IMF is Positive about DR - and so am I!

[NALs]

It should be no surprise to nobody that I am very positive about the country in general.

We are practically out of the crisis (despite lingering effects still on display), but we are pretty much out of it. The economy is growing again and things are looking quite promising, I can say we have a future to look at with bold wide eyes.

The IMF just recently is making available millions of Dollars of the $600 million package destine to the DR to strengthen our economy even further and take us out of these tempered waters of crisis into prosperity. This sum will come to our shores in small chuncks all the way to 2007, when the DR is expected to have an economy growing at over 5%, making us among the leaders in economic growth in the Western Hemisphere once again, and shutting those who keep making jokes about our current economic ills.

Here is the link towards the most recent IMF report on the DR:

http://www.imf.org/external/np/sec/pr/2005/pr0518.htm

[Malibook]

I hope you are right and I am certainly not one to make jokes about financial hardship, or rain on your parade, but what about the hyper-inflation?
http://dr1.com/forums/showthread.php?t=35791

How is it that this cash will trickle down to help the average Dominican and the poor masses?

Let's not forget that this is a loan that must be paid back with interest and these loans generally come with conditions that are often not so pleasant for numerous people.

Donde Mondongo y Porfio Rubirosa?
http://dr1.com/forums/showthread.php...351#post161351

[iluvdr]

Once again I got to take my hat off to you NAo... Your the man!
If some people ( Lechero, Keith etc...) would bother listenning closer to your opinions they would be quite wealthier by now!
I SURE AM!
Any predictions on the impact of the IMF deal on the currency?
In the short and mid term how do you feel the pesos will perform?
Also whats your initial thoughts on the new Dollar Certificate by the Central Bank??

P.S. PM me and let me know of how I can send that Rolex watch to you..You deserve it buddy!!! Thkx again.

[Porfio_Rubirosa]

Entering into the agreement with the IMF is not irrational. The IMF's terms are in most instances better than those offered by the commercial banks whose debt it will be replacing and it will certainly cement the currency stability that President Fernandez has already created.

However, those celebrating it need a reality check. The agreement will bring internationally enforced pain to most Dominicans, including more short to medium term unemployment, higher taxes and the extension of taxes to basic consumption goods, and inflation. And the free trade agreement could create a "double whammy" in this regard.

Traditionally, riots and civil disturbances follow the implementation of IMF austerity plans. And, in past threads, nobody could really cite a Latin American country that has benefited from the IMF.

The IMF imposed ending of the propane subsidy is likely to place even more stress on a struggling ecosystem.

All that said, my big gripe with the IMF has to do with what has happened to date - prior to the execution of the agreement. It's called "Moral Risk".

The previous government of the DR was on an irresponsible borrowing spree, and everyone knew it. They borrowed hundreds of millions for vaguely described (or non-described) projects. Obviously, from looking around, anyone could see that most of that money was not actually going to projects, but, rather, was going "elsewhere".

JP Morgan, Citibank, Banco Santander, Credit Suisse, international development and investment banks - all the usual suspects in the IMF rogues gallery - were lined up at the trough to lend to an obviously non-credit-worthy DR government at usurous terms. The DR government could have all it wanted -- to do with whatever it wanted.

So why were these financial institutions willing to lend to a government that was obviously falling faster than a Hippo down a greased slide - under any terms? Because there was no risk. They knew that the IMF would bail them out.

Thus the "Moral Risk" of the IMF and its policies. The IMF "insurance policies" encourages morally questionable governments. It pays them to be irresponsible and to borrow more and more and more. It gives them access to funds that they could otherwise never have. And they can often use those funds to buy reelection - which almost happened here.

Without the IMF, a morally questionable government can only steal tax, customs and other similar organic revenues. With the IMF, it's the sky's the limit, baby!

You see, the IMF does not exist to bail out developing world governments. It exists to ensure that the developed world's financial institutions get paid, no matter how irresponsible they have been.

Why is this a problem? Well, as is often the case, governments get theirs and leave power. Then the population is left to face the bills -- bills exponentially larger than a corrupt government without access to the IMF-backed banking scheme could possibly have created. The IMF then comes in with a giant stick to collect the money - causing plenty of mayhem along the way.

By rewarding irresponsible, corrupt, governments and working against responsible governments, it helps ensure that the "developing world" will stay the "developing world" for a good long time.

