VZCZCXYZ0014
PP RUEHWEB

DE RUEHDG #2038/01 2411545
ZNR UUUUU ZZH
P 291545Z AUG 07
FM AMEMBASSY SANTO DOMINGO
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UNCLAS SANTO DOMINGO 002038 
 
SIPDIS 
 
SENSITIVE 
SIPDIS 
 
STATE FOR WHA/CAR 
 
E.O. 12958: N/A 
TAGS: PGOV ECON MARR DR
SUBJECT: DOMINICAN CONGRESS' RECORD UNDER PLD CONTROL IS 
MIXED 
 
REF: A. SD 0734 
     ¶B. 06 SD 3307 
     ¶C. SD 1748 
     ¶D. 06 SD 3521 
     ¶E. SD 1166 
 
¶1. (SBU) SUMMARY:  With its sweeping victory in the 2006 
congressional election, the Dominican Liberation Party (PLD) 
gained concurrent control of the legislative and executive 
branches of government for the first time (Ref A).  The 
Congress' record over the past year is mixed:  Important 
legislation was passed to implement CAFTA, recapitalize the 
Central Bank, and make electricity theft illegal.  However, 
the Congress also approved a series of loans for the 
controversial Santo Domingo subway system, and failed to pass 
a law to modernize the national security structure.  We also 
note that passing legislation is merely the first step in 
most reform efforts, and that the strengthening of the 
Dominican judicial system is necessary to realize the 
potential of new laws.  END SUMMARY. 
 
ANTI-CORRUPTION PROGRAM 
----------------------- 
 
¶2. (U) August 16 marked the first the anniversary of the 
inauguration of the PLD-led Congress.  In public remarks on 
the occasion, Senate President Reinaldo Pared Perez, who is 
also the Secretary-General of the PLD, emphasized the party's 
efforts to reduce corruption in the Congress:  "It can be 
said categorically that the time when a man with a briefcase 
(of cash) could prowl the corridors of this branch of 
government, to corrupt lawmakers and impose the will of 
individuals and groups on the approval of law, has ended." 
 
¶3. (SBU) As examples of the anti-corruption drive, Pared 
cited the passage of legislation that was important for the 
country, but impacted specific business groups -- implying 
that in previous congresses the enactment of these laws would 
have been prevented through bribery.  Pared also cited the 
establishment of a Controllers Office, which is assisted by 
private external audit firm, as well the opening of the 
Congress' Office of Information Access, which received 1,293 
inquiries in its first eight months of operation.  Finally, 
the Senate President chided his colleagues for poor reporting 
on the use of the small grants funds that each manages for 
his district, monies which some observers consider to be 
little more than additions to Senators' salaries.  When 
Senators complained about limited travel funds, Pared told 
them that if they wanted to fly first class they could pay 
the difference out of their own pockets. 
 
LEGISLATIVE RECORD 
------------------ 
 
¶4. (SBU) In a public presentation of the Congress' record, to 
which the diplomatic corps was invited, Pared maintained that 
22 of the 122 laws passed by the 2006-2007 Congress had 
"major social and economic impact."  A list of this 
legislation follows (to which we added three other laws), 
accompanied by Embassy comments on laws of particular 
interest to the United States. 
 
¶A. Law on Implementation of the Free Trade Agreement Between 
the Dominican Republic, Central America, and the United 
States:  This seminal piece of legislation contained the 
changes to Dominican law, e.g. to government procurement 
regulations, that were necessary to bring CAFTA into force. 
Given the PLD's leftist roots and fact that the party 
inherited CAFTA from a previous administration, this law was 
an important statement of commitment to free trade. 
 
¶B. Law on the Recapitalization of the Central Bank:  This 
 
legislation, required under the Dominican Republic's IMF 
program, is designed to address macroeconomic weaknesses 
resulting from the 2003-2004 banking crisis.  The law 
addresses the Central Bank's quasi-fiscal deficit, which 
ballooned in the aftermath of the crisis as a result of large 
payments (exceeding that required by deposit insurance) made 
to individual account holders who lost their savings in the 
bank collapses (Ref B). 
 
¶C. Law on the Amendment of the General Law on Electricity of 
2001:  This legislation, also required by the IMF, made 
electricity theft illegal after decades of energy problems 
caused in part by rampant larceny (Ref C). 
 
¶D. Law on Instituting a Participatory System of Municipal 
Budgeting:  This legislation addresses a longstanding problem 
with the distribution of tax receipts to city governments. 
Under the previous system, some US$20 million in receipts 
were provided annually to the Dominican Municipal League 
(LMD), an umbrella organization.  The funds were then doled 
out in a non-transparent process by the President of the LMD, 
the Reformist Party's Amable Aristy Castro, who is the 
subject of numerous corruption allegations.  Under the new 
law, the LMD middle-man will be cut out, with municipal 
budgets now determined at an annual assembly of mayors. 
 
