable vessel fuels. Maritima Domin-icana, as a service provider to both the shipping industry and local industry, is also fo-cused on more efficient en-ergy production, and ways in which we can provide our own services, for example warehousing, in a more envi-ronmentally 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 envi-ronment.
In 2014 you mentioned that Maritima Dominicana planned to expand its business to supply chain management. How far has
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 this initiative advanced, and to what extent do you want to ex-pand 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 con-struct a logistic free zone to fa-cilitate supply chain manage-ment, 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. Fur-thermore, the transformation of the customs legal structure that we have been discussing with the government intense-ly over the past 12 months will be brought in too.
Maritima Dominicana has re-cently participated in the lead-ing 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 interna-tionally?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 Ship-yards, 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 attend-ing and the largest number of visitors ever. This was part-ly 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 interna-tional 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 tech-nology. 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, Ham-burg, and Rotterdam cannot find the fuel that they need. The suppliers themselves are also facing a challenge. Ham-burg 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 con-cerns about is the negative bal-ance of trade in the Dominican
Republic. What is your view on this situation and how does it af-fect the industry?With a balanced trade a coun-try 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-ex-istent. It is just a cost. There-fore, the struggle for each nation to balance its trade is an opportunity to be more competitive. They are look-ing for incentives, particularly in connection with the legal structure, so that the Domin-ican Republic, its free zones, and its agricultural producers, can export more volume com-pared to what we have done in the past, and reach a more balanced exchange of trade. ✖
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Caribe Trans is a member of several associations, includ-ing FIATA, IATA, and ADA-CAM. How does the company benefit from this, especially in terms of exchanging exper-tise and know-how with other associates?We are members of FIATA and IATA, and these two or-ganizations were created long ago in order to regulate business activity in the air cargo transportation (IATA) and freight forwarding (FIA-TA) segments. These associ-ations offer regular training and education programs for their members, and also lob-by governments to recognize the association’s concerns, initiatives, and proposals. Throughout the years, both have become leading institu-tions 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 asso-ciation that will look after all of our associates involved in the supply chain man-agement industry. The Do-minican Republic’s logistics industry lacked such a com-mon vision, and as the coun-try raised its profile as a third party logistics provider cli-ents required a complete and fully integrated logistics ser-vice. 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
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.
BIO
TBY talks to Luis M. Bogaert, President of Caribe Trans, on knowledge transfer, innovation, and investment.
shipping lines
to the need of the clients. Our company provides third party logistics services, but we also handle air cargo in collabora-tion 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 forward-ing division. More recently, we have focused on green energies, especially wind energy, and we had a major contract with one of the larg-est suppliers. We also have customs brokerage services as an Authorized Econom-ic Operator (OEA), and we offer a team of experienced technicians to perform all the processes related to imports, exports, and logistics in gen-eral. We also have our own warehouses operating in the major airports in the coun-try. In addition, we are part of a larger logistics project for the development of the new Haina logistics center. Lately, we have noticed that custom-ers are starting to understand they could have a lean man-agement model implemented in their companies by reach-ing 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 ma-jor challenge with the revamp of our IT system in the com-pany, 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 indus-try standards such as the ISO 9001:2008, BASC, ISSAGO, and the OEA.
What is the significance of the $5 billion investment in the ex-pansion of the Panama Canal for Caribe Trans, and for the overall logistics sector in the Dominican Republic?The Panama Canal is a cru-cial gateway to our part of the world, and its expansion will mean an influx of greater car-go volumes into the region. The Dominican Republic has much to offer, with the Cau-cedo Port serving as a hub tar-geting South America, Europe, and Haina Port which handles a great volume of the US cargo
plus having the great advan-tage of being inside the city and closer to the logistics cen-ters 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 competi-tive. The government is aware of the country’s potential in this area, and has publicly de-clared support for its develop-ment. 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 be-tween Punta Cana, Santiago, and Santo Domingo, and we also have the capabilities and the potential. ✖
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E.T. Heinsen SAS celebrates its 90th anniversary in 2014. What do you consider the com-pany’s landmark achievement? The main landmark has been the transfer of control within the family to the fourth gen-eration. That alone is quite an achievement and something that is looked up to by the many companies that strug-gle 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.
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.
BIO
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.
DELIVERINGthe goods
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 tax-free and be exported without incurring additional fees. Moreover, when you con-sider north/south business, the Dominican Republic is between Brazil and Argenti-na, and the US and Canada, which means considerable traffic going from north to south, which could easi-ly stop here and distribute goods into Central America, by taking advantage of the transshipment port. And when considering Europe and the Dominican Repub-lic, you see that the first port of call to any service between the two continents is the Do-minican Republic, which is also an attractive proposi-tion 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 Do-minican 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 pro-vide 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 in-terested, as is the government and, of course, ourselves. We hope to see the cluster up and running in 1H2015.
E.T. Heinsen, through sister company Transporte Impala, also provides inland transport services. What importance do you give to that part of the business?The biggest problem in the Dominican Republic with regards to logistics is the mo-nopoly on in-land transpor-tation. We are not members of Fenatrado and can distrib-ute in containers and chassis anywhere in the Dominican Republic. Soon, we will enter other markets, and are already building our strategy accord-ingly, and also undertaking local distribution between industries. Industries that en-gage heavily in distribution are trying to outsource their trans-portation, which is why we provide a truck and personnel exclusively for them, and they ultimately save money.
What are Heinsen’s current de-velopment strategy and key ob-jectives for 2015?For 2015, we forecast gener-ating at least 15% greater rev-enue than today. The primary goal is to keep costs low, in-crease productivity, and reg-ister better results. But each individual line of our business has its own goals. In the ship-ping and transportation sec-tors, we want to expand and post a better bottom-line. At the airports, we want addition-al representation from the US.
On the logistics side, we are keen to enter more into ware-housing, which is important, as it is a totally new business line. Meanwhile, we are a ma-jor stakeholder in the Port of Rio Haina, and are not only upgrading operational soft-ware, but also expanding our capacity as a logistics opera-tor. For example, grain com-ing from New Orleans to the Dominican Republic in huge bulk carriers is actually dis-charged 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. ✖
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F O C U S D O M I N I C A N P O R T S
HUB-READYIn 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 logistics services.
THE DOMINICAN REPUBLIC has a great advan-tage 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 suc-cess of ports lies not only in their location and produc-tivity 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 un-dergoing significant developments.
Rio Haina, located just 10km away from Santo Do-mingo, 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 Organiza-tion. 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 cen-ter.” 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 Do-mingo. 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 internation-al 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 logis-tics center with one-stop shopping services to further facilitate international commerce and bring the Do-minican Republic a significant competitive advantage over other regional players. ✖
THEBUSINESSYEAR 89Maritime
I N T E R V I E W
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.”
BIO
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.
UNLOADINGthe hub What is the significance of the logistics center with one-stop shopping services you are cur-rently developing, and what are the prospects for this initiative?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 devel-opment 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 lo-cal 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 em-ployment. We have an area of land of about 40 hectares currently being developed. We have the option to devel-op a further 80 hectares mak-ing a total of 120 hectares. We see this as an opportunity to develop growth and further promote the Dominican Re-public 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 trans-formed 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 interna-tional commerce.
How do you evaluate Caucedo’s performance in 2014 and its con-tribution to the local economy?We are a key point in the lo-cal economy. On a national basis, about 60% of the cargo going in and out of the coun-try comes through here. In the captive market, we han-dle about 64.5% of the cargo. This is also able to attract in-ternational businesses on the strength of our sizable port. In terms of performance, we are in the top tier and we can of-fer 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 manu-al and paper-based work to the online environment, all to make it easier for our custom-ers to do business with us, and the Dominican Republic more competitive.
What is the significance of the partnership with DP World, one of the largest maritime terminal operators in the world?I consider ours a good com-bination. DP World operates more than 60 ports around the world and we bring the know-how on operating the port, while it is also a challenge for a global company to enter and manage 60 different local cul-tures or environments. As a result, having a local partner is extremely important. We con-tribute equally to the partner-ship and success of Caucedo.
What role does security play at Caucedo?We now hold all possible cer-tifications. Security in this region is an important topic, and we are all unfortunate-ly challenged by a certain trade in illegal commodities, which we actively seek to prevent. We enjoy close co-operation with the local au-thorities 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 com-modities, and are looking to enhance our scanning capa-bilities to the point where the latest technology allows us to penetrate the entire container to identify suspi-cious materials. Early in 2015 we will have in place one of the most efficient and mod-ern scanners available on the market today, increasing the number of scanners in Cau-cedo to two.
What other plans are set for 2015?The key considerations for us are developing the Port Community System, con-tinuing to grow our Cacuedo Logistic Center, and further preparing the Port for the opening of the Panama Ca-nal. In 2015 we will deepen the current draft of the port from 13.5m to 15m, which will enable the port to the re-ceive larger vessels once the Panama Canal expansion is completed. On smaller proj-ects, we seek ways to reduce our CO2 footprint and save energy. ✖
THEBUSINESSYEAR90 DOMINICAN REPUBLIC 2015
I N T E R V I E W
How is Haina adapting to the expansion of the Panama Ca-nal, and how will it impact the shipping industry in the Domin-ican 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 oth-er types of vessels. Our focus is on intra regional trade, es-pecially with the US, and on serving feeder vessels that come from other transship-ping 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 exam-ple the Far East to North America, whereby the imme-diate direct impact for Haina will be limited. The expan-sion 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, al-though that does not direct-ly translate into increased regional trade as some have suggested. The reality is that growth in maritime trade is driven mainly by the eco-nomic development of the in-dividual countries. There will be an increase in demand for transshipment services for the larger vessels, and mul-tiple countries including the Dominican are competing to capture it.
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 non-profit private organization focused on increasing security in the total supply chain. He also sits on the board for the Dominican Shippers’ Association.
BIO
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 Haina was the first Dominican Port to receive ISO9001-2008 certification and the first com-pany in the country to receive Authorized Economic Operator certification. What role does se-curity play in your operations?Security is of the essence. The port is ISPS-certified by the In-ternational Maritime Organi-zation, and any terminal active in the global market requires this security certification. We
were also certified as compli-ant with the Customer-Trade Partnership against Terrorism program (C-TPAT) by the US Customs and Border Patrol in 2011, only the fifth port out-side the US to be certified. We have also been certified by the Business Alliance for Secure Commerce (BASC), which is a global non-profit organization driven by the private sector that develops and sets world-class standards for security. We were the first company in the Dominican Republic to be certified as an authorized eco-nomic operator (AEO), which is a security certification pro-vided by the World Customs Organization. All of this has re-quired substantial investment in basic infrastructure and technology, as well as estab-lishing rigorous control pro-cesses. We have the best CCTV system in the country with more than 130 strategically located cameras and a mod-ern monitoring center, and we maintain recordings for at least three months. We are in the late stages of implement-ing biometric access control in all restricted areas of the port. In addition we also use the NA-VIS 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 Carib-bean?We have been taking advan-tage of our privileged geo-graphic 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 in-ternational airports, 13 mari-time 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.
