DOMINICAN REPUBLIC: ELECTION PROSPECTS

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP84B01072R000200170028-0
• Release Decision: RIPPUB
• Original Classification: S
• Document Page Count: 21
• Document Creation Date: December 21, 2016
• Document Release Date: September 3, 2008
• Sequence Number: 28
• Publication Date: May 11, 1982
• Content Type: REPORT

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J r k_ Kr;'1'
11 May 1982
DOMINICAN REPUBLIC: Election Prospects
SUMMARY
The ruling Democratic Revolutionary Party candidate, Senator Salvador
Jorge Blanco, is the likely winner of the Presidential election on 16 May and
will head a government more at odds with US foreign policy than that of incum-
bent President Guzman. The presence of several leftists among Jorge Blanco's
close advisers poses a possible threat of radical policy shifts by his govern-
ment. 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 Washington. But Jorge Blanco is well aware of the
powerful political and economic constraints against a major leftist move and
therefore is likely to resist the more extreme urgings of his radical
associates.
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
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 Quisqueyan Democratic Party's Elias
Wessin y Wessin on the right--will finish well behind Jorge Blanco and
Balaguer.
25X6
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Dominican democracy is still in its formative stages and remains highly
influenced by traditional personalist politics and emotional appeals.
Although 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.
The primary factor influencing a decision by the military leadership to
intervene will be their perception of the likely US reactinn_ F_ i
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 contractionary
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 politic-
ally sensitive issues, are likely to be addressed immediately. 25X1
A problem over the long term will be the loss of the Reformista Party,
which will not survive Balaguer's death. Its already factionalized leadership
would split and form new parties or join existing conservative groups. This
splintering would leave the center-left PRD to dominate--a situation that 25X1
might precipitate military action. This in turn would polarize the popula-
tion, creating conditions similar to those preceding the 1965 civil war.
* * *
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
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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 Reformists 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 Reformists Party
is essentially a personalistic vehicle for the conservative views
of its founder and leader. r 25X1
Jorge Blanco has maintained a strong lead over Balaguer in
virtually every poll,. taken since Febf'uary, reflecting the party's
large grass roots organization 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--threatened to sap the party's strength. The
danger was alleviated, however, when the charismatic party Secre-
tary General, Jose Francisco Pena Gomez, announced his candidacy
for mayor of the capital city. Pena Gomez's addition to the 25X1
ticket virtually locks in the votes of his massive personal
following for the PRD, both in the city and rural-areas.
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 attract-
ing the fringe votes of the two major parties. Retired General
Wessin y Wessin, leader of the PQD, instigated the military
Quisqueya is the Indian 'aboriginal name for the island of Hispaniola, of
which the Dominican Republic occupies the eastern two thirds. 25X1
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25X1
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 discon-
tented Reformistas and could poll some 3-5 percent of the vote.
Juan Bosch was a founding member of the Dominican Revolutionary
Party, but broke away to start his Marxist party in-,l973. 25X1
His party cou . 25X1
ene i trom dissa is ac ion among iettist 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 PRD
The Guzman Legacy
Incumbent President Guzman has been a disappointment to many
PRD supporters. He represents the ruling party's most conserva-
tive elements, and he has been frequently at odds with the
center-left and left-wing 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
International line. In addition, the public faults Guzman for
the economy's poor performance. 25X1
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 mis-
managing 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 Blanco's thwarted bid for the
1978 Presidential nomination. Their political rivalry has under-
cut the efficiency of the party's campaign machinery, but is
unlikely to cause a serious loss of votes. 25X1
Jorge Blanco
The Man
A reserved intellectual but astute politician, Jorge Blanco
is often described as an excellent administrator with a legal
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mindset. His sophisticated campaign, however, has been haunted
by the issue of his true ideological bent--a question raised not
so much by his own political background as by the leftist convic-
tions of some close associates. Jorge Blanco's background, how-
ever, 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. His 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 party, 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 nomina-
tion in 1978. As Senate Minority leader, Jorge Blanco drafted
the 1978 Amnesty Law that allowed many political exiles to return
home. He visited the US as a Leader Grantee in 1979.
Asela Mera de Jorge, his wife, is considered Jorge Blanco's
closest and most influential adviser.
F-Both Jorge Blanco and
Mera de Jorge are products of the "Santiago clique"--a predomin-
antly conservative group of wealthy businessmen and landowners
from the republic's second city. She retains more of her con-
servative roots than her husband, although close family ties keep
both in frequent contact with this group. 25X1
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 Hatuey de Camps--all radical
student leaders of the mid-to-late sixties and now identified
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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,
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 other
information concerning Ovalle's travel outside the Dominican
Republic. 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 first-hand. He
probably will receive a high position in the Foreign Affairs
De Camps, the aggressive President of the Chamber of Depu-
ties, probably will occupy an influential post in a Jorge Blanco
government--possibly'Administrative Secretary to the Presi-
dency. 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. Never-
theless, the ambitious young deputy has presidential aspirations
and recently has begun to moderate his image, toning down his
rhetoric, and associatin with the moderate left of the ruling
party. 25X1
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 direc-
tion 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 25X1
with Ovalle and Es final
Ovalle's connections within 25X1
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
5XA
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These advisers have become the principal target of Jorge
Blanco's opponents on the right. Allegations of Cuban backing
for Jorge Blanco are also prevalent, but there is scant evidence
to support these charges.
