In any event, the tide had turned once again back to the PLD or conservative party in 2004 but there was, and still are, many problems to be fixed.  Ironically, the current President of the country - Dr. Leonel Fernandez Reyna (PLD or conservative party) was the same gentleman who was President from 1996-2000, when the country had some of the lowest inflation rates and the highest rates of economic growth in all of Latin America.  His campaign strategy was very simple in that he in essence told people, you knew what things were like when I was President before, you know what things are like now with the other guy (the period from 2000 to 2004) - you decide which is better.  And so they did, giving Dr. Fernandez roughly 75 percent of the vote in 2004.

However, while the election took place in May of 2004, the new President did not take office until August (which is normal as elections are held in May, and the actual change in power takes place about 3 months later).  So, the current President, as of March 2005, has really only been in office for about 6 months.  Even so, in that short time, through various economic policies instituted immediately, inflation has been brought down to about 14 percent at the moment and the goal once again is a single digit.  Apart from this, the goals of the current party include payment of foreign debt (denominated in US Dollars) and other unpaid debt from the last administration as quickly as possible.  However, this involves some bitter medicine, one of which has been a strengthening of the Dominican Peso versus other currencies via a number of economic measures.  Incredibly enough, the US Dollar has been in a free fall against all other major currencies in the world, and so this is part of the equation as well.

The currency exchange rates for the Dominican Peso versus other currencies has stabilized and is currently about 28 Pesos to One US Dollar.  However, many do believe it is now too low (that it has strengthened too much versus the US Dollar) and that the correct market rate should be somewhere in the thirties (35, for example).  So, we will have to wait and see. Interestingly enough, the fallout has been a drop in US Dollar interest rates in the local banks, but this has happened more so because in the past (when things were going in the other direction) Dominicans ran out to exchange all their liquid assets into US Dollars or Euros.  So, the reality is that the banks have been flush with US Dollar deposits, and possibly for the first time have not had enough local Dominican Peso deposits.  Therefore, while interest saving accounts or CD rates for US Dollar deposits have generally dropped below 3 percent, time deposits (90 Day CD) for Pesos remains in the 15 to 20 percent range.  For this reason, for anyone living or retired in the Dominican Republic, it is still very possible to live off interest earned from banking deposits (in Pesos).

As always, a sound plan or hedge in terms of some funds denominated in Pesos, some funds in US Dollars, some in Euros in addition to other things, such as Gold or Real Estate offers the best opportunity to ride whatever economic situations unfold - and this is true no matter where you might be living.

Question. I have heard that the economy is in real trouble, and that the middle-class is having a very hard time.  I have also heard some comments that the positive things mentioned about the Dominican Republic are very different from what many Dominicans are saying.  Is this true?

Answer.  The truth is that many, many people have made money with all of these economic swings and it is also very true that many people have been hurt by it as well.  The Chinese symbol for chaos is the very same one for opportunity.  Meaning while severe economic swings in currency markets, stock markets, real estate or whatever - can mean some people might be on the losing side, there are also people who might have had enough foresight to invest in such a way that they could take advantage.  So in any situation there are people who have made money, and people who certainly have lost money also.

Who has made money?  People that bought Pesos when the exchange rate was 50, people that invested into Gold when gold dipped below US$400, people that moved money into Euros, people that invested in real estate and those people that have had money invested at 20 percent or better in terms of interest rates (who are still able to live off bank account interest income as a result).  Who has been hurt or who has lost money (or has seen a decline in their standard of living)?  Many local Dominicans earning a fixed monthly salary, people who did not hedge themselves into gold or other assets, people that have no cushion or savings and those people that were poor or unemployed (who were probably poor or unemployed before and still are now, regardless).

