Dominican Republic and Haiti: Country Studies

Dominican Republic and Haiti: Country Studies
and its inability to meet its foreign debt commitments left it no
choice but to turn again to the IMF in 1990.
High levels of inflation, increasing debt, and persistent deficits
masked several positive trends during the 1980s, however.
The most positive development was the country's rapid diversification
away from its dependence on sugar. New jobs in assembly
manufacturing offset many of the local jobs in the cane
fields. Employment in assembly operations grew from 16,000 in
1980 to nearly 100,000 by 1989. These figures represented the
world's fastest growth in free-zone employment during the
1980s. By 1987 the value of assembly exports surpassed that of
traditional agricultural exports. The Dominican Republic also
enjoyed the Caribbean's fastest growth in tourism during the
1980s. Moreover, although the mining industry suffered from
low prices and labor disputes, it contributed a significant percentage
of foreign exchange as well. The agricultural sector
also diversified to a limited degree, with a new emphasis on the
export of nontraditional items such as tropical fruits (particularly
pineapple), citrus, and ornamental plants to the United
States under the Caribbean Basin Initiative (CBI—see Glossary)
.
Economic Policies
The severe imbalances in public finances and the fluctuations
of deteriorating budget deficits that characterized the
1980s spilled over into the early 1990s. Problems related to servicing
the debt also continued, forcing the government to follow
a policy of on-again, off-again recourse to IMF interference.
Although the required austerity measures usually
caused public discontent and, in some cases, civil disturbances,
President Balaguer, who had refused to negotiate with the IMF,
changed course in 1990 and announced at the beginning of his
sixth term that he was doubling basic food and fuel prices to
meet the conditions for resumed IMF assistance. The following
year witnessed further anti-inflationary measures, including
the freezing of public-sector pay. The government also stopped
its practice of printing money to pay for public spending, and
the money supply contracted. The ensuing deep recession
caused inflation to drop significantly and the exchange rate to
stabilize. These developments in turn prompted the IMF in
September 1991 to approve an eighteen-month standby
arrangement, followed by an RD$31.8 million (about US$4.4
million) loan. Soon the economy registered a 3 percent
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