2017 Investment Climate Statements: Dominican Republic

Policies Towards Foreign Direct Investment

Under the Foreign Investment Law (No. 16-95), dated November 20, 1995, unlimited foreign investment is permitted in all sectors, with the exception of the disposal and storage of toxic, hazardous, or radioactive waste not produced in the country; activities negatively impacting public health and the environment; and the production of materials and equipment directly linked to national security, unless authorized by the President. The Dominican Republic provides certain tax incentives to investment in tourism, renewable energy, film industry, Haiti-Dominican Republic border development, and the industrial sector.

The Dominican Republic is a signatory of the Free Trade Agreement between the United States and the countries of Central America (CAFTA-DR), which sets forth rules for the protection of current or potential investors against unfair or discriminatory governmental action. CAFTA-DR mandates non-discriminatory treatment, free transferability of funds, protection against expropriation, and procedures for the resolution of investment disputes.

The Export and Investment Center of the Dominican Republic (CEI-RD), a government agency created in 2013, offers assistance to foreign investors wanting to invest in the Dominican Republic. The National Council of Free Trade Zones for Export (CNZFE) offers assistance to companies looking to invest in the free trade zones.

Limits on Foreign Control and Right to Private Ownership and Establishment

There are no general (statutory, de facto, or otherwise) limits on foreign ownership or control. According to Law No. 98-03 and Regulation 214-04, an interested foreign investor must file an application form at the offices of CEI-RD within 180 calendar days from the date on which the foreign investment took place. CEI-RD will then evaluate the application and issue the corresponding Certificate of Registration within 15 working days.

In order to set up a business in a free trade zone, a formal request must be made to the National Council of Free Trade Zones, the entity responsible for issuing the operating licenses needed to a free zone company or operator. The Council assesses the application and determines its feasibility. For more information on the procedure and the steps to be taken in order to apply for an operating license, visit the website of the National Council of Free Zones at http://www.cnzfe.gov.do .

Other Investment Policy Reviews

The government conducted an investment policy review in the context of a World Trade Organization (WTO) Trade Policy Review in 2015. https://www.wto.org/english/tratop_e/tpr_e/s319_e.pdf 

In the past three years, the government has not conducted an investment policy review through the Organization for Economic Cooperation and Development (OECD). The last United Nations Conference on Trade and Development (UNCTAD) investment policy review was published in 2009.

Business Facilitation

According to the World Bank’s 2017 Doing Business report, starting a business in the Dominican Republic requires a 7-step process that takes 14.5 days and costs 16.3 percent of income per capita. Steps include (1) checking the company name with the National Office of Industrial Property (ONAPI); (2) purchasing the company name with ONAPI; (3) paying the incorporation tax with the National Internal Revenue Agency (DGII); (4) registering the company with the Chamber of Commerce and obtaining an identification number; (5) filing for the national taxpayer registry and applying for fiscal receipts at DGII; (6) registering local employees with the Department of Labor; and (7) registering employees at the Social Security Office.

The Dominican Republic has a single-window registration website for S.R.L. company registration (http://www.formalizate.gob.do/ ) that offers a one-stop shop for registration needs. Foreign companies may use the registration website. The website receives 6 out of 10 “dots” in GER’s ranking for clarity and completeness. The use of a local lawyer is highly advisable for company registrations.

The Ministry of Industry and Commerce (MIC) leads the Dominican Republic’s assistance and registration program for small and medium-sized enterprises (PYMES). The +PYMES program, a partnership between the Ministry of Industry and Commerce (MIC) and the National Competitiveness Council, offers technical assistance to majority Dominican-owned companies and defines small businesses as those with fewer than 75 employees and medium-sized businesses as those with between 76 and 150 employees.

Outward Investment

The Dominican Republic promotes outward investment through CEI-RD. There are no restrictions on domestic investors investing abroad. Top exports are gold, silver, and agricultural goods. The largest recipient of Dominican outward investment is the United States.

The Dominican Republic has Bilateral Investment Treaties (BITs) with: Chile, Finland, France, Italy, Republic of Korea, Morocco, Netherlands, Panama, Spain, Switzerland, and Taiwan. According to the Dominican Ministry of Industry and Commerce, Free Trade Agreements (FTAs) currently in force include: CAFTA-DR; the Economic Partnership Agreement (EPA) between the European Union and CARIFORUM (an organization of Caribbean nations, including the Dominican Republic); a trade agreement between the Dominican Republic and the Central American countries of Costa Rica, El Salvador, Guatemala, Honduras, and Nicaragua; a free trade agreement with CARICOM (the Caribbean Community); and a trade agreement with Panama.

An agreement for the exchange of tax information between the United States and Dominican Republic has been in effect since 1989. On September 15, 2016, the United States and the Dominican Republic signed an agreement to improve international tax compliance and to implement the Foreign Account Tax Compliance Act (FATCA), but the agreement has not yet been implemented. The Dominican Republic has tax agreements to avoid double taxation and prevent tax evasion currently in force with Canada and Spain.

