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DE RUEHDG #0124/01 0201201
ZNR UUUUU ZZH
R 201200Z JAN 10
FM AMEMBASSY SANTO DOMINGO
TO RUEHC/SECSTATE WASHDC//EEB/IFD/OIA// 0558
INFO RUCPCIM/CIM NTDB WASHINGTON DC
RUCPDOC/DEPT OF COMMERCE WASHINGTON DC
RUEATRS/DEPT OF TREASURY WASHINGTON DC
RUEHDG/AMEMBASSY SANTO DOMINGO

UNCLAS SANTO DOMINGO 000124 
 
SIPDIS 
 
E.O. 12958: N/A 
TAGS: EINV ECON EFIN ELAB PGOV OPIC KTDB USTR DR
SUBJECT: DR: 2010 Investment Climate Statement 
 
OVERVIEW OF FOREIGN INVESTMENT CLIMATE 
 
 
 
¶1. While the Dominican government welcomes foreign investment, 
significant systemic problems can make investing in the country a 
risky undertaking.  Foreign investors cite a lack of clear, 
standardized rules by which to compete and a lack of enforcement of 
existing rules.  Complaints have included corruption, requests for 
bribes, delays in government payments, failure of the Dominican 
government or of Dominican private sector entities to honor 
contracts, disregard for Dominican court rulings, and non-standard 
procedures in Customs valuation of imported goods.  In 2009, the 
Dominican Republic rose from 102 to 99 among the 180 countries 
included in the Corruption Perceptions Index published by the 
international non-governmental organization Transparency 
International.  The Heritage Foundation's Economic Freedom Index 
considers it "mostly unfree" in terms of global economic freedom, 
ranking it 88 out of 179 countries. 
 
 
 
¶2. Under the Foreign Investment Law (No. 16-95), 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.  There are no limits on foreign control of firms or 
screening of foreign investment in the open sectors.  In practice, 
improvements in assisting foreign investors wanting to invest in 
the Dominican Republic have been made, especially by the Center for 
Exports and Investment in the Dominican Republic (CEI-RD).  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 formerly SOEs engaged in 
activities such as electricity generation, airport management and 
milling sugarcane. 
 
 
 
¶3. In 2008, foreign direct investment flows into the Dominican 
Republic totaled USD 2.885 billion according to the Central Bank of 
the Dominican Republic. 
 
 
 
¶4.  Recent worldwide index rankings for the Dominican Republic 
include: 
 
 
 
2009 TI Corruption:  99/180 
 
2009 Heritage Economic Freedom:  88/179 
 
2010 World Bank Doing Business:  86/183 
 
FY 09 MCC Government Effectiveness:  -.08 (median 0.00) 
 
FY 09 MCC Rule of Law:  -.08 (median 0.00) 
 
FY 09 MCC Control of Corruption:  -.2 (median 0.00) 
 
FY 09 MCC Fiscal Policy:  -2.4 (median -.6) 
 
FY 09 MCC Trade Policy:  73.0 (median 75.6) 
 
FY 09 MCC Regulatory Quality:  0.00 (median 0.00) 
 
FY 09 MCC Business Start Up:  .965 (median .962) 
 
FY 09 MCC Land Rights and Access:  .703 (median .729) 
 
FY 09 MCC Natural Resource Management:  88.38 (median 84.41) 
 
 
 
CONVERSION AND TRANSFER POLICIES 
 
 
 
¶5. The Dominican exchange system is a market with free 
convertibility of the peso.  The economic agents perform their 
transactions of foreign currencies under the conditions freely 
negotiated by them. 
 
¶6. 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. 
 
 
 
¶7. 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.  Some industries, 
particularly those operating in free trade zones (zonas francas), 
complain that the Dominican authorities carry out operations 
through the Central Bank and the government-owned Banco de Reservas 
that result in an overvalued peso, penalizing export sectors and 
the tourism sector. 
 
 
 
¶8. Resolutions 64-06 and 106-06, issued by the Dominican Civil 
Aviation Board, require all airlines serving the Dominican market 
to pay nearly all local taxes in U.S. dollars as opposed to local 
currency for both entry and exit of each passenger.  Some airlines 
have considered challenging this requirement in the courts, but the 
fines for failure to comply are punitive and compel the airlines to 
comply until the courts decide otherwise. 
 
