DOMINICAN REPUBLIC: ELECTION PROSPECTS

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP03T02547R000100820001-1
• Release Decision: RIPPUB
• Original Classification: S
• Document Page Count: 26
• Document Creation Date: December 21, 2016
• Document Release Date: July 28, 2008
• Sequence Number: 1
• Publication Date: May 1, 1982
• Content Type: MEMO

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Directorate of Secret
State Dept. review completed
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Directorate of
Intelligence
Election Prospects
Dominican Republic:
Information available as of 5 May 1982
has been used in the preparation of this report.
Secret
ALA 82-10068
May l98_'
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Summary
Dominican Republic:
Election Prospects r
resist the more extreme urgings of his radical associates.
The ruling Democratic Revolutionary Party (PRD) candidate, Senator
Salvador Jorge Blanco, is the likely winner of the presidential election on
16 May and is expected to head a government more at odds with US
foreign policy than that of incumbent President Guzman. The presence of
several leftists among Jorge Blanco's close advisers poses a possible threat
of radical policy shifts by his government. Two of these will hold high
positions in his administration and could undertake unilateral actions---
such as issuing public statements in support of the Salvadoran insurgents
or pressing for closer ties with Cuba that would cause frictions with 25X1
Washington. But Jorge Blanco is well aware of the powerful political and
economic constraints against a major leftist move and therefore is likely to
Jorge Blanco's main opponent, conservative politician and former three-
term President Joaquin Balaguer, has been unable to reduce the front-
runner's substantial margin. Balaguer's campaign, already weakened by
the candidate's failing health, is bogged down by intraparty squabbling and
an undistinguished vice presidential candidate. Alternative candidates-
the Dominican Liberation Party's Juan Bosch on the left and the Quis-
queyan Democratic Party's Elias Wessin y Wessin on the right will finish
well behind Jorge Blanco and Balaguer 25X1
Dominican democracy is still in its formative stages and remains highly
influenced by traditional personalist politics and emotional appeals. Al-
though nowhere near the scale of the 1980 political violence in Jamaica,
violent clashes between armed activists of the two major parties have
increased tensions. The principal threat to Dominican democracy is that
the military will intervene to prevent Jorge Blanco from assuming office if
elected. it is unlikely that the 25X1
military will disrupt the electoral process as they tried to do in 1978, but
their subsequent actions before the inauguration in August are less certain.
25X1
Jorge Blanco.
The primary factor influencing a decision by the military leadership to
intervene will be their perception of the likely US reaction. Although heavy
pressure from Washington prevented a takeover in 1978, the military
hierarchy may interpret US actions following the recent coup in Guatema-
la as a sign that the United States would not oppose a rightist move against
Secret
ALA 82-10068
May 19N2
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No matter who wins the elections, the new president will face an economy
beset by continued weakening of its terms of trade and by the contraction-
ary effects of austerity measures instituted by the current administration.
Growth rates have tumbled in the past two years, and the short-term
outlook for substantial increases in foreign investment and aid is dim.
Problems of rising unemployment and an inevitable request for IMF
assistance, two politically sensitive issues, are likely to be addressed
immediately.
A problem over the long term will be the loss of the Reformista Party,
which will not survive Balaguer's death. Its already factionalized leader-
ship would split and form new parties or join existing conservative groups.
This splintering would leave the center-left PRD to dominate-a situation
that might precipitate military action. This in turn would polarize the
population, creating conditions similar to those preceding the 1965 civil
war
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On the eve of the elections, rumors and speculation are rife depicting
scenarios ranging from military intervention to an alliance between former
Presidents Balaguer and Bosch, and General Wessin y Wessin. With
emotions heating up rapidly, it is possible that a series of destabilizing
events could occur.
successful coup. On balance, therefore, it is our assessment that the
The
Army Chief of Staff, however, supports the electoral process, making it 25X1
virtually impossible for the remaining arms of the military to effect a
elections will proceed as scheduled,
percentage of the votes than earlier anticipated.
25X1
The rumored triple alliance of Balaguer, Bosch, and Wessin y Wessin
seems highly unlikely, as these individuals have been bitter enemies for 25X1
years. Nevertheless, tensions are on the rise and probably will produce a
political polarization on Sunday giving the two major candidates a higher
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Dominican Republic:
Election Prospects
Background The 16 May presidential and legislative elections in the Dominican
Republic-the Caribbean's largest democracy-will mark the nation's
fifth such contest and second change of presidents since the 1965 civil war.
