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#581: ECONOMY-DOMINICAN REPUBLIC: PRESIDENT ON ... (fwd)
From: Greg Chamberlain <GregChamberlain@compuserve.com>
ECONOMY-DOMINICAN REPUBLIC: PRESIDENT ON ...
SANTO DOMINGO, (Sep. 27) IPS - In an effort to leave a legacy of
fundamental economic change as he nears the end of his term, President
Leonel Fernandez has concluded the privatization of the country's key
This follows the recent privatization of the electricity generating and
distribution network, the management of the leading airports and a flour
Fernandez, whose five-year term ends next August, has dedicated his
stay in the presidential palace to the "modernization" of the country of
7.5 million people.
Central to this was the reform of the economy, particularly the
reduction of the heavy state presence through divestment of key sectors.
The president is hoping that by the time he leaves office -- under the
new Dominican constitution, he cannot have consecutive terms - he will
also have overseen the divestment of the state tobacco company, the
national airline and the ports.
The privatization of the sugar mills has been an emotive issue in the
country, which shares the island of Hispaniola with Haiti.
"The changes in the electricity sector were important for the
government, as they indicate the path which the president wants the
country to take," said a statement from the presidential palace.
"It is good for the economy to have adequate and reliable electricity,
so we are pleased that it has happened. However, we know that the sugar
company presents us with greater problems because of the social importance
of the company and the industry."
The Dominican sugar industry, the largest in the Caribbean after
Cuba's, has traditionally been used by the government as a source for
patronage to the politically favored.
Rafael Trujillo, the dictator who ruled the country until his
assassination in 1961, used the sugar industry to finance his personal
coffers and to reward his cohorts.
Joaquin Balaguer, who was president for seven non- consecutive terms,
also used the industry by allowing political allies and the military free
use of the industry's lands.
This left Fernandez with a difficulty. In order to complete the sale of
land owned by the CEA, the state sugar company, squatters will have to be
The army has already been called out to help evict squatters on
hundreds of thousands of hectares. Military officers are among the illegal
The 10 mills owned by the CEA have been privatized through leases to
foreign and local companies. The government will receive $11 million per
year from the companies.
The leases include sugar cane fields, cattle ranches, sugar mill
infrastructure and all production facilities, said the statement. Lands
owned by the CEA, but which have not been used for sugar cane farms, will
later be leased for non-agricultural uses, said the Commission for the
Reform of Public Enterprises, which is responsible for the country's
These are the lands which are occupied by squatters.
"The CEA has lost millions of dollars over the past few years, and the
mills and the land had to be privatized," said an official of the
Dominican central bank.
The company's losses this year are expected to be about $100 million,
the official said.
It is not yet clear how the new operators will deal with the labor
needed in the cane fields.
The refusal of Dominicans to work in low-paying jobs in factories and
fields led the CEA to turn to the use of workers from neighboring Haiti.
The presence of thousands of Haitians in the country has exacerbated
social and racial tensions.
"The privatization of Dominican firms is a major development," says
John Panzer, a senior economist at the World Bank, who is responsible for
"This will liberate resources for the state to use elsewhere. There
are, however, some fundamental social issues concerning the privatization
of the sugar company as this touches the lives of many poor people."
The privatization of the electricity sector has also presented the
government with new problems. Consortia of South American, North American,
European and local companies have invested $650 million in taking control
of the power sector.
But this has not ended the frequent and protracted power cuts which
have been troubling the country for the past 10 years.
"The power cuts will end by the beginning of next year," Fernandez said
"The power cuts will not end for several months," countered Karl Huber
of AES Distribution, one of the private companies running the power
Fernandez has also been forced to intervene in a dispute about
electricity rates, following extensive consumer complaints.
The state agency responsible for the privatization programme said last
year the sale of the power utility would not lead to an increase in
However, the new managers of the sector increased rates by five
percent, claiming this was part of their contract.
A meeting between Fernandez and the investors led to an agreement that
the rates will be frozen.
"All these events do not indicate any failure of the privatization
program, as many opposed to progress are claiming," said the presidential
"Change brings disruption, and we are having this fundamental change
for the benefit of the Dominican people."