 
 
EXPROPRIATION AND COMPENSATION 
 
 
 
¶9. There are approximately 20 outstanding disputes with 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 confiscations 
have been used for purposes of infrastructure or commercial 
development.  In some cases, claims have remained unresolved for 
many years.  Investors and lenders have typically not received 
prompt or adequate payment for their losses and payment has been 
difficult to obtain even in cases in which a Dominican court has 
ordered compensation or the government has recognized a claim.  In 
one case, the Dominican Supreme Court in 1970 ordered the 
government to compensate a U.S. family whose land and businesses 
had been expropriated.  The Dominican government compensated owners 
only for the expropriated land but to date has not offered 
compensation for the businesses.  In other cases, lengthy delays in 
compensation payments have been blamed on errors committed by 
government-contracted property assessors, slow processes to correct 
land title errors, and other technical procedures. 
 
 
 
¶10. The past four Dominican administrations have expropriated fewer 
properties than their predecessors and have generally paid 
compensation in those cases.  Discussions of 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. 
 
 
 
¶11. 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, as noted above, a number of U.S. claims against the 
Dominican Republic remain. 
 
 
 
DISPUTE SETTLEMENT 
 
 
 
¶12. On October 23, 2007, Decree No. 610-07 placed DICOEX - the 
Directorate of Foreign Commerce of the Secretariat of State for 
Industry and Commerce - in charge of commercial dispute settlement, 
including disputes related to the Investment Chapter of CAFTA-DR. 
Currently, quite a few U.S. investors, ranging from large firms to 
private individuals, have disputes with the Dominican government 
and parastatal firms involving payments, expropriations, or 
contractual obligations.  Both free trade zone companies and 
 
non-free-trade-zone companies have problems with dispute 
resolution.  U.S. firms indicate that corruption on all levels - 
business, government, and judicial - in the Dominican Republic 
impedes their access to justice so as to defend their interests. 
 
 
 
¶13. In April 2002, the Dominican Republic associated itself with 
the International Center for the Settlement of Investment Disputes 
("ICSID," also known as the "Washington Convention").  In August of 
the same year the country implemented the New York Convention on 
Recognition and Enforcement of Foreign Arbitral Awards (the "New 
York Convention").  The New York Convention provides courts a 
mechanism with which to enforce international arbitral awards. 
 
 
 
PERFORMANCE REQUIREMENTS/INCENTIVES 
 
 
 
¶14. Foreign investors receive no special investment incentives and 
no other types of favored treatment, except in the area of 
renewable energy (see below).  There are no requirements for 
investors to export a defined percentage of their production.  A 
law is currently pending in the Dominican Congress to eliminate the 
requirement that free trade zones export at least 80 percent of 
their output. 
 
 
 
¶15. 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. 
 
 
 
¶16. 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. 
 
 
 
¶17. The Renewable Energy Incentives Law (No. 57-07), which entered 
into force in June 2008, provides an array of incentives to 
business 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 manufactured products.  The incentives include a 100 percent 
exemption from taxation on imported inputs (equipment and 
materials) and a 10-year exemption from all taxation on profits up 
to, but not beyond, the year 2020. 
 
 
 
RIGHT TO PRIVATE OWNERSHIP AND ESTABLISHMENT 
 
 
 
¶18. The Dominican Constitution guarantees the freedom to own 
private property and to establish businesses.  The Foreign 
Investment Law (No. 16-95) provides foreign investors the same 
rights to own property as are guaranteed by the Constitution to 
Dominican investors.  Public enterprises are not given preference 
over private enterprises.  An area of concern, however, is the 
legitimacy of property titles.  In 2006, the Inter-American 
Development Bank approved a USD 10 million loan to help the 
Dominican Supreme Court modernize its property title registration 
process. 
 
 
 
PROTECTION OF PROPERTY RIGHTS 
 
 
 
¶19. The Dominican Republic has laws with sanctions adequate to 
protect copyrights and has improved the regulatory framework for 
 
patent and trademark protection, but United States industry 
representatives continue to cite a lack of enforcement of 
intellectual property rights (IPR) as a major concern.  The 
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 Office of the 
U.S. Trade Representative (USTR).  The Dominican authorities have 
delivered these quarterly reports since January 2005.  The Embassy 
has noted improved coordination in this regard among various 
government agencies including the Secretariat of Industry and 
Commerce, the Attorney General's Office, the Patent Office and the 
Copyright Office.  In 2005, the authorities advised cable 
television operators of their legal responsibilities regarding 
copyright and secured a formal agreement with the operators' 
association in August 2005. Since that time authorities have seized 
equipment from various operators found to be infringing the laws. 
The authorities temporarily closed down several broadcasters found 
to be violating the law. 
 