The Dominican system is one of the most pluralistic in Latin America, with
20 legally recognized parties spanning the entire political spectrum. One-
half of the republic's 5 million citizens, who are evenly distributed between
rural and urban areas, is eligible to vote, and some 90 percent probably will
turn out for the election. 25X1
Despite the array of political groups, two parties will dominate the contest,
probably gaining more than 70 percent of the vote:
? The governing center-left Dominican Revolutionary Party (PRD), whose
standard bearer is Senator Salvador Jorge Blanco.
? The center-right Reformista Party (PR), led by its founder and former
President Joaquin Balaguer.
From 1966 until its electoral victory in 1978, the PRD had provided the
principal opposition to Balaguer's Reformista government. By far the most
developed political group in the Dominican Republic, the PRD has a
defined party philosophy and a well-organized party machine. In contrast,
the Reformista Party is essentially a personalistic vehicle for the conscrva-
Jorge Blanco has maintained a strong lead over Balaguer in virtually every
poll taken since February, reflecting the party's large grass-roots organiza-
tion and traditional strong support in the urban areas. Results in the
capital city district will be the key to the electoral outcome. In 1978 the
PRD outpolled the Reformistas by some 136,000 votes in Santo Domingo
while running almost a dead heat in the rest of the nation. For a while it
seemed doubtful that the 1978 performance could be repeated this year, as
deterioration in city services-caused primarily by a running feud between
the party's incumbent President Guzman and the current mayor-threat-
ened to sap the party's strength. The danger was alleviated, however, when
the charismatic party Secretary General, Jose Francisco Pena Gomez,
announced his candidacy for mayor of the capital city. Pena Gomez's
addition to the ticket virtually locks in the votes of his massive personal fol-
lowing for the PRD, both in the city and rural areas
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The leftist Dominican Liberation Party (PLD), led by former President
Juan Bosch, and the smaller rightist Quisqueyan ' Democratic Party (PQD)
could have a significant role in attracting the fringe votes of the two major
parties. Ret. Gen. Wessin y Wessin, leader of the PQD, instigated the
military overthrow of Bosch's democratically elected PRD government in
1963; this event ultimately led to the civil war of 1965 and the US military
intervention. The Quisqueyan party, built primarily around its leader's
honest image, has drawn a number of discontented Reformistas and could
poll some 3 to 5 percent of the vote. Juan Bosch was a founding member of
the Dominican Revolutionary Party, but broke away to start his Marxist
party in 1973. He currently receives substantial Cuban backing. His party
could benefit from dissatisfaction among leftist members of the PRD and
might receive up to 12 percent of the vote in May, giving him several seats
in the Chamber of Deputies.
The Guzman Legacy
Incumbent President Guzman has been a disappointment to many PRD
supporters. He represents the ruling party's most conservative elements,
and he has been frequently at odds with the center-left and leftwing
majority. Party Secretary General Pena Gomez has criticized the President
sharply for bypassing veteran party members for high government positions
in favor of Guzman's personal supporters. Moreover, the administration's
conservative foreign policy often runs against the party's Socialist Interna-
tional line. In addition, the public faults Guzman for the economy's poor
performance.
This legacy will hamper Jorge Blanco somewhat, although the obvious
political dichotomy between the two camps has made the identification less
than absolute. Prior to becoming the party's standard bearer, Jorge Blanco
heavily criticized Guzman for mismanaging the economy and for failing to
squelch promptly rumors that he would run for a second term in violation
of the party's statutes. The reelection issue increased the animosity
between the two, which dates back to Jorge Blaneo's thwarted bid for the
1978 presidential nomination. Their political rivalry has undercut the
efficiency of the party's campaign machinery but is unlikely to cause a
Jorge Blanco
serious loss of votes.
The Man
A reserved intellectual but astute politician, Jorge Blanco is often de-
scribed as an excellent administrator with a legal mind-set. His sophisticat-
ed campaign, however, has been haunted by the issue of his true ideological
Dominican Republic occupies the eastern two-thirds.
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bent --a question raised not so much by his own political background as by
the leftist convictions of sonic close associates. Jorge Blanco's background,
however, indicates that he has been a consistent proponent of social
democracy. His ideological tendencies were demonstrated early on by his
concern for human rights before it was fashionable, his continuous
criticism of the military role during Balaguer's administration, and his
emphasis on the institutionalization of democracy and social justice in his
campaign for the 1978 PRD presidential nomination. Isis political positions
over the years have avoided Marxist prescriptions, and he chose not to
accompany Juan Bosch when the latter left the PRD to found his own
leftist party 25X1
Jorge Blanco is a successful attorney and a longtime member of the ruling
party. He and Guzman were on the six-man Dominican Revolutionary
Party committee that negotiated the settlement of the 1965 civil war.
