Dom Rep tourism could grow 250% in 10 years

JULIAN RICHARDSON Assistant business co-ordinator richardsonj@jamaicaobserver.com

Friday, May 18, 2012

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DOMINICAN Republic could attract 10 million tourists to its shores by 2023, says a tourism industry expert.

Caribbean Hotel & Tourism Association (CHTA) Chairman Enrique de Marchena Kaluche said the target was desirable because it would create more than 800,000 jobs and add US$10 billion ($870 billion) in revenue to the economy, or more than the total value of Dominican exports last year.



Currently more than four million tourists visit the Spanish-speaking country each year, luring revenues totalling US$4 billion and 250,000 direct and indirect jobs, according to World Travel and Tourism Council figures.

De Marchena, speaking before tourism entrepreneurs recently at a conference held at UNIBE Cap Cana, was endorsing a plan by presidential contender Danilo Medina of the Dominican Liberation Party. He proposed making Medina's proposal of attracting 10 million tourists over the next ten years a "National Goal", reported Kaluche's law firm DMK Lawyers in a press release.

The expert on tourism said, although ambitious, the country should pursue the goal because of the "extended impact it would have on the economy and the development of the nation's production capacity", suggesting that it could be achieved with proper development planning.

Ten million tourists would demand at least RD$45 billion ($102 billion) in local agricultural products for consumption in tourism establishments alone, De Marchena said, noting that would be an outstanding amount compared with the total value of the 41 leading local agricultural products produced in 2010 which came to RD$66 billion.

He also envisioned a huge contribution to employment with the creation of 800 thousand jobs in tourism and industries linked to it.

The drinks industry, for instance, would undergo an unprecedented boost with liquor sales to hotels alone in excess of RD$3.5 billion and soft drinks sales of more than RD$2.3 billion, he said.

De Marchena added that the building industry would enjoy "extraordinary benefit" with more than US$15 billion in State and private funds being injected into infrastructure as well as the construction and renovation of accommodation.

"More than 100 thousand additional rooms would have to be built and at least 40 thousand existing ones would have be renovated or rebuilt," he said

Tourism is the number one priority of a strategic economic-development plan proposed by Medina, the Dominican Republic's presidential candidate in the May 20 national elections, if elected, reported Caribbean Business.

The Dominican Republic reportedly leads other Caribbean islands in hotel-room inventory with 65,000.

In Jamaica, current gross earnings from tourism is approximately US$2 billion, which comes from 1.9 million stopover visitors and 1.1 million cruise passengers, while the daily spend is US$115 for stopover visitors and US$90 for cruise passengers.

Jamaican'sMinister tourism Wykeham McNeill, said recently that the success of the country's tourism sector should not be based solely on increasing visitor arrivals but that focus should also be placed on identifying ways of growing earnings per visitor.

Read more: http://www.jamaicaobserver.com/business/Dom-Rep-tourism-could-grow-250--in-10-years_11494342#ixzz1vFAH9XjI

New cruises for DR, Puerto Rico

Friday, May 18, 2012


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SANTO DOMINGO, Dominican Republic - CARNIVAL Corporation said that it is building a US$65-million ($5.6- billion) cruise ship centre in the Dominican Republic to draw ships to the Puerto Plata region for the first time in nearly 30 years.



The Amber Cove Cruise Center at Bay of Maimon is scheduled to open in 2014 and is expected to accommodate as many as 8,000 cruise ship passengers daily.

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The centre is being built on 30 acres (12 hectares) of waterfront property with help from local shipping company Grupo B&R. It will feature a marketplace, restaurants, bars and a water attraction, Carnival said.

More than 350,000 cruise ship passengers visited the Dominican Republic last year, a one per cent drop from the previous year.

Also, officials in Puerto Rico announced that the US Caribbean territory would be the home port for a Royal Caribbean cruise ship next year.

The Jewel of the Seas is slated to make 25 departures out of San Juan starting in May 2013, said Economic Development Secretary Jose Perez-Riera. The ship is expected to generate US$8 million in revenues and attract more than 60,000 tourists.

He said Puerto Rico has welcomed three other new ships in the past year, the Celebrity Silhouette, the Azamara Journey and the MSC Poesia, as part of a new incentives package.

Puerto Rico saw 972,000 cruise ship passengers last year, an eight per cent drop compared with the previous year.

