US embassy cable - 05SANTODOMINGO4759

UNCLAS SECTION 01 OF 05 SANTO DOMINGO 004759 
 
SIPDIS 
 
DEPT PASS USTR FOR RUSSEL SMITH; DEPT FOR WHA/CAR, 
WHA/EPSC; DEPT PASS USAID 
 
E.O. 12958: N/A 
TAGS: ECON, DR, ETRD 
SUBJECT: DOMINICAN REPUBLIC: CBI BENEFITS FOR THE 2005 
CONGRESSIONAL REPORT 
 
REF: SECSTATE 188288 
 
1.  The Following information is keyed to reftel questions. 
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WTO and Free Trade Commitments 
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2.  The Dominican Republic signed the Central American Free 
Trade Agreement (DR-CAFTA) with the United States on August 
5, 2004.  Ratification of the agreement was completed in the 
Dominican Congress in September of 2005.  Inclusion of the 
Dominican Republic in CAFTA expands the trade coverage of the 
agreement by some 40 percent, creating a free market for U.S. 
goods and services that would become the 2nd largest U.S. 
export market in Latin America. 
 
3.  Under DR-CAFTA the Dominican Republic commits to 
undertake needed reforms to alleviate many of the systemic 
problems in areas including customs administration, 
protection of intellectual property rights, services, 
investment, government procurement, sanitary and 
phytosanitary barriers and other non-tariff barriers. 
 
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Protection of Intellectual Property Rights 
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4.  While the Dominican Republic has laws with sanctions 
adequate to protect copyrights and has improved the 
regulatory framework for patent and trademark protection, 
United States industry representatives continue to cite lack 
of IPR enforcement as a major concern.  The Dominicans 
specifically committed in a side letter to CAFTA to make 
stronger efforts to halt television broadcast piracy, and 
agreed to report on their efforts in this regard in a 
quarterly report to USTR.  The Dominican government has 
delivered these quarterly reports on time since January, 
2005.  The Embassy has noted improved coordination in this 
regard among various government agencies including the 
Secretariat of Industry and Commerce, the Attorney General,s 
 
SIPDIS 
Office, the Patent Office and the Copyright Office.  The 
authorities advised cable television of their legal 
responsibilities regarding copyright, secured a formal 
agreement with the operators' association in August, 2005, 
and in September seized equipment from six operators found to 
be infringing the laws.  The Attorney General's office 
instituted proceedings against several television 
broadcasters in the first half of 2005 for infringement of 
the copyrights of the owners of various U.S. film titles. 
 
5.   On three occasions during a twelve-month period during 
2004-2005, congressional representatives proposed legislation 
that would weaken the country's intellectual property laws by 
reducing penalties for patent violations, by making the 
granting of compulsory licenses automatic if the government 
failed to act on an application, and by undercutting data 
protection for patents. Embassy officers repeatedly expressed 
USG concern to the congressional leadership about this 
legislation, which was advocated by domestic pharmaceutical 
manufacturers.  Two of the proposed bills died in Congress 
without a vote.  As of October 2005, the third proposal has 
been offered in the Senate, but the Embassy understands that 
there is no support for placing it on the agenda. 
 
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Protection of Worker Rights 
----------------------------------- 
6.  The Dominican Constitution provides for the freedom to 
organize labor unions, and all workers, except the military 
and the police, are free to organize.  Organized labor 
represents an estimated eight percent of the work force and 
is divided among four major confederations and a number of 
independent unions.  The 1992 Labor Code provides extensive 
protection for worker rights and specifies the steps legally 
required to establish a union, federation, or confederation. 
The code calls for automatic recognition of a union if the 
government has not acted on its application within 30 days. 
In practice, the Dominican government readily facilitates 
recognition of labor organizations. 
 
7.  The government generally respects association rights and 
places no obstacles to union registration, affiliation, or 
the ability to engage in legal strikes.  However, enforcement 
of labor laws is sometimes unreliable, inhibiting employees 
from freely exercising their rights.  The Dominican Republic 
recognizes the problem and is working to correct shortcomings 
in enforcement.  Unions are independent of the government and 
generally independent of political parties.  The law 
forbidding companies to fire union organizers or members has 
at times been enforced selectively, and penalties appear 
insufficient to deter employers from violating worker rights. 
 Labor unions can and do affiliate freely regionally, and 
internationally. 
 
8.  Collective bargaining is legal and must be used in firms 
in which a union has the support of an absolute majority of 
the workers.  Many of the manufacturers in the Free Trade 
Zones (FTZs) have voluntary "codes of conduct" that include 
workers, rights protection clauses.  Workers do not always 
know their rights under these codes. 
9.  The Dominican Constitution empowers the executive branch 
to set minimum wage levels, and the Labor Code assigns this 
task to a tripartite (government, employer and worker) 
national salary committee.  Congress  may enact minimum wage 
legislation.  There are presently 14 minimum wage scales, set 
by sector and/or geography, and the minimum monthly salary is 
approximately USD 119 (3,570 pesos) in the FTZs and USD 164 
(4,920 pesos) outside the FTZs. 
 