During 1965-73, while he was fairly active in the moderate wing of the par-
ty, Jorge became skeptical about the viability of electoral democracy under
the restrictive Balaguer administration. He withdrew temporarily to his
law practice but returned to politics prior to his bid for nomination in 1978.
As Senate Minority Leader, Jorge Blanco drafted the 1978 Amnesty Law
that allowed many political exiles to return home. He visited the United
States as a Leader Grantee in 1979. 25X1
Asela Mera de Jorge, his wife, is considered Jorge Blanco's closest and
most influential adviser. She accompanies her husband on most political
outings and probably is
partly responsible for his campaign's drive to get the female vote. Both
Jorge Blanco and Mera de Jorge are products of the "Santiago clique" a
predominantly conservative group of wealthy businessmen and landowners
from the republic's second city. She retains more of her conservative roots
than her husband, although close family ties keep both in frequent contact
25X1 " I
His Inner Group and Power Bases
Much of the debate over Jorge Blanco's ideological position is caused by
the diversity within his coterie. The most controversial members of his
campaign team are Jose de Jesus Ovalle, Fulgencio Espinal, and Hatucy de
Camps--all radical student leaders of the mid-to-late I 960s and now
identified with the left wing of the party. Ovalle, a talented campaign
strategist and the principal architect of the party's new grass-roots primary
system, reportedly traveled to Czechoslovakia and North Korea in the
early 1970s to receive unspecified training. His outspoken criticism of the
Balaguer administration blocked him from returning to the Dominican
Republic. He spent the next seven years in exile in New York. We have no
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other information concerning Ovalle's travel outside the Dominican Re-
public. Espinal, elected to the Chamber of Deputies in 1978, is an
outspoken supporter of the Nicaraguan Government and the Salvadoran
insurgent movement. He also advocates diplomatic relations with Havana.
He was a member of a delegation of Dominican Congressmen-both from
the Reformistas and PRD-who visited Cuba in 1980 to see Cuban
socialism firsthand. He probably will receive a high position in the Foreign
Affairs Ministry.
De Camps, the aggressive president of the Chamber of Deputies, probably
will occupy an influential post in a Jorge Blanco government-possibly
Administrative Secretary to the Presidency. Many of de Camps' past
actions have won him the label of radical leftist; for example, in the
aftermath of the 1979 hurricanes he and other congressional leftists defied
President Guzman's prohibition and invited Cuban relief assistance.
Nevertheless, the ambitious young deputy has presidential aspirations and
recently has begun to moderate his image, toning down his rhetoric, and
associating with the moderate left of the ruling party.
These three will be the primary advocates of more radical policies within
Jorge Blanco's circle of advisers. The extent of their influence will be key in
determining the ideological direction of his government. De Camps-the
most moderate of the three is a known close confidant, but Jorge Blanco's
closed nature and campaign expediencies have obscured his relationship
with Ovalle and Es incl.
IOvalle's connections within the party, however,
should give him some leverage with Jorge Blanco regardless of his post-
election assignment. A follower of both de Camps and Pena Gomez,
Espinal's potential influence is more questionable because-unlike
Ovalle-he does not have a large following in the party.
These advisers have become the principal target of Jorge Blanco's oppo-
nents on the right. Allegations of Cuban backing for Jorge Blanco are also
prevalent, but there is scant evidence to support these charges.
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Cuban financial aid to Jorge Blanco also has been rumored, but it is 25X1
unlikely that substantial Cuban funds-if any have been received by 25X1
Jorge Blanco. The party has raised an estimated US $10 million from its
supporters-a large share from Dominicans in New York-A
It seems unlikely that Jorge Blanco would risk
the political consequences of taking Cuban money when rightist and 25X1
military scrutiny is so intense.
