2014 Index of Economic Freedom

Dominican Republic

overall score61.3
world rank80
Rule of Law

Property Rights30.0

Freedom From Corruption27.3

Limited Government

Government Spending92.3

Fiscal Freedom83.7

Regulatory Efficiency

Business Freedom56.1

Labor Freedom55.2

Monetary Freedom75.7

Open Markets

Trade Freedom77.8

Investment Freedom75.0

Financial Freedom40.0

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Quick Facts
  • Population:
    • 10.2 million
  • GDP (PPP):
    • $98.7 billion
    • 3.9% growth
    • 5.0% 5-year compound annual growth
    • $9,646 per capita
  • Unemployment:
    • 13.0%
  • Inflation (CPI):
    • 3.7%
  • FDI Inflow:
    • $3.6 billion
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The Dominican Republic’s economic freedom score is 61.3, making its economy the 80th freest in the 2014 Index. Its overall score is 1.6 points higher than last year due to improvements in investment freedom, monetary freedom, business freedom, and freedom from corruption. The Dominican Republic is ranked 16th out of 29 countries in the South and Central America/Caribbean region, and its score is just above the regional average.

Over the 20-year history of the Index, the Dominican Republic’s economic freedom score has risen by over 5 points, driven by gains in only three of the 10 economic freedoms. Most improved is the area of market openness. The trade freedom score increase of more than 45 points is one of the largest gains in that category since the founding of the Index. The Dominican Republic has advanced into the ranks of the “moderately free” over the past five years.

Nevertheless, the lack of deeper institutional reforms remains a serious impediment to further improvements in economic freedom. The most visible constraints on private-sector development involve excessive administrative bureaucracy and a lack of respect for contracts. Government inefficiency and widespread corruption affect much of the economy.

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Background

In August 2012, Danilo Medina of the center-left Dominican Liberation Party won the presidency, succeeding three-term President Leonel Fernández. Before the 2008–2009 global financial crisis, there had been a surge in economic growth led by tourism, telecommunications, and maquiladora manufacturing. The economy rebounded somewhat in 2010, and moderate growth has continued. The DR has a nearly $1.7 billion IMF standby agreement. The Central America–Dominican Republic–United States Free Trade Agreement (CAFTA–DR) 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 and contribute to high unemployment. Drug and human trafficking persist. Approximately one-tenth of GDP is supported by remittances from the U.S.

Rule of LawView Methodology

Property Rights 30.0 Create a Graph using this measurement

Freedom From Corruption 27.3 Create a Graph using this measurement

Official corruption remains a serious problem in the security forces, civilian government, and private sector, and officials can engage in corrupt practices with impunity. The Dominican Republic is a major transit hub for narco-traffickers. The judiciary is politicized and riddled with corruption, and the legal system offers little recourse to those without money or influence. Enforcement of intellectual property rights remains poor.

Limited GovernmentView Methodology

The top individual income tax rate is 25 percent, and the top corporate tax rate is 29 percent. Other taxes include a value-added tax (VAT), an estate tax, and a net wealth tax. Overall tax revenue is up slightly to 13 percent of GDP. Expenditures have been steady at around 16 percent of GDP. This has put pressure on public finances. Public debt is about 34 percent of gross domestic output.

Regulatory EfficiencyView Methodology

Incorporating a business takes more than two weeks, and licensing requirements cost over half the level of average annual income. The non-salary cost of employing a worker is moderate, but restrictions on work hours are rigid. By 2012, the government had replaced universal subsidies on gas and electricity with targeted subsidies, higher electricity tariffs, and conditional cash transfers.

Open MarketsView Methodology

The average tariff rate for the Dominican Republic is 6.1 percent. Foreign investors may not be able to rely fully on enforcement of laws and regulations. The small financial sector remains relatively stable and continues to evolve in a positive manner. Distortions in the foreign exchange market have gradually been eliminated, and a range of credit instruments is available for the private sector.

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
1Chile78.7-0.3
2Saint Lucia70.70.3
3Colombia70.71.1
4The Bahamas69.8-0.3
5Uruguay 69.3-0.4
6Barbados68.3-1.0
7Peru67.4-0.8
8Saint Vincent and the Grenadines670.3
9Costa Rica 66.9-0.1
10Jamaica 66.7-0.1
11El Salvador 66.2-0.5
12Dominica65.21.3
13Panama 63.40.9
14Trinidad and Tobago62.70.4
15Paraguay 620.9
16Dominican Republic61.31.6
17Guatemala 61.21.2
18Nicaragua 58.41.8
19Honduras 57.1-1.3
20Brazil56.9-0.8
21Belize56.7-0.6
22Guyana55.71.9
23Suriname54.22.2
24Haiti48.90.8
25Bolivia48.40.5
26Ecuador481.1
27Argentina44.6-2.1
28Venezuela 36.30.2
29Cuba28.70.2
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