Transparency of the Regulatory System

The full text of draft regulations is made available for public review, and regulatory agencies give notice of proposed regulations in public meetings where consultations can take place. All proposed regulations are published on a unified website: http://consultoria.gob.do/ .

On the Global Innovations Index, the Dominican Republic ranks 103 out of 128 for regulatory environment and 73 out of 128 for regulatory quality. The World Economic Forum’s 2016 Global Competitiveness report ranked the Dominican Republic 127^th out of 138 countries in efficiency of the legal framework in challenging regulations, and 110^th in burden of government regulations.

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 article 31 of Law 479-08, which also declares that financial statements should be prepared in accordance with generally accepted accounting standards nationally and internationally (as amended by Law 31-11). The ICPARD and the country’s stock market regulator (Superintendencia de Valores) require the use of International Financial Reporting Standards (IFRS), including IFRS for small and medium-sized entities (SMEs).

In recent years, the Dominican government carried out a major reform effort aimed at improving the transparency and effectiveness of laws affecting competition. Law 42-08 from 2008 on the defense of competition set up an agency to improve and enforce competition laws. Nonetheless, efforts to establish the rule of law in many sectors of the economy have been impeded, or in some cases, soundly defeated by special interests. For example, in 2008, the government refused to enforce a court ruling to halt an illegal blockade of a U.S. business by disgruntled ex-contractors. As another example, in 2013, the Dominican government rescinded permits for a U.S.-owned tourism and real estate development and declared large swaths of the land as a national park. In 2015, several U.S. investors cited the Dominican government’s repeated failure to pay compensation for or return expropriated land, even though valid court orders had been obtained. Many investors, both Dominican and foreign, consider that influence through political contacts trumps formal systems of regulation.

International Regulatory Considerations

The Dominican Republic is member of the WTO and a signatory to several multilateral FTAs including CAFTA-DR, CARICOM-DR, and EPA. In addition, the Dominican Republic is a member of a number of other regional and international organizations, including the United Nations, the Organization of American States, the Central American Integration System, the International Center for Settlement of Investor Disputes, and the Multilateral Investment Guaranty Agency.

As a member of the WTO, the government has committed to, but does not always, notify all draft technical regulations to the WTO Committee on Technical Barriers to Trade (TBT).

Legal System and Judicial Independence

The legal system of the Dominican Republic is civil law and is based on the Napoleonic code. On October 23, 2007, Decree No. 610-07 placed the Directorate of Foreign Commerce of the then-Secretariat of State for Industry and Commerce (DICOEX) in charge of commercial dispute settlement, including disputes related to the Investment Chapter of CAFTA-DR. 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; and Law No. 126-02, concerning e-Commerce and Digital Documents and Signatures.

The country is divided into 12 Judicial Departments, each one headed by a Court of Appeals with jurisdiction over civil and criminal matters. Each Judicial District has a court of first instance. Justices of the Peace handle small claims, certain traffic accidents, landlord-tenant disputes, and other matters. There are also specialized courts with jurisdiction over labor cases, disputes involving registered land, cases involving minors, and administrative matters. The Supreme Court is the highest court, with jurisdiction to handle most appeals from the courts of appeal, and first instance jurisdiction in criminal matters involving certain high-level government officials. The Constitutional Tribunal, created in 2010, rules on the constitutionality of laws and treaties and decides cases involving constitutional questions.

According to the Constitution, the Judicial Branch is independent of the other branches of the State. The right of access to justice is a constitutional right granted by Article 69 of the Constitution. It provides that every person, including foreigners, has the right to appear in court.

The judicial process in the Dominican Republic is procedurally competent, although investors complain of long wait times for a decision. The resolution of a civil case normally takes 2-4 years, although some take significantly longer. Some investors complain that the local court system is unreliable, biased against them, and that special interests and powerful individuals are able to use the legal system in their favor. Regardless of whether they are located in a free-trade zone, companies have problems with dispute resolution, both with the Dominican government and with private-sector entities. U.S. firms indicate that corruption on all levels – business, government, and judicial – impedes their access to justice to defend their interests. Moreover, several large U.S. firms have been subject of injunctions issued by lower courts on behalf of distributors with whom they are engaged in a contract dispute. These disputes are often the result of the firm seeking to end the relationship in accordance with the contract, and the distributor using the injunction as a way of obtaining a more beneficial settlement. These injunctions often disrupt the U.S. companies’ distribution activities, resulting in severe negative impact on sales. In order to effectively engage in the Dominican market, many U.S. companies seek local partners that are well-connected and understand the local business environment.

The World Economic Forum’s 2016 Global Competitiveness report ranked the Dominican Republic 127^th out of 138 countries in judicial independence and 112^th in efficiency of the legal framework in settling disputes. On the Global Innovations Index, the Dominican Republic ranked 85 out of 128 countries for rule of law.

