Dominican Landslide Gives Abinader the Power to Fix Low Tax Take

(Bloomberg) -- Economists expect Dominican Republic President Luis Abinader to use his landslide election win to boost low tax revenue as the Caribbean economy targets an investment grade credit rating.

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With almost all the electoral colleges reporting, Abinader had 57% of the vote, followed by his nearest rival, former president Leonel Fernandez with 29%.

“This strong political mandate will give him more room for maneuver than he had in his previous administration,” said Nestor Rodriguez, a strategist at Barclays, in reply to written questions.

The president’s popularity as well as the strong economy should prevent major social discontent if he introduces new taxes or eliminates tax breaks, Rodriguez said.

Fitch Ratings said it also expected tax reform to be a priority over the next four years, saying this could increase the country’s low tax ratio of 14% of gross domestic product, which it said is “an important rating weakness.”

“We think a fiscal reform is clearly forthcoming,” JPMorgan Chase & Co analyst Steven Palacio wrote clients Monday. “President Abinader has called for a broader shake-up that goes beyond what would be an ordinary fiscal reform.”

This is likely to include an overhaul of the inefficient electricity sector and deepening the nation’s presence in financial markets, Palacio said.

Dollar bonds edged higher Monday, with notes due in 2045 rising 0.3 cent to 99.5 cents on the dollar, according to indicative pricing data collected by Bloomberg.

Read More: As Haiti Crumbles, Its Neighbor Is Thriving With a Tourism Boom

Fitch rates the country BB-, three notches below investment grade. Bloomberg analysts expect the country to grow 4.4% this year on the back of record-breaking tourism and foreign direct investment.

Haiti Hardline

Abinader, 56, has also suggested he will continue his hardline stance against neighboring Haiti, which has been consumed by gang violence, hunger and chaos since the 2021 murder of President Jovenel Moise. Abinader has responded by stepping up the construction of a border wall, continuing deportations and demanding that the international community take the crisis seriously.

Kenya has offered to lead a multinational security force to Haiti that could be deployed as soon as this week.

“The international community has finally listened,” Abinader said at a conference in Washington earlier this month.

Also up for election on Sunday were 32 senators and 190 deputies. Local media reported that initial results suggested that Abinader’s Modern Revolutionary Party and its allies would have a strong showing.

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