A battle for electoral control
The Dominican Republic and China have announced the establishment of formal diplomatic relations. This implies that the DR recognizes only one China, with Taiwan a part of it. The deal has led to the rupture of the DR’s 77-year diplomatic relationship with Taiwan. But investment opportunities that may now be seized by Chinese firms, and a rise in Chinese tourism, are the likely advantages.
Q1 2018 economic activity expanded by 6.4% from Q1 2017, according to preliminary data. In January 2018, real GDP growth as measured by the IMAE was 7%; in February, 6.3%, and in March, 5.9%. This performance is probably influenced by the lagged effects of monetary policy easing adopted in mid-2017, which contributed to partial recovery in H2. In March, average prices grew by 0.37%, putting January to March inflation at 0.55%, and y/y inflation at 3.91%, below the Monetary Program target of 4%. In Q1, interest rates rebounded from Q3 and Q4 2017 levels. In March, the weighted average lending rate rose 143 points, and the borrowing rate by 79 points.
Official projections put real GDP growth for 2018 at 5.5%, and for 2019 at 5%. That would put broad unemployment at 12.4% to 12.6%. Intensification of activity in 2018 could generate inflation and FX pressures, particularly if oil costs rise. The CAD will increase, and could reach 1%-1.2% of GDP in Q2.
The political temperature has been rising, and the outlook for the 2020 national elections is uncertain. Within the ruling PLD, confrontation between ex-president Leonel Fernández and President Danilo Medina has intensified. Their dispute revolves around the law for political parties. Medina intends to impose a law that obliges parties to hold open and simultaneous primary elections. Fernández and his group, and the PRM and other opposition parties, oppose these measures, as do the country’s business and religious communities.
Medina's true interest is in snatching from Fernandez control of internal PLD elections, now controlled by PLD President Fernandez and his ally Senator Felix Bautista. That would allow Medina to influence the choice of candidates for 2020. The bill including the open primaries system has passed in the Senate, but its fate in the House is uncertain.
The fact that today re-electing a president is unpopular, and that support for Medina and his government has diminished with the corruption and Odebrecht cases, will make it much harder to pass a constitutional amendment. Medina is also testing whether such an amendment could lead to his third consecutive presidential nomination.
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