Laws and Regulations on Foreign Direct Investment

CEI-RD, which aims to be a one-stop-shop for investment information, registration, and investor after-care services, maintains a user-friendly website for guidance on the government’s priority sectors for inward investment and on the range of investment incentives (http://cei-rd.gob.do/ ).

Competition and Anti-Trust Laws

There is no government agency that reviews transactions for competition-related concerns (whether domestic or international in nature); however, the government’s National Commission for the Defense of Competition (ProCompetencia) is responsible for promoting and defending competition by fostering best practices.

Expropriation and Compensation

There are dozens of outstanding disputes between U.S. investors and the Dominican government concerning unpaid government contracts or expropriated property and businesses. Property claims make up the majority of expropriation cases. Most, but not all, expropriations have been used for infrastructure or commercial development. In some cases, claims have remained unresolved for many years. Typically, investors and lenders have not received prompt payment of fair market value for their losses, and subsequent enforcement has been difficult even in cases in which the Dominican courts, including the Supreme Court, have ordered compensation or the government has recognized a claim. In other cases, 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. The procedures to resolve expropriations lack transparency and, to a foreigner, may appear to be antiquated. Few examples exist where government officials are held responsible for not paying a recognized claim or not paying the claim in a timely manner.

Discussions at the U.S.-Dominican Trade and Investment Council meetings in October 2002 prompted the Dominican government to establish procedures under a 1999 law to issue bonds to settle claims against the Dominican government dating from before August 16, 1996, including claims for expropriated property.

In 2005, with assistance from the U.S. Agency for International Development (USAID), the Dominican government identified and analyzed 248 expropriation cases; most (65.5 percent) were resolved by paying claimants with bonds or by dismissing the claim. However, a number of U.S. claims against the Dominican Republic remain.

Recent administrations have expropriated fewer properties than their predecessors, and for the most part have paid compensation. Nonetheless, there are current disputes alleging expropriation, particularly in areas where the government changed or enforced national protected areas regulations.

Dispute Settlement

ICSID Convention and New York Convention

In 2000, the Dominican Republic signed the International Center for the Settlement of Investment Disputes (ICSID, also known as the “Washington Convention”), but has not ratified it. In 2002, the Dominican Republic became signatory to the Recognition and Enforcement of Foreign Arbitral Awards (New York Convention).

Investor-State Dispute Settlement

The Dominican Republic has entered into several bilateral investment treaties, most of which contain dispute resolution provisions that submit the parties to arbitration. The Dominican Republic is a signatory to CAFTA-DR and is thus bound by the investment chapter of CAFTA-DR. There are currently three pending investor-state cases filed against the Dominican Republic under CAFTA-DR.

The Embassy is aware of at least 25 U.S. investors who are involved in ongoing legal disputes with the Dominican government and parastatal firms involving payments, expropriations, contractual obligations, or regulatory obligations. The investors range from large firms to private individuals and the disputes are at various levels of legal review.

International Commercial Arbitration and Foreign Courts

Law 489-09 on commercial arbitration governs the enforcement of arbitration awards, arbitral agreements, and arbitration proceedings in the Dominican Republic. Per law 489-09, arbitration may be ad-hoc or institutional, meaning the parties may either agree on the rules of procedure applicable to their claim, or they may adopt the rules of a particular institution. Certain aspects of the UNICTRAL model law are incorporated into Law 489-09.

Foreign arbitral awards are enforceable in the Dominican Republic in accordance with Law 489-09 and applicable treaties, including the New York Convention, to which the Dominican Republic is a party. There are complaints that the court process is slow and that domestic claimants with political connections have an advantage.

Bankruptcy Regulations

The Restructuring and Liquidation of Business Entities and Merchants Law (Law 141-15) was signed by President Medina on August 18, 2015, which took effect 18 months after signing. The law will allow a debtor company to continue to operate for up to five years during reorganization proceedings by staying legal proceedings. The law orders the creation of new courts with exclusive jurisdiction to hear all matters regarding the insolvency process, 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 United Nations Commission on International Trade (UNCITRAL) Model Law of 1997.

Eighteen months after the law’s signing, no specialized bankruptcy courts have yet been set up. Certain judges have been assigned to hear bankruptcy matters but there are no specialized bankruptcy judges yet.

Investment Incentives

Foreign investors receive no special investment incentives and no other types of favored treatment, except for investments in renewable energy; in manufacturing investments located in Special Zones for Border Development (near the frontier with Haiti); and for investment in tourism projects in certain locations (see below). There are no requirements for investors to export a defined percentage of their production.

Foreign companies are unrestricted 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. The government imposes no conditions on foreign investors concerning location, local ownership, local content, or export requirements.

