Identifier
Created
Classification
Origin
05SANTODOMINGO4759
2005-10-24 13:42:00
UNCLASSIFIED
Embassy Santo Domingo
Cable title:  

DOMINICAN REPUBLIC: CBI BENEFITS FOR THE 2005

Tags:  ECON DR ETRD 
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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 05 SANTO DOMINGO 004759 

SIPDIS

DEPT PASS USTR FOR RUSSEL SMITH; DEPT FOR WHA/CAR,
WHA/EPSC; DEPT PASS USAID

E.O. 12958: N/A
TAGS: ECON DR ETRD
SUBJECT: DOMINICAN REPUBLIC: CBI BENEFITS FOR THE 2005
CONGRESSIONAL REPORT

REF: SECSTATE 188288

UNCLAS SECTION 01 OF 05 SANTO DOMINGO 004759

SIPDIS

DEPT PASS USTR FOR RUSSEL SMITH; DEPT FOR WHA/CAR,
WHA/EPSC; DEPT PASS USAID

E.O. 12958: N/A
TAGS: ECON DR ETRD
SUBJECT: DOMINICAN REPUBLIC: CBI BENEFITS FOR THE 2005
CONGRESSIONAL REPORT

REF: SECSTATE 188288


1. The Following information is keyed to reftel questions.
--------------
WTO and Free Trade Commitments
--------------

2. The Dominican Republic signed the Central American Free
Trade Agreement (DR-CAFTA) with the United States on August
5, 2004. Ratification of the agreement was completed in the
Dominican Congress in September of 2005. Inclusion of the
Dominican Republic in CAFTA expands the trade coverage of the
agreement by some 40 percent, creating a free market for U.S.
goods and services that would become the 2nd largest U.S.
export market in Latin America.


3. Under DR-CAFTA the Dominican Republic commits to
undertake needed reforms to alleviate many of the systemic
problems in areas including customs administration,
protection of intellectual property rights, services,
investment, government procurement, sanitary and
phytosanitary barriers and other non-tariff barriers.

-------------- ---
Protection of Intellectual Property Rights
-------------- --------------

4. While the Dominican Republic has laws with sanctions
adequate to protect copyrights and has improved the
regulatory framework for patent and trademark protection,
United States industry representatives continue to cite lack
of IPR enforcement as a major concern. The Dominicans
specifically committed in a side letter to CAFTA to make
stronger efforts to halt television broadcast piracy, and
agreed to report on their efforts in this regard in a
quarterly report to USTR. The Dominican government has
delivered these quarterly reports on time since January,

2005. The Embassy has noted improved coordination in this
regard among various government agencies including the
Secretariat of Industry and Commerce, the Attorney General,s

SIPDIS
Office, the Patent Office and the Copyright Office. The
authorities advised cable television of their legal
responsibilities regarding copyright, secured a formal
agreement with the operators' association in August, 2005,
and in September seized equipment from six operators found to
be infringing the laws. The Attorney General's office
instituted proceedings against several television
broadcasters in the first half of 2005 for infringement of
the copyrights of the owners of various U.S. film titles.



5. On three occasions during a twelve-month period during
2004-2005, congressional representatives proposed legislation
that would weaken the country's intellectual property laws by
reducing penalties for patent violations, by making the
granting of compulsory licenses automatic if the government
failed to act on an application, and by undercutting data
protection for patents. Embassy officers repeatedly expressed
USG concern to the congressional leadership about this
legislation, which was advocated by domestic pharmaceutical
manufacturers. Two of the proposed bills died in Congress
without a vote. As of October 2005, the third proposal has
been offered in the Senate, but the Embassy understands that
there is no support for placing it on the agenda.

--------------
Protection of Worker Rights
--------------

6. The Dominican Constitution provides for the freedom to
organize labor unions, and all workers, except the military
and the police, are free to organize. Organized labor
represents an estimated eight percent of the work force and
is divided among four major confederations and a number of
independent unions. The 1992 Labor Code provides extensive
protection for worker rights and specifies the steps legally
required to establish a union, federation, or confederation.
The code calls for automatic recognition of a union if the
government has not acted on its application within 30 days.
In practice, the Dominican government readily facilitates
recognition of labor organizations.


7. The government generally respects association rights and
places no obstacles to union registration, affiliation, or
the ability to engage in legal strikes. However, enforcement
of labor laws is sometimes unreliable, inhibiting employees
from freely exercising their rights. The Dominican Republic
recognizes the problem and is working to correct shortcomings
in enforcement. Unions are independent of the government and
generally independent of political parties. The law
forbidding companies to fire union organizers or members has
at times been enforced selectively, and penalties appear
insufficient to deter employers from violating worker rights.
Labor unions can and do affiliate freely regionally, and
internationally.


