DOMINICAN POLITICS II #1: LEONEL'S GRAND NATIONAL

UNCLAS SECTION 01 OF 04 SANTO DOMINGO 004653 SIPDIS STATE FOR WHA, WHA/CAR, WHA/EPSC, INR/IAA, EB/ESC/IEC/EPC; STATE PASS USTR FOR VARGO, MALITO, AND HAUDA; NSC FOR LATIN AMERICA ADVISOR; USSOUTHCOM ALSO FOR POLAD; TREASURY FOR OASIA-MAUREEN WAFER; USDA FOR FAS; 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: ECON ETRD DR EPET EFIN ENRG PGOV SUBJECT: DOMINICAN POLITICS II #1: LEONEL'S GRAND NATIONAL CONSULTATION ¶1. This is the first in a series of political reporting on the second year of the administration of Dominican president Leonel Fernandez. LEONEL'S GRAND NATIONAL CONSULTATION Over the weekend of October 9-10, with a hastily organized grand national seminar Dominican President Leonel Fernndez sought to move the nation's eyes from its long economic plight to the prospects and requirements of economic recovery based on dialogue, consensus and social responsibility. "This has been memorable," he told participants at the end of the two days of nationally televised sessions. "This is not a new type of academic encounter; it is an effort to elaborate a plan, jointly and through consensus." This was the same approach that the President had used on tax reform, electricity reform, and anti-corruption: he put himself before a room full of eloquent and informed individuals with interests to defend and asked them to recognize the national interest in addition to their own. He asked them to help the country undertake a "titanic transformation." Opening speaker Technical Secretary Temistocles Monts called for "a consensus, not conflict, for a social pact" along the lines of Spain's Montcloa Pact 28 years ago, an accord to pursue the national interest with policies that are anti-inflationary, restrictive of spending, education-minded and willing to embrace reforms of tax structures. Organization of the event was hasty and slipshod, especially considering that the announced objective was inclusiveness and consensus. Fernndez gave his staff two weeks to put it together. Invitations were dated October 4 but arrived to surprise most participants, including this Embassy, late on Friday, October 8 for sessions opening the next morning. The opposition PRD said its leaders had already made plans; only President of the House of Representatives Alfredo Pacheco appeared, attending the Saturday morning session. Fernndez's Commissioner of Insurance, venerable PLD leftist Euclides Gutierrez, made no secret of the fact that senior government officials were obliged to be there. The audience of several hundred represented most of the country's political and economic elites from government, the private sector, political parties, civil society, the diplomatic corps and international financial institutions. The themes that emerged were not new. Off-the-shelf presentations, lectures and Q&A sessions outlined macroeconomic and financial problems, the Dominican Republic's lack of international competitiveness (102 out of 117 ranked by the World Economic Forum), the overhang of Central Bank debt, the precarious electricity sector with its annual bill of US$500 million for subsidies, the fiscal hit impending with the implementation of the CAFTA-DR free trade agreement ("just 50 days from now"),the oil shock, and the abysmal state of infrastructure, education and health services. Hugo Rivera Santana of the Industry and Commerce Ministry, assured the participants that the government was already at work on measures required for the entry into force of the free trade agreement (CAFTA-DR) and told them of the possibility that the country might eventually qualify for U.S. assistance through the Millennium Challenge Corporation. - - - - - - - - The Summing Up - - - - - - - - Fernndez presented some bills and outlined his intentions with his hour-long closing talk on Sunday. He picked up the metaphor from his 2004 inaugural speech: the Dominican Republic is no longer a critically ill patient in intensive care but rather one in the recovery room; now the country must understand the origins of its tragic illness. "This crisis was the result of mismanagement of fiscal, monetary and exchange policies that raised the public debt to the equivalent of more than 55 percent of GDP. In the previous administration the national debt almost quadrupled. There lies the origin of the nation's ills." Acknowledging the minority status of his party, Fernandez thanked congressional representatives for helping formulate the 2004 tax package, praised the approach of dialogue and asked for support in carrying out fiscal reform. This one would be a transformation of the tax system, shifting great responsibilities from Customs to Internal Revenue. "I reject the misguided assertion that the tax reform is for 9 billion pesos too much." The exchange rate will be determined by the market. Fernandez acknowledged the difficulties faced by free zone manufacturers and the tourism sector due to the prevailing rate. The free trade agreement offers great opportunities and might lead to a hemisphere-wide agreement. The country needs to think in addition of an agreement with the European Union and to strengthen its links with Spain. Solving the problems of electricity supply once and for all was crucial for improving competitiveness. The approach of partial privatization adopted in his 1996-2000 administration was valid and had succeeded elsewhere in Latin America. "Privatization was not invented by the Dominicans." Facing a probable deficit in generation capacity in 2007, he said, "We have been calling for a public request for tenders for new investment in generation." A Spanish firm will be setting up a wind farm in the southwestern area of Bani and the Mexican has invited Dominican officials for next week to discuss a possible petroleum agreement that could include Central American countries. The government has begun international contacts to look at the possibilities of developing ethanol as an alternative fuel. Fernandez said that Santo Domingo needs mass public transport using new energy sources, such as a Metro. Many electricity generation contracts were not negotiated openly or transparently. "We should not have to pay for electricity that is not delivered. This must be reconsidered, renegotiated and redistributed." Electricity must be available to users at reasonable rates, which "is not possible according the terms of some of these contracts. So that, here and now, I put on the table my definite intention to call a meeting to set up the renegotiation of energy contracts." (Strong applause.) He called on energy distribution companies to install meters and improve supervision over collections -- "which should not be difficult, since as the World Bank representative said, 85 percent of those who do not pay do have the means to do so." He pledged that the government would demonstrate the political will to carry this out. (Renewed applause.) The country cannot achieve its Millennium Development Goals without help, he said. "This will cost US$ 29 billion, compared with the US$ 18 million of our entire Gross Domestic Product." He asked for the active and dynamic participation of international organizations and suggested that rich countries follow the suggestion expected from Spain at this week's Ibero-American summit: canceling debt in exchange for investment in education. "Such a measure is not charity or philanthropy, but rather an investment by the rich countries to assure that poverty does not reach their shores." Among the principal challenges are education, health, and the improvement of phyto-sanitary standards, along with other conditions in keeping with human dignity. Justice must be totally depoliticized and there must be real transparency in the handling of public funds. The two-day seminar had been a success, he said, and he announced that he would be appointing commissions to meet monthly to continue the work; participants would be called together anew at the end of 2005. ¶2. (U) Drafted by Michael Meigs ¶3. (U) This piece and others in our series can be consulted at our SIPRNET web site, http://www.state.sgov.gov/p/wha/santodomingo< /a> along with extensive other material. MINIMIZED CONSIDERED HERTELL