Dominican Republic - The economy

RrTIIA TrtbV6 Im 8ln RESTRICTED - - **** * *Report No. WHt- 130a IREPORTS DE Roo I WITHIN L ONE WEEK _ This report was prepared for use within the Bank and its affiliated organizations. They do not accept responsibility for its accuracy or completeness. The report may not be oublished nor may it be quoted as representing their views. INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT INTERNATIONAL DEVELOPMENT ASSOCIATION THE ECONOMY OF THE DOMINICAN REPUBLIC August 13, 1963 Department of Onerations Western Hemisphere UtS T$10 0TAT =^ RTD AeT oTIr C U.S5. $ 1.O00 = RD$1 peso ± rAMTVUL rV \4lnA"L .4l j.Q Page I7Oo rTA- r ,M SUIIARY AND CONCU-S-LUINS 1 I.HISTûRICAL BACKGROUNDM The Trujillo Regime Pcvt Trujillo Interlude 2 The New Administration 2 II. THE STRU.3TURE OF THE ECONOM1 3 A, General Trends 3 Agricultural Credit Ag-rculturavl Productivity¶7 6N Sugar 7 u3 Irdustr.Ly andMing1 Mining 16 D. Transport and Telecommunications 16 E. Power 17 F. Education 18 III. INTERNAL FINANCES AND PUBLIC INVEST3ENT 19 A. Money and Credit 19 B. Government Finances 20 Expenditures 21 1 1 -, i V i3L43 e s f'. Public IeTnvestm-,en4-2 IV. ETERIL FIANE AN TRD 25, 7.T V V "3% A TLAJ T7IMI 1 TATATjeIiJ2j .lU~Jk AM MnA 1-%l Exports 26 Imports 27 V. ECONOILIC PROSPECTS AND CREDITjORTHINESS 27 Creditworthiness 30 STATISTICAL APPENDIX: Tables 1 - 23 BASIC DATA 10in n P uI -4-4-- 1. .)-41-'. -j*~* VMUZ~Qd U.L -L I. L UL"1.tU L.LU U 7 i,J C- I V- U-14..LA~ \~ at curren:t prices) Per Capita GNP 1962: RD2 4O Balance of Payments (US-, million): 1959 1960 1961 1962 Exports (f.o.b,) 132 16$ 138 173 Tmports (P. - 1 107 Cn 70 19')7 /11jJLU - -4 I I '- -'- I Other current and donations 26 -.25 - 25 -33 Current balance -e $0 bl 13 Capital flow lb. -1 --13 31 Errors and omissLons -20 -.20o -4l -33 Net Surplus/Deficit -27 7 17 12 Composition of Exports /o Sugar Bananas Coffee Cacao and Chocolate 1960 52 6 13 11 1961 h? A in 7 1962 $6 7 12 6 Goviernment Revenues & Expenditures (million pesos) 1961 1962 Total current revenues 118 148 Total Expenditures 139 162 Current Deficit 21 lt Financed by: Bank Credit 12 -14 Private transfers 9 21 U.S. Aid - 7 loAn 10Al1 1A,)(g Cost of Living Index (1910 = 100) 233 224 250 Wage Index (1941 = 100) 411 436 584 July '62 Electric Power: Generating capacity kp1j) t 7U 72 Peak load (iW) 60 65 70 Total consumption (million K.H) 218 240 266 External Public Debt as of December 31, 1962 (US, million) Total 36.6 Disbursed 16.6 1963 Service as % of 1963 exports -- about 1,5% ATL AN/C OCEAN MONTI CRISTI Luperon - Lucas EL A DAJABON VALV RDE SALCE DY NAGUA Lncheo L 11 0A~0 coo Bohsa de Samanda edro SonooaosLoooron00 MccMes ELIAS P N SAN <Monte El Crcodo Pee os Cosos s- C-- Le Descb e 002,DOMINICAN REPUBLIC L ss Merede PEDERNA .L m0am02 2-- ond 4--ane hhway co00Roo O- - Aphl highwaoys L.n De,b11 Sagaoé r mill 0 SAN 0 40 L - 0 50 d 'i / K ILOME TE R S JUNE 1963 BRD- 1193 qTTMMTAPY ATT rnw .TJ. TT.J. 1. The Trujillo regime that ruled the Dominican Republic from 1930 Government and the economy as a family business,, Much of the most pro- prises were owned or controlled by the Trujillo family. 2. During the 1950's, the country experienced the most rapid economic ----~J 1.- - - - - z . -7 - 1 -.4. - - * . .a - - U.&p'. L U"Li LU It h-LitUyor According- tO thte U1~id -';LLZLdU-LU-%.Z) 61U00 natimal product increased at an annual average rate of about 8 percent coLir ' o a > e percen rate v1 popuLation growtuh This high grovth rate was stiu.-alated by an expansion of exports and a high rate of ca'ital forna- tion that averaged 1o percent of GNP ine heavy capital outlays were 11- nanced almot ent,irely out of internal savings and were concentrated mainly on the construct:1on of public works and on building up the industrial sec2or, Consurp,ticn Lakc k,p den by lw waZes, high p[- cs and heavy t,ration. The sup::2-su c:inu ion s v4danced 1y the fa'& t to one pro m:.,ction ol. a nur::c-r f majaor consuser iteras such as beans, sneet -otatoeS, eggs, bee:, and te-xtiles lagged behind population growth. 3, The balance sheet cf the economic legacies of the Trujillo era that ended in 1961 lccks somewhat as follows: Principal assets - a substan- tial and modarn industrl sect&or; good tral-sport and electaic po-wer iaci- lities; a collection 3' government buildings that precludes any need for new ones for some time to come; and, virtually no external debto The princi- pal liabilities were the neglect of agriculture except for ric, and sugar and peanuts which were the raw materials for two large Trujillo-omed indus- tries; an acute shortage of technicians due largely to the political oppres- sion that produced a steady exodus of professional people; neglect and political contamination of education; and, exploitation of peasants and workers which has produced strong and probably unattainable demands for large and rapid economic improvements, 4,, After the assassination of Generalisimo Trujillo in May 1961, his sons and associates tried to retain power through economic and political concessions, In the economic field, government salaries and minimum wages in the private sector were raised by an average of 30 to 40 percent, In addition, the prices of basic food and other products were sharoly cut by decree, and many taxes were either reduced or abolished. 5. The Council of State that took over the Government from the Truiillo associates in January 1962. enacted a series of measures to pre- serve political peace, It started a work relief and agricultural credit nroarnm with tPnhni-nl annl finnninl >.< itanna frnm thp TTS. GoTnvrnmenth and Inter-American Bank, and established an Agrarian Reform Institute to ATn theo industrial+.hi ncto.,n e Triillon enterriss wrt over and placed under the public Industrial Development Corporation which als TovideSj finanLCing fOr private Asr tre ug c ments. The Trujillo enterprises included a large sugar complex which accounts - ii1 - for about two-thirds of the countryls sugar output, large cement and peanut oil factor"ies, and smnller" plants prodcinn+. 7. Th rapd sh. from a 11- ~avn ala__ that took place in 1962 was brought about by higher wages, lower taxes, and .1 LJoi JL1 . A1J) . Lt_-OuL UU_LUi11Z Jiia U11lere were somUle5 pic A _ Lift. a major inflation and balance of payments crisis was averted largely because of the in- 1lu cs 0l; Iin sugar prices TheLL suga pbdcr ( il!IncUludin1g the arg publicly-o-wned complex) were able to absorb the higher wage costs, and the igher export receipts helpeu oU Linance the sharp eulea6e inI 1upurv WnU the heavy capital outflowo In the public sector, the fiscal impact of the general increase in government salaries and higher current expenditures was greatly moderated by the extraordinary increase in revenue generated by the sharp rise in imports, The growth prospects of the Dominican economy greatly depend on how well the Government manages and uses the economic resources under its control -- the industrial enterprises, the agricultural lands and the large budget,, The Government which came into power in February 1963 was elected on a plat- form giving strong emphasis to economic and social reforms. In its first months, the new Administration has by a variety of measures shown its willing- ness to live up to its electoral promises, 9. There is little doubt that continued political stability and sound economic management would strengthen business confidence, and there are al.. ready signs that the private sector is coming to life after being in the doldrums for years. The continued growth of confidence would have several favourable economic consequences: It would stimulate construction activity and industrial investment; it would halt or greatly reduce capital outflows and might lead to the repatriation of Dominican funds now held abroad; finally, it would produce a significant inflow of private foreign investment. 10. An annraisal of current trends and future expectations lcads to the conclusion that the Dominican Republic's short-term growth prospects are good, Most of the impetus for economic growth in the years ahead will have to come from an expansion of production for the internal market. With the rise in wages and the formerly denressed consimmntin levels_ the ciemandl for $o&istuffs and manufactured goods can be expected to grow faster than population over the next few years, 11- A qJ gri fJ rn~n+. nni 4' n ii ~ivtran p 1rdio n ovr thi -next- two or three years will not require either heavy public outlays (except for tional irrigation facilities will probably be needed by the late 1960's to sut inthe inrease -in pouto.BtiagcltalproduCti4on iS toC continue to be a major source of economic growth, the severe shortage of technical manpower will have to be overcome. Though the pulic agencies, with outside help. are making sporadic efforts to muster and develop the needed s'As much more~ wvia.J tiv Lu U~ue - ii - 12. With reasonably efficient management of the factories that are now controlled by the Industrial Development Corporation, industrial pro- duction can be expected to continue its rapid growth to replace imports and satisfy rising demands for manufactured consumer goods. But if these industrial plants are to make their full contribution to the Dominican economy, there is a need for an independent study of each of the major plants to determine the most efficient way of managing and financing them. There are several possible alternatives ranging from the status quo to the sale of the properties to orivate interests. There are a number of possi- bilities and combinations in between, such as private management on a con- tract basis with or without nrivatp finqncial narticipation and the sale of stock to small Dominican shareholders. Whatever the most suitable ananmnt7nnnt mi±b. he it shon1iP he A:tp.rrirPd on the basis of a careful study of the various alternatives. 13. The immediate outlook for exports is very favorable. They are experted to reAch an all-time high of ahont :-9,2?0 million in 196 . or nearlv 30 percent above the previous peak of 173 million in 1962. This big in- creaseno.Ic& is\ "~ni -l-nnc!. c nfjy-al r f"mni n in t.bgP .-mnrf, nrin. of sugar from five cents in 1962 to an estimated average of eight cents a ,-ni,nA Tli- rYewi ,1 Qiign ,A Til pvnl-O flno rv mn-. I-.n fi~nmnnp _qll it.a e--'1 -- _ 1 e l h essential internal expenditures (including the local costs of foreign- repayment of the country's short-term external obligations, notably the 6n7 M..L.L-Lon L credi U L L&Um, Ue .L i" 1-j aL1 n' 1 W J__'.L onJA'1 'ILI± W~~ that have accumulated because of the Central Bank's failure to remit the lureign exchange iur the pe1u0 wut- n I-LuxuxI _u_u4_ nIve uA___44Uu AL4 commercial banks to pay for foods purchased abroad. The Government has alreay starte to repay the LormUer, an nE a11[1UU[!LUU Ult 1t wLL uun liquidate the latter, The sugar boom together with the disbursement of a Uzy millon U.S. grant should produce an accumulation of :u-'-u mil1ur of exchange reserves within the next couple of years. 15. Looking beyond 1964 to the latter 1960's, the Dominican Republic is not expected to encounter unmanageable balance of pay-menLus problems uven if there is a. sizeable decline in sugar prices, providing the necessary re- straint is exercised in fiscal and wage policies. Sugar exports of about $85 million in 1967 would be a reasonable guess on the basis of a volume of around 900,000 short tons and an average price of four to five cents a pouna. Among other exports, tobacco offers the best growth prospects as the quality irproves; the rest of tne major exports -- cofee, cocoa, bananas, and bauxite -- are unlikely to change much from their 1962 levels. Thus, a con- bination of available information and reasonable guesses leads to an export projection of around $180 million in 1967. 16. This export level together with a modest net inflow of public and private capital of say 30 million would give the Dominican Republic an im- port capacity of at least $170 million which would be 27 percent above the 195b peak and some 4b percent above the 1956-1959 average. If substantial - iV - foreign exchange reserves are accumulated during the period of high sugar nriesz in immedinte nrnpnect, thv can h drawn upon in shuseuent years to supplement export earnings. This would provide for the financing of a lpuel of imnorts tha+ should he adqnate n qlinort a sati-itorv rate of growth providing the volume of consumer imports is not allowed to get out of hand. Moroverif the ennnmy doe indpp rnw ranily. much f the investment in industry and construction is likely to be financed from 17. The fut,Ure co-a. of sugar pc i highly "ca bt. Cuban and INestern European production fail to recover, it would be surpri- SJ4ff if +ha r AJA an+ fn1l enheI+all h +e teir neet oamwti the next few years. A precipitous drop would not only cut export receipts and budget re'venuces, but Mruld an+ +T ounmo+Aumed P4 ninn snucr complex in a tight financial squeeze. Rio Haina is an inefficient, high- cot _-- 0,due~ -414'~ 1- ,n,,n, point of fiv cnts!--,,-+ n,i, rUv' ri - with four cents or less for South Puerto Pico, the major orivate producer. Unless itI kespsn - i-ts~+nC~~,, csso. sirg" ncvnn a m~~oerate dron in +h)o I.Tcrrl price could put Rio Haina in the red. Its losses would have to be covered by th, Govern m either through direct subsidy or by empting the Comnany from the payment of taxes. In either case, the adverse effect on the budget econcy ak-.n to the Argentine railroads or the Bolivian tin mines. 18. The pro2pect of a drop in sugar prices underlines the need for surplus vle ta roceipts are high and while the need for puIblic savings position to finance some of its investment outlays by internal borrowing if sugar nrinPs and tax oeint qhinuld dron. Fo r if the qiior hom is used as a basis for infl:ting wages and public srending, there is a serious 9qnr thl-i th. Gov-rr-- -i will hare neither the f-in1i e -c'rces nor the political strength to cope with the consequences of a sharp drop in sugar nr' re. 19. The Trujillo regime left the country with virtually no external debt: most public and private investment was financed out of internal savin;s which were also used to purchase foreicn-owned enterprises. As a result of the high levels of saving and investment in the fifties, the Dominican Reoublic does not need heavy public canital outlays to facilitate a satisfactory rate of economic growth in the sixties. Moreover, it can afford to finance from external sources much of what it does need. This is especially fortunate, as public savings have shrunk to practically nothing because of the rapid increase in current expenditures, though they should rise rapidly as a consequence of the new sugar tax. As Public investment requirements grow in the late sixties and early seventies, and debt-servic- ing capacity is used up, public saving will have to rise to finance a larger share of the public investment needed to sustain economic growth. -)v - CI. Illt UUVf:1rlI1UliU Li' Ifubu L fprOIall U Ceru aCl-Ul in "Ale 1le1iU U1 public investment was a contract for a $150 million line of credit signed in arcn 192 with a group of European suppliers to finance the total cost of the following projects: a hydroelectric power and irrigaticn project Im-n 1 * - 1r 1 1 - . . 1 I , * \ klavera IAam) in the Yaque del Norte Valley; a multipurpose cam kvalaesia; on the Nizao River near Santo Domingo that will supply water to Santo Domingo via an aqueAuCt; the expansion of the port and tne construction of a tnermal power plant at Puerto Plata on the north coast. 