The sugar industry was for many years the key player of the national economy, where most of the investment and credit were concentrated and where most foreign exchange and tax revenues were generated. If production and sugar prices raised much, there were enough foreign exchange to import consumer goods for the population and inputs and techniques for businesses. In turn, the bank recovered loans and the government raised its revenue. In other words, the capitalist economy was experiencing a boom. But if the opposite was true (lower production and sugar prices) had shortage of dollars, decreased imports, the productive sector contracted, increased bank arrears, falling tax revenues and increased …show more content…
The banking system mainly focuses its resources towards trade, which in 2008 captured 30% of the credit of the Multiple Banks. The processing industry and construction picked up 8% and agriculture 1.3%. The rest of the credit went to the other sectors of the economy and personal consumption. The capital bank orientation shows clearly where is the greatest business gain.
The current model made the Dominican economy more dependent on the external sources. Before it depended on the evolution of the prices of sugar, coffee, cocoa, snuff and gold, but at least those products were part of the national productive base; agro exports meant that there was capacity to produce in the country. Today, most currencies do not depend on domestic productive capacity, but external sources: remittances, tourism, foreign investment, and loans. With domestic exports, which in 2010 ascended to 2,518 billion (not including free zones), hardly could finance 19.5% of national imports of that …show more content…
It is really miserable wages. These data clearly show the precarious living conditions of the majority of the working population. In the informal sector revenues are worse.
5. The NAFTA with the US
The signing of the Free trade area (FTA) with the United State is strengthening the importer and financial character of the national economy. Three years after starting the treaty, the trade deficit grew in the Dominican Republic with the United States. Only in the first quarter of 2010, it increased 54.1% over the same period of 2009.
In the case of trade in agricultural and agro-industrial products between the two countries, the imports increased and the Dominican deficit also increased. In 2006, when he was not yet in effect of the NAFTA, the Dominican Republic exported to the United States approximately 333 million dollars. In 2007, when NAFTA began, exports fell. In 2008 they returned to fall and in 2009 and 2010 were recovered. United States, however, increased by nearly 60% its sales in just two years, from 2006 to 2008. In 2009 fell due to its internal crisis, but even in that year the Dominican trade deficit was higher than before NAFTA. And in 2010 the United States again raised exports (World Trade Organization,