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 exist that were present even before COVID-19. Rising food costs are making 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, threaten long term critical resources for tourism, which is a major economic driver.
Before COVID-19, the Dominican Republic was the number one tourist destination in the Caribbean with over six million tourists. In 2019, the United States accounted for nearly 40% of tourists to the DR, with two million visiting Americans. With such a heavy dependence on tourism, and especially American tourism, the DR may face challenges with increased unemployment in this sector. Early indications point to tourist numbers rebounding to and even exceeding those from 2019, however it will be important to track longer-term trends to assess impacts post-pandemic.
The DR’s per capita GDP of $7,268 masks a very uneven distribution of wealth heavily in favor of the upper classes. Around 40.4 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 continue to erode. 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. The country slipped to 115th place out of 190 countries in the World Bank’s “Ease of Doing Business” 2020 Index, and in Transparency International’s 2020 Global Corruption Perception Index, the DR ranked also slipped to 137th place out of 180 countries. 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. However, 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. 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.