VZCZCXYZ0019
PP RUEHWEB

DE RUEHDG #1729/01 3122032
ZNR UUUUU ZZH
P 072032Z NOV 08
FM AMEMBASSY SANTO DOMINGO
TO RUEHC/SECSTATE WASHDC PRIORITY 1724
INFO RUEHZA/WHA CENTRAL AMERICAN COLLECTIVE PRIORITY
RUEATRS/DEPT OF TREASURY WASHDC PRIORITY
RUCPDOC/USDOC WASHDC PRIORITY 1762

UNCLAS SANTO DOMINGO 001729 
 
SENSITIVE 
SIPDIS 
 
E.O. 12958: N/A 
TAGS: ENRG ECON EINV DR
SUBJECT: ONE DEAD AS BLACKOUTS LEAD TO PROTESTS 
 
REF: A. SANTO DOMINGO 1611 
     ¶B. SANTO DOMINGO 1133 
 
¶1. (U) Summary: Owed USD 500 million, the country's private 
power generators have cut back electricity output, causing 
extensive blackouts throughout the country.  This situation 
has incited violent protests, increased crime and caused 
economic losses.  With GoDR officials saying the government 
lacks the funds to cover the generators' debts, sector 
insiders say the problem is bound to worsen.  The government 
is seeking World Bank approval to divert a USD 60 million 
loan intended for structural improvements to the electricity 
grid to pay the generators' invoices. End Summary. 
 
¶2. (SBU) The current debt to electricity generators continues 
to grow, reaching USD 500 million at the end of October. 
(Reftel A) When the government failed to pay July invoices by 
the end of October, the generators severely cut back 
production, asserting that they lacked the cash to purchase 
fuel.  Most notable was the reduction at the 300 MW AES 
Andres plant; AES Dominicana canceled its December fuel 
delivery and has been rationing production since mid-October. 
 AES Dominicana President Marco De la Rosa told EconOff that 
if they do not receive payment by the end of November, AES 
will cancel the January shipment and power down AES Andres in 
early January.  "If that happens, it will be a national 
tragedy," he said.  He also noted that they will need to 
replenish the coal supply at the company's 240 MW Itabo plant 
before it runs out of coal on December 10. 
 
¶3. (U) The electricity deficit averaged 40 to 50 percent of 
demand for the first few days of November.  To deal with 
this, the three public electricity distributors operating on 
the national grid, which are known as EDEs, have implemented 
rolling blackouts throughout the country.  In some 
neighborhoods, the blackouts last as long as 20 hours per 
day.  On November 5, government-provided fuel oil brought the 
deficit down to 15 to 20 percent, somewhat stabilizing the 
situation.  The blackouts have lessened slightly, but 
continue. 
 
¶4. (U) Generation company executives told EconOff that they 
have met numerous times with Radhames Segura, the executive 
vice president of the Dominican Corporation of State-Owned 
Electricity Companies (CDEEE) ) the holding company that 
controls the EDEs, and once with Finance Minister Vicente 
Bengoa.  The message they received, said Roberto Herrera of 
Compania de Electricidad de San Pedro de Macoris (CESPM), was 
that the government does not have the money to pay its 
current debt. 
 
¶5. (SBU) This message is consistent with Bengoa's public 
statements on the country's fiscal situation.  In interviews 
with the press, he has acknowledged that government revenues 
have been lower than expected of late.  Furthermore, he told 
the industry representatives that the drop in fuel prices has 
meant a drastic cut in the oil financing that the GoDR was 
receiving from Venezuela through the Petrocaribe agreement 
(Reftel B), Herrera and De la Rosa told EconOff.  An economic 
downturn could compound this situation.  Perhaps even more 
worrisome, however, is the possibility that one of the 
generators will invoke the sovereign guarantee of its 
contract, which Herrera said that CESPM's financier, 
Citibank, is considering. 
 