So, to borrow a line from The Caine Mutiny, you'll pardon me if I don't celebrate with the rest of you.

[playacaribe2]

Originally Posted by Nal0whs

It should be no surprise to nobody that I am very positive about the country in general.

We are practically out of the crisis (despite lingering effects still on display), but we are pretty much out of it. The economy is growing again and things are looking quite promising, I can say we have a future to look at with bold wide eyes.

The IMF just recently is making available millions of Dollars of the $600 million package destine to the DR to strengthen our economy even further and take us out of these tempered waters of crisis into prosperity. This sum will come to our shores in small chuncks all the way to 2007, when the DR is expected to have an economy growing at over 5%, making us among the leaders in economic growth in the Western Hemisphere once again, and shutting those who keep making jokes about our current economic ills.

Here is the link towards the most recent IMF report on the DR:

http://www.imf.org/external/np/sec/pr/2005/pr0518.htm

Nal0whs:

I am not surprised at your positive view on the Dominican Republic, but I am surprised at your "we are practically out of the crisis," and "things are looking quite promising."

This crisis will be an ongoing event for some years to come. The government is still seeking to restructure much of its debt. In simple terms it is looking to lengthen payback periods or obtain better terms, but the bottom line is the money must be paid back.

Further, the IMF money is being "loaned" to the Dominican Republic for multiple purposes as outlined in the Standby Agreement and it too must be paid back. So while you might believe that the crisis is over, I am of a different opinion.

That opinion is predicated on the fact that countries who avail themselves of IMF resources, on average, spin in financial hell for years. Brazil, Ecuador and Argentina are probably good examples of what can and does happen after the IMF steps in to help "strengthen the economy."

The payback of these funds must come from somewhere and I have not seen the evidence that the economy is rebounding and will be growing at over 5% by 2007.

To be sure, the Dominican Republic could defy the odds and do all the right things with those funds and the world economy could start booming again. But I suspect that in 28 months the electricity problem will still be much the same and by that time President Fernandez will be in re-election mode or at least trying to keep the PLD in power and that will mean further increases in the already bloated government payroll.

So what is it now that makes you say "things are looking quite promising."

Respectfully,
playacaribe2

[MerengueDutchie]

Well there are positives and negatives:

Positives:

1) Immediate bankruptcy has been evaded for now.

2) A basis of trust has been established to refinance the 2006 and 2013 amounts at longer maturities, at the current low interest rate this is a plus.

3) Conditions of IMf loan are generally marginally more favorable than commercial ones.

Negatives:

1) The DR will stay in debt and need to pay up for a long time to come.

2) These payments are deducted from investments that could otherwise benefit economic growth (provided they are not spend on jeepetas)

3) It will require a lot fiscal work on the govt part and not giving in to spending demands to actually start absolving the DR of some of its burden.

So it's all a matter of opinion, but while the general outlook has improved, I'm not sure the crisis has passed.

Btw I do agree with Porfi about the lending of large amounts to the Hippo govt. It might be time for some of the large banks to take a few cents on the dollar in those scenario's, however, I feel that's not gonna happen anytime soon.

As to the peso, I think stability in govt will keep the exchange rate stable as well. A few things though, I am unsure if there is sufficient cash ot pay the 23Mil interest due before end of Feb 2005 (they're already in the grace period) and I am unsure of the political motivations about the exchange rate. Both of these factors can influence the exchange rate.

[Lurch]

Originally Posted by Nal0whs

It should be no surprise to nobody that I am very positive about the country in general.

We are practically out of the crisis (despite lingering effects still on display), but we are pretty much out of it. The economy is growing again and things are looking quite promising, I can say we have a future to look at with bold wide eyes.

The IMF just recently is making available millions of Dollars of the $600 million package destine to the DR to strengthen our economy even further and take us out of these tempered waters of crisis into prosperity. This sum will come to our shores in small chuncks all the way to 2007, when the DR is expected to have an economy growing at over 5%, making us among the leaders in economic growth in the Western Hemisphere once again, and shutting those who keep making jokes about our current economic ills.

Here is the link towards the most recent IMF report on the DR:

http://www.imf.org/external/np/sec/pr/2005/pr0518.htm

As much as I enjoy our discussions the RD still has problems to which no solution has been offered.

