LatinFinance - January/February 2015 - 40

"A great deal will depend on decisions
made in Venezuela," says Guillermo Quiroga, an analyst covering the Dominican
Republic for investment bank BancTrust.
"If they decide to reduce subsidies through
PetroCaribe, the Dominican Republic
would have to spend much more covering
energy needs."
Fitch's Arias - who reckons PetroCaribe
will not come to a dead stop, but is likely
to be scaled down - says DomRep could
handle the change. "There will definitely
be an impact, but the Dominican Republic
has access to markets and other sources of
financing that could offset any losses from
PetroCaribe," he says.
The other oil story
Meanwhile, the Caribbean's only investment grade-rated country, Trinidad and
Tobago, is also exposed to lower oil prices
- although, in its case, because it is an
exporter. Oil and gas account for 40% of
GDP and half of government revenues,
according to Oppenheimer. With low
sovereign debt, and a record of running
current account surpluses, the country is
in a better financial position than many of
its neighbors.
The country is likely to draw attention
from investors in the coming years, says
Fisher at Oppenheimer. "We are seeing
a lot of new flows coming into the higher
grade credits in the Caribbean," he says.
"Sovereign wealth funds or hedge funds
that may not have looked at these countries three or four years ago now have
them on the radar."
But attracting more investment in hydrocarbon exploration and production "is
what everyone is watching", as the country's oil and gas reserves decline and the oil
price falls, says Joydeep Mukherji, analytical manager at Standard & Poor's.
Randy Ramadhar Singh, advisor in the
energy ministry, says the country has a
buffer, though, in the form of a sovereign
wealth fund. Set up in 2007 to invest oil
and gas income, the fund stood at just over
$5 billion at the end of 2013, although contributions have fallen, from $207 million in
2012 to $42 million in 2013.
As such, the government is not too
concerned - at least not yet - about the
declines in hydrocarbon prices, he says.
"We have been cutting back on spending
as prices have declined, but a second step
could be releasing money. That is why we
are not panicking too much right now," he
says. LF

40 L ATINFINA NCE.COM - January/February 2015

CARIBBEAN
INFRASTRUCTURE

Attracting investment is fundamental to growth
and exports in a tough external environment.
By Lucien Chauvin

Resource
competition

D

evelopment of the Pueblo
Viejo mine, which started production in
2012, has been vital for the Dominican Republic's external financial position since. It
is expected to bring in more than $10 billion
of export earnings over its 25-year life.
Already, it is having an effect: increases
in gold shipments accounted for most of
the island's 5.8% export growth in 2013 and
the 6.2% growth in the first three quarters
of 2014.
That jump improved the Dominican
Republic's current account position, which
in turn was central to Fitch's upgrade of the
sovereign from B to B+ in November. "The
diversified export structure makes growth
prospects more robust," says César Arias,
associate director at Fitch.
The Dominican Republic is sitting atop
nearly $58 billion worth of unexplored
minerals and metals, according to the local

MANUEL ROCHE, PUEBLO VIEJO

"THE POSITIVE
CONTRIBUTIONS OF
THIS INVESTMENT ARE
WITHOUT PRECEDENT
IN THE CARIBBEAN"

geological society. A new fillip to the country's mining industry came in September
when the government backed away from
the creation of a new national park that
would have impeded a planned expansion
of a ferronickel mine, Falcondo, owned by
Glencore Xstrata.
Production at the Pueblo Viejo mine
was only possible after a six-year, $5 billion
investment by Canadian firms Barrick Gold
and Goldcorp. The project includes an electricity plant built specifically for the mine,
to avoid relying on the local grid.
"Our investment represents the largestever foreign investment in the history of the
Dominican Republic," says Manuel Roche,
the mine's president. "The investment
made possible 50% of [economic] growth
[in 2013]. The positive contributions of
this mega foreign investment are without
precedent in the country and in the Caribbean region."
As Roche's comments imply, attracting
investment in infrastructure necessary to
get projects like Pueblo Viejo up and running will be vital to sustaining growth and
exports across the Caribbean. If the cost of
fuel imports rises with the possible end of
Venezuela's Petrocaribe subsidies, exports
will become even more important.
The region "has tremendous resources,
but we have never tapped into them," says
http://www.LATINFINANCE.COM
LatinFinance - January/February 2015

Table of Contents for the Digital Edition of LatinFinance - January/February 2015
