have written a large number of articles over the years and
seemingly on topics that might seem to be unrelated to our own
business, but one thing we have espoused constantly during the
past 15 years has been our faith in the emerging markets – And
The Dominican Republic in Particular. Why do we feel
this way? Well, generally speaking it's the demographics
in both the developed and so-called emerging or undeveloped
markets, and the net effects of capital and manufacturing
relocating from the developed world to the emerging markets as
well. While the developed markets of North-America and
Europe are going to continue to struggle with aging
populations, extensive and unfunded social welfare liabilities
and what we think will be a continued decline in tax revenues,
the emerging markets are the proverbial last place team that
have no where to go but up.
It is true of course that such developing markets need to contend with issues surrounding levels of poverty that are certainly much higher than the developed world (although statistics for social welfare seem to also show increased poverty in the developed countries, not less). And it is also true that such emerging markets have very youthful populations that will need employment some day (in contrast to the aging populations in the developed world), but these are issues that can be improved through economic growth, which we think is more attainable than resolution of the issues the developed world currently faces. Simply stated another way, we certainly think the emerging markets such as the Dominican Republic will have an easier time achieving economic growth than the developed world will have in paying off their now contentious levels of debt.
In the case of the Dominican Republic specifically, GDP growth for the first part of 2015 came in at a positive 6.5 percent. According the World Bank's March 2015 report, GDP growth in the Dominican Republic has averaged around 5.5 percent annually between 1991 and 2013. In addition, according to the World Bank's report titled Doing Business 2015, the Dominican Republic along with Jamaica and Trinidad and Tobago featured among the countries that implemented the most reforms in Latin America making it easier for local entrepreneurs to do business. The World Bank also says that The Dominican Republic has weathered the global economic crisis well and in 2010 experienced one of the highest growth rates in the region. National debt per capita is US$3,500 in the Dominican Republic. In the United States national debt per capita has been calculated out to about US$60,000. National debt in the Dominican Republic related to GDP is calculated at about 40 percent. National debt in the United States is now over 100 percent of GDP and the debt to GDP figures for many EU member countries mimics the US. The top corporate and personal income tax rate in the Dominican Republic is 30 percent, compared to close to 50 percent (if not higher as is the case with Germany at 56 percent) in many EU member countries. The latest inflation numbers (as of August 2015) for the Dominican Republic report less than one percent as (actual was half percent).
However, real estate is the one area that is a bargain in the Dominican Republic in comparison to similar properties in other parts of the Caribbean. Simply said, your money will go further when looking to purchase a home or condominium apartment in the DR. According to Numbeo (www.numbeo.com), housing costs are MORE THAN DOUBLE in Panama in comparison to the Dominican Republic. In fact, on average, when comparing real estate costs in the Dominican Republic to the Bahamas, Cayman Islands, Curacao, Antigua, Trinidad & Tobago, Puerto Rico, and the British Virgin Islands, Dominican Republic homes cost HALF as much. In addition, annual real estate taxes in the Dominican Republic are 1 percent of the value in excess of about US$100,000. So, if you do manage to purchase what would be a very upper end home for US$300,000 – your annual tax bill would be about US$2,000 (or equivalent obviously in the local currency).
In summary, while the so-called industrialized developed nations have decided to drown themselves in debt and hope that economic growth can pull them out of it, many of the emerging markets are still growing and do not have the debt levels anywhere near what they are in the developed world. For this reason, we still are bullish on places like the Dominican Republic and we think in the long run such nations will continue to be better choices for living and working.