21. The contract is vague and incomplete. It imposes few obligations on the suppilars; it contains no cost estimates (the total cost of the three projects will probably be considerably less than $150 million); the descrip- tion of the projects is vague; repayment terms are not clearly stated but oblitate the Government to pay '1 million for work done in 1964-1965. 22. Apart from the deficiencies in the methods of financing and executing the projects, their economic justification may be open to question because they have not been adequately studied. The Govern,rent does recognize that suppli.r credits will be more costly than financing by national and international lending agencies. But it justifies the contract on the grounds of the urgent political necessity for getting these projects underway to provide jobs, reduce the expenditures for work relief, and to realize sooner their economic benefits. It is doubtful that the projects will be built more quickly under this type of external financing. ioreover, the constraction of large projects that require extensive planning and engineering is not an effective way of creating jobs rapidly. 23. If the projects under consideration are completed, and if those already identified for external financing turn out to be sound, and are built as scheduled, the country's infrastructure should be adeauate to meet most of its needs until the late 1960's. Indeed, as these basic facilities are enlarged and improved, a wide gao will emere between the size and auality of the country's physical capital and the capacity of its people to use it effectively, unless vij:orous efforts are made within the next few years to expand and improve education and to a lesser extent, health services. 2L. At the end of 1962.. the Dominican Renblin's exrnal public dht repayable in foreign currency totalled US'36.6 million, of which US'20 million was undisbursed. Much of it is on fqiriv soft term. and the peak service payments in 1967 amount to US$2.8 million, or less than 2 percent of Droiected export receints. Tf t.'he US AM.flm million line of cre .ere fully utilized, the debt se-rvice would be about 10 percent of projected P-mmort Pa-nin7R_ A good),- guessq. i-ou1ld beo that no more-1 than Ar 1~00milo would be needed to finance the three projects specified in the contract. 'If thin turns otn be fheasemq, -1d the rel-Inder of' the credit14 4sntue the Dominican Republic would be creditworthy for $40-$50 million of additional praisal of the Dominican Republic's economic prospects in the light of the I. HISTORICAL BACKGROUND 1. The Dominican Republic occupies the eastern two-thirds of the island of Hispaniola in the Caribbean. It was discovered by Columbus on his first voyage in 1492 and was the first Spanish colony in the New World. The French began to settle the western part of the island (which became the Republic of Haiti in 1804) in the seventeenth century and developed a rich plantation economy. In 1795, Spain ceded the eastern part of the island to France after virtually abandoning it for centuries. This marked the beginning of the sad and turbulent history of the Dominican Republic, as the slave uprisings against the French in Haiti spread throughout the island. These conflicts culminated in the Haitian occupabion of 1822-181, when all the wealthy white families were driven out of the country. 2. The Dominican Republic achieved independence in 18)4)1 when the Haitians were pushed out by Juan Pablo Duarte. the hero of Dominican independence. The decades that followed were marked by a series of revolutions and unheavals and a neriod of Snanish oneunation (1861-1865) that was ended by a war. In 1905, the U.S. Government established a reaiveshin ovpr th Fminir.in ns on hphlf oP U'-S. hondholders that continued until 1940. From 1916 to 1924 the U.S. Marines occupied b ani ntry. A th.r tlhe 1Pnn:tJrn of the l 2. nrn,1nat.inn f?ore f R fel Leonidas Trujillo M4olina rose to power and was elected President in 1930. The Trujillo Regime 3. Economic stagnation characterized the first decade of the Trujillo rapidly during the war and a number of manufacturing industries were estab- of the Trujillo family and were managed mainly by foreign personnel. 4. During the 1950!s, the country experienced the most rapid economic grla U11 4Ln iLls ilstory. 'uLL c h o f ',I Ite G_ ha i -,JU- J±dC U tJ QL I U1I'.: U1-VUt±LdjflA 1. of industry and the building of roads, power, irrigation, and other public facilities. These hev caia valy in ae siby low -LWagel'RS, high prices, and heavy taxation that kept consumption low in relation to incume. .Tme Trujilo regime was a Aght and oppressive political dictator- ship that ran the Government and the economy as a family business. Much of the most productive agricultural land and nearly all of the large industrial enterprises were owned or controlled by the Trujillo family. The authori- tarian and brutal behavior of the regime became a matter of deep interna- tional concern in the late fifties, and sanctions were imposed on the Dominican Republic by the Organization of American States in August 1960. The most important economic effect of these sanctions was a substantial increase in the U.S. Import duty on Dominican sugar. This cost the Dominican economy :'20 - 25 million a year in foreign exchange, and probably marked the beginning of the declin, and fall of the regim*. But the decisive blow was the assassination of Generalisimo Trujillo on May 30, 1961. - 2 - 6. The balance sheet of the economic legacies of the Trujillo era that ended in 1961 looks somewhat as follows: Principal assets - a sub- stantial and modern industrial sector; good transport and electric power facilities; a collection of government buildings that precludes any need for new ones for some time to come: and. virtually no external debt. The principal liabilities were the neglect of agriculture except for rice, and sugar and neanuts which were the raw materials for two large TruJillo- owned industries; an acute shortage of technicians due largely to the poli- tical onnression tha. nrnrnd1 a -ts dv .or1 of nf o%fssJonal neonle: ne- lect and political contamination of education; and, exploitation of peas- ants and workers which ha nrorind strnng and nrobablv unattainable de- mands for large and rapid economic improvements. Post-Trujillo Interlude 7. After the assassination of Generalisimo Trujillo, his sons and corts tr +Vie tol +ret+a)i V nl oe byl loosening InTi-il the.i17' nn1poitica1 and economic strangle hold on the country. They raised government salaries tand prv-nte- + in -m m 10y rnnv t.o' 1-0at pevr2 l+a r cn t - the cut r,a +1 -n pr a ice ~fbh food and other products and they either reduced or abolished a nLriber of D. But dept thes i4otn 4.cssos 1- -4 4- 4-was1 r , 1 . ousted in January 1962 and succeeded by a seven-man Council of State that the drafting of a new constitution by an elected constituent assembly. 9. The Council enacted a series of economic measures to preserve po- litical peace. it started a work relief and agricultural credit program with technical and financial assistance from the U.S. Government and Inter- American Bank, and estalilshed an Agrarian Kelorm Institute to distrioute and settle the Trujillo-owned lands. In the industrial sector, the Trujillo enterprises were taken over and placed under the public Industrial Develop- ment Corporation. 10. Despite the political unrest and tension that prevailed through- out 1962, the Council did achieve its main objective in steering the country through free and peaceful elections and in paving the way for an orderly transfer of political power. This was done without serious damage to the economy, thanks to high sugar prices. The New Administration 11. The first free elections since 1924 took place on December 20, 1962 and were won by the Partido Republicano Dominicano (PRD) led by Juan Bosch, a writer and political science professor, who returned to the Domin- ican Republic after nearly three decades of exile. He took office on Feb- ruary 27, 1963. The PRD won by a two-to-one margin of the popular vote over its nearest rival, Union Civica Nacional (UCN), and took 20 out of 27 - 3 - Spntp qnt t out n 74 in the Inor chamber. The PFD is the party of the democratic left and received most of its support from the peasants wndrl es T*he CM is a n-cnrative panrtyv anrl has r1rawn mosqt of its leaders from the upper classes. The new government was elected on a plat-- form givingy songN emph-iais ton econnom4nir andnoial refo-rm-_ Tn~ i t. fir.-t. months, the new Administration has by a variety of measures shown its II. THE STRUCTURE OF THE ECONOMY A. General Trends 12. According to the official statisticsl/, there was a continuous ±~~ ~~~~~~ ±1 U1 i ic UI.± P1 UUUL;U t:;AUtt)U LulJ -L7-J// UUAJ. J116 u"V~ 1960. From 1950 to 1958 the average annual increase was about 8 percent a. ia high growt rate was omulated by an expansion of exrtsI and a high rate of capital formation that averaged 18% of GNP. The heavy capitlU outlays were financed aliust entirely uut of inturnal savings anu were concentrated mainly in the construction of public works and in building up the industrial sector. Uonsuaption was kept UUwn by te LUw oUVince U.L the masses and the high import duties. The suppressed consumption is evi.- Uenced Uy the Lact that the producuin of a nuibver of muour onutr iuems such as beans, sweet potatoes, eggs, beef, and textiles lagged behind population growth. 14. Political instability that culminated in the assassination of Gen- eral Trujillo and the ouster of his regime led to a decline in investment and a slackening in the rate of economic growth in the years 1959-1961. But sav- ings remained high and the large trade surplus facilitated heavy capital ex- ports. In 1962, the economy made a vigorous recovery, as export receipts in- creased sharply and consumption rose to record levels and savings fell to 11 percent of GNP which is substantially below the average rate for the decade. 15. The rapid shift from a high-saving to a high-consumption economy was brought about by higher wages, lower taxes, and the loosening of import restrictions. While there were some price increases, a major inflation and balance of payments crisis was averted largely because of the increase in sugar prices. The sugar producers (including the large publicly-owned com- plex) were able to absorb the higher wage costs, and the higher export re- ceipts helped to finance the sharp increase in imports and the heavy capital outflow. In the public sector, the fiscal impact of the general increase in government salaries and higher current expenditures was greatly moderated by the extraordinary increase in revenues generated by the sharp rise in imports. 1/ The GNP estimates should be viewed as showing trends rather than actual magnitudes because of the unusual crudeness of the estimates which are a mixture of real and money values, though this is not too serious be- cause the domestic price levelswas fairly stable during the 1950's. 16. Domestic production has responded with remarkable speed to the increase in demand especially in the industrial sector where there was excess capacity; agricultural production is responding more slowly. The scope for import substitution of food products is indicated by the record lovel of food imports in 1962 which were considerably above the previous peak reached in 1958, B. Agriculture 17. Agriculture is the mainstay of the Dominican economy. It pro- vides nearly all the exports, and employs about two-thirds of the labor force. though its share of the gross national product is considerably less. 18. The Dominican Republic has natural conditions favorable to agri- culture. These include a mild subtropical climate, generally good soils, and adequate rainfall in a large part of the country., According to the 1950 census, about 2,,6 million hectares or half the total area of the coun- try was in farms of various kinds, Of this 26 nprcent was in crops. 38 percent in pastures, 10 percent fallow, and 20 percent in forests, The two main nrodnuing areas az thp so3th.)attrn constal nlin where most of the sugar cane is grown and which contains some of the best cattle lands; and. the entral portion of the Cihac (Vaqedel Nn+ore and Yuna rivers vall1 in the north where the rest of the major crops (rice, tobacco and bananas) are grown, Theote produacing areas are the delrn Simi baJ_ in th southwest and the western tip of the Cibao valley that contains the largest brnapla-tations. ..0±ie Lune 1 U. ~ILL" _tL_L _Ln UL_L UU-IL I t:;t, I ciLlU Wit, -LJL i:U L ±1 fall in the western part of the country make irrigation necessaryo The I UUU!1U 11U.4JZ.I± fC1L U I I.VIII CA LJU U ):; DUUV IL UdIIt_b _L11 .'1)LU UL~ diJkJUt, 130,000 in 1959, The present facilities have the capacity to irrigate abvut l.;4Ovu hevtreu; tne actual irrigateu area, however, is smaller than this, and parts of it receive only intermittent irrigation due to the lack u-L- ai ouuhr water control facilljules, Aocut nalf tne "i-ands under irrigation are in the three valleys of the Yaque del Norte, Ymna, and _LLq1U~ue Ue.L i±DUr L-_V ldb Uf_--1 ub uifdtUeU uldu wi-ilI pl.UOJJl- I_U(;.±L _Z UV make the fullest use of these rivers, the irrigated area in these three valleys mih be inrese-t------hetas Land Te n rure 20u The two main haracteristics of land tenure in the Dominican Republic are the very large number of small and generally inefficient units and the very sizeable government holdings and sugar plantations, The statistics in the following table probably understate the concentra- tion of land owrnrship lecause they do not fully take account of the reportdly growiag number of dispossessed farmers and ;quattes; r7r do they show cigle vwne>ship of multiple lardhold.Igs. 0 ile some c' the Trujillo lands were under pasture, much of the sate lnds (includi:g the Trujillo lands) have either been inadequately used or not used at all, except for the lands owned by the nationalized sugar millso About 380,000 hectares of state lands have so far been classified and inventoried, Distribution of Farm 0-wnership innn -pn-l No, of farms % of No. of farms % of farm area 0 to 2 152.6 315.7 5152 70.1 11 2 to 5 58.7 72,7 21.2 16.7 12 5 to 10.1 32,8 300 11,9 6,7 ) 10,1 to 2-02 1907 17,2 7z1 3.9 ) 25.2 to 755 96 b.1 3o5 19) 77 756, to 201.2 2, 17 Oi8 0 ) Above 201.2 100 0.7 0.3 002 ) Total 277. 450.3 10000 10000 V r~ W--~A ~ ~1O~T~rc 'P-ol i,n r.n -rac Instituto Agrario Dominicano: Land Tenure in the Dominican of the State may be considerably larer., These idle and underutilized lands in the years ahead, 21. The political consequences that might have arisen from the in- '1 _3 L,-- -_X' 4- creasing numUuer oJ -Laiuess peatau ±eu une w vuulu.s u Ot u unue u:z a vigorous program of land settlement, An Agrarian Institute was created in May 1962, and it has already sett"led several nunured aml ie on pious of up to five hectares. The Institute plans to settle about 30.,000 families at an average cost of approximately 1diZ,200 per family in the next three years, though President Bosch is considering an even more ambitious program. 22, While some of the output on the newly-settled lands will substi.