Foreign direct investment (FDI) plays an important role for the Dominican economy, and the Dominican Republic is one of the main recipients of FDI in the Caribbean and Central America. The government actively courts FDI with generous tax exemptions and other incentives to attract businesses to the country. Historically, the tourism, real estate, telecommunications, free trade zones, mining, and financing sectors are the largest FDI recipients.
Besides financial incentives, the country’s membership in the Central America Free Trade Agreement-Dominican Republic (CAFTA-DR) is one of the greatest advantages for foreign investors. Observers credit the agreement with increasing competition, strengthening rule of law, and expanding access to quality products in the Dominican Republic. The United States remains the single largest investor in the Dominican Republic. CAFTA-DR includes protections for member state foreign investors, including mechanisms for dispute resolution.
Foreign investors report numerous systemic problems in the Dominican Republic and cite a lack of clear, standardized rules by which to compete and a lack of enforcement of existing rules. Complaints include perceptions of widespread corruption at both national and local levels of government; delays in government payments; weak intellectual property rights enforcement; bureaucratic hurdles; slow and sometimes locally biased judicial and administrative processes, and non-standard procedures in customs valuation and classification of imports. Weak land tenure laws and interference with private property rights continue to be a problem. The public perceives administrative and judicial decision-making to be inconsistent, opaque, and overly time-consuming. A lack of transparency and poor implementation of existing laws are widely discussed as key investor grievances.
U.S. businesses operating in the Dominican Republic often need to take extensive measures to ensure compliance with the Foreign Corrupt Practices Act. Many U.S. firms and investors have expressed concerns that corruption in the government, including in the judiciary, continues to constrain successful investment in the Dominican Republic.
The current government, led by President Luis Abinader, made a concerted effort in its first full year of government to address issues of corruption and transparency that are a core issue for social, economic, and political prosperity, including prosecutorial independence, long-awaited electricity sector reform, and the empowerment of the supreme audit institution, the Chamber of Accounts. More work has repeatedly been promised, but passage remains uncertain as each measure is still subject to administrative or legislative processes, including approval of new public procurement legislation, passage of draft civil asset forfeiture legislation, the law for reform of the management of government assets, and a modern foreign investment law.
The Dominican Republic, an upper middle-income country, has been the fastest growing economy in Latin America over the past 50 years, according to World Bank data. It grew by 12.3 percent in 2021, 4.7 percent when compared with 2019 (pre-pandemic). Tax revenues were 12.7 percent higher than what was stipulated in the Initial Budget for 2021; coupled with budgetary discipline, the government closed its deficit to 2.7 percent of GDP. However, inflation at the end of 2021 was 8.50 percent, double the target of 4.0 percent ±1.0. Despite the government efforts to reduce public spending and increase revenues, absent meaningful fiscal reform, public debt continued to grow in 2021, reaching $47.7 billion at the end of November 2021 (if debt to the Central Bank is added, the public debt reached $62.04 billion), and a total service of debt of $5.9 billion – resulting in decrease in the debt to GDP ratio, but an increase in the total value of government debt. The government continues to apply large subsidies to different sectors of the economy such as the electricity sector and hydrocarbons. In 2021, the government allocated $1.03 billion to the subsidy for Electricity Distribution Companies (EDE’s) and $266.9 million directly to fuel.
According to the 2022 Climate Change Performance Index, the Dominican Republic is one of the most vulnerable countries in the world to the effects of climate change, though it represents only 0.06% of global greenhouse gas emissions. As a small island developing state, the Dominican Republic is particularly vulnerable to the effects of extreme climate events, such as storms, floods, droughts, and rising sea levels. Combined with rapid economic growth (over 5 percent until 2020) and urbanization (more than 50 percent of population in cities, 30 percent in Santo Domingo), climate change could strain key socio-economic sectors such as water, agriculture and food security, human health, biodiversity, forests, marine coastal resources, infrastructure, and energy. The National Constitution calls for the efficient and sustainable use of the nation’s natural resources in accordance with the need to adapt to climate change. The government is acting, both domestically and in coordination with the international community, to mitigate the effects of climate change.
|TI Corruption Perceptions Index||2021||128 of 180||http://www.transparency.org/research/cpi/overview|
|Global Innovation Index||2021||93 of 131||https://www.globalinnovationindex.org/analysis-indicator|
|U.S. FDI in partner country ($M USD, historical stock positions)||2020||$2,806||https://apps.bea.gov/international/factsheet/|
|World Bank GNI per capita||2020||$7,260||https://data.worldbank.org/indicator/NY.GNP.PCAP.CD|
1. Openness To, and Restrictions Upon, Foreign Investment
The Dominican Republic presents both opportunities and challenges for foreign investment. The government strongly promotes inward FDI and has prioritized creating a sound enabling environment for foreign investors. While the government has established formal programs to attract FDI, a lack of clear rules and uneven enforcement of existing rules can lead to difficulties. The approval in 2021 of a National Competitiveness Strategy, including the formation of a National Competitiveness Council, seeks to respond to the indicators of the Global Competitiveness Index of the World Economic Forum, and should help address some of these concerns.
The Dominican Republic provides tax incentives for investment in tourism, renewable energy, film production, Haiti-Dominican Republic border development, and the industrial sector. The country is also a signatory of CAFTA-DR, which mandates non-discriminatory treatment, free transferability of funds, protection against expropriation, and procedures for the resolution of investment disputes. However, some foreign investors indicate that the uneven enforcement of regulations and laws, or political interference in legal processes, creates difficulties for investment.
There are two main government agencies responsible for attracting foreign investment, the Export and Investment Center of the Dominican Republic (CEI-RD) and the National Council of Free Trade Zones for Export (CNZFE). CEI-RD promotes foreign investment and aids prospective foreign investors with business registration, matching services, and identification of investment opportunities. It publishes an annual “Investment Guide of the Dominican Republic,” highlighting many of the tools, incentives, and opportunities available for prospective investors. The CEI-RD also oversees “ProDominicana,” a branding and marketing program for the country launched in 2017 that promotes the DR as an investment destination and exporter. CNZFE aids foreign companies looking to establish operations in the country’s 79 free trade zones for export outside Dominican territory.
There are a variety of business associations that promote dialogue between the government and private sector, including the Association of Foreign Investor Businesses (ASIEX).
Foreign Investment Law No. 16-95 states that unlimited foreign investment is permitted in all sectors, with a few exceptions for hazardous materials or materials linked to national security. Private entities, both foreign and domestic, have the right to establish and own business enterprises and engage in all legal remunerative activity. Foreign companies are not restricted in their access to foreign exchange, there are no requirements that foreign equity be reduced over time or that technology be transferred according to defined terms, and the government imposes no conditions on foreign investors concerning location, local ownership, local content, or export requirements. See Section 3 Legal Regime for more information.
The Dominican Republic does not maintain a formalized investment screening and approval mechanism for inbound foreign investment. Details on the established mechanisms for registering a business or investment are elaborated in the Business Facilitations section below.
The Dominican Republic has not been reviewed recently by multilateral organizations regarding investment policy. The most recent reviews occurred in 2015. This included a trade policy review by the World Trade Organization (WTO) and a follow-up review by the United Nations Conference on Trade and Development (UNCTAD) regarding its 2009 investment policy recommendations.
2009 UNCTAD – https://unctad.org/en/pages/PublicationArchive.aspx?publicationid=6343
2015 WTO – https://www.wto.org/english/tratop_e/tpr_e/s319_e.pdf
2015 UNCTAD – https://unctad.org/en/PublicationsLibrary/diaepcb2016d2_en.pdf
Foreign investment does not require any prior approval in the Dominican Republic, but once made it must be registered with the CEI-RD. Investments in free zones must be registered with the CNZFE, which will notify the CEI-RD. Foreign investment registration is compulsory, but failure to do so is not subject to any sanction.