1. Extreme Debt Load (exchange games can hide some of it, but not enough)

2. IMF program will cause significant short & medium term issues that will test the restraint of public spending

3. 2007 growth projections as as solid as the clay on Titan

4. Bloated government payroll

5. Impact of the elimination of propane subsidy (huelga anyone?). The transport unions are already postioning themselves.

6. Electrical grid payments and resale (now that is going to be interesting)

7. Textile Industry (21 million USD package offered was a bit of a joke to compete against China/SE asia.

8. Cost of currency manipulation (I would love to see the actually numbers on this, however we wont know until the PLD is out of office)

9. Unemployment which is expect to increase even w/o the loss of the textile jobs.

Crisis is not even close to being over, the RD is just paying debt with more debt. Show me progress on these issues and I'll sing along with you, but until that happens I'll see just as a commercial for your business interests.

[Chris]

Nals, I love your optimism and really, in all good moments, share it. But, why is the power disappearing lately? Why do we have an increase in children's illnesses because of malnutrion? I guess only a very few people on this site will appreciate me saying Oy Vey!

I think it is still a crapshoot! If we're lucky, we'll make it. If we're lucky, we'll make our own luck!

I really don't understand the IMF ponying up with another loan to 'make good' what is going to disappear from this country with the Chinese entry to the apparel market. Do you guys read the news out there? A loan to make up for lost profit? Econony 101 must have changed since I had to cheat to pass it in school! Oy Vey!

[Texas Bill]

It is his (and others like wise) everlasting optimism that is going to lead to disaster!

They ALL seem to disregard the root cause of all the economic problems that have beset this country over the past 4.5 years. I include the present administration because, so far, their "corrective action" has consisted of very little 'action" and a helluva lot of rhetoric about what they're "going" to do!

I haven't seen a reduction in the government payroll YET! In fact, what i have seen has been an INCREASE in that "unproductive" area of the financial equation!

I haven't seen an effort on the part of the Legislative bodies to reduce their propensity to spend! Instead, I have seen the promulgation of even MORE spending authorizations by those "watchdogs" of the country! A good case in point is the recent 30+% in their take-home pay! Now, I sk you, is that a signal of government austerity???

Frankly, I am of he opinion that it will be a continuation of the previous administration's policies of "spend, then borrow to pay for the spending" into the future. That way the blame can be placed where-ever they wish.

Porfi may be right in his descriptive scenario of the IMF and their constituant lenders. I have no intimate knowledge along those lines, but the scenario would tend to support his summation. But that has been the way of wealth throughout history and sometimes recipients of unlimited credit allocation just can't seem to resist the temptations offered. So, I ask the question, who is at fault? The lendor, or the lendee? People world wide have a problem managing their money, therefore it follows that nations would have the same problems with "easy credit" since the payback is over such a long period of time.

All said and done, i am of the opinion that we all are in for a long period of reconstrudtion of several germain points; ie, reinstatement of accreditation of the nation world wide, afirmation through action of stated policies, elimination of corruption in both the business and government milleaus and honesty and transparancy in dealing with one another.

That said, I'll retire and await the denials to be forthcoming.

Texas Bill

[NALs]

Given the results, what would the people here on DR1 suggest would get us out of the crisis once and for all as quickly?

I sure don't see any around. The IMF is the next best thing.

As with everything, there are pros and cons, but what are the alternatives?

Default? Cutbacks on all services rather than a few?

We are practically out of the crisis, look at my words carefully, PRACTICALLY out of the crisis. This does not implies that we ARE out of the crisis, just that we are on our WAY out.

Since Leonel took control, our economic reports have been beyond expectations. We were suppose to decline by 1% economically last year and instead, we ended with a very good 2% economic increase (about as much as the US economy is currently growing at, and that is also the historical average economic growth of the US as well).

Macroeconomic stability has been greatly achieved though a few tweeks must be fixed here and there, the exchange rate has greatly stabilized from the fiasco of a year ago, there is great confidence in the banking sector as of late. People are starting to shop more, investment are pouring in, the economy is moving to boom times as of now.

What would get us quickly out once and for all is the IMF plans, afterall, the IMF was what helped the DR get out of our crisis in the 1980s and that paved the way for Balaguer's opening of the economy. Then Leonel came and fully opened the economy and voila, we had a boom time.

Show me what other options we have that are much more promising that the current IMF plan? Show me... and then explain why...