LbA]I
Serving as counterweights to these radical influences are two prominent
establishment moderates, the successful Avanzada Electoral organization,
and numerous center-left party activists. Bernardo Vega, a leading govern-
ment economic adviser since the mid-1960s, is an adviser to Jorge Blanco's
campaign and may be slated for governor of the Central Bank. Milton
Messina, a financial expert, advocate of foreign investment, and former
Dominican Ambassador to the United States, has been closely involved in
the preparation of Jorge Blanco's economic program and possibly will be
named Foreign Minister. The Avanzada Electoral, a sort of "Citizens for
Jorge Blanco" group encompassing a large number of business and
community leaders who decline membership in the party, lends to the
campaign a particular respectability. 25X1
The inclusion of both conservatives and leftists among his advisers--
several of the latter, skilled organizers and campaigners--reflects Jorge
Blanco's desire for a broad base of support. Just as he is attempting to draw
support from the Balaguer constituency with the help of the Avanzada
Electoral group, the leftists in his entourage facilitate competition with the
extreme left for the votes of a large number of discontented, nonideological
Dominicans.
25X1
Mindful of the historical propensity of the Dominican Armed Forces for
political intervention, Jorge Blanco has been especially conciliatory to the
military. His platform outlines increased benefits for the military such as
special housing, higher pay for junior officers, and a senior institute for
military training. Moreover, he has claimed credit for President Gunman's
recently announced social security institute for the military
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His Campaign
Jorge Blanco's campaign has addressed issues reflecting the party's
orthodox social democratic line. The slogan, "A better future for your
children with Jorge Blanco," promises continued improvement in human
rights, clean government, and more egalitarian distribution of wealth. He
has proposed, for example, a substantial increase in public works; encour-
agement of labor-intensive, export-oriented industries; continuing the
gradual process of agrarian reform and agricultural development; and
closer controls on the repatriation of earnings by foreign firms. He has also
focused on Balaguer's weaknesses, specifically his poor health and his
record of political repression.
Foreign policy issues have received low-level-and essentially vague
treatment in Jorge Blanco's platform. He has stated only that the country's
"foreign relations, given our geographic situation, will be complex and
different in the years ahead," but he has not repeated for domestic
audiences assurances he made in the United States that he would not alter
the nation's basic international posture
Likely Policies as President
The existence of radical elements within Jorge Blanco's inner circle poses a
possible threat of radicalization of his government. On balance, we believe
that any predilection Jorge Blanco may have for a leftward shift would be
sharply constrained by the political and economic realities of the Domini-
can Republic, a circumstance Jorge Blanco fully appreciates. Chief among
these is the military establishment, which has a long history of political in-
tervention. A second factor is the nation's heavy economic dependence on
the United States. More than two-thirds of the nation's exports went to the
United States last year, and most of the increased foreign investment
needed by the Dominican Republic is expected to come from US firms.
Moreover, the success of Jorge Blanco's administration will be largely
dependent upon the continued support of the influential business sector. As
a candidate, Jorge Blanco has shown he recognizes the importance of these
forces and will take action when necessary.
As President, Jorge Blanco is likely to move cautiously in dealing with the
military. The first move usually made by a newly inaugurated president is
the replacement of the military high command. Jorge Blanco's choices to
fill these posts will be critical for future military support. He has indicated
he will follow the law enacted under Balaguer setting strict rules for
promotion and assignment; this is likely to be most pleasing to the younger,
more professional-minded officers. Although there are rumors that he will
25X1
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reinstate retired military supporters in defiance of the Armed Forces'
Organic Law, Jorge Blanco is unlikely to provoke the military's rancor by
pursuing such a politically insensitive policy
In domestic matters, a Jorge Blanco administration will be more national-
istic and reform minded than its predecessor. The party and Jorge Blanco
himself-has characterized Guzman's presidency as a transition from
Balaguer's repressive and corrupt administrations to a truly social demo-
cratic government. Some programs, however, such as social welfare and
judicial and educational reforms, may founder on the nation's economic
problems. A program of nationalization is unlikely; the 1961 acquisition of
dictator Rafael Trujillo's family assets gave the state a significant -and
often burdensome-role in the economy. Jorge Blanco will, however, seek
to make foreign investors more responsive to Dominican problems. His
legal background undoubtedly will come into play in scrutinizing contracts
and revising the current investment law to limit competition between
foreign-owned and Dominican firms. 25X1
Jorge Blanco will attempt to strike a delicate balance between pressures b}
the left for greater political freedom and the limited tolerance for
dissidence among the military, police, and other elements on the right. His
own inclination is toward political openness; human rights was the topic of
his dissertation in 1951. His cabinet selections and other appointments, like
his campaign team, probably will be broad based. In a similar vein, Jorge
Blanco has proposed granting lifetime Senate seats to the republic's ex-
Presidents. This would guarantee not only Balaguer and Guzman a voice in
the government, but also Juan Bosch, who commands a significant
followin on the far left. Some of this will be hard for the security forces to
accept. 25X1
We expect Jorge Blanco's foreign policy to be more independent of the
United States and more outgoing in regional matters. For example, Jorge
Blanco is likely to support strongly Mexico's plan for a negotiated
settlement in El Salvador. Drawing on his experience during the Domini-
can civil strife, Jorge Blanco believes in the sequence of a negotiated end to
fighting, the establishment of a provisional government, the exile of certain
military personalities, and free elections. He is less likely. however, to
support Nicaragua unquestioningly. Although partly motivated by a
campaign strategy that seeks to moderate his leftist image, Jorge Blanco's
backing for the Sandinistas is conditional on their maintenance of some
semblance of pluralism. 25X1
Jorge Blanco also may modestly expand contacts with Cuba which
currently are limited to exchanges in the areas of sports and culture-in
line with his party's philosophy of maintaining ties, especially commercial,
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with all countries. He probably will relax Guzman's tight restrictions on
Cuban travel to the Dominican Republic. He recognizes the Cuban link
hits a sensitive nerve in the military, and he has assured US officials that
Cuba is not a priority issue. He considers closer relations with Mexico and
Venezuela to be of more importance.