- tute for the crops and livestock formerly produced on the Trujillo lands, much of it will be new production. The projects have thus far concentrated on the production of rice, peanuts, fruits and vegetables, tobacco, beans, poultry and some cattle. Rice production in the newly-settled farms is ex- pected to total nearly RD§2 million in 1963, or about RD$1,OO per family,, Agricultural Credit 23. Until the Agricultural and Industrial Credit Bank was converted into a purely agricultural bank early in 1962, small farmers had practically no access to credit facilities. The Bank got off to a rapid start, and in its first eleven months of operation disbursed loans totalling RD$14 millione These loans were made primarily to help expand the production of basic food- stuffs, in view of the rapid increase in demand. Much of the lending has been one-year crop financing; about 35 percent has gone for rice production - 6 - Lending Operations of the Agricultural Bank April 1, 1962 ..February 28, 1963 Total Amt. % of No. of Av. size Preoutle. Tnt. Tot.q Toans of Loans (RD$'000s) Lent (approx.) (approx.RD$) Rice 3,954 2800 7,610 520 Tobacco 2,713 19.3 15,400 175 Poultry 673 4.9 150 4,500 Livestock 1,487 10.6 775 1,920 Cacao 352 2.,6 1,390 250 Coffee 597 h3 3,380 180 Peanuts 698 4.9 7,250 100 Beans 395 2,8 3,16o 125 Various grains 877 6.2 4.400 200 Loans with guarantee (mostly rice and livestock) 1,539 10o9 260 5,900 Other 768 5A 890 860 Total 1h,126 10010 44,700 315 inci bo1ut 20 nprcent for livestock develonment. The Bank-s financin- will make possible a significant expansion in the output of rice, peanuts and tobanco. Poultry and ea nrodntion have alrtndv risen. as the number of farms has grown from six to 150 within the past year, 24. The Bank's funds in 1962 came from the Agricultural and Industrial Credi+ Bank and R$5 million of loans from the Ti and Tnter-Amprinnn Rank,. In 1963, the Bank expects to receive about RD$12 million from counterpart funds gprtA hv q TmA?2_8 million prpnt! and will lso use the undi3bursed US$2O5 million from an IDB loan together with collections on 1962 loans. In nadition the counternart fiind- f rnm +.hp .zqlp f A millinn nf rinp under P.L.480 in 1962-1963 will be available for the construction of warehouses .z ~ ~ ~ ~ ~ n^1iAM n-'~+f r .,T .o rA 1Inn" +n p.n" 'c A g--;- n,l 4-nvn ura lvr-A,nct-1-1r 4- producing an expansion of agricultural output, increasing amounts of tech- nical assistance will be necessary YiLelus inominican agriculture are generally low, despite favorable growing conditions, For example, the average yield for beans is about 800 lbs4 per acre; for corn about L,20u 10, per acre; for coffee about 250 lbs. (1,800 lbs. in Costa Rica); for cocca about 300 lbs. (900 - 1,200 in Trinidad and Costa -ica). Sugar cane yields average 20 to 25 tons per acre (60 - 65 in Peru), and range from 65 tons on - 7 - irrigated lands to 6 - 8 tons on marginal lands. The low yields are due partly to the Trujillo regime's high exoort taxes on coffee and cacao -- about one-third of the price as recently as 1960 -- which discouraged outlays to improve vields. and also (except for sugar cane) to the small size of farm units which are not easily reached by extension services, 260 Farmers receive technical assistance from the Secretariat of Agriculture (narticularlv in coffee and cacao). the Agrarian Institute. the Tobacco Institute, and the Agricultural Bank. But the supply of tenhnici ns is extremely limited. -ni a nronosal is under study in the Secretariat of Agriculture to establish a central extension service that wold coordinate and prand the sqrvines now nrnvided_ A new school of agronomy was recently established at the university. In addition, a vo.-. cational ag-Jicultur1al scolfinancedr byr pjrivate buiness._ ,T qr,, f, hp- Ford Foundation, will open this year in Santiago which is in the heart ~~~-P~__ Tl- 4,. -41.~,~ ~ , Agr "J T"St+- + -~ 4 -c ' , ce i and marketing cooperatives on its projects to teach basic skills and hopes Ougar -1 ne product1on or sugar is 'Re biggeSt niufury 1i WU awUTLicLUnJ Republic. Sugar and its by-products account for about one-sixth of GNP anJ. more than half the country's exports; the sugar companies employ some 75,000 workers in the mills and fields, Gross expenditures of the govern- men0-owned Rio Haina complex totalled about RuDIP7 million for the year ending in September 1963 - a sum equal to nearly half the Central Govern- ment budget. 20, Sugar production, which began in the early years of this century, remained at about 500,000 tons from 1935 to 1950, A rapid expansion took place in the 1950's, stimulated mainly by the personal interests of the Trujillo family, The largest mill in the country, Central Rio Haina, which started operating in 1951, was owned by the Trujillos. Cane production was increased by expanding the area under cultivation, from 140,000 hectares in 1953 to 194,000 hectares in 1957, especially after the Trujillo family pur- chased the West Indies Sugar Corporation properties in 19560 These propEr- ties were combined with the Central Rio Haina properties into one giant corporation - the Rio Haina Sugar Company -- which has accounted for about 60 percent of the country's outpu', Although this company was generally ine-fficient and grew much of its cane on marginal lands that were 100 kilo- meters or more from the mill, its low wages, tight labor discipline, and a high internal selling price made it very profitable. The foreign-owned South Puerto Rico Sugar Company at La Romana produces about 30 percent of the total supply; private Dominican producers account for about 7 percent; and the rest is produced by four small government-owned mills, 29. In the 19501s, Dominican sugar was sold mainly in the world mar-- ket (especially the United Kingdom). rather than in the United States. However, as the gap between the U.S. premium price and the world market nrine widened- an innreaqinr nronrtinn went ton the United Stats. Wphen the United States broke diplomatic relations with Cuba in 1960 and divided the Cuban sugar quota among various countries, the Dominican Republic was able to sell more than one-third of its total sugar exports in the U.S. in 1962, due to shortfalls in the U.S, and special quotas assigned to the Dominican Republic, 815,000 tons out of a total of 860,000 tons exported went to the U.S. Under the U,S. sugar law of 1962, the basic quota for the Dominican Republic in 1963 and 1964 was set at 190,000 tons a year, plus 130,000 tons assigned from the Cuban quota, The total quota has since been raised to 61,LOOO tons a yearo 30. The high prices on the world market since the end of 1962 have been due mainly to the decline in Cuban production and the pcor beet crops in Europe, As the world price rose above the U.S. premium price, Dominican sales to the U.S. were no longer subject to a 20 percent dutyo The higher prices also enabled the Dominican industry to absorb substantial increases in costs that were mainly due to heavy wage increases, especially from No- vember 1961 to January 1962, The basic daily wage for cane cutters rose from about $1,60 to $3,20; and mill woi,kers received siilar increaseso The shortage of cane cutters has lengthened the cutting and grinding season from 4-5 months to 10 months, and has increased the number of year-round workers employed by the sugar comanies. Revenues and Expenditures of the Rio Haina Sugar Comipany (Fiscal years to September 30) Fiscal Year Ending Sept 30 1961 1962 Bude Budge tl/ Revenues 47 57 64 Crude sugar sales 43 53 57 Sales of supar by-nrocnlts 7 Expenditures 37 53 62 Salaries and wages 13 26 26 Emports of materials and equipment 7 7 7 Payments for confiscated properties - 3 6 Taxes 4 13 14 (a) Production (4) (-) (-) (b) Export (-) (4) (6) (c) Import (-) (2) (4) (d) Profit and other (-) (7) () Other Expendituresl 13 4 9 Revenues less Expenditures 10 4 2 1/ On the basis of 575,000 metric tons estimated crude sugar production. 2/ Mostly debt repayment and capital expenditures. Source: The Rio Haina Sugar Company - 9 - 31, The most worrisome development in Rio Haina's operations is the doubling in its wage bill between 1960/61 and 1961/62 and the continuing political and trade union pressure to raise it further, Wage increases and the lengthening of the cutting and grinding season account for most of the extraordinary rise in the wage bill; some of it is the result of navroll-naddinL induced by nolitical nressure, Though Rio Haina employs a large number of supernumeraries on its permanent staff, there is a shorta of hn, 10.000 n nnnp nuftp.r- minlv hnaule of the nolitical tensions betleen the Dominican Republic and Haiti. Thousands of Haitians fonrmerllt Movedpr across+li thbrdrlo ton cuti. -n.ip_ "Nrht .hp. bonrde,r lihas b.n virtually closed for some time. The shortage of cane cutters, at a time when there is w-idespread unemplonnent+ andA uneemlin annyte, doubling of wage rates, can be explained by the strong reluctance of Do- ,0, - tlln, o - _ f4 ~1r nr --+ t--,l -rk;rn.r.~4+ 4; l rc,vr i 'l nn"A T V-1- --- nQ A,1,1 .an.J tJ LtV .LL ~ LA*-JV -L±'J -,.. - .- . -. -0-) 'hl+ ____ because cane-cutting is regarded as undignified work. 32. Rio Hainals financial position has been adversely affected by Wit _L. U UilI U l1j i LHi~ 1~ L'~l1 10. k U0 _LJJ pan 'as been~ foce o Supl domestic market at an artificially low price that was fixed in the fall 01 enici thu jie _t Wa~ U 11111 ILUJJ Pk LkJU LUO UU 1 C VV) it~~~L 003~ a rose from 60,000 tons in 1961 to 130,000 tons in 1962, The private mills are expecteu to supply part of the domestic market in 1u963 33o Rio Haina s costs of production nave risen from less than three cents a pound in 1960,/61 to about five cents a pound in 1962; this compares witn about four cents a pouad for the South Fuerto Eico Sugar Co,,,panyo These high costs may pose serious problems for Rio Haina if and when sugar prices fallo Cost-cutting measures should therefore be undertaken as soon as pos- sible. The following are some of the more promising ones: the diversion of marginal lands to other crops or pastures; keeping the cutting and planting seasons from extending beyond June to improve the quality of the cane (the best cane is obtained in the colder dry season before June); more effoctive use of suitable fertilizers and the adoption of higher-yielding varieties of cane; and gradual reductions in the labor force. 34. The long-term prospects for the Dominican sugar industry are highly uncertain0 They depend on external factors such as the world price and future U.S. sugar legislation, and internal factors such as production costs, The immediate problem is whether enough cane can be cut and work stoppages in the mills can be kept to a minimum in order to take advantage of the high prices, In 1963, the total production of sugar may be below 1962: total exports of 800,000 short tons of raw sugar is a reasonable estimate. An average price of RD$8 per 100 lbs0 would yield RD1,028 million for raw sugar exports which would be the all-time high, Other Major Crops and Livestock 35. For reasons discussed earlier, the production of a number of major food crops failed to keep up with the growth in population and fell far shor4 of the rise in per capita incomes (Table 6). The imbalance between demand and supply and the unused productive capacity justifies the heavy emphasis beinE placed on expanding agricultural output. The production and export prospects for the main crops are discussed below. 36, The activities of the new farm agencies such as the Agricultural BRnkl<- thp AqrArinn f-rm Tn -itm - qi thp Tnhqenn TnqiAtP ,4hrri- nro.. vide a powerful stimulus for an expansion of agricultural output, Much of in the long-run more irrigation will be needed, This calls for early p-lannin todtrmn roetpioiis0 Geteefrs hud ob directed at increasing productivity through an expansion and improvement will require considerable time; others can be done quickly especially if intensive cultivation is already producing significant increases in prc. e Ine recent s'lid-i_LZ e-; unar1-p _reses lI larm worrI wagb le. nv mt eniij.L Um U almost entirely to workers in the sugar and banana plantations, though they have also al.Iected the larger rice producers who employ Larm workers0 rthe wage increases without corresponding productivity gains will tend to weken the compet.L.ve position of Dominican export crops ani inau:e the larger rICU producers to switch to less labor intensive crops. 38. Coffee has been the Dominican Republicts second largest export for most of the last decade and reached a peak of RD millon in 1y>oo under the stimulus of the high prices of the early 190's, the area devoted to coffee increased substantially and exports rose from 290,000 bags in 1951 to h2,000 bags in 1952; since then, they have fluctuated between 350,000 bags and 500,000 bags, with internal consumption remaining at about 150,000 bags The present area under coffee totals about 125,000 hectares, with most of it in the hands of small producers owning less than 6 - 7 hectares; only one coffee plantation is over 200 hectares. The distribution of production among many small units has impeded the introduction of more productive methods of cultivation. The high tax on coffee exports (RD$12 - RD$15 per bag) which was abolished in 1961 also discouraged technical improvements, especially after the drop in prices, 39. The Dominican coffee crop tends to mature in the last three months of the year. Much of the 1962-1963 crop was lost because virtually all of it matured in a few weeks and could not be harvested because there were not enough pickers3 The short harvest strained processing and storage facilities. with resulting losses in quality; moreover, under the interim arrangements prevailing before the new International Coffee Agreement went into effect, the Dominican Republic could exoort only 35 percent of its yearly auota in the last quarter of 1962 when the crop matured. These various factors are likely to produce a reduction in the value of coffee exnorts in 1963. unlehs there is a large increase in production in 1963-1964, and quarterly quotas under the new agreement are less rigid- - 11 - 40. Higher prices to coffee producers as a result of the abolition of the export tax together with improved plantings should lead to higher yields and better quality. The financing provided by the Agricultural Bank should also helo to stimulate higher production to meet the basic quota of 425,000 bags under the new coffee agreement, This quota can be ad:usted either unward or downward by the International Coffee Conil; during the 1961964 marketing year, the adjusted basic quota for the Dominican Renublin is nermitted to innrPas by 20 nercent. which would be 85000 bags if the basic quota is not changed. At recent prices (approxi- mtely 33 to - cents a pounl in Ne York on Junne 6 196; or about 31 cents f.o.b, Dominican Republic) the basic export quota would produce export eanrningsQ of abouti+ $17 YnilI ~ cycle, a multiplicity of small producers, and low yieldso Most of the tree ar a ver~y old and~ the~ a veage pr_--+;O of abo q0i 000 tons co from trees yielding an average of one pound of dried cacao per tree, com- pared,- with. 7 or IQ pounda= in Lcuadlor and'1 --_LU %k J Trin idad . T he Se cret ari-iat of Agriculture has started to import new plants, and plans to encourage a ShiiL v Ln prout. o fromU theUI Ciba .o Unew areas Uil~ L., L __'Y -_'U± which appear to be more suitable for producing cocoa, The tax on exports u-c raw cooua JJ ert-u th- coce oa t ru __. _ -1e 1nou e 1 - -uu P--4 04 Ld U U LUI Uf1U L4±ii (u L LUi Ui1t: 11J1i±00 .o-W4 %& ChocL CIJU~ C; which has produced much of the exports of cocoa products in the past decade. i fie cnief products are cocoa liquor, cocoa butter, duu oa cake .nu ae sold mainly in the United States. 