What is the importance of public–private partnerships (PPP) for the further development of the Do-minican maritime industry? Within the context of a port, one sees the complex inter-section of diverse stakehold-ers, both private and public. Haina International Termi-nals is an excellent example of what can be achieved when a PPP works correctly. This port used to be a govern-ment-run facility, but unfor-tunately 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 al-lows 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. ✖
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
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Transport
100 98 95 The Dominican Republic’s car dealers have started to introduce hybrid cars to a still traditional Dominican market.
Angel Terrero, Caribbean Regional Manager of Yobel, on the supply chain management business and being a regional player.
Franklin Avendaño, Regional Manager of Avianca, on passenger routes and the importance of the Dominican market.
T
Shipping in the Dominican Republichas seen consistent growth over recent years, as investment from international firms continues to inject capital into the sector and free zones expand.
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.
he Dominican Re-public’s transport sector has been gaining strength
with the dual support of pub-lic and private investment, although its share of GDP as of 2012 had declined YoY to 4.5% from 4.7%. Its com-prehensive road network linking the major and minor conurbations, along with 36 airports flesh out Caribbe-an nation’s comprehensive infrastructure offering. In-deed, the historic connection to the sea harks back to the earliest days of transatlan-tic 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 Nation-al Development Strategy is improved promotion and en-couragement 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 inter-national connections is sys-tematically being executed.
DELIVERING THE NATION
Image: DHL Dominicana
WHEN THE BOAT COMES INShipping in the Dominican Republic has seen consistent growth over recent years, as investment from international firms continues to inject cap-ital into the sector and free zones expand. A total of 4.2 million metrics tons of car-go was loaded in Dominican ports in 2012, while over 13.7 million tons was unloaded over the same period. Accord-ing to World Bank sources, 1.5 million TEUs passed through the port system in 2012, com-pared to 1.4 million in 2011.
The oldest port in the so-called “New World,” situated on the mouth of the river Oza-ma and docked at by Christo-pher Columbus is part of Do-minican maritime heritage. Today it serves a wide range of purposes, including gen-eral 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 ex-tensive refurbishing. The Don Diego terminal pier is 400m in length, while Sans Sou-
THEBUSINESSYEAR92 DOMINICAN REPUBLIC 2015
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.
ci serves as a homeport for prominent cruise lines. Over 350 ocean-going ships utilized San-to Domingo’s ports in 2012, 13 of which were cruise vessels.
Haina, located 11km from Santo Domingo, is the preeminent Dominican port, and ac-counts for around 70% of all cargo handled. It consists of 15 ship berths, which can take liq-uid 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 Domin-go and Barahona. A major new maritime devel-opment, the $65 million Amber Cove cruise cen-ter 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 30-acre Amber Cove, forecasts hosting 100,000 pas-sengers in its first year.
There remains considerable potential for the Dominican maritime industry to exploit. Tony Vásquez, President The Dominican As-sociation of Air and Maritime Shipping Agents (ADACAM) explained how: “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.”
CAUCEDO 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 facil-ity 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 en-terprise 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 ex-ports to these markets in 2013 at $29.5 billion, making it the third largest trading partner of the US in Latin America. Similarly, goods pro-duced in Dominican FTZs are overwhelmingly exported to Puerto Rico and the US. Caucedo could increase in importance with the comple-tion 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., Presi-dent 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 Domin-ican Association of Air and Maritime Shipping Agents (ADACAM) have undertaken prepara-tory work for the formation of a transportation logistics cluster. According to Ewald Th. Hein-sen B.: “The National Association of Consoli-dators 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 gener-ate more employment and account for a larger slice of GDP. However, this can only happen if we improve our competitiveness.”
2007 2008 2009 2010 2011 2012
Transport Sector Share of GDP (2007-12)Source: Central Bank of the Dominican Republic
5.00
4.00
3.00
2.00
1.00
0
The State of Main Roads as of 2012Source: Ministry of Public Works and Communications of DR
Deficient 16%
Regular 49%
Good 35%
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PAUL GUERRERO MELOExecutive 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.
COME FLY WITH METhe 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 Si-glo XXI (AERODOM), which is working to prof-itably 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 Re-public’s efficient airports in 2013, Punta Cana International Airport, serving a distinguished tourist location in the east of the country, re-ceived over 66% of the 2.6 million arrivals by air in 1H2014.
ON THE ROADSince the completion of the first highway in the Dominican Republic, “la Duarte,” in 1922, the importance of roads for the economic devel-opment 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 Devel-opment’s 2030 National Development Strategy,
several road projects are being actively expand-ed. 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 improv-ing infrastructure in rural areas. ✖
Avianca is the world’s second oldest continuously operating airline. How has the company developed since its foundation?Actually, Avianca is the com-mercial brand, and is the holding company for all Avi-anca carriers, which include TACA International Airlines, Trans American Airlines in Peru, LACSA in Costa Rica, and AeroGal in Ecuador. Yet in terms of a commer-cial 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 han-dle Avianca Cargo under the commercial name of Tampa Cargo. We fly to almost 100 destinations across America, and three in Europe—Ma-drid, Barcelona, and Lon-don, 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 in-dustry. We also have over 5.4 million subscribers to our Li-feMiles 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. What is the importance of the Dominican Republic for Avian-ca’s operations?Actually, it is important be-cause the Dominican Repub-lic 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 opera-tions 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
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 wide-ranging 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.
BIO
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.
PROCEED to gate 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 rea-sons 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-year-old aircraft, which is new, and most of these planes have onboard personalized entertainment systems. We also have numerous pro-grams for companies, such as leisure packages or cor-porate 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 air-craft in Central America, and the addition of the first Air-bus A321 for Colombia.
A workforce of over 19,000 employees, serving 98 direct destinations in 26 countries throughout the Americas and Europe
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 Ecua-dor, Avianca transported more than 1.3 million pas-sengers, which was an 8.7% increase in comparison to August 2013. The seat ca-pacity increased as well by 7.8% and as a result of this, the occupation was 78% of the load factor, which is im-pressive. For international markets, Avianca transport-ed one million passengers on international routes, on a 3.8% increase, while the seat capacity rose by 3.4%. For the Dominican Repub-lic, the passenger increase was 22%, versus August 2013, while revenues substantially increased by around 20%. We currently have one daily flight to Bogotá from San-to Domingo and flights four times a week to Lima, in ad-dition to daily flights from Punta Cana to Santo Domin-go. In the commercial area, we have nine employees, but if we include the airports in Punta Cana and Santo Do-mingo, it is around 45. ✖
THEBUSINESSYEAR96 DOMINICAN REPUBLIC 2015
F O C U S T H I R D - P A R T Y L O G I S T I C S S E R V I C E S
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 disas-ters, the country enjoys constant GDP growth, political stability, and robust socioeconomic development.
According to Jonathan Hall, FM Global’s Executive Vice-President, supply chain man-agement is “becoming more global, complex and interdependent,” and “it is essential for decision makers to have concrete facts and in-telligence about where their facilities and their suppliers’ facilities are located.” Both the Do-minican Republic’s authorities and the private sector representatives have already realized the importance of having well developed and com-petitive 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 sup-portive environment of political and economic stability, which greatly impacts both economic development and international trust.
Alexander Schad, Schad’s Executive Presi-dent, believes that the Dominican Republic has “adequate and comparatively modern infra-structure, namely ports, airports, and roads.”
MOVE IT, MOVE IT
The Dominican Republic is fully dedicated to transforming itself into a regional hub and is already undergoing significant developments in its logistics infrastructure.
OLMAN CASTILLOCountry Manager, DHL Dominicana
What strategies does the company implement to better serve the Dominican Repub-lic’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 Re-public undergo the same training as those in Costa Rica, China, or Uruguay. We also pay close at-tention to feedback to maximize staff motivation, and we are investing in facilities and equip-ment. In 2013, we celebrated the 25th anniversary of DHL’s presence in the DR by investing $400,000 in our facilities.
What is your assessment of the 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.
Olman Castillo, DHL’s Country Manager, is also pleased by the quality of local infrastruc-ture, “roads, subway and ports are remarkably good, as well as the quantity and quality of air-ports for passenger traffic.” According to Castil-lo, the Dominican Republic holds the potential to become a hub in the Caribbean, but “must improve warehouses and security infrastruc-ture, and ensure that a constant source of elec-tricity is available.”
Local third-party logistics providers are con-scious of the importance of introducing new technologies and innovations in their oper-ations 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 par-ty logistics services, not the other way around.”
Caribe Trans is not the only third-party lo-gistics services provider to invest heavily in technology. Schad, one of the market leaders, is currently implementing an automated ware-house management system controlled by radio frequency, providing immediate data and inven-tory visibility, as well as an electronic document storage and retrieval system, which aims to im-prove 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 dynam-ics 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 mul-tiple locations, the Post-Panamax vessels will now be serviced in larger hubs.
Rising to the challenge, one of the most im-portant ports, Caucedo, which neighbors Las Americas Airport, will soon start the construc-tion 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 Direc-tors, 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.” ✖
THEBUSINESSYEAR 97Transport
Getting AroundSource: TBY Research
HAITI
DOMINICAN REPUBLIC
LAS AMERICAS
SANTO DOMINGO
EL CATEY
DAJABON
MONTE CRISTI
MAO
MOCASALCEDO NAGUA
PUERTO PLATA
LUPPERON
SABANETA
ELIJAS PINA
SAN JUAN
JIMANI
NEYBA
PEDERNALES
BROHANA
MARIA MOTEZ
SAMANA
ATLANTIC OCEAN
CARIBBEAN SEA
LA MONA CANAL
MONTE PLATA
COTUI
HATO MAYOR
EL SEIBO
PUNTA CANA
LA ROMANA
HIGÜEY
SAN CRISTOBAL
BANI
SANTO DOMINGO
BONAO
CONSTANZA
JARABACOA
CIBAO
AZUA
PUERTO PLATA
A total of
4.6 Million metric tons of cargo was loaded at Dominican ports (2013)
Million tons of cargo was was unloaded over the same period (2013)
Over
14.7 connects Santo Domingo to the fertile Cibao region
DR1 gives Santo Domingo a direct link to the mid-sized cities
DR2 connects Santo Domingo to the main tourist towns
DR3
connects main routes to smaller-sized cities
DR5 DR4-DR8-DR6 provide alternative routes or work as auxiliary routes
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 Universidad Católica Madre 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).