The Renewable Energy Incentives Law (No. 57-07), which entered into force in June 2008, provides an array of incentives to businesses developing renewable energy technologies. This law was passed as part of the Dominican government’s efforts to invigorate the local production of renewable energy as well as renewable energy-related manufactured products. The incentives included a 100 percent tax exemption on imported inputs (equipment and materials) and a 10-year (from the date of initial operation and not beyond 2020) tax exemption on profits derived from the sale of electricity generated from renewable resources. This law played a large role in the debut of the Caribbean’s first and only commercially viable wind farm in October 2011. Foreign investors praise the provisions of the law, but express frustration with approval and execution of potential renewable energy projects. In 2012, the law was modified as part of President Medina’s fiscal reform measures, reducing the tax incentive for small-scale producers of renewable energy and eliminating the 10-year tax exemption on profits derived from the sale of electricity generated from renewable sources.

In order to encourage development in economically deprived areas located near the Dominican Republic’s border with Haiti, Special Zones for Border Development were created by Law No. 28-01, passed in 2001. A range of incentives, largely in the form of tax exemptions for a maximum period of 20 years, are available to direct investments in manufacturing projects in the Zones. 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.

Law 158-01, on the Promotion of Tourism Development, grants incentives in the form of tax relief on tourism development projects in certain provinces and municipalities of the DR listed in Law 158-01 and extended in Law 184-02. The government of the Dominican Republic announced a goal of doubling the number of tourist arrivals to the country from five million in 2012 to 10 million by 2022.

Foreign Trade Zones/Free Ports/Trade Facilitation

The Dominican Republic’s free trade zones (FTZs) are regulated by the Promotion of Free Zones Law (No. 8-90), which provides for 100 percent exemption from all taxes, duties, charges and fees affecting production and export activities in the zones. These incentives are for 20 years for zones located near the Dominican-Haitian border and 15 years for those located throughout the rest of the country. This legislation is managed by the Free Trade Zone National Council (CNZFE), a joint private sector/government body with discretionary authority to extend the time limits on these incentives.

Foreign currency flows from the free trade zones are handled via the free foreign exchange market. Foreign and Dominican firms are afforded the same investment opportunities both by law and in practice. The CNZFE’s Annual Statistical Report for 2015 (most recent available), noted a Free Zone Sector with a total of 65 free zone parks (up from 60 the previous year) and 630 operating companies (up from 614). Of those companies, 36.2 percent are from the United States. Other significant investment was made by companies registered in the Dominican Republic, Canada, Spain, Germany, Netherlands, South Korea, Switzerland, United Kingdom, Italy, and others. In general, firms operating in the free trade zones experience fewer bureaucratic and legal problems than do firms operating outside the zones. In 2015, free zone exports totaled USD 5.5 billion, comprising 3.1 percent of GDP.

At the end of 2015, the tax incentive laws governing the CNZFE’s changed. Specifically, in 2016, CNZFE’s will be able to offer any amount of their products on the Dominican market for sale (applicable taxing would apply), in parallel with overseas shipments. Before, only up to 20 percent of a CNZFE’s products could be sold on the local market. Private industry anticipates the impact would be minimal, since the primary markets for goods produced in the Dominican Republic’s CNZFEs are overseas.

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
http://www.cnzfe.gov.do 

Performance and Data Localization Requirements

The Dominican labor code establishes that 80 percent of the labor force of a foreign or national company, including free trade zone companies, be composed of Dominican nationals (although the management or administrative staff of a foreign company is exempt from this regulation). The Foreign Investment Law (No. 16-95) provides that contracts licensing patents or trademarks, leases of machinery and equipment, and contracts for provision of technical know-how must be registered with the Directorate of Foreign Investment of the Central Bank.

There are no requirements for foreign IT providers to turn over source code and/or provide access to surveillance (backdoors into hardware and software or turn-over keys for encryption). There are no mechanisms used to enforce any rules on maintaining set amounts of data storage within the country. The government has no data localization policies.

Real Property

The Constitution of the Dominican Republic recognizes and guarantees the right to own private property and provides that the state shall promote the acquisition of property, especially titled real property. The Constitution further provides that it is “in the public interest that land be devoted to useful purposes and that large estates be gradually eliminated,” and that the social policy of the state shall promote land reform and effectively integrate the rural population to the national development process by encouraging renewal of agricultural production.

Mortgages and liens exist in the Dominican Republic and there is a National Registry of Deeds. 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.

Under Dominican law, all land must be registered; all unregistered land is considered state land. Registration requires seven steps, an average of 60 days, and payment of 3.7 percent of the value of the land as a registration fee. The landowner is required to have a survey of the land, a certificate demonstrating that property taxes are current, and a certificate from the Title Registry Office that evidences any encumbrances on the land (such as mortgages or easements) and serves as a check on the extent of land rights to be transferred. Property ownership may revert to occupants (such as squatters) after twenty years, if they properly register the property.

