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With a population of 10.53 million and a nominal GDP of USD64.14 billion, the Dominican Republic is not only the largest economy in the Caribbean but the 10th-largest in Latin […]

With a population of 10.53 million and a nominal GDP of USD64.14 billion, the Dominican Republic is not only the largest economy in the Caribbean but the 10th-largest in Latin America and boasts the fastest-growth in the entire Western Hemisphere. With another 1.8 million Dominicans living and working in the US, the booming Caribbean country is intimately linked to the world’s largest economy in more ways than one.

The Dominican Republic-Central America Free Trade Agreement (CAFTA-DR), which was first signed in 2004 under George W Bush, has worked small wonders for many in the country. With the US by far its largest trading partner and export market, 49% of the DR’s exports go to Uncle Sam, while 44% of everything imported into the country is of US origin. Of consumer goods, the figure of imports from the US surges to 70%.

It almost goes without saying: Dominican consumers are extremely receptive to American products—for social, cultural, and economic reasons. Yet this also means the island is vulnerable to blips in the American market. That said, general American recovery in 2015 led to recovery in the Dominican economy that same year, so the opposite is also true.

Since the implementation of CAFTA-DR, bilateral trade between the DR and the US has grown by 22.5%, from USD9.9 billion in 2004 to USD11.7 billion in 2015. This number also obscures the huge influence of remittances from the Dominican diaspora in the US. Payments from friends and family members back to the island each year account for 10% of its GDP. Given that 8.7% of the economy relies on tourism and that most of the 5.6 million visitors who stayed in Dominican hotels and ate at Dominican restaurants in 2015 were from the US, the connection looms all the larger.

The Dominican economy grew by an impressive 7% in 2015, the fastest in the entire hemisphere. This was led by the construction sector, which accounted for 19.1% of economic activity, followed by finance (9.2%); trade (8.6%); education (8.4%); transportation and storage (6.4%); hotels, bars, and restaurants (6.3%); health (6.5%); local manufacturing (6.3%); energy and water (6.3%); and free trade zones (5.1%).

The country also enjoys a stable macroeconomic environment, which the reelection of President Danilo Medina in 2016 and the lowering of the fiscal deficit from 3.2% in 2014 to 1.9% in 2015 only strengthened. Unemployment has also decreased from 6.4% in October 2014 to 5.9% a year later. To be sure, rampant inequality still persists. For a middle-income country with a GDP per capita of USD6,000, 41% of the population still lives under the poverty line, including half of all children.

Though a difficult challenge, this is also an opportunity. The government, for its part, is hard at work with international organizations such as The World Bank to alleviate poverty, increase the penetration of public services into the rural hinterland, and bring as many citizens as possible into the formal economy. All of this means there will be huge opportunities for companies that capitalize first on integrating these regions and demographics into the Caribbean’s largest economy.

As things stand, there are also huge opportunities for firms in energy-related fields, whether renewable or not. The government has started building two coal-powered plants that will be operational in 2017, and is also interested in operators and suppliers for the construction and conversion of power generating facilities. Moreover, the combination of the country’s many free trade zones, the expansion of the Panama Canal, the country’s access to cheap American natural gas, and the rising cost of labor in China all mean the Dominican Republic will only grow more attractive as an offshore option for American and other firms looking to capitalize on free North American trade.

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