 
 
¶20. 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 them.  CAFTA-DR mandates both 
statutory and actual damages for copyright and trademark 
infringement, and requires measures to help ensure that monetary 
damages can be awarded even when it is difficult to assign a 
monetary value to the infringement. 
 
 
 
TRANSPARENCY OF THE REGULATORY SYSTEM 
 
 
 
¶21. In recent years the Dominican government has carried out a 
major reform effort aimed at improving the transparency and 
effectiveness of laws affecting competition.  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.  Many investors, both Dominican and 
foreign, consider that influence through political contacts will 
predominate over formal systems of regulation. 
 
 
 
¶22. On December 3, 2002, the Financial and Monetary Law (No. 
183-02) created a new regulatory regime for the monetary and 
financial system.  One of its provisions allowed for foreign 
ownership of national financial institutions.  The agreement 
negotiated with the International Monetary Fund (IMF) in 2003 and 
2004 required additional regulation and improved supervision of the 
banking sector, and authorities have required banks to improve 
capital ratios in order to meet international standards. 
 
 
 
¶23. On December 4, 2007, the Competitiveness and Industrial 
Innovation Law (No. 392-07) established a framework to promote the 
development of the manufacturing sector by streamlining the customs 
regime for qualifying companies.  Many of these benefits had 
previously only been enjoyed by companies within the free trade 
zones.  The legislation also changed the former Industrial 
Promotion Corporation (CFI) into the new Center for Industrial 
Development and Competitiveness (Proindustria). 
 
 
 
EFFICIENT CAPITAL MARKETS AND PORTFOLIO INVESTMENT 
 
 
 
¶24. During a period of strong GDP growth and largely successful 
economic reform in the 1990s, Dominican authorities 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, Leonel Fernandez's administration formulated with 
the International Monetary Fund a comprehensive program aimed at 
 
addressing the weaknesses in macroeconomic policies and in a wide 
range of structural areas.  Business confidence gradually returned, 
but effects of the 2003-2004 economic crisis linger; however, those 
reforms enabled the Dominican banking sector to avoid severe 
difficulties during the international financial crisis of 2009. 
 
 
 
¶25. In the wake of the global economic and financial crisis, the 
Executive Board of the IMF approved on November 9, 2009, a USD 1.7 
billion Standby Agreement (SBA) with the Dominican Republic.  The 
28-month program seeks 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 country had successfully implemented a USD 
665 million SBA approved in 2005 that helped the DR recover from 
its 2003 banking crisis. 
 
 
 
¶26. The Dominican securities market, the Bolsa de Valores de Santo 
Domingo, opened on December 12, 1991, and mostly handles offerings 
of commercial paper.  In 2009, the Bolsa de Valores handled more 
than USD 768 million worth of transactions, with USD 116.5 million 
in the primary and USD 651.9 million in the secondary market.  It 
is supervised by the Superintendency of Securities (SIV), which 
approves all public securities offerings. 
 
 
 
¶27. 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. 
 
 
 
COMPETITION FROM STATE-OWNED ENTERPRISES (SOEs) 
 
 
 
¶28. SOEs in general do not have a significant presence in the 
economy, with most functions performed by privately-held firms. 
One notable exception is in the energy sector, where private 
companies only operate in the electrical generation phase of the 
process, with the government handling the transmission and 
distribution.  Distribution had been previously privatized, but, 
due to the serious problems in that sector (including lack of 
payment), the government once again took over the distribution 
function. 
 
 
 
CORPORATE SOCIAL RESPONSIBILITY 
 
 
 
¶29. Although in general there is not an entrenched culture of 
corporate social responsibility (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). 
 
 
 
POLITICAL VIOLENCE 
 
 
 
¶30. There have been occasional spontaneous outbreaks of protest in 
some of the poorer areas of the Dominican Republic over spiraling 
electricity costs, rising gas and food prices, corruption, and 
lengthy rolling blackouts throughout the country.  Occasional labor 
protests have been peaceful, but security forces routinely have 
used excessive force to disperse protesters. 
 
