Cablegate: Dominican Government Sees Economic Threats and Opportunities

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DE RUEHDG #0027/01 0222252
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O R 222252Z JAN 10
FM AMEMBASSY SANTO DOMINGO
TO RUEHC/SECSTATE WASHDC IMMEDIATE 0607
INFO WESTERN HEMISPHERIC AFFAIRS DIPL POSTS
RHMFIUU/CDR USSOUTHCOM MIAMI FL

UNCLAS SECTION 01 OF 02 SANTO DOMINGO 000027

SIPDIS

E.O. 12958: N/A
TAGS: PREL ETRD EINV HA DR
SUBJECT: DOMINICAN GOVERNMENT SEES ECONOMIC THREATS AND OPPORTUNITIES
IN HAITI CRISIS

REF: SANTO DOMINGO 23

1. In a 01/22/10 meeting with Charge and Emboffs, Eddy Martinez,
Executive Director (with ministerial rank) of the Dominican Export
and Investment Center (CEI-DR), explained that the Government of
the Dominican Republic (GoDR) is concerned the Haitian earthquake
and its aftermath will adversely affect Dominican companies that
relied on exports to that country, while at the same time
recognizing that the Haiti relief and reconstruction effort
provides export opportunities for Dominican firms, as well as the
possibility of promoting economic integration on the island of
Hispaniola that would boost economic growth and sustainable
development in both countries. Martinez led Emboffs on a tour of
CEI-DR's exhibition center showcasing Dominican products that
address emergency needs in Haiti, put in a plea for expanding the
HOPE program from Haiti to the DR, handed over two reports on
Dominican exports to Haiti and the effect the earthquake has had on
this sector, and provided points of contact for American firms and
NGOs looking to purchase relief supplies in the DR for distribution
in Haiti.

2. Martinez was present at the beginning of Charge's 01/20/10
meeting with Foreign Minister Carlos Morales (Reftel), where he
expressed the GoDR's concern that Dominican companies that have
relied on the Haitian market will be severely adversely affected by
the Haitian earthquake and its aftermath. Many Dominican firms
have lost their Haitian customers, he explained, either through
the destruction of the latters' stores and warehouses, or through
their deaths. There is also the fear, Martinez added, that the
enormous influx of humanitarian assistance will displace Dominican
exports to Haiti for an extended period of time. He asked Charge
to visit CEI-DR's Haiti Relief Export Center to view its operations
and receive a more detailed briefing.

3. Charge, accompanied by Pol-Econ Counselor, Agricultural Attache
and USAID Economist, met with Martinez and CEI-DR New Business
Manager Sofia Ortiz on 01/22. Martinez provided Emboffs with a
study on border commerce and another on the impact of the
earthquake on DR-Haiti commerce. According to Martinez:

n Exports from the DR to Haiti totaled USD 647.3 million in 2009,
an increase of 14.5 percent over the previous year;

n Most of the formal exports went through the southern border
crossing at Jimani (USD 152.3 million in 2009) to Port au Prince;

n These exports have "virtually disappeared" since the earthquake,
as the major retail businesses in the Haitian capital were
destroyed ;

n Informal exports in the border towns of Pedernales and Elias
Pina (USD 25.5 million in 2009) have fallen 15-30 percent since the
earthquake;

n On the other hand, the market in Dajabon in the north (the least
affected part of Haiti) has operated normally;

n The decrease in trade with Haiti is negatively affecting many
Dominican businesses, particularly small- and medium-enterprises
for whom Haiti was their major if not sole export market;

n The GoDR fears that many of these companies may go bankrupt
unless a way can be found to renew their export trade to Haiti;

n There is also concern that donations for Haiti relief will
displace Dominican exports, particularly as certain unnamed
countries have informed the GoDR that their reconstruction projects
will be carried out using materials imported from the donating
country;

n CEI-DR is assisting Dominican companies by hosting in its
exhibition hall a Haiti Relief Export Center, where Dominican
companies can show their products that would contribute to relief
and reconstruction efforts (fertilizer, medical supplies, plastic
sheeting and storage, food products, pesticides, building
materials, etc...);

n CEI-DR is encouraging international organizations, foreign
embassies and NGOs to visit the Center to explore purchasing goods
from Dominican suppliers for Haiti;

n Recent visitors have included the Inter-American Development
Bank, the World Bank, UNICEF and representatives from actor Vin
Diesel's foundation;

n Companies, organizations and NGOs interested in visiting the
Center should contact either Sofia Ortiz or Patricia Fernandez at
809-530-5505 and/or visit CEI-DR's website at www.cei-re.gov.do;
and

n The GoDR is emphasizing to local manufacturers that they should
look beyond making a quick buck on a few exports to Haiti now, and
instead should look to charging minimal mark-ups in order to firmly
establish themselves in the Haitian market, gain goodwill and
demonstrate their competitiveness.

4. Looking beyond immediate measures for Haitian relief,
Martinez described what the GoDR is doing and what it suggests the
U.S. can do to promote long-term economic growth and sustainable
development in Haiti and the Dominican Republic:

n The Dominican Export Free Zone has generated some employment in
Haiti;

n Expansion of the U.S. HOPE program for Haiti to the entire
island of Hispaniola would accelerate this process and could lead
to the creation of thousands of jobs in both countries, taking
advantage of Haiti's unskilled labor pool and combining it with
more skilled labor in the DR;

n Many Dominican companies are already basing some if not most of
their manufacturing in Haiti (Note: Grupo M, a textile
manufacturer, does most of its production at a 4000 worker plant in
northern Haiti, with the more-skilled finishing work performed at
its factory in Santiago. End Note);

n GoDR ministries are looking at revising the tax treatment for
companies that export to Haiti, and

n (In response to a query from Emboffs) The GoDR could look at
relaxing import tariffs on inputs for goods manufactured for export
to Haiti;

n (In response to a question from Charge) The GoDR will also look
at taking steps to encourage service exports to Haiti and explore
setting up a similar export resource center to promote such exports
and make their availability known to interested parties; and

n The GoDR will study the capacity of its industry to produce for
the Haitian market.

5. COMMENT: The GoDR is correct in seeing the Haiti earthquake as
both a threat and an opportunity in economic terms. The USG should
take this into consideration both for the immediate political need
to maintain the GoDR's impressive assistance to and cooperation
with Haiti relief and rebuilding efforts, as well as the long-term
economic integration and development of both countries. Embassy
will continue to engage Martinez and other GoDR officials on these
issues. With respect to the possible expansion of HOPE to the DR,
Martinez was uncertain as to whether this would conflict with the
terms of CAFTA-DR. Guidance on this question from the Department
would be appreciated. END COMMENT.
Lambert

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