The Dominican Republic is a middle-income country, with the largest economy of Central America and the Caribbean. The country has weathered the global economic crisis well and in 2010 experienced one of the highest growth rates in the region.
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After more than a decade of economic and social progress, many Latin Americans are worried about their future. Across the continent people have seen their lives improve in recent years. But now they w... Show More +ant to know if the progress is there to stay. The question is:Can Latin America expand or at least maintain the social and economic gains of the last decade?President Moreno, Secretary Lew, Minister Cardenas, Madame Lagarde, I am very honored to join you today when you are discussing this question. With the commodity boom fading, China’s growth slowing, and change in the US monetary policy, the growth forecast for Latin America has dropped to 1.2 percent this year.This is low, but it is not a collapse. And that is, in fact, what brings me to the good news – the many historic firsts -- about Latin America that we at the World Bank are so eager to celebrate.As our research shows, for the first time in recent history, the region is no longer following a boom-bust cycles that used to set the economy back for years, hurting the poor the most.In fact, in the past decade or so we have seen the region cut extreme poverty by half to 12 percent in 2012. At the same time the middle class has doubled to 34 percent. That means that for the first time in history the region has more people in middle class than among the poor. What’s more, living conditions for the bottom 40 percent of the population improved dramatically. Between 2005 and 2010 income growth of the bottom 40 percent relative to the total population was highest in Latin America than in any other region of the world. In 2003, six out of 10 Latin Americans in the bottom 40 were among the extreme poor, by 2012, only three out of 10 were in this condition.Even Haiti, the poorest country in the hemisphere, has been recovering. The Haiti I saw during a recent visit is very different from the one I witnessed right after the devastating earthquake. This is an impressive transformation in a continent where opportunities have traditionally not benefited many citizens-- where race, gender or social background made a big difference in one’s potential future in life.Today, the region’s macro-economic and financial fundamentals are solid. Reserves are strong, inflation is under control in most countries and there is –in several economies—fiscal space for countercyclical measures. With some space to respond in the short-term, we must remember that in the longer term investments in productivity will be critical to boost growth back to the levels that brought about so many social gains.And those investments will take time to bear fruit. It is not an effort that shows instant success. It can be difficult to explain changes in societies that have become accustomed to quicker gains, particularly ahead of elections. But it can be done. We just need to look at Mexico, which has put in place broadly supported reforms that are only slowly showing their benefits. Moving into a highly productive economy takes a combination of factors: from quality education and improved logistics, infrastructure, and innovation, to an efficient State, and a modern business environment. Let’s look at infrastructure a bit closer: The last time that Latin America made a big-push to invest in public infrastructure was in the 1960s. Yet connecting markets, both within and across borders is necessary to boost productivity. And I am not only talking about roads or airports. “Soft” infrastructure, including transparency, customs efficiency, and institutional reforms will be just as crucial to facilitate access of regional products to foreign markets.Or consider education: Latin America has expanded access to education, with secondary-school coverage approaching 100%. But the challenge now is to improve the quality of public education in order to continue broadening opportunities for all. It will take better teaching and a tertiary education that produces the skills needed by the economy. To be honest, we might need more engineers and fewer economists. Another key issue is integration. The challenge is not so much whether to become more open, which has been achieved in the region with a few exceptions. Rather, it is about the quality of trade connections within the region and with the rest of the world. An upcoming World Bank analysis highlights that economic development in today’s world is inherently linked to participation within global value chains. In this process of searching for productivity gains, each country will need to find its own path in accordance with its own circumstances.This July I had the opportunity to see firsthand how Nicaragua is building water-resistant roads by employing local residents. Aside from providing jobs, this project is helping address an important void in the country’s productivity. Because in this Central American country road infrastructure deficiencies translate into high costs of transport, and diminished competitive advantage. As a former finance minister myself, I fully understand that there is only so much you can control. You cannot change commodity prices or the growth trends in China, but I am sure that you must be thinking how to make public expenditures more efficient so that the social gains can be maintained with low growth. At the World Bank Group we are focusing our actions on helping countries to share prosperity. Our lending in the region supports public and private initiatives in a variety of sectors. All aimed to help countries achieve their next goals in development. Dear Ministers, ColleaguesThis is a unique setting. It is not often we see all the ministers of finance from Latin America, the Caribbean and North America discussing their challenges together. It is also a reminder of the potential of this hemisphere in terms of building cooperative economic and trade relations that can benefit all and eventually link the Americas with the Pacific, uniting two powerful growth poles. Thank you! Show Less -