BIO
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 com-panies offering outsourcing ser-vices in supply chain manage-ment. What factors have led to this success?We are highly flexible and de-sign all our infrastructure and service platforms based on our customers, and they lever-age our technologies and op-erational know-how. We have implemented a world-class warehouse management sys-tem, 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 compa-ny 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 Eu-rope, the US, or Asia, or have partnerships with local com-panies, while we are proudly Latin American and operate our own branches.
Yobel offers services in supply chain management in 11 coun-tries throughout the Americas. What role does the Dominican Republic play within your inter-national portfolio?The Dominican Republic to-day is our largest operation in the Caribbean, although Puerto Rico and Panama fea-ture too. For 2015, the Domin-ican Republic will maintain a leadership role for Yobel in the
Caribbean, but Panama is ex-periencing rapid growth, and I believe by 2016 it will have become the company lead-er. The Dominican Republic is strategic for us because we manage all our regional op-erations from here. In Puerto Rico, the Dominican Repub-lic, 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 indus-try. We have implemented a strong quality system for that sector and have considerable experience with consumer goods, cosmetics, technolo-gy, and food and beverages; hence, business in the Domin-ican Republic is important, and there is a wide portfolio of services on offer. Our biggest market is the multinationals.
How does the regulatory en-vironment in the Dominican Republic affect Yobel’s perfor-mance and the logistics indus-try as a whole?Our business operates within a supportive environment of political and economic sta-bility; the country has a sta-ble growth rate of over 5.5%, while inflation is within the acceptable range, and the cur-rency is stable, although we face other challenges. I con-sider the labor law compli-
cated, for example. There is a movement among the private sector to propose its amend-ment, which goes beyond our industry. The employee is currently over-protected un-der this law, giving a compa-ny 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 busi-ness 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 Do-minican Republic?It is adequate for the mar-ket in terms of warehousing and roads. Yet, any serious attempt to transform the Do-minican Republic into a hub will demand more modern infrastructure and a regulato-ry law. For example, the Port of Caucedo being construct-ed in partnership with DP World is building some infra-structure 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 reg-ulatory 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 approxi-mately 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 ad-vantage in the region. ✖
THEBUSINESSYEAR 99Transport
I N T E R V I E W
In what sectors are Schad’s services most required, and what customers are you tar-geting?Schad mainly serves the consumer goods, food and beverage, pharmaceuticals, technology, and telecom-munications 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 manufactur-ing 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 lo-gistics company in the world. However, more important than this is the network that DHL has. While Schad’s pres-ence is in the Dominican Re-public, we have access to the
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 the Dominican Republic.
BIO
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 firstoffices of DHL everywhere in the world, permitting us to serve customers along the en-tire global supply chain, from origin all the way to the end consumer.
What innovations and technol-ogies is Schad using for its op-erations?We are implementing auto-mated warehouse manage-ment systems that are con-trolled by radio frequency, which gives us immediate data and inventory visibility. Within the transport sector, we have an in-house Trans-portation Management Sys-tem 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 doc-ument storage and retrieval system, which aims to im-prove our overall process ef-ficiencies.
What have been the major mile-stones for Schad in 2014?During 2014, we have consoli-dated our trucking network to provide daily coverage to all the municipalities of the Do-minican Republic. Our logis-tics operation in the eastern part of the island was consol-idated, and now offers cus-toms brokerage, warehous-
ing, and distribution from our center in Punta Cana, mainly to serve the tourism sector. These services guarantee our customers same-day deliver-ies with over 99% accuracy. Looking to reduce risks, sev-eral projects were successful-ly completed ending with our Business Alliance for Secure Commerce certification.
In August 2013, SOFOS un-veiled the country’s biggest rooftop solar panel array, at your logistics complex. What is the importance of this invest-ment for the development of the country’s energy sector?We feel good that our green energy production is equiv-alent 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 prob-lem regarding electricity, with high costs, irregular pro-duction, and blackouts. We are heading in the right direc-tion to improve that. We ap-plaud the government’s de-cision 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 termi-nal, and is about half the size of the first one.
How would you assess the cur-rent condition of the logistics sector in the Dominican Repub-lic and the country’s potential to become a future regional hub?I think, as a country, we have an adequate and compara-tively modern infrastructure. Established service providers such as airlines, ocean cargo liners, land transport com-panies, logistics operators, and warehousing companies, offer multiple competitive services. The Dominican Re-
public just needs two more things, the first being the le-gal framework that will en-able the country to become a hub. Under the current framework, it is too expen-sive 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 regula-tory framework. Secondly, regarding education, we still need quite a bit more devel-opment. There is a need for more in-depth specialized training in our industry. Cur-rently, almost everyone in this sector learns on the job. The academic sector offering is a necessary ingredient for the competitiveness of the Dominican Republic. ✖
THEBUSINESSYEAR100 DOMINICAN REPUBLIC 2015
COSTSThe 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 ur-ban areas. Due to significant fuel savings, the payback on hybrids usually takes three to five years. In the words of Nelson Peña, CEO of Per-avia 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 environ-ment, as well as the bottom line of a fleet.
PLUG-INSThe potential of hybrid technology has ex-panded significantly in the last few years mostly due to the inclusion of plug-in hybrid electric vehicles (PHEV), hybrid electric vehi-cles with rechargeable batteries that can be restored by connecting a plug to an external electric power source. PHEVs share the char-acteristics of both, conventional and hybrid electric automobiles, having electric motors along with internal combustion engines. Plug-in 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 appro-priate currently as they do not require a re-charging 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 elec-tric cars. Their combustion engines work as a backup when the batteries deplete.
UNPLUG & GOAs 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.
F O C U S H Y B R I D S
SALESTo date, approximately 9 million hybrids have been sold worldwide. Among all hybrid vehi-cles, 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 IMAGEIn 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 cus-tomer, and people have come to hear about these vehicles through the grapevine.” Nelson Peña also claims that “penetration is low, be-cause people are not familiar with these tech-nologies.” 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.
DONATIONIn March 2014, the Ministry of Economy, Plan-ning and Development of the Dominican Re-public announced that the country received a $5 million donation from the Japanese Govern-ment for the purchase of 125 hybrid vehicles. The vehicles have been assigned to 16 Domini-can Ministries and will be delivered in the mid-2015. 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 co-operation between the two countries.” He also added that “the vehicles have a low environ-mental impact and consume less fuel, which in his view contributes to Dominican Republic’s sustainable development, reducing pollutants and greenhouse gas emissions.”
EXPECTED GROWTHThe number of hybrid vehicles is likely to fur-ther 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 tech-nology has significantly improved over the years and the number of product offerings keeps growing. There will be more hybrid op-tions in more vehicle classes and styles in the near future.• And last but not least, the hybrid sector is like-ly 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.
www.thebusinessyear.com
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How would you describe the current Dominican Republic vehicle market and what trends are you seeing?
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 larg-er SUV before opting for a Lexus, as the cheapest Lexus can cost $80,000. Another trend gradu-ally emerging in the Domini-can Republic is that for hybrid vehicles, that we were the first to introduce them. People are still not aware of their sheer ad-vantages, 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 vehi-cles through the grapevine. The Dominican Republic does not have charging stations yet but they will come soon.
TBY talks to two Dominican Republic car dealers about changing consumer tastes and
encouraging vehicle purchasers to go greener.
take your foot OFF THE GAS
NELSON PEÑA Our country is traditional. Dominican people use only diesel and gasoline ve-hicles, and mostly pick-ups and trucks, with SUVs being the most demanded vehicles, represent-ing 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. How-ever, 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 appropri-ate currently as they do not re-quire a recharging station; peo-ple 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 mod-ern system, and the most ad-vanced technology available in the world.
Delta Comercial was founded in 1962 by the Peynado fami-ly. Why did Najri Group decide to purchase the company and what was the impact of the ac-quisition?
AN When I joined Delta Comer-cial 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 distribu-tor 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 Re-public, 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; how-ever, today we represent Chi-nese brands and deal in all seg-ments of vehicles: automobiles, mini-vehicles, buses, trucks, and light trucks, although the principal focus is on hybrid vehicles. Peravia Motors intro-duced the dual-mode vehicle to the Dominican Republic. We represent Chinese brand BYD, which employs the most advanced technologies in elec-tric 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 vehi-cle 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
R E V I E W R E A L E S T A T E
Real Estate & Construction
110 109 107 One of the strongest and best established sectors, the cement industry is thriving, not least in the export markets.
Two senior figures in the Dominican construction industry discuss the construction boom in the north of the country.
Raúl Nazario Rizek, President of Constructora Rizek, on how big infrastructure projects are helping the economy.
A
In the domestic market, too, there isan 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.
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.
cross the property market, Domin-ican 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 suc-cess 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 vis-ited the Dominican Repub-lic last year, a country with a population of just 10 mil-lion. 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.styles of today’s young peo-ple, means more properties are needed to cater to single-tons and young couples as yet without children.
The consequence of all this has been a surge in construc-tion, particularly in coastal areas and in towns which just 10 years ago were fishing villages. A government pro-gram has ensured that a cer-tain quota has remained as social housing. Nonetheless, the average price of accom-modation has risen to $2,078 per sqm. Since 2005 the Do-minican Republic has been attracting more tourists than any other Caribbean coun-try—attracting more than 5 million in the year to June 2014, according to data from the World Bank. This num-ber of visitors, in a country of only 10 million, puts con-siderable pressure on prop-erty 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 pre-vious year.
Image: Codelpa
THEBUSINESSYEAR104 DOMINICAN REPUBLIC 2015
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 MAYFAIRA huge rise in the number of so-called invest-ment 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 Puer-to 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 So-sua 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 mar-kets in the Caribbean.
COMMUNITY CHESTIt is in Santo Domingo, though, where the prime real estate lies. This is hardly surpris-ing. The country’s capital city boasts excel-lent infrastructure links, internationally and domestically, with road, air, and maritime transport all fully integrated, making the city an important hub for the region. Santo Do-mingo is also the most historic in the Carib-bean, 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 prop-erty prices—a trend that is expected to contin-ue for the foreseeable future, with ample op-portunity for lucrative returns on investment. Luxury beach villas near to Santo Domingo already fetch a handsome $7 million with rela-tive ease on the international markets.