8. Collective bargaining is legal and must be used in firms
in which a union has the support of an absolute majority of
the workers. Many of the manufacturers in the Free Trade
Zones (FTZs) have voluntary "codes of conduct" that include
workers, rights protection clauses. Workers do not always
know their rights under these codes.

9. The Dominican Constitution empowers the executive branch
to set minimum wage levels, and the Labor Code assigns this
task to a tripartite (government, employer and worker)
national salary committee. Congress may enact minimum wage
legislation. There are presently 14 minimum wage scales, set
by sector and/or geography, and the minimum monthly salary is
approximately USD 119 (3,570 pesos) in the FTZs and USD 164
(4,920 pesos) outside the FTZs.


10. The Dominican Labor Code establishes a standard work
period of 8 hours per day and 44 hours per week. The code
also stipulates that all workers are entitled to 36 hours of
uninterrupted rest each week. In practice, a typical work
week is Monday through Friday plus a half day on Saturday,
but longer hours are common. The code grants workers a 35
percent differential for work totaling between 44 hours to 68
hours per week and double time for any hours above 68 hours
per week. Overtime is mandatory at some firms in the FTZs.


11. The Labor Code sets the minimum age for employment at 14
years, and places restrictions on the employment of youths
between the ages of 14 and 16. In 2001 the Ministry of Labor
and the National Statistics Office reported that 17.7 percent
of children ages 5 to 17 years in the Dominican Republic were
working. Most of these children work in the informal and
agricultural sectors. This information was gathered as part
of a survey to establish a baseline for the International
Program on the Elimination of Child Labor carried out by the
ILO.

-------------- --
Preventing Worst Forms of Child Labor
-------------- --


12. The country ratified ILO Convention 182 on November 15,
2000, and the government has taken a strong stance on the
need to eliminate the worst forms of child labor. A national
committee on child labor has been established, and it
collaborates with the ILO, UNICEF, and several
non-governmental organizations. The Dominican Republic has
signed a Memorandum of Understanding with the ILO,s
International Program for the Elimination of Child Labor and
is working with the ILO on various programs aimed at phasing
out exploitative child labor. This includes the ILO-IPEC
Time Bound program on the worst forms of child labor, with an
Education Initiative component to improve access to education
funded by the U.S. Department of Labor.

--------------
Counter-Narcotics Efforts
--------------


13. The Dominican Republic is classified as a major
transshipment country for narcotics moving from South America
into Puerto Rico and the United States. The country has been
fully certified as cooperating with U.S. counter-narcotics
efforts. The Dominican Republic has met the U.S. counter
narcotics certification criteria under the Foreign Assistance
Act of 1961.

-------------- --------------
Inter-American Convention Against Corruption
-------------- --------------


14. The Dominican Republic has ratified the Inter-American
Convention Against Corruption (IACAC). When Leonel Fernandez
was elected president in 2004, he made anti-corruption a
major theme of his inaugural speech. In April 2005 the
President established a Government Ethics and Anti-Corruption
Commission. Corruption remains a deep-rooted problem in
Dominican society. Corruption and the need for reform are
openly and widely discussed.

-------------- --------------
Transparency in Government Procurement
-------------- --------------


15. Historically, contracts for large public works, military
equipment, vehicles and other supply contracts are often not
subject to competitive bids. The government is in the
process of changing this practice. Over the past six months
the administration has stopped two large procurements
initially negotiated directly -- a package of equipment for
the police valued at well over USD 100 million and the
acquisition of two coal-fired generating plants to produce
1400 MGWT -- and converted them into tenders instead. The
presidency suspended directly negotiated procurement of
software valued at between USD 4 and USD 11 million when the
new Government Ethics and Anti-Corruption Commission made
strenuous objections. As part of a Stand-by Agreement signed
with the IMF in early 2005 the Dominican Republic undertook a
commitment to pass legislation making government procurement
more transparent. The procurement reform legislation has
been prepared but not enacted. President Fernandez has a
"bridge decree" pending signature since March, 2005; it would
direct government officials to resort to open tenders for
acquisitions of goods, services, and construction for all
purchases above relatively restricted minimum amounts. The
Dominican Republic assumed a similar obligation in the
CAFTA-DR agreement, which is likely to enter into force in
early 2006..

--------------
Expropriations
--------------


16. Dominican expropriation standards have historically been
at variance with international norms. Some U.S. investors
have outstanding disputes with the Dominican government
concerning expropriated land. Property claims make up the
majority of expropriation cases. Most, but not all seizures
have been for purposes of infrastructure or commercial
development. Almost all pre-1996 expropriation claims have
been solved, through a mechanism which provides claimants
with the opportunity of accepting bonds once claims have been
reviewed, confirmed and negotiated.