25X1
Serving as counterweights to these radical influences are
two prominent establishment moderates, the successful Avanzada
Electoral organization, and numerous center-left party activ-
ists. Bernardo Vega, a leading government economic adviser since
the mid-sixties, 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
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Electoral, a sort of "Citizens for Jorge Blanco" group encompass-
ing a large number of business and community leaders who decline
membership in the party, lends to the campaign a particular
_-__ __-i_i_ : -25X1
The inclusion of both conservative and leftists among his
advisers--several of the latter skilled organizers and campaign-
ers--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 espe-
cially 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 mili-
tary training. Moreover, he has claimed credit for President
Guzman's recently announced social security institute for the
military. 25X1
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 egalitar-
ian distribution of wealth. He has proposed, for example, a
substantial increase in public works; encouragement 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, speci-
fically his poor health and his record of political repression.
Foreign policy issues have received low level--and essen-
tially vague--treatment in Jorge Blanco's platform. He has
stated only that the country's "foreign relations, given our
geograp ituation will be complex and different in the years
ahead,
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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 Dominican Repub-
lic, a circumstance Jorge Blanco fully appreciates. Chief among
these is the military establishment which has a long history of
political intervention. A second factor is the nation's heavy
economic dependence on the US. More than two-thirds of the
nation's exports went to the US 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. For example,
he recently forced Pena Gomez--a souice of considerable power and
influence--to cancel'-a Socialist International meeting scheduled
to be held in the Dominican Republic the week prior to the 25X1
elections.
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.
In domestic matters, a Jorge Blanco administration will be
more nationalistic 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 democratic 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
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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 undoubt-
edly will come into play in scrutinizing contracts and revising
the current investment law to limit foreign-owned competition
with Dominican firms. 25X1
Jorge Blanco will attempt to strike a delicate balance
between pressures by 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 Si nificant
following on the far left.
We expect Jorge Blanco's foreign policy to be more indepen-
dent of the US, 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 Dominican 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.
Jorge Blanco also is likely to expand modestly 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, with all~~ies_
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25X1
Much of his foreign policy will not contradict Washing-
ton'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 scholar-
ships 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 welcomed 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 insure 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 economic exchanges and exposing Duvalier to
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 25X6
no longer the fiery campaigner he once was. 25X6
Even with some dramatic last minute pitch, he is unlikely to
close the gap with Jorge Blanco. Since losing the 1978 election,
Balaguer's Reformists Party has fallen into disarray because of
its loose organization, 25X6
and lack of ideological foundation.
Dominican peasants have looked to Balaguer as their protec-
tor and benefactor, but both the current administration and
retired General Wessin y Wessin's conservative Quisqueyan Demo-
cratic Party have made some inroads in this constituency.
Guzman's agrarian reforms, rural health services, and agricul-
tural extension program have won over some allies, while the
Ouisguevan candidate has hammered hard at Balaguer's weak points
Rural-to-urban migra- 25X6
tion will also shrink Balaguer's following, although he can count
on the votes of some new urbanites not yet picked up by the PRD.
In addition, Balaguer will gain some support from low-income
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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 m
A4- F_ I ayor of Santo Domingo, the prospects for such an 25X1
Balaguer's health has given the Reformists vice presidential 25X6
larly assumed that the 74-year old Balaguer.
wou d not survive a fourth term. Departing
from usual practice, Balaguer permitted party delegates to choose
his running mate. The move backfired as he was paired with
Fernando Alvarez Bogaert, an ambitious Reformists 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 powerful politician, Balaguer tried to
force the party to drop Alvarez by resigning from the presiden-
tial race. The desired response was,not forthcomin and he was
forced to withdraw his resignation two days later.
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 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 25X1
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 readi rate a high-
handed, out-of-step executive. 25X1
Balaguer probably would expect nonconditional US economic
assistance and would wholeheartedly coo erate with the Caribbea
Basin Initiative. 25X6
he will be less suscep i e to the adverse political consequences
of turning to the IMF for assistance--a step many Dominicans
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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.
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 ties 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
_out of fear that Guzman would establish a leftist regime.
Guzman, in turn, has attempted to depoliticize and profes-
sionalize 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
Indeed, the armed forces on the whole, while 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. 25X1
The drive for professionalism--and, with it, apolitical
service--has not yet caught up with the military's lona-hpld
anti-Communist fervor.
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of Staff. Most younger officers would oppose a return to
Balaguer's politicization of military affairs, but at the same
time they are apprehensive about Communist encroachment. (S)
If Jorge Blanco wins as expected, the period between the
elections and the inauguration, however, will be tricky. The
military 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 US
reaction would be carefully assessed by the military hierarchy
The State of the Economy
The Loss of Steam in 1981
Economic issues will continue to preoccupy the next govern-
ment as they have the Guzman administration. Even though Domini-
can 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 1976-80, half the rate of the early 1970s.
