Chapter

DOMINICAN REPUBLIC

Author(s):
International Monetary Fund. Monetary and Capital Markets Department
Published Date:
September 2004
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(Position as of March 31, 2004)
Status Under IMF Articles of Agreement
Article VIIIDate of acceptance: August 1, 1953.
Exchange Arrangement
CurrencyThe currency of the Dominican Republic is the Dominican peso.
Exchange rate structure
UnitaryOn January 1, 2004, the foreign exchange market was unified, leading to the transfer of external debt payments to the private market. Previously, there were three exchange rates: the official exchange rate set by the Central Bank of the Dominican Republic (CBDR), the rate used by commercial banks for foreign exchange transactions with the public, and the extrabank market rate determined by foreign exchange transactions with exchange houses. On October 6, 2003, all private sector transactions began to be settled on the private free market.
Classification
Independently floatingIn January 2004, the authorities ceased their policy of intervening in the foreign exchange market to manage the exchange rate. Previously, the CBDR intervened occasionally in the market via a foreign exchange desk that managed purchases and sales of foreign exchange for the CBDR, the commercial banks, and foreign exchange dealers. As a result, effective January 31, 2004, the exchange rate arrangement of the Dominican Republic has been reclassified to the category independently floating from the category managed floating with no preannounced path for the exchange rate. The reference exchange rate is set daily by the CBDR as the weighted average of the previous day’s rate at commercial banks and exchange houses.
Exchange taxNo.
Exchange subsidyNo.
Forward exchange marketNo.
Arrangements for Payments and Receipts
Prescription of currency requirementsSettlements with Bolivia, Brazil, Chile, Colombia, Ecuador, Mexico, Peru, and Uruguay may be made through two accounts that were established under reciprocal credit agreements within the framework of the LAIA. Imports (debits) and exports (credits) are recorded in these accounts, and all payments must be invoiced in dollars. All other transactions must be expressed in domestic currency; however, transactions between residents and nonresidents may be made in any convertible currency.
Use of foreign exchange among residentsContracts in foreign currency are legally binding.
Payments arrangements
Bilateral payments arrangements
OperativeYes.
Clearing agreementsYes.
Barter agreements and open accountsSettlements take place under reciprocal credit agreements with Argentina, Bolivia, Brazil, Chile, Colombia, Ecuador, Mexico, Peru, Uruguay, and Venezuela.
Administration of controlExchange control policy is determined by the Monetary Board and administered by the CBDR.
International security restrictionsNo.
Payments arrearsNo.
Controls on trade in gold (coins and/or bullion)No.
Controls on exports and imports of banknotes
On exports
Domestic currencyTravelers are allowed to export up to RD$20,000 in domestic banknotes and RD$100 in coins.
Foreign currencyTravelers are allowed to export up to US$10,000 or the equivalent.
On imports
Domestic currencyTravelers are allowed to import up to RD$20,000 in domestic banknotes and up to RD$100 in coins.
Resident Accounts
Foreign exchange accounts permittedYes.
Held domesticallyResident corporations and individuals may locally maintain savings or time deposit accounts in dollars or in any other freely convertible foreign currency at banks authorized to offer full services.
Accounts in domestic currency held abroadNo.
Accounts in domestic currency convertible into foreign currencyAccounts denominated in Dominican pesos are convertible against other currencies. Economic agents may enter into transactions involving foreign currencies on freely negotiated terms, in accordance with the general rules and regulations governing contracts.
Nonresident Accounts
Foreign exchange accounts permittedNonresident corporations and individuals may locally maintain savings or time deposit accounts in dollars or in any other freely convertible foreign currency at banks authorized to offer full services.
Domestic currency accountsYes.
Convertible into foreign currencyYes.
Blocked accountsNo.
Imports and Import Payments
Foreign exchange budgetNo.
Financing requirements for importsNo.