Law No. 16-95 Foreign Investment, Law No. 98-03 on the Creation of the CEI-RD, and Regulation 214-04 govern foreign investment in the Dominican Republic and require an interested foreign investor to file an application form at the offices of CEI-RD within 180 calendar days from the date on which the foreign investment took place. The required documents include the application for registration, containing information on the invested capital and the area of the investment; proof of entry into the country of the foreign capital or physical or tangible goods; and documents of commercial incorporation or the authorization of operation of a branch office through the setting up of legal domicile in the country. The reinvestment of profits (in the same or a different firm) must be registered within 90 days. Once the documents have been approved, the CEI-RD issues a certificate of registration within 15 business days subject to the payment of a fee which varies depending on the amount of the investment.
Lack of registration does not affect the validity of the foreign investment; but the fact that it is needed to fulfill various types of procedures, makes registration necessary in practice. For example, the registration certificate has to be presented to repatriate profits or investment in the event of sale or liquidation and to purchase foreign exchange from the authorized agencies for transfers abroad, as well as to process the residency of the investor. In April 2021, CEI-RD launched an online Registry of Foreign Direct Investment, which aims to streamline and make the registration processes more transparent to investors. For more information on becoming an investor or exporter, visit the CEI-RD ProDominicana website at https://prodominicana.gob.do .
The Dominican Republic has a single-window registration website for registering a limited liability company (SRL by its Spanish acronym) that offers a one-stop shop for registration needs ( https://www.formalizate.gob.do/ ). Foreign companies may use the registration website. However, this electronic method of registration is not widely used in practice and consultation with a local lawyer is recommended for company registrations. According to the “Doing Business” report, starting a SRL in the Dominican Republic is a seven-step process that requires 16.5 days. However, some businesses advise the full incorporation process can take two to three times longer than the advertised process.
In order to set up a business in a free trade zone, a formal request must be made to the CNZFE, the entity responsible for issuing the operating licenses needed to be a free zone company or operator. CNZFE assesses the application and determines its feasibility. For more information on the procedure to apply for an operating license, visit the website of the CNZFE at http://www.cnzfe.gov.do.
There are no legal or government restrictions on Dominican investment abroad, although the government does little to promote it. Outbound foreign investment is significantly lower than inbound investment. The largest recipient of Dominican outward investment is the United States.
3. Legal Regime
The national government manages all regulatory processes. Information about regulations is often scattered among various ministry and agency websites and is sometimes only available through direct communication with officials. It is advisable for U.S. investors to consult with local attorneys or advisors to assist with locating comprehensive regulatory information.
On the 2021 Global Innovations Index, the Dominican Republic’s overall rank was 93 out of 131 nations analyzed, which is a setback from its rank in 2020 by three positions. In sub-sections of the report, the Dominican Republic ranks 101 out of 131 for regulatory environment and 74 out of 131 for regulatory quality.
The World Bank Global Indicators of Regulatory Governance report states that Dominican ministries and regulatory agencies do not publish lists of anticipated regulatory changes or proposals intended for adoption within a specific timeframe. Law No. 107-13 requires regulatory agencies to give notice of proposed regulations in public consultations and mandates publication of the full text of draft regulations on the relevant agency’s website. Additionally, Law No. 200-04 allows citizens in general to request information to the government on a unified website: https://saip.gob.do/ . Foreign investors, however, note that these requirements are not always met in practice since not all relevant Dominican agencies provide content, and those that do often do not keep the content up to date, and many businesses point out that the scope of SAIP’s website content is not always adequate for investors or interested parties. U.S. businesses also reported years’ long delays in the enactment of regulations supporting new legislation, even when the common legal waiting period is normally six months.
The process of public consultation is not uniform across the government. Some ministries and regulatory agencies solicit comments on proposed legislation from the public; however, public outreach is generally limited and depends on the responsible ministry or agency. For example, businesses report that some ministries upload proposed regulations to their websites or post them in national newspapers, while others may form working groups with key public and private sector stakeholders participating in the drafting of proposed regulations. Often the criteria used by the government to select participants in these informal exchanges are unclear, which at a minimum creates the appearance of favoritism and that undue influence is being offered to a handpicked (and often politically connected) group of firms and investors. Public comments received by the government are generally not publicly accessible. Some ministries and agencies prepare consolidated reports on the results of a consultation for direct distribution to interested stakeholders. Ministries and agencies do not conduct impact assessments of regulations or ex post reviews. Affected parties cannot request reconsideration or appeal of adopted regulations, although they could challenge any of its content if deemed unconstitutional at the Constitutional Court and contest its application before the Superior Administrative Tribunal.
In February 2022, the Dominican Republic’s General Directorate of Internal Taxes (DGII) proposed to extend the existing 18% value added tax known as the ITBIS to digital services and published the draft regulation on its website (https://dgii.gov.do/Paginas/default.aspx) for public comment.
The Dominican Institute of Certified Public Accountants (ICPARD) is the country’s legally recognized professional accounting organization and has authority to establish accounting standards in accordance with Law No. 479-08, which also declares that (as amended by Law No. 311-14) financial statements should be prepared in accordance with generally accepted accounting standards nationally and internationally. The ICPARD and the country’s Securities Superintendency require the use of International Financial Reporting Standards (IFRS) and IFRS for small and medium-sized entities (SMEs).
By law, the Office of Public Credit publishes on its website a quarterly report on the status of the non-financial public sector debt, which includes a wide array of information and statistics on public borrowing ( www.creditopublico.gov.do/publicaciones/informes_trimestrales.htm ).
In addition to the public debt addressed by the Office of Public Credit, the Central Bank maintains on its balance sheet nearly $10 billion in “quasi-fiscal” debt. When consolidated with central government debt, the debt-to-GDP ratio is over 60 percent, and the debt service ratio is over 30 percent.
As of the end of 2020, the Dominican Republic was involved in 18 dispute settlement cases with the WTO: one as complainant, eight as respondent, and nine as a third party. In recent years, the Dominican Republic has frequently changed technical requirements (e.g., for steel rebar imports and sanitary registrations, among others) and has failed to provide proper notification under the WTO TBT agreement and CAFTA-DR.
The judicial branch is an independent branch of the Dominican government. According to Article 69 of the Constitution, all persons, including foreigners, have the right to appear in court. The basic concepts of the Dominican legal system and the forms of legal reasoning derive from French law—civil law system in general. The five basic French Codes (Civil, Civil Procedure, Commerce, Penal, and Criminal Procedure) were translated into Spanish and passed as legislation in 1884. Some of these codes have since been amended and parts have been replaced, including the total derogation of the Code of Criminal Procedure in 2002, resulting in a hybrid legal framework.
There is a Commercial Code and a wide variety of laws governing business formation and activity. The main laws governing commercial disputes are the Commercial Code; Law No. 479-08, the Commercial Societies Law; Law No. 3-02, concerning Business Registration; Commercial Arbitration Law No. 489-08; Law No. 141-15 concerning Restructuring and Liquidation of Business Entities; and Law No. 126-02, concerning e-Commerce and Digital Documents and Signatures.
Some investors complain of significant delays in obtaining a decision by the Judiciary. While Dominican law mandates overall time standards for the completion of key events in a civil case, these standards frequently are not met. The Judiciary has requested additional funds to hire more judges, clerks, and judicial personnel to address these concerns. In 2020 the World Bank noted that resolving complaints raised during the award and execution of a contract can take more than four years in the Dominican Republic, although some take longer. Dominican nationals and foreigners alike have the constitutional right to submit their cases to an appeal court or to request the Supreme Court review (recurso de casación in Spanish) the ruling of a lower court. If a violation of fundamental rights is alleged, the Constitutional Court might also review the case with the authority to nullify the lower court judgment. Notwithstanding, foreign investors have complained that the local court system is unreliable, is biased against them, and that special interests and powerful individuals are able to use the legal system in their favor. Others who have successfully won in courts, have struggled to get their ruling enforced.
