LatinFinance - March/April 2016 - 32

Tapping commodities
The Dominican government remains confident that mineral exploration offers strong
FDI potential as the Energy and Mines
Ministry gets ready for an international
bidding round for oil and gas exploration
blocks later this year. "The Dominican
Republic has a world-class geology for mining, despite being just a small island. Right
now, we have one of the world's best gold
mines and new gold and copper deposits
have been identified in the south of the
country," says José Sena, president of the
Mining and Petroleum Chamber of the
Dominican Republic.
The government's experience with
Pueblo Viejo is certainly one reason why
it's keen to see new mining projects. The
mine is not only a star performer in the
economy (paying more than $1 billion in
taxes since signing a new contract with
the state in September 2013), but is one of
the lowest cost mines in the world, averaging around $620 per ounce produced. It
produced approximately 1 million ounces
of gold in 2015 and expects to repeat that
again this year.
Pueblo Viejo's Rocha ticked off the reasons behind the company's importance to
the country. "First, we represent the largest foreign investment ever made in the
Dominican Republic," he says, referring to
the nearly $4 billion that Canada's Barrick
Gold and Goldcorp have poured into the
mine since 2009. "Second, we are the largest exporter in the nation and will remain
so for many years to come. Third, we are
the largest taxpayer, according to the tax
administration. In essence, we are a major contributor to the nation's economic
growth and financial stability," he says.
Gold exports from Pueblo Viejo, combined with the steep decline of the price
of international oil, have allowed the
government to more than halve the cur-

32 L ATINFINA NCE.COM - March/April 2016

rent account deficit from 4.1% in 2013 to an
estimated 2% in 2015. The mining company
accounted for a major portion of the nation's corporate income tax, according to
Rocha.
Rocha says mining companies that
discover new deposits will encounter a
positive environment. "The Dominican
Republic has made a great effort since the
re-negotiation of our contract in 2013 to

send positive signals to foreign investors
that the country welcomes responsible
mining," he says.
Mining executives are hoping a troubled
nickel mine, Falcondo, can get back on
its feet. Glencore Xstrata last August sold
its 85% stake in the project to American
Nickel, formed by venture capitalists and
miners. The mine, which has operated for
nearly 60 years, has faced financial and

Dominican Republic FDI
Peaks and valleys
3.5
3
2.5

USD billions

down the road, but for now he sees investment continuing to flow to the Dominican
Republic to meet demand.
Erich Arispe, director in Fitch Ratings'
Latin America sovereign ratings group,
says that while FDI in tourism is growing
strongly, investment is not limited to a
single driver. "The Dominican Republic is
very different from other Latin American
countries because FDI does not concentrate in a single sector, and certainly not
in a commodity sector. The Dominican
Republic is a very diversified economy and
FDI reflects that," he says.

2
1.5
1
0.5
0
2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014
Source: World Bank

ERICH ARISPE, FITCH RATINGS

"THE DOMINICAN
REPUBLIC IS VERY
DIFFERENT FROM
OTHER LATIN
AMERICAN COUNTRIES
BECAUSE FDI DOES
NOT CONCENTRATE IN
A SINGLE SECTOR, AND
CERTAINLY NOT IN A
COMMODITY SECTOR"

environmental difficulties in the past and
has been closed since 2013. The new owners hope to reopen this year.
Sena says the country has another big
opportunity with non-metallic mining in
the form of cement, adding that Dominican companies were eyeing exports to the
East Coast of the US. The largest cement
producer, Cemex Dominicana, a division
of Mexico's Cemex, produced a record 2.2
million metric tons last year, up from the
1.8 million tons that it averaged during the
previous five years.
The solid performance of the cement
industry has been fueled by the uptick in
public works projects and construction for
tourism and to meet expanding consumer
demand for new housing projects, shopping malls and services, such as schools
and health facilities.
"All you have to do is drive around Santo
Domingo to see that there is a great deal
of investment in construction," says S&P's
Orozco. LF
Additional reporting by Sara Rosner
http://www.LATINFINANCE.COM
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