HomeReportsBureau of Economic and Business Affairs2017 Investment Climate Statements…Dominican Republic

# 					2017 Investment Climate Statements: Dominican Republic			

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													Executive Summary											

                -  Executive Summary 
                -  1. Openness To, and Restrictions Upon, Foreign Investment   
                -  2. Bilateral Investment Agreements and Taxation Treaties   
                -  3. Legal Regime   
                -  4. Industrial Policies   
                -  5. Protection of Property Rights   
                -  6. Financial Sector   
                -  7. State-Owned Enterprises   
                -  8. Responsible Business Conduct   
                -  9. Corruption   
                -  10. Political and Security Environment   
                -  11. Labor Policies and Practices   
                -  12. OPIC and Other Investment Insurance Programs   
                -  13. Foreign Direct Investment and Foreign Portfolio Investment Statistics   
                -  14. Contact for More Information   

## Executive Summary

The Dominican Republic is an upper middle income country and the largest economy in the Caribbean region. In 2016, the Dominican economy grew an estimated 6.6 percent according to the Central Bank, making it the fastest-growing country in Latin America. Growth was led by public and private sector construction, financial services, mining, and tourism.

The Dominican Republic has adopted policies of greater openness to international trade and investment in the last decade. As a result, foreign direct investment (FDI) plays a prominent role in the country’s economic development. According to the U.S. Bureau of Economic Analysis, U.S. foreign direct investment (FDI) in the Dominican Republic was USD 1.4 billion in 2015, an increase of 11.9 percent over 2014. The Dominican Republic is among the main recipients of FDI in the Caribbean and Central America. The tourism, real estate, telecommunications, free zones, mining, and financing sectors are the largest recipients of foreign direct investment. Historically, the United States has been the largest investor, followed by Canada and Spain. The strength of the U.S.-Dominican trade relationship stems from close geographic proximity and the historical, cultural, and personal ties that many Dominicans have with the United States.

The Dominican Republic-Central America Free Trade Agreement with the United States (CAFTA-DR), in force now for ten years, has increased bilateral trade between the United States and the Dominican Republic from U.S. USD 9.9 billion the year before CAFTA-DR implementation to USD 12.5 billion in 2016. CAFTA-DR is also credited with increasing competition, improving the rule of law, and expanding the range of choices and access to quality products in the Dominican Republic. CAFTA-DR includes a number of protections for foreign investors, including mechanisms for dispute resolution.

Despite the stable macroeconomic situation, significant systemic problems remain in the Dominican Republic. Foreign investors cite a lack of clear, standardized rules by which to compete and a lack of enforcement of existing rules. Complaints include allegations of widespread corruption, requests for bribes, delays in government payments, weak intellectual property rights enforcement, bureaucratic hurdles, slow and sometimes biased judicial processes, non-standard procedures in customs valuation of imported goods, as well as product misclassification as a means of negating CAFTA-DR benefits and increasing customs revenues. Weak land tenure laws and government expropriations continue to be a problem, though less so than in previous years. The Dominican authorities have carried out some reform efforts aimed at improving transparency, especially fiscal transparency. Nevertheless, corruption and better implementation of existing laws are openly and widely discussed as key public grievances.

The Dominican government in 2016 was the subject of several corruption scandals, sparking public protests and calls for institutional change. The government’s response to these scandals and whether it makes a genuine effort to end impunity will likely have a significant impact on whether it continues to be seen as an attractive market for foreign direct investment. The investment climate in the coming years will largely depend on sustaining the political will to implement reforms necessary to promote competitiveness and transparency, rein in the public debt, and end widespread corruption.

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