2013 Index of Economic Freedom

Dominican Republic

overall score59.7
world rank87
Rule of Law

Property Rights30.0

Freedom From Corruption26.0

Limited Government

Government Spending92.6

Fiscal Freedom83.7

Regulatory Efficiency

Business Freedom53.7

Labor Freedom55.6

Monetary Freedom72.9

Open Markets

Trade Freedom77.8

Investment Freedom65.0

Financial Freedom40.0

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Quick Facts
  • Population:
    • 10.1 million
  • GDP (PPP):
    • $93.4 billion
    • 4.5% growth
    • 5.9% 5-year compound annual growth
    • $9,287 per capita
  • Unemployment:
    • 14.6%
  • Inflation (CPI):
    • 8.5%
  • FDI Inflow:
    • $2.4 billion
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The Dominican Republic’s economic freedom score is 59.7, making its economy the 87th freest in the 2013 Index. Its overall score is 0.5 point lower than last year due to declines in six of the 10 economic freedoms, including freedom from corruption, labor freedom, and trade freedom. The Dominican Republic is ranked 17th out of 29 countries in the South and Central America/Caribbean region, and its score is about average for the region.

Continuing its efforts to promote economic diversification and modernization, the government has introduced structural reforms to revitalize the economy. A relatively high degree of openness to global trade and investment has aided the transition to a modern and competitive economic system, and modest tax rates have boosted competitiveness.

Nonetheless, the lack of political momentum for deeper institutional reforms remains a serious obstacle to advancing economic freedom. The most visible constraints on private-sector development involve administrative bureaucracy and the lack of respect for contracts. Government inefficiency and widespread corruption affect much of the economy. Court enforcement of property rights remains vulnerable to political interference, and rigid labor regulations are an impediment to reducing the high level of unemployment.

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Background

In May 2012, Danilo Medina, backed by three-term President Leonel Fernández’s center-left Dominican Liberation Party, was elected to succeed Fernández as president. Before the 2008–2009 global financial crisis, the Dominican Republic was enjoying a surge in economic growth led by tourism, telecommunications, and maquiladora manufacturing. The economy rebounded somewhat in 2010 and has continued to enjoy moderate growth aided by a $1.7 billion IMF standby agreement. The Central America–Dominican Republic–United States Free Trade Agreement has helped to boost investment and exports and minimize market-share losses to Asian textile manufacturers. Corruption, wasteful government spending, and unreliable electric service reduce investment returns, driving high unemployment.

Rule of LawView Methodology

Property Rights 30.0 Create a Graph using this measurement

Freedom From Corruption 26.0 Create a Graph using this measurement

The court system is inefficient, and the state can expropriate property arbitrarily. Most confiscated property has been used for infrastructure or commercial development. Enforcement of intellectual property rights remains poor. Corruption in government ministries, the police force, and the military is believed to have worsened during former President Fernández’s last two terms (2004–2012), weakening government effectiveness.

Limited GovernmentView Methodology

The top income tax rate is 25 percent, and the flat corporate tax rate is 29 percent. Other taxes include a value-added tax (VAT), an estate tax, and a net wealth tax. The overall tax burden amounts to 12.8 percent of total domestic income. Government spending is 15.7 percent of total domestic output. The deficit has been reduced to around 2.5 percent of GDP, and public debt remains below 30 percent of GDP.

Regulatory EfficiencyView Methodology

The cost of completing license requirements has been reduced, and launching a business takes only seven procedures. However, starting a company takes at least half the level of average annual income. The non-salary cost of employing a worker is moderate, but restrictions on work hours are rigid. Inflation in mid-2012 was at the lowest level since 2009, but government price controls affect some products and services.

Open MarketsView Methodology

The trade-weighted average tariff rate is 6.1 percent, and non-tariff barriers add to the cost of trade. Foreign investment is permitted in most sectors, but the investment regime lacks transparency and clarity, increasing vulnerability to corruption. The small financial sector has been modernized and consolidated, but confidence in banking has been shaky. Capital markets are underdeveloped, and long-term financing is hard to obtain.

Country's Score Over Time

Bar Graph of Dominican Republic Economic Freedom Scores Over a Time Period

Country Comparisons

Bar Graphs comparing Dominican Republic to other economic country groups

Regional Ranking

rank country overall change
1Chile790.7
2Saint Lucia70.4-0.9
3The Bahamas70.12.1
4Uruguay 69.7-0.2
5Colombia69.61.6
6Barbados69.30.3
7Peru68.2-0.5
8Costa Rica 67-1.0
9Jamaica 66.81.7
10El Salvador 66.7-2.0
11Saint Vincent and the Grenadines66.70.2
12Dominica63.92.3
13Panama 62.5-2.7
14Trinidad and Tobago62.3-2.1
15Paraguay 61.1-0.7
16Guatemala 60-0.9
17Dominican Republic59.7-0.5
18Honduras 58.4-0.4
19Brazil57.7-0.2
20Belize57.3-4.6
21Nicaragua 56.6-1.3
22Guyana53.82.5
23Suriname52-0.6
24Haiti48.1-2.6
25Bolivia47.9-2.3
26Ecuador46.9-1.4
27Argentina46.7-1.3
28Venezuela 36.1-2.0
29Cuba28.50.2
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