By 1981, under the impact of unfavorable world economic trends,
economic growth fell to about 3 percent. Unemployment and the
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25X1
government's efforts to cut back social programs as the economy
slowed became serious political issues. 25X1
Early prospects for the 1981 external accounts were favor-
able. 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 the first half, however, the deepening world
recession reduced demand for major Dominican exports--sugar,
gold, coffee, and cocoa--even as oil import costs rose substan-
tially. 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 some import costs more than 25 per-
cent. These actions ultimately 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
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 2 months' imports
cover, Santo Domingo postponed principal payments on a major for-
eign loan and slowed payments on short-term credits. By the end
of the year, arrears totalled some $350 million and the buildup
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
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 Approved For Release 2008/09/03: CIA-RDP84B01072R000200170028-0 25X1
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
t
d
i
h
percen
compare
w
t
J percent 111 199' 80.
Partly in response to his austerity package, Guzman scored a
success against inflation. The government was able. to hold the
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 per-
formance, 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 stand-by loan. To qualify for an IMF program, the new
government will have to maintain the austerity measures even in
the face of growing criticism of the'program. Until the world
economy picks up and provides some stimulus for the balance of 25X1
payments, import controls will continue to be required.
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 Dom-
inican 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 action until
the US Congress passes the CBI legislation. Investors and
international bankers also are waiting until the new Dominican
administration clarifies its economic philosophy. The recent
rescheduling of payments on overdue accounts has not neatly 25X1
reduced investor skepticism.
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Disbursements of concessional foreign loans--limited by
restricted availability 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 stand-by 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 infor-
mal discussions with the IMF and imposed many austerity measures,
however, the electoral victor can approach the Fund early in the
new administration without appe~" to be conceding too many new
conditions. 25X1
Implications for the US
Just as Jamaica is perceived by regional leaders to be a
barometer of Washington's ability to promote stability and econo-
mic 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 dependence will restrain any Dominican leader from
alienating the US or Western nations. 25X1
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 Republic -somewhat left of
center, a pattern that will be reinforced to the extent that his
radical advisors 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 imple-
ment more radical programs, the principal manifestation of their
pre
sence will likely be periodic, sharp criticisms of US 25X1
12 __ I
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 cvruVm
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In economic matters, Jorge Blanco can draw upon a number of
talented individuals 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 around.
A Balaguer administration would back most US foreign policy 25X1
initiatives, although the President might undertake some new
policies to differentiate this term from his previous ones.
Balaguer would welcome the Caribbean Basin Intiative 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 admini-
strations have generally been credited with good economic per-
formance, this occurred under favorable world economic condi-
tions. Moreover, Balaguer held a tight personal rein on monetary
and fiscal policies and would be unable to do so again
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
heavy handed in his dealings with the legislature, he could
stimulate the political polarization that has not yet been buried
. -.
-_--L
the
Beyond the election, the strengthening of democratic insti-
tutions in the Dominican Republic could be derailed by two
potential, but uncertain, eventualities--military intervention or
the disintegration of the Reformists Party. The former would
rapidly destroy the democratic process that has been some 20
ears in the making.
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 succes-
sor and if he dies without doing so, the leadership probably will
fractionalize, taking with them the various party elements. Some
of these diverse elements could evolve into a Christian Demo-
cratic ideology; other Reformista elements could join existing
parties, or a totally new conservative political mechanism could
emerge. One prospect is almost certain no matter what occurs:
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parties, or a totally new conservative political mechanism could
emerge. 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 eventu-
ally leaving the center-left PRD as the dominant political entity
in the country.
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 US. (S)
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 Approved For Release 2008/09/03: CIA-RDP84BO1072R000200170028-0
DOMINICAN REPUBLIC: Balance of Payments
(in millions $US)
1977
1978
1979
1980
1981a
1982b
Trade balance
-67
-184
-263
-553
-274
-628
Exports f.o.b.
781
676
869
962
1180
1,000
sugar
232
181
201
310
550
500
Imports f.o.b.
848
860
1132
1515
1454
1628
Net services and transfers
-197
-136
-118
-254
-238
-247
Current account balance
-264
-320
-381
-807
-512
-875
Capital account balance
336
208
258
658
545
719
Private
202
51
63
292
298
420
Offical
134
157
195
366
247
299
SDR Allocation
0
0
7
7
0
0
Gold revaluation
0
16
28
24
0
0
Change in international
reserves
+72
-96
-88
-118
+33
-156
aEstimated
hprojected
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DOMINICAN REPUBLIC:
Selected, Economic Indicators
1979
1980
1981a
1982b
Real GDP Growth
(percent)
4.8
5.4
3.4
-1.0
Per capita GNP,
(dollars)
1,000
1,200
1,200
1,160
Consumer price inflation
(percent change)
9.1
16.8
10.0
10.0
bEstimated
Projected
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