The majority of buyers are from the US and, increasingly, Canada, as northerners seek a home, sometimes second, sometimes retire-ment, 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 Re-public is highly conducive to foreign invest-ment, encouraging some 20% of the wealth of high net worth individuals (HNWs) to be invested in property. The system also facili-
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 organiza-tions 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 COPYME-CON, 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 universi-ties 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 allo-cate notable resources to this program, at almost no cost to the companies themselves.
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.
THEBUSINESSYEAR 105Real Estate & Construction
tates the property market, making it easier for estate agents. To this end, the sector has quietly, but radically, transformed from be-ing 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 GOConstructora Rizek is one of the largest con-struction companies in the Dominican Re-public, and is behind many of the major infra-structure 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 defi-ciency in low- to middle-income accommo-dation. 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 exac-erbated 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 commit-ment, with the costs met by public-private
partnerships (PPPs), to construct up to 40,000 new homes a year through newly set out so-cial 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 Do-minican Republic, whose social housing pro-grams often see solar power facilities built in as standard, and social amenities such as sports centers and sustainable waste man-agement systems.
BUILDING BLOCKSDespite the efforts of central government—and the very real demand for housing at both ends of the social spectrum—the construc-tion sector is still relatively far from regaining its 2005-06 peak of around $2.3 billion. Cur-rent 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 outstrip-ping demand, rising more than 8% YoY in 2013. This is now leveling off, with supply and demand on an even keel, and the grow-ing market cooling prices. This is helped by a healthy overseas market, particularly among neighboring Caribbean countries (the Do-minican Republic is a net exporter of cement, adjusting its exports according to domestic demand, with some 300,000 tons exported
ANGEL GARCÍA CRESPO Executive President, 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.
THEBUSINESSYEAR106 DOMINICAN REPUBLIC 2015
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 gov-ernment’s ambitious push for more health and education facilities, as Julissa A. Báez, Executive Director of the Dominican Association of Ce-ment 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 mar-ket is expected to boost real estate in the com-ing 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 con-struction 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 capac-ity 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 enact-ed Law No. 189-11, aimed at supporting the country’s efforts to expand its housing stock and helping the Dominican Republic’s mort-gage market to develop while providing sig-nificant 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 exemp-tions. Moreover, it established the Trust as a legal instrument in the Dominican Republic’s legal framework. Therefore, legal entities in-corporated to manage assets, banks, invest-ment fund managers, stock brokers, and oth-er 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 im-prove its sanitation system, water and ener-gy distribution, as well as roads, bridges and similar infrastructure items; therefore the in-vestment in the construction and real estate is expected to see an increase in the short- and medium-term. ✖
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 overpro-duction 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.
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.
THEBUSINESSYEAR 107Real Estate & Construction
I N T E R V I E W
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.
BIO
TBY talks to Raúl Nazario Rizek, President of CONSTRUCTORA RIZEK, on how big infrastructure projects are helping the economy.
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 sec-tors are you most active?Constructora Rizek is a mar-ket leader in the construc-tion industry in the Domin-ican 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. Con-structora Rizek has high-lev-el resources for the execution of its projects. Our engineer-ing 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 proj-ects as well.
What are some of the key projects you are currently in-volved in?The Santo Domingo ring road is the most important highway project in the coun-try, as it impacts both Santo Domingo as and the broad-er 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 Domin-ican 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 Develop-ment Bank (IADB) and in-volves the reconstruction of over 120 km of the road that links the Dominican Repub-lic with Haiti.
Could you talk about the Bar-rick 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 consid-erations 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 min-ing 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: min-ing, road, housing, and also tourism, among others. We were part of the construc-tion team building the Pun-ta Cana Airport, construct-ing the taxiway and landing strips. This project involved the implementation of new technologies to meet the de-mands 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 Bar-rick Gold engineers with the high quality level of our ma-chinery, as we use the latest and most advanced technolo-gy in the industry and this sets us apart from the competi-tion. We recently implement-ed GPS system technology in our excavators, so when using it, excavators know what they need to do with no need to rely on topographic measure-ments. This tool makes the work more efficient and raises the quality level. Before, you needed four people plus the driver, but with this new sys-tem, only the driver is needed.
How do you assess the work-force 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 experi-enced operations manager, who is the main person in-volved in training our work-ers. Training is also related to safety, so we have developed our own training resources.
What is your assessment of the development of the infra-structure sector in the Domin-ican 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 ben-efits of them, despite some successful cases in the con-struction of maritime and airport facilities. The imple-mentation of these project schemes requires time and PPPs will definitely become a useful tool in the country, es-pecially for the development of infrastructure projects. There have also been posi-tive steps regarding the reg-ulatory framework for these projects.
What are the greatest chal-lenges facing the infrastruc-ture industry in the Dominican Republic and what is your out-look 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 cit-ies. Dominican cities require considerable additional ser-vices and infrastructure.
How would you assess the overall investment environ-ment in the country?Political and economic sta-bility are on the rise, as is le-gal security for investors. The government supports and respects private investment, and I believe that the invest-ment environment today is better than ever. ✖
THEBUSINESSYEAR108 DOMINICAN REPUBLIC 2015
I N T E R V I E W
What factors helped Codelpa to establish a leading position in the Dominican Republic’s con-struction sector in just two de-cades?Following the expansion of the tourism sector, we decid-ed to focus on construction, and today we are the fore-most 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 in-vestors enjoy here, which has brought many foreign compa-nies to the Dominican Repub-lic to build hotels. As business expanded, we expanded oper-ations 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 Air-port?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
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 the Dominican Republic. Previous positions have taken him to Jamaica and Haiti.
BIO
TBY talks to Álvaro Peña, President of Codelpa, on leveraging the growth in tourism, shaping the right and potential growth sectors.
building reputation
of our greatest advantages is our team of young and tal-ented 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 fa-cilities and processes related to the construction sector. For example, we are self-suf-ficient 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 Ba-hia Principe, among many others. This confirms our flexi-bility and ability to meet inter-national 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 high-er-education sector to provide our staff with other develop-ment opportunities. In addi-tion, closer ties with univer-sities will allow us to identify new professional talent.
In October 2013, Codelpa was recognized as the best con-struction company in the tour-ism 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 import-ant elements of our business. This award was bestowed by the Chamber of Construc-tion, based on our impact on the tourism industry; making us the most important local company in this regard. The Association of Hotels also re-inforced the prestige, by high-lighting how we conduct our operations from a business perspective. Over the years, we have partnered with Euro-pean, Canadian, and US firms, meaning that we know how to adapt our work to their expec-tations; we are a hugely flexi-ble company.
Since 1980, revenues generat-ed by the tourism sector have increased, from barely $172 million to $5 billion in 2013. How does Codelpa plan to re-spond 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 in-dustry 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 poten-tial in the luxury and ecotour-ism segments. Health tour-ism could also bring some interesting developments and in my opinion, this may take place sooner than peo-ple 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 re-gard, but we have yet to fully exploit it. ✖
THEBUSINESSYEAR 109Real Estate & Construction
C O N S T R U C T I O N I N T H E N O R T H B 2 B
What significant projects have you developed recently?
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 consid-er Watermark the most import-ant 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 num-ber of issues in mind, especial-ly the fact that it was luxurious boutique hotel by the beach. 2014 has also been important for us because we started ac-quiring 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 Puer-to Plata, where 80% of our work is currently located.
CAMILO E. HURTADO IMBERTVice-President, Constructora Hurtado
MAIRENÍ BOURNIGAL R. President, Grupo Atlántico RD
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.
due NORTH
Grupo Atlántico RD has almost 30 years experience of the Do-minican market. How has the company evolved and in which sectors are you most active?
MAIRENÍ BOURNIGAL R. We started in 1985 as a partnership between an engineer and an ar-chitect. We came to Puerto Plata to ride the construction boom that was started by the tourism industry in 1980, and entered industrial and hotel construc-tion. 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 con-struction area. We saw the prob-lems in the industry and went into business to give the service we thought was needed.
How would you assess the Do-minican Republic’s overall in-vestment environment?
CEHI I think the current govern-ment has done a great deal, and that the “one stop window” sys-tem is a great tool for investors, easing the process. It will defi-nitely boost development and boost investment. The govern-ment has also taken key steps in terms of tax advantages in sev-eral sectors of the economy. We work with many Canadians and I think the country should pay more attention to Canadian in-vestors. For example, Canadians are the second most important tourists in the north of the coun-try 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 great-er 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.
What projects do you consider to be Grupo Atlántico’s greatest achievements?
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 Puer-to 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 construc-tion 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. ✖
THEBUSINESSYEAR110 DOMINICAN REPUBLIC 2015
F O C U S C E M E N T
One of the strongest and best established sectors, the cement industry is thriving, not least in the export markets.
CONCRETE STEPSTHE 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 enjoy-ing 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 Nation-al Development Strategy 2010-30 and the stra-tegic 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 lo-cal 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 Ci-bao, DOMICEM, CEMEX, ARGOS, and Cemen-to 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 Domin-ican Republic’s cement is dedicated for export. The Dominican cement primarily heads to Ja-maica, 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 Associ-ation of Cement Producers (ADOCEM), “the Dominican Republic has the necessity to export more, because the storage capacity in the coun-try 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 sig-nificant increase of about 16% in reference to 2012. According to Julissa A. Báez, the increase was led mostly by government’s investment in
JULISSA A. BÁEZExecutive Director, ADOCEM
Currently, approximately 30% of the Dominican Republic’s cement is dedicated to the ex-port market. What are the most successful export channels?Our main market is Haiti be-cause of its geographical prox-imity. 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 Mex-ico 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 econo-my do you see the most poten-tial 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 govern-ment. 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.
building new schools, “with government in-vestment we have noticed a big change, and that is because the construction sector is very reliant on government decisions to invest in in-frastructure projects”.
ADOCEM was founded to regulate the sec-tor, disseminate good practices, conduct re-search and training programs, and promote improved equipment in the Dominican Re-public’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. ADO-CEM is working intensively on promoting the use of cement. According to ADOCEM’s pres-ident, Carlos González, “it’s the best time for the country to increase its cement consump-tion, since its price is 40% lower than in the entire region, resulting from greater compe-tition, since Dominican Republic boasts more producers than Mexico.” Currently a bag of cement in the Dominican Republic costs be-tween 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 coun-try 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 ca-pacity 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 inten-sively 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. ✖
THEBUSINESSYEAR 111
R E V I E W
Agriculture
116 115 114 On the eastern part of Hispaniola Island each day starts with that strong coffee aroma.
Gabriel León Roig Alfaro, Vice-President—Export of Roig Agro-Cacao, on the cocoa industry and the export market.
