The Dominican Republic, the main destination for Spanish and international investment in the Caribbean, is beginning to show signs of a solid reactivation after the collapse caused by Covid in 2020. The remarkable improvement in the tourism sector, driven by an accelerated vaccination (the country is one of the fastest advancing in immunization in the continent) clarifies a hopeful outlook.
And this at a time when President Abinader completes a year in power with renewed promises to encourage foreign investment to leave the crisis behind.
The Dominican Republic, whose GDP fell 6.7% in 2020, will grow 7.1% this year and 5.5% in 2022, according to international agencies. More optimistic, the central bank already forecasts an advance of 9% to 10% this year, after in the first half of 2021 the GDP progressed 13.3%, with advances in construction and free zones. For the bank, the economy is benefiting from a more favorable external environment, which allows for a greater flow of foreign exchange through remittances, tourism and investment. The Government’s commitment to guarantee massive vaccination to reactivate tourism and boost free zones has been praised by the IDB and the OAS.
In the first half of the year, this activity, in which Spanish firms are key players, grew by 36.1% (1.9 million visitors), with a 29.7% increase in revenues, to US$ 2.4 billion. In January-July the arrival of 2.4 million visitors was recorded and 2.5 million are expected in the second half of the year, according to Tourism, which highlights the recovery of 60,000 direct jobs and 102,000 indirect jobs as a result of the joint public-private effort.
The Ministry notes that hotel bookings for November and December already exceed those of the same period in 2019, before the pandemic, and forecasts a record in January 2022, with figures higher than January 2018, the best year for tourism in the Dominican Republic. Covid’s remarkable control has brought an 80% recovery in visitor arrivals in June-July compared to 2020.
Key factor in the reactivation is a health policy that has privileged the productive sectors, especially tourism, an important pillar of the economy (14% of GDP and 573,000 jobs). The Government has opened the door to visitors with two weeks of full vaccination, PCR negative certificate or antigen test. And it has just allowed hotels to open at 100% capacity, while maintaining social distancing. As of August 21, 54.6% of the adult population had received the two doses of the vaccine, according to official data. Covid has caused the death of almost 4,000 people in the country.
Another key factor is the evolution of remittances, which grew 51.5% in the first half of the year, to 5.263 billion, and 43.2% in the first seven months, to 6.159 billion. The more than 8.2 billion sent in 2020 by Dominicans abroad, mainly from the US and Spain, saved the country from the debacle when tourism and trade collapsed.
Spain is the third largest investor, with 2,000 million in stock and the presence of 160 firms, led by fifteen hotel companies (with Barceló, Ríu, Meliá, Iberostar at the forefront), which account for 65% of the rooms, and the airlines Air Europa (which last July operated its first direct flight Madrid-Samaná) and Iberia. But also with relevant operations in real estate, energy and finance: Sabadell, Mapfre, Acciona, Naturgy, Siemens-Gamesa, Inypsa, Elecnor, Mango, Inditex… And Abinader’s interest, expressed in his first visit to Madrid, is to promote new projects beyond the tourism activity.
Abinader, one year in power
Abinader completed one year in office in mid-August, when he arrived in the midst of the pandemic, with a reactivating economy but with enormous challenges ahead. Among his achievements are a strategy based on health risk management, financial support (agreements with airlines, fiscal flexibility, credit assistance to SMEs and support to vulnerable sectors); the assumption by the State of a health insurance for visitors affected by Covid; the creation of a Tourism Cabinet and an Urban Mobility Plan to implement massive transportation projects, among them the extension of the Santo Domingo subway.
Despite the recovery, the outlook is far from rosy. Abinader faces a worrying rise in public debt to 67.8% of GDP, high inflation and increasing citizen insecurity. Also pending is the fiscal reform recommended by the IMF (postponed to 2023), the reduction of the losses of the electricity distributors and the reform of pensions, health and unemployment.
Luis Abinader, whose first year has been marked by his promise of zero impunity for corruption and the investigation of alleged irregularities of the Executive Medina, has placed special emphasis on the promotion of foreign investment and collaboration with the private sector in infrastructure, energy and trade. A draft Law for the Promotion of Investment is currently being processed to pave the way for investments by speeding up the approval of projects. It seeks to reduce bureaucracy and red tape, improve the business environment, strengthen legal security and promote public-private partnerships.
ECLAC reports that the Dominican Republic remains the first destination country for FDI in the sub-region, which for the Government shows that the pandemic has not reduced the country’s attractiveness. FDI grew 49.4%, to US$1.617 billion in the first half of 2021 and could end the year at US$3.362 billion, with a resurgence of investment from the US, Spain, Holland, Germany and Canada in tourism, telecommunications, energy, agriculture and construction. The country recorded a 15.4% drop in arrivals in 2020, to 2.554 billion, in a year in which the US was the leading investor (31%), ahead of Mexico (21%) and Spain (13%).