In terms of the middle-class and standard or living in general, it is certainly true that prices were raised for many consumer goods whereas of course salaries never went up in tandem.  Now that the exchange rate has gone the other way, in theory prices should have come back down and in all fairness some products are less expensive than what they were back in July 2004.  However, if it is the case that a product is less expensive, chances are it is less expensive by only 10 or 15 percent, not 45 percent or more in line with the exact exchange rate.  Meaning, the excuse to raise prices before was the devaluation of the Peso.  However, some producers took extreme advantage and many who had no direct impact from the exchange rate took advantage also.  For example, if you grow Onions and you said back in 2004 that it was now more expensive to buy American or European fertilizer for the crops (which is possible but doubtful that they were in fact buying expensive products from Monsanto or Ortho in the first place) it is reasonable to assume that your prices would increase by the amount of costs that directly correspond to that.  In other words, what would the net effect be on increased production costs in such an example?  Ten Percent, Twenty Percent, etc.?  What happened was in fact that some things, like Onions, increased in price by 400 percent, if not more.  So, there were clear opportunists in private industry that took advantage to raise prices dramatically using the exchange rate as an excuse to do so.  Now that the exchange rate has stabilized and actually gone in the other direction, the government is clearly perturbed that merchants have not brought down prices in accordance.  But, such is the case in a free market capitalist system, where market forces will eventually work themselves out.  However, for sure it is safe to conclude that some producers of goods are making a killing and certainly have not reduced prices in accordance with the drop in the inflation rate, exchange rates, etc.

So, it is true that the middle class Dominicans have been hurt by the result of the 2000 - 2004 chain of events?  Absolutely so and in fact, one very well known local figure has said in private that the general population still has no real idea how bad off the previous government has left the state of the union, so to speak.  But, at the same time, there is a government now in place that wants to change things, that has the fiscal will and discipline to do so and that does have economic common sense, however it will take time to bring the situation back to where it was.

With that said, in terms of foreigners coming into the country for the first time, and those who have been smart enough to hedge themselves wisely, the Dominican Republic still offers a general lifestyle and cost of living more reasonable (and in some cases down right cheap) in comparison with many other places in the Caribbean.  So, if you were to make a comparison of things such as real estate especially, you will find that the Dominican Republic still is a good bet in relation to prices elsewhere.  In addition, while prices for many goods and services are higher than before (in which case they might be now about the same as they are in the US, whereas before they were very cheap), prices for other things have stayed the same or only increased slightly.  Labor costs are one example where this is true.  It all depends upon where you are standing in terms of your point of view.  They say the difference between a depression and recession is - a recession is when your neighbor looses his job and a depression is when you loose your job. 

So, are things very difficult in the Dominican Republic economically speaking?  For some people yes, but certainly not for all, and in fact some people have actually made quite a bit of money as well.  Generally speaking though, the local Dominican middle-class have been set back and it will certainly take strong leadership and economic medicine to put things back on track for improvement.  But, even so, the Dominican Republic does remain to be a very worthwhile option for retirement and relocation.  In addition, it is interesting to note the recent new housing construction boom in is part fueled by all the Dominicans from the US and elsewhere who want to move back to a lower cost, more peaceful environment (namely their home country, the Dominican Republic). 

Question.  Are Dominican Banks insured by government insurance?  Is the banking system safe in the Dominican Republic?  How is it possible the banks can pay such a high rate of interest for deposits?

Answer.  Taking the last question first, the Dominican Republic is great place to invest money in terms of banking deposits, but certainly not a place to borrow money.  In terms of US Dollar loans from a bank, one can probably expect to pay anywhere from 12 to 15 percent interest.  A loan in Pesos (car loan, home mortgage, etc.) can fetch anywhere from a bargain rate of 32 percent up to 40 percent or more.  And even with these rates, most banks will not loan money on a home mortgage for more than 10 years, so you can imagine what the monthly payments are like.  Interestingly enough, the saving grace for the country is that most people cannot or will not pay these kinds of rates.  So, it is true that many Dominicans do own their own home free and clear, or in the least, there is a much, much higher percentage of people in the Dominican Republic (in comparison to North Americans or Europeans) that truly own a home free from any bank debt or mortgage.  How is this possible?  Dominicans save their money and pay cash, or buy a building lot for cash, save some more money, then start constructing a home (and if they run out of money, then stop and wait until they can get started again with more cash in hand).  So, as a result, it may take longer for a Dominican to realize their dream of home ownership, but once they reach that goal, it is one they have accomplished without the bank on their back - and they truly do own their own home.  In comparison to the US or Europe, there are many people who say they own their own homes, but in fact they do not.  The bank owns it and it is the person living in the home that is really making monthly mortgage payments for 20 or 30 years.