42. With the strengthening of prices in 1963, exports of cocoa and chocolate should rise from the 1961-1yo2 levels of about uSo11 million to US$13414 million. With moderate increases in production they could rise to USO17-418 million within a few years if chocolate products remain at their present level of about US$h million, 43, The production of bananas increased rapidly in the latter 1950 s; exoorts had remained steady at about 1.5 - l,7 million stems from 1950 tc 19 5, but as new lands were brought into production, exports rose to a peak of 6.9 million stems in 1960, Except for a new Ecuadorean company, a sub- sidiary of the United Fruit Company is the only exporter of bananas which it purchases from about 250 independent suppliers. It provides technical and some financial assistance to these suppliers, but does not grow bananas on its own lands. The export prospects for bananas depend in large part on whether the company will introduce disease-resistant varieties in the Domi- nican Republic, The relatively stable output of the last three years was achieved by bringing into production the available disease-free lands in the Yaque del Norte valley. But unless additional disease-free lands can be utilized or disease-resistant varieties introduced, the area under banana production will be reduced in the coming years. If the status quo continues, exports could fall in the next four or five years to less than 5 million stems and allowing for a slight increase in price due to boxing (most of the exports will be boxed within a few years), the value of banana exports would decline from nearly US$12 million in 1962 to about US$9 million in 1967. - 12 - 44, Tobacco exports reached a peak of about 28,000 metric tons in 1946. Since then, they have fluctuated around 15,000 metric tons, reaching 22,000 metric tons in 1961, The chief export market has been Europe, and particularly Spain. With an improvement in prices in 1962 and larger saL3s of cigar leaf to the United States and Puerto Rico, exports rose from an average of about US$6 million between 1956 and 1961 to LTS$10 million in 1962, At the same time, there was a marked increase in domestic demand for tobacco for cigarettes. 453 Tobacco is grown mostly on small farms, and standards of efficiency and quality have generally been low. A Tobacco Institute was established in 1962: it has begun a technical assistance nrogram to improve aality and introduce Cuban-type curing. This will take some time, but there are already sipn. of irnrovement_ With the increase in acreage of 30-h0 percent from 1961 to 1962, the need to improve quality has become all the more important herquse there is a rowinq Pnd nrhapns surrils R1Tnn v of ow-onuality tobLc As quality improves, exports colld increase to about US$20 million in 1963, throug greatr sale in Nlrt.hPer-n E.wrno andl Tjn+.It tts -r,"The rdio.n of' -n wh.Aichi is t_he sal in +Ai 'nyinionn~r rlii doubled between 1950 and 1960 ,almost wholly as a result of an increase in the ir-rigated aqrea undepr ci,ltivation. T.n. -riceo f,)-rms: are smll butir-:-e are a fer fairly large producers, Production continued to grow in 1961-1962, Dominican Republic became an importer of rice. An agreement was signed with December 1962, 47. A substantial increase in rice production can be expected in the assistance and experimental work should help to raise yields (about 1,600 ,nrO /rn nn ^ ; -I , -I n I_... 2 fl kgo per hecture from u0to oufu'u oriparVU Ue aouuU L,_c6 Kt',n 1UWU)l it has been estimated that better drying methods alone could increase pro.- duction by 10 percent. Rice production should be adequate to satisly inter- nal needs within a year or two, despite the growth in per capita consumption, providing higher labor costs do not induce producers to switch to less labor intensive croos or livestock. 48. Except for the recent growth in the production of yucca and the increase in the production of peanuts in the early 1i00's, the output of the other domestic croqs such as beans, corn and potatoes generally remained stable or grew slowlyo Peanut production is not likely to increase signi.- ficantly in the years ahead because many farmers have switched one of their two crops of peanuts to tobacco. Corn production on the north 3oast has fallen because some farmers have turned to tobacco, and this may eliminate exports to Puerto Rico. The production of beans which is another staple Ln the Dominican diet, has fallen steadily since 1959, but should rise by about 10 percent in 1963, as a result of financial assistance from the Agricultural Bank. - 13 - 49. There are other agricultural products which could be profitably grown for export and domestic consumption. Natural conditions for fruits and vegetables are particularly favorable, as was amply demonstrated b a. Japanese colony which flourished in the 1950's. An Agricultural Products Processing Institute, for which the Government has requested technical and financial assistance from the United Nations Special Fund, could be very helpful in selecting suitable products, and in establishing the necessary standards of quality to meet the requirements of the export market, 50n Mild weather and year-round nastures give the Pominican Republic favorable conditions for raising cattle, According to the 1950 census, 28 percent of farm land was in nasture although it is doubtful whether more than a small proportion of this was under some form of managed pasture. There are many small cattle-owners and a few large ones, innluding the suar companies (the Rio Haina Sugar complex owns some 45,000 head of cattle), From 1950 to 1960, the catt.le nop.ulation increased from ARKnnn to 1,000o.o0 head, and some beef was exported to Puerto Rico ($1,8 million in 1960) even though per capita consumption in the Dominican Republic was one of the lowest in Latin America -_ about 15 lbs, a year compared with 68 lbs. in Cuba in rose by 25-30 percent. The higher demand was met by heavy slaughtering ported from Uruguay. The 250 per pound price ceiling imposed on packers in 1961, while retailers charge QQ a lb., has led to slaughtering under primitive, and unsanitary conditions, while the modern slaughterhouse in Santo Domingo has been receiving few animals, Consumption of other meats, particularly pork and chicken, has apparently increased considerably. 52, The Agricultural Bank is contemplating a three-year livestock development program that will cost at least RD$!! million, and the inter- American Bank is actively considering a US$6 million loan for the program. In view of the relatively low level of beef consumption and the country's natural advantages for producing beef, the livestock program deserves high priority, With proper management and adequate financing and technical assistance, it should make a significant contribution to economic growth. 53. The short-run prospects are favourable for an expansion of output of domestic crops on the basis of rising demand, the opportunities for im-- port substitution as a consequence of the recent sharp rise in food imports, and the use of idle or underutilized lands. In the long-run - probably be- ginning in the late 1960's -- new irrigation facilities and a growth in productivity will be needed to sustain this expansion, and adequate planning should be begun on time. C. Industry and Mining 54. The Dominican Renublic has a large and diversified industrial sector that may account for as much as 25 nercent of the gross domestic - 14 - product exc"uding the production of the sugar mills/. There are several big plants producing cement, concrete blocks and tiles, paper, flour, pea- nut oil, chocolate, bottles, paint, fertilizer, and textiles. In addition, there are smaller plants producing rum, beer, cigarettes, textiles, and shoes. Much of the industrial plant is in good condition and in several industries consists of a sinele large unit that tends to mononolize the domestic market. This applies particularly to the enterprises that were built and controlled by the Trujillo interests who mononlized or ncounted for the lionts share of the market for such staple items as peanut oil, naner. cement- ciparettes- boer- and qngar_ T"hp Triiillo in+.rP.tZ aln controlled the paint and fertilizer-mixing plants, and the bottle factory, as. well as- nerorniiqczAllnrP+nrriPq_ Tnal thi idsqilodig accounted for roughly a third of the sales of domestically-produced indus- much of thJmpetus for the indutril gro-', fff from the Trujillo enterprises (Table 7) Heavy protection, high prices, low wages , 4n tit ao isiln1gv - ntra ket. However, industrial activity was noticeably slowed in 1959/60 because of pltclunreSt- The slowdown was particularly marked in the constmic- tion industry, and in the production of consumer non-essentials such as ~~o ut1 _L L ULL - U U~ -. 1i nt-it 140dt .L .7J± ) in the public and private sectors produced a substantial increase in the "emand fPor adopuoflOur, peanut oi' etls achlcU g and cigarettes. The higher wages also raised production costs which have thus far been reflected only to a relatively small-extent in higher prices. Some industries, such as cement, have been able to meet the higher costs through reductions in their previously high profits; others nave absorbea some of the higher costs through a larger volume of production. 56. During the past year, the Trujillo enterprises have been trans- ferred to the Corporacion de Fomento Industrial (Industrial Development Corporation), which was created in June 1962 to make loans for industrial development and to supervise the management of the enterprises in which the Government has majority ownership. While it has been absorbed mainly in the latter task since it began operations in October 1962, the Corpora- cion has made a useful start in providing medium and long-term credit for industrial machinery and equipment, By the end of February 1963, 78 loans totalling RD$1o2 million had been disbursed. Most of these loans average about 1D15,000 on terms ranging up to five years at 8 percent interest, though some larger loans have been made for longer periods. 57. These lending operations were financed by the profits of the en- terprises in which the Corporacion has a majority interest, by a RDO5 million contribution from the Government, and RD$02 million from counterpart 1 There is no estimate of the proportion of gross domestic product origi- nating in the industrial sector; the total value of sales of industrial products, excluding sugar and its by-products, was estimated at RD$115 million in 1954 and RD$165 million in 1960O - 15 - funds generated by the $25 million AID loan. In 1963, the Corporaci2n wall receive an estimated RD$2,,$ million in dividends from the enterprises in which it holds shares and about the same amount from income tax payments by firms in which the Corporacion has a majority interest. The Export-Import Bank has authorized a loan of US$1 million to the Corporacion, but it has not yet been signed,, 5c. The prospects for the continued growth of industrial production are good, With the recent increase in wages and the suppressed demand for manufactured consumer goods that accumulated during the latter years of the Trujillo era, there is room for increases in prcduction at a rate exceeding population growth. The market for these goods should be further strengthened by a continued growth in personal incomes. 59. The sizeable entrepreneurial class has begun to respond to the hnovant demnnH nnr qPms to be cominp to life after years of timidity and depression, A very modern cigarette factory has recently started operating in qan+.iqr t new rnmiP qnl Prn-m nns are under active considera- tion. With the growth in industrial activity and a strengthening of confi- ronor -P'rion invetors will bco m incresingly attrated to the Dominican Republic. There seems to be a growing interest in the Dominican Republic amo- ,F'erto Rica n1'_nu,_-_,_-_Sv 1Iib10 nv -c 'horyinn +.n i-rpan-rrl Piiprtno Rinn n. s a high-wage area for certain products, especially in the apparel field. 60. The production of cement and other building materials should grow, loans totalling Us$5.6 million from the IDB and AID will give a strong boost uo 4.k 2ILL.LI 4-- LL 4- .,4 . T_ -A1 1 44-4--J, -l TTA.Q e-+ .L2S U.._ ..iI1C2±J LS from a U.S. bank, is contemplating a US$6,5 million investment in middle;- ment materializes, it should lead to other investments in residential and commercial construction. 01. While the overall prospects for industrial growth and development are favorable, there are at least two big elements of uncertainty, One is the almost chaotic labor situation, with innumerable newly-formed and pocor'y- organized unions; the other involves the management of the large industrial enterprises that are now controlled by the Corporacion de Fomento Industrial, The plants are in many cases inefficiently managed, and some are not managed at all. This is not surprising since they were formerly in the hands of the Trujillo family and managed mainly by foreign personnel. Some of the larger factories are being surveyed by ICAITI, a U.N.-sponsored technological in- stitute that was created to promote and improve industrial development in Central America. But apart from making technical improvements presumably on the basis of ICAITI's studies, the Government has not yet indicated how it proposes to handle the serious managerial and administrative problems of these enterprises. 62, If these industrial plants are to make their full contribution to the Dominican economy, there is a need for an independent study of each of the major plants to determine the most efficient way of managing and financing -16- them There are several possible alternatives ranging irom the status quo to the sale of the properties to private interests. There are a nunber of possibilities and combinations in between, such as private managemen- on a contract basis with or without private financial participation and the sale of stock to small Dominican shareholders. Whatever the most suitable ar- rangement might be, it should be determined on the basis of a careful study of the various al6ernatives., Mining 63. Bauxite, salt, iron ore, and gypsum are the only minerals produced in the Dominican Republic. Bauxite is by far the most important in terms of quantity and value of production. The deposits are located at Cabo Rojo in the southwestern part of the country and are being exploited by a local sub- sidiary of ALCOA under a 50-year concession granted in 1957 with an option to renew for an additional 20 years. 6L. Shipments of bauxite began in 1959 and increased to 869,000 metric tons a year in 1961/62 with an annual value of around $9 million, The con- tribution of the ALCOA oeration to the Dominican economy in the form of wages and salaries, taxes, royalties, and local purchases is approximately Z-1- million a vear- ALCOA navs a royalty of 25d per ton of dry ore. and taxes amounting to 38 percent of the profits which are determined on the hnqi. of the o lr ri(,p of' n1iminim qnr i nomnlicated formula AKThe vorlumre of- baxtzexprts+c Till p%robalyi be= mntai.nJn.r nu r the next couple of years, barring major work stoppages. However, in later Y c - -; 11 - - - , ~,- -- - - -A - - -i t c 1 ~ ~ ~ ~ i ' i~ ~ i i* come on the line in other countries. iUcu DU IU11ULut-111 RepUU± di 4 C)U FID U1L JV10 4 d aut 2,000 kms, of secondary roads. Much of the highway system was built in the in 1922 and is now being rebuilt. Three main highways fan out from Santo DO-J1IIig-U; 0-Lie run to1 Elia Pina on 4-1, U-444- 11c.-A-t1 aa.t.J Ege frm +,, capital to Higuey which is near the eastern tip of the country; the third and most important highway Serves te rich Cibao region and runs north and west through La Vega and Santiago (the second largest city) to monte Cristi on the ±iUUamn5 coast,Ue U 67, With nearly all the main cites and wwns connected by all-weaher roads and traffic densities relatively light, highway construction is not likely to be a high priority investment sector (on economic grounds) for some years to come. There is some need for additional feeder roads, though many have been built. The maintenance and improvement of existing nig1ways which have been badly neglected, especially during the latter years of the Trujillo regime, should receive high priorityo A 54 million loan from the Export-Import Bank for this purpose has been authorized, but has not yet been signed. - 17 - 68. The only railways of any economic significance are those owned or leased by the sugar mills and banana company. The two public service lines totalling a little over 100 kms. have been operating very irregu- larly and inefficiently. 