Land tenure insecurity persists, fueled by government land expropriations, institutional weaknesses, lack of effective law enforcement, and local community support for land invasions and squatting. Despite the requirement of land registration, most land in the Dominican Republic is not registered, and even if land rights are registered, tenure is not assured. In some parts of the country, unregistered land was expropriated for development without notice or compensation. In some cases, however, holders of title certificates received little or no additional security. Long-standing titling practices, such as issuing provisional titles that are never completed or providing title to land to multiple owners without requiring individualization of parcels, create substantial ambiguity in property rights and undermine the reliability of land records. Some of these practices were curtailed in the last few years, but nonetheless undermine the reliability of existing land documentation. In addition, the country struggles to control fraud in the creation and registration of land titles, including illegal operations within the government agencies responsible for issuing titles.

In the last decade, the Dominican government has implemented reform programs focused on developing institutional frameworks and strengthening government agencies and public administration. As part of its overarching program to modernize the justice sector, the Dominican Republic Supreme Court modernized its property title registration process through a USD 10 million USD Inter-American Development Bank (IDB) loan in an effort to 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 the last five years, the Dominican government instituted a number of reforms, including the development of a cadaster with digitized property titles and the establishment and expansion of 23 land registry offices across the country. In 2012 the government created the State Lands Titling Commission, which, working with the Dominican Agrarian Institute, is intended to achieve the titling of around 150,000 urban and rural properties.

Intellectual Property Rights

The Dominican Republic has a legal structure with laws and sanctions adequate to protect intellectual property rights (IPR) and has improved the regulatory framework for patent and trademark protection. However, industry representatives continue to cite a lack of enforcement of IPR and common infringement on and theft of IPR as a major concern, validating the Dominican Republic’s placement on the United States Trade Representative’s Special 301 Watch list. During the past year, no new IPR related laws or regulations have been enacted.

Key issues include rampant television signal broadcast piracy, insufficient enforcement actions against the manufacturers of counterfeit pharmaceuticals and other products, a backlog of patents waiting for approval, and weak customs enforcement of counterfeit trafficking. The Dominican government committed, in a side-letter to CAFTA-DR, to take measures to halt television broadcast piracy and agreed to report on its efforts in this regard in a quarterly report to the U.S. Embassy and the Office of the U.S. Trade Representative (USTR). The Dominican authorities have delivered these quarterly reports since January 2005, but significant signal piracy persists.

To fulfill CAFTA-DR requirements, the Dominican Congress passed legislation in November 2006 to strengthen the IPR protection regime by criminalizing end-user piracy and requiring authorities to seize, forfeit, and destroy counterfeit and pirated goods, as well as the equipment used to produce those goods. Customs officers have ex officio authority to seize any goods suspected as counterfeit. Prior to destroying counterfeit goods, customs officers must notify the rights holder. During this time, the goods are stored by customs, which charges the rights holder for storage. The rights holder then has 30 days to inspect the shipment and try to reach an agreement with the sender and manufacturer. At the end of the 30 days, if no agreement has been reached, then the rights holder can pay to send the items back or to have them destroyed.

For additional information about treaty obligations and points of contact at local IP offices, please see WIPO’s country profiles at http://www.wipo.int/directory/en/. 

Resources for Rights Holders

Contact at Mission:

Marina Grayson
Economic Officer
(809) 567-7775, extension 7582
GraysonMV@state.gov

Country/Economy resources:

List of Attorneys in the Dominican Republic, compiled by the Consular Section of the U.S. Embassy in Santo Domingo: http://photos.state.gov/libraries/dominicanrepublic/66631/acs/attorneys.pdf 

American Chamber of Commerce of the Dominican Republic
(809) 381-0777
comunicaciones@amcham.org.do

National Copyright Office (ONDA)
Ministry of Culture
Edificio del Archivo General de la Nación
Calle Modesto Diaz No. 2
Zona Universitaria
Santo Domingo, D.N.
(809) 2746-006
admin.onda@onda.gov.do

National Office of Industrial Property (ONAPI)
Ministry of Industry and Commerce
Av. Los Próceres No.11,
Santo Domingo, D.N.
(809) 567-7474
servicioalcliente@onapi.gob.do
http://onapi.gob.do/ 

Capital Markets and Portfolio Investment

The Dominican securities market, the Bolsa de Valores de Santo Domingo, opened on December 12, 1991, and mostly handles offerings of commercial paper. It is supervised by the Superintendency of Securities (SIV), 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.