Much of his foreign policy will not contradict Washington's. Although he
will decline taking a stand in areas far removed from Dominican concerns,
in some cases he will be fully supportive of US interests. For example, he
shares Guzman's concern over the large number of Dominicans receiving
scholarships for study in the USSR. On regional matters, he probably will
expand economic relations with the Caribbean's island nations,
CARICOM, and the Caribbean Development Bank. Jorge Blanco wel-
comed President Reagan's announcement of the Caribbean Basin Initiative
(CBI) and has expressed gratitude for its provisions on Dominican sugar.
He probably will scrutinize its trade and investment measures carefully,
however, to ensure that the Dominican Republic's best interests are served
by proposed programs. Although his party officially disdains the Duvalier
regime in neighboring Haiti, prospective members of Jorge Blanco's
administration favor continuing the modest level of diplomatic and eco-
nomic exchanges and exposing Duvalier to democratic values
Balaguer's New Bid After four years in the unfamiliar role of opposition leader, master
politician Joaquin Balaguer is bidding for his fourth elected term as
President. A major political figure since the late 1950s when he was a close
associate of Trujillo-who once appointed him President-Balaguer is
aging, nearly blinded by glaucoma, and no longer the fiery campaigner he
once was. Even with some dramatic last minute pitch, he is unlikely to
close the gap with Jorge Blanco. Since losing the 1978 election, Balaguer's
Reformista Party has fallen into disarray
Dominican peasants have looked to Balaguer as their protector and
benefactor, but both the current administration and retired Gen. Wessin y
Wessin's conservative Quisqueyan Democratic Party have made some
inroads in this constituency. Guzman's agrarian reforms, rural health
services, and agricultural extension program have won over some allies,
while the Quisqueyan candidate has hammered hard at Balaguer's weak
points-his eyesight and corrupt inner circle. Rural-to-urban migration
will also shrink Balaguer's following, although he can count on the votes of
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some new urbanites not yet picked up by the PRD. In addition, Balaguer
will gain some support from low-income groups disappointed by the current
administration. To have any chance of winning, however, he must keep the
PRD lead in the capital district under 50,000. With the popular Pena
Gomez running for mayor of Santo Domingo, the prospects for such an
outcome are dim. 25X1
Balaguer's health has given the Reformista vice presidential candidate
unprecedented importance in this election.
____]Departing from usual practice, Balaguer permitted party delegates ti 25X6
choose his running mate. The move backfired as he was paired with
Fernando Alvarez Bogaert, an ambitious Reformista known in some circles
as "the $6 million man" for his alleged embezzlement of government funds
in 1975. In an unsuccessful ploy that surely undercut his image as a 25X1
powerful politician, Balaguer tried to force the party to drop Alvarez by re-
signing from the presidential race. The desired response was not forthcom-
ing and he was forced to withdraw his resignation two days later
Clearly preparing for his eventual demise, Balaguer is attempting to build
an ideological base for the Reformistas. He allied them with two small
Christian Democratic parties for the election, hoping to gain eventual
admittance to the international movement based in Caracas. A recent 25X1
decision by the central election board, however, disallowed the parties'
submission of a Balaguer ticket with a different running mate, prompting
one party to drop out of the alliance. The other party's affiliation with the
Reformists will have little influence on balloting in this election]
In the unlikely event of victory, Balaguer will face a political and economic
situation different from the one he left in 1978. His ability to govern in the
freewheeling manner of the 1970s would be frustrated by the existence of'
an established, skilled opposition and a bipartisan Congress that is no
longer a mere rubber stamp. The system would not readily tolerate a high-
handed, out-of-step executive.
