Ruling PLD at the breaking point

DOMINICAN REPUBLIC - Report 03 Jul 2019 by Pavel Isa and Fabricio Gomez

The ruling PLD’s political crisis is so severe that the party is on the brink of a split, a situation affecting the whole country. The conflict stems former President Leonel Fernández’s pursuit of the presidential nomination, while President Danilo Medina wants, at any cost, to prevent him from winning it. The problem is that the only thing that can prevent Fernández from becoming the PLD candidate is Medina himself taking the nomination –an outcome prohibited by the Constitution. The idea of amending the Constitution to allow Medina to run is unpopular, and pursuing it could divide the PLD, and even cost the party the next presidency.As of today, Medina seems to have little chance of running in the 2020 election.

Fernández continues to push his electoral project with great force, under the slogan: "There is no turning back!” His meaning is clear: no negotiation with Medina will compromise his nomination. The tension is so great that it has turned into violence in the vicinity of Congress. The upshot is that, for the first time in many years, the opposition may have at least a shot at the presidency. The PRM will need more than the division of the PLD to win – but a divided PLD could help the party a lot. Still, the game isn’t over for the PLD. The deadline for submitting the final slate of pre-candidates is August 22nd (not July 7th, as we stated earlier). So there’s still time to negotiate a deal.

A new scandal is also shaking the country, and the Medina government. A network of international journalists has found evidence that Odebrecht paid bribes of almost $40 million to win a nearly $2 billion contract for the construction of the Punta Catalina Thermoelectric Project, the crown jewel of the administration. This is a devastating blow for Medina. The political implications could be severe, as several of the officials closest to Medina could be investigated and prosecuted. But the revelations could also encourage the Medina group to cling to power, as a shield against potential prosecution.

A series of foreign tourist deaths has led to an intense and negative publicity campaign in the United States against the Dominican Republic as a tourist destination -- and the impact on arrivals and revenues in Q3 is expected to be severe.

The economic outlook has changed significantly since June. Central Bank data suggest a growth slowdown in April and May, to a monthly average of 4.2%, well below the 5.7% estimated for Q1. In response, the Monetary Board has changed its policy stance toward flexibility. It announced the release of more than DOP 24 billion of legal reserve funds, and cut the monetary policy rate from 5.5% to 5%. Political uncertainty, construction cuts and other factors seem behind the growth decline. Inflation remains well below the target range, and international reserves and the exchange rate have been stable.

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