BW BF DomR v13 - Business Focus

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Dominican Republic Ministry of Tourism
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Dominican Republic
With a diversifying economy featuring cyberparks, energy opportunities and
luxury developments, the Dominican Republic’s moment has finally arrived.
W
hen one thinks of the Dominican Republic, images of
tropical beaches and all-inclusive resorts may come to mind,
but this nine million-strong nation, occupying two thirds of the
Caribbean island of Hispaniola, also has one of the Americas’ fastestgrowing economies and the most diverse scenery in the Caribbean.
The main architect of the country’s ambitious drive and rapid
recovery from a deep financial crisis only two years ago is President
Leonel Fernández Reyna, who was elected in May 2004.
“In the short time this government has been in place, we have
recovered from the worst financial crisis in many years. However, for
2005 we have a predicted GDP growth of 9.3%, inflation brought
under control at 7.3% and a stable exchange rate,” says Fernández.
“We have rescued the confidence of investors by achieving
macroeconomic stability.”
competitive advantage,” says CEI-RD’s executive
director and Secretary of State Eddy Martínez
Manzueta. “Investors here always emphasize the
Leonel Fernández, President Dominican Republic
Dominicans’ high learning ability and proficiency
in English.”
High-tech hub of the Caribbean
The government plans to turn the country into the high-tech hub of
the Caribbean by developing a call center and Business Processing
Outsourcing (BPO) industry, and a new cyberpark, with its recent
establishment of the Network Access Point (NAP) of the Caribbean,
similar to the NAP of the Americas in Miami. “We see high-tech
“We see high-tech industries, including call centers and BPOs, playing a vital role in the transformation
of the economy.”Leonel Fernández, Presidentt
Indeed, US$1,000 million worth of foreign direct investment (FDI)
entered the Dominican Republic in 2005, up 40% from 2004, and U.S.
investment accounted for around 40% of the total. As well as
economic stability, FDI has also rapidly increased due to the efforts of
the governmental Dominican Republic Export and Investment Center,
(CEI-RD), which is agressively targeting investors through offices in
New York, Miami and California, and because of the nation’s entry into
the Central American Free Trade Agreement, or CAFTA-DR, next
month. “We have a completely open economy and CAFTA-DR will
only enhance this tendency,” says Fernández.
“Apart from our stable, fast-growing economy, attractive cost
structure and “near shore” location, I would say people are our primary
industries, including call centers and BPOs playing a vital role in the
transformation of the economy and already have around 12,000
Dominicans working for 35 call centers nationwide,” says President
Fernández. According to the CEI-RD’s Mr Martínez, the country
already has “perhaps the best telecommunications infrastructure in the
Caribbean region and maybe all of Latin America”, and in 2005,
received US$300 million in telecoms investments.
Martínez is also executive chairman of Santo Domingo Cyberpark,
which is rapidly becoming the region’s center of excellence for IT,
software firms, BPO and call center operations, as well as high-tech
component manufacture. The cyberpark’s NAP of the Caribbean will
offer world-class connectivity to communications companies, research
The Dominican Republic...
Catching the Future!
S a n t o D o m i n g o , D o m i n i c a n R e p u b l i c Te l : 1 8 0 9 5 3 0 5 5 0 5 w w w. c e i - r d . g o v. d o
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and telecoms sector is French giant, Orange,
which became the second biggest mobile operator
in the country after only one year, and now has
more than a million customers.
Eddy Martínez, Executive Director, CEI-RD
Cap Cana - The world’s next great destination
networks and the government. The first business incubator for
technological start-ups has already been created and US$130 million in
initial investments sought. Within the cyberpark, the Institute of
Technology Las Americas (ITLA) offers wide-ranging IT and telecoms
training, and there is also an academy for BPO and call center training.
“Also launched this year is the Stevens Institute of Technology of the
Americas, a branch of the New Jersey-based research university,” says
Martínez. “Students will be credited in the United States and the
institute will be a center of research and innovation, specializing in the
creation of new products in biomedicine, software engineering,
electronics and electronics manufacturing.”
The cyberpark will also house the Academy of Multimedia and
Animation to assist in developing a Dominican film industry,
complementing extensive use of the country as a shooting location.
