Dominican Republic Bi-Weekly Report

A “Historic” Issuance

June 30, 2017BancTrust & Co. Research Team
  • Dominican Republic issued last week a USD500mn reopening of the 5.95% 2027 bonds
  • Exports through Free Trade Zones increased 4.8% y-o-y in 1Q17 and their contribution in the GDP grew 1.4% y-o-y, but their structure is way different than 20 years ago
  • Deflation is back again, with a -0.14% m-o-m result in the CPI in May after in March a -0.2% result was obtained

The Dominican Republic headed again to international markets, only that this time it was not for budgetary reasons but rather for finding financing for finishing the construction of the Punta Catalina thermoelectric plant. The sovereign opted for reopening the issuance of January 2017 where bonds worth USD1.2bn were sold with a 5.95% coupon rate and maturity in 2027. The retap was for USD500mn but the bonds priced at 106.382 in order to yield 5.1%, which the Finance Ministry deemed as a “historic” rate as it is the lowest in history for the country’s 10-year securities.

Dominican Republic Bi-Weekly Report

ITBIS: The Black Sheep in Tax Collection

June 16, 2017BancTrust & Co. Research Team
  • The head of the DGII affirmed that tax collection performance is doubling the economy’s, and results as of April back this statement except for a really important one: ITBIS
  • Deficit in US-DR trade balance reached USD3.1bn in 2016, 26.6% more than in 2015
  • The Central Bank is keeping its Monetary Policy Rate at 5.75% for June

Magin Diaz, director of the General Directorate of Internal Taxes (DGII, in Spanish) affirmed tax collection is overperforming last year’s results as it is averaging a growth twice of the economy’s, which we have previously remarked is positive news when taking into consideration that it has happened without carrying away a fiscal reform – which we still deem necessary in order to guarantee a steady long-term improvement of fiscal accounts.

Dominican Republic Bi-Weekly Report

Looking Forward to a Diminished Deficit

June 2, 2017BancTrust & Co. Research Team
  • The government is now targeting a smaller budget deficit in 2017 than previously expected, as performance in 1Q17 points towards a one-third reduction by year-end
  • US President Donald Trump proposed to cut foreign aid to Dominican Republic through specifics funds from USD21.6mn to USD10.5mn in 2017
  • The Central Bank’s governor met with NY and London investors with the intention of highlighting the strength of the macroeconomic fundamentals of the Dominican economy

The Dominican government is feeling optimistic regarding its fiscal accounts this year as the results for 1Q17 could translate into a fiscal deficit in 2017 two-thirds below than the previously budgeted. In detail, the fiscal deficit in 1Q17 reached DOP13.28bn while the planned figure for 2017 is DOP85bn – 2.3% of the GDP. In this regard, the Vice Minister of Planning Ivan Rodríguez stated that the fiscal deficit could fall to DOP54.67bn by year-end or 1.5% of the GDP according to a projection based on 1Q17 performance.

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

For the Sake of Transparency

May 5, 2017BancTrust & Co. Research Team
  • The Central Bank offers for the first time figures on Consolidated Public Debt, showing an 11.2% y-o-y increase in December 2016 to USD34.1bn from USD30.64bn in 2015-end
  • CEPAL cut DR’s growth forecast from 6.2% to 5.3% – we remain confident the economy will manage to surpass this figure on account of a stronger demand and new investments
  • A court ruled in favor of the USD184mn fine agreement between Odebrecht and the Dominican government

Last week, the Central Bank, in collaboration with the Finance Ministry, made publicly available the official debt statistics of the Consolidated Public Sector on its website for the first time. Previously, the Public Credit Office was in charge of posting exclusively the statistics. According to the press release, the initiative is the result of coordinated work between both institutions, aiming at greater transparency of public finances through the delivery of reliable and quality information.

  • Wednesday, July 19 2017

    -The National Assembly (AN in Spanish) approved the final reports on the popular consultation of 16 July and the candidates for magistrates of the Supreme Court (TSJ in Spanish). The latter is part of the process of one of the main items of the current agenda of “zero hour” established by the opposition party Democratic Unity Roundtable (MUD in Spanish), as the legislators expect to exercise their constitutional ability to name – on Friday 21 July – new magistrates and thus actively repudiate the current Supreme Court and i

  • Tuesday, July 18 2017

    - Following the results of the public consultation election on Sunday, the Democratic Unity Roundtable (MUD in Spanish) called for a 24-hour national strike on Thursday in protest against the National Constituent Assembly (ANC in Spanish) proposed by the administration of Nicolas Maduro. Furthermore, Freddy Guevara, deputy President of the Congress, said they expect to name the new magistrates of the Supreme Court on Friday. We can anticipate this move will not be acknowledge by both the government and the Supreme Court, but will u

  • Thursday, July 13 2017

    - S&P Global Ratings, following its Tuesday action of downgrading Venezuela’s rating, yesterday decided also to downgrade the corporate credit of Corporacion Electrica Nacional, better known as CORPOELEC (former ELECAR). The action resulted in a downgrade from “CCC” to “CCC -“while also maintaining the negative outlook. In detail, the rating agency argued that they are taking this action against the corporate as a result of the sovereign’s downgrade, as it reflects that this is a “government-related entity” (GRE

  • Wednesday, July 12 2017

    - A US appeals court blocked Exxon Mobil Corp from enforcing a USD1.6bn award against Venezuela for an asset seizure back in 2007. The court ruled that the judge made a mistake in excusing Exxon from complying with procedural requirements to enforce the October 2014 ruling. In this way, the court supported Venezuela’s point that Exxon should have tried to enforce the award under the federal Foreign Sovereign Immunities Act (FSIA), instead of streamlined procedures. All-in, Exxon's petition was dismissed without prejudice, meaning


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