Annual Report on Exchange Arrangements and Exchange Restrictions, 2007
Chapter

DOMINICAN REPUBLIC

Author(s):
International Monetary Fund. Monetary and Capital Markets Department
Published Date:
October 2007
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(Position as of March 31, 2007)

Status under IMF Articles of Agreement
Article VIIIDate of acceptance: August 1, 1953.
Exchange Measures
Restrictions and/or multiple currency practicesNo restrictions as reported in the latest staff report as of December 31, 2006.
International security restrictionsNo.
References to legal instruments and hyperlinksn.a.
Exchange Arrangement
CurrencyThe currency of the Dominican Republic is the Dominican peso.
Exchange rate structure
UnitaryThe reference rate used by the Central Bank of the Dominican Republic (CBDR) for its operations is set as the weighted average of daily rates reported by authorized exchange intermediaries.
Classification
Managed floating with no predetermined path for the exchange rateThe authorities intervene in the foreign exchange market to prevent undue exchange rate volatility.
Exchange taxNo.
Exchange subsidyNo.
Forward exchange marketNo.
References to legal instruments and hyperlinksn.a.
Arrangements for Payments and Receipts
Prescription of currency requirementsSettlements under the LAIA framework must be made in dollars. Other transactions between residents and nonresidents may be made in any currency.
Controls on the use of domestic currency
For current transactions and paymentsYes.
Payments arrangements
Bilateral payments arrangements
OperativeYes.
InoperativeThere is an inoperative agreement with Paraguay.
Regional arrangementsYes.
Clearing agreementsSettlements 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.
Barter agreements and open accountsSettlements take place under reciprocal credit agreements with Argentina, Bolivia, Brazil, Chile, Colombia, Ecuador, Mexico, Peru, Uruguay, and República Bolivariana de Venezuela.
Administration of controlExchange control policy is determined by the Monetary Board and administered by the CBDR. General regulations for foreign exchange operations and trading were issued in October 2006.
Payments arrearsNo.
Controls on trade in gold (coins and/or bullion)No.
Controls on exports and imports of banknotesExports and imports of currency are unrestricted, but amounts exceeding the equivalent of $10,000 must be reported for anti-money laundering purposes.
References to legal instruments and hyperlinksn.a.
Resident Accounts
Foreign exchange accounts permittedYes.
Held domesticallyResident corporations and individuals may maintain savings or time deposit accounts locally in dollars or in any other freely convertible foreign currency at full-service banks.
Held abroadNo.
Accounts in domestic currency held abroadNo.
Accounts in domestic currency convertible into foreign currencyAccounts denominated in 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.
References to legal instruments and hyperlinksn.a.
Nonresident Accounts
Foreign exchange accounts permittedNonresident corporations and individuals may maintain savings or time deposit accounts locally in dollars or in any other freely convertible foreign currency at full-service banks.
Domestic currency accountsYes.
Convertible into foreign currencyYes.
Blocked accountsNo.
References to legal instruments and hyperlinksn.a.
Imports and Import Payments
Foreign exchange budgetNo.
Financing requirements for importsNo.
Documentation requirements for release of foreign exchange for importsNo.
Import licenses and other nontariff measures
Positive listThis list includes beans, corn, garlic, milk, onions, chicken, 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, chicken, rice, and refined sugar require licenses.
Import taxes and/or tariffsThere are five tariff rates: zero, 3%, 8%, 14%, and 20%. 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. The previous exchange commission of 13% was eliminated effective July 1, 2006.



