The Dominican Republic's Wealth of Opportunities

The Dominican Republic is home to one of the best performing economies in the region. LatAm INVESTOR investigates the investment potential...

The Dominican Republic. A real bridge of a country, it is the Caribbean economy most linked to Central America and has the biggest GDP in both. I’m going to spend the next two months interviewing leading players from the public and private sector, but even my first impressions of the country make it worth highlighting for New World readers.

The first thing to note about the Dominican Republic is that the country is no stranger to UK ‘investors’. Sir Francis Drake is considered a hero in Britain, but he sacked the capital, Santo Domingo, and installed himself in the cathedral.

But our favourite pirate’s presence was no accident. Drake came to the Dominican Republic because its strategic location made it a vital trade pivot between the old and the new world. Today, more than 500 years after the Europeans made their first settlement in the Americas, the Dominican Republic remains a crucial trading hub. Now the country is trying to build on that location by developing its logistics infrastructure so that it can act as a transhipment point for goods passing between the Caribbean, Europe and South America.

Agriculture set for a boom in the coming years

Regular readers will know that one of LatAm INVESTOR’s favourite investment themes is agriculture. Put simply, the world will need increasing amounts of food and Latin America is the best place to provide it.

While the entire agriculture sector will rise with the growing tide of demand, some producers are particularly well placed to profit. LatAm INVESTOR has spent the last year visiting farmers from Chile to Guatemala and we’ve spotted an interesting trend. Non-traditional agriculture, that is demand for speciality products such as exotic, organic and fair-trade fruit and vegetables, has been going through the roof.

"The first thing to note about the Dominican Republic is that the country is no stranger to UK ‘investors’…"

The whole emerging-market consumer story may be passé for Western investors, but the introduction of hundreds of millions of people to the global middle class has certain lagging consequences – one of which is a demand for better-quality, more traceable, healthier food. Agriculture production lags demand because it takes a few years to start new crops in new areas, but over the last five years, Latin America has used capital and technology to expand farming frontiers – both in terms of area and crops grown.

And that’s another reason to like the Dominican Republic. It’s an agricultural powerhouse that specialises in niche value-added agricultural goods such as fair-trade bananas, organic coffee, quality rum, aromatic cacao and fine cigars. Throw in plenty of free trade agreements and the strategic location and it’s clear to see that the Dominican Republic should benefit.

The Dominican Republic is a tourist paradise

But the Dominican Republic has far more to offer than just agriculture. The most striking thing about the country – apart from the blaring music and great rum – is that it specialises in the sectors that LatAm INVESTOR often focuses on. Regular readers will know that Latin American tourism – ie, people travelling within the region – is one of our big investment themes.

Well, the Dominican Republic is a tourist magnet. Coastal resorts like Punta Cana draw in crowds from around the Americas, while the country is also home to the oldest and best preserved colonial centre in the region. The potential for more tourism growth has been recognised by industry insiders – for example, Carnival has just built a new port for cruise ships here. Carnival is clearly optimistic that the tourism trade will continue to drive the Dominican Republic’s economy.

Challenges or opportunities?

Of course the Dominican Republic has its fair share of problems. The energy matrix, for example, is pretty bad with regular blackouts. OK, so most buildings have an emergency generator, but you can’t build a winning economy on an expensive inconsistent energy supply. The companies that can find a cost-effective way to solve this problem will reward investors.

Another, well publicised, issue is immigration from neighbouring Haiti. The two countries share an island, but former French colony Haiti is desperately poor. Uncontrolled immigration from Haiti to the Dominican Republic caused resentment in the latter, while recent attempts to impose a new, more ordered immigration system, has sparked anger. Yet if the solution can be found, then the ten million people in Haiti can add an extra push to both the Dominican Republic’s consumer market and labour force.

It’s a fascinating country with clear investment potential and LatAm INVESTOR will keep you updated on the opportunities as they arise.