69. Telephone services are supplied by the Dominican Telephone Com- pany which is a subsidiary of the General Telephone Corporation. The number of telephones has risen steadily from 7,000 in 1953 to 24,000 in 1962 and they are virtually all dial. At the end of 1962, there were 4,400 firm orders for new installations, The Company's expansion program calls for an outlay of approximately 66 million in 1963-1965, This may be increased considerably if the Dominican Government authorizes higher rates which are now RD$10 for business and RD$$.50 a month for residential telephones. 70, The Dominican Republic has not yet developed a genuine tourist industry, and the prospects for the near future are not very promising, In t, ms of tourist attractions and facilities, the Dominican Republic is not at present in a favourable competitive position vis--a-vis other Caribbean cou~nt.'ies irnv:r_ there is still considerable excess hotel capacity. Thus far, mc:t of the "'ourists" have been transient passengers and bus ns snn E. Power 71. Most of the electric power is supplied by the Corporacion Domini:- cana 't de .' S ~.La..~ s'j~aa a ~I.fIUS~ after the Government's purchase of the privately-owned facilities. At the and the rest thermal and diesel. In addition, there are a number of genera- tJing plants with a total UcapacitLY. of- 3))4v0 1-t manaieUy tec rtpat sugar mills, municipalities, and certain military posts, Public sales of elecUr-cal energy nave Viben au an alnuaL avterage rae u auuuu .L%J jtoinU11V during the past five years (Table 9). Approximately 40 percent of this energy is "or Ji-Jut. u.UL. _~L 1UIU± 15 ai U.LL'VII I L U V 'WVZ;L.L 'JV, J percent if the production of the private generating plants is added, 72, The CDE has under construction a 26.5 HW thermal plant in Santo Domingo that will be completed in 1963 and an o.6 M hydro project on the Rio Las Damas in the southwestern part of the country which is scheduled to be on the line early in l9o, The two olants will increase CDE s genera- ting capacity by nearly 50 percent and should be adequate to meet the coun- tryts needs until 9yco-±yo96 73. The foreign exchange costs of the thermal plant were financed by a $34h million loan from the Export-import Bank; part of the foreign ex- change costs of the $2.9 million Las Damas hydro project is being financed by a supplier credit, The local costs of the two projects will be met out of the earnings of the corporation which amounted to an estimated RD$4,4 million (before depreciation) in 1962. The CDEs 1963-1965 program, calls - 18 - for enlarging the capacity of the Jimenoa hydro project (in the central nart of the country) by 7.5 1%Y at a cost of about $3 million and the con- struction of a 26,$ 7d thrma' unit at Puerto Plata to serve the northern and central reeions of the country. However, the Puerto Plata plant is among the three projects included for financing under a $150 million line of credit (6isnussd in a Inter spntionr the other two - the Tavera and Valdesia dams - are supposed to add perhaps 40-50 MW. Should these pioj- ects be onmpleteoA uthtn the next few yearos thyo wuld n-nvidadennate generating caaacity to meet the country's needu until the early 1970's. 7L Pr + Lfl J ,4ll cational expenditures per capita were among the lowest in Latin America, and total outlaysn avera les +1-n 2 _47r of1AM in the last qnq Although there are no reliable estimates of illiteracy, it is probably a swuv iJ J± -1U UfUkF IL L ',1 JJ. C ..;LUIU1Y 1.X UUII 0 14'P-,VI u_c%Jpi. Ld AI3 J of the Dominican Republic, The rate in the rural areas may be substantially 10 ruu__c expenditures on eaucation aLQ not rise appreciaDly until 1962. Outlays by the Secretariat of Education grew from 1955 to 1958, but. in ±you ana 19o± fell to their former level. Even with the projected in- crease in the 1963 budget, the Secretariat of Education would account for less than 10 percent of proposed central government expenditures. The educational facilities have become increasingly inadequate to meet the needs of a growing population. It has been estimated that in 1961 there were 00,000 children in primary schools, but there were no schools for an additional 200,000, The Dominican Republic has had one of the highest pupils-to-teachers ratios in Latin America. Moreover, most of the teachers in primary and secondary schools do not meet the ninimum qualifications of the Secretariat of Education. The inadequacy of educational facilities is also reflected in the almost total lack of vocational and technical education,- 76. The Council of State started a one-year program of school con- struction and teacher training, with the assistance of RD$5 million of counterpart funds generated by the AID $25 million loan. At the same time the Secretariat of Education prepared a three-year RD821 million plan to build schools, train teachers, and provide equipment and supplies. While some technical assistance is being given by AID and the GAS. much more will be needed to make effective use of the financial assistance for increasing the quantity and improving the quality of education. Vocational and tah. nical training should receive high priority if the country's human resources are to make their indispensable contribution towards the realizat.inn nf' i+.- economic potential. III. INTERNAL FINANCES AND PUBLIC INVESTMENT A. Money and Credit 77. The Dominican Republic has had an independent monetary system only since 1s7- when the Central Bank was estased, and the peso which has remained at parity with the U.S. dollar was introduced. The Government- owned Banco de Reservas is the largest commercial bank in the countury and is the Government's fiscal agent. There are also five private commercial banks, of which four are branches of foreign banks. Ihe two largest are Canadian and the other two are American branches established in 1962. In addition, there are three specialized public lending agencies that malce loans for agriculture, industry, and housing. 78. During the period 1950-1958, monetary expansion was not out of line with the growth in the level of economic activity. The money supply increased by RDS65 million, or about 150 percent, and time and savings de- posits rose by RDE31 million or irore than fourfold 1TAble 12). redit to the private sector which increased by RD?47 million1 was the major source of this expansion, Monetary trends were reversed in the period 1959-1961. Even though the Government and official entities increased their borrowing to finance deficits, the sharp contraction in commercial bank credit to the private sector and1 the heavy capital flight redu'c:2d the supply of money and quasi-money by 29 million. The drop in saving deposits alone amounted to R."' 13 milli-.n ,d was aLost entirely the reL."-t of withdrewals by the Trujilo f%mily. 79. liith the economic recovery in 1962 and a strengthening of confi- dence, there was a sharp rise in the holdin :s of domestic monetary assetc., and a reduction of capital flight. Despite the budget deficit, the Govern- ment did not contribute to the monetary expansion because it reduced its indebtcdness to the banking system by using RD)13 million of the RD$19 mil- lion of Tru illo deposits that it had confiscated. The commercial banks (including the two newly--stablished U.S. branches) increased their loans from RD$32 million to RD,53 million. This credit expansion led the Aonetary Board to raise reserve requirements against demand deposits from 30 percent to 50 percent to absorb excess liquidity. 80. ThP nommnrnial banks wprp abl to maintain th.ir Prnanded loan portfolio despite the higher reserve requirements because of the accumu- lation of rommrrnial arrpqr. Thpsp qrrf,r. whinlh qnnn..1 to mS mil.- lion at the end of 1962 are the result of the Central Bank's failure to remit the forpign erchange for fh npon which Dominicn imnnnrters have deposited in commercial banks to pay for goods purchased abroad. These Psos Are on dePno.Rif. -ith the. Cent.ral Baqnk aqndl aqre conidre as part of the commercial banks! reserves. Should the Central Bank liquidate these arrears, as- it plansq t.o do,) t.hp excessq. -reserve, of thebanking szrz.Yste iaouIl be wiped out. 1/ The Trujillo family's business activities accounted for a large part of this expansion. - 20 - 81. The interest rate on most loans is 8 percent, though the legal maximum is 12 percent on business loans. The Agricultural Bank and the Industrial Development Corporation charge 8 percent on all their loans. The amortization periods for the former generally range from one to five years and five to fifteen years for the latter. As noted earlier, the prospective supply of agricultural credit seems to be adequate. The sit- uation with regard to industrial credit is less clear. 82. The possibility of organizing a private industrial development bank in the Dominican Reoublic has been under consideration both within the country and abroad. A survey should be undertaken to assess the need for this trpe of bank. and to ascertain whether enough sunnort from local and external sources will be forthcoming. At present, it appears that the requirements for short nrd mediiim-t.erm inrinstrinI -rpdit are being met by the commercial banking system. Whether the long-term industrial credit needs will be satisfied in the future is less nlear and denends in eart on the future activities of the publicly-owned Industrial Development Corporation. B. Government Finnes 83. The nblic sector includes the Centrl nvernment. the Nntional District (Santo Domingo), and 25 municipal governments. The expenditures of the loal covernmentse rartly finn-A bv tr-ar-fo- :rom the Central Government. There is also a large and growing number of public autonomous or invested directly. These include the Aricultural Development Bank, the Agrarian Reform Ir~Twoutn+ the Nniusi T,ofit+n, Social Security Tn- stitute, the TBanco de Reservas, and the Industrial Development Corporation. 84. While it is difficult to measure the total magnitude of the pub- lie Sector, it- clearly play-s adecisive rol e In th1 e T-,- During the decade 1950-1960, the revenues and expenditures of the Central ~ V IU~L1 U I cu~eu L L 1 0. U l WL i UU~ C.1 -.L-L U11 kJ. 1"lI C2 L0U.-Lt: -Lj/* IUL UCO.± revenues and expenditures were about evenly matched, and the cumulative deficit amn-+A to cnly ROR lMillion or a 14++1 more +hani 1 pcrce of total expenditures. A large deficit did not emerge until 1961 when it mouunted ov R 1 mxillion,as revenues dropped to their luwesu lvel since 1954 and expenditures remained stable. Whereas in previous years Wne uel.c-Lve WtUrt IL1nn1U1Uj uy U1nt uZ1nxKing1k 3Y.3UU!n1 _n -L7UL UDUuU UWU'-u1ntr1uj of the deficit was covered by borrowing from the private sector and funds confiscated1U from11 the 1UjLj.lU fadMi.L-Y O5. The fiscal performance improved in 1962 with the recovery of revenues, and the deficit was cut to RD$12 million despite a steep rise in expenditures, which was offset by a Digger rise in revenues mainly as a consequence of higher import and sales tax collections. The monetary impact of the budget deficit was limited to Hirl million by the use of RD$5 million of counterpart from the $25 million U.S. loan. - 21 - 86. The recent trend in expenditures presents a discouraging pictuxe not so much because of the level but because of the composition of expen- ditures. The very large increase in current expenditures has been due al- most entirely to higher salaries and only to a very small degree to addi- tional public services, and investment has shrunk to less than 10 percent of the total. While there is some snonp for raising new revenues to finance public investment outlays, the major effort will have to be directed at rpiinninr the ltvpl and ohanring the nattuprn of rnrrent. exrncnitures.- The Government has taken some steps along these lines, but much more will have ton bep doner i f t.i h i budget isto. makep its. fulI contribution tnec nic g rrwtH and social welfare. 87. The 1963 budget that went into effect on January 1 called for VU..11 flU C2, S JJ 0 1 W4V.L I . 14-L-L.L.L.J V.I I t~.U~ ). I W '.. I '- -.IL..I-J.LIJ.40 4.4 _.L - - included RD418 million of profits from the nationalized industrial enter-, .P.LC09 %.U"c. k ViLil 1LLL) III_.L_LQ11 ..L1 .L/,JL - 4.3 PLV4..us hadve bee-n oIver.- estimated by RD$10 - RD$12 million, but this will probably be offset by the new taxo uiga lex-ports whnich iLs expecte to yildabut - i lio in_ 1963. Under this tax which was enacted in May of this year, the Government pounds , (fro on al sugar wll receive th UeSS O-V8r and above an aver-age price of aD$8V2 per 1U pounds (f.o.b,) on all sugar exports. This tax should yield around RD$30 oon n on the baEIs of present expectatious concerng uga± peace, The revenue from the tax has been earmarked as follows: 75 percent for building houses for sugar workers, and aqueducts and hospitals in rural areas; 15 percent for feeder roads; and 10 percent for the diffusion of culture. While many of these projects may deserve high priority, IT Is regrettable that the Government does not have complete flexibility in spen- ding the funds on the basis of national economic and social needs in accor- dance with general budgetary procedures, Thus, the new sugar tax will pro- vide less fiscal relief than it could because the revenues have been earnarke.. Expenditures 88, Under the fiscai mana-ement of the Trujillo rel-ime, pu1ic investment was financed almost entirely out of current revenues with little resort to internal or external borrowing, The rapid growth in re- venues provided the funds for a high rate of investment that averaged about 40 percent of total government expenditures from 1951 to 1958. As revenues fell and defense and other current expenditures increased, investment out-. lays dropped sharply in 1959-1960 and were down to less than 10 percent of total expenditures by 1962, 89. The sharp rise in current expenditures between 1961 and 1962 was due mostly to the general increase in government salaries of more than 25 percent. The Bosch ;dministration has twice rc.lled back salaries in the upper brackets, and is trying to reduce non-essential expenditures, But the con- tinuing high level of military and other non-productive expenditures leaves little margin for expanding investment and essential social services. The Droblem has been accentuated by the earnarking of 20 nercent of internal tax revenues (about RD$15 million in 1963) for local governments and by the Government7s decision to service RD9129 million of internal nblin dRht in- curred by previous Administrations; service payments on this debt will amount to RTD$7 million in 1963. Revenues 90. The tax burden in the Dominican Republic is one of the heaviest among the less developed countries. Central Government revenues which rose steadily from 1951 to 1958 averaged 24 percent of GNP during this period (Table 16). They began to decline in 1959 because of the st3ep drop in imports which generate a large share of total tax receipts. Im- port taxes, together with excise and sales taxes account for about two- thirds of total revenues; direct taxes mainly on business profits are the one other major source of revenue. The profits tax is progressive and rises from 10 percent on taxable profits under RDO5,000 to a maximum of 38 nercent on Drofits exceeding RD60.000. 