 
 
CORRUPTION 
 
 
 
¶31. The Dominican Republic has a legal framework that includes 
laws, regulations and penalties that ought to permit the effective 
 
combating of corruption.  However, corruption remains an endemic 
problem in the security forces, civilian government and in the 
private sector.  Corruption and the need for reform efforts are 
openly and widely discussed - a 2008 Gallup poll found 82 percent 
of Dominicans think the country is corrupt or very corrupt, but the 
incidence of people reporting requests for bribes by officials is 
about average for countries of the Latin America region.  A 
respected Dominican non-governmental organization supported by 
USAID-sponsored research in 2004 established that, during the 
previous 20 years, only one sitting government official had been 
convicted of corruption.  That individual was released after 
serving only six months of the sentence.  This study is being 
updated and will include information on the economic costs of 
corruption.  The Prosecutor General's office reports that, of 78 
denunciations of corruption it received between January 2008 and 
August 2009, eleven (or 14 percent) reached trial during 2008-2009. 
The prosecution service noted that the low figure was because most 
complaints were "not well founded, sometimes only concern public 
rumor and do not have sufficient probative elements."  The 
judiciary has dealt administratively with judges deemed corrupt, 
but no known prosecutions of corrupt judges have taken place. 
 
 
 
¶32. Although in July 2008 the Supreme Court upheld convictions 
related to the fraud-based 2003 collapse of the "Baninter" bank, 
President Fernandez pardoned, in December 2008, a convicted former 
Baninter vice president as well as four persons convicted in the 
2004-2005 RENOVE case involving fraud in the handling of government 
subsidies for the purchase of public buses.  Most members of the 
Pardons Commission resigned in protest against the pardons.  In 
December 2009, the President pardoned another individual convicted 
in the RENOVE case. 
 
 
 
¶33. As noted, lack of enforcement is the primary problem.  No data 
are available to assess whether corruption disproportionately 
affects foreign firms, but probably more Dominicans than Americans 
must deal with it.  At the same time, corruption is widely 
recognized as a form of protectionism, inasmuch as it can give an 
"insider" an undue advantage over outsiders (either foreign or 
domestic).  Over 25 percent of Dominicans consider corruption to be 
an impediment to development, according to the 2008 Gallup poll. 
 
 
 
¶34. The Dominican Congress ratified the UN Convention against 
Corruption 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.  As for regional 
initiatives, the Dominican Republic has signed the Inter-American 
Convention against Corruption (IACAC), but there was no reported 
progress in implementing the recommendations produced by the 
peer-review mechanism established under the IACAC.  The Dominican 
Republic is not a party to the 1992 Inter-American Convention on 
Mutual Assistance in Criminal Matters. 
 
 
 
¶35. The 2009 World Economic Forum's Global Competitiveness Index 
rated the Dominican Republic 133 out of 133 as regards "favoritism 
in the discharge of public duties," 127 out of 133 as regards 
"deviation of government funds,"  132 of 133 regarding "squandering 
of public expenditures," and 130 of 133 in terms of levels of 
confidence in the police.  An October 2009 survey by NGO watch-dog 
Participacion Ciudadana found that many key government institutions 
are not complying with the country's equivalent of a 
freedom-of-information law, while media reported that none of the 
country's 23 political parties comply with the law as regards their 
finances and expenditures. 
 
 
 
¶36. Giving or accepting a bribe is a criminal act.  Article 177 of 
the Criminal Code provides that:  "An official or public employee 
from the administrative, municipal, or judicial sphere who, in 
exchange for a gift or promise, provides his office for the 
commission of an action that, while lawful, is not covered by his 
salary, shall be punished by the loss of his civil rights and a 
fine of twice the monetary value of the gift, reward, or promise; 
in no case, however, may the fine be less than fifty pesos or the 
custodial term set by Article 33 of this Code be shorter than six 
months, and the imposition of the prison term shall in all cases be 
obligatory.  These same penalties shall apply to public employees, 
officials, and officers who, in exchange for gifts or promises, 
 
fail to perform any due or legal act inherent to their positions. 
The same punishments shall apply to any arbiter or expert, 
appointed by either the court or the parties at trial, who accepts 
offers or promises, or receives gifts or other considerations, in 
exchange for giving a decision or opinion that favors one of the 
parties."  Article 178 of the Criminal Code provides that: "If the 
exaction or bribery is associated with a criminal act punishable by 
penalties higher than those set out in the previous article, the 
harsher penalties shall invariably apply to the guilty."  Article 
181 of the Criminal Code provides that: "A judge in criminal 
proceedings who accepts a bribe and thereby favors or harms the 
accused shall be punished by prison with labor and by the fine 
established in Article 177."  Article 2 of the Bribery in Commerce 
and Investments Law (No. 448-06) provides that: "Any public 
official or person performing public functions who requests or 
accepts, either directly or indirectly, any item of monetary value 
as a favor, promise, or benefit, for himself or for another, in 
exchange for performing or omitting to perform an action related to 
the exercise of his public functions in matters affecting domestic 
or international trade or investments shall be considered to have 
accepted a bribe and, as such, shall be punished by a term of 
prison with labor of between three and ten years and fined an 
amount equal to twice the benefits received, requested, or 
promised, said fine in no instance amounting to less than fifty 
times the minimum wage." 
 