Documentation requirements for release of foreign exchange for importsEffective October 6, 2003, all imports are settled on the private free market. Previously, oil transactions were effected through the CBDR at the official rate on behalf of the REFIDOMSA (Refineria Dominicana de Petrólio); all other imports had to be settled through commercial banks and were subject to documentary requirements.
Import licenses and other nontariff measures
Positive listThis list includes beans, corn, garlic, milk, onions, poultry, rice, and sugar.
Negative listImports of live animals; seeds; plants; fruits; plant and animal products that are unhealthy, decomposing, or infected with germs or parasites; and substances harmful or injurious to human, plant, or animal health are prohibited.
Licenses with quotasImports of beans, corn, garlic, milk, onions, poultry, rice, and refined sugar require licenses.
Import taxes and/or tariffsThere are five tariff rates: zero, 3%, 8%, 14%, and 20%. A commission of 10% is charged on all imports, and it is collected by the General Directorate of Customs. There is a temporary import system for the entry, free of import duties and taxes, of certain goods that are to be reexported within a maximum of 18 months of being processed, worked, or repaired. In addition, there is a zero rate for imports of inputs, machinery, and equipment to be used in the textile and agricultural sectors.
Taxes collected through the exchange systemYes.
State import monopolyNo.
Exports and Export Proceeds
Repatriation requirementsNo.
Financing requirementsNo.
Documentation requirementsNo.
Export licenses
With quotasLicenses are required for sugar and textile exports to the United States. Bananas are subject to quantitative restrictions in the EU, as are coffee and cocoa in the markets of signatories to the International Coffee and Cocoa Agreement.
Export taxesOn January 6, 2004, a temporary common levy of 5% was imposed on gross proceeds from exports of domestic goods and services for a period of six months.
Payments for Invisible Transactions and Current Transfers
Controls on these transfersAll invisible payments may be made freely through commercial banks, subject to documentation requirements.
Investment-related paymentsNo controls are exercised on the transfer of profits.
Personal paymentsNo controls are exercised on the transfer of pensions and family maintenance payments.
Foreign workers’ wages
Prior approvalPrior approval of the president of the Republic is required for the hiring of Haitian workers to harvest sugarcane.
Other paymentsTechnical assistance fees must be registered with the CBDR.
Proceeds from Invisible Transactions and Current Transfers
Repatriation requirementsNo.
Surrender requirementsEffective October 6, 2003, surrender requirements were lifted. Previously, certain receipts (e.g., for international phone calls and credit card operations, as well as operations of foreign embassies) had to be surrendered to the CBDR.
Restrictions on use of fundsNo.
Capital Transactions
Controls on capital transactionsYes.
Controls on capital and money market instrumentsThe transactions are regulated under the Law on the Securities Market and, effective January 1, 2003, by the newly established Superintendency of Securities.
On capital market securitiesThe local capital market is still emerging. Shares and bonds are not yet traded. Only the primary market’s own operations are carried out using commercial paper denominated in domestic currency.
Controls on derivatives and other instrumentsNo.
Controls on credit operations
Commercial credits
To residents from nonresidentsPrior CBDR approval is required.
Financial credits
By residents to nonresidentsBanks and credit institutions may extend direct or indirect loans and guarantees to a single resident or nonresident individual or legal entity for up to 10% of their paid-up capital and reserves, or up to 20% of capital and reserves if such operations are secured with first-rank mortgages or real guarantees.
To residents from nonresidentsExternal debt may be contracted directly by the central government, subject to congressional authorization. New loans by other public entities require authorization from the president of the Republic for their subsequent registration with the Monetary Board. Private external debt must be registered with the CBDR, except for foreign exchange advances on future traditional exports, which require approval from the CBDR.
Guarantees, sureties, and financial backup facilitiesFull-service banks must request prior CBDR authorization to issue foreign currency guarantees, other than for trade operations.