¶6. (U) In their meeting with Bengoa and Segura, the 
generators asked the government to make a payment of USD 200 
million to enable the generators to buy fuel.  The pair of 
officials said they could not come up with that amount of 
money, but discussed a pair of possible avenues for obtaining 
some funds to pay the generators, De la Rosa told EconOff. 
One such manner would be for the government to transfer 
budgeted funds from another area of public spending to pay 
the generators.  Another possibility, Bengoa told the 
generators, would be to use loans that the World Bank and 
Inter-American Development Bank (IDB) have provided to the 
GoDR for electricity infrastructure rehabilitation to pay the 
generators.  Any such extraordinary use of multilateral loan 
would require the approval of the lending institution.  On 
November 6, Hoy newspaper reported that Segura sought USD 130 
million to pay the generators. 
 
--------------------------------------------- ---------- 
Blackouts spur protests, close schools and incite crime 
--------------------------------------------- ---------- 
 
¶7. (U) While blackouts are a daily part of life in the 
Dominican Republic, the current crisis has vastly increased 
their frequency and their duration.  The lack of electricity 
has led hundreds of small shops and businesses to close their 
doors, and areas that receive potable water via electric 
pumps are left without access to water.  The blackouts are a 
particular burden on hospitals.  Schools have responded by 
closing early, relying on candle and lamplight or holding 
classes outdoors. 
 
¶8. (U) The situation has led to protests in many areas of the 
countries.  Violent street protests erupted in the Cibao 
(northern) region, as residents burned tires, blocked roads 
and threw rocks.  Many of these incidences led to clashes 
with police, who employed the use of teargas, rubber bullets 
and live fire to disperse the protesters.  In Bayaguana, 
Monte Plata, a police bullet killed 17-year-old Eliezer de la 
Cruz, who was playing basketball near the protest, on the 
night of November 5.  Police contacts also told RSO that many 
police stations lack the electricity to adequately operate 
their communications equipment and have seen their 
crime-fighting efforts hampered by the blackouts.  Press 
reports suggest an increase in break-ins; one newspaper 
called blackouts a "thief's best friend". 
 
--------------------------------------------- -- 
Private sector calls for comprehensive solution 
--------------------------------------------- -- 
 
¶9. (SBU) While most public outcry has been focused on finding 
an immediate solution to the current situation, business 
chambers have seized on the chance to call for a 
comprehensive solution for the problematic sector, noting 
that electricity problems hurt the country's competitiveness 
and discourage investment.  The National Private Business 
Council (CONEP) released a timely study led by Argentine 
consultant Daniel Llarens that placed primary blame for the 
crisis on the weakness of the government institutions 
involved in the sector and on the rampant electricity theft, 
which the study estimated consumes 35 percent of the total 
electricity generated in the country.  The CDEEE responded 
combatively to the study, distracting attention from the 
study's conclusions by focusing on its assertion that the 
controversial Madrid Accords, which Segura blames for 
inflating the cost of electricity when oil costs rise, are 
fair. De la Rosa said he hopes that the government will use 
this study (or any of the many past studies which have 
reached similar conclusions) as a starting point for real 
reform in the sector. 
 
--------------------------------------------- ------ 
Blackouts affecting Embassy operations and security 
--------------------------------------------- ------ 
 
¶9. (SBU) Like all institutions in the Dominican Republic, 
Post has been affected by the current electricity crisis. 
The Public Affairs Office has been forced to cease most 
operations early on two occasions due to power outages when 
its generator failed.  The increased crime and civil unrest 
has RSO and its residential guards on heightened alert. 
Facilities Management has seen requests for generator 
fill-ups at government-leased residences increase from 10 to 
12 per month to 51 in the past month.  The American Citizen 
Services unit issued a warden message regarding the violence 
and danger associated with the protests. 
 
------- 
Comment 
------- 
 
¶10. (SBU) The worsening electricity situation appears far 
from a solution, and even a short-term fix may be hard to 
come by given the government's dire fiscal situation.  While 
it is encouraging to see talk of a comprehensive long-term 
solution to this problem, the government's goal appears to be 
to reach an agreement with the generators that would do 
little more than prop up the status quo. End Comment. 
FANNIN