LatinFinance - March/April 2016 - 28

formance," and that growth was "fueled
mainly by domestic demand." The IMF
forecasts less expansion than Medina for
the $64 billion economy this year, pegging
growth at around 5.4%.
The country of 10.5 million people has
benefitted from a string of positive turns,
including the development of its mining
sector, a major boost in public spending, a
flood of new tourists and the steep decline
in oil prices-all of which the government
has used to its advantage.
The positives outweigh potential challenges that include the Dominican Republic's high debt burden and low tax haul. Tax
collection is equivalent to around 13.5% of
GDP, among the lowest in the region, along
with Guatemala.
The IMF, however, says that the current
cyclical upturn provides a good opportunity to address remaining vulnerabilities,
build buffers against risks and strengthen
the foundations for a sustainable and more
inclusive growth in the future."
S&P analyst Manuel Orozco says conditions are in place for continued strong
growth. "Estimates show growth last year
around 7%, which is almost the same as
2014. The interesting thing is that in 2014
the Dominican Republic was influenced
by gold production, but last year there was
also tourism and construction. You cannot
point to just one driver of growth," he says.

MANUEL OROZCO, S&P

"THE INTERESTING
THING IS THAT IN 2014
THE DOMINICAN
REPUBLIC WAS
INFLUENCED BY GOLD
PRODUCTION, BUT
LAST YEAR THERE WAS
ALSO TOURISM AND
CONSTRUCTION. YOU
CANNOT POINT TO
JUST ONE DRIVER OF
GROWTH"

Vacation hub
The government sees tourism as a long-

Dominican Republic GDP growth
Maintaining a margin

12
Latin American & Caribbean

Dominican Republic

% chnage in GDP

8
6
4
2
0

Source: World Bank
*Forecast

28 L ATINFINA NCE.COM - March/April 2016

2018*

2017*

2016*

2015*

2014

2013

2012

2011

2010

2009

2008

2007

2006

2005

-2

term growth catalyst and is pumping money into infrastructure to improve access to
existing resort areas and to open up new
zones. The country hosted approximately
5.6 million tourists in 2015, according to the
Caribbean Tourism Organization (CTO), an
increase of 8.9% over the previous year. The
Medina administration wants to increase arrivals to at least 10 million within a decade.
The government expects FDI to follow
tourists. "Tourism remains quite robust and
in terms of FDI it is going to stay in the lead,"
says Kelli Bissett-Tom, associate director at
Fitch Ratings.
The country received $2.2 billion in FDI
in 2014, according to the Economic Commission for Latin America and the Caribbean, up 11% from the previous year. Although
2014 FDI was largely divided between the
sectors of manufacturing (26%), natural resources (21%) and tourism (23%), Díaz says
the weight has shifted and the portion going
to tourism has staged a big jump.
"A few years ago we had a big mining
project, but tourism has been booming in
the last three years. We have huge investments in hotels. We built highways from
Santo Domingo to all the tourist cities."
Such development, Díaz says, has fueled
a countrywide boom in investment. "Before
it was only the east, in Punta Cana. Now we
have a lot of investment flowing north."
Authorities hope that Samaná will eventually rival Punta Cana, which currently
receives around 80 direct flights daily
from around the world, according to Díaz,
including a huge uptick in Russian tourists
this decade. French company Vinci Airports announced in December that it would
acquire six of the nine airports that operate
in the Dominican Republic from Advent International, a private equity firm, including
facilities in Santo Domingo and Samaná.
President Medina was on hand in early
February to lay the cornerstone of the
new Hard Rock Hotel and Casino in Santo
Domingo, providing the capital city with
another draw. The facility is scheduled to
open at the end of 2017. The chain already
operates a similar facility in Punta Cana.
One complication could be the changing
dynamic between the US and Cuba, with
Cuba potentially becoming a major competitor for tourism revenue. Cuba saw the
region's largest expansion of tourist arrivals
in 2015, according to the CTO, increasing by
17.4% to 3.2 million visitors. S&P's Orozco
says Cuba will become a direct competitor
continued on page 32

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