DOMINICAN REPUBLIC: An Introduction to Corporate/Commercial

A Robust Market for Corporate/Commercial Opportunities

The Dominican Republic continues to be a bastion of economic growth and political and social stability in Latin America, acting as a magnet for investment from all parts of the world. With a renewed governmental mandate, controlled inflation and a hunger for new capital, the country continues to be poised for a robust 2025.

In addition to political and economic stability, the Dominican Republic has additional strengths including a privileged geographical location, free trade agreements with major world economies and trading blocs (including the USA and the EU), a pro-business administration, a young workforce that is increasingly bilingual, and modern infrastructure that is being ramped up in view of governmental plans to capitalise on nearshoring.

Energy

With demand for electricity continuing to increase, the state, through government-owned distribution companies, is focused on procuring the generation of new electricity sourced from renewable and conventional power plants at competitive prices. There are a total of 26 renewable energy projects under construction that are scheduled to enter operation between 2024 and 2025 and generate a total of 1,451 MW.

In the renewable energy arena, it is noteworthy that the Dominican Republic is transitioning to photovoltaic power plants with battery energy storage systems, which are currently being constructed. Financing for the construction of renewable and convention power plants represents an opportunity and an important source of investment for foreign capital.

Financing sources

While foreign lending remains a robust source of business in the country, it is also noteworthy that Dominican private equity funds are important players in the local market for investment and financing. In addition to investing in strategic sectors such as hotels and tourism, energy infrastructure and real estate, private equity funds are increasingly acquiring private companies (both on a standalone basis and with foreign investors) that are ready for increased growth or whose owners wish to exit. In addition, private equity funds are increasingly engaged in direct lending, in many cases competing head-to-head with established financial institutions that traditionally controlled corporate lending in the Dominican Republic.

Stock market developments 

In August 2023, the first direct initial public offering (IPO) took place after Law 163-21 was enacted to promote public offerings (previously, an indirect IPO had been issued in 2019 by means of a trust structure). In October 2023, a second IPO took place when a financial institution issued preferred shares. Furthermore, green bonds have been issued on several occasions in the local market, and demand has been strong. More IPOs are expected to follow given the recent positive experience and the need of local companies to diversify their financing mechanisms, as well as the robust demands of retirement investment fund managers (accredited funds professionals (AFPs)) to invest in equity.

Tourism 

Tourism has been one of the main sectors of growth in the Dominican Republic during the last decade. Numerous new hotels and other facilities have required extensive investment, and there are still tremendous opportunities for additional expansion, as the sector is transitioning to higher-end offerings that are popping up alongside northern coastline chains, such as Four Seasons and St. Regis, which are developing projects in the country. Under the country’s recent Public-Private Partnership Law, new projects are being developed such as Cabo Rojo in Pedernales. New ferry and maritime terminals are also being built for inter-island tourism.

Free trade zones 

There are currently more than 80 parks scattered throughout the Dominican Republic housing more than 700 companies operating under a highly competitive free trade zone regime, mainly composed of industrial and service operations. Sustained growth in traditional free trade zone activities (such as textiles) has also been followed by an expansion into more complex manufacturing such as medical devices, which now account for 31.3% of all free trade zone exports. The Dominican Republic is also considered a prime candidate for the development of nearshored advanced manufacturing facilities for semiconductors and the like because of the opportunities provided under the United States’ Semiconductor Act (the “CHIPS Act”) and the US Inflation Reduction Act (IRA).

Logistics hub 

The Dominican Republic is quickly becoming a logistics hub in the Caribbean because of its strategic location. The logistical performance in the country is impressive (average export time of eight hours and import time of ten hours). Legal reforms have also been proposed that would further strengthen the country’s advantage as a logistics hub. A prime example of the Dominican Republic’s shift is the ongoing development of the Punta Cana Free Trade Zone, which will operate as the first aerial, maritime and terrestrial logistics centre in combination with a free trade zone park.

Intellectual property 

The Dominican Republic has been removed from the United States Special 301 Report of the United States Trade Representative (USTR) – for the first time since 1996 – in recognition of the significant progress in intellectual property enforcement and transparency. This exclusion constitutes a milestone in Dominican history and signals an improvement in the country’s foreign investment climate.

Robust opportunities

The Dominican Republic continues to be a stable and attractive democracy open for investment and business. Although social and political challenges remain – as throughout most of Latin America – concerning the adequacy of wealth distribution, the quality of public education and the handling of public debt, the Dominican Republic remains ripe for further development, and such challenges are not insurmountable.

In the short term, the expectation is that the Dominican Republic will continue to focus on legal reforms, implementing favourable business policies and further transparency in governmental contracting. The robust growth in the country, led by the private sector, is indicative of the Dominican Republic’s opportunities to maintain its position as one of the continent’s top performers, and provides investment opportunities that cannot be overlooked in the current geopolitical and economic environment.