Read more: http://www.jamaicaobserver.com/business/New-cruises-for-DR--Puerto-Rico_11481982#ixzz1vFD1QntD

Business

Regional FDI hits record

But Caribbean inflows still low

BY JULIAN RICHARDSON Assistant Business Co-ordinator richardsonj@jamaicaobserver.com

Friday, May 18, 2012



FOREIGN Direct Investments (FDI) to Latin America and the Caribbean hit a record US$153.4 billion in 2011, though inflows to the Caribbean subregion continues to hover way below pre-recession levels, according to a new report.

Data released by the Economic Commission for Latin America and the Caribbean (ECLAC) shows that the 2011 figure represents a 31 per cent increase in FDIs over 2010. The performance was boosted mainly by FDI to South America increasing by 35 per cent to US$121.3 billion last year.



FDIs to Central America jumped by 16 per cent to $27.7 billion while the Caribbean attracted 20 per cent more FDI at US$4.4 billion.

Due to the fact that some regional countries, including Jamaica, did not provide data for 2011,the absolute difference and growth rate were estimated based on the variation shown during the 12 months of the last period in which available data was provided.

ECLAC noted that FDI flows to Latin America and the Caribbean maintained the previous year's upward trend and was 12 per cent above the historical high of 2008, erasing

the 40 per cent drop triggered by the global financial crisis of 2008 to 2009.

Brazil, which accounts for 43 per cent of the region's GDP and inbound FDI, absorbed 54 per cent of the increase in the flow of FDI to the region, reported ECLAC. The manufacturing industry was the main recipient of FDI in Brazil, with 46 per cent of the total, while the metallurgical sector also performed well largely due to construction of a new integrated plant by Germany's ThyssenKrupp at an estimated cost of US$6.75 billion, the report said.

FDI flows to the other economies of South America increased by 33 per cent, with some countries that had already posted record highs in 2010, such as Chile, Colombia, Peru and Uruguay, attracting even higher flows in 2011, said the study.

However, FDI flows into the Caribbean subregion were still less than half the figure for 2008, it was reported. According to ECLAC, the economies of the Caribbean have been the hardest hit by the economic crisis.

The organisation said the increase in total FDI to the Caribbean after two years of decline was mainly driven by a 25 per cent jump in FDI flows to the Dominican Republic (US$ 2.371 billion), boosted primarily by investments in its mining sector.

Bahamas also attracted considerably more FDI, some US$840 million in the first nine months of 2011, equivalent to 45 per cent more in 2010. This was largely the result of the Baha Mar major tourism project, ECLAC said.

Trinidad and Tobago attracted US$293 million in FDI in the first half of 2011, flat compared to the same period in 2010.

There were no figures for Jamaica, which saw FDI flows drop to US$170 million in 2010 compared to US$480 million in 2009.

FDI flows to Central America was slightly above the pre-crisis figure for 2008, the report said, noting that Panama and Costa Rica are the main destinations for FDI in the subregion.

Read more: http://www.jamaicaobserver.com/business/Regional-FDI-hits-record_11494473#ixzz1vFEErSZK

How Beneficial Is Foreign Direct Investment for Developing Countries?

Prakash Loungani and Assaf Razin

The resilience of foreign direct investment during financial crises may lead many developing countries to regard it as the private capital inflow of choice. Although there is substantial evidence that such investment benefits host countries, they should assess its potential impact carefully and realistically.

Foreign direct investment (FDI) has proved to be resilient during financial crises. For instance, in East Asian countries, such investment was remarkably stable during the global financial crises of 1997-98. In sharp contrast, other forms of private capital flows—portfolio equity and debt flows, and particularly short-term flows—were subject to large reversals during the same period (see Dadush, Dasgupta, and Ratha, 2000; and Lipsey, 2001). The resilience of FDI during financial crises was also evident during the Mexican crisis of 1994-95 and the Latin American debt crisis of the 1980s.

This resilience could lead many developing countries to favor FDI over other forms of capital flows, furthering a trend that has been in evidence for many years (see Chart 1). Is the preference for FDI over other forms of private capital inflows justified? This article sheds some light on this issue by reviewing recent theoretical and empirical work on its impact on developing countries' investment and growth.

