Chargé d’Affaires, a.i.
U.S. Embassy Santo Domingo
Remarks: “DR-CAFTA, The Next Ten Years”
Wednesday, November 22, 2017
Remarks as Prepared
Thank you to the American Chamber of Commerce, or AMCHAMDR, for being a steadfast partner for our mission and an advocate for U.S. business interests in the Dominican Republic, as well as the advancement of the Dominican Republic-Central America Free Trade Agreement, or DR-CAFTA. To be completely transparent, I will put my conclusion on the table from the start. This is it: The DR-CAFTA agreement is and will remain the cornerstone of our economic relationship due to the mutual benefits it provides, but the progress we have made up to this point is not enough. You might not all agree with me, but since we are celebrating the 10th anniversary of the accord this year, I think it is particularly appropriate that we pause for a moment to consider where we are today and then to contemplate what we, as two nations with deep historical, cultural, and business ties, must do in the next ten years.
So, where are we today with the DR-CAFTA? Well, the U.S. economy is strong by most indicators. For example, the S&P 500 index is up about 22% from this time last year and has nearly doubled since the agreement went into effect. Another important example is that, in my country, unemployment has decreased nearly 4%. Here, the Dominican economy is also trending up on most indicators, with the highest growth rates in the region over the past few years and continued growth projected at 4.75 percent this year. My argument is that DR-CAFTA contributed to this positive growth. Since its inception in 2007, bilateral trade between our countries has increased by $2.1 billion. In 2015 the United States Trade Representative’s office estimated that the two-way trade between DR-CAFTA countries and the U.S. was worth over $53 billion U.S. dollars.
Dominican global exports are up. Foreign Direct Investment (or FDI) to the Dominican Republic has more than doubled. The Dominican Republic’s Gross Domestic Product has grown 44%. In the past ten years the Dominican export sector has diversified significantly, you all have made strides in improving your business climate, you have modernized business practices, and you have improved essential economic institutions.
DR-CAFTA’s implementation led to substantial changes in Dominican laws related to dispute resolution, labor rights, environmental protection, government procurement, telecommunications, competition, tax, and fiscal transparency. With those legal changes came institutional changes, including better enforcement of property rights and labor protections, more robust IPR institutions, and an anti-monopoly office. These institutional changes should not be undervalued. The benefits that we have witnessed to date from DR-CAFTA derive mainly from institutional improvements.
But the improvements have not been based only on perception. Allow me to offer a concrete number: According to the UN Economic Commission on Latin America and the Caribbean, annual FDI inflows to the DR have more than doubled from approximately $1 billion in 2005 to $2.2 billion in 2015.
And there are other important numbers. For example, the Dominican Republic’s total trade has increased 143% in the last ten years, from $6 billion to $14.5 billion. In the first ten years of DR-CAFTA, your government estimates that the DR’s total agricultural exports to the U.S. increased over 90% to nearly $920 million. Cocoa products have been the fastest growing agricultural export category under DR-CAFTA, with the value more than doubling since 2006, and exports of fruits and vegetables from the DR have nearly doubled as well. In recent years, approximately 60% of total U.S. agricultural exports to the Dominican Republic were used as inputs by local farmers, ranchers, and processors.
This has generated jobs and improved income for Dominicans. And from my country we also recognize that there is a lot of opportunity here. Americans generally find the Dominican Republic to be an idyllic vacation destination, as evidenced by the fact that more than 2 million U.S. tourists visit this country every year.
Personally, I have had the opportunity to enjoy Bahia de las Aguilas in the southwest, Puerto Plata and Cabarete on the north coast, and Punta Cana in the east and there is no doubt in my mind that there is enormous untapped potential to continue to grow this vital part of the Dominican economy. The Amber Cove investment in Puerto Plata I visited is a great example of successful enterprise…$87 million in investment and already over 300,000 visitors in a year and a half. The Montecristi airport just received its first flight from the U.S. a few weeks ago…the opportunities are boundless.