Balaguer probably would expect nonconditional US economic assistance
and would wholeheartedly cooperate with the CBI. Because this term
probably would be his last, he will be less susceptible to the adverse
political consequences of turning to the IMF for assistance- --a step many
Dominicans would interpret as an invitation to foreign intervention. His
economic policy would restrict social welfare programs, while emphasizing
the public works that were his hallmark.
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In foreign policy, Balaguer would continue an essentially low profile, pro-
US stance. He would be unlikely to change the current level of relations
with Havana or Moscow, even though during his last administration tics
with Cuba were somewhat warmer than current contacts. Balaguer would
be certain to support US policy in Central America.
The Military Speculation about military intervention has run high throughout the
campaign, stimulated especially by allegations against the leftist associates
of Jorge Blanco. Politicized during the Trujillo era, most members of the
armed forces are stridently anti-Communist and consider the military as a
balancing force in Dominican politics. Following Guzman's 1978 electoral
victory, they seized the ballot boxes in an effort to derail Guzman's
victory wanting to retain Balaguer in office and fearing that Guzman
would establish a leftist regime. Strong US pressure, however, prompted
them to back down.
Guzman, in turn, has attempted to depoliticize and professionalize the
armed forces. His efforts, however, were hampered by his penchant for
making key appointments on the basis of loyalty rather than merit or
seniority. As a result, a number of these Guzman loyalists-whatever their
ideological position-will have a strong personal distaste for Jorge Blanco.
Moreover, Jorge Blanco reportedly has made several attempts to gain allies
in the armed forces, further rankling both Guzman and Balaguer support-
ers.
Indeed, the armed forces on the whole, although wary of Jorge Blanco, are
more concerned with those around him. The fact that their fears about
Guzman proved unfounded has tempered their intolerance for left-of-
center politicians.
The drive for professionalism-and, with it, apolitical service-has not yet
caught up with the military's long-held anti-Communist fervor. Guzman
weeded out most of the Trujillo-era holdovers and not a few of Balaguer's
political hacks, but several individuals still occupy high
positions-most notably the Chief of the National Police and the Navy
Chief of Staff. Most younger officers would oppose a return to Balaguer's
politicization of military affairs, but at the same time they are apprehen-
sive about Communist encroachment.
The precedent set by the United States in 1978 will be the most powerful
constraint against a military intervention in the coming election. Some
members of the armed forces, however, have suggested that friendly US re-
lations with Guatemala's new military junta indicate a change of heart by
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Washington. Military interference in the balloting is nevertheless unlikclv
unless violence--some instances of which have already Occurred provides
the plausible excuse of preservation of order. Activists for both maior-
parties are well-armed, in contrast to the 1978 elections when the
Reformistas possessed the greater share of the weaponry. Although the
level of violence has vet to reach that of 1978, rising political tensions may
spark excessive outbursts. As a safeguard against such violence, tile ArIM
Chief of Staff has accelerated upgrading the military's state of readiness
over the last year. Recent improvements include the acquisition of armored
personnel carriers, communications equipment, weapons and ammnrunitiun,
and the training of a counterterrorist unit. 25X1
If Jorge Blanco wins as expected, the period between the elections and the
inauguration, however, will be tricky. The militar will monitor the
activities of the President-elect and his advisers for any indications of
Communist influence indications that political losers will be happy to
provide. If pressure grows rapidly to block Jorge Blanco from taking office,
the domestic consequences and the chances for a negative ES reaction
would be carefully assessed by the military hierarchy before they respond.
The State of the The Loss (Y 'Steam in 1981
Economy Economic issues will continue to preoccupy the next government as they
have the Guzman administration. Even though Dominican economic
performance has been stronger in recent years than that of most other
Caribbean nations, the effects of the first major oil price shocks and
consequent softer global demand for Dominican exports pulled economic
growth down to an average of 5 percent annually in 1970-80, half the rate
of the early 1970s. By 1981, under the impact of unfavorable world
economic trends, economic growth fell to about 3 percent. l'ncmploymcnt
and the government's efforts to cut back social programs became serious
political issues as the economy slowed. 25X1
Early prospects for the 1981 external accounts were favorable. With sugar
prices down only slightly from the 1980 peak and production on the
upswing, sugar export earnings- usually about half of total receipts
looked particularly promising. Over the course of first-half 1981, however,
the deepening world recession reduced demand for major Dominican
exports sugar, gold, coffee, and cocoa even as oil import costs rose
substantially. The deteriorating terms of trade and the rising current
account deficit caused the Guzman administration in June to limit raw
material and intermediate goods imports and impose other restrictions that
boosted sonic import costs more than 25 percent. These actions ultimately
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cut nominal imports for 1981 below the unusually high level of a year
earlier that had attended massive foreign aid for hurricane reconstruction.