10.  The Dominican Labor Code establishes a standard work 
period of 8 hours per day and 44 hours per week. The code 
also stipulates that all workers are entitled to 36 hours of 
uninterrupted rest each week. In practice, a typical work 
week is Monday through Friday plus a half day on Saturday, 
but longer hours are common. The code grants workers a 35 
percent differential for work totaling between 44 hours to 68 
hours per week and double time for any hours above 68 hours 
per week. Overtime is mandatory at some firms in the FTZs. 
 
11.  The Labor Code sets the minimum age for employment at 14 
years, and places restrictions on the employment of youths 
between the ages of 14 and 16.  In 2001 the Ministry of Labor 
and the National Statistics Office reported that 17.7 percent 
of children ages 5 to 17 years in the Dominican Republic were 
working.  Most of these children work in the informal and 
agricultural sectors.  This information was gathered as part 
of a survey to establish a baseline for the International 
Program on the Elimination of Child Labor carried out by the 
ILO. 
 
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Preventing Worst Forms of Child Labor 
--------------------------------------------- -- 
 
12.  The country ratified ILO Convention 182 on November 15, 
2000, and the government has taken a strong stance on the 
need to eliminate the worst forms of child labor.  A national 
committee on child labor has been established, and it 
collaborates with the ILO, UNICEF, and several 
non-governmental organizations.  The Dominican Republic has 
signed a Memorandum of Understanding with the ILO,s 
International Program for the Elimination of Child Labor and 
is working with the ILO on various programs aimed at phasing 
out exploitative child labor.  This includes the ILO-IPEC 
Time Bound program on the worst forms of child labor, with an 
Education Initiative component to improve access to education 
funded by the U.S. Department of Labor. 
 
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Counter-Narcotics Efforts 
------------------------------- 
 
13.  The Dominican Republic is classified as a major 
transshipment country for narcotics moving from South America 
into Puerto Rico and the United States.  The country has been 
fully certified as cooperating with U.S. counter-narcotics 
efforts.  The Dominican Republic has met the U.S. counter 
narcotics certification criteria under the Foreign Assistance 
Act of 1961. 
 
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Inter-American Convention Against Corruption 
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14.  The Dominican Republic has ratified the Inter-American 
Convention Against Corruption (IACAC).  When Leonel Fernandez 
was elected president in 2004, he made anti-corruption a 
major theme of his inaugural speech.  In April 2005 the 
President established a Government Ethics and Anti-Corruption 
Commission.  Corruption remains a deep-rooted problem in 
Dominican society.  Corruption and the need for reform are 
openly and widely discussed. 
 
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Transparency in Government Procurement 
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15.  Historically, contracts for large public works, military 
equipment, vehicles and other supply contracts are often not 
subject to competitive bids.  The government is in the 
process of changing this practice.  Over the past six months 
the administration has stopped two large procurements 
initially negotiated directly -- a package of equipment for 
the police valued at well over USD 100 million and the 
acquisition of two coal-fired generating plants to produce 
1400 MGWT -- and converted them into tenders instead.  The 
presidency suspended directly negotiated procurement of 
software valued at between USD 4 and USD 11 million when the 
new Government Ethics and Anti-Corruption Commission made 
strenuous objections.  As part of a Stand-by Agreement signed 
with the IMF in early 2005 the Dominican Republic undertook a 
commitment to pass legislation making government procurement 
more transparent.  The procurement reform legislation has 
been prepared but not enacted.  President Fernandez has a 
"bridge decree" pending signature since March, 2005; it would 
direct government officials to resort to open tenders for 
acquisitions of goods, services, and construction for all 
purchases above relatively restricted minimum amounts.  The 
Dominican Republic assumed a similar obligation in the 
CAFTA-DR agreement, which is likely to enter into force in 
early 2006.. 
 
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Expropriations 
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16.  Dominican expropriation standards have historically been 
at variance with international norms.  Some U.S. investors 
have outstanding disputes with the Dominican government 
concerning expropriated land.  Property claims make up the 
majority of expropriation cases.  Most, but not all seizures 
have been for purposes of infrastructure or commercial 
development.  Almost all pre-1996 expropriation claims have 
been solved, through a mechanism which provides claimants 
with the opportunity of accepting bonds once claims have been 
reviewed, confirmed and negotiated. 
 
17.  Tthe Dominican Republic is a member of the International 
Center for the Settlement of Investment Disputes.  In August 
2002, the country ratified the 1958 UN Convention on Arbitral 
Awards (the New York Convention), thereby recognizing the 
right of companies to pursue international arbitration. 
 
