VZCZCXYZ0016
PP RUEHWEB

DE RUEHDG #1941/01 2291743
ZNR UUUUU ZZH
P 171743Z AUG 07
FM AMEMBASSY SANTO DOMINGO
TO RUEHC/SECSTATE WASHDC PRIORITY 8984
INFO RUEHZA/WHA CENTRAL AMERICAN COLLECTIVE PRIORITY
RUCPDOC/USDOC WASHDC PRIORITY 1683
RUEATRS/DEPT OF TREASURY WASHDC PRIORITY

UNCLAS SANTO DOMINGO 001941 
 
SIPDIS 
 
SENSITIVE 
SIPDIS 
 
STATE FOR WHA, WHA/CAR, 
STATE PASS EX-IM BANK (DWIGHT HEROW) 
 
E.O. 12958: N/A 
TAGS: BEXP EFIN ETRD DR
SUBJECT: EX-IM BANK SEEKS REPAYMENT OF TWO LOANS FROM THE 
GODR 
 
 
¶1. (SBU) Summary. On July 19-20, a delegation from The 
Export-Import Bank (Ex-Im), led by Senior Vice President John 
McAdams, met with President Leonel Fernandez, Minister of 
Finance Vincente Bengoa Albizu and Vice Governor of the 
Central Bank Clarissa de la Rocha to discuss the repayment of 
two outstanding loan obligations.  The two loans, totaling 
USD 9.8 million in principal plus $3.3 million in interest, 
were guaranteed by Banco Intercontinental (Baninter). 
However, the Central Bank took over Baninter,s obligations 
after the bank went into default in 2003.  The Minister of 
Finance and the President both indicated they wish to see the 
matter resolved, but the Central Bank insisted that it could 
not repay the full principal and requested a 20 percent 
discount and no interest similar to what the Europeans were 
paid to resolve their outstanding obligations.  In a 
follow-up letter dated August 7, Ex-Im indicated to the 
Central Bank they could accept a 20 percent discount on the 
principle and interest, as well as an additional 5 percent 
discount for the inclusion of the interest, which would total 
USD 9.963 million.  End Summary. 
 
Central Bank Negotiations 
 
¶2. (SBU) During the meeting with Vice Governor of the Central 
Bank Clarissa de la Rocha, Ex-Im Senior Vice President John 
McAdams noted that Ex-Im has been discussing these two 
outstanding loans with the Central Bank for several years and 
has been very patient while the GODR recovered from the bank 
failures of 2003.  However, McAdams said applications for new 
projects are being slowed down as a result of these 
outstanding obligations.  He noted that if Ex-Im declares 
these loans to be in default there are certain requirements 
that must be implemented including notifying international 
organizations such as the IMF and OECD and stopping all new 
projects in the DR.  McAdams stressed that Ex-Im has not had 
any repayment problems with other projects in the DR and he 
hopes that Ex-Im will continue to work closely with the GODR 
in the future.  He added that it would be unfortunate to let 
this relatively small amount of money get in the way of a 
much larger portfolio of projects in the country (over USD 
400 million.) 
 
¶3. (SBU) Vice Governor de la Rocha told Ex-Im that the 
Central Bank has established a system to recover funds and 
assets from the failed banks and their borrowers in order to 
repay the obligations.  She said that according to the law, 
only funds from this account can be used to repay the 
lenders, including Ex-Im.  De la Rocha also expressed concern 
that the IMF would not allow the GODR to take on additional 
debt related to the banking crisis.  She requested that Ex-Im 
consider a middle ground in order to resolve the issue and 
suggested they offer a discount similar to the 20 percent 
discount given by the Europeans to resolve their outstanding 
obligations.  At one point in the meeting De la Rocha 
mentioned the possibility of repayment of USD 10.9 million, 
which they considered to be the principal with no interest, 
over a period of six months or more.  Ex-Im responded 
favorably that it could consider repayment of principal 
without additional interest and penalties (which brings the 
total to just over USD 13 million.)  However, De la Rocha 
later insisted that the Bank could not pay the full principal 
amount and reiterated the need for a discount.  The two sides 
were not able to reach agreement on the amount to be repaid. 
Ex-Im indicated that it would continue to be patient for a 
little while longer, but said the ball is in the GODR,s 
court to offer a creative solution.  In a letter dated August 
7, Ex-Im sent a proposal to the Central Bank to offer a 20 
percent discount on the principle and interest, as well as an 
additional 5 percent discount since interest is included, 
which would total USD 9.963 million. 
 
¶4. (U) De la Rocha also mentioned that as part of the IMF 
agreement, the GODR needed to recapitalize the Central Bank. 
This was recently accomplished by issuance of $320 million in 
GODR bonds. The bonds were placed with the Central Bank and 
carry an interest rate sufficient to reimburse the Central 
Bank for the Baninter losses. 
 
Meetings with President Fernandez and Minister of Finance 
 
¶5. (SBU) President Fernandez told Ex-Im there is political 
will to resolve the outstanding loans and put the issue aside 
as soon as possible.  He asked Ex-Im to negotiate the 
interest payments since they were not part of the obligations 
that the Government originally took over from Baninter. 
Ex-Im indicated that they could negotiate the interest 
 
payments.  Ex-Im also raised the issue of the need for 
transparency in all Ex-Im projects.  Ex-Im noted its concern 
over possible conflicts of interest involving actors that 
have dual roles in transactions.  Ex-Im stressed the need for 
transparency, including the disclosure of relationships, and 
noted that this is a factor in consideration of projects. 
President Fernandez agreed that it was important not to have 
any appearance of conflicts of interest and said he would 
prefer not to pursue a project if there were any doubts.  He 
said he would have the Minister of Finance follow up and 
requested any suggestions that Ex-Im might be able to provide 
on implementing guidelines. 
 
¶6. (SBU) During the discussion, President Fernandez confirmed 
that the GODR would not move forward on a current Ex-Im loan 
application to acquire equipment for the police.  This 
project made headlines in the local papers recently with 
allegations of over pricing.  President Fernandez said he 
decided to put the application aside as a result of the media 
uproar. 
 
¶7. (SBU) The Minister of Finance Vincente Bengoa Albizu told 
Ex-Im that while the issue of the outstanding obligations is 
under the authority of the Central Bank, he believes the 
loans should be paid.  He said there would be a greater 
problem if the Government did not pay the loans and that he 
would push to have the matter resolved. 
 
Ex-IM cleared this cable. 
BULLEN