Identifier
Created
Classification
Origin
04SANTODOMINGO2722
2004-05-06 13:33:00
UNCLASSIFIED//FOR OFFICIAL USE ONLY
Embassy Santo Domingo
Cable title:  

DOMINICAN ELECTION SERIES #43: PLD CANDIDATE

Tags:  DR ECON PGOV 
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This record is a partial extract of the original cable. The full text of the original cable is not available.
UNCLAS SECTION 01 OF 03 SANTO DOMINGO 002722 

SIPDIS

SENSITIVE

STATE FOR WHA/CAR AND WHA EPSC
NSC FOR SHANNON AND MADISON
TREASURY FOR OASIA
USDOC FOR 4322/ITA/MAC/WH/CARIBBEAN BASIN DIVISION
USDOC FOR 3134/ITA/USFCS/RD/WH
DHS FOR CIS-CARLOS ITURREGUI

E.O. 12958: N/A
TAGS: DR ECON PGOV
SUBJECT: DOMINICAN ELECTION SERIES #43: PLD CANDIDATE
FERNANDEZ LOOKS TO ECONOMIST INTELLIGENCE UNIT FOR POLICY
PRESCRIPTIONS

REF: SANTO DOMINGO XX AND PREVIOUS

UNCLAS SECTION 01 OF 03 SANTO DOMINGO 002722

SIPDIS

SENSITIVE

STATE FOR WHA/CAR AND WHA EPSC
NSC FOR SHANNON AND MADISON
TREASURY FOR OASIA
USDOC FOR 4322/ITA/MAC/WH/CARIBBEAN BASIN DIVISION
USDOC FOR 3134/ITA/USFCS/RD/WH
DHS FOR CIS-CARLOS ITURREGUI

E.O. 12958: N/A
TAGS: DR ECON PGOV
SUBJECT: DOMINICAN ELECTION SERIES #43: PLD CANDIDATE
FERNANDEZ LOOKS TO ECONOMIST INTELLIGENCE UNIT FOR POLICY
PRESCRIPTIONS

REF: SANTO DOMINGO XX AND PREVIOUS


1. (SBU) This is cable # 43 in our series on the Dominican
elections.

PLD CANDIDATE FERNANDEZ LOOKS TO EIU FOR POLICY PRESCRIPTIONS

Judging from the consultant company he keeps, PLD candidate
Leonel Fernandez is anything but a radical in economic
matters. Rather than rely exclusively on in-house PLD
economists -- a small group, some of whom are experienced and
capable -- he turned at the outset of the campaign to the
thoroughly orthodox "Economist Intelligence Unit" for policy
prescriptions.

Fernandez recently provided to us a 113-page study entitled
"The Dominican Republic: Towards a New Development Model."
The Democracy and Development Global Foundation (FUNDGLODE),
headed by Fernandez, contracted the Economist Intelligence
Unit (EIU) to conduct the study, which was completed in
January. The document outlines some of the factors that the
EIU concluded led to the Dominican Republic's recent economic
crisis, suggests possible measures to ameliorate the
short-term consequences, and looks at longer-term solutions
to improve prospects for sustainable development. The policy
prescriptions are largely based on case studies of countries
that have faced similar challenges. The guidance looks
similar to principles the International Monetary Fund applies
in its programs and argues for greater economic
liberalization. Leonel has turned to the EIU for advice --
and that the advice he has received appears consistent with
the our broad policy objectives.

Fernandez founded FUNGLODE as a think tank and research
center following his presidency (1996 to 2000). Though the
organization asserts political independence and claims to be
non-partisan, Fernandez presides and it is closely identified
with the PLD. In an April 21 speech at an American Chamber of
Commerce Luncheon, Fernandez cited the EIU study and said
that he had circulated it among business leaders for comment.
He said that if he were elected, in the first 100 days he
would convene a crisis-management team to design a plan to

restore confidence and that Columbia University's Jeffrey
Sachs and other representatives from Columbia and Harvard
would be part of the team. (Sachs spoke at a FUNGLODE
luncheon last spring that Fernandez hosted.)

Fernandez pointed to South Korea's crisis-management plan
following the 1997-1998 Asian Crisis, which the EIU study
presented as an example. Fernandez said he would soon
publish the study for broader distribution and invite
business, religious and other community leaders to discuss
recommendations. The EIU's conclusions may provide insight
into what economic policy under a new Fernandez
administration might look like.