Getting back to banking interest rates, if a bank is charging 35 percent for a loan in Pesos, it is very easy to understand how they can afford to payout 15, 18 or 20 percent or more in interest (in Pesos) to depositors (and make a very healthy spread in the process).  On the subject of US Dollar interest rates for depositors, interest rates certainly have come way down (in part because the banks are now flush with US Dollar deposits as many, many Dominican ran out to convert Pesos to US Dollars when the exchange rates were falling in 2003 and 2004).  However, interest rates to loan US Dollars out have not, so this is why we are still seeing the interest rates for US Dollar commercial paper investments in the 7, 8 and 9 percent ranges.  Meaning, it is still cheaper for a local company to issue a US Dollar commercial paper certificate paying 8 percent, than to borrow US Dollars from the bank at say 12 or 15 percent.

On the subject of banking safety, many foreigners do not understand that the Dominican Republic has a Central Bank and a government department that supervises the banking industry.  If you think it is easy to get a banking license in the Dominican Republic, you had better think again.  Do not be confused with some other English speaking jurisdictions that were giving banking licenses to almost anyone that showed up with US$50,000 (or whatever amount).  This is not the case in the Dominican Republic.  In addition, we often hear the question - Does the Dominican Republic having government banking insurance like FDIC in the United States?  The short version of the answer is YES, and in fact if you review the numbers, the government banking deposit insurance fund in the Dominican Republic seems to be even that much more solvent than the US FDIC.  Not only that, it works.  Not one depositor lost money in the latest government takeover (2002 - 2003) of Banco Intercontinental or BANINTER.  Some will say the takeover was politically motivated by the last political party in power from 2000 - 2004, but that is another kettle of fish to discuss another day, as they say.  In any event, every depositor with an account at Baninter, be they foreigners or locals, that bothered to communicate with the Superintendent of Banking and complete the required form, got a check for their account balance.  In fact, some people that went in person actually walked out the same day with a check in hand.  So, there is a government banking insurance fund (that the local banks pay into), which is administered by the Central Bank, and it does do what it is supposed to do - protect bank depositors in the event of a bank failure.

Answer.  We have often heard some rumors or comments to the effect that the Dominican Republic has some sort of rampant crime problem or that tourists especially have had been targets.  Where this information comes from is beyond our scope of understanding simply because it is not true, or better said, the Dominican Republic is certainly no worse off than many, many other destinations for vacation or retirement (in many regards, it is better off).  In terms of the nations capital, Santo Domingo, if you think there is absolutely no crime in a city with close to 4 Million people, you are unrealistic.  There is crime.  There are robberies.  But it is worse than Miami, Florida?  Is it worse than Cancun, Mexico?  Is it worse than Aruba or New York City, or is it maybe even better?  Many, many foreigners have come to the Dominican Republic, have been living in the country for a number of years, and have never had a problem.  It is probably safe to say that trouble is the one thing you will always find anywhere in the world, if you take the time to go look for it.  Meaning, if your conduct yourself or do some foolish things, like go into a area 3:00AM in the morning that you probably should not, you are asking for the opportunity to have an unpleasant experience.  On the other hand, you could have your wallet lifted just as easily (tourist or not) on the New York City Subway as you could on the Subway system in London, Buenos Aires, and a number of other places that tourists might consider to be safe or safer than the Dominican Republic.  But enough of rumors and opinion - let us have some facts:

SOME STATISTICS REGARDING THE DOMINICAN REPUBLIC IN COMPARISON TO OTHER COUNTRIES:

EDITORS NOTE:  And it is official, the US wins again with .007 percent of the entire US population behind bars, which is one of the highest rates in the world.  Based on these findings we can possibly conclude that:  There are more criminals in the Unites States on average than in almost any other place on earth.  There are a very high number of criminals in Bermuda - with respect to the amount of crooks in the Dominican Republic.  There are actually less people in jail, per capita, in Communist Cuba, than in the United States.  There are more crooks in Puerto Rica or Mexico, on a per capita basis than the Dominican Republic.  In conclusion, many people have cited rumors or comments that the Dominican Republic is a more dangerous place to visit (in terms of criminality) than somewhere else.  However, these statistics would lend one to believe that the US is actually the most crime-ridden country on the planet.  Very interesting, but there is more:

Since the definition of HOMICIDE is similar in most countries, absolute comparisons of rates are possible (murder is murder in any language, although the Pan American Health Organization does include murder AND injuries purposely inflicted by another person as part of their definition).  From the most recently available statistics, the average rate (the number of homicides per 100,000 population) in the following countries on a national level was as follows:

EDITORS NOTES:  Oh those Canadians - must be something in that Molson Beer that keeps them all calm and collected.  In any event, it would seem that in comparison to visiting the Dominican Republic versus some other places:  You are twice as likely to be murdered in Puerto Rico than you are in the Dominican Republic, you are at higher risk to be murdered in the Bahamas than in the DR, and incredibly enough - you are 3 times more likely to be murdered in the US Virgin Islands.  Who knew?  The guy from the accounting department at work who you usually chat with at the water cooler told you he heard from the neighbor of his cousin (who heard from his proctologist) that the Dominican Republic was a dangerous place and that you are better off going to Puerto Rico or the US Virgin Islands.  Hmmm, do not forget to pack your bulletproof vest.

Question.  Some of the comments from Dominicans living in New York or things they have told me are different from some of the more positive things I have read in terms of the reality of the current situation in the Dominican Republic (economy, housing, etc.).  What is in fact the truth or why are some people reporting more negative things?

Answer.  Just as with many issues, it all depends upon with whom you talk to.  If you ask a homeless guy on the street - How is it going?  Chances are he will tell you - Not so good, or maybe something worse.  If you ask a guy that just sold his business for US$3 Million in cash the same question, the answer will probably be - Great, Could not be Better. 

The problem with most immigrants you encounter in the US and Europe is that either they are poor or probably come from a lower skilled working class background.  This is not meant to be a mean spirited or derogatory comment, but it is the truth.  Wealthy Dominicans do not migrate to the US.  What for? So they can pay higher taxes?  They may visit New York or Miami to go shopping, or take the kids to Disney World - but they do not want to live there.  Why should they?  They have it pretty good where they are and they know it, both in terms of taxes, cost of living, lifestyle, etc.  So, generally speaking, what kind of foreigners do you get seeking to live in the US, Canada or Europe?  People that cannot get a job in their home country, or people that cannot seem to get ahead financially in their home country.  Usually this means for the most part, people that are uneducated, people that come from more working class (lower levels of education) backgrounds, and also these are people that are willing to do the kinds of jobs in the US that Americans no longer want to do (like wash dishes in a restaurant, clean office buildings, etc., etc.).  These are not Rhoades Scholars or people with Doctorate Degrees in Economics. Accordingly, their own point of reference, their own base of knowledge and the family and friends they still have back in their home country are probably going to be in the same socio-economic class as well.

To illustrate this, the concerns of these people are that one-year ago, when they sent their usual monthly remittance of US$100 to their sister in the Dominican Republic, the sister changed the money at an exchange rate of 50 to 1, or RD$5,000 PESOS and she was thrilled accordingly.  Today, that same US$100 is worth about RD$2,800 or almost half.  So, today she is not so thrilled and she complains to her brother in New York that US$100 is not enough (and she wants him to send more money) because even though the Peso has doubled in value against the US Dollar, many of the prices in the supermarket have not been cut in half in tandem.  All true.  However, because this sister living in the Dominican Republic does not travel internationally and does not buy goods or products internationally, what she does not say is that her national currency, the Dominican Peso, buys almost double internationally than what it did one year ago.  Stated another way, it is now 50 per-cent cheaper to travel to New York or Europe or 50 percent less expensive, in Peso terms, to buys products from abroad (because she can buy US$1 with just 28 Pesos today, where as US$1 cost 50 Pesos one year ago).  In other words, the US Dollar lost half its value versus the Dominican Peso.  Bad for the Dominican guy in New York sending money back home every month, Good for the guy living in the Dominican Republic that has Pesos (who maybe can now afford to take his kids to Disney-world this year accordingly).  So, it all depends upon what side of the fence you are on, and whom you talk to or ask.