Money and Banking System

During a period of strong GDP growth and largely successful economic reforms in the 1990s, Dominican authorities, including the Central Bank, failed to detect years of large-scale fraud and mismanagement at the privately-owned Banco Intercontinental (Baninter), the country’s third largest bank. The failure of Baninter and two other banks in 2003 cost the government in excess of USD 3 billion, severely destabilized the country’s finances, and shook business confidence. The failures, and their consequences, brought about a crisis of devaluation, inflation and economic hardship. Upon taking office in August 2004, then President Leonel Fernandez’s administration formulated with the IMF a comprehensive program aimed at addressing the weaknesses in macroeconomic policies, the banking system, and a wide range of other structural areas. In 2005, the IMF’s Executive Board approved a USD 665 million stand-by agreement (SBA) that helped the Dominican Republic recover from its 2003 banking crisis. Business confidence gradually returned, but after effects of the 2003-2004 economic crisis remain, including lingering difficulty in accessing consumer and business credit financing. Reforms enacted after the 2003 crisis allowed the Dominican banking sector to avoid severe difficulties during the international financial crisis of 2009.

In the wake of the 2008 global economic and financial crisis, the IMF’s Executive Board approved a USD 1.7 billion SBA with the Dominican Republic. The 28-month program sought to assist the government in pursuing short-term counter-cyclical polices, strengthen medium-term sustainability, reduce vulnerabilities, and set the foundation for eventual recovery. The SBA lapsed in April 2012 with USD 500 million in pending IMF disbursements.

Currently, the Dominican Republic’s financial sector remains relatively stable and the financial system indicators were declared largely satisfactory by the IMF during its 2015 Article IV consultations, which noted that “the implementation of sound policies has underpinned the [country’s] strong economic performance” and that “the resilience of the financial system has been strengthened over the past years in tandem with improved bank supervision.”

Foreign Exchange and Remittances

Foreign Exchange

The Dominican exchange system is a market with free convertibility of the peso. Economic agents perform their transactions of foreign currencies under free market conditions. There are generally no restrictions or limitations placed on foreign investors in converting, transferring, or repatriating funds associated with an investment.

The Central Bank uses an average of the exchange rates reported by the foreign exchange market and financial intermediaries to set the rate for its own operations. Importers may obtain foreign currency directly from commercial banks and exchange agents. The Central Bank participates in this market in pursuit of monetary policy objectives, buying or selling currencies and performing any other operation in the market.

Remittance Policies

The government has made no changes to investment remittance policies. The government does not engage in currency manipulation tactics, and there are no parallel markets. The Dominican Republic is a member of the Caribbean Financial Action Task Force (CFATF), a FATF-style regional body. Its most recent mutual evaluation can be found at: http://www.fatf-gafi.org/topics/mutualevaluations/documents/mutualevaluationofthedominicanrepublic.html .

Sovereign Wealth Funds

State operations have few mechanisms and measures to ensure transparency and accountability. There is no requirement for an annual report from sovereign wealth funds.

State-Owned Enterprises (SOEs) in general do not have a significant presence in the economy, with most functions performed by privately-held firms. Notable exceptions are in the electricity and refining sectors. In the electricity sector, private companies only operate in the electricity generation phase of the process, with the government handling the transmission and distribution phases.

According to Article 2 of Law 10-04, state-owned enterprises (SOEs) are subject to audits by the Chamber of Accounts (“Camera de Cuentas”). Audits are published in http://www.camaradecuentas.gob.do/index.php/auditorias-realizadas . In addition, all audits are available as requested according to freedom of information provisions.

Privatization Program

The government does not have any privatization programs. A partial privatization of state-owned enterprises (SOEs) carried out in the late 1990s resulted in foreign investors purchasing shares and obtaining management control of former SOEs engaged in activities such as electricity generation, airport management, and sugarcane processing.

The government does not have an official position or policy on responsible business conduct (RBC), including corporate social responsibility (CSR). Although in general there is not an entrenched culture of CSR on the part of local firms, large foreign companies do normally have an active CSR program, as do a number of the larger local business groups. The majority of local firms do not follow OECD principles regarding CSR, but the firms that do are viewed favorably (especially when their CSR programs are effectively publicized). In 2012 a group of large Dominican companies started the “Heal a Nation” CSR initiative, the largest and most important local CSR initiative.

The Dominican Republic has a legal framework that includes laws, regulations and criminal penalties to permit the effective combating of corruption. However, the government does not implement the law effectively. Corruption remains an endemic problem in the security forces, civilian government, and private sector, and officials frequently engage in corrupt practices with impunity.

Corruption and the need for reform efforts are openly and widely discussed as key public grievances. In 2016, Transparency International gave the Dominican Republic a Corruption Perception Index (CPI) score of 31, ranking it 120 of 176 countries assessed. The World Economic Forum’s 2016 Global Competitiveness report identified corruption as the most problematic factor for doing business in the Dominican Republic, ranking the Dominican government in institutional strength as 123 out of 138 countries, and overall ranking the Dominican Republic as 92 out of 138 in its competitiveness index. Of the specific indicators, the Dominican Republic was in the bottom 20 out of 138 countries for favoritism in decisions of government officials, public trust in politicians, diversion of public funds, judicial independence, reliability of police services, and ethical behavior of firms.