Anyelo Rodríguez, General Director of AGRODOSA, on supporting farmers and sectoral growth.
Some of the country’s main agricultural products, such as coffee, tobacco, and cocoa, are cash crops destined for export.
A
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.
ccording to the World Bank, agri-culture accounts for 11% of the Do-
minican Republic’s GDP and employs 15% of the country’s workforce. With such a size-able chunk of the labor force and revenue tied into prima-ry production activities, it is clearly vital that the govern-ment 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, rough-ly 24% of the population is undernourished according to UN Food and Agricultural Or-ganization (FAO) measures, while the main agricultural crops being produced are cash crops destined for ex-port. In particular, the Do-minican Republic’s biggest commercial crop is sugarcane with the country producing around 630,000 tons a year, an increase YoY but signifi-cantly down on its 1 million-a-year heyday in the 2000s.
A BIT MORE AGROThe Dominican Republic
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 mil-lion 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 SCALESo how is the Dominican Re-public’s agricultural sector faring against this backdrop of food insecurity at home and heavy reliance on cash crops for much needed ex-port revenue? It has been argued by a number of com-mentators that improving the agricultural sector to support domestic consumption needs is still playing second fiddle
Image: MATASA
THEBUSINESSYEAR112 DOMINICAN REPUBLIC 2015
CARLOS SEGURA FOSTERGeneral 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. The Dominican Republic 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.
to both exporting, and to the tourism indus-try. The government has invested heavily in tourism and associated infrastructure proj-ects. This is understandable when you consid-er 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, includ-ing droughts, hurricanes, and price fluctu-ations 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 Fed-erico 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 pro-ducers, 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 ex-ception of the banana industry in the eastern Caribbean and a public insurance company in the Dominican Republic, agricultural insur-ance against natural disasters is non-existent in the region.” And for the Dominican Repub-lic’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, not-ed during his speech at World Food Day that in recent years, the country has managed to increase the production of major agricultur-al 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 not-ed that “through the timely agricultural pub-lic policies implemented by President Danilo Medina, the country will, in the near future, reach a level of excellence in food.”
IN GLASS HOUSESOne segment of the agricultural industry that has seen substantial growth during 2014 is greenhouse vegetables. In November Do-minican Today reported that the country had exported $111.6 million in vegetables during the year to date, some $15 million more than
HAITI
DAJABON
MONTE CRISTI
BROHANA
SAMANA
ATLANTIC OCEAN
CARIBBEAN SEA
SABANETA
SAN JUAN
MAO
NAGUA
PUERTO PLATA
ELIJAS PINA
JIMANI
NEYBA
PEDERNALES
LA MONA CANAL
AZUA
DOMINICAN REPUBLIC
MONTE PLATA
COTUI
HATO MAYOR
EL SEIBO
PUNTA CANA
LA ROMANASAN CRISTOBAL
HIGÜEYSANTO
DOMINGO
BANI
BONAOCONSTANZA
JARABACOA
MOCASALCEDO
Greener FieldsSource: TBY Research
Low to medium climatic production potential
Low soil suitability
Severe and very severe land degradation
Steep slopes and mountains
High climatic production potential
THEBUSINESSYEAR 113Agriculture
in 2013. This amounted to 63.5 million kilo-grams of produce being grown under protect-ed environments, compared to the 55.4 mil-lion kilograms grown in greenhouses during 2013. The Ministry of Agriculture attribut-ed 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 im-ports in the future. The agriculture sector will have more control of its crops and commod-ities and will, in turn, be able to recruit more Dominicans into farming.
GROWING GREENIn 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 Min-istry and CEI-RD’s proposals regarding safe pesticides for fruits and vegetables destined for export markets. These exports represent a vital
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 pos-sible 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. ✖
52
51.5
51
50.5
50
Workforce Employed in Agriculture (% of total)Source: The World Bank
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.
BIO
TBY talks to Anyelo Rodríguez, General Director of AGRODOSA, on supporting farmers,
agricultural investments, and sectoral growth.
field of dreams
What is the composition of AGRODOSA’s portfolio and what is the average client profile?AGRODOSA is a joint enter-prise involving the Domin-ican government and the private sector, acting as a pri-vate company. The aim of the company is to provide mar-ket security by insuring the agricultural and agribusiness sectors. Our company has re-valorized itself since President Medina assumed office. Un-der his administration, a new Law on Agricultural Insuranc-es was passed, setting a legal framework that allowed the agricultural insurance sector to better manage future risk. Moreover, the government has been subsiding the pur-chase of certain insurance pre-miums for small producers, as high risks and costs prevail in that sector. This support goes well beyond 25% (in some cas-es 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 disas-ter. I also believe it has helped to reduce poverty levels in the rural areas of the coun-try. AGRODOSA has worked closely with the state, in facil-itating 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 In-stitute of Tobacco, and FEDA. We have set up joint efforts to launch new insurance prod-ucts; health insurance, life insurance, and other related coverage. We are also study-ing the possibility of insuring agricultural producers against terminal illnesses. AGRODO-SA 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 contrib-uting to the reduction of pov-erty levels in the country.
What is the importance of the Agricultural Policy Program, supported by the Inter-Ameri-can Institute for Cooperation in Agriculture, with an investment of more than Ps480 million donated by the European Un-ion towards enhancing region-al capacities for small-scale farmers?The Dominican Republic 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 ac-count global technological, chemical, and agricultural developments, the agricul-ture sector in our country has not kept pace. There are
two key requirements for transforming the Dominican agricultural sector; financ-ing and organization, which is contingent on the level of cooperation. This is vital for our country since we have neither the economic re-sources, nor the level of ex-pertise of many of our com-petitors in the international market. These developments will be necessary before we can compete on the inter-national 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 coop-eration. These elements will help us to raise both produc-tion volumes and quality.
In 2013 the Dominican agricul-tural 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 ag-ricultural sector had access to financial tools, and small producers were completely neglected. The newly-ap-pointed ministers and public officers implemented chang-es in this regard; they allocat-ed Ps6 billion in 2013 to small producers. These financial tools have transformed the agricultural sector, in part by boosting cooperation between producers. For ex-ample, 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 greenhous-es, while the goal is to reach 10 million sqm in the near future. The government has ramped up spending in edu-cation, as well. ✖
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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.
BIO
TBY talks to Gabriel León Roig Alfaro, Vice-
President—Export of Roig Agro-Cacao S.A.,
on the Dominican cocoa industry,
sectoral strategy, and the export market.
SWEET success Founded in 1967, Roig Agro-Ca-cao, S.A. soon became one of the country’s leading exporters of cocoa beans and one of the largest organic cocoa export-ers in the world. What factors led the company to claiming its position?From the outset, our key strength has been the abili-ty 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 estab-lish these relationships and a climate of mutual trust.
In 1998 we suffered hurri-cane George, prior to which most of the beans exported from the Dominican Republic were of the Sanchez variety; a non-fermented bean. Essen-tially starting from scratch af-ter the hurricane, we started experimenting with fermenta-tion. Considering we are a low volume country compared to the African producers, and in the interests of competitive-ness against far larger players, we set about fermenting to attract high quality compa-nies, mainly in Europe and Japan, where we could enjoy
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.
What key steps should be taken to boost the development of the Dominican Republic’s cocoa in-dustry?From my point of view today there are two key aspects to consider. We need to im-prove our genetic material, which we are already at work on. We embarked on this both at a private and gov-ernment level and the results have been highly encourag-ing. The minister has extend-ed full support.
Another key consideration is the need to improve san-itary 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 ob-jectives for 2015?Currently, we are squarely fo-cused on quality. As for the fu-ture, there are different steps to be taken, one being to ex-periment 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 pro-cess, which can have interest-ing 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 pasteur-ized, distilled, and exported to the US. We and our local part-ners are partnered with a US company called Solbeso that is promoting and distributing the product. They have devel-oped the brand which is cur-rently 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 bever-age made from 100% alcohol derived from organic cocoa beans. In nature it resembles something, I would say, be-tween tequila and vodka, and is flexible enough to use in a wider range of cocktails such as margaritas. ✖
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F O C U S C O F F E E
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 man-ages 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 del-icate dark chocolate aroma and citrus notes, as well as perfectly balanced bright acidity. Their smooth but deep taste delights the most expe-rienced coffee connoisseurs, who admire the variety and quality of the Dominican coffee beans.
HARVESTDominican 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 Domin-ican Republic’s microclimates and topography, coffee is being picked virtually year-round, de-pending on the region, although the peak har-vest takes place between November and May. Most of the 50,000 Dominican coffee producers are small-scale farmers. According to ADOEX-PO, 92% of them cultivate the coffee beans in areas smaller than three hectares. The majori-ty (98%) of Dominican coffee is shade-grown, often under a canopy of pine, macadamia, and guava trees.
EXPORTSThanks to the Dominican coffee’s exceptional quality as well as the country’s strategic geo-graphic location, the Dominican Republic has become a quintessential provider of coffee to other Caribbean islands where coffee is not cul-tivated. Besides that, the country exports small amounts to more distant nations, such as Ja-pan, Canada, the United States, Italy, Germany, and France.
CODOCAFEFor more than a decade, the Dominican Re-public’s coffee industry has been supported by the Dominican Coffee Council (CODOCAFE).
WAKE UP AND SMELL THE DOMINICAN COFFEEOn 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.
Founded in 2000, with the aim of planning, implementing and executing the industry de-velopment policy, CODOCAFE represents the interests of the coffee growers. Over the past 14 years, the Council has launched several pro-grams supporting the development of the cof-fee industry and the improvement of farmers’ livelihood.
FIGHTING THE RUSTThe 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 priori-ty. 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 Ear-ly 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 POTENTIALThe coffee industry has deep social value, con-tributing to the conservation of the environ-ment, 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 farm-ers 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 produc-tion due to coffee rust. But despite recently lost share in the international market, the Domin-ican Republic retains enormous export poten-tial 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. ✖
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Coffee rust is a significant challenge for the industry, with the Dominican Coffee Council working hard to fight the blight
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I N T E R V I E W
What is the level of competitive-ness in the Dominican coffee in-dustry at the moment?The competitiveness of the coffee industry in the Do-minican Republic is great, especially when we refer to foreign markets. This is be-cause 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 competi-tiveness will improve substan-tially 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 Do-minican Coffee Council.
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.
BIO
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.
COFFEE to go Most of the Dominican Repub-lic’s producers are smallhold-ers. Moreover, the more than 45,000 Dominican families pro-ducing 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 coopera-tives, associations, and clus-ters that promote partnerships and thereby allow them to be-come micro entrepreneurs in the sector. There are coffee systems and technical assis-tance 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 produc-tion of coffee plants in nurs-eries. These plantations have coffee rust disease resistance, high production capacity, and good quality. Road improve-ment programs in production areas and support in post har-vest processes have benefited production.
