Questions & Answers About Living in The Dominican Republic

Question. I have heard that the economy is in real trouble, and that the middle-class is having a very hard time. I have also heard some comments that the positive things mentioned about the Dominican Republic are very different from what many Dominicans are saying. Is this true?
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Answer. The truth is that many, many people have made money with all of these economic swings and it is also very true that many people have been hurt by it as well. The Chinese symbol for chaos is the very same one for opportunity. Meaning while severe economic swings in currency markets, stock markets, real estate or whatever - can mean some people might be on the losing side, there are also people who might have had enough foresight to invest in such a way that they could take advantage. So in any situation there are people who have made money, and people who certainly have lost money also.
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Who has made money? People that bought Pesos when the exchange rate was 50, people that invested into Gold when gold dipped below US$400, people that moved money into Euros, people that invested in real estate and those people that have had money invested at 20 percent or better in terms of interest rates (who are still able to live off bank account interest income as a result). Who has been hurt or who has lost money (or has seen a decline in their standard of living)? Many local Dominicans earning a fixed monthly salary, people who did not hedge themselves into gold or other assets, people that have no cushion or savings and those people that were poor or unemployed (who were probably poor or unemployed before and still are now, regardless).
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In terms of the middle-class and standard or living in general, it is certainly true that prices were raised for many consumer goods whereas of course salaries never went up in tandem. Now that the exchange rate has gone the other way, in theory prices should have come back down and in all fairness some products are less expensive than what they were back in July 2004. However, if it is the case that a product is less expensive, chances are it is less expensive by only 10 or 15 percent, not 45 percent or more in line with the exact exchange rate. Meaning, the excuse to raise prices before was the devaluation of the Peso. However, some producers took extreme advantage and many who had no direct impact from the exchange rate took advantage also. For example, if you grow Onions and you said back in 2004 that it was now more expensive to buy American or European fertilizer for the crops (which is possible but doubtful that they were in fact buying expensive products from Monsanto or Ortho in the first place) it is reasonable to assume that your prices would increase by the amount of costs that directly correspond to that. In other words, what would the net effect be on increased production costs in such an example? Ten Percent, Twenty Percent, etc.? What happened was in fact that some things, like Onions, increased in price by 400 percent, if not more. So, there were clear opportunists in private industry that took advantage to raise prices dramatically using the exchange rate as an excuse to do so. Now that the exchange rate has stabilized and actually gone in the other direction, the government is clearly perturbed that merchants have not brought down prices in accordance. But, such is the case in a free market capitalist system, where market forces will eventually work themselves out. However, for sure it is safe to conclude that some producers of goods are making a killing and certainly have not reduced prices in accordance with the drop in the inflation rate, exchange rates, etc.
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So, it is true that the middle class Dominicans have been hurt by the result of the 2000 - 2004 chain of events? Absolutely so and in fact, one very well known local figure has said in private that the general population still has no real idea how bad off the previous government has left the state of the union, so to speak. But, at the same time, there is a government now in place that wants to change things, that has the fiscal will and discipline to do so and that does have economic common sense, however it will take time to bring the situation back to where it was.
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With that said, in terms of foreigners coming into the country for the first time, and those who have been smart enough to hedge themselves wisely, the Dominican Republic still offers a general lifestyle and cost of living more reasonable (and in some cases down right cheap) in comparison with many other places in the Caribbean. So, if you were to make a comparison of things such as real estate especially, you will find that the Dominican Republic still is a good bet in relation to prices elsewhere. In addition, while prices for many goods and services are higher than before (in which case they might be now about the same as they are in the US, whereas before they were very cheap), prices for other things have stayed the same or only increased slightly. Labor costs are one example where this is true. It all depends upon where you are standing in terms of your point of view. They say the difference between a depression and recession is - a recession is when your neighbor looses his job and a depression is when you loose your job.
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So, are things very difficult in the Dominican Republic economically speaking? For some people yes, but certainly not for all, and in fact some people have actually made quite a bit of money as well. Generally speaking though, the local Dominican middle-class have been set back and it will certainly take strong leadership and economic medicine to put things back on track for improvement. But, even so, the Dominican Republic does remain to be a very worthwhile option for retirement and relocation. In addition, it is interesting to note the recent new housing construction boom in is part fueled by all the Dominicans from the US and elsewhere who want to move back to a lower cost, more peaceful environment (namely their home country, the Dominican Republic).