Weak enforcement mechanisms and a lack of political will to prosecute criminals, particularly high-level public officials, are the primary barriers to effective investigations. No data is available to assess whether corruption disproportionately affects foreign firms, but both Dominicans and foreign residents in the Dominican Republic encounter the issue routinely. Corruption has the effects of protectionism by giving an “insider” an undue advantage over outsiders (either foreign or domestic). According to a February 2016 Gallup-Hoy poll, 46 percent of Dominicans believe that corruption has gotten worse, compared to 2014 and 2015. Dominicans point to low law enforcement salaries as part of the incentive for supplemental, illicit income. Dominicans also have a high tolerance for nepotism, often regarding it as a justified and expected activity of those with power and influence.

Giving or accepting a bribe is a criminal act according to Dominican law. Articles 177, 178 and 181 of the Criminal Code prohibit public officials and judges from accepting bribes or other gifts, under the penalty of a fine twice the benefit received and no less than six months in prison. Articles 2 and 3 of the Bribery in Commerce and Investments Law (No. 448-06) prohibit individuals or corporate bodies from giving, and public officials from accepting, gifts or bribes related to their public function, under the penalty of a fine twice the benefit received and three to ten years in prison with labor. U.S. businesses operating in the Dominican Republic often need to take extensive measures to ensure compliance with the Foreign Corrupt Practices Act (FCPA).

President Danilo Medina, who took office in August 2012, made some efforts to promote government accountability. Medina eliminated some government privileges such as luxury vehicles and lavish holiday parties. Medina also required all officials in his administration to comply with laws to declare their personal property within a month of being sworn in and when they leave office; many government officials, however, do not comply with this requirement. Although Medina allowed corruption investigations against two senators and a former Minister of Public Works, no high-profile convictions have been secured since he assumed office.

In October 2016, a Brazilian airplane manufacturer paid a criminal penalty to the United States for bribing officials of the Dominican Republic and several other countries. The case involved the buying of eight Super Tucano fighter planes by the Dominican Air Force in exchange for USD 3.52 million in kickbacks. Despite overwhelming evidence implicating key Dominican military officials, no one has yet been prosecuted. Further, in December 2016 the Dominican Republic was among those countries implicated in the far-reaching corruption scandal involving Brazilian construction giant Odebrecht. In a plea agreement with the United States Department of Justice, Odebrecht admitted to paying more than USD 92 million in kickbacks and bribes to Dominican officials and business people to secure construction contracts in the country.

Three government agencies have primary responsibility for countering corruption. First, the Public Ministry, led by the attorney general, is responsible for investigating and prosecuting corruption cases through the Special Prosecution of Administrative Corruption (PEPCA). The judiciary has dealt administratively with judges deemed corrupt, but no known prosecutions of corrupt judges have taken place. Second, the Chamber of Accounts, similar to the U.S. Government Accountability Office, promotes government accountability through audits and investigations, which often form the basis of PEPCA corruption cases. In 2015, the Chamber of Accounts submitted one annual audit report to Congress regarding the 2014 budget, which noted the Chamber’s continuing concern over significant deficiencies, failures and omissions in the government’s budgetary records. The Chamber of Accounts also submitted five audit reports to PEPCA with findings of misuse of public funds and lack of proper procedures, but there were few to no consequences for noncompliance. Third, the General Directorate of Ethics and Governmental Integrity operates with a strong political mandate but minimal practical results. Additionally, the Comptroller General’s Office defines management controls and accounting procedures for all government agencies, and a joint commission between the Comptroller General and Chamber of Accounts facilitates audits and investigations.

Civil society is actively engaged in anti-corruption campaigns through non-governmental organizations (NGOs) and the media. Several NGOs 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). Government agencies have limited and often adversarial relationships with civil society organizations, though a notable example of close cooperation was the 2010 Anti-Corruption Participatory Initiative, in which civil society organizations and government institutions conducted public outreach activities and public official training to encourage effective use of the law.

The Dominican Congress ratified the UN Convention Against Corruption (UNCAC) on October 26, 2006. The UN Convention has a broader scope on corruption than do other agreements; it includes provisions regarding money laundering, obstruction of justice, private sector corruption, and asset recovery. The Dominican Republic signed the Inter-American Convention Against Corruption (IACAC), though the Dominican Republic is not a party to the 1992 Inter-American Convention on Mutual Assistance in Criminal Matters. Both CAFTA-DR and UNCAC mandate that the Dominican Republic criminalize bribery.

UN Anticorruption Convention, OECD Convention on Combatting Bribery

The Dominican Republic signed and ratified the UN Anticorruption Convention. The Dominican Republic is not a party to the OECD Convention on Combating Bribery of Foreign Public Officials in International Business Transactions.

