The growing economic strength of the Dominican Republic : The Indicator from Planet Money For decades, the Dominican Republic's economy has been growing at a remarkably steady pace. The Caribbean nation of 11 million people is today considered a middle-income nation, but the International Monetary Fund projects it could become an advanced economy within the next 40 years.

Today on the show, we uncover the reasons behind the Dominican Republic's economic success and whether or not these benefits are being felt widely in the country.

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How the Dominican Republic became Latin America's economic superstar

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SYLVIE DOUGLIS, BYLINE: NPR.

(SOUNDBITE OF DROP ELECTRIC SONG, "WAKING UP TO THE FIRE")

DARIAN WOODS, HOST:

This is THE INDICATOR FROM PLANET MONEY. I'm Darian Woods.

WAILIN WONG, HOST:

And I'm Wailin Wong. Isaias Enriquez (ph) comes from a family of cacao farmers in the Dominican Republic. A few years ago, he decided to expand into tourism. He opened a lodge that he called La Jungla Del Chocolate, or Chocolate Jungle. Visitors get to stay on the farm and learn where chocolate comes from.

ISAIAS ENRIQUEZ: (Through interpreter) There's a lot of people in the world who know about cacao and eat chocolate, but they don't know how it's made.

WOODS: Isaias says that many of his guests come from European countries like Switzerland, Germany and Austria. But he also hosts a lot of visitors from Santo Domingo, the capital of the Dominican Republic. And this flow of domestic tourists reflects how some Dominicans have more disposable income to spend on things like vacations.

ENRIQUEZ: (Through interpreter) The people that visit us are middle- to upper-class, but we've had people from other classes, too. Groups of teachers, groups of students.

WONG: What Isaias has seen in his tourism business reflects a broader story of economic growth in the Dominican Republic. This Caribbean nation of 11 million people is considered a middle-income country like Costa Rica and Peru. But its economy is the breakout star of the region. It's grown on average more than any other Latin American country in the last five decades. And the International Monetary Fund says it could become an advanced economy in the next 40 years.

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WOODS: So today on the show, we look at what other countries can learn from the Dominican example and whether the benefits of the country's growth are being shared widely.

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WONG: Juan Jimenez is the Dominican Republic's former minister of economy, development and planning. He's also worked at the country's central bank. Juan says he's a math guy who wanted to tackle public policy.

JUAN JIMENEZ: Since I was a kid, I was very preoccupied with the problems that I saw in my community, with all the poverty that I saw in the countryside. And that's why I wanted to study a career that could equip me with the tools to design effective public policies.

WOODS: Juan's time in the Dominican government did coincide with a significant drop in poverty. The poverty rate was nearly 40% in 2012, and by 2019, it was about half that.

WONG: Another way of looking at this improvement is measuring how a country's per-capita income compares with a wealthier country like the U.S. As of 2022, the Dominican Republic's per-capita income was one-third of the U.S. It was about 60% of Turkey's, another middle-income country. And the International Monetary Fund says that the Dominican Republic has been closing the income gap with the U.S. faster than any other Latin American country in the past 50 years.

WOODS: In Juan's view, there are some pivotal decisions that set the stage for this economic growth. One happened in the early '90s.

JIMENEZ: At the beginning of the '90s, we had structural reforms that really laid the foundations of a new economic model based in exports of goods and services.

WONG: The government removed restrictions on foreign investment and focused on building up the country's export sector. One of the ways it did this was by setting up free trade zones. These are industrial parks that offer tax breaks and other incentives to companies that are making goods for export.

WOODS: And when we say tax breaks, we mean that companies are 100% exempt from a bunch of national and local taxes. They don't have to pay income tax or import taxes, and they get a break on certain fuel taxes, too.

WONG: Juan says that initially, these special zones are for the garment industry, but then China entered the World Trade Organization in the early 2000s. This dealt a blow to Dominican textile and apparel makers.

JIMENEZ: So one of the ways how the Dominican Republic adapted to this new reality was shifting its industrial production to a more sophisticated sector, knowing that in order to survive, they needed to attract other companies. So they were very active in promoting the country in other sectors such as the medical devices and electrical components.

JIMENEZ: Today, these two industries - medical devices, and electronics - are among the country's top export sectors, and there are hundreds of companies operating in more than 80 free-trade zones around the Dominican Republic. And they include big names like Johnson & Johnson.

WONG: Juan says another pivotal moment for the Dominican economy was in the early 2000s. The country suffered a banking crisis in 2003. Inflation spiked. The Dominican peso went into freefall. And the economy contracted.

WOODS: The government got financial help from the IMF in exchange for a bunch of reforms aimed at reining in government spending and borrowing. And this included cuts in electricity and gas subsidies for businesses and reducing the government's payroll.

WONG: The result, Juan says, is that the government has a certain discipline when it comes to taking on debt. For the last decade, it's avoided the kind of heavy borrowing that has pushed other Latin American countries into crisis.

JIMENEZ: Every time the government issues debt, it's very criticized. People dislike having debt in the country.

WOODS: Juan says external factors over the years have helped, too. About a decade ago, the country benefited from a drop in the price of fuel, which it imports. And more recently, it's gotten a boost from an increase in the price of gold, which it exports.

WONG: The Dominican Republic has also enjoyed political stability for most of the last several decades. Transfers of power have been smooth. And Juan says that when it comes to the economy, the country's political parties share a basic pro-business stance that has welcomed money from overseas. That's meant a steady flow of foreign direct investment. And one area of future investment, Juan says, is in outsourced services like human resources and legal support.

JIMENEZ: The Dominican Republic is also one of the countries where English is spoken broadly by significant fraction of the population. We have many young, talented professionals in the country that can do all the services that are needed in other countries. So we could develop that.

WOODS: But there are also young Dominicans for whom these opportunities seem elusive. Moraima Capellan Pichardo is the co-founder of a nonprofit called Cabarete Sostenible. Her organization runs a community garden and distributes food to local households in Cabarete, which is a resort town on the northern coast.

MORAIMA CAPELLAN PICHARDO: We focus on elderly folks, disabled and single parents without employment.

WONG: The area where Moraima lives is known for high-end tourism and real estate, but she says locals haven't really benefited from the influx of foreign dollars.

PICHARDO: There are no job opportunities that are outside of the tourism sector, and those jobs don't really require any level of education. We're being set up, basically, to work in low-level hospitality roles.

WOODS: Juan Jimenez acknowledges that the Dominican Republic does have a high level of income inequality. By one measure, it's among a handful of countries in Latin America where the lowest-income individuals receive the smallest share of total income.

WONG: And Juan says investing in the country's educational system and in job creation are ways to address the disparity. But Moraima says she's been hearing people talk about improving education for years now, and she's not seeing the results. She's seeing young people from her community leave the country.

PICHARDO: I think there's a desperation. They're not seeing job opportunities or even opportunities for small entrepreneurs or - that have an idea that they want to bring to life. It's very limited.

WOODS: For now, though, it looks like there won't be big shifts in policy. Dominicans go to the polls this Sunday for the first round of voting in the presidential election. Incumbent Luis Abinader is a former tourism executive who led the country during the pandemic, and he's favored to win reelection.

WONG: This episode was produced by Corey Bridges, with engineering by Patrick Murray. It was fact-checked by Sierra Juarez. Special thanks to Alejandra Marquez (ph) for interpreting. Kate Concannon edits the show, and THE INDICATOR is a production of NPR.

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