Coffee rust has recently impact-ed on the entire coffee popula-tion in the Dominican Republic causing huge financial losses. What is the importance of the agreement that CODOCAFE signed with the National In-stitute of Hydraulic Resources
(INDRHI) for controlling the disease in the Dominican Re-public?With this agreement, CODO-CAFE implemented an Early Warning Program in coor-dination with the Bureau of Meteorology and with the support of the Food and Agri-culture Organization (FAO). We have 223 weather sta-tions 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 recommen-dations for treatments to re-duce and eliminate the fun-gus 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 time-ly 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 signif-icant share in the interna-tional market as a result of the decrease in production, retains enormous potential due to the exceptional qual-ity of Dominican coffee. The
government’s Plantation Re-newal Program implemented through CODOCAFE contrib-utes greatly to the expansion of production, and with that the country will be able to re-cover much of its lost ground. The high quality that Domin-ican coffee displays is more than enough to penetrate any discerning and demand-ing market today. Ultimately, Dominican coffee has signif-icant 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 con-sumption and the interna-tional market.
What does the Dominican Re-public offer in terms of quality and variety of coffee beans?The quality of Dominican coffee has been steadily im-proving. We offer an interest-ing variety of coffees depend-ing 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 in-creases in the country. To date we have renewed about 2,260 hectares of plantations. Domestic consumption has increased as reflected in re-duced exports that are being processed by the local indus-try 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-qual-ity coffee. With the policy of attracting investment to the country, this can be exploited to install large plantations and facilities. ✖
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Health & Education
126 123 122 Having faced educational challenges in the past, the republic is set to address previous systemic shortcomings.
The country holds great potential to become a future medical hub due to its high quality medical, dental, and welfare services.
Dr. Alejandro Cambiaso Rathe, President and Founder of the Dominican Association of Health Tourism, on recent developments.
T
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.
DOCTOR'S HERE
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.
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 Establish-ing 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 pro-moted insurance coverage through contributions by the state, employers, and work-ers. In the years that followed, financial turmoil and political developments made achiev-ing universal coverage an on-going 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 insur-ance, self-managed insur-ance, and private providers.
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. With many public sec-tor patients uninsured, the pri-vate 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. Accord-ing 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 gov-ernment 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 macro-economic context. In doing so, comprehensive coverage and services will underscore improved equity, quality, and financial protection for the Dominican population.
THEBUSINESSYEAR120 DOMINICAN REPUBLIC 2015
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 Minis-try of Health operates on a three-tiered orga-nizational structure—central, regional, and provincial. At the central level, the office of the minister is supported by six vice-ministries: Ad-ministration and Finance, Planning and Devel-opment, Public Health, Quality Assurance, the Directorate for Strengthening Regional Health Services, and Social Welfare. In 2012, the Min-istry was composed of a network of 1,853 facil-ities made up of 1,703 primary care units and another 150 specialized treatment centers. These specialized centers entail 15 special-ized hospitals—such as advanced cardiac and oncology institutes—20 provincial hospitals, 11 regional centers, and 104 municipal hospi-tals. Standards of accreditation, regulations, and good practice have been established for health facilities, laboratories, and pharmaceu-tical 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 BILLThe Pan American Health Organization esti-mates 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 per-son. 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 govern-ment operations see lower margins. For ex-ample, 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 coun-try. Life expectancy has risen to 73.2 years for 2012, with the latest WHO estimates at birth be-ing 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 so-ciety 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 ex-ports, valued at $286 million, whose main ex-port 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 AHEADDominican 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 pub-lic health; (4) develop the social health insur-ance 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 ac-cess 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 preven-tion, 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 Do-minicans comprise 36% of the general popu-lation, 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 im-portant issue for the Dominican government. Natural events such as hurricanes and earth-quakes 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 challeng-es, but also keeping ahead of events. ✖
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.
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I N T E R V I E W
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?The Dominican Republic 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 Tour-ism Conference organized by the authorities of all the Caribbean countries to dis-cuss the potential of devel-oping 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 certifica-tion processes for hospitals and clinics. Some of the crite-ria we prioritize include hav-ing an international depart-ment, where the staff speaks English, and so on.
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.
BIO
DESTINATION, health What role do Public-Pri-
vate-Partnerships (PPPs) play in the development of the sec-tor?Cooperation between the public and the private sectors is key for the development of the health tourism sector. The tourism board has consid-erable 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 med-ical 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 pro-mote the Dominican Republic as a medical destination?We do not implement specif-ic actions, because we are in the process of giving a frame-work 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 sur-gery, orthopedics, and bar-iatric surgery. At the same time, we want to position the Dominican Republic as the second home for medical visitors. We want, essential-ly, to exploit the friendliness of Dominicans and the nat-ural 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 Medi-cal 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 bet-ter 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 train-ing, and we foresee the cre-ation 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 pro-gram 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 in-dustry abroad, and we plan to participate in numerous trade shows and fairs. ✖
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I N T E R V I E W
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.
Medical tourism is a highly prof-itable global phenomenon with tremendous potential for fur-ther growth. As an expert in the field could you talk us through this new global trend?Medical tourism is the seg-ment 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 bil-lion is generated by medical tourism. That includes not only medical care, per se, but also odontology and wellness at facilities such as spas. Med-ical 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. Addi-tionally, the long waiting lists in countries like the US and Canada, and the high cost of medical treatments are prob-lematic—the leading cause of bankruptcy for individuals in the US is health problems, making up 50% of cases.
The Government has been fo-cused on developing the tour-ism industry, but will this make a difference in the medical tour-ism segment? Medical Tourism is a segment that helps to grow and diver-sify the offer. The key factors are quality, safety, certifica-tions, JCI and ISQUA accred-itation, and health centers of
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 post-graduate 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.
BIO
PRESCRIPTION for growth
excellence. Not everybody can be a candidate to offer medical tourism services, as international criteria must be met. First, you have to com-ply with local criteria, such that the center needs to be licensed by the Ministry of Public Health and the pro-fessionals should be part of the medical college and their medical specialty society. In addition, the hospital should be certified and have inter-national departments that manage the entire patient experience, and optimally accredited by the joint com-mission international (JCI). In the Dominican Republic, there are three centers work-ing towards the accreditation process (Hospital General de la Plaza de la Salud, HOMS, and CEDIMAT).
Along with the above, what op-portunities do you see in the Dominican Republic?Medical tourism brings op-portunities for raising the bar on quality, and the need for certifications and ac-creditations 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 com-pany 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 ex-equatur 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 con-sist of investors coming to the Dominican Republic to establish health centers of excellence. They might well already have a special per-mit, but first, it has to meet established criteria, prefer-ably regarding technology that we lack in the country, which will promote knowl-edge transfer, and sustained medical education, creating employment and opportuni-ties for the local community. Thirdly, it should not create unequal competition for lo-cal physicians. Essentially, the establishing of interna-tional centers of excellence is geared at helping to dif-ferentiate us in the medical tourism industry and also raise the bar on quality and top-notch procedures. ✖
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M E D I C A L T O U R I S M F O C U S
Medical tourism is a highly profitable glob-al 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 direct-ly linked to economic development, generating higher incomes and better access to education. Demographic changes, such as aging popula-tions 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 increas-ing costs of health services in developed coun-tries, coupled with the availability of receiving alternative treatments at lower prices in devel-oping ones, is leading more and more patients to seek treatment overseas.
GOVERNMENT PRIORITYThe 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 nu-merous specialists in fields such as: cardiolo-gy, cosmetic surgery and dentistry, as well as multiple wellness and spa/recovery services providers.
ADTSThe Dominican Association of Health Tourism (ADTS), founded and chaired by Dr. Alejandro Cambiaso Rathe, a board certified medical tour-ism expert on prevention and management of health centers, is a nonprofit organization pro-moting the Dominican Republic as an ideal des-tination for medical tourism. However, ADTS’s aim is not only to attract new international pa-tients, 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 appropri-ate endorsements, accreditations, and certifica-tions for specialists and medical centers.
TREATMENT ABROAD UNDER ANY CONDITION
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 cost-effectiveness.
STATISTICSThere are no clear statistics regarding the num-ber and origin of medical tourists visiting the Dominican Republic. In the words of Dr. Cam-biaso 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 con-sequence 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 CLINICSThe leading Dominican medical centers are certified by the Dominican Republic’s Min-istry 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 stra-tegic international alliances, and have quality committees and special departments respon-sible for assigning a care coordinator to inter-national 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 presti-gious universities and hospitals in the US and Europe, such as Harvard University (Massa-chusetts), Jackson Medical Center (Alabama), Brigham and Women’s Hospital (Massachu-setts), and Oslo University and Hospital Clinic (Norway), among others.
The country has taken the steps needed to strengthen its position in the competitive inter-national 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 beau-tiful beaches, numerous hotels and golf clubs, and a culture of hospitality and warmth, which add to the recovery process. And it is easy to ac-cess: citizens from the US, Canada, and Europe require no visa. ✖
THEBUSINESSYEAR124 DOMINICAN REPUBLIC 2015
I N T E R V I E W
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 infra-structure and built a new surgi-cal floor. Could you tell us more about its main highlights and facilities?I arrived at Clínica Abreu in 1982, the year that the previ-ous surgical ward was built. We have now rebuilt it and relocated the surgical facilities to the 3rd floor following an in-vestment 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 Clíni-ca 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 re-building the surgical facilities and developing a new service for cancer patients, the ra-diotherapy 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 man-aging cancer with the right ra-diation therapy.
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).
BIO
general HOSPITAL
Clinica Abreu works in partner-ship 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, replac-ing Dr. Jordi Brossa after his 43 years as head of the clinic. Even though we have tre-mendous prestige, including in terms of services offered to diplomatic delegations from abroad, I concluded that if we continued using the same ad-ministrative system we would fail to advance. I therefore decided to seek a potential partnership and for this rea-son 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 be-cause 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 ad-visors available, especially in surgical services, which have traditionally been strong at our institution.