Regional growth down to 1.2 percent this year, rebounding to 2.2 percent in 2015Average for the entire region understates growth in many smaller countriesEmployment and quality education for all, key ... Show More +to maintaining social gainsWASHINGTON, October 7, 2014 – During the recent commodity boom, Latin America and the Caribbean proved that growth could be pro-poor and help fuel tremendous social progress. Now as growth slows regionally and beyond, it is critical to consider what will shore up economic activity while ensuring the poor won't stay behind. In its latest semiannual report, Inequality in a Lower Growth Latin America, the World Bank´s Office of the Chief Economist for Latin America and the Caribbean forecasts an average 1.2 percent rate of growth for 2014 with a rebound to 2.2 percent in 2015. This deceleration comes with a difference.“In terms of equity, the simple fact that Latin America today is not the Latin America of the 1980s or 1990s, is already a good news story,” said Augusto de la Torre, World Bank Chief Economist for Latin America and the Caribbean. “For the first time in recent history, the region is no longer following a boom-bust cycle of the type that used to set the economy back for many years, hurting the poor the most.”The report, issued ahead of the IMF-World Bank Group annual meetings, finds a great deal of heterogeneity within the region. Panama leads with an impressive 6.6 percent growth for the year and Bolivia, Colombia, Dominican Republic, Ecuador, Guyana, Nicaragua, Paraguay, and Surinam are expected to grow more than 4 percent, well above the regional average. Meanwhile big economies such as Venezuela and Argentina are going into negative territory, at -2.9 and -1.5 percent respectively, and the regional giant, Brazil, is expected to growth by only 0.5 percent.With this level of growth, countries may find it challenging to keep the social gains from the last decade. During those golden years the region was able to cut extreme poverty by half to 12 percent in 2012, and double the ranks of the middle class to 34 percent of the population in 2012. That year, Gini index of income inequality was 7 points lower than in 2003, largely due to a narrowing of wage gaps in the region.Now in a more stable, albeit slower growth environment, governments in the region will understandably want to focus on maintaining the levels of employment that contributed to those equity gains and thus meet the expectations raised during the boom. Some countries in the region will have at their disposal the types of tools -- such as countercyclical monetary policy with flexible exchange rates as well as ample space to borrow -- that will help them maintain jobs without compromising the longer term priority of boosting productivity in order to grow more.“Other countries, however, with high levels of indebtedness or facing inflation pressures despite the slowdown, may find it more difficult to respond,” said de la Torre. “The temptation for these countries would be to take the path of least resistance, keeping aggregate consumption and government spending high and borrowing to finance the associated fiscal and external deficits. This path might be encouraged by highly liquid international markets seeking higher yields. The short-run gains, however, would carry a high price: lower long-run growth due to a more vulnerable balance of payments or an uncompetitive real exchange rate.”To maintain the path of pro-poor growth of the past decade, productivity oriented reforms need to be complemented by policies that increase the quality and coverage of education in line with growing demand for skilled labor. The report thus concludes that advances in the quality of primary, secondary, and tertiary education that benefit all Latin Americans will be crucial to ensure that the dividends of productivity gains are fairly distributed so that the prosperity is truly shared. Contacts:In Washington: Sergio Jellinek (202)458-2841, email@example.comMarcela Sánchez-Bender (202) 473-5863, firstname.lastname@example.org For more information, please visit: www.worldbank.org/lac Visit us on Facebook: http://www.facebook.com/worldbankBe updated via Twitter: http://www.twitter.com/BancoMundialLAC For our YouTube channel: http://www.youtube.com/worldbank Show Less -