The free trade agreement between the United States and Central America entered into force on March 1, 2007, providing duty-free entry of goods from countries signatory to the agreement on a phased basis over 20 years. During the first year this agreement has been in effect, approximately 4,333 tariff line items already have duty-free access to the Dominican Republic.
State import monopolyNo.
References to legal instruments and hyperlinksn.a.
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 Agreement and International Cocoa Agreement.
Export taxesNo.
References to legal instruments and hyperlinksn.a.
Payments for Invisible Transactions and Current Transfers
Controls on these transfersAll invisible payments may be made freely through full-service commercial banks subject to documentation requirements.
References to legal instruments and hyperlinksn.a.
Proceeds from Invisible Transactions and Current Transfers
Repatriation requirementsNo.
Restrictions on use of fundsNo.
References to legal instruments and hyperlinksn.a.
Capital Transactions
Controls on capital transactionsYes.
Repatriation requirementsn.a.
Surrender requirementsn.a.
Controls on capital and money market instrumentsTransactions are regulated under the Law on the Securities Market and by the Superintendency of Securities (SOS).
On capital market securitiesShares are not yet traded. Only commercial paper transactions and transactions with some bonds denominated in domestic currency are carried out.
Bonds or other debt securities
Purchase locally by nonresidentsYes.
Sale or issue abroad by residentsThe sale or issue abroad by residents must be authorized by the SOS.
Controls on derivatives and other instrumentsNo.
Controls on credit operations
Financial credits
By residents to nonresidentsFull-service banks and credit institutions may extend direct or indirect loans and guarantees or securities to a single resident or nonresident individual, legal entity, or risk group for up to 10% of their paid-up capital and reserves, or up to 20% 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 authorization by the national congress. New loans by other public entities require authorization from the president of the republic prior to their registration with the CBDR. External debt must be registered with the CBDR.
Guarantees, sureties, and financial backup facilitiesFull-service commercial banks must request prior CBDR authorization to issue foreign currency guarantees, other than for trade operations. External short-term financing by such banks is limited to 30% of paid-up capital and reserves.
By residents to nonresidentsYes.
Controls on direct investment
Outward direct investmentFull-service commercial 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. Full-service banks wishing to invest abroad or to open cross-border entities must fulfill certain minimum requirements, including (1) prior authorization of the Monetary Board, which requires host-country authorization and the favorable opinion of the Superintendency of Banks; (2) in the case of full-service banks, a solvency ratio equal to or greater than 10% and fulfillment of prudential requirements in the Monetary and Financial Law or in Monetary Board resolutions; (3) in the case of full-service banks, sufficient management capacity to perform offshore functions; (4) maintenance of a cooperation agreement between the Superintendency of Banks and the host-country supervisory authorities; (5) approval by the host-country authorities of the investment; (6) a favorable report from the host-country supervisory authorities regarding the rating and soundness of the financial intermediary in which investment is to be made; and (7) submission of necessary documentation to the Superintendency of Banks.
Inward direct investmentInvestments must be registered with the Dominican Republic Exports and Investment Center. 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 assetsNo restrictions apply to transfers of assets; however, transfers exceeding the equivalent of $10,000 must be reported for anti-money laundering purposes.
References to legal instruments and hyperlinksLaw on the Securities Market.
Provisions Specific to the Financial Sector
Provisions specific to commercial banks and other credit institutionsFull-service banks and other credit institutions are (1) subject to supervision on a consolidated basis to evaluate global risk in aggregate terms; and (2) required to report to the CBDR and the Superintendency of Banks about all financial information of their consolidated subsidiaries, and to publish their consolidated financial statements. Implementation of market and liquidity risk management measures for financial institutions began June 30, 2006. Implementation of the market risk capital requirements began September 30, 2006.
Borrowing abroadFull-service banks may obtain financing abroad on a short-term basis, subject to a limit of 30% of their paid-up capital and reserves.
Lending to nonresidents (financial or commercial credits)Full-service banks and credit institutions may extend direct or indirect loans and guarantees or securities to a single resident or nonresident individual, legal entity, or risk group for up to 10% of their paid-up capital and reserves, or up to 20% if such operations are secured with first-rank mortgages or real guarantees.
Lending locally in foreign exchangeFull-service banks may grant loans in dollars up to 100% of their foreign exchange resources that are held in the form of savings or time deposits. Eighty-five percent of these loans must be channeled to individuals or legal entities that generate foreign exchange.