In regards to the many middle class Americans and Europeans that have come to the Dominican Republic, the truth is that country is still less expensive and affords a much better lifestyle than many other Caribbean options.  Housing especially, whereby in comparison to the Bahamas, Turks & Ciacos, Chile, Panama, etc. you get either more for your money in the Dominican Republic or you get a much larger or better home for less.  How so?  In Chile and Panama for example, you can find a brand new middle class apartment for about US$115,000 at the moment.  However, the catch is, the size of that apartment for that price in Chile or Panama will be about 95 square meters (a shoe box to put it bluntly).  In the Dominican Republic, you are buying a 140, 170 or 200 square meter apartment for the same money - to get square feet, multiply square meters by 10 to more or less get the square foot equivalent.  Stated another way, a brand new 2,300 square foot home in a new residential housing community might cost about US$100,000 to US$140,000 in the Dominican Republic.  That very same home will probably cost in excess of US$250,000 or more in many other Caribbean destinations.

Answer.  On the general cost of living issue, as we have already stated, while prices for some consumer items have come down slightly, many still have not.  However, with that said, someone arriving from the United States or Europe will find many prices in line with what they are in the US or Europe (and in some cases less, such as local produce, fruits, vegetables, sugar, etc.).  Cable television with about 90 channels (15 or so in English, including CNBC, CNN, and movie channels such as HBO, CINEMAX, etc.) will cost the equivalent of US$50 per month.  Telephone with non-excessive long distance phone calls will probably cost about US$50 per month.  The local telephone companies (Verizon and Tricom) offer a flat monthly bill of about US$35 with unlimited local calls (anything over that would be long distance or cellular phone calls that are billed at about 10 cents per minute - with local calls to other residential land lines basically free or unlimited).  While the monthly bills for electricity have gone up over the past two years, they really are not too out of line with US rates.  It is safe to say that if you have air-conditioning running every night in your bedroom, and your other standard appliances, (television, washer-dryer, etc.) your monthly will be about US$200.  For some people this may seem high, but for others, about what they pay per month if they currently live in a warm weather climate such as California, Texas or Florida.  Monthly food shopping bills will vary because it really all depends upon what you buy.  Meaning if you stick with local products and produce (which are quite good) you food bill will be lower than if you buy nothing but foreign or imported items.  Very good imported wines from Chile and Argentina cost about US$9 per bottle, however many people have told us that other spirits were much cheaper in the Dominican Republic than what they are in the US, so it really all depends on what you are buying, item by item.

A live in maid will cost you about RD$4,000 Pesos per month (which is actually quoting on the high side) or the equivalent of about US$150 per month.  Some people have a maid come in twice or three times a week (that cooks the day she is in, does laundry, irons, etc.) and the going rate comes out to about US$15 per day for 8:00AM to 4:00PM (more or less).

We already discussed the idea of buying a new home or apartment, which you can do in the capital city of Santo Domingo starting at about US$60,000 (obviously the equivalent of the current price in Pesos) and you can go up to perhaps US$130,000 or so - all depending upon where and what you want.  However, as of March 2005, the availability of a brand new 1,500 square foot 3-bedroom apartment for about US$60,000 or a brand new 2,300 square foot home in a gated residential community for US$100,000 is very real.  Forget about the advertisements for properties marketed in tourist areas to tourists for US$400,000 or more.  These properties are out there if you want them, but the reality is that new homes or apartments are very affordable in the Dominican Republic, putting the tourist-oriented or golf course developments aside.  Even so, we have seen some building lots being offered in some of the gated higher end golf course communities for about US$55,000 recently as well, so prices there too seem to have come back down to reality in some cases.

If you are renting, again, you might see some ridiculous things being asked or offered, but it is very possible to find an acceptable 2 or 3 bedroom apartment up to what might be called American or European standard in an upper middle class residential area for the equivalent of about US$500 per month.  So again, when making comparisons to some other jurisdictions in the Caribbean, chances are that you will find the Dominican Republic to be a bargain in comparison.