 |
| El presidente Luis Abinader durante su discurso de rendición de cuentas.(Foto de El Nuevo Diario) |
The simple idea behind LatAm’s star economy
Tourists love its white sandy beaches and turquoise seas but investors like the Dominican Republic for a different reason.
The Caribbean nation of 11.4mn has been an unexpected growth star, bucking Latin America’s generally miserable performance to deliver Asian-style growth averaging 4.9 per cent a year over the past half century.
The long boom has made Dominican Republic Latin America’s seventh biggest economy, overtaking much larger Ecuador and Venezuela. An IMF report last year even suggested that continued reforms “could eventually transform the Dominican Republic into an advanced economy by approximately 2060”.
Unsurprisingly, the Spanish-speaking nation’s President Luis Abinader is one of Latin America’s most popular leaders with an approval rating of 69 per cent, according to a recent Americas Society compilation. Polls suggest he will cruise to re-election in May, a rarity in a region of generally poorly regarded heads of state, turfed out by voters at the first opportunity.
Abinader’s recipe is simple: “Our government is a pro-investment, pro-business government, but at the same time we have increased social spending more than any other government,” he told the Financial Times in an interview.
Reeling off a list of investments in higher education, hospitals, public transport and targeted welfare programmes, he added: “That’s the key to success because it helps us keep social peace.”
To be sure, the foundations of the Dominican Republic’s economic fortunes were laid long before Abinader. What used to be a farming nation was transformed into a more manufacturing-oriented economy supported by free trade zones, and then a services-driven economy thanks to tourism and a bigger financial system.
Naturally, there are caveats. Climate change poses a growing risk to the Dominican Republic, in common with other Caribbean nations. Its next-door neighbour on the island of Hispaniola is Haiti, a failed state whose capital has been overrun by gangs.
Growing public spending is straining the Dominican budget and Abinader, with one eye on the voters, is cagey about whether he will increase the current low level of taxes after the election.
Money laundering remains a worry. Detractors ask whether many of those gleaming new hotel and luxury condominium developments are funded by drug dollars. Despite steady improvements under the current government, Transparency International ranks the Dominican Republic 108th out of 180 nations on its Corruption Perceptions Index, slightly worse than Ukraine.
Nonetheless, Eric Farnsworth of the Council of the Americas in Washington says that under Abinader the DR “does seem to have turned a corner”.
“Investors are definitely having a look, seeking to shift supply chains from Asia to free trade partners closer to the US,” he said. “If he keeps going in the same direction, others will need to take note.”
But will they? Although many economists believe Latin America has a once-in-a-generation opportunity to profit from growing global demand for its critical minerals, food exports and clean energy, it is far from clear the region’s leaders understand this.
The Community of Caribbean and Latin American States (CELAC), a regional co-ordinating body, issued a 100-point declaration after its annual summit in St Vincent this month.
Although the voluminous communique found space to welcome the UN’s declaration of an international day of the potato and salute the international year of camelids (very encouraging for llamas) it was remarkably short on proposals for making the most of the region’s economic potential.
Therein lies Latin America’s problem. In much of south-east Asia, a national consensus exists on pursuing better education and infrastructure to make the economy more competitive.
But Latin America remains stuck in a world of stop-go policies and political extremes, where the left lean against business and towards jacking up public spending, while the right take pride in balancing budgets and wooing business but often neglect welfare and public services.
It does not take a big leap of imagination to realise it may be smart to couple moderate pro-growth policies, aimed at drawing investment, with spending adequately on key public services and essential infrastructure.
As Abinader puts it: “It’s a simple recipe and I didn’t invent it . . . we don’t have to reinvent the wheel.”
https://www.ft.com/content/5e73b3fc-41ef-4d88-9fa3-21cbd1d1bec5?sharetype=blocked
No hay comentarios.:
Publicar un comentario