One of the multinationals most heavily investing in the high-tech
The premier location for
knowledge-based companies
in the Caribbean and
Latin America
Santo Domingo, Dominican Republic
Tel: +1 809 738 5000 [email protected]
www.pcsd.com.do
Orange Dominicana’s president Frédéric
Debord puts the company’s success down to:
listening to the local customer, tailoring products
specifically for them and launching new products first. “I think we
stimulated
this
market,
introducing
products
like
per-second billing and helping to boost penetration in the sector from
3-5% in 2002 to 14% last year, by opening the market to the many
people with changeable incomes with products such as part pre-paid
and part post-paid. Today, Orange has became a local brand and serves
its customers accordingly.”
The company is co-operating with the International Finance
Corporation (IFC) on a US$130 million further extension to the
network to cover remoter areas, there is now GPRS data coverage
nationwide and the recent introduction of Edge technology has further
boosted transmission capacity.
Orange Dominicana is now targeting the business customer through
its corporate services department, and aims to be number one in the
marketplace within a few years.
The company has roaming agreements with U.S. carriers and last
year received a prize from Dominican exporters for providing
invaluable support through their extensive roaming network. Mr
Debord says: “Our vision is to support the investor everywhere and at
all times. We also cover all the tourist areas, no matter the size.”
During the two years of Fernández government, confidence has been
restored in the financial sector following the collapse of Bancrédito
bank, which Secretary of State for Finance Vicente Bengoa describes as
“one of the greatest economical comebacks in Latin American history”.
“We owe a great deal to investors in the United States and Spain who
saw the potential and had faith in our economy,” he says.
One of the nation’s biggest financial players and supporters of
development is Banco León S.A., which helped to end the 2003
banking crisis by assisting in buying Bancrédito. Now, the number of
personal and corporate accounts is booming due to the bank’s
philosophy, asserts president Manuel Peña-Morros. “Our philosophy is
transparency in business, combined with new products and leading
technology to offer our customers the best service in the market.”
The bank converted approximately US$170 million from
unproductive portfolios to productive ones in 2005 and has reduced
Bancrédito’s past indebted portfolios from 56% to 4.3%.
With 56 branches nationwide, Banco León is focusing on increasing
its presence in areas of tourist development. It is also supporting
Energy for progress
Looking for an attractive investment...
...we have some bright ideas
Corporación Dominicana
de Empresas Eléctricas Estatales
Centro de los Héroes, Santo Domingo
Dominican Republic. www.cde.gov.do
Tel: +1 809 535 1100 Fax: +1 809 535 7472
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Electricity sector finally set for improvement
Until now, a major blackspot affecting the Dominican economy
has been the electricity system, which faces regular blackouts
and excessively high tariffs. However, the government was so
determined to tackle the problem that it created a ministerial
position for Rhadamés Segura, who became Secretary of State and
executive vice-president of CDEEE (Dominican Corporation of State
Electric Companies).
The sector had long experienced problems, with a no-pay culture
prevalent from years of free provision, despite privatization of many
firms, as well as separate companies responsible for distribution,
generation and transmission and an unfair system of fuel pricing for
distributors. “When this government entered power in August 2004,
the whole electricity system was in a deplorable state, with generalized
and nationwide blackouts, and generators paying 50-60% of the costs
of the electricity they sold to the distributors,” Mr Segura explains.
“We have heavily subsidized the sector to redress this situation and in
2005 achieved 90% of payments from distributors to generators. In
2006 we will reach 100%.”
Now there is an integrated plan, supported by a US$150 million
World Bank loan, that includes bringing experienced professionals
from Latin American nations that had similar problems, which, it is
hoped, will remedy the system within three years.
The government is bringing on-line up to 1,200 megawatts
(MW) of additional economical mineral carbon plants and
hydroelectric plants of at least 400MW, investing US$1,300-1,400
million in generation over the next few years, with the involvement
of Chinese, Dubai and local companies. There is an artificially low
market demand of 1,900 kilowatts (kW) due to many unconnected
or non-paying users, but in the next two or three years it will be
at 2,500kW, according to Segura. Further transmission systems are
also being constructed, with the 138,000 watt network set to increase
to 345,000.
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tourism by investing heavily in some of the most important projects,
like Cap Cana and Westin Rocco Ki.
“We are the pioneers in the country in Internet banking as
Banco León is the only one where you can make 44 different types
of payments online,” says Peña-Morros. “Currently, we are working on
an automated credit center, where one would be able to get a loan
in 15 minutes.”
The insurance market is also healthy. The market leader for
corporate and life insurance, as well as the most capitalized in the
sector, is La Colonial. “After 34 years in the marketplace, we are the
only company in the country that is rated,” says executive vicepresident Dr Luis Guerrero Román. “For 2006, we have a B++ rating
from AM Best, the insurance specialist, which would be even better if
the country’s credit rating rose. Thanks to AM Best’s rating, we have
many multinational customers such as Nestlé, Bacardi, Phillip Morris
and Colgate.”