The EIU recommendations for the Dominican Republic covered a
broad array of issues and included examples of countries that
managed short-term crises and of others that made long-term
adjustments. Some of the study's short-term conclusions for
the Dominican Republic can be summarized as follows:

-- Adherence to IMF targets increases access to funds,
supports investor confidence, provides basis for
macro-economic stability, decreases vulnerability to shocks,
and strengthens the domestic banking sector;

-- Re-privatization of national assets provides immediate
revenue but requires sound regulatory framework.

-- Resolution of economic and social problems must be given
priority over political motivations.

-- Anti-corruption efforts are crucial.

-- Authorities must educate the public on benefits of cutting
the public sector and privatizing state assets.

-- A stable and proactive debt-management program should be
implemented.

-- Energy issues can be tackled through emergency measures,
increased private sector participation, and establishment of
strong regulatory framework.

-- The country should strengthen weakened banking systems and
take advantage of technical assistance to meet international
standards.

-- A new administration should adopt measures to stimulate
private sector development to restart the economy.

-- Public relations are important -- a new government must
establish strong communication channels and a public
relations strategy for dealing with investors and keeping
them informed.

The EIU study presents a blueprint for a longer term economic
model also. Some of the recommendations include:

-- Encourage competition and phase out subsidies in the
energy sector;

-- Avoid excessive reliance on free zones and tourism
enclaves that can distort the economy and concentrate
benefits that don't help with broader development of
communities or the country.

-- Liberalize trade and competition by reducing import duties;

-- Diversify crops and adopt country/sector branding;

-- Increase competition and regulatory supervision in banking
and financial sector and establish risk-based early-warning
system to identify vulnerable institutions;and

-- Support small and medium-sized enterprises (SMEs).

The report addresses other long-term issues such as
investment in human capital through improved healthcare and
social security, poverty reduction, and investment in
information technologies. It notes that the Dominican
Republic has performed poorly in each of those areas.

Compared with the PLD platform --

The PLD's economic platform, introduced last month, largely
mirrors the EIU study, while explicitly blaming the ruling
PRD for upsetting the economic stability and sustained growth
achieved while Fernandez was President. The PLD asserts that
under the PRD there has been increased unemployment,
accelerated government spending, an unchecked policy of
internal and external borrowing, and mismanagement of the
banking crisis, all of which led to "negative performance
during these last years." The Party platform lists ambitious
objectives in broad terms and delineates strategies -- which
are stated as
broad objectives themselves, in most instances lacking
specifics. The economic platform
covers macroeconomic policy, the industrial sector, tourism,
agriculture, and sugar.

Although the PLD macroeconomic policy calls for fiscal
austerity, tax reform, sustainable
debt, strict monetary policy, and a market-based exchange
rate, it makes only veiled
reference to the International Monetary Fund standby
agreement.

On trade, the PLD calls for increased competitiveness and
continuation of the
competitiveness program initiated under Mejia. Similarly, on
tariffs, the platform sets an objective of establishing a
tariff regimen "adjusted to the situation of openness."

Of possible concern for the multilateral trade agenda, the
platform calls for renewing the strategic alliances and
guarding the interests of small economies in all of the trade
negotiating forums, and reintegrating the country into
CARICOM's "regional negotiating machinery."

Brain and Heart

Throughout the campaign, Fernandez has sought to convince
prospective voters through his measured, rational analysis of
the country's problems. He is thoughtful but not necessarily
a deep thinker - - rather, a man ready to listen to expert
advice. Recent radio spots have sought to rouse more
emotion, featuring particularly a recording of his
back-and-forth dialogue with a rally blaming Hipolito for the
rise in prices of meat, electricity, fuel and transport. His
slogan promises that "Progress is returning." In his
regional journeys Fernandez has met separately with gathering
from economic sectors, promising improvements but warning
them that he will need a year or more to put the government's
house in order.

Assuming that Fernandez eventually wins the foreshadowed
victory, he will need both brain and heart -- that is,
convincing charisma -- to hold the people's faith long enough
for the orthodox prescriptions to work.


2. (U) Drafted by Thomas Pierce.


3. (U) This report and others in our elections series can be
consulted on our SIPRNET site
http://www.state.sgov.gov/p/wha/santodomingo/ along with
extensive other material.











HERTELL