 
 
¶37. Both CAFTA-DR and the UNAC, ratified by the country, mandate 
that the country criminalize bribery (offer/request).  Article 3 of 
the Bribery in Commerce and Investments Law (No. 448-06) provides 
that: "Any individual or corporate body that intentionally offers, 
promises, or provides, either directly or indirectly, a public 
official or person performing public functions in the Dominican 
Republic with any item of monetary value or other gain as a favor, 
promise, or benefit, for himself or for another person, in exchange 
for the commission or omission by that official of any action 
related to the performance of his public functions, in matters 
affecting domestic or international trade or investments, shall be 
considered to have given a domestic bribe." 
 
 
 
¶38. Several government bodies have a role in fighting corruption, 
including the Prosecution Service's National Directorate to 
Prosecute Administrative Corruption, the legislative branch's Court 
of Accounts (a GAO-like entity), and the Central Bank.  Another key 
institution is the National Ethics and Anti-Corruption Commission, 
established by President Fernandez in 2005.  However, the 
Commission is little known and under-utilized by the general 
public. 
 
 
 
¶39. Several NGOs work to combat corruption, especially through 
better transparency.  These include: the Foundation for 
Institutionalization and Justice (FINJUS) and Participacion 
Ciudadana. 
 
 
 
BILATERAL INVESTMENT AGREEMENTS 
 
 
 
¶40. On September 6, 2005, the Dominican Congress ratified the Free 
Trade Agreement with the United States and five Central American 
countries (CAFTA-DR).  Implementation occurred on March 1, 2007. 
The Dominican Republic has bilateral investment treaties with 
Chile, Ecuador, France, and Spain; bilateral trade agreements with 
several Central American countries (CARICOM); and a partial trade 
agreement with Panama.  However, these do not provide the level of 
protection to investors generally offered by U.S. bilateral 
investment treaties.  An agreement for the exchange of tax 
information between the United States and Dominican Republic has 
been in effect since 1989. 
 
 
 
¶41. In 2007, the Dominican government started negotiating bilateral 
agreements with Canada and Mexico.  The Dominican government also 
signed an Economic Partnership Agreement with the European Union as 
part of CARICOM in December 2007 that entered into force in 2008. 
 
 
 
OPIC AND OTHER INVESTMENT INSURANCE PROGRAMS 
 
¶42. The Overseas Private Investment Corporation has been active in 
the Dominican Republic with both insurance and loan programs and 
continues to support private enterprises working in the DR.  The 
Dominican government is a party to the Multilateral Investment 
Guarantee Agency (MIGA) Agreement. 
 
 
 
LABOR 
 
 
 
¶43. The Dominican Constitution provides the right of workers to 
strike and the right of private sector employers to lock out 
workers.  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.  The 
Labor Code requires that 80 percent of non-management workers of a 
company be Dominican nationals and the remaining percentage be 
composed of foreign nationals. 
 
 
 
¶44. 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 was 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.  Most employers have 
found the local work force competent, trainable, and cooperative. 
Foreign employers are not singled out when labor complaints are 
made.  Organized labor represented an estimated 8 percent of the 
work force.  The Labor Code specifies that 20 or more workers in a 
company may form a union.  Before a union may officially call a 
strike, however, it must have the support of an absolute majority 
of all company workers, unionized or not; it must have previously 
attempted to resolve the conflict through mediation; it must have 
provided written notification to the Ministry of Labor of the 
intent to strike; and it must have waited 10 days from that 
notification before striking.  In part due to these stringent 
requirements, brief work stoppages are more common than lengthy 
strikes. 
 