The clinic is mostly known for its excellent cancer treatment center. Can you tell us more about its facilities and the tech-nologies used?The linear accelerator that we have is extremely advanced technology. We acquired that through our Venezuelan part-ners because they have four or five cancer centers in Ven-ezuela and three in Colom-bia. They have tremendous expertise, and because of my 30-year experience in a public hospital managing the gyne-cological cancer department, I decided to find information on those companies adept at cancer management. This cancer center has had phe-nomenal success, and opened another identical branch on October 30th in La Romana. We have set up a CCD radio-therapy center. It is a great pleasure to have had the op-portunities I have had over the past 30 years, to help women with cancer. I have a prefer-ence 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. ✖
Inaugurated its new surgical floor in May 2014
The only clinic in the DR to provide a training program for radiotherapy specialists
THEBUSINESSYEAR 125Health & Education
P H A R M A B 2 B
What is your assessment of the current regulatory framework and what steps are necessary to encourage the further devel-opment of the pharmaceuticals sector?
FERNANDO J. ESPINAL The regulatory framework is a long way from working the way that it should. We are struggling and the authorities are collab-orating on efforts to change the industry. We have a long list of registrations that are long over-due, 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 organiz-ing 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 import-ant, because companies and patients may lose out because products aren’t in the market. However, I do note improve-ment. For example, authorities have been extremely demand-ing in terms of quality and the
FERNANDO J. ESPINALExecutive Vice-President, INFACA
BENJAMIN BEN-DAVID BONETTIPresident, Medek Pharma
TBY talks to two major players in the Dominican pharmaceuticals sector about
the current regulatory framework and their growth strategies in the market.
A CURE for your ills
process is currently flowing more smoothly. Markets and market trends change, and the regulatory framework should also be swift and flexible to ac-commodate this. The markets are regulated, which is good, but there is still some work to do.
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 ven-ture with a Spanish laboratory, Laboratorios Juste from Madrid. Our 50/50 partnership is an im-portant asset.
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 seg-ments: 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 phar-macies. 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 Domin-ican 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 agree-ment 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 for-mulation 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 in-terested in having this product for their markets.
BBDB In our generic business line, we have a long-lasting part-nership with our suppliers. In our new lines, we have a policy of working with very few peo-ple 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% in-crease in government spending on the treatment of catastrophic diseases. There are plans to cen-tralize more purchases through tenders. In the private sector, I foresee many niche markets, such as cancer and kidney dis-ease, to grow. And meanwhile, in terms of international ex-pansion, we work with Haiti, while prioritizing growth in the Dominican Republic, as there is much to do here. That said, we do target international expan-sion for the future. ✖
THEBUSINESSYEAR126 DOMINICAN REPUBLIC 2015
Review E D U C AT I O N
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.
Coming in at 143rd out of 144 countries in ed-ucation in the 2013 Global Competitiveness Report—just above Haiti—the drastic re-forms implemented by President Danilo Me-dina represent a no-holds-barred response to the country’s educational crisis. By mandat-ing that 4% of the GDP be spent on education (around $2.5 billion), and a slew of other stip-ulations, 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 soci-ety 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
LEARNING FOR THE FUTURE
800,000 Dominican households, and at a rea-sonably low cost as a share of GDP. Moreover, an increasing share of this program is being carefully targeted, and more importantly be-ing conditional on actions that increase the human capital of the poor and strengthen
Image: INTEC
A major focus of the government is on a massive expansion of the education system
THEBUSINESSYEAR 127Health & Education
IGNACIO SANTONIExecutive Director, ADEN International Business School
How would you characterize the business education envi-ronment?Having worked in Panama and Argentina for ADEN, what distin-guishes the Dominican Republic is the way in which executives are willing to improve their em-ployability level through higher education programs. Nowadays, being part of an MBA course means sharing the same profes-sional and personal background with your classmates. The Dominican Republic has a high level of young and talented pro-fessionals in charge of recruiting and training processes.
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 Domini-can Republic; since that time we have set up several post-gradu-ate programs, we expanded our profile, and strengthened our offering and partnership portfo-lio. 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 ser-vices and products. We expect to increase our turnover in the country by 40% by 2015.
their health and the education of their chil-dren, so that it isn’t just a handout but rather an investment in human capital.”
A STRONG FOUNDATIONThe starting point for educational success be-gins in the earliest years. Between 2008 and 2012, the gross enrollment rate for pre-pri-mary 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 en-rollment, and repetition, the overall enroll-ment 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 de-velopment. Boys fared only slightly better.
To understand why the Dominican Repub-lic has the second lowest rate of early child-hood education in Latin America—30 points behind the regional average according to the Programa de Promoción de la Reforma Ed-ucativa en América Latina y el Caribe (PRE-AL)—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
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.
communities, and had future implications when marginalized children entered the primary and secondary grades lacking the requisite skills. This in turn caused increas-ing 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 sec-tor 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 sig-nificant differences in attendance based on income; essentially only those who could af-ford 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 stu-dents in the near future. A major part of the government educational reforms is the con-struction of new schools and classrooms in underserved rural areas—where private insti-tutions are less common.
SCHOOL'S INAccording to official statistics, between 2008 and 2012, only 74.8% of primary school par-ticipants successfully completed their pro-grams 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 UNE-SCO 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, giv-en 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 profes-sions 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
THEBUSINESSYEAR128 DOMINICAN REPUBLIC 2015
average university educated worker could ex-pect to make around $565 per month. That means that entering the teaching profession could cost graduates 60% of their potential earnings, thus deterring numerous quali-fied 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 to-tal 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 post-secondary reform is to improve and build the capacity for effective and standardized vo-cational 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.
UPWARDS AND OUTWARDSEnrollment in university studies in the Do-minican 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 enroll-ment between 2006 and 2009. Beyond sim-ple numbers, the government is currently fo-cused on improving the quality of university education. Undergraduate studies predom-inantly train graduates for what the OECD describes as “administrative functions.” Ac-cording to the OECD, deficiencies in the Do-minican 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
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 crit-ical aspect of national development is fore-grounding this concern, and seeking to ad-dress 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 internation-alization potential. As the university system both takes in and sends out more students regionally and globally, the country can ex-pect to develop itself as both an educational and eventually economic hub; a virtuous cy-cle with a clear and well-established record of success. ✖
1995
1996
1997
1998
1999
200
0
200
1
200
2
200
3
200
4
200
5
200
6
200
7
200
8
200
9
2010
2011
2012
Primary school enrollment, 1995-2013, %Source: The World Bank
120
115
110
105
100
95
90
85
THEBUSINESSYEAR 129Health & Education
U N I V E R S I T I E S V O X P O P U L I
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.
FOSTERING THE FUTURE
RADHAMÉS MEJÍARector, APEC University
ROLANDO M. GUZMÁNRector/President, INTEC
MIGUEL R. FIALLO CALDERÓNRector, Universidad Nacional Pedro Henriquez Ureña (UNPHU)
PEC University was created by the busi-ness 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 com-prised of industry figures. This board plays a major role in de-fining the characteristics of the school. They participate in the design of the curriculum, based on the tangible needs of indus-try. 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 Educati-vo. It is a foundation providing loans to students who are unable
A
am committed to en-hancing the social functions of UNPHU,
improving its quality assess-ment, and instigating more in-ternational cooperation. The University also needs to throw its support behind better edu-cational programs for doctors, which is necessary for this re-gion. Another matter of impor-tance is fostering innovation and entrepreneurship, which involves supporting the differ-ent projects of the Inter-Amer-ican 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 stu-dents 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 educa-tion, embracing a larger number of students.
I
NTEC began as a graduate level univer-sity, but expanded to
accommodate the undergrad-uate level. We realized that the Dominican Republic was in need of high quality education at all levels, and that our aca-demic model had the opportu-nity 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 fruit-ful 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 busi-ness topics are a critical part of the training for engineering and health professionals. Ul-
timately, education is about more than training profession-als 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.
I
to pay for university study. That is part of our philosophy. That foundation not only gives loans to students who come to our uni-versity, 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.
THEBUSINESSYEAR130 DOMINICAN REPUBLIC 2015
I N T E R V I E W
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.
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.
BIO
CLASS act
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 San-to Domingo, was founded on March 17, 2005. The idea came from the need to pro-vide an integral, modern ed-ucation for students from preschool all the way to high school. In 2007, motivated by the need to continue promot-ing the strong principles that underpin our educational be-liefs, 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 val-ues necessary for the 21st Cen-tury: 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 suc-ceed 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 stan-dards promote equality by ensuring all students are well prepared to play leading roles and collaborate with their peers in the Dominican Re-public 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 differ-ent digital tools like Schoolo-gy, Dropbox, Kahn Academy, and other sites. The publish-ing houses with which the school has signed contracts provide a platform for teach-ers and students to interact even when they are not in school. St. Patrick School strongly believes in innova-tion, as demonstrated in our updated curriculum which paves the way for facilitators to plan based on the Common
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 mid-term development strategy?We recently opened our new preschool, in order to satisfy the demands of the commu-nity. This school year SPS has embarked on achieving on a new objective: the transfor-mation of our mission and vision, to ensure our best in-tentions 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 devel-op skills such as leadership, creativity, emotional intelli-gence, negotiation, effective communication, teamwork, analytical thinking, self-mo-tivation, decision-making, positive attitude, proactiv-ity, and entrepreneurship, among others.
Our true mission is to con-tribute, 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
R E V I E W
Tourism
140 137 136 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.
H
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%
HAVING IT ALL
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.
eading into 2015 the Dominican Re-public remains the leading player in
the Caribbean tourism sec-tor 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 Ja-maica 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 peri-od in 2013. Of these tourists, 66% arrived at the privately owned Punta Cana Interna-tional Airport, which is the second busiest airport in the Caribbean. It currently plays host to 53 airlines and has
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 Domini-can 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 Sa-maná (1.6%).
Added to arrivals by air, cruise passenger visitor num-bers 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 Do-minican Republic slumped by a hefty 29% back in 2009-2010. The latest figures, how-ever, show that this down-turn is reversing. The cruise lines calling at Dominican ports include heavyweights in the market, such as Roy-al Caribbean International, Norwegian Cruise Line, Costa Cruises, Princess Cruise Line,
How important is the Domini-can Republic’s wedding indus-try 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 wed-dings 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 inter-national team?Having an international team brings a variety of ideas, solu-tions, and creative thinking to the business. We have a Russian team responsible for the Rus-sian market, and likewise for the US, because they understand the particular needs and expec-tations. Plus, native speakers make the couples feel more comfortable.
What is your assessment of 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.
and Holland America. And the country has the infrastructure to attract these players in the lucrative cruise trade. The three main Domin-ican 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 ex-cursions 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 Re-public’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 con-tinue to be the biggest source of inbound tour-ists to the Dominican Republic given their geographic proximity. In 2010 North America accounted for 45.7% of the country’s tour-ists, 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 Do-minican 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 tour-ists entered the country, representing an in-crease 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 HEADAt present the Dominican Republic has in ex-cess 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.