While the law provides for an independent judiciary, businesses and other external groups have noted that traditionally the government did not respect judicial independence or impartiality, and improper influence on judicial decisions was widespread. The Abinader administration has made a concerted effort to respect the autonomy of the Public Ministry and the Office of the Attorney General, and investors have noted improvements. The administration has proposed a constitutional amendment to strengthen the independence of the Office of the Attorney General, but it faces uncertain prospects in the Dominican Congress.
Several large U.S. firms cite the improper and disruptive use of lower court injunctions as a way for local distributors to obtain more beneficial settlements at the end of contract periods. To engage effectively in the Dominican market, many U.S. companies seek local partners that are well-connected and understand the local business environment, but even this is a not a guarantee.
The legal framework supports foreign investment. Article 221 of the Constitution declares that foreign investment shall receive the same treatment as domestic investment. Foreign Investment Law No. 16-95 states that unlimited foreign investment is permitted in all sectors, with a few exceptions. According to the law, foreign investment is not allowed in the following categories: a) disposal and remains of toxic, dangerous, or radioactive garbage not produced in the country; b) activities affecting the public health and the environmental equilibrium of the country, pursuant to the norms that apply in this regard; and c) production of materials and equipment directly linked to national defense and security, except for an express authorization from the Executive.
The Export and Investment Center of the Dominican Republic (ProDominicana, formally known as CEI-RD) aims to be the one-stop shop for investment information, registration, and investor after-care services. ProDominicana maintains a user-friendly website for guidance on the government’s priority sectors for inward investment and on the range of investment incentives ( https://prodominicana.gob.do ).
In February 2020, the Dominican government enacted the Public-Private Partnerships (PPP) Law No. 47-20 to establish a regulatory framework for the initiation, selection, award, contracting, execution, monitoring and termination of PPPs in line with the 2030 National Development Strategy of the Dominican Republic. The law also created the General Directorate of Public-Private Partnerships (DGAPP) as the agency responsible for the promotion and regulation of public-private alliances and the National Council of Public-Private Partnerships as the highest body responsible for evaluating and determining the relevance of the PPPs. The PPP law recognizes public-private and public-private non-profit partnerships from public or private initiatives and provides for forty-year concession contracts, five-year exemptions of the tax on the transfer of goods and services (ITBIS), and accelerated depreciation and amortization regimes. The DGAPP website has the most up to date information on PPPs ( https://dgapp.gob.do/en/home/ ).
The National Commission for the Defense of Competition (ProCompetencia) has the power to review transactions for competition-related concerns. Private sector contacts note, however, that strong public pressure is required for ProCompetencia to act. Its decisions can be challenged before the Superior Administrative Tribunal (TSA). The TSA’s ruling can be revised in its legality through a recurso de casación by the Supreme Court of Justice (SCJ), and if there was a constitutional violation, the case could be heard by the Constitutional Court.
On June 14, 2021, ProCompetencia approved sanctions against four pharmaceuticals firms found guilty of price fixing (Profarma Internacional, S.R.L, Sued & Fargesa, S.R.L., Mercantil Farmacéutica, S.A. y J. Gassó Gassó, S.A.S) for certain drugs such as analgesics and anti-flu medicines. Total fines reached $250,000 ($14 million pesos).
The Dominican constitution permits the government’s exercise of eminent domain after the President has declared a plot of land for public use by official decree; however, it also mandates fair market compensation in advance of the use of seized land. Nevertheless, there are many outstanding disputes between U.S. investors and the Dominican government concerning unpaid government contracts or expropriated property and businesses, as well indirect expropriation. Property claims make up the majority of cases. Most, but not all, expropriations have been used for infrastructure or commercial development and many claims remain unresolved for years. The Abinader administration has committed to resolve disputes over land title before government use, but in some cases the matters are protracted and there are multiple claims to the same piece of land.
Traditionally, investors and lenders have reported that they typically do not receive prompt payment of fair market value for their losses. They have complained of difficulties in the subsequent enforcement even in cases in which the Dominican courts, including the Supreme Court, have ordered compensation or when the government has recognized a claim. In other cases, some indicate that lengthy delays in compensation payments are blamed on errors committed by government-contracted property assessors, slow processes to correct land title errors, a lack of budgeted funds, and other technical problems. There are also cases of regulatory action that investors say could be viewed as indirect expropriation. For example, they note that government decrees mandating atypical setbacks from roads, or establishing new protected areas can deprive investors of their ability to use purchased land in the manner initially planned, substantially affecting the economic benefit sought from the investment.
Many companies report that the procedures to resolve expropriations lack transparency. Government officials are rarely, if ever, held accountable for failing to pay a recognized claim or failing to pay in a timely manner.
Law 141-15 provides the legal framework for bankruptcy. It allows a debtor company to continue to operate for up to five years during reorganization proceedings by halting further legal proceedings. It also authorizes specialized bankruptcy courts; contemplates the appointment of conciliators, verifiers, experts, and employee representatives; allows the debtor to contract for new debt which will have priority status in relation to other secured and unsecured claims; stipulates civil and criminal sanctions for non-compliance; and permits the possibility of coordinating cross-border proceedings based on recommendations of the UNCITRAL Model Law of 1997. In March 2019, a specialized bankruptcy court was established in Santo Domingo.
The Dominican Republic scores lower than the regional average and comparator economies on resolving insolvency on most international indices.
4. Industrial Policies
Investment incentives exist in various sectors of the economy, which are available to all investors, foreign and domestic. Incentives typically take the form of preferential tax rates or exemptions, preferential interest rates or access to finance, or preferential customs treatment. Sectors where incentives exist include agriculture, construction, energy, film production, manufacturing, and tourism.
Incentives for manufacturing apply principally to production in free trade zones (discussed in the subsequent section) or for the manufacturing of textiles, pharmaceutical products, tobacco and derivatives, clothing, and footwear specifically under Laws 84-99 on Re-activation and Promotion of Exports and 56-07 on Special Tax Incentives for the Textile Sector. Additionally, Law 392-07 on Competitiveness and Industrial Innovation provides a series of incentives that include exemptions on taxes and tariffs related to the acquisition of materials and machinery and special tax treatment for approved companies.
Special Zones for Border Development, created by Law No. 28-01, encourage development near the Dominican Republic-Haiti border. Law No. 12-21, passed in February 2021, modified and extended incentives for direct investments in manufacturing projects in the Zones for a period of 30 years. Incentives still largely take the form of tax exemptions but can be applied for a maximum period of 30 years, versus the 20 years in the original law. These incentives include the exemption of income tax on the net taxable income of the projects, the exemption of sales tax, the exemption of import duties and tariffs and other related charges on imported equipment and machinery used exclusively in the industrial processes, as well as on imports of lubricants and fuels (except gasoline) used in the processes.
Tourism is a particularly attractive area for investment and one the government encourages strongly. Law 158-01 on Tourism Incentives, as amended by Law 195-13, and its regulations, grants wide-ranging tax exemptions, for fifteen years, to qualifying new projects by local or international investors. The projects and businesses that qualify for these incentives are: (a) hotels and resorts; (b) facilities for conventions, fairs, festivals, shows and concerts; (c) amusement parks, ecological parks, and theme parks; (d) aquariums, restaurants, golf courses, and sports facilities; (e) port infrastructure for tourism, such as recreational ports and seaports; (f) utility infrastructure for the tourist industry such as aqueducts, treatment plants, environmental cleaning, and garbage and solid waste removal; (g) businesses engaged in the promotion of cruises with local ports of call; and (h) small and medium-sized tourism-related businesses such as shops or facilities for handicrafts, ornamental plants, tropical fish, and endemic reptiles. In January 2020, the government announced a special incentive plan to promote high-quality investment in tourism and infrastructure in the southwest region of Pedernales for more information contact the Ministry of Tourism at https://www.mitur.gob.do/ .
For existing projects, hotels and resort-related investments that are five years or older are granted complete exemption from taxes and duties related to the acquisition of the equipment, materials and furnishings needed to renovate their premises. In addition, hotels and resort-related investments that are fifteen years or older will receive the same benefits granted to new projects if the renovation or reconstruction involves 50 percent or more of the premises.
