US embassy cable - 04SANTODOMINGO6915

UNCLAS SECTION 01 OF 02 SANTO DOMINGO 006915 
 
SIPDIS 
 
STATE FOR WHA/CAR, WHA/EPSC, EB/TPP/BTA, EF/IFD/OMA; STATE 
PASS AID/LAC; NSC FOR SHANNON AND MADISON; LABOR FOR ILAB; 
USCINCSO ALSO FOR POLAD; TREASURY FOR OASIA-LCARTER, 
RTOLOUI, DDOUGLASS 
STATE PASS USTR FOR VARGO, RYCKMAN, MALITO, CRONIN 
USDOC FOR 4322/ITA/MAC/WH/CARIBBEAN BASIN DIVISION 
USDOC FOR 3134/ITA/USFCS/RD/WH; DHS FOR CIS-CARLOS ITURREGUI 
 
E.O. 12958: N/A 
TAGS: DR, EFIN, PREL 
SUBJECT: DOMINICAN REPUBLIC TOWARD PARIS CLUB AND THE IMF 
STANDBY 
 
REF: SANTO DOMINGO 6841 
 
1. (U) Dominican Technical Secretary Temistocles Montas 
called in Paris Club governments' local representatives on 
December 29 and asked them to offer financing assurances for 
the Dominican Republic for 2005-2006 at the next Paris Club 
meeting, which is scheduled for the week of January 10. 
Montas said that at the last meeting on December 12, the 
Paris Club validated the Dominican strategy for handling its 
external arrears but had saved a decision about financing 
assurances for the January meeting.  The Dominicans are 
working toward completing all of the prior actions that are 
pre-requisites for a new IMF standby program, and identifying 
how the country's financing gap will be filled is one of 
them. 
 
2. (U) The timing is important to the Dominicans, Montas 
said.  The deadline for completing the prior actions is 
January 11 if the IMF Board is to consider the standby at its 
January 21 meeting.  In fact, Montas said the Government is 
trying to meet all of the prior actions by January 7.  The 
Dominicans want to be on the agenda for the January 21 IMF 
Board meeting because January 21 is the holiday for the 
protector of the country, Altagracia.  Launching the new 
standby on the day of the protector of the country holds 
great symbolism that President Fernandez would like to take 
advantage of. 
 
3. (U)  Montas said there were only three more prior actions 
to complete (other than Paris Club) and that all three are in 
process.  The first is passing the domestic budget.  The 
Senate has already acted, and passage in the Chamber of 
Deputies is expected either this week or next.  The second is 
issuing a decree to establish a committee to handle the 
electricity crisis.  The decree is drafted but President 
Fernandez decided to wait until January 3 or 4 to issue it. 
And the third is issuing a decree that eliminates certain 
illegal customs measures--administrative measures that DR 
Customs had no legal right to institute, such as Customs 
exceptions for books and medicines. 
 
4. (U) Montas added that by December 31, the Dominicans will 
have eliminated all its external debt service arrears to 
Paris Club creditors.  This had also been a prior action, but 
Montas categorized it as essentially completed.  The 
Government planned to do the same (eliminate arrears) on debt 
service owed to private banks in the first few days of the 
new year.  Among other, apparently completed prior actions 
that Montas mentioned were the following: 
-Starting operation of the Committee for Recovering Assets 
-Consulting with the bondholders and the four big banks that 
hold 85 percent of the debt on which service is due in 2005 
and 2006. The Government will meet with the banks in 
mid-January. 
-Establishing a mechanism to control/coordinate Dominican 
external borrowing. 
-Establishing a plan for recapitalizing the banks 
-Reviewing banks' business plans 
 
5. (U) Montas acknowledged explicitly creditor governments' 
distrust of the Dominican Government following the failures 
of the past two IMF standbys.  He said that the Fernandez 
government has sufficient will to fully comply with the 
standby it hopes will be approved January 21.  Montas 
observed that as soon as CAFTA is ratified, the Government 
will move forward on a fiscal reform project. 
 
6. (SBU) Note: We appreciate the Dapartment's offer to review 
arrears and inform the Embassy of any obligations to U.S. 
Government creditors that have not been cleared by December 
31 as Technical Secretary Montas indicated they would be.  We 
also understand from separate discussions with the Department 
that the U.S. will probably support giving the IMF financing 
assurances of one year as requested by Montas, and we request 
that the Department inform us before the January 10 Paris 
Club meeting if this changes. End note. 
Hertell