Tourist Arrivals by Main Markets-1H2014Source: Caribbean Tourism Organization
DR Average Monthly Temperature (Celsius)Source: World Bank
DR Average Monthly Rainfall (mm)Source: World Bank
European Tourist Arrivals by Main Markets-1H2014Source: Caribbean Tourism Organization
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.
MANY BASKETSSo what is the country’s recipe for tourism suc-cess? 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 signif-icant 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, regu-latory incentives, and good planning. Further-more, the government’s own investment in infrastructure projects, such as its 2012 Coral Highway linking Punta Cana to Santo Domin-go, 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 Do-minican 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 exemp-tion to hotels, resorts, and tourist related activi-ties. 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 wed-dings, 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. Accord-ing to the latest quarterly survey undertaken by the country’s Central Bank, 96.6% of all tour-ists 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, accommoda-tion, 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 Repub-lic Has It All—and this does indeed appear to be the case as the tourism industry continues to go from strength to strength. ✖
4.7Million
TOTAL NUMBER OF TOURISTS ARRIVING BY AIR (2013)
423,910
CRUISE SHIP VISITORS (2013)
HOTEL STOCK
ROOMS
70,000 95%
PURPOSE OF VISIT
HOLIDAY
AVERAGE LENGTH OF STAY
9 NIGHTS
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V O X P O P U L I B O U T I Q U E H O T E L S
Local boutique hotel operators explain how they offer top-quality services to international guests looking for a unique Dominican experience.
GETTING AWAY FROM IT ALL
LAURA TORALGeneral Manager, Rancho Platón
LIONEL GÓMEZGeneral Manager, Zoëtry Agua Punta Cana
POLIBIO SCHIFFINOGeneral Manager, Casa Bonita
e decided to turn Rancho Platón into an eco-lodge. We fin-
ished the construction of all of our current cabins in 2011. We focus on nature lovers; peo-ple 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 Do-minicans stay here, but we are also focusing on international clients, especially Europeans. Our dining area is surround-ed by trees and natural pools where our guests are able to taste great national and inter-national cuisine. And we espe-cially pay attention to the qual-ity of ingredients. All products that can be are bought locally, from fruits and vegetables to fish. Moreover, all of our em-ployees are from the area, in-cluding the chef. We use the energy provided by our five hy-droelectric 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 treat-ment water. They are designed to allow water to flow naturally to the Río Nizao. We also have our own independent wa-ter supply system that brings pure, high- quality water di-rectly from the spring.
W
asa Bonita was built in the 1970s on a site that used to be a cattle
ranch belonging to my grandfa-ther. In 1990 my parents decid-ed to add 12 rooms and convert-ed 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 up-dating our facilities to make Casa Bonita attractive to upscale clientele. Today in Casa Bonita you will have an experience that blends health and wellbeing ser-vices, adventure activities, and gastronomy, with the ambiance of rustic elegance. Guests that come to Casa Bonita are nor-mally individual travelers look-ing 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
C
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 stan-dard of four-diamond service, they are also 100% committed to guest satisfaction. We offer an eco-friendly environment,
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 un-wind 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 tre-mendous sense of hospitality.
Z
honeymooners enjoy the sense of privacy we offer too. The gas-tronomy experience at Casa Bo-nita 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.
THEBUSINESSYEAR 135Tourism
I N T E R V I E W
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 club-house. 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 won-derful location. It is difficult to find a more beautiful des-tination. We have eight holes on the oceanfront, where you can almost feel the waves. We also have the advantage of having a small bluff run-ning 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 expen-sive, but we want to have the course as close to what the pros would play on as pos-sible. We have already host-ed three Champion’s Tour events, so we know what their demands are and we are very close to that on a day-to-day basis.
What is the average profile of 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 Repub-lic. That is where we see the biggest impact. The average
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.
BIO
TEE time
age is usually between 35 and 60. We are also starting to see some Latin American activity and we always see some Eu-ropean activity too.
How popular is golf among Do-minicans?Due to our environment and business model our operation caters to a high-end residen-tial and tourist resort custom-er. We are less geared toward servicing the local Domini-can 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 in-ternational 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 con-tribute 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 Do-minican Republic currently at-tracts 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 posi-tion the Dominican Republic as a golf destination is still re-quired in order to potentially triple that number in a five-year 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 rep-resents a much bigger piece than just in terms of volume.
What is your assessment of the Dominican Republic’s infra-structure?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 cli-ents also attend Casa de Cam-po 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. ✖
Listed among the world’s finest courses, and ranked number one in the Caribbean and Mexico by Golfweek for the last seven years
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F O C U S G O L F
With 28 golf courses to choose from, the Dominican Republic aims to become the premier golf destination in Latin America.
GOLF IN PARADISEWith an increasing number of world-class golf courses created by some of the most prized golf course designers such as Pete Dye, Jack Nick-laus, Greg Norman, Tom Fazio, Robert Trent Jones Sr., and Gary Player, the Dominican Re-public 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.
CASA DE CAMPO, LA ROMANACasa 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 Carib-bean. "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. "With-out proper heavy machinery to crack the coral, the tireless Dominican crew used sledgeham-mers, pickaxes and chisels." The course, which opened its green in 1971 has already proven it-self 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 vari-ety of water sports, tennis, shooting, polo, ma-rina, and lovely Altos de Chavon make Casa de Campo Caribbean a most complete resort.
PUNTA ESPADA, CAP CANAAnother famous Dominican Republic golf des-tination is an 18- hole Punta Espada Golf Course at Cap Cana, the first Jack Nicklaus’ signature course in the Dominican Republic. Punta Espa-
JUAN COHENPresident, 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 insti-tutions 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 organiz-ing more tournaments and events. We are a leading golfing destination in Latin America, but still have more to do to realize the huge potential.
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 host-ed the Cap Cana Championship, an official PGA TOUR’s Champions Tour event, between 2008 and 2010.
CORALES, PUNTA CANACreated by Tom Fazio, Corales Golf Course ranks among the top golf courses in the Domin-ican 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 Domini-can Republic’s must-play courses.
PLAYA DORADA, PUERTO PLATADesigned 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, al-mond trees, and the sublime royal Poinciana trees. Time to find that caddy. ✖
THEBUSINESSYEAR 137Tourism
D E S T I N A T I O N P H O T O E S S A Y
Visitors never fail to be amazed by the magnif-icent beauty and diversity before them as they arrive. While mass tourism has built up mostly in Puerto Plata and Punta Cana, Samaná Pen-insula still remains relatively untouched, re-taining the traditional charm of its virgin rain-forests, creeks, and some of the world’s best beaches. Its capital, Santa Bárbara de Samaná, overlooking the Bay of Samaná, is home to nu-merous welcoming cafés, vibrant streets ring-ing to the rhythm of merengue, and a multi-tude 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 Haitis-es National Park. A scenic boat ride across the Bay will land you at the Park with spectacular mangroves swamps, sea grass beds, and nu-merous islets.
CAYO LEVANTADOThose who have had the chance to visit Sa-maná Peninsula claim that all tropical fanta-sies come true at Cayo Levantado, a tiny, pri-vate island in Samaná Bay. Cayo Levantado, with its pale sands washed by turquoise water
SAMANÁ PENINSULA
Mother Nature has been particularly generous to the island of Hispaniola, especially its eastern territory.
LUSH, LUSH
The Dominican Republic has different landscapes to suit all tastes and desires
Image: Dominican Republic Ministry of Tourism
THEBUSINESSYEAR138 DOMINICAN REPUBLIC 2015
and hills covered in emerald palm groves is of-ten called a “Bacardi Island” thanks to being the location for numerous TV commercials. The island has three beaches; two of them lo-cated on the south side for the exclusive use of guests at the only hotel located on the is-land, the five-star Gran Bahia Principe. These breathtaking and surprisingly quiet beaches are dotted with sun loungers and white ca-banas, 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.
LAS TERRENASAccessed via mountain roads, Las Terrenas occupies a tiny corner of country’s northeast-ern 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 Euro-pean 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 gal-leries 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.
EL SALTO DEL LIMÓNIn the heart of the Samaná Peninsula is El Salto del Limón, a spectacular 150-foot wa-terfall camouflaged by surprisingly rough landscape, and encircled by peaks covered in dense greenery. After less than a 30 min-ute 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 Colum-bus ,who called Samaná Peninsula the fairest land on the face of the Earth. ✖
Houses add a touch of Caribbean flavor to American-style villas
The countryside is only ever a short drive away
Image: Dominican Republic Ministry of Tourism
Image: Dominican Republic Ministry of Tourism
THEBUSINESSYEAR 139Tourism
SANTO DOMINGO
01 Hotel EmbajadorAv Sarasota no. 65 Bellavista, Santo Domingo, Republica DominicanaT +1 890 221 2131www.occidentalhotels.com
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.
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.
LA ROMANA
03 Hotel Casa de CampoCasa de CampoLa RomanaT +1 800 877 3643www.casadecampo.com.do
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 0000www.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.
BARAHONA
05 Hotel Casa BonitaKm. 17 Carretera de la Costa, Barahona, BarahonaT +1 800 525 4800casabonitadr.com
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.
SANTIAGO
06 Hotel Hodelpa Gran Almirante
Av. Estrella Sadhalá, Santiago de los Caballeros, República DominicanaT +1 809 580 1992www.hodelpa.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.
PUERTO PLATA
07 Casa Colonial Beach & SpaPlaya Dorada, Puerto PlataT +1 809-320-3232www.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.
THEBUSINESSYEAR140 DOMINICAN REPUBLIC 2015
HELPFUL HINTSSome survival tips that will help get you through the first few days in the country
Useful Numbers
EMERGENCY & HEALTHEMERGENCIES 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 HIREAVIS www.avis.com.do
EUROPCAR DOMINICAN REPUBLIC
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
GOVERNMENTPRESIDENCY
www.presidencia.gob.do
MINISTRY OF FOREIGN AFFAIRS
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 CONSULATESUSA
www.santodomingo.usembassy.gov
MEXICO www.embamex.sre.gob.mx/
republicadominicana
BRAZIL
www.embajadadebrasil.org.do
CHILE
www.chileabroad.gov.cl/santo-domingo
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.
There are many street sellers and windshield washers, especially in busy intersections of Santo Domingo. Remember to keep some change in the car.
Most Dominicans believe in God and when speaking will often use the phrase Si Dios quiere; if God wishes it.
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.
There are public taxis that run along specific routes, with four spots for sale in the backseat and two in the front.
Drink bottled water and be careful to use clean water when washing fresh fruit and vegetables or consuming ice.