In addition, individuals and companies receive an income tax deduction for investing up to 20 percent of their annual profits in an approved tourist project. The Tourism Promotion Council (CONFOTOUR) is the government agency in charge of reviewing and approving applications by investors for these exemptions, as well as supervising and enforcing all applicable regulations. Once CONFOTOUR approves an application, the investor must start and continue work in the authorized project within a three-year period to avoid losing incentives.
The Dominican Republic encourages investment in the renewable energy sector. Under Law 57-07 on the Development of Renewable Sources of Energy, investors in this area are granted, among other benefits, the following incentives: (a) no custom duties on the importation of the equipment required for the production, transmission and interconnection of renewable energy; (b) no tax on income derived from the generation and sale of electricity, hot water, steam power, biofuels or synthetic fuels generated from renewable energy sources; and (c) exemption from the goods and services tax in the acquisition or importation of certain types of equipment. Foreign investors praise the provisions of the law but have historically expressed frustration with approval and execution of potential renewable energy projects. Ongoing reforms to the energy sector discussed in Section 7 on State-Owned Enterprises should alleviate some of these concerns and have already enabled the completion of several solar power concessions over the past year. The Minister of Energy and Mines, Antonio Almonte, affirmed March 9 that the only way that the Dominican Republic has to counteract the fuel crisis in the international market is by stimulating and promoting the production of renewable energies.
The Dominican government does not currently have a practice of jointly financing foreign direct investment projects. However, in some circumstances, the government has authority to offer land or infrastructure as a method of attracting and supporting investment that meets government development goals. Anticipated reforms to government-owned asset management (See Section 7) may change the institutional actors and framework for engaging with government-owned resources.
In February 2020, the government passed a law on public-private partnerships (PPPs) that may encourage high-quality infrastructure projects and help catalyze private sector-led economic growth. In 2020, the Abinader administration officially launched the DGAPP as the government office responsible for planning, executing, and overseeing investment projects financed via PPPs. Their website has the most up to date information on their initiatives and mandates ( https://dgapp.gob.do/en/home/ ).
Law 8-90 on the Promotion of Free Zones from 1990 governs operations of the Dominican Republic’s free trade zones (FTZs), while the National Council of Free Trade Zones for Export (CNZFE) exercises regulatory oversight. The law provides for complete exemption from all taxes, duties, charges, and fees affecting production and export activities in the zones.
According to the Ministry of Industry and Commerce, the Dominican Republic has established 79 free trade zones – 38 in the Northern Zone, 17 in the Santo Domingo and the National District, 13 in the Southern Zone, and seven in the Eastern Zone. Additionally, there are 734 companies operating in the zones that employ over 182,700 people.
CNZFE delineates policies for the promotion and development of Free Trade Zones, as well as approving applications for operating licenses, with discretionary authority to extend the time limits on these incentives. CNZFE is comprised of representatives from the public and private sectors and is chaired by the Minister of Industry and Commerce.
Border FTZs located in one of the seven provinces along the Dominican-Haitian border benefit from incentives for a 20-year period, while those located throughout the rest of the country benefit for a 15-year period. Companies operating in the FTZs do pay tax on the purchase of locally sourced inputs and relevant taxes do apply when products produced in FTZs are sold in the Dominican market.
In general, firms operating in the FTZs report fewer bureaucratic and legal problems than do firms operating outside the zones. Foreign currency flows from the FTZs are handled via the free foreign exchange market. Foreign and Dominican firms are afforded the same investment opportunities both by law and in practice and Dominican companies operating in or adjacent to the FTZs benefit from exposure to international business standards and best practices.
According to CNZFE’s 2020 Statistical Report, exports from FTZs totaled $5.9 billion, comprising 3.5 percent of GDP. Investments made in FTZs by U.S. companies in 2020 represented approximately 32.7 percent of total investments. Other major investors include companies registered in the Dominican Republic (39.5 percent), Canada (2.7 percent), Germany (2.6 percent), and Puerto Rico (2.3 percent). Companies registered in 38 other countries comprised the remaining investments. The top exports from FTZs are medical and pharmaceutical products, tobacco and derivatives, apparel and textiles, jewelry, electronics, and footwear. Estimates for 2021 predict over $7 billion in exports from FTZs, representing over 60% of total exports from the country.
Exporters/investors seeking further information from the CNZFE may contact:
Consejo Nacional de Zonas Francas de Exportación
Leopoldo Navarro No. 61
Edif. San Rafael, piso no. 5
Santo Domingo, Dominican Republic
Phone: (809) 686-8077
Fax: (809) 686-8079
Law 16-92 on the Labor Code stipulates that 80 percent of the labor force of a foreign or national company, including free trade zone companies, must be comprised of Dominican nationals. Senior management and boards of directors of foreign companies are exempt from this regulation.
The Dominican Republic does not have excessively onerous visa, residence, work permit, or similar requirements inhibiting mobility of foreign investors and their employees. The host government does not have a forced localization policy to compel foreign investors to use domestic content in goods or technology.
There are no performance requirements as there is no distinction between Dominican and foreign investment. Investment incentives are applied uniformly to both domestic and foreign investors in accordance with World Trade Organization (WTO) requirements. In addition, there are no requirements for foreign IT providers to turn over source code or provide access to encryption.
Law No. 172-13 on Comprehensive Protection of Personal Data restricts companies from freely transmitting customer or other business-related data inside the Dominican Republic or beyond the country’s borders. Under this law, companies must obtain express written consent from individuals to transmit personal data unless an exception applies. The Superintendency of Banks currently supervises and enforces these rules, but its jurisdiction generally covers banks, credit bureaus, and other financial institutions. Industry representatives recommend updating this law to designate a national data protection authority that oversees other sectors.
5. Protection of Property Rights
The Dominican Constitution guarantees the right to own private property and provides that the state shall promote the acquisition of property, especially titled real property, however, a patchwork history of land titling systems and sometimes violent political change has complicated land titling in the Dominican Republic. By law, all land must be registered, and that which is not registered is considered state land. There are no restrictions or specific regulations on foreigners or non-resident owners of land. Registering property in the Dominican Republic requires 6 steps, an average of 33 days, and payment of 3.4 percent of the land value as a registration fee.
Land tenure insecurity has been fueled by government land expropriations, institutional weaknesses, lack of effective law enforcement, and local community support for land invasions and squatting. Political expediency, corruption, and fraud have all been cited as practices that have complicated the issuance of titles or respect for the rights of existing title holders. Moreover, while on the decline, long-standing titling practices, such as issuing provisional titles that are never completed or providing titles to land to multiple owners without requiring individualization of parcels, have created ambiguity in property rights and undermined the reliability of existing records.
In the last decade, the Dominican government received a $10-million, Inter-American Development Bank (IDB) loan to modernize its property title registration process, address deficiencies and gaps in the land administration system, and strengthen land tenure security. The project involved digitization of land records, decentralization of registries, establishment of a fund to compensate people for title errors, separation of the legal and administrative functions within the agency, and redefinition of the roles and responsibilities of judges and courts.
In 2008, the country transitioned to a new system based on GPS coordinates and has been working towards establishing clear titles, but, in March 2021, an industry source estimated that only 25 percent of all land titles were clear. The government advises that investors are ultimately responsible for due diligence and recommends partnering with experienced attorneys to ensure that all documentation, ranging from title searches to surveys, have been properly verified and processed.
Mortgages and liens do exist in the Dominican Republic. The Title Registry Office maintains the system for recording titles, as well as a complementary registry of third-party rights, such as mortgages, liens, easements, and encumbrances. Property owners maintain ownership of legally purchased property whether unoccupied or occupied by squatters, however, it can be difficult and costly to enforce private rights against squatters. This may in part be due to a provision in the law known as “adverse possession,” which allows squatters to acquire legal ownership of land without a title (thereby state-owned).