Chart 1: The composition of capital inflows has shifted away from bank loans and toward FDI and portfolio investment

The case for free capital flows

Economists tend to favor the free flow of capital across national borders because it allows capital to seek out the highest rate of return. Unrestricted capital flows may also offer several other advantages, as noted by Feldstein (2000). First, international flows of capital reduce the risk faced by owners of capital by allowing them to diversify their lending and investment. Second, the global integration of capital markets can contribute to the spread of best practices in corporate governance, accounting rules, and legal traditions. Third, the global mobility of capital limits the ability of governments to pursue bad policies.

In addition to these advantages, which in principle apply to all kinds of private capital inflows, Feldstein (2000) and Razin and Sadka (forthcoming) note that the gains to host countries from FDI can take several other forms:

FDI allows the transfer of technology—particularly in the form of new varieties of capital inputs—that cannot be achieved through financial investments or trade in goods and services. FDI can also promote competition in the domestic input market.
Recipients of FDI often gain employee training in the course of operating the new businesses, which contributes to human capital development in the host country.
Profits generated by FDI contribute to corporate tax revenues in the host country.

Of course, countries often choose to forgo some of this revenue when they cut corporate tax rates in an attempt to attract FDI from other locations. For instance, the sharp decline in corporate tax revenues in some of the member countries of the Organization for Economic Cooperation and Development (OECD) may be the result of such competition. (For a discussion, see the article by Reint Gropp and Kristina Kostial in this issue.)

In principle, therefore, FDI should contribute to investment and growth in host countries through these various channels.

FDI versus other flows

Despite the strong theoretical case for the advantages of free capital flows, the conventional wisdom now seems to be that many private capital flows pose countervailing risks. Hausmann and Fernández-Arias (2000) suggest why many host countries, even when they are in favor of capital inflows, view international debt flows, especially of the short-term variety, as "bad cholesterol":

It [short-term lending from abroad] is driven by speculative considerations based on interest rate differentials and exchange rate expectations, not on long-term considerations. Its movement is often the result of moral hazard distortions such as implicit exchange rate guarantees or the willingness of governments to bailout the banking system. It is the first to run for the exits in times of trouble and is responsible for the boom-bust cycles of the 1990s.

In contrast, FDI is viewed as "good cholesterol" because it can confer the benefits enumerated earlier. An additional benefit is that FDI is thought to be "bolted down and cannot leave so easily at the first sign of trouble." Unlike short-term debt, direct investments in a country are immediately repriced in the event of a crisis.

Recent evidence

To what extent is there empirical support for such claims of the beneficial impact of FDI?

A comprehensive study by Bosworth and Collins (1999) provides evidence on the effect of capital inflows on domestic investment for 58 developing countries during 1978-95. The sample covers nearly all of Latin America and Asia, as well as many countries in Africa. The authors distinguish among three types of inflows: FDI, portfolio investment, and other financial flows (primarily bank loans).

Bosworth and Collins find that an increase of a dollar in capital inflows is associated with an increase in domestic investment of about 50 cents. (Both capital inflows and domestic investment are expressed as percentages of GDP.) This result, however, masks significant differences among types of inflow. FDI appears to bring about a one-for-one increase in domestic investment; there is virtually no discernible relationship between portfolio inflows and investment (little or no impact); and the impact of loans falls between those of the other two. These results hold both for the 58-country sample and for a subset of 18 emerging markets. (See Chart 2.) Bosworth and Collins conclude: "Are these benefits of financial inflows sufficient to offset the evident risks of allowing markets to freely allocate capital across the borders of developing countries? The answer would appear to be a strong yes for FDI."

Chart 2: FDI has a stronger impact on domestic investment than do loans or portfolio investment

[IMG]http://www.imf.org/external/pubs/ft/fandd/2001/06/images/loung-c2.gif[/IMG]

Borensztein, De Gregorio, and Lee (1998) find that FDI increases economic growth when the level of education in the host country—a measure of its absorptive capacity—is high. The World Bank's latest Global Development Finance (2001) report summarizes the findings of several other studies on the relationships between private capital flows and growth, and also provides new evidence on these relationships. (For a summary, see the article by Deepak Mishra, Ashoka Mody, and Antu Panini Murshid in this issue.)

Reasons for caution?

Despite the evidence presented in recent studies, other work indicates that developing countries should be cautious about taking too uncritical an attitude toward the benefits of FDI.

Is a high FDI share a sign of weakness? Hausmann and Fernández-Arias (2000) point to reasons why a high share of FDI in total capital inflows may be a sign of a host country's weakness rather than its strength.


