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Mr. Markus Rodlauer and Mr. Alfred Schipke

Abstract

Central America has received growing attention as a region that is integrating successfully into the global economy. This paper examines—among other things—the macroeconomic and fiscal implications of the Free Trade Agreement with the United States (CAFTA-DR), noting that the agreement will provide a boost to the integration process. To maximize the benefits in terms of faster sustainable growth, poverty reduction, and social progress, however, the region also needs to press ahead with ambitious structural reforms to entrench macroeconomic stability and ensure an attractive environment for investment, while stepping up regional cooperation in the areas of taxes and tax administration, financial systems, and statistics.

Mr. Jaime Cardoso and Mr. Philip M Young

Abstract

This paper summarizes the authorities’ stabilization efforts, how these efforts were subsequently reinforced by certain key structural reforms, and other related developments that help explain the remarkable performance of the Dominican Republic’s economy in the 1990s during which the country achieved one of the highest output growth rates in Latin America, combined with low inflation, and a much improved external debt profile. The authorities often resorted to external arrears as a means of financing the external current account deficits of the 1980s. Although rescheduling agreements were reached with the international banking community and with the Paris Club of official creditors in the mid-1980s, they met with limited success until the authorities embarked on their stabilization program of the early 1990s. Large and persistent fiscal deficits represented a significant burden for monetary policy. Although at the beginning of the decade more than half of the public deficit was financed by foreign loans, episodes of default on external and domestic government debt led to a progressive drying up of these sources of financing.

P. Young, D. Dunn,, A. Giustiniani,, F. Nadal-De Simone,, E. Tanner, and J. McHugh

Fiscal adjustment and tax reform during the early 1990s were instrumental in achieving high real economic growth rates and moderate inflation for the remainder of the decade. However, by the middle of the decade the reform process slowed substantially. In recent years, important gains in tax administration helped to keep the overall public sector deficit in check, while a greater reliance on broad-based domestic taxes was gradually being achieved The authorities have proposed or are considering a number of fiscal policy reforms that would extend the progress made in recent years and would enhance the transparency and efficiency of public sector operations. It is expected that over the medium term the savings achieved from this reform agenda would allow an increase in government spending in priority areas, such as health, education, and basic infrastructure.

International Monetary Fund

This paper examines the Uruguay Round and its implications for the Dominican Republic. The ratification of the Uruguay Round Agreement has several implications for the Dominican Republic. Certain regulatory and legislative reforms will have to be addressed, some new specific institutional mechanisms developed, and several commitments will have to be implemented. In addition, the competitiveness of the Dominican Republic regarding several export products may be affected. The paper highlights that the Dominican Republic has committed to unifying all import charges to no more than a harmonized level of 40 percent.

International Monetary Fund

This paper examines the Uruguay Round and its implications for the Dominican Republic. The ratification of the Uruguay Round Agreement has several implications for the Dominican Republic. Certain regulatory and legislative reforms will have to be addressed, some new specific institutional mechanisms developed, and several commitments will have to be implemented. In addition, the competitiveness of the Dominican Republic regarding several export products may be affected. The paper highlights that the Dominican Republic has committed to unifying all import charges to no more than a harmonized level of 40 percent.

Mr. Markus Rodlauer and Mr. Alfred Schipke

Abstract

Central America has received growing attention in recent years as a region that is integrating successfully into the global economy. A decade and a half after the end of civil conflicts and serious economic dislocation in parts of the region, Central America has seen great progress on many fronts: peace and democracy have been firmly established, economies have stabilized and important market-oriented reforms have been implemented, and trade and financial openness have increased notably. As a result, growth has returned and social indicators have improved. At the same time, the glass can also be seen as half empty: poverty is still widespread in most countries; economic and social progress remains constrained by weak institutions and political difficulties; and the institutional framework of regional cooperation and integration is still at an early stage. There is concern that these problems, if unaddressed, could inhibit sustained growth and therefore undermine domestic consensus on the stability and market-oriented policy frameworks now being followed throughout the region. The key task facing policymakers in Central America is thus how to entrench and strengthen the virtuous cycle of good policies and strong institutions, solid growth that is more widely shared across societies, and domestic consensus on the policy framework. The vigorous embrace by the Central American countries and the Dominican Republic of the Free Trade Agreement with the United States (CAFTA-DR) is clear testimony of their commitment to a strategy of outward-looking and market-oriented integration to meet these challenges. This paper looks at the progress that has been made, the challenges ahead, and the region’s efforts to meet them.

Mr. Jaime Cardoso and Mr. Philip M Young

Abstract

Since 1992, the Dominican Republic has experienced an extended period of robust economic growth, declining unemployment rates, modest consumer price inflation, and a generally manageable external position. Indeed, in the second half of the 1990s, the Dominican Republic ranked among the world’s fastest-growing economies, with particularly strong performances in the telecommunications, construction, free-trade zone, and tourism sectors.

M. Ayhan Kose, Mr. Alessandro Rebucci, and Mr. Alfred Schipke

Abstract

Five Central American countries (Costa Rica, El Salvador, Guatemala, Honduras, and Nicaragua) and the United States signed the Central American Free Trade Agreement (CAFTA) in May 2004. The Dominican Republic (DR) joined the negotiations at the beginning of 2004 and signed the agreement (CAFTA-DR) in August 2004. The agreement will go into effect after the respective legislative bodies have ratified it.1

Mr. Jaime Cardoso and Mr. Philip M Young

Abstract

During the early 1990s, the Dominican Republic undertook a number of important reforms to liberalize its trade regime. The most significant reforms took place in September 1990 as part of the New Economic Program, when the protectionist regime, which shielded domestic producers with high tariffs and cumbersome nontariff barriers, was largely dismantled. These reforms were consolidated in 1991–92, when the authorities simplified the exchange rate system and introduced a series of tax reforms that eliminated several important trade-based taxes, including all export taxes.