For investors in the tourism sector, it is important to note that the Dominican constitution guarantees public access to all beaches in the Dominican Republic. Disputes have arisen over whether this passage ensures access to sand or to the coast and may create legal risks for investors as coastlines change over time. In addition, investors or owners that might have property demarcated for sale when environmental sciences were not as developed are now subject to laws prohibiting private development any closer than 60 meters from the tideline.
The Dominican Republic has strong intellectual property rights (IPR) laws and is meeting its IP obligations under international agreements such as the WTO Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS). Nevertheless, weak institutions and limited enforcement can present challenges for investors. Under the Abinader administration, the country’s posture toward the protection and enforcement of IPR has improved. However, many agencies continue to be under resourced, a reality that is unlikely to change in a contracting fiscal environment. Illicit and counterfeit goods, as well as online and signal piracy, are common and continue to present challenges for authorities. In the Dominican Republic, illicit or counterfeit goods include the full gamut of fashion apparel and accessories, electronics, pharmaceuticals, cosmetics, cigarettes, and alcohol.
Several IP authorities in the Dominican Republic grant intellectual property rights. The National Office of Industrial Property (ONAPI) issues trademarks and patents, the National Copyright Office (ONDA) issues copyrights, the Ministry of Public Health and Social Assistance (MISPAS) issues sanitary registrations required for marketing foods, pharmaceuticals, and health products, and the Directorate of International Trade (DICOEX) has jurisdiction over the implementation of geographical indications. IPR registration processes have improved in recent years, but delays and questionable adjudication decisions are still common. ONAPI started e-filing services for patents, which has helped make the registration process more efficient. However, ONDA continues to be hampered by lack of expertise and resources. The agency has the authority to investigate copyright violations but continued to shirk its responsibility of submitting formal requests to the telecommunications regulator (Indotel) to cancel licenses of those using pirated signals. As a result, copyright enforcement and prosecutions have been nonexistent.
IPR Enforcement is carried out by the Customs Authority (DGA), the National Police, the National Copyright Office (ONDA), the Dominican Institute of Telecommunications (Indotel), the Special Office of the Attorney General for Matters of Health, and the Special Office of the Attorney General for High Tech Crimes.
In October 2021 the Deputy Attorney General formed the National Advisory Board for Intellectual Property that should be approved by the President’s Legal Counsel in 2022. If approved as currently envisioned, the Board should be vested with the legal authority to delegate roles to the different agencies. This Board is in addition to the already functional interagency working group that has led to more coordination between the various IP agencies and the private sector. As a result, prosecution case counts have risen from 73 cases in 2018 to 217 cases in 2021. Additionally, the prospector’s office is investigating more cases. From 2018-2020 the prosecutor’s office investigated 268 cases. In 2021 alone the office investigated 468 cases. This can be attributed to better training of prosecutors at the regional level. In February 2021, the IP unit partnered with ONAPI and ONDA to launch an IP training academy for prosecutors and judges to improve the country’s judicial capacity.
Since 2003, the U.S. Trade Representative (USTR) has designated the Dominican Republic as a Special 301 Watch List country for serious IPR deficiencies. The country, however, is not listed in USTR’s Review of Notorious Markets for Counterfeiting and Piracy. The Abinader administration has committed to getting the Dominican Republic removed from the Special 301 Watch List.
For additional information about national laws and points of contact at local IP offices, please see WIPO’s country profiles at http://www.wipo.int/directory/en .
6. Financial Sector
The Dominican Stock Market (BVRD by its Spanish acronym) is the only stock exchange in the Dominican Republic. It began operations in 1991 and is viewed as a cornerstone of the country’s integration into the global economy and domestic development. It is regulated by the Securities Market Law No. 249-17 and supervised by the Superintendency of Securities, which approves all public securities offerings.
The private sector has access to a variety of credit instruments. Foreign investors are able to obtain credit on the local market but tend to prefer less expensive offshore sources. The Central Bank regularly issues certificates of deposit using an auction process to determine interest rates and maturities.
In recent years, the local stock market has continued to expand, in terms of the securities traded on the BVRD. There are very few publicly traded companies on the exchange, as credit from financial institutions is widely available and many of the large Dominican companies are family-owned enterprises. Most of the securities traded in the BVRD are fixed-income securities issued by the Dominican State.
On August 6, 2021, the Law 163-21 for the Promotion of the Placement and Marketing of Publicly Offered Securities in the Stock Market of the Dominican Republic was enacted as a complement to Law 249-17, to promote the issuance of shares by private and public companies. This law declares of national interest the promotion and development of the public offering of securities as a financing mechanism for the revitalization of the national economy, with special emphasis on the issuance of shares of private and public companies in the stock market of the Dominican Republic. Among the incentives proposed by Law 163-21, is the exemption of listed companies from the 1% tax for capital increase when they issue new shares during their first three years of validity. Likewise, during that same 3-year period, the Law reduces to 15% the rate of Income Tax applicable to Capital gains generated by the seller of a share listed on the stock exchange.
Dominican Republic’s financial sector is relatively stable, and the IMF declared the financial system satisfactory during 2021 Article IV consultations, however, directors agreed that while financial system remains resilient and well monitored, it would benefit from moving closer to international standards for supervision and regulation and enhancing the macroprudential and crisis management toolkit.
According to the first National Financial Inclusion Survey from the Central Bank, published on March 22, 2020, only 46.3 percent of Dominicans have a bank account. Financial depth is relatively constrained. Private lending to GDP (around 30.5 percent, according to the IMF) is low by international and regional standards, representing around half the average for Latin America. Real interest rates, driven in part by large interest rate spreads, are also relatively high. The country’s relatively shallow financial markets can be attributed to a number of factors, including high fiscal deficits crowding out private investment; complicated and lengthy regulatory procedures for issuing securities in primary markets; and high levels of consolidation in the banking sector.
Dominican banking consists of 112 entities, as follows: 47 financial intermediation entities (including large commercial banks, savings and loans associations, financial intermediation public entities, credit corporations), 41 foreign exchange and remittance agents (specifically, 35 exchange brokers and 6 remittances and foreign exchange agents), and 24 trustees. According to the latest available information (January 2022), total bank assets were $47.7 billion. The three largest banks hold 69.7 percent of the total assets – Banreservas 32.6 percent, Banco Popular 21.9 percent, and BHD Leon 16.4 percent. While full-service bank branches tend to be in urban areas, several banks employ sub-agents to extend services in more rural areas. Technology has also helped extend banking services throughout the country.
The Monetary and Banking system is regulated by the Monetary and Financial Law No. 183-02, and is overseen by the Monetary Board, the Central Bank, and the Superintendency of Banks. The mission of the Central Bank is to maintain the stability of prices, promote the strength and stability of the financial system, and ensure the proper functioning of payment systems. The Superintendency of Banks carries out the supervision of financial intermediation entities, in order to verify compliance by said entities with the provisions of the law.
Foreign banks may establish operations in the Dominican Republic, although it may require a special decree for the foreign financial institution to establish domicile in the country. Foreign banks not domiciled in the Dominican Republic may establish representative offices in accordance with current regulations. To operate, both local and foreign banks must obtain the prior authorization of the Monetary Board and the Superintendency of Banks. Major U.S. banks have a commercial presence in the country, but most focus on corporate banking services as opposed to retail banking. Some other foreign banks offer retail banking. There are no restrictions on foreigners opening bank accounts, although identification requirements do apply.
The Dominican government does not maintain a sovereign wealth fund.
7. State-Owned Enterprises
The legacy of autocratic rule in the mid-twentieth century and the practice of distributing social services as political patronage have resulted in a relatively larger role for state-actors in the Dominican economy when compared with the United States. Since 1997, by means of the approval of the General Law of Reform of Public Companies No. 141-97, State-Owned Enterprises (SOEs) have been on the decline and do not have as significant a presence in the economy as they once did, with most functions now performed by privately held firms. Notable exceptions are in the electricity, banking, mining, and refining sectors.
