LatinFinance - January/February 2015 - 38

Weaning off
The Dominican Republic has made more
progress than others in the Caribbean on
switching from Venezuelan oil-fuelled
electricity to unsubsidized fuel. It is also in a
more comfortable debt position than some
peers - although that has been rising over
the past four years. The IMF forecast the
country's debt would hit 49% of GDP last
year. But faster growth, improving exports,
and efforts to trim the fiscal deficit led Fitch
to upgrade the country last November from
B to B+.
"The improvement in confidence and

38 L ATINFINA NCE.COM - January/February 2015

the increasing pace of credit growth is allowing for domestic demand to be robust,"
says César Arias, Fitch's associate director
covering the Dominican Republic. He is
confident the government will keep debt in
check this year and next.
Virginia Bello, in charge of capital markets analysis in the finance ministry, says
debt dynamics are "not a problem" in the
Dominican Republic.
"Fiscal consolidation underway since
the start of this administration [in 2012] has

©REUTERS

$932 million IMF extended fund facility
granted in 2013, to help Jamaica lift growth
and cut debt. Jamaica has passed six reviews under the program, most recently in
November.
Oppenheimer's Fisher says he has never
seen such a positive outlook for Jamaica.
"When past IMF programs have been
implemented, the goal posts have tended to
waiver and wiggle here and there," he says.
"This time, they have remained steadfast
and have produced the most positive GDP
in a long time."
Jamaica's economy, in fact, expanded
almost 1% in the year to mid-2014, according to the IMF: still low, but picking up. As
well as cutting debt, IMF data indicates the
country ran a small budget surplus in the
year to March 2014, of 0.1% of GDP.
"The economic reform program of the
government, supported by this extended
IMF facility, has significantly changed the
trajectory of the main macroeconomic
indicators, moving from a path that was
unsustainable, and leading to worse rates,
to a path that is stabilized and improving,"
says Brian Wynter, governor of the Bank of
Jamaica.
The improvement in the fiscal balance
and a sharp fall in the current account
deficit have been big achievements, he says.
"The changes [to the deficits] are very important in terms of creating an environment
that is more sustainable, reducing the risk
profile for Jamaican businesses and thereby
creating more stability for us to build [...] a
solid basis for growth."
Despite the progress, pushing ahead will
be tough for Prime Minister Portia SimpsonMiller's government. A three-year wage
freeze agreed with public sector workers
in 2012 is up this year. Public sector wages
represent around 10% of GDP or 37% of
government spending, according to Oppenheimer.

REGIONAL LINKS: Venezuela's Rafael
Ramírez says PetroCaribe support will
continue

stabilized the debt," she says. "There has
been a slight increase, but it will begin to
decline in 2015 and we expect a downward
trend in the coming years."
DomRep is a regular issuer in the dollar
bond market, and its 2015 budget allows for
$1.5 billion to be sold in the international
market and another $900 million in peso
equivalent locally.
Bello says the growing economy and
declining debt should provide room for
liability management exercises, although
that is unlikely this year. "We will look at
debt management options starting in 2016,"
she says.
The Dominican Republic is now one of
the top performing economies in the Caribbean, with the IMF projecting growth of
5.3% in 2014 and 4.2% in 2015. A $5 billion
gold mine has started production, and the
US recovery has helped remittance and
tourist flows.
Still, the future of PetroCaribe will have
implications here.
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