WASHINGTON, September 25, 2014 – The World Bank Board of Executive Directors endorsed today a new strategy to support the Dominican Republic’s efforts to broaden economic and social opportunities for ... Show More +all Dominicans. The strategy offers a new lending program of US$550 million and advisory services over the next four years 2015-18.The new strategy was jointly prepared by the Dominican Government, and the World Bank Group (WBG) comprised by the International Bank for Reconstruction and Development (IBRD) the International Finance Corporation (IFC) and the Multilateral Investment Guarantee Agency (MIGA).“Economic growth in the last decade has been strong, but with little impact on poverty reduction. This Country Partnership Strategy with the World Bank Group will support our efforts to achieve a more just country, with better opportunities for all,” said Temístocles Montás, Minister of Economy, Planning and Development.While the Dominican Republic grew at an average of 6.7 percent per year over the last decade, making the country one of the top performers in the Latin America and Caribbean region, poverty and unemployment have remained high, with 46 percent of rural Dominicans living in poverty and about 30 percent of young people unemployed“The Dominican Republic has significant potential to create more and better jobs, as well as to improve access to finance, to more reliable electricity and telecommunications, and to better services in education, health, water and social protection, for the poorest 40 percent of the population,” said Sophie Sirtaine, World Bank Country Director for the Caribbean. “This new strategy reflects a common effort to boost results on the ground in these areas”, she said.To achieve these goals, the strategy agreed with the Dominican government identifies five thematic areas for support toImprove access to quality public services, including education, health, water and social protection by increasing the number of new teachers recruited under a competitive selection system, doubling the number of children vaccinated, providing access to improved sanitation to approximately 128,000 poor people in Puerto Plata, and strengthening the flagship safety net Progresando con solidaridad.Increase access to electricity, telecommunications and other infrastructure by reducing losses in the electricity sector, investing in renewable energy and improving access to more efficient and reliable ICT services through a national broadband network interconnecting 15 provinces.Build resilience to external shocks by installing a new telemetric network for managing water resource flows, building and rehabilitating four dams and developing a national integrated information system.Improve the business climate by halving the time taken to register new companies, improving access to finance for over 60,000 small and medium entrepreneurs, and facilitating more public private partnerships.Promote efficient management of public resources by strengthening fiscal management, budgetary processes and civil society capacity in budget analysis and oversightA critical part in the strategy will be played by IFC, the largest global development institution focused exclusively on the private sector. IFC’s committed portfolio in the Dominican Republic stands at US$208 million. In addition, mobilizations from IFC partners amount to US$97 million. IFC expects to mobilize financing for new investments for an average total of US$50 million per year“IFC has partnered with the Dominican private sector for more than 50 years in critical areas such as diversifying the energy matrix, increasing access to financing for small and medium entrepreneurs, and supporting new infrastructure,” said Ary Naim, IFC’s Country Head for the Dominican Republic. “With this new strategy, we plan to build on these strong partnerships, helping the country generate productive jobs and continued economic growth.Support to the private sector is complemented by a MIGA guarantee for US$107.6 million for a toll road to the Northeast of the DR for MIGA’s client, Autopistas del Nordeste Show Less -
ChallengeThroughout the 1990s, the electricity sector in Dominican Republic provided substandard service, with inadequate generation capacity and frequent power cuts. The historical roots were a combi... Show More +nation of politics, corruption and the inefficiencies of a state-owned monopoly. At times, the problems boiled over into national crises. Over the past decade, the Government restructured the sector and made major progress in most areas, including the professionalization of senior management of the distribution companies, better targeting of the subsidies, the revival in investments to rehabilitate the energy grids, and the strengthening of regulations. The service improved with an increasing number of clients receiving electricity 24 hours (around 791,000 or 35% of the market). SolutionThe World Bank-financed Electricity Distribution Rehabilitation Project in the Dominican Republic helped the Government to improve the quality of electricity service in the three electricity distribution companies. The project was successful in reaching 101,197 households, increasing the number of hours of service in the three distribution companies, and reducing the number and frequency, as well as the duration, of blackouts.The activity supported the increase of the electricity quality services by ensuring that the electricity distribution companies prepared and executed grid rehabilitation projects. The projects increased the performance of the companies by(a) achieving economies of scale and more competition in procurement,(b) introducing “supply and installation” contracts,(c) incorporating the best practices of the three Distribution Energy Companies (EDEs) in terms of both investments and community outreach, and(d) having robust monitoring and evaluation so that lessons are learned and mistakes corrected faster. Show Less -