I suspect this audience is even more familiar than I am with everything I have just said. But this is where we are, right now, after 10 years of the DR-CAFTA, in November 2017. It is a good place, and this is good news. There will surely be more good news to come given our current momentum and trajectory. But what do we need to do, as neighbors and partners to assure that the next ten years look even better than today? If I am right and the good results we have achieved so far are not enough, what else do we need to do? I suggest there is much to be done.
The current U.S. Administration has been consistent in its stated desire to create more U.S. jobs and grow the U.S. economy. DR-CAFTA is part of that because, in our perspective, it has been beneficial to both of our countries. The United States has been a good faith partner in upholding the treaty as written, and has spent considerable resources helping Dominicans modernize and improve business practices.
While it is true that Dominican exports to the U.S. have not grown as fast as Dominican imports from the U.S., it is also true that Dominican exports to the rest of the world have grown substantially due in no small part to improved business practices under DR-CAFTA. And we continue trying to help stakeholders identify and enter growth markets. I recently visited a farm in La Vega that is part of one of our programs, totaling $40 million, to help Dominican livestock, dairy, fruit, and vegetable value chains access foreign markets. However, I cannot say the sentiment of accessing markets has always been reciprocated. I regularly hear examples of Dominican importers struggling to import U.S. dairy and other products due to technical and bureaucratic barriers that contradict the spirit of the DR-CAFTA agreement. We continue to believe, though, in the strength of our collaboration as trade partners.
The great promise of DR-CAFTA going forward lies in providing the legal and institutional framework that will allow us to continue to grow together, using and developing our comparative advantages where they exist. We need to redouble our efforts to address significant challenges, many of which do not have simple solutions, and we have to do this in the face of global competition that is unceasing. As former Ambassador to the U.S. Bernardo Vega wrote in Hoy on October 31, “más sano, inteligente, y de visión a largo plazo sería fijarnos en lo mal que quedamos en los índices internacionales sobre corrupción, ineficiencia y competitividad y analizar cómo mejorar…”
So as we look towards the next 10 years, I look to you, members of AmCham, who understand the significant investments my countrymen have already made here in this country, and the even greater investments that can be made if we can collectively establish the proper conditions by building on the strong foundation set under DR-CAFTA. I look to you leaders within the Dominican private and public sectors, for your engagement and your help to answer three very tough questions. It is my opinion that the way in which the Dominican Republic answers these questions will define how successful we can be, maybe even beyond the next ten years.
The first question is the most important: how can the Dominican Republic significantly reduce corruption? Second and third will come as no surprise: how can the DR increase its competitiveness? And third, how to improve citizen security? As everyone here knows, these questions are easy to ask but hard to answer. Exceedingly hard to answer. And I want to be very clear here – my country’s role as your friend, your ally, and your business partner is not to answer these questions for Dominicans. It is not our place, but we are interested helping you strengthen your institutions, and we are also interested in the health of your economy and your democracy. I know, as an American, that it is the strength of our U.S. institutions that drives investor confidence in our market.
Going back to the questions, I will not speak for very long on corruption, because you know better than I the gravity of the situation. Polling, the news, and all other indicators tell us that Dominicans are fed up with corruption. The Dominican Republic ranked 120 out of 176 in a 2016 Corruption Perception Index by a respected NGO. Corruption remains a major drag on growth, not just here, but around the region and the world. It robs businesses of predictability, and damages the government’s ability to promote good economic policy. No country is free of corruption and no country can say it is doing enough to combat its pernicious effects.
Revelations in the Odebrecht case have shown that millions of dollars, dollars that could have supported education, infrastructure, and development, were lost to corruption. These losses must be confronted, and these trends reversed to if we are to continue positive economic growth over the next ten years. My government stands ready to work with yours, whether by promoting the use of tools such as the fiscal transparency portal at the Ministerio de Hacienda or by cooperating on investigations managed by your legal system, and my embassy eagerly awaits your engagement as key partners and allies in this fight.