The Dominican Corporation of State Enterprises (CORDE) was established by Law No. 289 of June 30, 1966, with the purpose of managing, directing, and developing all the productive and commercial companies, goods, and rights ceded by the Dominican State as a result of the death of the dictator Rafael Leónidas Trujillo. Among the state-owned companies that came to be managed by CORDE are the salt, gypsum, marble, and pozzolana mines. In 2017, the dissolution of CORDE was entrusted to a Commission chaired by the Legal Consultancy of the Executive Power, which assumed the operational, administrative, and financial management of this entity until the dissolution process was definitively completed. Within the framework of the dissolution process of CORDE, the ownership of the mining concessions of the Dominican State was transferred to the Patrimonial Fund of Reformed Companies (FONPER) through the Mining Concessions Transfer Agreement between CORDE and FONPER dated July 2, 2020.
Shortly after being sworn into office, in August 2020, President Abinader issued Decree 422-20 forming the Commission for the Liquidation of State Organs (CLOE) under the charge of the Ministry of the Presidency. Since then, the CLOE has been in the process of dissolution and liquidation of CORDE, and on December 8, 2020, CLOE requested the FONPER Board of Directors revoke the Concessions Transfer Agreement. FONPER’s Board of Directors approved the revocation through Minutes No. 02-2021 of March 11, 2021, authorizing the president of FONPER to sign an agreement with CLOE that revokes and nullifies the Transfer Agreement. It is not clear whether this revocation has been completed.
In 2021, the Office of the President proposed a bill to regulate government business assets, government participation in public trusts, and to create the National Center for Companies and Public Trusts (CENEFIP). The bill’s intent is to reform the management of state assets and replace the disgraced Patrimonial Fund of Reformed State Enterprises (FONPER), which is being investigated for alleged irregularities that may have personally benefited politically affiliated persons. The CENEFIP bill is under review in the legislature.
Also in 2021, the executive branch transferred the functions and properties of the State Sugar Council [Consejo Estatal del Azúcar] to the Directorate General of National Assests [Dirección General de Bienes Nacionales]. The State Sugar Council maintains one remaining sugar mill, Porvenir.
In the partially privatized electricity sector, private companies mainly provide electricity generation, while the government handles the transmission and distribution phases via the Dominican Electric Transmission Company (ETED) and the Dominican Corporation of State Electrical Companies (CDEEE). This sector is undergoing additional reforms, including the dissolution of the CDEEE and privatization of the management and operation of the distribution companies. The CDEEE and the distribution companies have traditionally been the largest SOEs in terms of government expenditures. The government also participates in the generation phase, too (most notably in hydroelectric power), and one of the distribution companies is partially privatized.
The Dominican financial sector consists of 112 entities, as follows: 47 financial intermediation entities (including large commercial banks, savings and loans associations, financial intermediation public entities, credit corporations), 41 foreign exchange and remittance agents (specifically, 35 exchange brokers and 6 remittances and foreign exchange agents), and 24 trustees. According to the latest available information (January 2022), total bank assets were $47.7 billion. The three largest banks hold 69.7 percent of the total assets – Banreservas 32.6 percent, Banco Popular 21.9 percent, and BHD Leon 16.4 percent. The state-owned, but autonomously operated BanReservas is the largest bank in the country and is a market leader in lending and deposits. Part of this success is due to a requirement for government employees to open accounts with BanReservas in order to receive salary payments. BanReservas was also utilized to distribute government social support payments during the pandemic. Roughly a third of the bank’s lending portfolio is to government institutions.
In the refining sector, the government is now the exclusive shareholder of the country’s only oil refinery; Refinery Dominicana (Refidomsa), after having extricated Petroleos de Venezuela, S.A. (PDVSA) in August 2021. Refidomsa operates and manages the refinery, is the only importer of crude oil in the country, and is also the largest importer of refined fuels, with a 60 percent market share. The price for fuel products is set by the Ministry of Industry, Commerce, and SMEs. Fuel prices are heavily subsidized.
Law No. 10-04 requires the Chamber of Accounts to audit SOEs. Audits should be published at https://www.camaradecuentas.gob.do/index.php/auditorias-publicadas . While audits have not always been publicly available, the new President of the Chamber is making a concerted effort to conduct and publish all audits required by law.
Partial privatization of state-owned enterprises (SOEs) in the late 1990s and early 2000s resulted in foreign investors obtaining management control of former SOEs engaged in activities such as electricity generation, airport management, and sugarcane processing. In the electricity sector, these reforms were reversed between 2003 and 2009, but have largely remained in place for other sectors.
Major reforms for the electricity sector, as outlined in the National Pact for Energy Reform signed February 2021, are ongoing. Plans for dissolving the CDEEE are in process, with the organization functional in name only, and the Ministry of Energy and Mines having assumed many of the authorities conferred to the CDEEE upon its founding in 2001 and across its 20-year life span. Complete dissolution and final distribution of authorities remains a legal question, which is currently being reviewed by the President’s legal advisor and the Ministry of Energy and Mines.
The DGAPP has taken the first step to improve the governance and performance of electricity distribution companies through the introduction of private sector participation. On November 29, 2021, the DGAPP publicly accepted for detailed evaluation an application submitted by the Board of the Electricity Distribution Companies (Consejo Unificado de las Empresas Distribuidoras de Electricidad) for a Public Private Partnership (PPP) covering the three state-owned distribution companies. The DGAPP Resolution No. 89/2021 follows the process in the PPP Law (Law No. 47-20), whereby any public or private entity wishing to propose a PPP must submit a formal proposal and justification to the DGAPP. Government officials expect the process to privatize the management and operation of the electricity distribution companies to begin in earnest in the summer of 2022 with the release of tender documents. All indications are that foreign firms will be invited to participate in these tenders. Questions should be directed toward the Ministry of Energy and Mines ( https://mem.gob.do/ ) or DGAPP ( https://dgapp.gob.do/en/home/ ).
8. Responsible Business Conduct
The government does not have an official position or policy on responsible business conduct, including corporate social responsibility (CSR). Although there is not a local culture of CSR, large foreign companies normally have active CSR programs, as do some of the larger local business groups. While most local firms do not follow OECD principles regarding CSR, the firms that do are viewed favorably, especially when their CSR programs are effectively publicized. There is a growing trend for businesses to align with the United Nations Sustainable Development Goals and small and medium enterprises are beginning to follow examples of the CSR work of the larger local business groups of being more responsible to societal and environmental issues. These entities are viewing CSR as a competitive advantage. The CSR Risk Checker is a tool designed to help companies understand some of the CSR risks associated with countries from which they may import or in which they may have production facilities. The report lists a total of 19 possible risks for the Dominican Republic, of which 11 are related to labor rights, three to human rights and ethics, three to environment, and two to fair business practices.
The Dominican Constitution does guarantee consumer rights stating, “Everyone has the right to have quality goods and services, to objective, truthful and timely information about the content and characteristics of the products and services that they use and consume.” To that end, the national consumer protection agency, ProConsumidor, offers consumer advocacy services.
The Dominican Republic also joined the Extractive Industries Transparency Initiative (EITI) in 2016 ( https://eiti.org/dominican-republic) and is rated as achieving meaningful progress in its efforts to incorporate EITI standards into its regulatory framework. Its fourth country report, covering 2019 and 2020, was recently approved and can be found at https://eiti.org/document/dominican-republic-20192020-eiti-report. The Ministry of Energy and Mines, as the government entity in charge of sectoral policy, is carrying out reform processes in the area of mining and hydrocarbons, including modernizing, organizing, and streamlining its own role. Other reforms include 1) modification and modernizing of the Mining Law of 1971, which was submitted to the Presidency for review in February 2021; 2) public consultation and revision of the regulation that will govern creation and management of the 5% of the net benefits generated by the exploitation of non-renewable natural resources that accrue to the state, established in article 117 of Law No. 64-00 of Environment and Natural Resources, and 3) drafting the regulation governing Artisanal Mining.