¶E. Law on Fiscal Amnesty:  Together with "F" and "G" below, 
this legislation was part of a package of tax relief that the 
Government said was made possible by increased revenue 
resulting from economic growth that exceeded budget targets. 
Some analysts interpreted the legislation as purely 
politically motivated, coming as it did shortly before the 
PLD's presidential primary. 
 
¶F. Law on the Reduction of the Income Tax 
 
¶G. Law on the Reduction of the Tax on the Alcoholic Beverages 
and Tobacco Sectors 
 
¶H. Law on the Right of All to Simple Appeal for Legal 
Protection ("Amparo"):  This legislation is part of President 
Fernandez's initiative to strengthen civil rights, an effort 
which he has said will include proposed constitutional 
amendments to define the presumption of innocence and improve 
the right to habeas corps (Ref D). 
 
¶I. Law on Austerity in the Public Sector:  This anti-deficit 
legislation puts caps on government spending. 
 
¶J. Law on Civil Aviation:  This legislation reorganized and 
renamed the General Directorate of Civil Aviation to the 
Dominican Civil Aviation Institute (IDAC).  The 
reorganization is intended to improve the efficiency of IDAC 
and, given the elevation of the Dominican Republic to a 
Category I country for air safety this year, efficiency has 
taken on new importance. 
 
¶K. Law on the Transition to Jurisdictional Control of the 
Administrative Activities of the State 
 
¶L. Organic Law on the Ministry of Finance:  Together with 
"M-P" below, this legislation was part of a World Bank-IDB 
project designed to strengthen the Ministry of Hacienda and 
Ministry of Planning and Development. 
 
¶M. Law on the Creation of a Ministry of Planning and 
Development 
 
¶N. Law on Public Planning and Investment 
 
¶O. Law on the National System of Internal Controls Auditing 
 
¶P. Law on the Creation of an Integrated System of 
Administrative Finance for the State 
 
¶Q. Law on the General Defense of Business Competition 
 
¶R. Law Against Crimes and Offenses of High Technology 
 
¶S. Law on the Efficiency of Collections 
 
¶T. Law on Commercial Arbitration 
 
¶U. Law on Industrial Competitiveness and Innovation:  This 
legislation was passed primarily to strengthen the failing 
textile maquilas in the free trade zones by giving them 
additional tax breaks and subsidized loan rates to assist 
diversification. 
 
¶V. Law on the Mercantile Restructuring and Judicial 
Liquidation 
 
¶W. Law on the Granting of Special Incentives to those 
Receiving Foreign Pensions 
 
¶X. Law on the Establishment of a Regulatory Regime for the 
Development of Micro-, Small-, and Medium-Sized Enterprises 
 
¶Y. Law on Renewable Energy Incentives:  In addition to create 
incentives for the development of renewable energy, this 
legislation will regulate activity in the sector. 
Implementing regulations will be put in place starting in 
September 2007, with the goal of establishing a national 
master plan for renewable energy development by August 2008. 
This law opens the door to the development of biofuels and 
ethanol production, as well as wind, solar, and other 
renewable energies. 
 
COMMENT 
------- 
 
¶5. (SBU) On its own, the legislation that brought CAFTA into 
force would stand as a decent record for the Dominican 
Congress for the 2006-2007 session.  Add to that the laws to 
recapitalize the Central Bank and make electricity theft 
illegal and a reasonable record emerges.  However, the 
Congress' term is marred by its acquiescence in funding 
President Fernandez's prized Santo Domingo subway project, 
which is controversial because of its high cost and lack of 
transparency in procurement.  Legislators approved hundred of 
millions of dollars of loans for the transportation system 
(estimates range as high as US$683 million) (Ref E). 
 
¶6. (SBU) The Embassy would have liked to have seen the 
Congress act more quickly on the pending Law on National 
Security and Defense.  The Dominican Republic is in dire need 
a modern defense strategy, one in which budgeting decisions 
are made based on strategic objectives that are determined by 
a deliberative method, and which brings together all 
government entities (not just the military) in a coherent 
inter-agency process.  The new legislation carries the 
potential for addressing these important issues. 
 
¶7. (SBU) Finally, we note that passing legislation is merely 
the first step in most reform efforts, and that the 
unfortunate pattern here in areas such as anti-corruption, 
money laundering, and trafficking in persons is:  Good 
legislation, decent prosecution, and very few (if any) 
convictions.  The strengthening of the Dominican judicial 
system is therefore one of the top Country Team and USAID 
programming objectives. 
 
(U) This report and additional information can be found on 
Embassy Santo Domingo's SIPRNET site, 
 
http://www.state.sgov.gov/p/wha/santodomingo/  
BULLEN