All types of insurance are offered for both small and large entities
and personal customers, including medical, for which La Colonial has
100,000 customers. The company is also a representative for U.S. giant
Aetna and has correspondence agreements with Zurich Insurance,
Liberty Mutual, Royal & SunAlliance and INI.
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Hilton Santo Domingo, the city's leading Business & Convention hotel
Mr Segura says: “There are enormous opportunities to invest in
generation, transmission and distribution in power line development,
participation in concessions or providing loans. The Dominican
Republic is small, but it has a very high electricity consumption level.”
Serving almost a quarter of the Dominican population with its
600MW capacity is private generation company, EGE Haina, 50%
owned by UK group, CDC, with UK government participation since
the entity became privatized in 1999. Since then, the company has
invested some US$244 million in repairing existing plants and adding
new capacity. “Our immediate priority was to recover wasted capacity
and reach the nameplate capacity,” says general manager Tito Sanjurjo.
“In 1999 when we arrived, we only had 120MW of real delivery
capacity, and in two years we increased that to over 530MW. We
brought on-line another new plant of 150MW, which is the world’s
largest floating barge. We asked the builder to get as much capacity
into a barge as possible and chose a vessel as it has a fast delivery time,
coming on-line in 11 months, and attracts maritime loans.” Another
plant in Barahona was completed and is now one of EGE Haina’s most
economical and reliable.
The biggest electricity generator in the Dominican Republic is U.S.
giant AES, also one of Latin America’s top 25 companies, which has
around 800MW of capacity and US$850 million invested in the
country. Apart from being the pioneer of far cleaner and economical
liquid gas, AES Dominicana also controls one of only two entry points
for Liquefied Natural Gas (LNG) in the Caribbean and houses Latin
America’s largest tank for the fuel.
The company is also known for financial excellence. Last year’s issue
of US$160 million in bonds was named “Deal of the Year” by
Euromoney magazine, and was the first major operation involving
international capital after the nation restructured its debt.
“We see ourselves as the big opportunity in natural gas generation
and are looking to work with other plants to convert their fuel oil,” says
company president Manuel Pérez Dubuc. Mr Pérez calculates that
between US$200-300 million in government subsidies could be saved
annually by changing from liquid petroleum gas to natural gas and is
TO ENJOY IT ALL...
IT’S OUR LIFESTYLE!
Samaná
Sosúa
Bávaro
Puerto Plata
Cabarete
+1 516 867 3182 / 516 721 9645
[email protected] • www.amhsamarina.com
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discussing this proposal with the government
as well as developing a Dominican-Argentine
company, Línea Clave, to develop a retail
market for natural gas for industry. “We also
aim to convert this country into the Caribbean
energy hub to export gas to the U.S., Mexico
and Central America, taking advantage of our
extraordinary location and the CAFTA-DR,”
says Pérez. “Our proposal is to use our
LNG terminal and import natural gas from
Trinidad and Qatar, adding two or three more
tanks. This could happen in a very short time
as we already have half the necessary
investment here.”
One generation company specifically geared
to the needs of the tourism industry is CEPM
or Punta Cana-Macao Energy Consortium,
named after the eastern resort area where
operations began 15 years ago. “The eastern
part of the island represents 70% or more of
the tourism revenues that the country has and
I think we have been an important partner
in that development,” says Rolando González
Bunster, president of CEPM and also of
EGE Haina.
With the rapid development of tourism, Mr
González realized there was a need for a
guaranteed, reliable service and so installed
over 100MW between Bayahibe and Bávaro,
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and now serves every hotel in the two resorts
while continuing to see annual growth in
demand of 20%.
Until CEPM’s arrival, every hotel had their
own generator, and there was no supply for
other tourism-related businesses. “When we
went into Bayahibe in 2000, it went from the
19th Century to the 21st Century overnight,”
says González. “Today everybody there has
electricity and everybody pays, so local people
can run businesses and land value shoots up
wherever we supply.”
CEPM is immune to problems faced by
other generators, as they also control
distribution and transmission, and always have
more installed capacity than demand. With
less than one minute of power outages in a
year, CEPM is now looking to expand to
booming Samaná and is also seeking partners
in new ventures. A 120km transmission line
linking the Casa Campo, Bayahibe and Bávaro
resorts, costing US$30 million is its next
venture and González also promises to cut
tariffs.