As a result, Santo Domingo managed to hold the trade deficit to $274 mil-
The 1981 current account deficit of some $500 million was financed
largely through loans from international institutions and private lenders.
Borrowing boosted the medium- and long-term foreign debt from public
and private sources close to $2 billion. To maintain foreign reserves at two-
months' imports cover, Santo Domingo postponed principal payments on a
major foreign loan and slowed payments on short-term credits. By the end
of the year, arrears totaled some $350 million and the buildup was
beginning to reduce the availability of credit
Despite the constraints imposed by continuation of a large-scale balance-
of-payments deficit, the Dominican economy performed reasonably well,
especially in the first half of the year. Favorable weather spurred a sharp
recovery in agricultural output-particularly in the important sugar
sector-from the low levels caused by hurricane damage. The subsequent
increase in food processing was a boost to industrial activity.
As the international payments situation dictated, however, the government
resorted to tighter monetary policies and reduced government investment
outlays to complement the June import restrictions. Declines in export and
import tax receipts caused a $200 million shortfall in projected government
revenues, but the cuts in expenditures kept the budget deficit at a moderate
3 percent of GDP. As a result of the austerity measures, economic activity
began to slip toward yearend. Commercial activity in particular dropped
off. Several small businesses were squeezed out by difficulties in obtaining
credit and reduced import availability. For the year as a whole, GNP
growth was 3.4 percent compared with 5 percent in 1980.
Partly in response to his austerity package, Guzman scored a success
against inflation. The government was able to hold the consumer price rise
to about 10 percent in 1981.
Deepening Recession in 1982
With the austerity program still in place and continuing low prices for
Dominican exports, economic activity is expected to decline slightly this
year. In light of the poor economic performance, the new government will
probably seek substantial amounts of international financial assistance.
Santo Domingo may even be forced to take the politically touchy step of
seeking an IMF standby loan. To qualify for an IMF program, the new
government will have to maintain the austerity measures even in the face of
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Dominican Republic:
Balance of Payments
Trade balance
Exports f.o.b.
Sugar
Imports f.o.b.
Net services and
transfers
Current account
balance
Capital account
balance
Private
Change in interna-
tional reserves
a Estimated.
b Projected.
growing criticism of the program. Until the world economy picks up and
provides some stimulus for the balance of payments, import controls will
continue to be required. 25X1
The world recession will have a distinctly adverse effect on Dominican
external accounts this year. Export earnings are likely to fall 15 percent.
Even though the volume of sugar exports is expected to increase, average
world prices will be far below last year's level, and earnings from this
source could reach just $500 million. Moreover, world prices for other
Dominican commodity exports are expected to remain low. To hold the
trade deficit below $700 million, Santo Domingo is attempting to keep real
import volume to last year's level. With reduced export earnings and
somewhat larger service payments, the current account deficit may
approach $900 million. 25X1
Capital inflows projected for this year will only partially cover this deficit,
and Santo Domingo may be forced to draw its foreign exchange reserves
down sharply. Efforts to attract increased direct private investment are
meeting with limited response. Many potential investors are taking no
-67
-184
-263
-553
-274
-628
781
676
869
962
1,180
1,000
232
181
201
310
550
500
848
860
1,132
1,515
1,454
1,628
-197
-136
-1 18
-254
-238
-247
-264
-320
-381
-807
-512
-875
336
208
258
658
545
719
202
51
63
292
298
420
0
0
7
7
0
0
0
16
28
24
0
0
72
-96
-88
-1 18
33
- 156
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Dominican Republic:
Selected Economic Indicators
Real GDP growth (percent)
4.8 5.4 3.4
- 1.0
Per capita GNP (dollars)
1,000 1,200 1,300
1,200
Consumer price inflation
(percent change)
9.1 16.8 10.0
10.0
Estimated
b Projected.
action until the US Congress passes the CBI legislation. Investors and
international bankers also are waiting until the new Dominican administra-
tion clarifies its economic philosophy. The recent rescheduling of payments
on overdue accounts has not greatly reduced investor skepticism.