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Government-owned Broadcasters 
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Government-owned entities do not/not broadcast copyrighted 
material belonging to U.S. copyright-holders without their 
express consent. 
 
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Bilateral Extradition Treaty 
--------------------------------- 
 
18.  The Dominican Republic signed a bilateral extradition 
treaty with the United States in 1909.  In the first term of 
President Fernandez, 1996-2000, the executive revised its 
procedures for that previously inactive treaty and began to 
extradite fugitives requested by the United States.  Since 
that time more than 100 fugitives have been extradited, with 
the active participation of each administration.   The 
country has also signed and ratified the U.N. Convention 
Against Illicit Traffic in Narcotic Drugs and Psychotropic 
Substances.  In accordance with Article 6 of that Convention, 
each of the offenses listed in Article 3 (1) shall be deemed 
to be included as an extraditable offense in any extradition 
treaty existing between the parties. 
 
19.  The Dominican Supreme Court examines each extradition 
request closely to assure compliance with its interpretation 
of the treaty. The executive branch of the government 
cooperates readily with extradition requests, though 
presidential decrees authorizing extraditions may include 
language concerning maximum sentences and stating that 
remitted fugitives should not be subject to death penalty. 
 
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Recognition of International Arbitral Awards 
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20.  The Dominican Republic implemented the New York 
Convention on Recognition and Enforcement of Foreign Arbitral 
Awards (the New York Convention) in August of 2002, which 
provides courts a mechanism to enforce international arbitral 
awards.  A U.S. firm recently resolved out of court a dispute 
in which it had appealed a verdict from a Dominican lower 
court inconsistent with the findings of the international 
arbiter identified in the contract. 
 
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General Economic Conditions 
------------------------------------ 
 
21.  The Dominican economy suffered from major financial 
imbalance in 2003-2004, prompted in large part by extensive 
banking frauds, mismangement of the economy, and a loss of 
confidence.  The new administration's renegotiation of the 
IMF standby agreement and appropriate macroeconomic and 
fiscal management has resulted in better than expected 
economic performance this year despite a poorly performing 
electricity sector and high international prices for fuel. 
GDP growth projections for 2005 are in the 3 to 4 percent 
range, up from 2 percent in 2004.  The Dominican peso has 
been overvalued on a purchasing power parity basis since late 
2004 and relatively stable at less than 30 pesos to the U.S. 
dollar for much of the year.  Market pressures led to 
adjustments in September and October, resulting in an 
exchange rate of around 32 to the dollar. 
 
22.  Inflation was low through much of 2005 but prices for 
basic items were nevertheless at historical highs.  Inflation 
accelerated in September when it reached an annualized rate 
of 3.8 percent for the month, the highest rate in nearly two 
years.  The Central Bank cites increased world petroleum 
prices as possible reasons for the drop in peso value and 
increased inflation. Congress continues to review fiscal 
reform measures as the government prepares itself to adjust 
for the loss of taxes on trade with the implementation of 
DR-CAFTA. 
 
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Access of U.S. Goods to Market 
--------------------------------------- 
 
23.  Dominican consumers show a pronounced preference for 
U.S. goods.  It does not afford preferential treatment to 
products of any developed country.  The country generally 
provides reasonable and equitable access to U.S. goods and 
services.  With the entry into force of DR-CAFTA, 
approximately 80 percent of U.S. manufactured goods will 
immediately enter the country duty free. 
 
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Export Subsidies 
-------------------- 
 
24.   The Dominican Republic does not provide direct 
subsidies to encourage exports.  The FTZs are the major 
source of exports and production in the zones is tax-free and 
duty-free, in accordance with WTO recommendations. 
 
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Trade Policies 
------------------- 
 
25.  The Dominican Republic had previously signed a trade 
agreement with the Central American countries; its successful 
efforts to join negotiations on DR-CAFTA required it to make 
further reciprocal trade concessions to those countries.  The 
Dominicans have revived formal trading links with Puerto Rico 
in anticipation of the entry into force of DR-CAFTA. 
 
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Economic Development 
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26.  President Fernandez's administration has a 
socially-conscious, market friendly policy and cooperates 
closely with international donors.  The austerity required by 
the financial crisis and readjustment has been a hinderance 
in increasing investment in social capital and infrastructure. 
 
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Administration of CBERA 
----------------- 
 
27.  Dominican political and trade authorities have 
cooperated closely with U.S. authorities concerning the CBERA 
and other regional trade matters. 
 
 
26.  The post officer assigned to responsibility for this 
reporting is Jehan S. Jones (O: 809-731-4469, F: 
809-686-4038, Email:  Jonesjs2@state.gov. 
BRINEMAN