We cannot talk about competitiveness without mentioning education. As a friend and partner of the Dominican Republic, it is concerning to see that according to the World Economic Forum’s 2016-2017 Global Competitiveness Report the Dominican Republic ranked 123 out of 138 countries for quality of primary education and ranked low on competitiveness. Clearly there is work to be done and clearly the Dominican government recognizes this. We applaud the Medina Administration’s focus on education. It will take every bit and more of ten years, focused on the quality of the education to turn this around, as Minister Navarro said from this podium not long ago. We are trying to contribute with our programs on literacy and English language teacher development.
The histories of PUCMM, UNPHU, APEC, INTEC, and ISA all bear testimony to our commitment to Dominican education. I had the opportunity to visit ISA in Santiago recently and saw the fruits of what was once upon a time a Peace Corps, USAID, Ford Foundation, and Texas A&M collaboration.
Today more than ever, an educated work force leads to innovation, and innovation is the way to become more competitive. Major investments in education are needed, especially in the fields of Science, Technology, Engineering, and Math (or STEM as they are commonly referred to). Improved expertise in STEM fields will position the Dominican Republic well in a future economy likely to be dominated by technical fields.
Educated Dominicans create jobs and create investment opportunities at every level of the economic supply chain in the country: from the neighborhood store, the microenterprises, to large factories employing hundreds of Dominicans. An educated population is the foundation of a healthy, secure and prosperous country. Looking down the road, ten years from now, we know we cannot maintain the growth and success of the Dominican Republic without an educated public.
Lastly, the third great question or challenge we have to face is the concern over citizen security. Polling data consistently tells us this truth that we see in the headlines every day. As a friend, partner and neighbor, we are concerned with the increased rate of crime affecting Dominicans. My staff receives calls daily from American citizens impacted by crime. Potential investors have expressed the same concerns. Crime jeopardizes the Dominican economy at every level. It is essential that Dominicans enjoy a safe and prosperous island, and the solution must be found as soon as possible. On security, we cannot afford to seek solutions during the next ten years. The lack of security affects everything, and eventually, even investment disappears.
But things do not need to be this way. My wife Yanira and I have been the recipients of exuberant Dominican hospitality. From my experience Dominicans are at heart a warm, open, welcoming, and fun loving people. This plague of insecurity is systematic of larger forces at work that must be stemmed collectively, including the reduction of U.S. drug demand, admittedly at the very core of criminality in our region. It is worth noting that the U.S. spent over $9 billion last year on demand reduction and drug treatment programs in the United States. In other words, we are making a great effort in my country.
We are also helping here. We work with the Dominican police to professionalize the police force. We contributed to the creation of the 911 system, which we are proud to see has already assisted so many Dominicans in emergencies and has led to a reduction in violence in Santo Domingo and Santiago. Over the next few years, we should expand on these advances and continue exploring how we can collaborate to dislodge citizen security from its entrenched top slot amongst the concerns of the Dominican people. People worried about security do not go out, they do not spend, and they do not grow your economy.
But I want to assure you that I have faith that we are going to achieve positive change. I have faith that the Dominican Republic will answer the difficult questions. I have faith because I have seen political will from you and from your government. Even more, I have faith because I have seen how deep our shared interests are. In ten years, I hope we can all look back at this point in time and identify it as a turning point for the Dominican Republic. Let this be a moment in time when economic possibilities started to become realities for all Dominicans and the nation turned itself away from the clutches of corruption, pervasive crime, and poor educational standards.
I need all of you to work with me toward that end. I understand I am preaching to the choir here, not revealing sacred unknown truths, but that is my appeal to you.
Engage with us and take advantage of our strengths. I know that working together we can build on the solid foundation of the DR-CAFTA and turn our hopes for the next ten years into reality. I am proud of the positive relationship the United States and the Dominican Republic enjoy, and I am optimistic for our shared future. We know what needs to be done. We know how to do it and I want you to know that you have a loyal ally in us, always willing to help you. So let’s do it!
Thank you very much, and I wish you all a Happy Thanksgiving!