While tourism remains key to the Dominican Republic, its economy is diversifying into other areas.
By David Franco
On May 21st, with 51.21% of the total vote, Danilo Medina of the ruling Dominican Liberation Party (DLP) secured a narrow victory in the Dominican Republic’s presidential elections amidst accusations that his party influenced the campaign through interference and vote rigging.
A former Secretary of State in two of three of Leonel Fernandez’s administrations (1996-2000 and 2004-2006), Medina ran as the continuation candidate cementing the DLP’s quasi hegemony in the Caribbean country. The opposition front-runner Hipolito Mejia, leader of the Dominican Revolutionary Party (DRP) and Dominican Republic’s President between 2000 and 2004, finally accepted defeat on May 23rd.
In a country where presidential elections are usually conducted in a climate of violence (for example, the presidential elections of 2008 resulted in several deaths and a number of injuries), the relatively low incidence of violent protests this time has come as a positive sign. However, the fact that Medina obtained such a narrow victory amidst what leading international organisations and observers have labelled as fraudulent practices during the election campaign raises questions about the state of the country’s fragile democracy.
Voters have confirmed that they value the financial stability that the DLP, and specifically Leonel Fernandez, has brought to the country, with Medina’s campaign slogan being ‘the best change is the safest change’. Fernandez inherited a banking crisis in 2004 and was able to effectively stabilise the country’s economy, earning the support of a large part of Dominican society.
However, concerns over corrupt practices in the public sector persist. In this regard, Medina’s lack of a clear policy programme to tackle corruption may result in the entrenchment of these practices, which are widespread across the country (according to Maplecroft’s corruption index, the Dominican Republic is ranked 83 out of 197 countries where 197 represents the lowest risk). The prevalence of corruption is likely to continue to affect the business environment, posing challenges to the private sector.
Vote-rigging allegations
International observers and local NGOs have confirmed that vote rigging practices took place throughout the electoral campaign. However, whilst evidence points to malpractices in both parties, local NGO Participacion Ciudadana claims that the Government’s buying of votes greatly exceeded that of the opposition. In what appears to be an attempt to prevent political instability, both the international community and opposition leader Hipolito Mejia have accepted the result of the elections.
Analysts have also been quick to point out that Medina risks governing under the shadow of former President Leonel Fernandez. Fernandez was first elected president in 1996 and then again in 2004 and 2008 after an amendment to the constitution in 2002, which was ironically adopted under the presidency of this year’s DRP front-runner and former president Hipolito Mejia (2000-2004).
Mejia reintroduced the right for immediate re-election capped at two consecutive mandates, hoping one day to return to office. But instead, Mejia’s reform has left the door open for Fernandez to run for Presidency again in 2016, a scenario that local press consider likely.
Likely policies
In addition, Medina’s decision to appoint former First Lady Margarita Cedeno as the country’s Vice President raises serious questions over Fernandez’s likely influence and control over the new administration.That said, broadly speaking democratic institutions face no real threat in the Dominican Republic; political stability and the independence of the country’s institutions are generally guaranteed. However, corruption continues to pose a significant challenge to the country’s democratic system as highlighted above.
Medina’s government will likely continue to reinforce the previous administration’s friendly approach to foreign investment. Despite the global economic downturn that has affected the Dominican Republic’s main trading partner the United States, the country has continued to grow at a solid pace. Furthermore, the relationship with international institutions remains solid as evidenced by the successful 2010 agreement with the International Monetary Fund which granted the country $1.7 billion in financing.
No doubt this has contributed to an increase in foreign direct investment since Fernandez took power for the second time in 2004, underpinned by growth in the telecommunications and finance industries and significant investment in infrastructure. However, despite continued growth, poverty remains a significant issue. Almost a third of the population lives under the poverty line and unemployment remains high, with the main industries failing to create jobs.
Crime and drug smuggling are on the rise with intelligence reports pointing to senior officials involved in drug trafficking. In this regard, a lack of a clear and credible programme to tackle the country’s high level of corruption represents the principal threat to foreign investors. Businesses operating in the Dominican Republic will therefore continue to be at risk of complicity and the ensuing legal and reputational risks while operating in the country.
David Franco is an analyst at Maplecroft.
For information on Maplecroft’s Election Monitors, please see here: http://maplecroft.com/portfolio/election_monitor/
