Volume 6, Number 21, Page 2

Recent Developments in the Dominican Republic

The following article was contributed by Russin, Vecchi & Heredia Bonetti, the affiliate firm in the Dominican Republic of Russin & Vecchi, a consortium of law firms with presence in Asia, Europe, North America, and the Caribbean. The article is a compilation of recent legal and economic developments in the Dominican Republic, including issues related to privatization, energy, telecommiunications and banking.

Capitalization of CDE

The State transferred to the private sector the 50 percent it held in the monopoly of the national system of energy, maintained through the Dominican Electrical Corporation (CDE - Corporación Dominicana de Electricidad), via the process of capitalization of the company.

On the 13th of August the CDE handed over the administration of the North and South distribution areas to the foreign company Fenosa Union. With this it leaves in the hands of the private sector the responsibility for the collection and installation of electric power services in all the country. Distribution of electricity make up three of the five business units of the CDE that the Commission for the Reform of the Public Companies (CREP - Comisión de Reforma de la Empresa Pública) placed in the capitalization process. The other generating plants of Haina and Itabo will enter the private sector at the end of the month.

Capitalization of the State Sugar Council and Tobacco Company

The CREP postponed the bidding for the leasing of the sugar mills of the State Sugar Council (CEA - Consejo Estatal del Azúcar). A new date was set for the 19th of September. The postponement is due to the demand by some of the foreign investors to have more time to review the situation of the 10 sugar mills of the CEA. The bidding of the sugar mills will not take place until the authorities finish cleaning the sugar fields. There has been increased uncertainty from the bidders as to the illegal occupation of some of the fields.

Capitalization of CAT

Two foreign companies presented their credentials before the CREP with the aim of being associated to the Dominican State in the process of capitalization of the Tobacco Company (CAT - Compañía Anónima Tabacalera). The consortium that entered the pre-qualification for the capitalization of the CAT are British American Tobacco (BAT), Cita Caribe represented by Alvaro Quezada, and Business American (BLC) represented by Guillermo de Jesús.

The capitalization of the state tobacco company that manufactures cigarettes and cigars, well-known for its Montecarlo and Hilton brands, will be made at the end of September and as of that date it will take the name of the “La Tabacalera” and be owned by CAT, Compañía Tabacalera Santiaguense and La Habanera.

Privatization of Ports

The recently designated director of the Dominican Harbor Authority, Melanio Paredes stated to the press that the Government has a program for the privatization of the ports. He indicated that the concession contracts to private companies for the leasing of the Las Américas, Samaná, Barahona and Puerto Plata airports will allow the country to have a modern airport system.

World Bank and Dominican Government

The World Bank and the Dominican Government signed a loan agreement of US$12.3 million to be used in different structural programs of the Dominican Institute of Telecommunications (INDOTEL).

Prevention of Corruption Director Resigns

Lawyer Pedro Castellanos Khoury resigned from his position of Director of the Department of Prevention of Corruption, which is attached to the General Office of the Prosecutor of the Republic, due to the limitations he encountered and which prevented him from accomplishing his duties. According to the information received, doctor Castellanos Khoury was displeased with the fact that the recommendations in the cases he had investigated and concluded had not been followed because they were kept in other offices.

Senate Approves in First Reading the Law of Electricity

The Senate of the Republic approved on the 7th of September a draft of the General Law of Electricity, which establishes, among other points, that the tariff system will remain inalterable for a period of four years, and only be modified by the Superintendent of Electricity for regulated consumers or in case of an unusually low level of available energy.

For more information, see Russin, Vecchi & Heredia Bonetti’s http://www.rvhb.com/