DOMINICAN REPUBLIC - USITC BIENNIAL CARIBBEAN

UNCLAS SECTION 01 OF 02 SANTO DOMINGO 003564

SIPDIS

SENSITIVE

STATE PASS TO USITC FOR LSCHLITT
STATE PASS TO OPIC
STATE PASS TO USTR FOR GDURKIN
TREASURY FOR OASIA/INC

E.O. 12958: N/A
TAGS: ASEC ECON ETRD OTRA XL EFIN DR
SUBJECT: DOMINICAN REPUBLIC - USITC BIENNIAL CARIBBEAN
BASIN INVESTMENT SURVEY

REF: SECSTATE 87702


1. This cable is in response to the USITC's request for the
2004 Caribbean Basin Investment Survey. According to the
Dominican Export and Investment Center, foreign direct
investment (FDI) in the Dominican Republic in 2004 totaled
USD 650 million, down from USD 1.01 billion in 2003.
Investment in free trade zones continued to increase as did
FTZ exports, though at a much lower rate than previously. The
Caribbean Basin Trade Partnership Act has been very effective
in attracting new business to the Dominican Republic in the
past, and now businesses are looking to the Dominican
Government to ratify the U.S.-Central American, Dominican
Republic Free Trade Agreement (CAFTA-DR) to create even
greater free trade benefits on a permanent basis.


2. The Dominican National Council of Free Trade Zones (CNZFE)
indicates that Free Zone areas in 2004 grew in terms of the
number of businesses, the number of employees and total
exports. There was a 7.4% increase in the number of free
zone areas in 2004. The total value of exports from free
trade zones was USD $4.4 billion, just slightly (0.2%)
greater than in 2003. However, free trade exports in
comparison to all Dominican trade decreased by 5%. The
United States has the highest representation in the free
trade zones with 256 business, which in 2004 represented 45%
of the total free trade zone businesses. Exports from the
largest FTZ sector, textiles, dropped as they did in 2003,
this time by 5.5%.


3. Total new investment in Free Trade Zones in 2004 was USD
114 million. U.S. businesses are the largest investors in
the Free Trade Zone areas with 2004 investments estimated at
USD 57 million. The highest percentage of goods exported
from the Free Trade Zones goes to the United States -- 76% of
total FTZ exports. Of 569 FTZ businesses, 456 use materials
originating in the United States.

- - - - - - - - - - - - - -
FDI by Sector in FTZ (in millions of U.S. dollars)
January to December 2004
Data from CNFZE
- - - - - - - - - - - - - -
Textiles 47.2
Metals 10.1
Medical Instruments/Materials 8.6
Services 8.4
Tobacco 7.6
Cartons and Paper Products 6.3
Construction Materials 4.8
Construction 4.7
Food 3.4
Agro-Industrial 2.8
Chemical Products 2.8
Plastic Goods 2.1
Trade Related Business 1.1
Jewelry 1.2
Electronics 1.1
Leather Goods 0.6
Refrigeration 0.6
Assembly of Electrical Equiment 0.2
- - - - - - - - -
Total 113.6
- - - - - - - - -


4. Sensitive - Business Confidential

The following company-specific information represents some of
the largest U.S. companies registered as foreign businesses
in the Dominican Republic, and reflects those companies
registered as having new investment in 2004.

- Verizon is the main telephone service provider operating in
the Dominican Republic.
The company invested USD 220 million in a new headquarters
building and infrastructure upgrades during 2004. The local
Verizon president told us that the company did not benefit
from CBERA/CBTPA.

- Tricom is 40 percent owned by Motorola and is the second
largest provider of long distance and cellular telephone
services in the Dominican Republic. Citigroup of New York
owns a sizable share of Tricom's debt. A Tricom executive
states that 2004 investment was USD 28 million and this was
new investment. Tricom did not receive CBERA/CBTPA benefits
in 2004. However, the company had benefited in the past
through CARIFA (Section 936) bond issues.

- CODACSA/The Fairfield Group invested approximately $13
million in toll road construction but claimed no CBERA/CBTPA
benefits.

- Colgate Palmolive, Inc. is the leading manufacturer in the
Dominican Republic of soaps and toothpaste.
It invested approximately USD 1.5 million during 2004. The
company is not located in a free trade zone and the project
would have been launched without CBERA/CBTPA.

- Pernod Ricard Dominicana invested approximately USD 17
million in 2004. Pernod Ricard is a French company, but the
Dominican office is managed out of the company's U.S.
headquarters and the investment is categorized by the
Dominican Government as a U.S. investment. The company is not
located in a free trade zone and the project would have been
launched without CBERA/CBTPA.

- FMI Apparel, an FTZ company, would not disclose new
investment for 2004, but indicated that CBERA/CBTA incentives
are essential to the company and that without them the
company would not be doing business in the Dominican Republic.
HERTELL