One striking feature of FDI flows is that their share in total inflows is higher in riskier countries, with risk measured either by countries' credit ratings for sovereign (government) debt or by other indicators of country risk (see Chart 3). There is also some evidence that its share is higher in countries where the quality of institutions is lower. What can explain these seemingly paradoxical findings? One explanation is that FDI is more likely than other forms of capital flows to take place in countries with missing or inefficient markets. In such settings, foreign investors will prefer to operate directly instead of relying on local financial markets, suppliers, or legal arrangements. The policy implications of this view, according to Albuquerque (2000), are "that countries trying to expand their access to international capital markets should concentrate on developing credible enforcement mechanisms instead of trying to get more FDI."

Chart 3: FDI's share in total inflows is higher in countries with weaker credit ratings

In a similar vein, Hausmann and Fernández-Arias (2000, page 5) suggest that "Countries should concentrate on improving the environment for investment and the functioning of markets. They are likely to be rewarded with increasingly efficient overall investment as well as with more capital inflows." Although it is very likely that FDI is higher, as a share of capital inflows, where domestic policies and institutions are weak, this cannot be regarded as a criticism of FDI per se. Indeed, without it, the host countries could well be much poorer.

Fire sales, adverse selection, and leverage. FDI is not only a transfer of ownership from domestic to foreign residents but also a mechanism that makes it possible for foreign investors to exercise management and control over host country firms—that is, it is a corporate governance mechanism. The transfer of control may not always benefit the host country because of the circumstances under which it occurs, problems of adverse selection, or excessive leverage.

Krugman (1998) notes that sometimes the transfer of control occurs in the midst of a crisis and asks:

Is the transfer of control that is associated with foreign ownership appropriate under these circumstances? That is, loosely speaking, are foreign corporations taking over control of domestic enterprises because they have special competence, and can run them better, or simply because they have cash and the locals do not? . . . Does the firesale of domestic firms and their assets represent a burden to the afflicted countries, over and above the cost of the crisis itself?

Even outside of such fire-sale situations, FDI may not necessarily benefit the host country, as demonstrated by Razin, Sadka, and Yuen (1999) and Razin and Sadka (forthcoming). Through FDI, foreign investors gain crucial inside information about the productivity of the firms under their control. This gives them an informational advantage over "uninformed" domestic savers, whose buying of shares in domestic firms does not entail control. Taking advantage of this superior information, foreign direct investors will tend to retain high-productivity firms under their ownership and control and sell low-productivity firms to the uninformed savers. As with other adverse-selection problems of this kind, this process may lead to overinvestment by foreign direct investors.

Excessive leverage can also limit the benefits of FDI. Typically, the domestic investment undertaken by FDI establishments is heavily leveraged owing to borrowing in the domestic credit market. As a result, the fraction of domestic investment actually financed by foreign savings through FDI flows may not be as large as it seems (because foreign investors can repatriate funds borrowed in the domestic market), and the size of the gains from FDI may be reduced by the domestic borrowing done by foreign-owned firms.

FDI reversals? Recent work has also cast the evidence on the stability of FDI in a new light. Though it is true that the machines are "bolted down" and, hence, difficult to move out of the host country on short notice, financial transactions can sometimes accomplish a reversal of FDI. For instance, the foreign subsidiary can borrow against its collateral domestically and then lend the money back to the parent company. Likewise, because a significant portion of FDI is intercompany debt, the parent company can quickly recall it.

Other considerations. There are some other cases in which FDI might not be beneficial to the recipient country—for instance, when such investment is geared toward serving domestic markets protected by high tariff or nontariff barriers. Under these circumstances, FDI may strengthen lobbying efforts to perpetuate the existing misallocation of resources. There could also be a loss of domestic competition arising from foreign acquisitions leading to a consolidation of domestic producers, through either takeovers or corporate failures.

Conclusion

Both economic theory and recent empirical evidence suggest that FDI has a beneficial impact on developing host countries. But recent work also points to some potential risks: it can be reversed through financial transactions; it can be excessive owing to adverse selection and fire sales; its benefits can be limited by leverage; and a high share of FDI in a country's total capital inflows may reflect its institutions' weakness rather than their strength. Though the empirical relevance of some of these sources of risk remains to be demonstrated, the potential risks do appear to make a case for taking a nuanced view of the likely effects of FDI. Policy recommendations for developing countries should focus on improving the investment climate for all kinds of capital, domestic as well as foreign.

http://www.imf.org/external/pubs/ft/fandd/2001/06/loungani.htm

Good news for Haiti and this is also good news for DR. If Haiti ever gets its economy going north, DR will benefit enormously.