In May 2018, the Ministry of Energy and Mines presented the Shared Production Model Contract that regulates hydrocarbon exploration and exploitation activities in the Dominican Republic, there are separate version of the contract for on and offshore explorations. These contract models are used in the awarding of oil and gas blocks in the country, which began in November 2019. The government is exploring another licensing round, but dates have not been released. After being signed, contracts must be approved by the National Congress and promulgated by the President.
On December 15, 2003, through Decree No. 1128-03, the government established the Superintendency of Surveillance and Private Security (SVSP) to exercises control, inspection, and surveillance, over all persons and institutions that carry out surveillance and private security activities and their users, in the Dominican Republic. Despite the sizeable sector, there do not appear to be any government, civil society, or private firms in the Dominican Republic affiliated with the International Code of Conduct Association (ICoCA) and the government is not a signatory of the Montreaux Document.
According to the 2020 List of Goods Produced with Child and Forced Labor, there are indicators of child labor in the production of baked goods, coffee, rice, and tomatoes in the Dominican Republic and indicators of child and forced labor in the production of sugarcane. Stakeholders have raised serious inquiries regarding inhumane labor conditions in the Dominican Republic’s sugar sector for many years. In December 2011, Father Christopher Hartley filed a submission under the labor chapter of DR-CAFTA alleging numerous labor violations across the Dominican Republic’s sugar production industry. The U.S. Department of Labor (DOL) conducted an investigation and found “evidence of apparent and potential labor violations in the sector,” including concerns regarding acceptable conditions of work, child labor, and forced labor. Since issuing its report in 2013, DOL has engaged directly with the Government of the Dominican Republic (GODR), the International Labor Organization (ILO), and Dominican Republic industry stakeholders; provided technical assistance and related program funding; and conducted six public periodic reviews. The most recent review in 2018 found that “while concerns remain, the GODR continues to take positive steps towards addressing some of the labor issues identified in the report.” Another DOL periodic review is expected to be released in 2022.
At the same time, recent findings by investigative journalists assert that, despite ten years of effort, labor conditions in the Dominican Republic’s sugar sector remain abhorrent. Reports from the Washington Post, Mother Jones, and the Center for Investigative Reporting focusing on conditions at the Central Romana Corporation (owner of the world-famous Casa de Campo resort), include written and video testimonies by laborers about the conditions they experience in the bateys, colonos, sugar cane fields, and throughout the country’s sugar production. These testimonies describe poverty-level wages and crippling debt, excessive work hours, inadequate safety or protective equipment, abhorrent housing conditions with limited access to water and electricity, denial of public benefits such as pensions, social security, and medical care, and harassment, intimidation, and retaliation by supervisors, company representatives, company armed guards, and police.
Department of State
- Country Reports on Human Rights Practices;
- Trafficking in Persons Report;
- Guidance on Implementing the “UN Guiding Principles” for Transactions Linked to Foreign Government End-Users for Products or Services with Surveillance Capabilities;
- U.S. National Contact Point for the OECD Guidelines for Multinational Enterprises; and;
- Xinjiang Supply Chain Business Advisory
Department of the Treasury
Department of Labor
According to the 2022 Climate Change Performance Index, the Dominican Republic is one of the most vulnerable countries in the world to the effects of climate change, though it represents only 0.06% of global greenhouse gas emissions. As a small island developing state, the Dominican Republic is particularly vulnerable to the effects of extreme climate events, such as storms, floods, droughts, and rising sea levels. Combined with rapid economic growth (over 5 percent until 2020) and urbanization (more than 50 percent of population in cities, 30 percent in Santo Domingo), climate change could strain key socio-economic sectors such as water, agriculture and food security, human health, biodiversity, forests, marine coastal resources, infrastructure, and energy.
The National Constitution calls for the efficient and sustainable use of the nation’s natural resources in accordance with the need to adapt to climate change. The National Council for Climate Change and the Clean Development Mechanism under the Office of the Presidency is responsible for creating the National Policy on Climate Change (PNCC), the Climate Compatible Development Plan (CCDP), and the Strategic Plan for Climate Change 2011-2030 (PECC). Through these documents, the Dominican government is acting, both domestically and in coordination with the international community, to mitigate the effects of climate change. In its January 2021, report MIT Technology Review’s Green Future Index ranked the Dominican Republic as 55th out of 76 countries and territories on their progress and commitment toward building a low carbon future, stating “a new national government is updating the country’s Paris Agreement commitments and developing a plan for carbon neutrality by 2050.” The full report can be found at The Green Future Index | MIT Technology Review .
The Dominican Republic is also signatory to multiple international environmental conventions, corresponding protocols and agreements, and free trade agreements with environmental protection provisions. The Dominican Republic is party to the UN Framework Convention on Climate Change (UNFCCC), the Convention on International Trade in Endangered Species of Wild Fauna and Flora (CITES), and the International Convention for the Prevention of Pollution from Ships (MARPOL).
In its latest Nationally Determined Contribution (NDC) from 2020, the Dominican Republic committed to a 27 percent greenhouse gas reduction by 2030 (compared to 2010 levels), with 20 percent conditional and seven percent unconditional. The country has also established the goal of net-zero emissions by 2050. The NDC identifies mitigation options in the energy (generation, efficiency) and Industrial Processes and Product Use (IPPU) sectors. Proposed actions are meant to improve electricity generation; energy efficiency; road transportation; agriculture, forestry, and other land use (AFOLU); and waste management.
The Dominican Republic is also part of several regional adaptation initiatives, such as CARIFORUM, the Increasing Climate Resilience Project, the Caribbean Biological Corridor, and the Haiti-Dominican Republic Binational Cooperation Program, among others.
The Ministry of Environment and Natural Resources, which provides guidance in matters of air quality, waste disposal, forestry management, and water quality, has designated 127 protected areas across the country, and is working towards designating and protecting a total of 30 percent of the country through public and public-private management. The Dominican government also encourages support for climate change prevention and mitigation from the private sector through tax and investment incentives, such as Renewable Energy Law 50-07, which grants numerous incentives and tax exemptions to investors in renewable energy. BloombergNEF’s Climatescope report ranks the Dominican Republic as the 15th most attractive market for energy transition investment out of 107 emerging markets. The report looks at opportunities in the power, transportation, and building sectors, specifically.
The Dominican Republic has a legal framework that includes laws and regulations to combat corruption and provides criminal penalties for corruption by officials. While challenges remain, overall enforcement of these laws has improved thanks to a heightened focus on transparency by the Abinader administration and concerted efforts by the Office of the Attorney General. In a change from prior years, investigations targeted well-connected individuals and high-level politicians, both from prior administrations and the current one. The Dominican Republic’s rank on the Transparency International Corruption Perception Index rose to 128 in 2021 from 137 in 2020 (out of 180 countries assessed).
Nonetheless, U.S. companies continued to identify corruption as a barrier to FDI. Firms often complained about a lack of technical proficiency in government ministries that resulted in public tender opportunities that were not competently drafted or executed in accordance with international best practices. Some firms went so far as to suggest that more problematic tenders had been set up intentionally to favor politically connected firms. The business community has also complained about corruption at the municipal level and its relevance to such things as permitting procedures. U.S. businesses operating in the Dominican Republic often need to take extensive measures to ensure compliance with the Foreign Corrupt Practices Act.
President Abinader has generally made good on his commitment to make fighting corruption a top priority of his administration. He appointed officials with reputations for professionalism and independence and went to great efforts to respect the independence of his appointed head of the Public Procurement General Directorate, the Chamber of Accounts (the country’s Supreme Audit Institution), and the Attorney General’s Office. In addition, the Abinader administration has publicly committed to prioritizing passage of institutional reforms that will advance the fight against corruption, such as new public procurement legislation, and a bill that would allow for civil asset forfeiture. Passage of this legislation, however, remains in question as the measures are in various levels of administrative and legislative review.
