Learn about barriers to market entry and local requirements, i.e., things to be aware of when entering the market for this country.
While the DR’s economic growth is expected to exceed that of other Caribbean countries, systemic challenges persist. Rising food and energy costs, exacerbated by the conflict in Ukraine, make it increasingly difficult for the poor to afford the basic food basket. The impacts of environmental degradation, such as mangrove, beach and coral reef erosion, as well as pollution, threaten long term critical resources for tourism, which is a major economic driver.
Before COVID-19, Dominican Republic was the number one tourist destination in the Caribbean with over seven million tourists, 40 percent of whom were from the United States. Tourism rebounded in 2021 to 5.3 million visitors with strong growth anticipated through 2022, but still lower than pre-pandemic levels. The DR is not a party to the Open Skies agreement with the United States, which makes travel to the DR more expensive than it otherwise would be. With such a heavy dependence on tourism, especially American tourism, the DR faces challenges with increased unemployment in this sector.
The DR’s per capita GDP of $8,604 masks a very uneven distribution of wealth heavily in favor of the upper classes. Around 40 percent of the population lives below the poverty line. Education outcomes have been well below other countries in Latin America. Public spending has historically been disproportionately funneled into public works and the electricity sector at the expense of other social programs, such as education and healthcare. The DR’s poor performance in these global rankings, in terms of both the quality of its public education and time spent in school, prompted the education reforms under the previous Medina administration; however, progress has been elusive.
The DR is a net importer of oil and price volatility has had a significant impact on the local economy. Additionally, electricity subsidies continue to burden fiscal accounts, making this sector a drag on the economy. Compounding the problem is the inability of the state-owned electric power distribution companies to collect payment on roughly 35 percent of the electricity they supply – either through technical losses or non-payment of bills and/or theft by individuals and companies. The accumulation of debts owed to the power generators results in a lack of working capital, disruptions in fuel supplies, and frequent blackouts across the country.
International indicators of the DR’s competitiveness and transparency indicate significant issues. Foreign investors cite a lack of clear, standardized rules by which to compete and a lack of enforcement of existing rules. Complaints include allegations of widespread corruption, requests for bribes, delays in government payments, weak intellectual property rights enforcement, bureaucratic hurdles, slow and sometimes biased judicial processes, non-standard procedures in customs valuation of imported goods, as well as product misclassification as a means of negating CAFTA-DR benefits and increasing customs revenues. Weak land tenure laws and government expropriations continue to be a problem.
The lack of transparency and corruption continue to earn the DR low scores in international comparison tables. In Transparency International’s 2021 Global Corruption Perception Index, the DR improved two places to 128 out of 180, among the lowest in Latin America. Procurement by government agencies and parastatal organizations is often conducted by private direct negotiation with preferred suppliers and lack transparency, which discourages competition and facilitates corrupt practices. The situation has improved since the implementation in 2007 of CAFTA-DR, which includes requirements for government procurement of goods and services by public tender. However, under current law, foreign suppliers can only bid on international public tenders, which are relatively rare. However, foreign suppliers can participate in any other procurement process if they set up a local branch or subsidiary or have local tax residence through a mercantile registry. There is a lack of institutional continuity across changes in government administrations. The wholesale turnover in government personnel that typically occurs with changes in administrations can result in loss of records, which in turn can result in payment disputes and rejection of bills for goods and services purchased by preceding administrations.