Resources to Report Corruption

Contact for government agency responsible for combating corruption:

Procuraduría Especializada contra la Corrupción Administrativa (PEPCA)
Calle Hipólito Herrera Billini esq. Calle Juan B. Pérez,
Centro de los Heroes, Santo Domingo, República Dominicana
Telephone: (809) 533-3522
Fax: (809) 533-4098
Email: info@pepca.pgr.gob.do

Government service for filing complaints and denunciations:

Linea 311
Phone: 311 (from inside the country)
Website: http://www.311.gob.do/ 

Contact for “watchdog” organization that monitors corruption:

Participación Ciudadana
Phone: +809 685 6200
Fax: +809 685 6631
Email: info@pciudadana.org

There is no recent history of significant politically motivated violence. In 2015, there were multiple mostly-peaceful protests throughout the country over social and economic issues such as salary increases for public employees, labor disputes, corruption, as well as statelessness and problems with the civil registry system. Isolated incidents of intra-party political violence among political candidates and party members were reported in the lead up to the May 2016 presidential elections. There are no examples of significant politically-motivated damage to projects or installations in the last 10 years. Polls show that general insecurity is growing in the Dominican Republic, although the cause is a perceived increase in street crime rather than politically motivated violence.

The World Economic Forum’s 2016 Global Competitiveness report ranked the Dominican Republic 122^nd out of 138 countries in business costs of crime and violence and 111^th in organized crime.

The Dominican Labor Code, which became law in June 1992, is a comprehensive piece of legislation that 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. Recent tripartite commissions to revise the code have failed to reach agreement between the government, union, and private sector participants. Dominican industry supports changes to the Code to protect the interests of small and medium enterprises and to encourage growth of the formal sector. Dominican unions support changes to increase protections for workers. President Medina stated that he wants a labor code reform and will try again to reconvene a tripartite commission during his second administration.

The Labor Code establishes a standard work period of 8 hours per day and 44 hours per week and stipulates that all workers are entitled to 36 hours of uninterrupted rest each week. The law provides for premium pay for overtime, which is mandatory at some firms in the free trade zones. 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.

The Labor Code requires that at least 80 percent of non-management workers of a company be Dominican nationals. Adherence to this law, however, is questionable. Additionally, waivers are available and regularly granted in the agricultural sector.

The Labor Code provides for the right of workers, with the exception of military and police, to form and join independent unions, conduct legal strikes, and bargain collectively; however, it places several restrictions on these rights. The Labor Code specifies that 20 or more workers in a company may form a union; however, a union must comprise 50 percent plus one of the workers in the entire company in order to bargain collectively. Few companies had collective bargaining pacts. The Labor Code stipulates that workers cannot be dismissed because of trade union membership or union activities; however, in practice, some firms fired workers associated with union activities. Before a union may officially call a strike it must have the support of an absolute majority of all company workers, attempt to resolve the conflict through mediation, provide written notification to the Ministry of Labor of the intent to strike, and wait 10 days from that notification before striking. Brief work stoppages are more common than lengthy strikes, in part due to these stringent requirements.

The Dominican Labor Code establishes a system of labor courts for labor disputes. While cases did make their way through the labor courts, the process was often long and cases remained pending for several years. One exception is workplace injury cases, which are typically concluded quickly and in majority found in favor of the worker. Both workers and companies report that mediation facilitated by the Ministry of Labor is the most 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 International Labor Organization (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, they have few resources and capacity to conduct inspections, creating gaps in policy and enforcement. Labor inspectors do not have the ability to impose fines or penalties, but rather document violations for prosecution by the Attorney General’s office. Overall, few violations are reported and even fewer are prosecuted and penalized.

The Dominican Labor Code does provide for severance payments, and there is no differentiation between layoffs and firings. Specifically, Article 80 of the Dominican Labor Code requires approximately one month salary for each year worked and Articles 219-222 of Dominican Labor Code require that the prorated portion of the “thirteenth month” (aka Christmas Bonus) be paid as well.

In 2016, the Dominican government made it possible for migrants with work and residency permits to participate in the national social security network, a contributory program which provides medical benefits to the worker and family (up to third-degree relatives), pension and disability pay.

The Overseas Private Investment Corporation (OPIC) is active in the Dominican Republic with both insurance and loan programs and continues to support private enterprises working in the country. The Dominican Republic signed a Guaranty of Private Investments Agreement with the U.S. government in 1962. The Dominican government is also a party to the Multilateral Investment Guarantee Agency (MIGA) Agreement.

Table 2: Key Macroeconomic Data, U.S. FDI in Host Country/Economy

* Source: Dominican Republic Central Bank: http://www.bancentral.gov.do/estadisticas_economicas/real/ 

Table 3: Sources and Destination of FDI

Dominican Republic data not available on the IMF website.

Table 4: Sources of Portfolio Investment

Dominican Republic data not available on the IMF website.

Economic Section Chief and Senior Commercial Representative
Embassy of the United States of America
Avenida República de Colombia
Santo Domingo, DR
InvestmentDR@State.gov