“We are also installing a world-class stateof-the-art wind farm of 100-200MW and are
in negotiation with the Haitian government to
build a line from Barahona to Port-au-Prince.
They cannot grow without electricity, and we
are building a line to sell some of our excess
electricity to a country that really needs it.”
CEPM is working with the IDB and World
Bank on the proposal, which requires less than
US$25 million to complete.
Luxury tourism has arrived
www.juanperdomo.com
Phone: +809 571 2100
Dominican Republic
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Although the Dominican Republic has long featured on the tourist map, it is only now that the
country’s true potential is to be realized. President Fernández says: “To date, the focus has
mainly been on all-inclusive resorts, but we want
visitors to experience more, and local communities to benefit more economically. Therefore,
we are taking action to diversify and also
upgrade our tourism product extensively.”
This diversification begins with encouraging
the tourist to discover those attractions of the
country that have often been overlooked.
“Despite our size, we have some of the best
beaches anywhere, the hemisphere’s oldest
city, the highest mountain in the eastern
Americas, whitewater rafting and other
adventure sports, lush jungles, lakes and even
expanses of desert dunes and whale-watching.
Another key attraction is the Dominican
people who are friendly, open and always
willing to help.”
The government has a new tourism
development
plan,
consisting of massive
boosts in infrastructure,
Rhadamés Segura
Executive vice-president, CDEEE
attracting a higherearning, more discerning
clientele and opening up
new parts of the country to tourism.
U.S. tourists have increased from just
60,000 in 1996 to more than 1.1 million last
year and the aim is to double this by 2008.
The Secretary of State for Tourism announced
US$1,500 million in investments in the sector
this year, increasing to US$5,000 million by
2008, including the addition of 9,600 hotel
beds, mostly in luxury developments, 12
marinas and 26 golf courses in 2006.
Hilton was one of the first international
chains to operate in the Dominican Republic,
firstly collaborating with the local Coral brand
on a chain of resorts, and recently in the
business tourism sector with the opening of
the flagship Hilton Santo Domingo. The hotel
opened in summer 2005 as the capital’s newest
luxury hotel.
“For Hilton, it was very important to be in
Santo Domingo, especially because of the newfound confidence in the economy and we
clearly see the opportunity to become the
number one player in this major city,” says
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general manager and country director, Charles Muller. The state-of-theart, 21-floor building, which has five floors of executive rooms, is set on
the oceanfront Malecón promenade and also houses the capital’s largest
and most modern casino.
Apart from extensive meetings facilities and high-speed Internet access
in every room, Mr Muller is also offering packages “where people stay
during the week in one of the four close-by Hilton resorts, and at the
weekend come here for cultural visits to the nearby colonial area.”
One of the most successful local chains, and the largest, is Amhsa
Marina Hotels & Resorts with seven mid and upper range all-inclusive
resorts in the most renowned beach areas. “Our continuous vocation
toward service excellence, unbeatable value-for-money, flexibility to
adapt our products to any market changes and our highly-qualified staff
are our main strengths,” opines executive president Luis Rafael López.
This competitiveness has allowed the group to increase its share of
American tourists by 60% on the year, mainly by working with Liberty
Travel, the number one client of American Airlines. The group has also
negotiated with Delta and Continental Airlines.
Amhsa has two hotels in Bávaro, the country’s premier resort, known
for its 35km of uninterrupted white sand beach. These are the Grand
Paradise and The Club, both of which have nearby flight connections to
major U.S. cities. In Cabarete, on the northern coast and famed for its
water sports, Amhsa offers the Paraiso and Camino del Sol hotels. The
up-and-coming eco-tourism destination of the Samaná Peninsula houses
the Casa Marina Bay Beach Resort, with an open-air sea aquarium and
miles of largely untouched coast and mountains. In Playa Dorada in the
north, the Paradise Beach Resort & Casino caters especially to families
and golf lovers. “I believe that every destination is unique and we can
create a tailormade product for each place,” says Mr López.
The group is also looking to expand internationally in Jamaica and the
Mayan Riviera. “We have various investment plans available and we are
open to local investments and those from abroad. These could either be
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Banco León’s main headquarters. www.leon.com.do
as strategic partners in projects, or as co-investors. It could be for a
specific project or for the whole chain.”
Real estate is a major boom area within the tourist industry, and
Century 21-Juan Perdomo, part of the U.S. real estate giant since 2002,
has the biggest listing of properties in northern Dominican Republic.