External short-term financing by banks authorized to offer full service is limited to 20% of paid-up capital and reserves.
By residents to nonresidentsYes.
Controls on direct investment
Outward direct investmentFull-service banks and other credit institutions may invest up to 20% of their paid-up capital in branches, agencies, or representative offices abroad, as well as make equity investments in foreign financial institutions. Effective March 31, 2004, full-service banks wishing to invest abroad or to open cross-border entities must fulfill certain minimum requirements.
Inward direct investmentInvestments must be registered with the CBDR. Investment in the following sectors is prohibited: (1) disposal of toxic waste and dangerous or radioactive substances not produced in the country; (2) activities that affect public health and the environment; and (3) production of materials and equipment that affect defense and national security.
Controls on liquidation of direct investmentNo.
Controls on real estate transactionsNo.
Controls on personal capital transactions
Transfer of assets
Transfer abroad by emigrantsYes.
Transfer into the country by immigrantsYes.
Provisions specific to commercial banks and other credit institutions
Borrowing abroadBanks authorized to offer full services may obtain financing abroad for up to one year, subject to a limit of 30% of their paid-up capital and reserves.
Lending locally in foreign exchangeBanks authorized to offer full services may grant loans in dollars up to 100% of their foreign exchange resources that are held in the form of savings or time deposits to the sectors exporting goods and services for the purpose of financing activities specific to their operations and to the importing sectors for the purpose of covering payments abroad to acquire goods and services.
Differential treatment of deposit accounts in foreign exchange
Reserve requirementsThe reserve requirement ratio is 20% for both domestic and foreign currency deposits. Effective February 6, 2003, reserve requirements on foreign currency deposits must be held at the CBDR. Previously, they had to be held at foreign banks with an AAA classification or the equivalent. On March 23, 2004, the structure of the 20% reserve requirement for domestic currency deposits was changed to allow the banks to retain up to 5% (i.e., one-fourth of the reserve requirement), with the remainder to be retained at the CBDR. In addition, banks are required to hold 5% of their domestic currency liabilities at the CBDR in 30-day certificates at an annual interest rate of 15%.
Credit controlsBanks and credit institutions may extend direct or indirect loans and guarantees to a single resident or nonresident individual or legal entity for up to 10% of their paid-up capital and reserves, and up to 20% of capital and reserves if such operations are secured with first-rank mortgages or real guarantees.
Differential treatment of deposit accounts held by nonresidents
Reserve requirementsYes.
Liquid asset requirementsYes.
Interest rate controlsYes.
Credit controlsYes.
Open foreign exchange position limitsThe net short or long positions of full-service banks are subject to exchange risk controls.
On resident assets and liabilitiesYes.
On nonresident assets and liabilitiesYes.
Provisions specific to institutional investors
Limits (max.) on securities issued by nonresidentsYes.
Limits (max.) on investment portfolio held abroadYes.
Other controls imposed by securities lawsNo.
Changes During 2003
Exchange arrangementOctober 6. All private sector transactions began to be settled on the private free market.
Imports and import paymentsOctober 6. All imports began to be settled through the private market.
Proceeds from invisible transactions and current transfersOctober 6. The surrender requirements for certain transactions were lifted. Previously, certain receipts (e.g., for international phone calls, international credit card operations, and operations of foreign embassies) had to be surrendered to the CBDR.
Capital transactions
Controls on capital and money market instrumentsJanuary 1. The Superintendency of Securities began operations.
Provisions specific to commercial banks and other credit institutionsFebruary 6. Reserve requirements on foreign currency deposits were required to be held at the CBRD (previously, they had to be held at foreign banks with an AAA classification or the equivalent).
Changes During 2004
Exchange arrangementJanuary 1. The foreign exchange market was unified, leading to the transfer of external debt payments to the private market.



January 31. As a result of the authorities’ ceasing to intervene in the foreign exchange market to manage the exchange rate, the exchange rate arrangement of the Dominican Republic was reclassified to the category independently floating from the category managed floating with no preannounced path for the exchange rate.
Exports and export proceedsJanuary 6. A temporary levy of 5% was imposed on gross proceeds from exports of goods and services for a period of six months.
Capital transactions
Controls on direct investmentMarch 31. Full-service banks wishing to invest abroad or to open cross-border entities were required to fulfill certain minimum requirements.
Provisions specific to commercial banks and other credit institutionsMarch 23. The structure of the 20% reserve requirement for domestic currency deposits was changed to allow banks to retain up to 5% (i.e., one-fourth) of the reserve requirements, with the remainder to be kept at the CBDR. Banks were required to hold an additional 5% of their domestic currency liabilities at the CBDR to be covered by 30-day certificates at an annual interest rate of 15%.

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