Dominican Republic businesses asked for contributions to ease cash crisis

Friday, November 7, 2003

SANTO DOMINGO, Dominican Republic: The government of the Dominican Republic, desperate to reinstate a credit agreement suspended by the International Monetary Fund, has begun soliciting donations from the country's business community in order to reinstate the agreement and return to the IMF's favour.

According to a report in London's Financial Times, during the six-month, $120m fundraising effort, duty-free zones will donate about $4m per month to help placate the IMF, while hoteliers have committed a monthly $3.5m and exporters $1.5m. Other groups will soon decide how much they can afford to give the government.

The government says that without the fundraising effort, it would be unable to find the money to cover the deficits of power companies it recently repurchased.

"The country is in a crisis of large proportions and for this reason we have undertaken this commitment, which complies with the IMF's requirements, in order to relaunch the agreement," said Elena Viyella de Paliza, president of the National Private Business Council.

The World Bank and the InterAmerican Development Bank had joined the IMF in agreeing to lend the Dominican Republic $1.2bn over two years. The money was designed to help it recover from the $2.2bn collapse in May of Baninter, the country's second-biggest commercial bank, and from a sharp depreciation of the Dominican peso.

But the pact was suspended when the government announced a $600m buyback of two power distributors sold four years ago to Union Fenosa of Spain.

The IMF arrangement is on hold until the fund can evaluate the impact of the buyback agreement with Union Fenosa, said a spokesman for Hipólito Meja, the Dominican president.

Mr Meja has said the negotiations with the IMF are "going well". The government is looking for fundraising methods that comply with the IMF's terms, and "many people understand" that the money has to be found.

The setback for the country coincides with an intensifying campaign for next May's presidential election. Mr Meja's own Revolutionary party (PRD) has been split for much of this year by a rift between Mr Meja and other senior functionaries, angry over his plan to seek a second consecutive term.

A recent change in the Dominican constitution allows consecutive terms, but PRD rules do not.

Some Wall Street analysts have observed that the government is paying more attention to Mr Meja's re-election than to the economy or getting back on track with the IMF.

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