 
 
¶45. Collective bargaining is legal and may take place in firms in 
which a union has gained the support of an absolute majority of the 
workers.  Few companies have collective bargaining pacts.  The 
Labor Code stipulates that workers cannot be dismissed because of 
trade union membership or union activities; however, in practice, 
it appears that some firms have fired workers associated with union 
activities. The law does not provide for the reinstatement of 
workers dismissed on account of their union activities.  The 
Dominican labor code establishes a system of labor courts for 
dealing with disputes.  While cases did make their way through the 
labor courts, the process was often long and cases remained pending 
for several years.  Both workers and companies reported that 
mediation facilitated by the Secretariat of Labor was the most 
effective method for resolving worker-company disputes. 
 
 
 
¶46. Many of the major manufacturers in the 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. 
Workers are not always aware of such codes or the principles they 
contain. 
 
 
 
FREE TRADE ZONES/FREE PORTS 
 
 
 
¶47. 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. 
 
 
 
¶48. 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 2008 noted a 
Free Zone Sector with a total of 48 free zone parks (down from 53 
the previous year) and 525 operating companies (down from 526).  Of 
those companies, over 47 percent are from the United States 
(including Puerto Rico).  Other significant investment was made by 
companies registered in South Korea, Spain, and the Netherlands. 
In general, firms operating in the free trade zones experience 
fewer bureaucratic and legal problems than do firms operating 
outside the zones.  In 2008, free zone exports totaled USD 4.54 
billion, compared to USD 4.52 billion in 2007.  The exports from 
the FTZs comprise 65 percent of all exports from the DR. 
 
 
 
¶49. The FTZ sector experienced a loss of 2.7 percent of jobs in 
2008 over 2007.  The expiration of the Multi-Fiber Arrangement, the 
progressive increase in local production costs, including 
electricity, transportation and even customs costs, and an 
overvalued currency are some of the major factors affecting the 
free zone companies' profitability.  Exporters/investors seeking 
further information from the CNZFE may contact: 
 
 
 
Consejo Nacional de Zonas Francas 
 
Leopoldo Navarro No. 61 
 
Edif.  San Rafael, piso no. 5 
 
Santo Domingo, Dominican Republic 
 
Phone: (809) 686-8077 
 
Fax: (809) 686-8079 and 688-0236 
 
Web-site Address:  http://www.cnzfe.gov.do 
 
 
 
FOREIGN DIRECT INVESTMENT STATISTICS 
 
 
 
¶50. Foreign direct investment (FDI) in the last few years has been 
largely concentrated in trade, tourism, telecommunications, real 
estate development, and electricity.  The Dominican government has 
made a concerted effort to attract new investment, taking advantage 
of the new foreign investment law and of the country's natural and 
human resources.  The decision in the late 1990s to privatize or 
"capitalize" ailing state enterprises (electricity, airport 
management, and sugar) attracted substantial foreign capital to 
these sectors. 
 
 
 
2008 FDI data 
 
Source: Preliminary data from the Central Bank of the Dominican 
Republic 
 
- - - - - - - - - - - - - - - - - - - 
 
FDI Stocks:  USD 11,154.8 million 
 
FDI Stock /GDP:  6.3 percent 
 
FDI Net Flows:  USD 2,884.7 million 
 
 
 
*Information provided by the Central Bank of the Dominican 
Republic.  Basis year has been revised from 1946 (used in the last 
ICS report) to 2006 (used in this current report). 
 
2008 FDI flows by Source Country (in millions of U.S. dollars) 
 
Source:  Preliminary data from the Central Bank of the Dominican 
Republic 
 
- - - - - - - - - - - - - - - - - - - 
 
United Kingdom:  600.7 
 
Mexico:  559.6 
 
Canada:  587.1 
 
United States:  497.4 
 
Spain:  190.0 
 
Chile:  53.7 
 
Switzerland:  43.5 
 
Italy:  4.8 
 
France:  -2.3 
 
Holland:  -16.9 
 
Grand Cayman:  -48.2 
 
Others:  415.3 
 
- - - - - - - - - - - - - - - - - - - 
 
Total:  2,884.7 
 
 
 
 
 
2008 FDI flows by Sector (in millions of U.S. dollars) 
 
Source:  Preliminary data from the Central Bank of the Dominican 
Republic 
 
- - - - - - - - - - - - - - - - - - - 
 
Trade:  703.6 
 
Real Estate:  656.0 
 
Transportation:  350 
 
Mining:  299.6 
 
Telecommunications:  283.1 
 
Finance:  237.3 
 
Tourism:  236.9 
 
Free Trade Zones:  66.5 
 
Electricity:  51.7 
 
- - - - - - - - - - - - - - - - - 
 
Total:  2,884 
Lambert