17. Tthe Dominican Republic is a member of the International
Center for the Settlement of Investment Disputes. In August
2002, the country ratified the 1958 UN Convention on Arbitral
Awards (the New York Convention),thereby recognizing the
right of companies to pursue international arbitration.

--------------
Government-owned Broadcasters
--------------
Government-owned entities do not/not broadcast copyrighted
material belonging to U.S. copyright-holders without their
express consent.

--------------
Bilateral Extradition Treaty
--------------


18. The Dominican Republic signed a bilateral extradition
treaty with the United States in 1909. In the first term of
President Fernandez, 1996-2000, the executive revised its
procedures for that previously inactive treaty and began to
extradite fugitives requested by the United States. Since
that time more than 100 fugitives have been extradited, with
the active participation of each administration. The
country has also signed and ratified the U.N. Convention
Against Illicit Traffic in Narcotic Drugs and Psychotropic
Substances. In accordance with Article 6 of that Convention,
each of the offenses listed in Article 3 (1) shall be deemed
to be included as an extraditable offense in any extradition
treaty existing between the parties.


19. The Dominican Supreme Court examines each extradition
request closely to assure compliance with its interpretation
of the treaty. The executive branch of the government
cooperates readily with extradition requests, though
presidential decrees authorizing extraditions may include
language concerning maximum sentences and stating that
remitted fugitives should not be subject to death penalty.

-------------- --------------
Recognition of International Arbitral Awards
-------------- --------------


20. The Dominican Republic implemented the New York
Convention on Recognition and Enforcement of Foreign Arbitral
Awards (the New York Convention) in August of 2002, which
provides courts a mechanism to enforce international arbitral
awards. A U.S. firm recently resolved out of court a dispute
in which it had appealed a verdict from a Dominican lower
court inconsistent with the findings of the international
arbiter identified in the contract.

--------------
General Economic Conditions
--------------


21. The Dominican economy suffered from major financial
imbalance in 2003-2004, prompted in large part by extensive
banking frauds, mismangement of the economy, and a loss of
confidence. The new administration's renegotiation of the
IMF standby agreement and appropriate macroeconomic and
fiscal management has resulted in better than expected
economic performance this year despite a poorly performing
electricity sector and high international prices for fuel.
GDP growth projections for 2005 are in the 3 to 4 percent
range, up from 2 percent in 2004. The Dominican peso has
been overvalued on a purchasing power parity basis since late
2004 and relatively stable at less than 30 pesos to the U.S.
dollar for much of the year. Market pressures led to
adjustments in September and October, resulting in an
exchange rate of around 32 to the dollar.


22. Inflation was low through much of 2005 but prices for
basic items were nevertheless at historical highs. Inflation
accelerated in September when it reached an annualized rate
of 3.8 percent for the month, the highest rate in nearly two
years. The Central Bank cites increased world petroleum
prices as possible reasons for the drop in peso value and
increased inflation. Congress continues to review fiscal
reform measures as the government prepares itself to adjust
for the loss of taxes on trade with the implementation of
DR-CAFTA.

--------------
Access of U.S. Goods to Market
--------------


23. Dominican consumers show a pronounced preference for
U.S. goods. It does not afford preferential treatment to
products of any developed country. The country generally
provides reasonable and equitable access to U.S. goods and
services. With the entry into force of DR-CAFTA,
approximately 80 percent of U.S. manufactured goods will
immediately enter the country duty free.

--------------
Export Subsidies
--------------


24. The Dominican Republic does not provide direct
subsidies to encourage exports. The FTZs are the major
source of exports and production in the zones is tax-free and
duty-free, in accordance with WTO recommendations.

--------------
Trade Policies
--------------


25. The Dominican Republic had previously signed a trade
agreement with the Central American countries; its successful
efforts to join negotiations on DR-CAFTA required it to make
further reciprocal trade concessions to those countries. The
Dominicans have revived formal trading links with Puerto Rico
in anticipation of the entry into force of DR-CAFTA.

--------------
Economic Development
--------------


26. President Fernandez's administration has a
socially-conscious, market friendly policy and cooperates
closely with international donors. The austerity required by
the financial crisis and readjustment has been a hinderance
in increasing investment in social capital and infrastructure.

--------------
Administration of CBERA
--------------


27. Dominican political and trade authorities have
cooperated closely with U.S. authorities concerning the CBERA
and other regional trade matters.



26. The post officer assigned to responsibility for this
reporting is Jehan S. Jones (O: 809-731-4469, F:
809-686-4038, Email: Jonesjs2@state.gov.
BRINEMAN