91_ The tay strncture has bea-n substantially modified during the past two years. In 1961, the Government reduced or abolished a large number of taes becinning with the abolition of the crnoulsory 10 percent tax withheld from government workers' salaries for the benefit of the Truill nnlitical nArty The tax changes aded in to an estimted RDA30 million on the basis of 1961 yields. The following important taxes were elimiated:+n-qr taenn cofeep andl ocoan ORTWiP millionn) tay on sugprr production for export (RD5 million); and the 12 percent surtax on certain sourc"es o nu-- (DT'Oe _- 'Io;n) * In addition the headr tanndi f.bp -Im_ port duty on gasoline were both reduced, with resulting revenue losses of it1A4p2 I) A.LL.L I-V L1, I. UuD I? kI %,LV V . v i-y. were offset by an increase in import taxes from RD36 million to an all- b1me high of napUt milLIon wni was nl2 mi uIn auve the previous high reached in 1958. Revenues from import taxes amounted to 53 percent of total 1962 imports (. o.b. ) and 7 percet uo txabe imports ty rose by a considerably larger percentage than imports because the propor- tion of tax-exempt imports declined. The heavy iacrease in the consumptEun of alcoholic beverages and cigarettes also contributed substantially to the increase in total revenues. In addition, the profits from the foratr Trujillo enterprises, together with the imposition of taxes on certain irms thau had formerly been exempt, prouced a significant amunt of revenue in 1962. 93. A personal income tax was enacted for the first time in May 1962 and produced about D*3 million in 1yoz. Inere is a flat exemption of RD"1,200; and the rates are progressive, ranging from 5 percent on the first RD$2,UUU to a maximum of 12 percent on net taxable income above RD$60,000. The tax on wages and salaries is withheld at the source. The income Tax Office is trying hard to improve administration and increase collections, especially on non-salary incomes. The office expects to col- lect at least RD$5 million in personal income taxes in 190, and increasing amounts in later years. C. Public Investment 94. During the 1950ts, especially the middle and latter years of the decade, public investment was high, both in relation to GNP and as a pro- portion of total investment. From 1954 to 1958, public investment averaged - 23 - about 11 percent of GNP and about 60 percent of total investment. These outlays were financed entirely out of public savings. Public investment began to decline in 1959, as shrinking revenues and steadily rising cur- rent expenditures diminished public savings. 95, Muich of the country's infrastructure was built during the years when the rate of public investment was high, W.hile there was undoubtedly a good deal of misdirection and waste of public funds,the investments in transport, power, and irrigation were major factors in stimulating the country's economic growth, To be sure, the Trujillo regime made these investments mainly to help the family enterprises, but the country was nevortiieless endowed with a relatively well-develoned infrastru:- ture. 96. The level of public investment began its steep and steady decline in 1959 and. drooned off to nractically nothing in 1962. According to the GNP estimates, public investment which was RD$65 million in 1958 amounted to only RT)l m-llion in 1962- but mu-h of it wa- either for renavment of past obligations for public works or transferred to autonomous agencies for non-investment nurnn.es_ Pibi'lir. in 6-vnlpd to only RD. million in 1962, but the Dominican Republic received a significant amount of external aeni8tance for the first time ATD madea loan of PPhW94 million for alano of payments support and of the RD$14 million of counterpart that had been diSIO-1-+1-sed a t~ U nen of i 1196 T r J rN n +_~4 fn-e- cao-n 1-mIcap+. -,innri. and the rest mainly for agriculture and education. U,S. Government agencies and t-he Inter-American 1:-L 1--+r~ USl21 mi~linn -- IC62 for" housing, agriculture, and electric power, but little of this was disbursedo EXTERNAL PUBLIC BORRO1ING, 1962 as of Deco 31, 1962 Source Purnose Amount L mi ions)__ iv Dacluu U rayiluo .Lou and Budget Support 1/ IDB Agricultural Credit 3.0 2c5 Export-import Bank Electric Power 3o4 3.3 AID Housing 2.1 2.l IDB Housing 3.5 3.5 U,S, Government Rice under P.L.480 I/ 5oO _o2 Total 42.0 2606 ±1ne counterpart Irom these " onU s ou e used ur agricuAu-ra ---e-4 and other development purposes,, - 24 - 97. Unless public savings can be raised from their present rock bot- tom level, the volume of public investment wil. depend on the rate of dis- bursement of external assistance already committed and the Government's ability to get additional outside help to finance not only the foreign ex- change costs but also most if not all of the internal costs of public in- vestment. Undisbursed loans in counterpart and foreign exchange amounted to about RD27 million at the beginning of 1963. Since then, the Dominican Government has received a U.S. grant of $22,8 million as compensation for the higher U.S. duty on Dominican sugar. These funds will be used to pay for imports from the U.S. and the peso counterpart will finance development activities. The Export-Import Bank has auth6rited loans of $h million for road maintenance and $1 million to the Industrial Development Corporation; and the Inter-American Bank expects to make a $6 million loan for livestock development. 98. The Government has not yet prepared a public investment program. But it has had a Planning Board since April 1962 whose main functions are to assist in the preparation, coordination and execution of public invest- ment programs and projects. Because of unsettled political conditions and an inadequate staff, the Planning Board has made little impact so far. It has. however. orenared a complete inventory of public investment projects including those under construction, planned, or proposed. These projects have heRn ranked in order nf Drioritv on the basis of very Dreliminarv appraisals. This compilation is a useful start in establishing the basis for a nblic investmenV-.nrram- The Government has indicated chat it plans to reorganize and strengthen the Planning Board. 99. The Government is rightly placing high priority on the expansion of ~14-,~1 ..-..A4-4-.. Tn aditio too. th mill-In"v -!+All t.n bp cliq.. bursed from the $3 million agricultural loan from the IDB and the expected credit is contemplated through the allocation of RDe23 million of the conlepat enrae by, I-~ TT (Z --, on +"H t< iliny) P T. ),RO lon for rice imports. The building of feeder roads is expected. to absorb m--of tFhe reof the +hounte-rntv funds. mainly for internal consumption, offer the best prospects for sound and quickly the counterpart funds becom available and upon the administrative and techn-iclCd capac~.LU O .L Ull JUJILLLI.LUIALIJ ULLL U~ Lrt-L.LO U 1I1C1At: _ L U. U L V tz use of these funds. 101. In addition to expanding agricultural production, the Government is trying hard to use public iuvestrent as a meanu of proviuig jobs for the unemployed vhose ranks have been swelled in recent years by the drast.c decline in public and private construction activity. while unemployment has been reduced somewhat by the work relief program started in mid-1962 by the Council of State, the program costs about Ray> million a year and is almost completely non-productive. - 25 - 102. The Government's most important action in the field of public investment was a contract for a $150 million line of credit signed in March with a group of European suppliers to finance the total cost of the fnllowinq nroiects: a hydroelectric power and irrigation project (Tavera Dam) in the Yaque del Norte Valley; a multipurpose dam (Valdesia) on the Nizao RIver near Santo Domino that will supply water to Santo Domingo via an aqueduct; the expansion of the port and the construction of a thermal nna n1i-. -f Puert.o Plata on the north coast. 103. The contranct is vague and incomolete. It imnoses few obligations on the supplijrs; it contains no cost estimates (the total cost of the three p -il-I "hnh1r ho Pnn ir bipr v h than 4l10 million): the des- cription of the projects is vague; repayment terms are not clearly stated but obligate the Governmentto pnnay 4.1 million for work done in 196h-1965. l0~. Apart from the cvfincgad executing the projects, their economic justification may be open to ques tion because thiey have no4 1-p A-4-1, qiiAlipd. Thep (lnrp.rnnnf recognizes that supplier credits will be more costly than financing by na tio-)nal1 a ndU int er na tio0n al lending34 -- -- agecie. uT),+A iustifies the con- tract on the grounds of the urgent political necessity for getting these P., c6ud-ra to provid Jos. redc t'-l exedt-1r for -Ork rel ie - and to realize sooner their economic benefits. It is doubtful that the Projects will be built more ucKyun-e -Jls type of -xternnal fiancJng. Moreover, the construction of large projects that roquire extensive planning and engineering is not an ef.fective vJay of L;LcratingL jobs apdy 10). As the projects under construction are completed, and if those already identified for external financing turn out to be sound, and are built as scheduled, the country*s infrastructure should ue aUquaeu tV meet most of its needs until the late 1960's. Indeed, as these basic facilities are enlarged and improved, a wide gap will emerge between tne size and quality of the country's physical capital and the capacity of its people to use it effectively, unless vigorous efforts are made within the next few years to eqand and improve education and to a lesser extent, health services. IV. EXTERNAL FINANCES AND TRADE 106. The balance of payments appears to have paralleled the internal financial equilibrium of the 3yu0s. a cumulaU.VU cULrE'[1 uCuu 0u_L.LLLDu of US3h million in the first half of the decade was followed by a deficit of $28 million in the latter years (Taule 1(). Curren deficit and net capital outflows steadily diminished foreign exchange reserves, from a peak of $53 million in l95 to a net figure of -> million in 19.Y. 107. In 1960-1961, the Trujillo regime severely restricted imports as a means for exporting large amounts of capital, and the current account surplus during these two years totaLled yl million or Zuy of exports, as a consequence of higher exports (mainly sugar) and abnormally low imports that were pushed to their lowest level since 190 by tight exchange controls. - 26 - 108. In 1962, the current account surplus dropped off sharply, because imnorts almost doubled as a conseouence of wage increases and the general economic upswing. A considerable loosening in the administration of exchange control facilitaterd the I1rap innrPnp in imPYrts Evt-rn;1 finnnial as.- sistance was also a significant factor in the 1962 balance of payments. Of the 1 4 million TT-.. overnment lian Alh million vq r1i.hnr.q3 in 1962- There were also small drawings on loans from the Ex-Im Bank and IDB. Short- tePrm nri-irnf.o rnni- 41 inflf'11,T in i-hcn fn-fm nf' rr- Pnn n'r-rqr. nrinnfP.r tri $10 million. 109. The foreign exchange position did not reflect the current account foreign exchange reserves rose by only $12 million. The explanation for the -I,rge is --4 -7--- P 4 - 4 - 4 unrecorded capital outflows induced by the ursettled political conditions. underinvoicing of documents to avoid payment of the heavy import taxes. 110. The banking system had no foreign exchange reserves at the end of 1u2, and the reserves were negative If the coimmrcial arrear referred to in paragraph 80 are included. In view of the recent strengthening of the countryls reserve position, the uovernment is liquidating the com- mercial arrears to remove their adverse effects. Because of the delays in receivinE payment, foreign suppliers have not been giving Dominican importers normal credit terms, and in many cases, they are being required to pay in advance. if the commercial arrears were liquidated, the economy could probably obtain an equivalent amount of floating short-term commercial credit from abroad. Exports ill. Movements in the value of exports since 1950 have resulted almost entirely from fluctuations in the price and volume of sugar exports. The high level of exports in 1960 was due to a record volume of sugar shipments and large sales in the U.S. at a premium price. The sharp decline in total exports in 1961 can be attributed mainly to the drop in sugar production due to strikes and the withholding of shipments in anticipation of the lift- ing of the OAS sanctions. 112. The abnormally high sugar price in 1962 was a major factor in helping to preserve economic and political stability in the Dominican Republic. The high price enabled the sugar industry to pay much higher wages for cane- cutting and grinding without suffering heavy losses. The chances are that these wage increases would have been ordered by the Government even if the sugar price had not risen. The higher export receipts also provided the foreign exchange to finance the extraordinary increase in commodity imports and capital exports. Finally, the higher collections of taxes on imnorts and on profits of the sugar companies helped to keep down the budget defi-c:it that would have been much larger as a conseauence of the tax cuts and hir-her current expenditures. - 27 - 113. The commodity composition of Dcminican exports is somewhat less concentrated than is usually the case in a small tropical country, while sugar is the predominant item, it has never amounted to as much as 60 per.- cent of total exports and in most years, it has been less than 50 percent, The two largest exports - sugar and coffee - have seldom exceeded two- thirds of the total., in recent years, bananas, tobacco, and bauxite have accounted for an important share of Dominican export trade (Table 19)o Imports 1140 The heavy capital outlays and economic growth during 1950-1958 are reflected in the composition of imports. Capital goods and related materials accounted for a major share of the increase in total imports between 1950 and 1958 (Table 20). The downward trend from 1958 to 1961 was similar, as these items registered steep declines, This was especially true o-' machinery and equipment (including military) and vehicles which drop>d from US$35 million to 'JS$ll million, However, the extraordinary increase in imports in 1962 was heavily concentrated in consumer items., Food products and textiles may have accounted for half the total increase. and automobile imports raised the number of passenger cars in the country from 10,000 to 14h,0000 This sharp rise in imports reflected a previously suppreosed demand for these goods, as well as wage increases, arid probably somc. acce.1tio~n of inventories. V,, COVDC PROSPECTS AND CREDTWORTHINESS 115. The growth prospects of the Dominican economy greatly depend 'n I--w well th___~~nment manages and uses the economric resources under its control - the industrial enterprises, the agricultural lands and the Re a aeaon ale poLIti-a staiIIty is an i;ndisensable co-ndition fo economic growth. At present, there is no clear danger of an upheaval, thoug po i i a devel pment in t 1 he Domin can Re public aru e a ar i c,ul carl y unpredictable because there is virtually no relevant history to draw upon, But there is litedut4htcni-eUoiiclsaiitZ n on economic management would strengthen business confidenceP and there are aleysi hat te private sector is coming to Life after being in the doldrums for yearso The continued growth of confidence would have several f avorable ecounumiC u eues: it would stimulate construction activity and industrial investment; it would halt or greatly reduce capital outflcws and mighu Lead to the repaUriation of Dominican lunds now held abroad; finally, it would produce a significant inflow of private foreign investment,' 117. An appraisal of current trends and future expectations leads to the conclusion that the Dominican Republicts short-term growth prospects are good. -ost of the impetus for economic growth in the years ahead will have to come from an expansion of production for the internal marketo With the rise in wages and the formerly depressed consumption levels, the demand for foodstuffs and manufactured goods can be expected to grow faster than population over the next few years. - 9A - 118. A significant expansion in agricultural production over the next two or hr e years -114 --4- -_ - 4--- 1---± -1-1 V4' -JI ± -4 '1UC ___ I 4_ credit) or a major increase in the area under cultivation. However, addi- + m .a .2 1a-1m ee0414+ e a" .1 LJC N ACA U. ,)w +ke lat+ 10,S's +o sustain the in-crease in production, and nreparatory work should be started in time. P1 But ifarclualpouto s to ,.