Jochi Vicente, Minister of Finance of the Dominican Republic: “We have avoided the turbulent moment in the region”

The Dominican Republic's economy grew 2.4% last year, a rate that, while the envy of many of its peers in Latin America, is low for a country that has quickly become a middle-income country.

But 2023 was an exceptional case, argues Finance Minister Jochi Vicente, who expects growth to reach 5% this year.

“What happened was that the number one objective of economic policy during 2023 was not growth, but the control of inflation,” says Vicente in this interview with EL PAÍS in Punta Cana, held within the framework of the Annual Meeting of Governors. of the Inter-American Development Bank (IDB).

Tourism, mining and the industrial sector have boosted this small economy and the markets are optimistic about its potential, says the official.

Ask.

His country made a great effort to host this meeting.

How important is the IDB for the country?

Answer.

The IDB is the largest multilateral financier of the Dominican Republic.

About 44% of the financing we currently have comes from the IDB Group, a portfolio that totals nearly 2.5 billion dollars.

The country has a long history with the IDB and the Dominican Republic hosting the annual meetings is historic for two reasons.

First, the last time there was an assembly here was 30 years ago.

And second, because in this particular Assembly the IDB is going to make transcendental decisions for its future.

The new institutional strategy will be known and approved, as well as the capitalization of IDB Invest, which is the private arm of the IDB.

We will talk about the IDB Lab and resource mobilization.

Q.

At the end of last year, the country reached its maximum credit rating, are you going to take advantage of the moment to issue more debt?

A.

We reached a milestone, yes, but that is the first step, because our goal is investment grade.

The country has historically had a poor rating.

Now, the governance indices published by the World Bank register significant improvements in the six indicators, starting with the issue of controlling corruption, which is a fundamental element for generating trust and attracting investment.

Regarding financing plans, we make use of the instruments that are available.

We are now working on a green bond, an ESG bond (with environmental, social and governance criteria), with the advice of the World Bank.

We will go on the market in the second or third quarter of this year.

Q.

How much will the amount be?

A.

It is to be defined.

I can tell you that it is an instrument that will be linked to environmental and water projects.

Q.

The rating agency Fitch considered that the past reforms to reduce the financial losses of the State's electricity companies “are beginning to bear fruit.”

What is your expectation in the medium term?

A.

At the beginning of 2021 we managed to get a new version of what is known here as “the electricity pact” signed, a series of measures for the sector that had to be endorsed by all sectors of society: businessmen, churches , unions, political parties.

One of those measures was the elimination of institutions that should not be there, such as the former Dominican Corporation of State Electrical Companies (CDEEE).

A foreign investor wants to go to one place to know what the requirements of his project are.

On the other hand, when we came to the Government, the financial statements of the State distribution companies had not been audited for six or seven years.

As of 2020 we audit them, those of 2022 and 2023 are ongoing.

We have made a brutal push towards renewable energies, mainly solar and wind.

We have yet to make distribution companies more efficient

Q.

A proposed Fiscal Responsibility Law has already passed through the Senate, do you expect it to be approved by Deputies?

What does the initiative consist of?

A.

We hope it will pass before the end of the first semester this year.

The law proposes a gradual reduction in the level of general government debt, with a goal of 40% of GDP by 2035. The current level is 45.8%.

The mechanism of reaching the goal is the control variable, that the growth of primary spending does not exceed expected inflation plus 300 basis points.

Q.

GDP grew 2.4% last year, which is high compared to the region, but low compared to previous years, where the economy has grown on average 5%.

What happened?

A.

Many countries would celebrate 2.4% growth, but by the standards of the Dominican Republic it is relatively low.

What happened was that the number one objective of economic policy during 2023 was not growth, but the control of inflation because there is nothing more odious to the population than the inflation tax.

The central bank embarked on a policy to stop it and succeeded.

Let's say it was the cost we paid in exchange for growth.

Q.

There are presidential elections in May, do you expect a slowdown in investment due to political uncertainty?

A.

No, because there is no uncertainty as to who is going to win the elections.

All polls indicate that President Luis Abinader is going to be re-elected.

Perhaps the best referendum we just had in the municipal elections that took place in February, where our party even surpassed the polls and we achieved greater representation in both mayors and councillors.

Regardless of that, if you talk to investment and multilateral banks, there is a positive atmosphere towards the country.

Q.

Even Panama, and more importantly Peru, have recently fallen into political instability and/or social unrest, despite significant growth rates as inequality persists.

According to the IDB itself, the Dominican Republic continues to be a very unequal country.

A.

Our approach is not only economic, it is also social.

We have doubled economic transfers to families in vulnerable situations.

We have had to implement a series of subsidies to avoid the indiscriminate increase in fuel prices.

The Government is clear that economic development requires a strong private sector, and it is also clear that social needs cannot be neglected.

And I believe that this characteristic is what has allowed us, perhaps, to avoid things that have been seen in other sister countries, in a time as turbulent as the one we have gone through in recent years.