In a notable change from prior administrations, investigations into corruption and arrests have targeted senior officials not just from the opposing parties, but also from the ruling coalition. These moves have sent a powerful signal that the Abinader administration no longer tolerates the sort of pervasive corruption that was seen under prior administrations.
Civil society has been a critical voice in anti-corruption campaigns to date. Several non-governmental organizations are particularly active in transparency and anti-corruption, notably the Foundation for Institutionalization and Justice (FINJUS), Citizen Participation (Participacion Ciudadana), and the Dominican Alliance Against Corruption (ADOCCO).
The Dominican Republic signed and ratified the UN Anticorruption Convention. The Dominican Republic is not a party to the OECD Convention on Combating Bribery.
Procuraduría Especializada contra la Corrupción Administrativa (PEPCA)
[Attorney General for Investigating Administrative Corruption]
Calle Hipólito Herrera Billini esq. Calle Juan B. Pérez,
Centro de los Heroes, Santo Domingo, República Dominicana
Telephone: (809) 533-3522
La Dirección General de Ética e Integridad Gubernamental (DIGEIG)
[Directorate General for Governmental Ethics and Integrity]
Av. México No. 419 Esq. Leopoldo Navarro, Edificio Oficinas Gubernamentales Juan Pablo Duarte, Piso 12, Gascue, Santo Domingo, D. N. República Dominicana
Telephone: (809) 685-7135
[Line 311] (government service for filing complaints and denunciations]
Phone: 311 (from inside the country)
Participación Ciudadana [Citizen Participation]
Wenceslao Alvarez #8, Zona Universitaria
Phone: (809) 685-6200
10. Political and Security Environment
Despite political stability and strong pre-pandemic economic growth, citizen and public security concerns in the Dominican Republic impose significant costs on businesses and limit foreign and domestic investment. There are no known national security threats affecting foreign investment within the Dominican Republic.
The U.S. Department of State has assessed Santo Domingo as a critical-threat location for crime. According to the Latin American Public Opinion Project, there is a steady increase in crime-related victimization and a growing perception of insecurity in the Dominican Republic since 2010. In 2021, Fund for Peace ranked the Dominican Republic 107 out of 179 countries in its Fragile States index. Other than domestic violence, criminal activity is mostly associated with street-level incidents consisting of robberies and petty larcenies. Of these, street robbery is particularly concerning as criminals often use weapons to coerce compliance from victims. In addition, the Dominican Republic faces challenges with organized crime. Transnational criminal organizations in the Dominican Republic use land, airspace, and territorial waters for the transshipment of drugs from South America destined for the United States and Europe, transshipment of ecstasy from the Netherlands and Belgium destined for United States and Canada, substantial money laundering activity particularly by Colombian narcotics traffickers, and significant amphetamine consumption.
The U.S. Department of State has assessed the Dominican Republic as being a low-threat location for terrorism and a medium-threat location for political violence. There are no known organized domestic terrorist groups in the Dominican Republic. Nonetheless, the Dominican Republic is a likely transit point for extremists from within the Caribbean, Africa, and Europe.
A porous border between Haiti and the Dominican Republic remains an ongoing concern as the security situation in Haiti has worsened after the assassination of the Haitian President Moise in August 2021 and the growing gang problem in Haiti. Dominican officials have expressed concerns about widespread civil unrest or instability in Haiti contributing to illegal flows of people and illicit goods across the border.
In 2021, few protests took place. COVID-19 protocols might have had a dampening effect on the size and scale of protests.
The Dominican Republic armed forces view irregular migration along the border, citizen security, illicit trafficking of arms, weapons, and drugs, as well as natural disasters as threats to their national security. As a result, they have postured their forces to support land, air, and maritime whole of government efforts to protect their sovereign territory.
11. Labor Policies and Practices
The Dominican labor market continues to regularize as pandemic-related economic impacts subside. An ample labor supply is available, although there is a scarcity of skilled workers and technical supervisors. Some labor shortages exist in professions requiring lengthy education or technical certification. According to 2021 Dominican Central Bank data for July-September (the latest available), the Dominican labor force consists of approximately 4.6 million workers. The labor force participation rate is 63.1 percent; 57.7 percent of the labor force works in services, 10.0 percent in industry, 9.8 percent in education and health, 7.9 percent in agriculture and livestock, 9.2 percent in construction, and 5.4 percent in public administration and defense. Approximately 41.1 percent of the labor force works in formal sectors of the economy and 58.9 percent in informal sectors.
From January to September 2021, unemployment decreased from 8.0 percent to 6.8 percent as the economy continued its rebound from the COVID-19 pandemic. When factoring in discouraged workers and others who were not actively seeking employment, however, the unemployment rate increased from 6.8 percent to 13.6 percent in the period July-September 2021. Youth unemployment remained steady at 13.5 percent, indicating the pandemic had a greater impact on employment for older, more vulnerable segments of the population. Central Bank data from 2021 indicates that the labor market has nearly recovered to pre-pandemic levels, with the percentage of employment reaching 97.5 percent of the levels before the pandemic.
With respect to migrant workers, the most recent reliable statistical data is from 2017 and shows a population of 334,092 Haitians aged ten or older living in the country, with 67 percent working in the formal and informal sectors of the economy. Migration experts believe that this number has increased to approximately 500,000 or more since 2017. The Dominican government and the United Nations are expected to provide an updated migrant survey in 2022.
The Dominican Labor Code establishes policies and procedures for many aspects of employer-employee relationships, ranging from hours of work and overtime and vacation pay to severance pay, causes for termination, and union registration. The code applies equally to migrant workers; however, many undocumented Haitian laborers and Dominicans of Haitian descent working in the construction and agricultural industries do not exercise their rights due to fear of being fired or deported. The law requires that at least 80 percent of non-management workers of a company be Dominican nationals. Exemptions and waivers are available and regularly granted. The law provides for severance payments, which are due upon layoffs or firing without just cause. The amount due is prorated based on length of employment.
Although the Labor Code provides for freedom to form unions and bargain collectively, it places several restrictions on these rights, which the International Labor Organization (ILO) has characterized as excessive. For example, it restricts trade union rights by requiring unions to represent 51 percent of the workers in an enterprise to bargain collectively. In addition, the law prohibits strikes until mandatory mediation requirements have been met. Formal requirements for a strike to be legal also include the support of an absolute majority of all company workers for the strike, written notification to the Ministry of Labor, and a 10-day waiting period following notification before proceeding with the strike. Government workers and essential public service personnel, in theory, may not strike; however, in practice such employees, including healthcare workers, have protested and gone on strike.
The law prohibits dismissal of employees for trade union membership or union activities. In practice, however, the law is inconsistently enforced. The majority of companies resist collective negotiating practices and union activities. Companies reportedly fire workers for union activity and blacklist trade unionists, among other anti-union practices. Workers frequently have to sign documents pledging to abstain from participating in union activities. Companies also create and support company-backed unions. Formal strikes occur but are not common.
The law establishes a system of labor courts for dealing with disputes. The process is often long, with cases pending for several years. One exception is workplace injury cases, which typically conclude quickly – and often in the worker’s favor. Both workers and companies report that mediation facilitated by the Ministry of Labor was the most rapid and effective method for resolving worker-company disputes.
Many of the major manufacturers in free trade zones have voluntary codes of conduct that include worker rights protection clauses generally aligned with the ILO Declaration on Fundamental Principles and Rights at Work; however, workers are not always aware of such codes or the principles they contain. The Ministry of Labor monitors labor abuses, health, and safety standards in all worksites where an employer-employee relationship exists, however, resources for adequate monitoring and inspection are insufficient. Labor inspectors can request remediation for violations, and if remediation is not undertaken, can refer offending employers to the public prosecutor for sanctions.
14. Contact for More Information
Embassy of the United States of America
Avenida República de Colombia #57
Santo Domingo, Dominican Republic +1 (809) 567-7775