+- to be' a -Jo so-re of economic growth, the severe shortage of technical manpower will have to sporadic efforts to muster and develop the needed skills, much more will now controlled by the Industrial Development Corporation, industrial pro- UUUnUII UU erexpecueu Uu cunuinue its rapid growth to replace imporu and satisfy rising demands for manufactured consumer goods. As general confidence is strengthened, the construction industry, both residential and commercial, should also make an important contribution to economic gurown in tne years anead. 1U. The immediate outlook for exports is very favorable. They are expected to reach an all-time high of about $220 million in 1963, or nearly 30 percent above the previous peak of $173 million in 1962. This big in- crease is expected to result almost entirely from a rise in the exnort price of sugar from five cents in 1962 to an estimated average of eight cents a pound. The new sugar tax will enable the Government to finance all its essential internal expenditures (including the local costs of foreign- financed investment projects) and perhaps even leave a modest budget surplus. - 90 - Export Prospects Actual 19602 19603 966, 196 - -..-- - -USI miLlln- - 1/ r) 1 / Raw sugar 89e2 128 o - o -, By-products 7.7 12 8 8 Furfural 2.6 3 3 3 Coffee 19.9 17 18 19 Cacao 7.6 9 10 11 Tobacco 10.0 13 17 18 Bananas 11.6 11 9 8 Bauxite 2/ 8.7 9 8 8 Chocolate 6.6 6 4 4 Others 3/ ll,6 12 l4 16 Total 172.5 220 176 180 Raw sugar ('000 short tons) 883 800 , 900 90C Coffee (1000 metric tons) 29 25 El 27 2d Cacao (OO metric tons) 19 20 22 23 Tobacco('000 metric tons) 18 22 25 25 Bananas (million stems) 6.7 6.0 5.0 .7 1/ Using a projection of $85 million here rather than the $80-$85 millicn range prsnte- AIn the- tex do4nt-rn~~1 r14~~~1~ conclusions. 5/ Include peanut cake, cotton, fruits and vegetables, cement, corn and in 1162) -AdC 1967, meat. 4/ Basic unadjusted quota under the International Coffee Agreement. 121. The growth in foreign exchange receipts will make possible the repayment of the country's short-term external obligations, notably the $9 million credit from the I.M.F. and the $24 million of commercial arrears. The Government has already started to repay the former, and has announced that it will soon liquidate the latter. The sugar boom together with the disbursement of the $23 million U.S. grant should produce an accumulation of $40-$50 million of exchange reserves within the next couple of years. 122. Looking beyond 1964 to the latter 1960's, the Dominican Republic is not expected to encounter unmanageable balance of payments problems even if there is a sizeable decline in sugar prices, providing the necessary re- straint is exercised in fiscal and wage policies. Sugar exports of $80 to 85 million in 1967 would be a reasonable guess on the basis of an export volume of about 900,000 short tons, at an av3rage price of four to five cents n on -1r . Amoirn b-oter expr s. +n -I--r.~-- nc +-,-nn _+ h 4- -rvCr+I, lC%fll+ l. the quality .:iproves; the rest of the major exports -- coffee, cocoa, bananas,. anbuite. --C are unlikey chng much from~I h~iltel-r ./62~±~ .V1_U1 a combination of available information and reasonable guesses leads to an ex.port, pr rovje tugenn wion a moueU ned $u8 niilow 0i puonie 7VU private capital of say $30 million would give the Dominican Republic an inport capactUy of at least $170 million which would be 2t percent above the 195o peak and some 48 percent above the 1956-1959 average. If substantial foreign exchange reserves are accumulated during the period of high sugar prices :n immediate prospect, they can be drawn upon in subsequent years to supplement export earnings. This wouLd provide for the financing of a level of imports that should be adequate to support a satisfactory rate of growth providing the volume of consumer imports is not allowed to get out of hand, Moreover, if the economy does indeed grow rapidly, much of the investment in industry and construction is likely to be financed from private external sources. 124. The future course of sugar prices is highly uncertain, but unless Cuban and iestern European production fail to recover, it would be surpri- sing if they did not fall substantially below their present levels within the next few years. A precipitous drop would not only cut export receipts and budget revenues, but would put the Rio Haina Company in a tight finan-, cial squeeze. Rio Haina is an inefficient, high-cost producer with a break-even point of five cents a pound or more, compared with four cents or less for South Zeuerto Rico, the major private producer. Unless it keeps its costs from rising, even a moderate drop in the world price could put Rio Haina in the red. Its losses would have to be covered by the Govern- ment either through direct subsidy or by exempting the Company from the payment of taxes. In either case, the adverse effect on the budget would be the same, and could mark the beginning of a chronic drain on the economy akin to the Argentine railroads or the Bolivian tin mines. 125. The prospect of a drop in sugar prices underlines the need for exercising restraint in wage and fiscal policies. By running a budget surplus while tax receipts are high and while the need for public savings to finance investment is not pressing, the Government will be in a position to finance some of its investment outlays by internal borrowing if sugar orices and tax receipts should drop. For if the sugar boom is used as a basis for inflating wages and public spending, there is a serious danger that the Government will have neither the financial resources nor the political strength to cope with the conseauences of a sharp dron in sugar orices. Creditworthiness 126. As noted earlier, the Trulillo regime left the country with ir- tually no external debt. It financed practically all of the public and private investment out of internal savings uhich ween asn nz in nn ason foreign-owned enterprises. Because of the high levels of saving and invest- ment in the fifties- the nominican Reubic dre not need hean publi capital outlays to facilitate a satisfactory rate of economic growth in Wi1t: U * IU UV t:I, .L U~ L. LLI CL - V. U UVJ L- . Ll- - - much of what it does need. This is especially fortunate, as public savings I-' -- - . -- ,--- A n ner rn-vo+ flave si-iunIk to practically notin Uiltz; i-aid.L expenditures, though they should rise rapidly as a consequence of the new sugar tax. As public investment requiremenUt gru 1 iU the LaVe sxtUs anu early seventies, and debt-servicing capacity is used up, public savings will have to rise to finance a larger share of the public investment needtd to sustain economic growth. 127. At the end of 1962, external public debt repayable in foreign currency totalled $36.6 million, of which $20 million was undisbursed. Much of it is on fairly soft terms; and the peak service payments in 1967 amount to 02.8 million, or less than 2 percent of projected export receipts. If the $150 million line of credit were fully utilized, the debt service would be about 10 percent of projected export earnings. A good guess would be that no more than $80-490 million would be needed to finance the three projects specified in the contract. If this turns out to be the case, and the remainder of the credit is not used, the Dominican Republic would be creditworthy for $0-$50 million of additional loans on conventional terms. Anything beyond that would require a new appraisal of the Dominican Republic"3 economic prospects in the light of the circumstances then prevailing. STATISTICAL APPEND IX: TAOLES 1 - 23 LIST OF TABLES Table No. External Public Debt le, Summary of External Public Debt 2~. Service on External Public Debt. 1963-1977 Ponulation. National Income and Production Trends 3. Population Trends, 1950-1961 Li CGram-m Nal -Jonal Produc 3- t, 1950-1962 5o Sugar Production and Exports, 1953-1962 6 Pro-n1t.on of Mnior Agricultural Items. 1950-1962 7, Production of Major Industrial Goods, 1950-1962 A- TranPnrt an rimmininntion. 196-1962 9. Electric Power Consumption, 1953-1962 Prices and Wages ll, Consumer Price Index in Santo Domingo, 1958-1962 13, Index of Wages in Principal Industries, 1950-1962 Financial and Fiscal Statistics LL ~ ouiLiiw: a ur-1-s uo. -1-he nanldng.i~ C-4 10 o - 15. Fiscal Operations of the Central Government, 1951-1962 100U en1raU uvi.nrU,u u 3Yug avy iD JApnU.LV UA , 17. Composition of Central Government Expenditures, 1955-1962 18. Central Government Budgeta-ry ReVene, 95,,96 Trade and Balance of Payments Saiics 19. Balance of Payments, 1950-1962 2o international Reserves of the Banking System, 195u-76U2 21L Principal Exports, Value and Volume, 1950-1962 22c imports by Major Categories, 1950-1962 23. Terms of Trada, 1950-1962 TABLE 1 DONINICAN REPUBLIC: EXTNAlL PUBLIC DEBT 0UTANDING INCLUDINMG UNDISUBSE AS OF D11111ECLR 31, 1962 WITH MAJOR REPORLTD ADDITIONS JANUA,Y 1 - FEBRUARY 28, 1963 Debt Repayable in Foreign Currencies (In thousands of U.S. dollar equivalents) Debtioutstandi ng Major reported December 31, 1962 additions et of T i n]ling Januarv 1 - Item undisbursed undisbursed February 28, 1963 TOTAL EXTERNAL PUBLIC DEBT 16,639 36,558 2,100 Privately-placed debt 3,166 3,5h3___ TT. ornment loans 1,7 3n3 2.100 Export-Import Bank 35 3,018 AID 12,634 25,O00 2,100 Department of Agriculture 804 h,997 Sori-ce: IBED Econcmic Staff. TABLE 2 DOMINICAN REPUBLIC: ESTIMATED COKRACTUAL SERVICE PAYMENTS ON EXTERNAL PUBL-C DEBT OUTSTANDING INCLUDING UNDISBUREDÏ AS OF DECEIBER .31 )7 WT-J TO) FEBRUAIRY c?9MäR96 Debt Repayable in Feoreign Currencies (In thousands i)fC U,S, dollar equivalents) Debt iut- United States GovernMent standing plus un- Payments during year Expert- disbursad Privately.- Import Year January 1 Amortization Interest Total Placed Debt Total. Bank Other 1963 36,558 3 324 3,341 3,202 139 3C9 1964 35,611 50D 319 8199 620 393 227 1965 35,h1 '19 362 1,283. 188 18C93 boa 685 1966 3k,222 847 357 .1,2CLC 105 1.99 393 706 1 33,375 2,'97 35 2,808 981 378 2,332 1968 30,918 2<363 319 2,82 2,682 36h 2,318 1969 28,555 2D363 291 25 2, 3569 2 32h 1.970 26,192 2,363 261 2,624 2,624 335 2,289 1971 23,ý829 2,363 231 29 259h 320 2,27h 1972 21.h66 2,363 2-5 2r568 2,68 306 2,262 1973 19,;103 2,ý40 173 2,574 2,574 292 2,282 1974 16,702 2235' 144 2",-8 2h98 277 2,221 1975 14j348 1,926 11 2,037 2.037 256 781 1,976 12, h22 1,680 89 1,769 1769 - 1,769 1977 1072 1,67 77 1,757 1,757 -157 2/ Includes service on all debt listed in Table 1 prepared on May 17, 19630 .urce: 1rRN Ennrnn r S-PV TABLE 31 DOINICAN REPUBLIC: POPULATION TRTIDS 195o-1961 1950 1951 1952 1953 1954 1955 1956 1957 1958 1959 1960 1961 1962 Total rid-year 1 (million inhab- itants) 2.129 2.201 2.276 2.354 2.436 2.522 2.611 2.704 2.800 2.900 3.013 3.118 n.a. % increase 3.4 3.5 3.4 3.5 3.5 3,5 3.6 3.5 3.6 3.9 3.5 - Birth rate 2) (live births por 1000) 37.2 33.9 41.4 40.3 42.2 41.5 40.5 40.9 41.3 39.8 n.a. n.a. n.a. Death rate 2) (deaths per 1.000) 10.0 9.9 9.9 8.7 8.4 9.1 9.1 8.6 8.4 10.5 n.a. n.a. n.a. 1) Direccion General de Estadistica y Censos: Datos Preliminares, IV Genso Nacional de Poblacion, 1960. A census was taken in 1950, and one in 1960. 2) U.N. Demographic Yecrbock 1960, and 1961. TABLE h DOMENICAN REPUBLIC: GROSS NATIONAL PRODUCT, 1950-1962 (million pesos) Prel, 1950 1951 1952 1953 1954 1955 1956 1957 1958 1959 1960 1961 1962 Private consumption 247 271 296 319 332 352 381 403 431 448 451 463 560 Public consumption 42 45 50 50 51 63 82 97 109 114 118 94 129 Total consumption expenditures 2 389 315 36 6 9 382 1i5 463 500 539 561 569 557 -689 i) Private investment 29 19 35 30 30 36 45 51 54 54 32 27 51 Public investment 24 28 48 37 50 76 64 61 65 51 41 36 20 Total grosS investrment expendLitures 53 46 83 68 80 112 109 112 119 105 73 63 71 Net exports of goods and services (including donations') 19 6 -5 3 22 -11 -6 20 -14 -21 50 41 13 Gross National Product at current prices 361 .368 424 439 484 517 565 631 645 645 692 660 773 Source: Banco Central de -La Republica Dominicana. 1) It should be noted that the consuner price index for 1J962 rose by about 7. TABLE 5 DOMINICAN REPUBLIC: SUGAR PRODUCTION AND EXPORTS 1953 1951 1955 1956 1957 1958 1959 1960 1961 1962 Area planted in cane ('000 hectares) 140 1.1 150 173 194 190 185 220 181 192 Production (t000 short tons) 629 724 701 856 919 921 890 1,223 96v 992 Total exports (1000 short trns) 1/ 611 562 636 769 851 740 734 1,210 827 891 U.S. market 30 32 32 L4 76 100 113 464 349 863 Price of exports (U.S. cents per lb.) U.S. market (Quota) 2/ 5,43 5.21 5.co 5.1, 5.30 5c41 5.35 5.35 5-36 5.56 World market 3.41 3.26 3.24 3Ai8 5.16 3.50 2.97 3.14 2,91 2.98 U.S. Quota premium 2.02 1.95 1.76 1,62 0.14 1.91 2.38 2.21 2 45 2.58 1/ Including both raw and refined sugar, at raw values. Refined sugar exports are a small part only of sugar exports. 2 Cuban equivalent by subtracting freight, insurance atd duty from raw sugar price New York basis spot Contract No. 6 until 1961, when Contract No. 7 was usrd, 3/ Spot price No. 4 World Contract f,a.s. Cuba until 1961 when No. 8 World Contract f.o.b. Caribbean ports was used. Source: ComisiLon de la Defensa del Azucar, U.S. Department of Agriculture, Sugar Reports, and Internaticnal Bank for Reconstruction and Development, Commodity Note No. 37. TABLE 6 DOMINICAN REPUBLIC: PRODUCTION OF 1AJOR AGRICULTURAL ITEBS ('000 metrie tons) Est,. Estim, cre-de-farmi L950 1955 1956 1957 1958 1959 1960 1961 1962 valite of production ___1962 (million pesos) Mainly for domestic use: Beans 23 23 18 18 21 27 24 17 19 3.3 Sweet potatoes 82 78 88 79 87 73 92 101 n.a. L3 6) Rice (unmilled) 60 74 79 99 116 113 120 127 132 170 Corn 83 90 90 94 98 99 101 102 104 5,8 Yuca 143 131 134 138 154 159 169 188 n.a, 3.4 6) Peanuts 16 53 45 45 61 65 62 4h 52 9.1 Cotton - - - - - 3 2 h 5 1.2 Eggs (million units) 61 54 52 50 54 53 53 n.a. n.a. 2,7 3) Milk (million liters) 66 2) - - 1h7 17 147 1147 150 n.a. 22,5 h) Beef (carcass ) 13 2) - - 15 18 18 20 20 . 1L.o 5) Mainly for export: Coffee 25 33 32 36 32 35 35 36 31 210 Cacao 33 29 28 35 34 32 34 30 34 9 Tobacco 22 18 19 21 21 18 23 26 27 10.8 Bananas 1) (million stems) 1.5 1.7 15 2.1 3.6 4.1 6.9 6.2 6.7 16 7) Sources: Direccion General de Estadistica y Censos, Banco Agricola, and United States Department of Agriculture, Indices of Agricultural Production for the 20 Latin American Countries, Preliminary 1961/62. 1) Exports, 6) 1961. 2) 1952--1954 average. 7) f.o.b. export va-Lue. 3 19 ,ed on retai-4.l pricc of ren per egg. L) 1961, based on retail price of 15 cents per liter. 5) 1961, based on packer's cost of 25 cents per lb, carcass weight. TABL-E 7 DOMINICAN REPUBLIC: PRODUCTION OF MAJOR INDUSTRIAL GOODS (millions of units) 1950 1955 1956 1957 1958 1959 1960 1961 1962 Peanut oil (liters) 2.8 9.0 10.5 11.4 13.1 13.2 13.-4 12.9 17.6 1) Rice (milled) 39.9 51.4 59.3 62.7 72.4 68.3 74.9 79.8 94.0 3) Sausage and other mPeat products (kg) 0.9 0,9 1.3 1.6 2.2 2.3 2,7 2.3 n.a. Corn and wheat flour (kg) 1.1 2.1 2.6 3.2 3.0 3.,9 17.8 28.6 30.7 2) Cheese (kg) 1.0 1.0 0.9 0.9 1.1 1.2 1,1 1.2 n.a. Cigarettes (units) 673 902 8.0 90! 