According to the latest report of the United Nations Economic Commission for Latin America and the Caribbean (ECLAC), the Dominican economy is the fastest growing economy in the Latin American and Caribbean region (LAC) and the eighth largest economy in Latin America. It is also the main foreign direct investment (FDI) destination in the region, offering a favorable legal framework and unique fiscal incentives available for many sectors, such as tourism, real estate, infrastructure, agribusiness, services, and manufacturing.
With a population of more than 10 million, it represents one of the most attractive markets in Latin America and the Caribbean. The country’s main advantages are political and economic stability; a favorable legal and incentive framework; preferential access to international markets; a young qualified workforce; competitive labor costs and productivity; modern infrastructure; strategic geographical location; and connectivity. “The construction industry has benefited from an influx of foreign investment to add capacity in the tourism sector,” according to Lee Sutton, a country risk analyst with Fitch Solutions.
In 2018, the Dominican economy grew 7%, fueled by a robust domestic demand. The diversity of the economy has helped the country withstand international shocks. More than half of global trade for the Dominican Republic is accounted for by the United States, and it is of the utmost importance that the country maintains an open and positive relationship with its main partner. In fact, in terms of value exported, Dominican Republic trades with the US more than with the rest of the world (5586.192 USD million vs. 4377.284 USD million in 2019, but the trend was similar in the last years).
With a GDP of US$85.6 billion, the Dominican Republic ranks as the 96th largest exporter in the world; according to the World Economic Forum, it ranked number 82nd in the competitivity index with 57.38 points in 2018. In the same year, the country exported a total of US$8.24 billion worth of gold, electric components, cigars, medical instruments, and clothing, among other products. The main destinations for these exports are the United States, Canada, India, Switzerland, and Germany. Whether DR has a Regional Trade Agreements (RTAs) with a partner is largely correlated with the total trade volumes. All RTAs signed have provisions on goods and services.
Regarding services in 2018, Dominican Republic exports amounted to US$9.23 billion. The top services were international tourism, transportation and logistics, information and communications technologies, textile and apparel, medical devices and electronics, major league baseball, and, recently, call centers and Business Process Outsourcing (BPOs).
According to the most recent update of the Observatory of Economic Complexity (OEC), the Dominican Republic ranks number 76th in the economic complexity index, improving 11 points in 20 years. The countries considered in this classification must have a population of more than 1 million, exports of at least US$1 billion, and products with world trade over US$500 million.
Moreover, the skilled and available workforce appeals to global companies to set up their operations in the Dominican Republic as manufacturers and service providers.
According to the Economic Commission for Latin America and The Caribbean (ECLAC), the Dominican Republic Foreign Direct Investment averaged US$2,500 million between 2010 and 2020, reaching its highest point of US$3,570.7 million at the end of 2017.
The Dominican Republic’s economy is an example of successful expansion; the country has managed to reduce its levels of poverty while maintaining a steady GDP growth over the past 25 years. This growth has been driven by diversification and export expansion, allowing the Dominican Republic to transition from being one of the Western Hemisphere’s poorest countries to consolidate as an upper-middle-income country. The Free Trade Zones have directly benefited from the exemptions on import duties and the attractive incentives that allow them to operate in a much more favorable policy ecosystem, featuring a stable democracy, welcoming local culture, and a world-class logistics center and competitive prices.
The International Monetary Fund (IMF) praised the country’s economic and financial progress following its most recent visit in December 2015. An important part of the country’s appeal to international companies and investors is that it is democratic, stable, and economically healthy and it supports its democratic and economic development.
On August 16, 2020, our president Luis Abinader, took office after successful elections that confirming the strong, democratic government institutions and the stability of the country. The results of the election had a significant positive impact on international perception, including the confidence of international investors.
“This election resounds as an example to other nations of the power of democracy and what is possible when countries prioritize the wishes of their people,” U.S. Secretary of State, Mike Pompeo, tweeted after Abinader’s inauguration, saying he was “optimistic about this chapter in US-Dominican partnership.”
There has been democratic rule for the past 50 years and it continues to evolve into a more open and transparent institution. Within the past 10 years, the government has taken great strides toward establishing stability through steps such as constitutional reform, joining the Open Government Partnership and Anti-Corruption Initiative, and launching National Vision 2030.
Carlos Espaillat, LL.M., MBA
Deputy Chief of Mission