Dominican Republic Bi-Weekly Report

Reaching the Goals

May 19, 2017BancTrust & Co. Research Team

• According to the Central Bank, Dominican Republic grew 5.2% y-o-y in 1Q17, while the MEAI for March showed a 6.2% y-o-y expansion. We believe the results reinforce DR’s trend to growth above its potential
• Once again tourism results exceeds expectations with a 15% y-o-y growth in tourist arrivals in April and a 9.9% y-o-y increase in related income for 1Q17
• The increase in foreign currency inflows made the Central Bank to reach its highest level of international reserve in history, equivalent to 4 months of imports

The Central Bank of the Dominican Republic (BCRD in Spanish) released the preliminary results for the economic performance in 1Q17 and, as usual, DR continues making bids for another promising year. In detail, the BCRD showed that Dominican GDP expanded 5.2% y-o-y in 1Q17, which is consistent with the macroeconomic projections and their tendency to grow above its potential. In addition, the monetary authority also released the Monthly Economic Activity Index (MEAI) which registered a y-o-y variation of 6.2% in March. In our view, the latest results on this index show DR’s capacity to keep growing above its potential and the trend so far this year leads us to believe that there is room for further improvement. All-in, we maintain our forecast of GDP growth for 2017 near the 7% y-o-y, which goes in line with the BCRD expectations (6.4%-7.4%) but well above the most recent forecast of ECLAC (5.3%).

Dominican Republic Bi-Weekly Report

DR’s Free Trade Zones Get the Region’s Gold Star

April 14, 2017BancTrust & Co. Research Team
  • DR’s exports through Free Trade Zones were the most among the DR-CAFTA
  • The Executive Board of the IMF officially concluded the Article IV consultation in the country and provided an update of their estimations for 2017 and 2018
  • The Corporation of Electric State Enterprises announced a USD780mn investment to add almost twice the current renewable sources’ generation 

Figures from the Observatory of Competitiveness of the Dominican Republic show that exports through Free Trade Zones in the country totaled USD5.3bn in 2016, where medical equipment, textiles and electrical products were the items with the largest share of the total (25.3%, 20.6% and 14.1%, respectively). Additionally, the report from the observatory details that the total figure is the largest among the reported from the rest of the members of the DR-CAFTA, leaving behind the USD4.9bn from Costa Rica and the USD3.9bn from Honduras.

Dominican Republic Bi-Weekly Report

Stabilizing the FX Market

March 31, 2017BancTrust & Co. Research & Strategy Team
  • The Central Bank of the Dominican Republic will sell USD275mn in the local FX market to avoid unwanted fluctuations in the exchange rate
  • February’s CPI registered a m-o-m variation of 0.42%, while the YTD inflation figure stood at 1.04%
  • According to the former president of the Finance Commission in the chamber of deputies, subsidies to electricity amounted to USD9.9bn between 2005 to 2016. Thus, representing another reason to urge the electricity pact

A month ago, we informed in our DR Bi-weekly Report “Homework Needs to be Done” the complaints of the industrial sector regarding a shortage of foreign currency in the domestic market, even when the Dominican market is receiving a great amount of US dollars especially from the positive results in the external sector. This particularly contributed with a greater level of international reserves in the Central Bank of the Dominican Republic (BCRD) that went over the psychological barrier of USD6bn for the first time in the country’s history. Back in that moment, the governor of the BCRD, Hector Valdez Albizu, stated that their intention was to follow a new policy line with a more flexible FX market and less intervention.

Dominican Republic Bi-Weekly Report

Growth Amid Political Disruption

March 17, 2017BancTrust & Co. Research Team

• The Economic Activity grew 5.5% y-o-y January on account of a strong expansion in the sectors of free trade zones and local manufacturing, agriculture and services
• The Odebrecht case is slowly turning into a political nightmare for the government of Danilo Medina in an otherwise quiet political year
• The administrative minister of the Presidency affirmed a tax reform is off the table in the short term

According to the latest report by the Dominican Republic Central Bank (BCRD in Spanish), the economy continues to grow above its potential as the Monthly Economic Activity Index (IMAE in Spanish) saw a 5.5% y-o-y expansion in January. This outcome was mainly driven by the sectors of Free Trade Zones Manufacturing (8.5%), Agriculture (6.2%), Local Manufacturing (6.1%), and Services (6.1%). Within the latter, Financial Intermediation Services stands out with an impressive 9.2% expansion, followed by Commerce (7.7%), Hotels and Restaurants (5.9%), and Transportation and Storage (5.4%).

Dominican Republic Bi-Weekly Report

Homework Needs to be Done

March 3, 2017BancTrust & Co. Research Team

• The IMF released its mission report, highlighting the strong economic context but calling for further strengthening of DR’s fiscal situation
• ECLAC expects the Dominican Republic to lead growth in Latin America this year, although external negative shocks can drive south this estimation
• Inflation remains in line while tremors over foreign currency shortages increase

On 31 January, a mission from the International Monetary Fund (IMF) arrived in the country to carry out the annual consultation under Article IV; the visit was intended to last two weeks and to focus on 2017 perspectives as well as economic and fiscal policy improvements. In the initial meeting with the Central Bank, Governor Hector Valdez Albizu highlighted that macroeconomic fundamentals are better positioned than at the end of 2016 – when the IMF went on a Staff Visit -, thus expecting a positive review from the organism. Nevertheless, the IMF laid out key recommendations to be done for the country in order to stay on its outstanding trend.

  • Thursday, May 25 2017
    Venezuela:

    - During a televised press conference, the top Public Prosecutor Luisa Ortega Diaz addressed several events regarding the wave of protests in Venezuela. In detail, the prosecutor denounced the possession of arms by the population despite the current ban by the Ministry of Interior, the performance of state security forces and military trials of civilians. One of the statements with greatest impact referred to the cause of death of a young opposition demonstrator product of a metal projectile fired by an official of the Bolivarian

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  • Wednesday, May 24 2017
    Venezuela

    - Finance Minister Ramon Lobo and the Executive Board of the Central Bank of Venezuela (BCV in Spanish) announced the start of operations of the new FX system DICOM. The system will work through two weekly auctions (the first one will take place tomorrow) and a bands’ system where the FX rate will fluctuate – the starting rate has not been announced yet. The official rate will be the lowest offered by those who are adjudicated, but a “contingent” auction will take place in case that such rate exceeds the upper band establis

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  • Tuesday, May 23 2017
    Venezuela:

    - For today, the new FX scheme, DICOM, is set to begin operations, and yesterday the Minister of Foreign Trade and International Investment, Jesus Faria, assured that the main goal is to reduce the impact of the parallel dollar and to increase the assignment of currency for business. It is expected that today further details of the mechanism will be disclosed from the facilities of the Central Bank of Venezuela (BCV for its words in Spanish), so stay tuned for more.

    Argentina:

    - The US Treasury Secretary, Steven Mnuchin, told the Senate yesterday that regulators would review Rosneft’s stake of Citgo Petroleum Corp., this as concerns have emerged over possible control from the Russian company in case that PDVSA fails to make payments on the bonds guaranteed by Citgo’s collateral. Senators raised their concerns – regarding Rosneft’s “control of a major US energy supplier” – on what they consider a national security matter to Mnuchin, who heads the Committee on Foreign Investment in the Unite

    Read More >>

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