Disbursements of concessional foreign loans-limited by restricted avail- 25X1
ability of counterpart funds under a tightened public budget and delays in
project execution--are likely to proceed at a slow rate. While the
Dominicans are counting on up to $50 million from the Compensatory
Financing Facility (CFF) of the IMF and $20 million from a World Bank
structural adjustment loan, Santo Domingo will proably be forced to turn
to the IMF for a standby loan. In the Dominican Republic, such an action
will be widely viewed as a threat to national sovereignty and an indictment
of financial mismanagement. Since Guzman held informal discussions with
the IMF and imposed many austerity measures, however, the electoral 25X1
victor can approach the Fund early in the new administration without
appearing to be conceding too many new conditions
Implications for Just as Jamaica is perceived by regional leaders to be a barometer of
the United States Washington's ability to promote stability and economic progress, the fate
of the Dominican Republic will have a strong impact on US influence in
the region. No matter who wins the elections, the Dominican Republic will
continue to rely on the United States for investment, aid, and access to
markets. The CBI, if approved by Congress, will provide desperately
needed foreign exchange. Moreover, provisions of recently established US
sugar quotas will enable continued access to US sugar markets the
destination of over two-thirds of Dominican sugar exports. This depend-
ence will restrain any Dominican leader from alienating the United States
or Western nations.
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As President, Jorge Blanco will be critical of US policy in Central
America, but supportive in other areas, such as Poland and Afghanistan. In
general, he will be inclined to uphold the positions of the Socialist
International and move closer to a Third World line in international
organizations. Jorge Blanco undoubtedly will move the Dominican Repub-
lic somewhat left of center, a pattern that will be reinforced to the extent
that his radical advisers are allowed to express themselves publicly. Still,
domestic constraints-such as the military and economic conditions will
limit the degree of basic policy shifts. Although we cannot rule out
attempts by these advisers to implement more radical programs, the
principal manifestation of their presence will likely be periodic, sharp
criticisms of US policy. 25X1
In economic matters, Jorge Blanco can draw upon a number of talented in-
dividuals to form an effective policy team. He is untested as a leader,
however, and he will have to make a number of hard political decisions to
turn the economy arnnnd
LZDAI
A Balaguer administration would back most US foreign policy initiatives,
although the President might undertake some new policies to differentiate
this term from his previous ones. Balaguer would welcome the CBI and
attempt to provide a favorable environment for foreign investment. It is
unlikely, however, that he has the leadership capability to reverse the
current economic downturn. Although his past administrations have
generally been credited with good economic performance, this occurred
under favorable world economic conditions. Moreover, Balaguer held a
tight personal rein on monetary and fiscal policies and would be unable to
do so again in his present state of health 25X1
A Balaguer presidency could have a negative impact on the progress of
Dominican democracy and on the stability of the Republic itself. Should
Balaguer attempt to crack down arbitrarily on some of the extreme leftist
parties or become heavyhanded in his dealings with the legislature, he
could stimulate the political polarization that has not yet been buried in the
past. Without an outlet for opposition, some of the more radical groups
probably would attempt to undermine his government through covert and
terrorist actions. 25X1
Beyond the election, the strengthening of democratic institutions in the
Dominican Republic could be derailed by two potential, but uncertain,
eventualities-military intervention or the disintegration of the Reformista
Party. The former would rapidly destroy the democratic process that has
been some 20 years in the making. The principal constraint against such a
development would be strong US opposition.
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The other problem, the demise of the Reformista Party, is of greater
concern over the longer term. Balaguer has been the glue holding the party
together. He has not yet designated a successor, and if he dies without do-
ing so, the leadership probably will fractionalize, taking with them the
various party elements. Some of these diverse elements could evolve into a
Christian Democratic ideology; other Reformista elements could join
existing parties, or form a totally new conservative political mechanism.
One prospect is almost certain no matter what occurs: the Reformista
Party, as presently constituted, would no longer exist. The Dominican
political system would be weakened by the proliferation of small parties,
forcing a realignment and eventually leaving the center-left PRD as the
dominant political entity in the country. More conservative military
officers, believing-probably correctly-that an unencumbered PRD
would begin a leftist tilt, might attempt to intervene. A successful coup
would polarize the population and produce a situation similar to that which
preceded the 1965 civil war. Either development would present serious
foreign policy concerns for the United States.
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