US embassy cable - 05SANTODOMINGO3564

UNCLAS SECTION 01 OF 02 SANTO DOMINGO 003564 
 
SIPDIS 
 
SENSITIVE 
 
STATE PASS TO USITC FOR LSCHLITT 
STATE PASS TO OPIC 
STATE PASS TO USTR FOR GDURKIN 
TREASURY FOR OASIA/INC 
 
E.O. 12958: N/A 
TAGS: ASEC, ECON, ETRD, OTRA, XL, EFIN, DR 
SUBJECT: DOMINICAN REPUBLIC - USITC BIENNIAL CARIBBEAN 
BASIN INVESTMENT SURVEY 
 
REF: SECSTATE 87702 
 
1. This cable is in response to the USITC's request for the 
2004 Caribbean Basin Investment Survey.  According to the 
Dominican Export and Investment Center, foreign direct 
investment (FDI) in the Dominican Republic in 2004 totaled 
USD 650 million, down from USD 1.01 billion in 2003. 
Investment in free trade zones continued to increase as did 
FTZ exports, though at a much lower rate than previously. The 
Caribbean Basin Trade Partnership Act has been very effective 
in attracting new business to the Dominican Republic in the 
past, and now businesses are looking to the Dominican 
Government to ratify the U.S.-Central American, Dominican 
Republic Free Trade Agreement (CAFTA-DR) to create even 
greater free trade benefits on a permanent basis. 
 
2. The Dominican National Council of Free Trade Zones (CNZFE) 
indicates that Free Zone areas in 2004 grew in terms of the 
number of businesses, the number of employees and total 
exports.  There was a 7.4% increase in the number of free 
zone areas in 2004.  The total value of exports from free 
trade zones was USD $4.4 billion, just slightly (0.2%) 
greater than in 2003.  However, free trade exports in 
comparison to all Dominican trade decreased by 5%.  The 
United States has the highest representation in the free 
trade zones with 256 business, which in 2004 represented 45% 
of the total free trade zone businesses. Exports from the 
largest FTZ sector, textiles, dropped as they did in 2003, 
this time by 5.5%. 
 
3. Total new investment in Free Trade Zones in 2004 was USD 
114 million.  U.S. businesses are the largest investors in 
the Free Trade Zone areas with 2004 investments estimated at 
USD 57 million.  The highest percentage of goods exported 
from the Free Trade Zones goes to the United States -- 76% of 
total FTZ exports.  Of 569 FTZ businesses, 456 use materials 
originating in the United States. 
 
- - - - - - - - - - - - - - 
FDI by Sector in FTZ  (in millions of U.S. dollars) 
January to December 2004 
Data from CNFZE 
- - - - - - - - - - - - - - 
Textiles 47.2 
Metals   10.1 
Medical Instruments/Materials 8.6 
Services 8.4 
Tobacco 7.6 
Cartons and Paper Products 6.3 
Construction Materials 4.8 
Construction 4.7 
Food 3.4 
Agro-Industrial 2.8 
Chemical Products 2.8 
Plastic Goods 2.1 
Trade Related Business 1.1 
Jewelry 1.2 
Electronics 1.1 
Leather Goods 0.6 
Refrigeration 0.6 
Assembly of Electrical Equiment 0.2 
- - - - - - - - - 
Total 113.6 
- - - - - - - - - 
 
4.  Sensitive - Business Confidential 
 
The following company-specific information represents some of 
the largest U.S. companies registered as foreign businesses 
in the Dominican Republic, and reflects those companies 
registered as having new investment in 2004. 
 
- Verizon is the main telephone service provider operating in 
the Dominican Republic. 
The company invested USD 220 million in a new headquarters 
building and infrastructure upgrades during 2004.  The local 
Verizon president told us that the company did not benefit 
from CBERA/CBTPA. 
 
- Tricom is 40 percent owned by Motorola and is the second 
largest provider of long distance and cellular telephone 
services in the Dominican Republic. Citigroup of New York 
owns a sizable share of Tricom's debt. A Tricom executive 
states that 2004 investment was USD 28 million and this was 
new investment. Tricom did not receive CBERA/CBTPA benefits 
in 2004.  However, the company had benefited in the past 
through CARIFA (Section 936) bond issues. 
 
- CODACSA/The Fairfield Group invested approximately $13 
million in toll road construction but claimed no CBERA/CBTPA 
benefits. 
 
- Colgate Palmolive, Inc. is the leading manufacturer in the 
Dominican Republic of soaps and toothpaste. 
It invested approximately USD 1.5 million during 2004.  The 
company is not located in a free trade zone and the project 
would have been launched without CBERA/CBTPA. 
 
- Pernod Ricard Dominicana invested approximately USD 17 
million in 2004.  Pernod Ricard is a French company, but the 
Dominican office is managed out of the company's U.S. 
headquarters and the investment is categorized by the 
Dominican Government as a U.S. investment. The company is not 
located in a free trade zone and the project would have been 
launched without CBERA/CBTPA. 
 
- FMI Apparel, an FTZ company, would not disclose new 
investment for 2004, but indicated that CBERA/CBTA incentives 
are essential to the company and that without them the 
company would not be doing business in the Dominican Republic. 
HERTELL