Differential treatment of deposit accounts in foreign exchange
Reserve requirementsThe reserve requirement ratio is 20% for both domestic and foreign currency bank deposits. The reserve requirement on foreign currency deposits at the CBDR must be maintained at 100%. In the case of reserve requirements in domestic currency, banks may retain up to 2% in cash, with the remainder to be retained at the CBDR. Small loan offices that have become credit corporations must maintain a reserve requirement of 5%, which has to be gradually built up to 15% over a period of six months. Effective November 28, 2006, the reserve requirement is 15% for other financial intermediary institutions (savings and loan associations, savings and credit banks, and credit corporations) and 10% for Banco Agrícola de la Republica Dominicana. The calculation of the reserve requirement position of full-service banks and other financial intermediary institutions in domestic currency is made daily for purposes of monitoring liquidity, and accumulated weekly for full-service banks and biweekly for savings and credit banks, credit corporations, and savings and loan associations for purposes of determining penalties, if any.
Information required for calculating the reserve requirement position of financial intermediary institutions is submitted electronically to the CBDR on a daily basis through the online banking system or such other means as may be determined.
Credit controlsFull-service banks and credit institutions may extend direct or indirect loans and guarantees or securities to a resident or nonresident individual, legal entity, or risk group, 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.
Investment regulations
Abroad by banksFull-service commercial 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. Full-service banks wishing to invest abroad or to open cross-border entities must fulfill certain minimum requirements, including (1) prior authorization of the Monetary Board, which requires host-country authorization and the opinion of the Superintendency of Banks; (2) in the case of full-service banks, a solvency ratio equal to or greater than 10% and fulfillment of prudential requirements in the Monetary and Financial Law or in Monetary Board resolutions; (3) in the case of full-service banks, sufficient management capacity to perform offshore functions; (4) maintenance of a cooperation agreement between the Superintendency of Banks and the host-country supervisory authorities; (5) approval by the host-country authorities of the investment; (6) a favorable report from the host-country supervisory authorities regarding the rating and soundness of the financial intermediary in which investment is to be made; and (7) submission of necessary documentation to the Superintendency of Banks.
Open foreign exchange position limitsThe net short or long foreign currency positions of full-service banks are subject to the limits established in the Foreign Exchange Regulations. The limits are as follows: (1) for the long position for all financial intermediaries, the equivalent of 20% of liabilities denominated in foreign currencies plus contingent liabilities without foreign currency collateral, or 100% of paid-up capital and legal reserves, whichever amount is larger; and (2) for the short position for financial intermediaries, the equivalent of 20% of their assets denominated in foreign currencies, or 100% of the paid-up capital and legal reserves.
On resident assets and liabilitiesTransactions are regulated by the Law on the Securities Market and by the SOS.
On nonresident assets and liabilitiesShares and bonds are not yet traded.
Provisions specific to institutional investors
Insurance companies
Limits (max.) on investment portfolio held abroadFinancial intermediary institutions’ external loan portfolios are subject to the following limits relative to principal: (1) 10% for unsecured loans, (2) 20% for secured loans, and (3) 50% for tied loans. Equity investments are limited to 20% of capital.
Limits (min.) on investment portfolio held locallyFinancial intermediary institutions’ domestic loan portfolios are subject to the following limits relative to principal: (1) 10% for unsecured loans, (2) 20% for secured loans, and (3) 50% for tied loans. Equity investments in the Dominican Republic are subject to the following limits relative to principal: (1) 20% in service companies and (2) 10% in nonfinancial enterprises.
Pension fundsn.a.
Investment firms and collective investment fundsn.a.
References to legal instruments and hyperlinksSecond Resolution of the Monetary Board of November 28, 2006, Foreign Exchange Regulations; Law on the Securities Market.
Changes during 2006
Imports and import paymentsJuly 1. The exchange commission of 13% charged on all imports was eliminated.
Provisions specific to the financial sector
Provisions specific to commercial banks and other credit institutionsJune 30. The implementation of market and liquidity risk management measures for financial institutions began.
September 30. The implementation of market risk capital requirements began.
November 28. The reserve requirement was 15% for financial intermediary institutions other than full-service banks and 10% for Banco Agrícola de la Republica Dominicana.
Changes during 2007
Imports and import paymentsMarch 1. The free trade agreement between the United States and Central America entered into force.

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