DOMINICAN REPUBLIC - Industry
Executive Vice-President, Grupo Viamar
Born in 1958, Fernando Villanueva S. graduated from the Pedro Henríquez Urena National University with a diploma in Political Science, and occupied several positions at Grupo Viamar before becoming Executive Vice-President in 1988.
The car business in the Dominican Republic has been up and down for the last five years. In 2007, new car sales reached above 30,000 units for the first time, but in 2008 and 2009, during the global financial crisis, sales went down sharply to less than 14,000. By 2010, sales started to grow again to a level of 20,000 units and again in 2011 went below that level. For 2012, we expect sales to grow slightly to about 21,000 units. As a country of 10 million people, the Dominican Republic is a promising market in terms of potential volume. However, the auto sector in this country has been suffering from a lack of growth, with sales still bellow the levels of 2007 mostly due to the lack of growth in the purchasing power of the economically active population. The situation at the moment is that the country has a large deficit. In order to combat the shortage in government-projected income against expenditure, a new tax reform was approved by the congress impacting the vehicle tax structure. Beside import duty, VAT is being increased from 16% to 18% in addition to the first license plate tax, which will be raised from 17% up to 20% depending on emission levels, plus a new annual transit fee of 1% based on the value of the vehicle, instead of a flat rate of less than $100. Since the purchasing power of the people that can afford to finance a vehicle will be reduced with the new taxes on the goods they purchase, it is expected that the market is going to slow down during 2013.
If you study the numbers of Guatemala, Costa Rica, and El Salvador, they have taxation levels similar to those of the Dominican Republic; however, our government is talking about raising taxes, meaning we are going to have the most expensive cars in the region. If that happens, we will lose our competitiveness and we are going to be in a difficult situation. A vehicle is not a luxury, but a necessity for the professional working class of the Dominican Republic, since a massive transportation system is not still available. The only relief for the Dominican Republic has been the Central America-Dominican Republic Free Trade Agreement (CAFTA-DR), which creates a competitive advantage for vehicles made in the US. As a country culturally oriented to the US, the market embraced US-made vehicles like Ford at competitive prices.
The truth is that if money or financing was not an issue, most families owning two vehicles wouldn’t rely on SUVs as they actually do. Today, approximately 45% of the vehicles that are sold in the country are SUVs, while less than 20% are sedans. People are concerned about potholes and the lack of a good drainage system in the streets during the rainy season. People buy SUVs not because they are snobbish, but because SUVs satisfy a practical need and people have the perception of feeling safer in them compared to other cars. In our case, our most popular models are the Ford Explorer, the Kia Sportage, and Sorento, as well as the Mazda CX-9.
The Japanese brands were the first to tailor products oriented to emerging economies like the Dominican Republic. Within all those brands, Mazda stands out as maybe the only Japanese brand in the Dominican Republic that, in contrast with the others’ options, didn’t offer an entry-level brand or a luxury brand to the market, but instead a true premium brand experience at a non-premium price.
We have made Ford the number one US brand in the Dominican Republic, even including the volume of non-US made, US-branded vehicles being imported into the Dominican Republic. As the first brand to deliver a promise to customers by offering to drive quality, green, safe, and smart vehicles at CAFTA-DR prices, the market embraced the brand. This campaign boosted the brand’s initial growth to above 400% and has been challenging the competitive vehicle market in the Dominican Republic since.
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