President Juan Perdomo has 20 years’ experience in the marketplace and
currently has three major developments under construction, all in
enviable settings near to or beside the beach. Recently, the American
market has become the most important for the company, accounting for
50% of sales last year. “Apart from being close to the U.S., we have
affordable prices and the regulations are exactly the same for foreigners
as Dominicans,” says Mr Perdomo.
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Much more than a resort
Dominica Republic’s luxury Cap Cana resort is a tourist destination in itself.
P
erhaps the most ambitious real estate and tourism
development in the entire Caribbean, the US$500 million
luxury Cap Cana project, taking 10 years to complete over 3 stages, is
dubbed “the world’s next great tourist destination”.
“This is not a resort, but a destination in itself and has already been
built as such,” says president of the board of directors, Ricardo Hazoury
Toral, a member of one of the Dominican Republic’s most
entrepreneurial families. “There are people that come all the way from
Europe and they don’t even know that it is in the Dominican Republic.
We want Cap Cana to be a destination where you feel you are in
contact with nature and the Caribbean, but with style and luxury.”
These two concepts are a central feature of Cap Cana, which has
already cost US$200 million two years into its development. It will
house three Jack Nicklaus’ signature golf courses; the nation’s first
luxury marina holding super-yachts; five boutique hotels and 5,000
accommodation units, ranging from one-bedroom apartments to villas,
all beside 5.5 km of white sandy beach and only seven minutes’ drive
from Punta Cana International Airport.
By the end of the year, Cap Cana aims to have one golf course open,
as well as part of the marina and some accommodations.
Mr Hazoury says there was no problem getting Jack Nicklaus and
other investors involved, once they had actually visited the site,
although it was completely virgin land. “Despite the unique features of
doubling in value in three years. Hazoury is so
confident of success that he has already embarked
on a new project “that is going to have a lot of
Ricardo Hazoury, President of the Board of Directors, Cap Cana
importance, probably even more than Cap Cana,
where I am going to be selling lots for around
US$3-12 million”— all a far cry from low-cost
package tourism with which the Dominican
Republic had long been associated.
The Hazoury family’s Grupo Abrisa holding has several important
companies, such as Aerodom, which has a 35-year concession to
operate six of the country’s nine international airports. “Our aim is to
be the leading company in this area in the Caribbean,” states director
general Astrid Díaz. “It is paramount that when a tourist arrives in a
country, they encounter a high level of service, as his first and last
contact with that nation is at its airport. We therefore invest heavily in
service, with much know-how coming from a branch of Vancouver
International Airport, which operates with us, and in new
technologies.” Aerodom also received a US$100 million loan for its
ambitious upgrades.
The company has invested US$30 million in upgrading Puerto
Plata’s international airport while in Santo Domingo’s International
“Cap Cana is unique. It has amazing scenery and views, and is completely in touch with nature, but with
every possible luxury to hand.”Ricardo Hazoury, President of the Board of Directors, Cap Cana
not one, but three, signature golf courses, and being the only marina
housing 100ft+ yachts between Puerto Rico and the Turks and Caicos
Islands, the main attraction is the location itself. I have not created this
place—nature did that—and it is unique. It has amazing scenery and
views and is completely in touch with nature, but with every possible
luxury to hand. Apart from 5-star resort facilities, Cap Cana is
formulated to be a city; anything you can imagine that a city needs, we
have it, such as restaurants, drug stores, beauty salons, bars,
discotheques, churches, health facilities.”
Hotel groups such as Spain’s NH, besides constructing luxury
boutique hotels, are also involved in developing real estate here, further
broadening the range of accommodations and styles. Currently, prices
range from US$400,000 for a 1-bed apartment to more than US$5
million for a villa, and the destination is already a guaranteed
investment opportunity. Beach lots bought at US$100 per m2, have
since been sold at US$400 per m2 and Hazoury predicts another
Airport Las Americas, the country’s main airport, capacity has almost
been doubled recently with the addition of a new terminal and four
additional gates, allowing use by wide jets. “This will make the airport
an ideal mini-hub for continental destinations and enable us to
compete with San Juan,” says Ms Díaz.
Aerodom has invested US$72.9 million in building a new airport in
the up and coming tourist mecca of Samaná. The opening is set for
next year and there are still possible investment opportunities for
services. “Aerodom is key to the development of tourism in the
Dominican Republic and thus of our economy, as we allow for any
growth in tourist numbers. To further encourage this, we are very open
to negotiating good terms for airlines who wish to develop new routes
or fly from existing ones to different airports here.”
Report compiled by Gareth Gardiner-Jones
Business Focus
Making Dominican Republic Airports “World Class”
www.businessfocus.org.uk
www.aerodom.com
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