SANTO DOMINGO ECONOMIC-POLITICAL ROUNDUP, MAY 29,

UNCLAS SANTO DOMINGO 000632

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TAGS: EFIN ECON ENRG EINV PHUM DR
SUBJECT: SANTO DOMINGO ECONOMIC-POLITICAL ROUNDUP, MAY 29,
2009

(U) In this edition of the roundup:


1. New Customs Director and Superintendent of Banks

2. Pressure Builds on the GODR to Seek an IMF Agreement

3. Government Seeks to Buy Out Remaining Private
Participation in Electricity Distribution

4. Constitutional Reform and Nationality


1. (U) New Customs Director and Superintendent of Banks

On May 27, Rafael Camilo Abreu, the Superintendent of Banks,
was named as the new Director of Customs. He replaces Miguel
Cocco, who passed away on May 21 after a long illness.
Camilo is well respected by the banking community and
considered to have done a good job in overseeing the reform
of the banking system after the 2003 crisis. He will be
replaced by Haivanjoe Ng Cortinas, the Superintendent of the
Stock Exchange.


2. (SBU) Pressure Builds on the GODR to Seek an IMF Agreement

The Governor of the Central Bank and the Minister for
Economy, Development and Planning have both publicly called
for the GODR to sign a stand-by agreement with the
International Monetary Fund (IMF). On May 25, the Central
Bank Governor Hector Valdez Albizu told the press that he
supports a new agreement as a precautionary measure similar
to ones taken by Peru and other countries. On May 27, the
Minister for Economy, Development and Planning Temistocles
Montas told the media that the GODR needs to sign an
agreement and that the financing would help stimulate the
economy. Both members of the President's Economic Cabinet
have been known to support an IMF agreement; however, they
have not previously made such public endorsements. Both men
acknowledged that only the President can make the final
decision. It is believed that the Minister of Finance
Vicente Bengoa is still the main opponent to an IMF
agreement. Earlier in May, Valdez Albizu traveled to
Washington to meet with IMF officials who said the IMF is
prepared to sign an agreement. On a separate trip, Bengoa
led a team that met with World Bank (WB) officials to request
budget support assistance, in part to help address the
payment crisis in the electricity sector. Montas told the
press that the WB and the Inter-American Development Bank
said the GODR would have to seek a stand-by agreement with
the IMF before it could access more financing. With
financing options running out and the fiscal deficit growing,
it appears to be a matter of time before the GODR is forced
to go to the IMF for a new agreement.


3. (U) Government Seeks to Buy Out Remaining Private
Participation in Electricity Distribution

The Dominican government is negotiating with the U.S. firm
Trust Company of the West (TCW) to purchase its 50 percent
stake in the electricity distribution company Ede Este. With
this stock acquisition, the government would consolidate full
ownership of Ede Este and own all three of the country's
major distribution companies, known as "Edes", outright. Ede
Norte and Ede Sur were nationalized in 2003. Press reports
have estimated the price being discussed is between USD 20
and 25 million. TCW has filed three arbitration claims
against the government, including one under CAFTA-DR, for a
total of USD 680 million, for breach of contract. The
powerful director of the state electricity holding company,
Radhames Segura, had long been rumored to seek full state
control of electricity distribution in the country; he has
often criticized Ede Este's progress in comparison with the
state-run Edes. But business leaders have labeled the
acquisition a step in the wrong direction, noting that it was
during President Fernandez' first administration that the
Edes were created and privatized.


4. (SBU) Constitutional Reform and Nationality

On May 26, the Congress, which is reviewing the proposed new
constitution article by article, approved the nationality
article. The article gives current Government practice
constitutional standing, but is unlikely to result in any
significant changes since the Government's policy on
nationality had been previously upheld by the Supreme Court.
The new article omits from nationality those born to people
illegally in the country as well as to those in transit, and

states that the term "in transit" will be defined by DR law.
It is not clear whether those born to people in the country
legally (e.g. on work visas),but lacking permanent
residency, will be granted nationality. An additional change
from the current practice allows acquisition of Dominican
nationality through either a Dominican mother or father,
whereas both were previously required. The text approved is
the more inclusive of the two options presented before the
Dominican Congress. The alternative, nationalist option --
limited to a strict jus sanguinis system -- failed.
BULLEN