Dominican Republic politics: New
president is inaugurated
August 17th 2012
FROM THE ECONOMIST INTELLIGENCE UNIT
Danilo Medina, of the centrist Partido de la
Liberación Dominicana (PLD), was sworn in as the Dominican Republic's 56th
president on August 16th, alongside his vice-presidential pick, Margarita
Cedeño de Fernández, the wife of the outgoing three-time president, Leonel
Fernández, of the same party. Mr Medina and Ms Cedeño will serve a single
four-year term until August 2016, since the constitution bans consecutive
re-election. The new president's inaugural address focussed primarily on social
policy, and avoided a direct discussion of some of the challenges he will face,
including the need to slash public spending and secure a new agreement with the
IMF.
Mr Medina, an economist and former congressman, served as Mr Fernández's
secretary of the presidency during the former president's first two terms
(1996–2000 and 2004-06), and ran against him in the PLD's presidential
primaries in 2008. He will now fall to him to push through needed reforms in
the fiscal arena, as well as in education and health services. He will also
have to address the chronic difficulties of the electricity sector, which have
long hindered competitiveness and drained public funds.
Although Mr Medina will benefit from a two-thirds majority in Congress
for the entire duration of his presidency, helping him to pass legislation, he
will struggle to shrink a bloated bureaucracy and to satisfy the expectations
of a population disheartened by high prices for basic goods, unreliable and
expensive electricity supply, and poor public services.
Main policy proposals
Mr Medina's speech focused on the social and developmental aspects of
his platform, which have dominated his discourse from the outset of his
campaign last year. He established the main two goals of his presidency to be
to lower the poverty rate (34% of the population in 2010, according to the
World Bank) and reduce income inequality. He included ambitious social
objectives such as eliminating illiteracy and the creating 400,000 new jobs by
the end of his tenure (illiteracy is around 12% of the adult population,
according to United Nations figures, and unemployment stands at 14%).
Healthcare, which is highly deficient despite a social-security law passed in
2001, will also be targeted, with the aim of providing universal healthcare to
the population.
Policy will be guided by the Estrategia Nacional de Desarrollo 2010-30
(END, the National Development Strategy), a programme that sets the main
economic, social, institutional and environmental goals through 2030. The
strategy revolves around three main "pacts": education reform, fiscal
reform and electricity-sector reform, which are also the key tenets of Mr
Medina's policy programme. While he elaborated on the specifics of his
education and electricity-sector reform plans, Mr Medina did not describe in
his speech his strategy to tackle the government's large fiscal deficit (which
the Economist Intelligence Unit estimates will be 4.2% of GDP in 2012) and
growing financing needs. He did confirm, however, that the government would
seek to increase the tax take (currently around 14% of GDP, according to
government estimates). Addressing the concerns expressed by various sectors
that have demanded that new taxes must come with greater controls on government
spending, Mr Medina said he would implement austerity measures and improve the
efficiency and transparency of public spending.
Reducing the high level of corruption, which has long characterised the
government apparatus, is another central goal set by the new administration.
Endemic corruption in government ministries, the police force and the military
is believed to have worsened during Mr Fernández's last two terms, burdening
public finances and weakening government effectiveness. Mr Medina also
announced an overhaul of the national police force, which has recently received
international attention because of a rash of extra-judiciary killings and
human-rights violations. He mentioned his intention to seal a free-trade
agreement with Haiti, which is the Dominican Republic's second-largest commercial
partner after the US, as well as to improve migratory policies between the two
countries.
A move away from previous policy priorities
The speech excluded discussion of crucial topics, such as the direction
of macroeconomic policy, the fight against drug-trafficking, the growing
external debt and plans for the development of local industry. Contrary to Mr
Fernández's constant theme of modernisation—indeed, under his rule the capital
city of Santo Domingo developed into a modern metropolis—Mr Medina's speech
omitted talk of public works and infrastructure upgrades, which had become the
hallmarks of the Fernández administration. The mention of a pending fiscal
reform supports the widespread belief that negotiations will the IMF will
produce a new loan agreement by early 2013, complete with requirements to
improve financial management.
With this inaugural address, Mr Medina fundamentally re-arranged what
had been the government's priorities in recent years. This will serve to
differentiate him from his predecessor right from the start. However, he still
must explain how he will finance his plan to achieve his ambitious social
goals, which will be difficult considering the country's fiscal challenges.
New cabinet, but too few new faces
Although Mr Medina has succeeded in setting himself apart from Mr
Fernández, the same cannot be said for his picks for major cabinet posts.
Thirteen of the 27 top appointees chosen thus far are holdovers from Mr
Fernández's staff. Announcements about remaining positions, including governor
of the Central Bank (who will likely be retained), are still pending. Leaving
some experienced ministers in place will prove less disruptive in the early
stages of Mr Medina's administration, and the retention of the economy
minister, Temístocles Montás, deemed to be a solid technocrat, will be
reassuring to investors. However, Mr Medina may well make some changes once he
settles into his new role.
(Tomado de Economic Inteligence Unit:
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