902 845 d26 861 1090 3) Cigars (units) 35.9 30.2 27,5 28.0 23.4 26.9 29.8 25.9 n.a. Rum (liters) 3.3 14,5 4.7 4.3 4.3 3.4 3,8 4,4 n,a. Beer (liters) 6.6, 7.1 8.3 10.5 13.3 12.5 9.4 8.7 9.4 4) Textýiles (meters) 0.6 2.7 3.1 3.8 4.1 3,5 7.0 n.a. n.a. Fertilizers (kg) 4.0 5) 8.4 1.1.7 32.7 32.3 48<6 20.7 n.a. n.a. Glass (units) 6) - 1.7 2.0 5.7 19,0 94 14,.0 n.a. n.a. Cement (kg) 71.5 234.5 246.6 280.4 269.6 189.5 169.7 242.9 239.4 export 35.0 18.7 52.6 142.9 68.4 ,nternal consiucption 234.6 170.8 117.1 100,0 171.0 Lunber (square feet) 2>4.0 23.6 23.3 27.6 34.9 33.0 21.8 n.a. n.a. 1) First 9 ronths. 4) First 6 months. 2) Wlheat flour only; an estimated 10" should be 5) 1952: first year of production, added for corn flour. 6) i,ostly bottles. Source: Direccion General de Estadistica y Censos, Estadistica Industrial de la Republica D3nini- cana 1960, and subsequent data. TABLE 8 DOMINICAN REPUBLIC: TRANSPORT AND COILJUNICATIONS 1956 195 7 1958 195Q 1960 1961 1q62 Nunber of automobiles 7.07)1 7.209 8,321 9,616 9,879 9,851 13,9h0 trucks, buses and jeeps 7,513 7,011 8,0h 7,661 7,h39 7,l14 8,80b - - officiald veict.les 2,L39 2,hULh 2,89 3,1 3),597 3,i61 3,23h motorcycles & scooters 1,253 1,419 1,896 2,326 2,019 2,331 4,128 Gasoline consunption(milLigals.) 29.8 32.8 35.6 34.0 32.8 29,7 L1.7 Port traffic through Santo Domingo ('000 metric tons) n.a. i-,83 R ,019 909 1,210 635 L1, Traffic through other norts ('000 metric tons)> n,a. 1,011 993 1,669 2,439 1,642 2,195 Number of Telephones 2/ 11,033 12,767 14,665 17,065 19,361 20,463 23,936 Cncoming tourists ('000) n.a. n.a. n.a. n.a. n.a. 130 295 1 LAYrgely -pugap nri rnnnn e a also auite i-n-i in 1959. Source: Ministerio de Obras Publicas y Comunicaciones, Direccion General de Rentas Internas, Direccion General de Estadistica y Censos, CUrporacion de Fement Industrial, Doiinican Telephone Company. TABLE 9 DOMIICAN REPUBLIC: ELECT IC POUER CONSILiPTION. 1953-1 962 1953 1954 1955 1956 1957 1958 1959 1960 1961 1962 Generating capacity (PW) 44.5 44.5 44.5 45.0 57.7 57.7 70.3 70.3 70.3 71.9 Peak load (MW) 27.7 35.6 37.8 42.9 47.5 53.7 55,0 59.9 64.8 70.2 Consumption (million KWH) Residential 20.3 21.8 28.5 37.6 44.3 52.7 58.8 64.9 68.3 84.2 Cornmercial 10.3 10.0 13.9 18.1 21.8 26.2 28.8 31.6 31.2 35.6 Industrial 25.2 31.1 42.3 63.4 70.5 75,0 74.6 81.2 97.5 103.2 Public lighting 4.2 5.4 6.4 8.5 10.0 11.6 12.8 13.8 15.2 15.0 Gover=nent and Municipalities 7.4 80 8.7 13. 17.0 20.7 24.. 26.3 27.5 27.8 Total 67.4 76r3 99.9 141.5 163.5 186.1 199.4 217.9 239.8 265.9 1ue orprc"-in Döoryminirnnn. de Electricidad. TL-BLE 10 DOMINICAN REPUBLIC: PRICE TRENDS Wholesale prices Cost of living 1941 = 100 1941 = 100 1950 235 220 1951 261 238 1952 267 241 1953 267 237 1954 252 232 1955 254 232 1956 252 236 1957 276 247 1958 274 242 1959 258 242 1960 267 233 1961 250 224 1961 1) I 255 233 II 249 226 III 234 209 IV 248 219 1962 1) I 258 246 II 276 251 III 281 250 IV 285 252 1963 Jan. 290 256 Feb. 284 255 1) End of each quarter. Source: Banco Central de la Repiblica Dominicana. TABLE 11 DOMINICAN REPUBLIC: CONSUvER PRICE INDEX IN SANTO DOMINGO (1955 100) Total Food Housing Annarpl Other Weight 1.00 0.40 0.26 0.16 0.18 1958 100.0 100.0 100.0 100.0 100.0 i1959 Q 9.8 9.nn n0. ini.n ing.n 1960 96.3 100.0 9.1 92.1 106. Source: Direccion General de Estadistica y Censos. TABi' 19 DOMINICAN REPUBLIC: RETAIL PRICES OF STAPTE PRODUCTS 1961 - 1962 1960 = 100 1960 Aver- 1961 1962 age Price Mar. Jun. Sep. Dec. Mar, Jun. Sep. Dec. (cents per unit) Rice 0.15 (lb,) 103 68 68 68 75 77 82 89 Beans 0.13 (ib.) 90 130 105 86 105 12h 113 105 Plantains 1i56 (100) 106 6Li 5 72 11, 10 128 166 keat o.36 (1bý) 110 99 110 110 77 80 96 131 EL7s 0.05 (on) 100 110 1,10 1I 120 1o 100 130 Peanut Oil 0,,63 (hottle) 89 103 i(! 63 95 9c 95 87 Ru- 1'09 (½ ttle) 101 101 101 110 112 112 101 101 e Bnco C.ent..LaJ, oJU-Letí-1-n e n s ua TABLE 13 DOINHICAN R2PUBLTC: IliEX '.F 5AGS IN PRINCIPAL INDUSTRIES (19h1 0o) 1962 1.950 195 1956 1957 1958 1959 1960 1961 Tarch July Electricity production 186 211 213 226 222 219 2th 230 341 364 Food produets 239 348 370 424 h56 474 452 464 550 581 Textiles 273 320 352 339 354 3144 352 368 447 487 Chemicals 378 481 505 510 535 546 594 621 84 922 Forest products 254 314 300 318 341 310 499 380 339 350 Services 219 2L8 269 288 295 309 318 308 4d5 h8l General index 274 343 349 368 399 h09 h11 h36 56h 58h Source: Direccion General do Estadistica y Censos. ADTM I) DOHINICAN REPUBLIC: SUMMIARY ACUUUNTS U THE BA1a'i!MG STaSLe End of Period 1950 1954 1955 1959 1960 1961 1962 A. Foreign reserves (net) 30O 52.9 20.6 -5.2 2.4 -11o5 0.2 B. Domestic credit 38.8 86.4 142.0 153.6 140.2 1602 179.4 1. To Government (net) 7.6 -16.5 -12.4 3,0 1.3 15.8 2.6 2. To official entities (net) -0-1 -Jf 3 *2 4r* ULP 7 J'*. %- * * 3. To Agricultural Bank (net) - - 28.2 28.7 49.9 45.h 47.7 4. To private sector Vu u7. 72.3 u1 A - . 5, Unclassified items (net) [.h 2.1 8.1 9,8 12.0 12.3 14.7 C. Liabilities to private sector 52.3 108.6 147.7 130.5 127.4 119.0 138.8 1. Currency 19.4 34.2 50.5 50.5 48.4 51.6 62.4 a) nemanda (aneposit ),n -i RhAC Ah. 1.8 h,G.2 4. 3. Time and savings deposits 9 8 30,8 40,6 39.7 27,2 22,2 26.0 D. Capital and Surplus 16.5 30,,7 1,.,9 16.7 14.2 15.7 17.3 E. Commercial arrears - - - 1.2 1.0 14.0 23.5 Sources: Banco Central and International Monetary Fund. 'ABLEi, 15 DC.INICAN REPUBLIC: FISCAL OPERUTIONS OF THE CENTRAL GOVERNMENT (million pesos) 1951 1952 1953 195- 1955 1956 1957 1958 1959 1960 1961 1962 Revenues 89 9 96.5 102.2 113.1 12L9 138.1 150.7 154.5 1h5.1 113.4 11i3.0 149.8 Expenditures 76..9 104.4 91.4 107ý9 127.2_14,7 153,1163.6 157.6 147.3 138.5 162.C, ,Srplus (+) or Deficit (-) 13.0 -7.9 lo.8 5.2 -5.3 -6,6 --2.t -9.1 -12.5 -3.9 -20.5 -12 2 Used up by (-) or financed by (+) -13.0 7.9 -10.8 --52 5.3 6.6 2.4 9-1 12.5 3.9 20.5 12 2 Bank credit (net) -10.5 8.o 1.6 -6.3 -6.3 -0.4 2.0 8.0 9.3 4.7 11.5 -13,8 Claims of the private sector on the Government 1) -2,7 1.0 -12.0 - - - - - - 3.8 - Transfers from private sector 2) - - -- - - - - - - .7 18.8 Sales of official obligations Sales of official obligations - - - - 9.7 3.4 3.5 - - - - US budget support - - - - - - - - 7.0 Discrepancy 3) 0.2 -1.1 -o.h 2ý2 1.9 3.6 -3.1 1.1 3.2 -0.8 0.5 -0,8 1) Includes changes of Government securities and coins with the private sector, and in 1961 a direct loan from a 'Dominican citizen. 2) Cash previously held by Trujillo family, 3) Tncludes changes in outstandingý TreasLuy checks, and errors and omissions. Source: International Monetary Fund. T.<aLE 16 DOMI1U11CAN REPUBLIC: CENTRAL GOVEIRIIENT BUDGETARY EXPENDITURES (million pesos) Budget :1951 1955 1956 1957 1958 1959 1960 1961 1962 2963 Qur;nt tes 40.7 54.9 66.7 78.8 87.6 88.6 94.4 92M0 121.3 119.2 alarios 21,7 28.2 31.4 34.9 40.8 49.5 49.1 50.2 64.8 78.9 Other 1) 19.1 26>6 35.4 43.9 46.8 39.1 45.3 41.3 56.5 40.2 lkrMstment Exenditures 22.0 54.9 56.1 55.0 57.9 45.7 36.2 30.5 14.4 12.2 Construction 21.5 48.1 48.9 45.6 51.2 34.8 30.3 26.9 9.3 10.3 Equipment 6.5 6.8 7.2 9.4 6.7 10.9 5.9 3.6 5.1 1.9 Otherxne_e_ditures 2) 8.2 17.5 21.G 19.3 18.2 23.3 16.7 16.0 26.2 42.5 Fixed changes and transfers 5.6 8.5 10.7 12.7 10.4 16.5 11.9 10.2 18.4 30,8 Financial investments and land purchases 0.7 6.0 5.6 3.4 4.6 3,5 2.3 1.8 3.7 ) ) 5.1 Other 1.9 3.0 5.5 3.2 3.1 3.3 2.5 4.0 4.1 ) Total 76.9 127.2 144.7 153.1 163.6 157.6 147.3 13.5 162.0 167.3 1) Includes some salaries 2) voct of these are pensions, transfers to loco1 governments, interest payments, and land purchases. Ccurce: Gcretaria de Estado de Finanzas, and staff estimates, ?ABLE l'( DOMINICAN REPUBLIC: COMPOSITION OF CENTRAL GOVERNMENT EXPENDITURES (million pesos) Budget 1955 1956 1957 1958 1959 1960 1961 :1962 1963 Legislature 0.5 0.6 07 07 0.8 0.7 0.7 0.4 0h9 Presidency and Executive 4.4 3.2 46 9.4 6, 1.5 12.0 9.5 15.9 Govtt Departmerits (except Presidency) 129.0 136.4 146h 152.7 143.5 139.9 122.0 147.3 -149.6 of which: Armed Forceg 23.6 29,2 35,6 35.5 42.6 33.4 31.6 32.3 32.3 Interior and Police 5.6 7.7 78 9.0 11.8 7.7 5.9 22.0 29.3 Fina.nces 29.3 20.6 17.9 17,6 12.6 30.3 25.3 27.7 19.7 Education (incuding University) 9.5 10.4 11.6 13.7 12.8 10.2 10.5 13.1 16.2 Agriculture 3.9 3.4 4,8 12.2 12.3 10,9 7.8 9.3 10.3 Public Health & Social Welfare 7.1 7.7 8.h 11.8 108 11.2 10.2 L1.2 14.4 Public Works 33.3 43.5 52,1 39.4 29.3 30,6 24.6 2l 16.5 Justice, - - 2,8 3.4 3e9 3.1 3.1 3,0 4.6 Judiciary and various tribunals (exeluding Pinistry of Jugti(e) 1.8 8 0,2 0,1 0.1 0.1 0.1 0.1 0.9 Other (incl. liquidation prevr. budget) 0.5 3,6 1.3 0.8 5.8 4.5 3.7 2.7 - Total 127.2 1lU.7 153.1 163.6 157.6 147.3 138.5 162.0 L67.3 Source: Secreta:ria. de Estado de Finanzas Includes subsidiles of5 152 to mni¯ Cip<Lities 2_/ Includes subsic:ies of' 15e0 to mun:icipalitiLes TABLL IC DOMINICAN REfUBLIC: CENTRAL GOVERIIWNMF BUDGETALY REVENUES (million pescs) Budget 1951 1955 1956 :1957 1958 1959 1960 1961 1962 1963 A. Direct Taxep 10.9 16,3 18j3 20.8 24.6 23.8 21,2 20.7 17.8 23.2 Business taxes 15.1 15.0 12.6 12.8 12,6 Head tax 7.4 7.4 7.1 6.7 0.8 Other taxes (including personal income tax) 2.1 1.4 2.5 1.2 4.4 B. I rdirect Taxes 107.L 101.3 101.4 79.8 11L.8 122.9 Import taxes 26.9 41,0 43.9 46.4 49.1 40.6 34.8 29.0 59.4 62.8 Export taxes 11.7 17.3 16.0 16.3 16.5 13.3 14.9 9.0 5.4 5.3 Production and sales taxes 26.2 243 24.0 31.8 25.4 25.5 29.6 23.8 30.6 35.5 of which a-Lcoholic beverages 4.6 5.1 5,3 6.2 5.6 6.2 6.1 11.8 11.5 cigarettes 4.0 3.8 4.6 4.3 4.4 4.7 4.1 6.3 12.0 sugar 5.5 4.8 9.1 4.7 4.6 5.9 5,6 0.9 - Other 8.7 10.2 9.8 9.0 7.5 7.3 Surtax ) 8.1 11.7 12.3 9.0 11.9 12.0 ) C. Nontax receints ) 14.7 23.0 35.4 35.4 22.5 20.020,817.5 17.2 292 Fublic service receipts ) 14.0 11.8 10.2 9.9 8.4 9.2 Income from nationalized enterprises - - - - 4.3 18.0 Other )8.5 8.2 10.6 7.6 4.5 2.5 D. Total 121-9 -31 150,7 154.5 145.1 1l3.4 118.0 119.8 175,8 Source: Secretaria d3 ZXdo d, F9 i'3s, anu staff estimates. TABLEB 95 DOMINICAN REPUBLIC: BALAICE OF PAYMENTS 1950 - 1962 (million US. dollars) Frelim, 1950 1951 1952 1953 1954 1955 1956 1957 1958 1959 1960 1961 1962 Exports (f.o.b.) 1) 86.9 119.5 116.3 10.3 12L0 2.15.0 121.8 16L5 134.7 1318 164.6 137.9 172.5 ILMports (f.o.b) 1) -43.O -76.9 -97.0 -86.0 -83h6 -100.2 -110,0 -117.5 -134. -126.5 -90.3 -72.0 -126.5 Trade Balance 43,9 42.6 19.3 18.3 37,6 14.8 11.8 44.0 0 3 5.3 74.3 65.9 h6.0 Irvestment income payments -12.3 -26.5 -14.4 -6.4 -4.2 -12.5 -6.3 -12.0 -4.1 -15.2 -13.9 -13.3 -15.2 Jther services including donations (net) -12. -9.8 -10,5 -8.8 -118 -12.9 -L,8 -11.8 -9.9 -12 -10.6 -11.7 -18.0 Current Account Balance 19,2 6.3 -5.6 3.1 216 -10.6 -6.3 20.2 -13e7 -21.1 49.8 L,0.9 12,8 Official Iong-term capital -0.3 -0.1 -0.3 - - -13.2 -1.3 -4.7 - - - - 16.3 Private long-~term capital -12 7.7 2.3 -8.0 6.6 1,1 5.0 -Li 33.0 6.2 -2.7 -30.5 Private short-term capital -L11 0.9 1.0 -37 -1.1 -9.2 -4.0 11.9 -0.3 7.5 -11-1 17.1 16.9 Net errors and omissions -12,0 2.0 2.1 2.3 -10.4 15.6 -0.6 -31.2 -22.8 -19.9 -28.3 -41.3 -32.5 Surpius cr Deficit 4.6 16.8 -0.5 -6,3 16.7 -16.3 -7.2 -h.9 -3.8 -27.3 7.7 -13.8 11.5 1) The discrepancy between these data and those in Tables 21 and 22 is explained by the fact that the data in Tables 21 and 22 tend to record the moverrierit of goods rather than payments; the discrepanc.ies in 1960 and 1961 export data are due to the special duty applicable to Dorniciian sugar exports to the U.S. in 1960 and 1961; this duty is inciuded. in Table 21. and excluded here,. SDurce: InL,ernational M'4onetary Fund TABLE 20 DOMINICAN REPUBLIC: INTERNITIONAL RESERVES OF THE BANKING SYSTEM (million U.S. dollars) Commercial Total Commercial End of year Central Bank Banks (all banks) arrears (net) 1/ (net) 1/ (net)-1/ (all banksl 1950 19.4 10.5 30.0 - 1951 29.7 13.0 42.8 - 1952 32.3 10.3 42.6 - 1953 28.2 7.9 36.2 - 1954 35.8 17.1 529 -- 1955 29.2 7.3 36.5 - 1956 25.3 4.1 29.4 - 1957 24.5 0.3 24.8 - 1958 19.3 1.3 20.6 - 1959 12.3 -17.5 -5.2 1.2 1960 11.7 -9.3 2.4 1.0 1961 -4.7 -6.8 -11.5 14.0 1962 7.9 -7.7 0.2 23.5 1/ Excluding commercial arrears. Source: International Monetary Fund, TABLE 21 DOMINICAN REPUBLIC:PRINCIPAL EXPORTS. VALUE AND VOLUME 1950-62 1950 1955 1956 1957 1958 1959 1960 1961 1962 Value of Exrorts 83.5 114.9 1246 161,0 136.6 130.1 180.4 143.1 172.5 (million U.S. dollars) Raw sugar 37.5 39.8 49.8 83.2 54.5 45.6 85.2 59.0 87.2 Furfural. - 0.9 15 3.1 3.1 3,6 3.2 2.4 2.6 Other sugar by-products 3.2 5.0 6.4 11.2 6.0 9.7 9.0 8.3 9.6 Cacao 14.6 16.8 8,9 13.5 20.6 15.1 13.9 5.0 7.6 Chocolate 2.7 7.0 5.3 5.5 8.0 7.2 5.7 5.6 3.6 Coffee 12.3 28.3 32.8 25.1 23.8 17.5 22,6 13.7 19.9 Tobacco 4.7 4.9 5.1 5.2 4.8 5.0 6.7 9.5 10.0 Bananas 0.9 2,0 2.0 2.6 4.8 6.0 11.2 11.3 11.6 Bauxite - - - - - 5.1 8,0 9.4 8.7 Other 7.5 10.1 12.7 11.7 112 15.3 14.6 18.9 11.6 Volume of Exports (1000 metric tons) Raw sugar 424.6 556.1 666.1 723.4 651.5 626.0 1,060,0 732.9 781.9 Furfural - 3,9 6,,4 12,.6 13.7 17.4 14.9 10.1 12.3 Cacao 25.8 22.6 17,5 24.0 24.1 21.7 26.1 11.7 18.8 Chocolate 4.4 8.o 8.7 8.1 7.8 8.6 8,8 10.4 6.6 Coffee 12.9 24.4 26.4 21.7 25.8 21.9 29.2 20,1 29.2 Tobacco 14.5 13.1 13.5 11.8 11.5 12.2 15.2 22.0 18,2 Bananas (million stems) 1.5 1.7 1.5 2.1 3.6 4.1 6,9 6.2 6.7 Bauxite - - - - - 489.0 787.1 869.3 869,2 So,urce Be;c Gentral de la Bepblia Dominicana, BolIn Mensel. TAELE -2 DCI4INICAE REPUBLIC: IIiPORTS DYl iAJOR AT LGORIES 1-950-1962 (million U.S. dollars) Jan.-July Prelim. 1950 1951 1952 1953 1954 1955 1956 1957 1958 1959 1960 1961 191 1962 1962 Food products 5.1 7.7 10.1 9.0 8.8 8.7 9.4 10.6 11.9 10.3 u.5 6.3 3.2 9.7 Machinery and equipm ent 3,2 3.6 14.4 11.2 12.3 15.4 17.2 16.7 21.2 23.3 12.7 8.0 4.6 3.9 Vehicles 3.1 3.8 9.1 10.5 6.7 6.7 8.6 10.3 14.0 11.2 5.6 3.4 2.0 5.3 Iron, steel and manufactures 3.1 4.6 7.9 6.1 6.7 6.5 8.0 8.4 9.5 7.1 6.4 5.0 2.8 4.1 E,lectrical equipment and appliances 2.2 2.7 5.2 6.3 4.8 5.8 7.4 7.0 9.3 9.S 5.8 4.0 2.6 3.1 Building materials (iron and steel) 1.8 1.7 3.4 4.0 3.9 6.4 6.2 6.9 6.1 2.7 2.5 2.2 1.0 2.5 Nineral oils and gasoline 28 4.5 5.6 5.6 5.8 Ö.0 8.9 10.1 9.2 9.5 9.1 7.9 4.ö 5.5 Chemical and pharma- ceutical products 2.5 4.1 5.0 4.1 4.6 5.0 6.3 7.6 8.0 9.0 7.4 748 4.3 4.9 Cotton and imanu- factures 6.0 7.4 9.1 7.5 8.2 7.6 8.3 10.0 9.6 7.5 7.7 6.6 3.4 3.6 Silk and manufactures 1.2 2:.6 2.7 2.3 2.3 2.3 2.4 2.3 2.4 1.8 1.6 1.3 0.7 1.6 Paper and manu- factures 15 2.3 3.9 2.6 3.C0 3.5 3.8 4.1 4.5 4.2 3.5 2.9 1.8 3.0 Rubber and manu- factures 1.0 1.5 2.8 2.6 2.3 3.0 2.9 3.1 3.5 3.2 3.1 3.0 1.7 2.5 Other products 10.1 12.1 17.7 14.7 13.4 19.2 19.0 19.4 20.4 17.9 13.1 11.1 6.3 9.3 Balance of paynents adjustments 1/ -0.6183 -0.1 -0.5 0.6 2.1 1.-6 1.0 _.8 9. 3.3_ -2.5---- 2.2 Total, f. o.b. imports 43.0 76.9 97.0 86.0 83.4 100.2 110.0 117.5 '134.4 126.5 90.3 72.0 39.2 64.0 123.3 Source: Direccion G,-nerl de Estacistica y Censos: Comei_ ; Le la Renb]ica Doinica_ra; Banco Cen- tral de la RepublicaDomini International ronnry Fund j/ Refers to gooIs not inorted in the year in which ownership wias transferred, coverage and some special government inprts, TABlE 23 DOMINICAN REPUBLIC: TERMS OF TRADE 1950 - 1962 Export Prices (Sugar) Import Prices 1) Terms of Trade (>I) 1950 9o 115 00 11o 1951 123 151 95 128 1958 100 10 100 100 1953 95 94 94 87 1954 109 86 93 117 1955 94 86 94 10c0 1956 92 90 97 95 1958 100 100 100 100 1959 87 88 100 87 1960 86 96 101 85 1961 81 96 103 79 1962 (2nd 105 141 103 102 quarter) 1) U.S. index of export prices: other important exporters to the Dominican Republic (Canada, Germany) do not vary enough from this to make adjustment worthwhile. Souzce: internstional Financial Statistics, adjusted for change of series from 1953 base to 1958 base in later statistics.