Balaguer: Trying to Keep the Island Afloat

SANTO DOMINGO, Dominican Republic - Low wages and surplus labor are key to this Caribbean nation's economy, and also its curse.

A skilled craftsman in a rattan furniture factory in the country's capital earns 350 pesos a month - about S120, working a five and a half day week. A waiter at a good hotel restaurant earns 200 pesos a month and may get another 100 pesos in tips, or about $100 a month.

Agricultural workers, who comprise the bulk of a labor force of just over two million people, are paid even less.

Population growth in this overwhelmingly Catholic country of six million people, the size of Vermont and New Hampshire combined, is a high 2.7 percent yearly.

The Dominican government says that 28 percent of the workforce is unemployed; most economists believe that the rate is much higher.

The problems facing the country's president Joaquin Balaguer, 79, are immense. Since his inauguration on August 16, 1986 he's tackled problems in a way uncharacteristically direct for Dominican politicians.

Balaguer was president in 1960-61 under dictator Rafael Leonidas Trujillo, but fled to the United States in 1962. After President Lyndon Johnson sent in 22,000 U.S. troops in 1965, Balaguer was elected president for three four-year terms - from 1966-78. He lost the 1978 election to the Dominican Revolutionary Party (PRD) of Antonio Guzman. Guzman committed suicide a few weeks before the end of his term. And in 1982, the PRD's Salvador Jorge Blanco was elected.

In Balaguer's last hurrah, last May, he swept his Social Christian Reformist Party (PRSC) to victory, winning 41.4 percent of the 2.1 million votes cast. Jorge Blanco, who did i not stand for re-election because of his growing unpopularity, supported the PRD's Jacobo Majluta, who received 39.2 percent of the vote. Most of the remaining 20 percent went to Juan Bosch, of the Dominican Liberation Party (PLD), who had also served briefly as president in 1962. '

In the eight years of PRD dominance, the government payroll nearly doubled to 214,903 employees, according to the Dominican Central Bank's national statistics office. In this , sophisticated capital city, where the son of Christopher ! Columbus once ruled, the big central government office building is known as "el guacal," which means crate or case; the non-productive government workers in el guacal are known as "las botellas," literally empty bottles.

Balaguer's first step after his inauguration was to empty "el guacal." Some say he's fired 30,000 non-productive civil servants, a claim the government denies. But the government concedes Balaguer has retired 80 high-ranking military and police officers, including 35 generals.

Balaguer is attacking government waste by requiring that all government paychecks be picked up personally, canceling all government posts that were filled between the May election and his inauguration, and demanding that department supervisors prepare lists of personnel they find superfluous.

The president knows this is his last shot at assuring i himself a place in Dominican history - he'll be nearly 83 at the end of this term. He is refusing to hand out jobs willynilly to even his own PRSC loyalists, as Guzman and Jorge I Blanco did for the PRD.

As a result, PRSC cadres have been sitting in at party buildings around the nation, threatening to burn them.

But Balaguer is not budging. He's carefully refused to name anyone who heads a large PRSC faction to a high-level government post. He's allowing no "heir-apparent" to rise above the political horizon; instead he's named young technocrats to key government jobs.

He has no young family save for a grand-nephew, Joaquin Ricardo, who was PRSC political secretary. Balaguer appointed him Dominican consul-general in New York City, an important job since there are about a half-million Dominicans in the New York area. But no ambitious politician wants to be cut off from his home base, and Ricardo is.

The snubbing of disgruntled job-seekers has weakened the PRSC, but it has also brought Balaguer new respect among independent analysts here. And it has spotlighted problems in the PRD administration. When Jorge Blanco was inaugurated in 1982, it took him 18 months to set his administration in place, but between last May's vote and Balaguer's August 16 inaugural, Blanco's party swiftly helped itself to various "benefits;" leaving the Dominican treasury nearly exhausted. In that three month period, 7,000 to 10,000 import tax "exonerations" on new autos were given away - or sold. There is now a glut of new Mercedes-Benz convertibles for sale here.

On assuming office, Balaguer called for a political truce. Although it was quickly rejected by the tiny parties of the far left and Bosch's PLD was silent, some of the PRD's leaders agreed despite the lack of a direct response from the party.

In the May vote Balaguei s party won 75 local mayoralties to the PRD's 20 and the PLD's three. Similarly, in the senate of the National Congress, it won 21 seats, the PRD seven, the PLD two. But in the lower house, the chamber of deputies, Bosch's PLD holds the key: the PRSC won 56, the PRD 48, the PLD 16.

Fortunately for Balaguer, the PRD also is split and the PLD generally has remained quiet, though on two occasions it prevented quorums from being formed in the chamber of deputies.

But Balaguer's political problems are, of course, small when compared to his and his country's economic problems.

Despite efforts at agricultural diversification and industrialization, sugar remains the backbone of the Dominican economy. The cost of producing a pound of Dominican sugar is around 12 cents; in the last six years the world price of sugar plummeted. The price is now only between five and six cents, which explains why Gulf and Western, the U.S.-based conglomerate that once was one of the biggest Dominican sugar producers, pulled out of this country completely.

When Balaguer was inaugurated in August, the sugar situation here looked bleak. The State Sugar Council - a government enterprise that is now the chief sugar producer - was threatening to close some of its mills and fire thousands of workers.