Business
Haiti drafting mining laws

Friday, May 18, 2012


PORT-AU-PRINCE, Haiti - THE Haitian government is drafting legislation for the newly emerging mining industry to help this impoverished Caribbean nation reap benefits, said the new prime minister.

Laurent Lamothe, who saw his Cabinet and policy plan approved earlier this week, told The Associated Press during an interview that the legislation will be sent to Parliament soon. It will lay out rules apportioning royalties for the government and setting protections for the people and environment that could be affected by mines.

"The most important thing is to have the correct mining law," he said. "It ensures that the right portion comes to the state. It ensures that the people living in the region where the mines are have their rights protected. It ensures environmental protection."

The plans to draft the mining legislation come after the AP reported that two mining companies have begun drilling in Haiti's northeastern mountains. The companies say testing indicates the precious metals such as gold, copper and silver are worth potentially US$20 billion ($174 billion).

That would be a boon for Haiti, which is one of the world's poorest countries. Most of its 10 million people live on less than US$2 a day.

Until the story, few Haitians knew about the recent efforts to mine their country. Mining camps are unmarked, and the work is being done in remote villages on the opposite side of the country from the capital, Port-au-Prince.

US and Canadian investors have spent more than US$30 million in recent years on exploratory drilling along with camps for workers, new roads, offices, and laboratory studies of samples.

Haiti's mining potential has been known for several decades. In the 1970s, United Nations geologists documented significant pockets of gold and copper ore, but foreigners weren't willing to take a risk in a country where corruption and political instability have long discouraged foreign investment.

Mining laws in Haiti haven't been revised since 1976.

Lamothe said the legislation being drafted is meant to benefit Haiti while making the country attractive to outside investors by allowing companies to profit from mining.

When asked how much he would like Haiti to receive, Lamothe said: "As much as possible without hampering also the revenue of the party, allowing them to do business."

The interview came after Lamothe introduced the ministers of his Cabinet, which was approved by Parliament on Monday. The government includes two new posts, a minister to deal with poverty and another to support farmers.

In addition to the mining legislation, Lamothe said his government wants to introduce programmes that will clean Port-au-Prince's garbage-strewn streets by using firefighters and other workers, better maintain roads and help mothers living in the capital's poorer neighbourhoods.

Lamothe, a former telecommunications executive, officially became prime minister Monday night following the approval of his Cabinet and government plan. There had been a nearly three-month vacancy after President Michel Martelly's first prime minister resigned after only four months on the job.

Read more: http://www.jamaicaobserver.com/business/Haiti-drafting-mining-laws_11482672#ixzz1vFiQYrdK

"The centre is being built on 30 acres (12 hectares) of waterfront property with help from local shipping company Grupo B&R. It will feature a marketplace, restaurants, bars and a water attraction, Carnival said."

So they will own the beach and land all around the port.... Those wanting to have a restaurant or business there will pay their price to lease space....
In the end very little money coming in for this new port would stay in the country.
Foreign Investment is like buying products not made in the end market of sale, the profits don't stay in the country and benefit very few other than the corporations that are buying up developing countries...
Imported goods come in at lower prices that local producers can't compete with, forcing them out of the market and putting more people out of work...
Just look at a supermarket booklet and count the locally produced goods... I did this yesterday.... 5 products in a 10 pages made local.... In a foreign owned supermarket...

Developing countries need foreign investment but it is always come at a cost and is a double edged sword....

Eat local. Buy local.

If Carnival was not to build the new cruiser port in Puerto Plata , thenno one would and certainly no Dominican company would invest the $65 million ..so Carnival will lease out spaves for shops and restaurants ,,so what because they must get a return on their money ...and in the meantime the shop keepers buy in local produce and make the shopkeepers do better and the food producers do better and the Dominican producers of quality items do better, the cigar manufactureers do better , the tour guides get work and there will be enterprising Dominicans offereing 3 hour tours or donkey rides and so the DR benefits enormously ..
Thank you Carnival