There was some improvement in conditions as cane cutters went into the fields late in 1986 to harvest the crop. The Central Bank leaned on the Dominican banks to come up with a $20 million loan to the Sugar Council and the council scraped together another $20 million to prepare the fields for harvest, acquire new rolling stock, rehabilitate the rail system, and repair antiquated mill equipment.

The current crop is expected to produce between 500,000 and 600,000 tons of sugar, of which 302,000 tons are earmarked for the U.S. quota, where prices are four times the world market price. About 200,000 tons - some of which will be illegally exported to neighboring Haiti - is needed for domestic consumption, leaving only a relatively small amount to be sold at a loss on the world market.

The Dominicans - and other sugar producers - seemed to have gained somewhat from the Soviet nuclear disaster at Chernobyl: the Soviet sugar beet crop in the Kiev area has suffered from intense radiation. As a result, world prices have stabilized and the Soviets have been forced to enter the world's sugar market to fulfill their needs.

The trick for Balaguer's government will be to hold down Dominican sugar output- in the 1970s Dominican production was a million tons yearly, with 20,000 Haitian cane-cutters imported to do the work in the fields under dismal conditions. Today most of the cane-cutters are Dominican residents - often Haitian, often in the country illegally, but at least not forced to live like slaves for several months, as the imported Haitian laborers were.

Balaguer's most important mission on the sugar front is to keep his country's quota high in Washington, along with the 20 cents-a-pound price.

The new administration is offering incentives to put idle rice land into production in the northeast of the country and to increase bean and corn crops. Balaguer is trying to interest Florida, Texas and California citrus growers in joint ventures to take advantage of frozen-concentrate technology, and the Caribbean Basin Initiative.

Balaguer's administration is moving fast toward a massive construction program of public housing, new public buildings and roads. At the same time, a large, inefficient and polluting cement plant owned by the government in this city is being closed and the 600 person work force at the government-run paint factory is being trimmed. Balaguer has told public enterprises they'll have to meet their own debts and he has refused to print money to bail them out.

The president is pushing the so-called "free zones," where partly finished goods are brought from the U.S. for finishing, then re-exported to the U.S. duty-free. There are about 140 freezone companies in all, employing more than 40,000 workers. Some new, multinational corporations, like General Electric, are just settling in. Other companies already in the free zones are going in for high-tech chores that can be performed more cheaply here than in the United States. American Airlines, for example, is talking of setting up here, while a GTE subsidiary has already established a computerized graphics operation. A Dominican engineer earns about U.S. $235 a month, a supervisor about U.S. $400 a month.

Tourism is enjoying an unprecedented boom in this Caribbean nation, fueled in part by the panic about "terrorism" that has swept the United States in the past year. But the curve has been upward since the early 1980s. The nation had 341,313 overnight visitors in 1982, a total of 497,280 in 1985, and 1986 is expected to be considerably higher, according to the Tourism Ministry. Three of every five tourists are from the United States, but two countries, Canada and Italy, doubled the number of visitors arriving here between 1984 and 1985. Another reason for the influx: tourists have discovered that the Dominican Republic is cheap.

Now the Dominicans are starting to go after the upscale U.S. tourist market, and to do this they have to build new hotels. A hotel construction surge is underway on the north coast, around Puerto Plata and Sosua, and here in Santo Domingo four new hotels are being built on the waterfront Malecon.

Aside from tourism and sugar, the nation's other major foreign exchange earner has been gold from the El Rosario mining complex in the northeast mountains. Present reserves, however, are expected to run out in a couple of years. Although there was pressure to switch to sulphur oxide gold reserves, at a price tag of more than $300 million and the possibility of major pollution problems, Balaguer's government has rejected such proposals on environmental grounds.

The Dominican Republic remains the Caribbean region's single largest exporter to the United States of non-petroleum products. In the first half of 1986, U.S. imports from this country were $516 million, down less than one percent from the same 1985 period. A $50 million drop in sugar exports to the United States was mostly made up by gains in coffee, jewelry, textile, beef, fruit and vegetable shipments.

Inflation has been brought under control: in 1986 it ranged from 12 to 15 percent, compared to about 30 percent in 1985. And the Dominican peso has steadied at three to the U.S. dollar. Economists are estimating that per capita income in 1986 reached $900, but say there was probably little growth in the gross national product.

Balaguer's government was left with a foreign debt of $3.7 billion, almost $3 billion of which is overdue. After the president's inauguration the new National Congress authorized renegotiation of the debt, and a rescheduling almost certainly will mean putting in place an austerity program approved by the International Monetary Fund.

Balaguei s government has two things going for it:

• Remittances from the more than one million Dominicans living in the U.S. amount to at least $600 million yearly, though official figures cut the total in half. Bankers say the higher number is accurate, but that many of the remittances never get into the official figures.

• Then there is what one Dominican official calls "our safety valve," referring to the 65-mile Mona Passage between this country's east coast and Puerto Rico's west coast. The passage is traversed by thousands of Dominicans seeking work illegally each month.

Balaguer's last hurrah is not going to be easy.

William Steif, a freelance writer based in the U.S. Virgin Islands, writes regularly for the Multinational Monitor.