Whiter the Course?

September 25, 2007

Having an incumbent president pass on the sash of office to his successor is still a rare occur- rence in the Dominican Republic. Guzmin's July suicide once more preempted this symbol of continuity and propelled Vice President Jacobo Majluta temporarily to the post he had long been eyeing. Majluta used his forty-day presidency to recoup his political image following months of divisive party faction fights and charges of dis- honesty. He worked well with the party, inau- gurating PRD anti-corruption measures such as state company audits. He managed to receive the kudos which should have been Jorge Blan- co's by lowering prices, decrying speculation and raising public sector doctors' salaries. Already campaigning for 1986, Majluta left the National Palace a candidate; and he left Jorge Blanco with only austerity tasks to implement. Jorge Blanco set the tone in his August 16 in- auguration speech: "By voting for us the people voted for morality and austerity, the fundamen- tal pillars of our government's program." Morality, because rumors of corruption during Guzman's administration were rife, and had reportedly led the President to suicide. Auster- ity because, by all accounts, all accounts were empty. The Central Bank, devoid of reserves, was nearly $400 million behind in its commercial payments, and overdue debts had piled up above $200 million. The 1982 balance of payments deficit was already $560 million; the government budget deficit was even higher. More than 150 capital city businesses were verging on bankruptcy, low world prices had caused Falconbridge's nickel operations to be closed all year and now Alcoa was threatening 33NACLA Report to retire from its bauxite operations. By September's end, the CEA would cease all in- ternational sales. More than a leader was needed: a consensus of sacrifice had to be forged. "This crisis will be overcome only with great effort and with the sacrifice of all Dominicans, especially the most economically powerful classes," Jorge Blanco prefaced his program. If anyone could inspire trust that austerity would be shared, it was Jorge Blanco. He was known as a politician of liberal convictions, an honest lawyer, a family man to boot. The presence of Reagan's inaugural delegate, Ells- worth Bunker, evoked another memory which spoke to Jorge Blanco's principles: the last time Bunker and Jorge Blanco had been face to face was over the negotiating table in 1965, follow- ing the U.S. troop invasion. Bunker's words were weighted with the U.S. threat to bomb Santo Domingo. Jorge Blanco, representing thousands of Constitutionalist fighters still pressing on in the streets, stood up to U.S. demands, minimizing political losses in a no- win situation. Many elements of Jorge Blanco's program suggested a brand of reformism capable of legitimizing the skewed distribution of wealth and economic growth. Measures to continue the wage freeze and lengthen the work day were cushioned by the promise of a literacy campaign to teach 200,000 to read, mainly through the volunteer labor of thousands of party rank and file; generous tax incentives to agroexporters were offset by a commitment to reclaim for redistribution to 8,000 families each year the thousands of acres of government land in the hands of individuals; an end to non-food price controls was offset by basic food price stabiliza- tion and the establishment of a sort of food stamp program. Business would pay too, it seemed, through a ceiling on dividends and brakes on capital flight. From urban property owners the govern- ment would exact a real estate tax; from specu- lators, a capital gains tax. The President himself made a hit by taking a 40% salary cut and by reducing bureaucratic wage levels. Meticulous in his reference to the party as his guide, and to the people as the PRD's source of strength, on the first day it seemed that Jorge Blanco's popularity could survive even in the face of austerity. But a crisis is a period of readjustment and realignment, and the coming months promise to be volatile ones. On the one hand is Jorge Blanco's recognition that he cannot afford to lose the allegiance of the popular sectors. On the other, the constraints of economic crisis have never been so great; domestic business interests and international business pressures are calling for a tune that is hard for everyone to sing together. In late October the country reached a tenta- tive agreement with the IMF on a three-year credit package worth $467 million. While details of the agreement were not made public, the government did commit itself to substan- tially reduce the budget deficits, raise local in- terest rates and not implement any import restrictions-including Jorge Blanco's pro- posed ban on the import of food and luxury goods. The peso had been effectively devalued by 50% through the earlier institutionalization of the parallel market via the commercial banks. These measures, together with the PRD's economic recovery program, may ultimately prove irreconcilable with continued popular support. To the people, Jorge Blanco had promised no public sector layoffs; to the IMF, a hefty reduction in public spending. The gov- ernment's emphasis on construction made the unemployed hopeful about jobs; but builders and buyers would now face interest rates closer to the U.S. level. The wage freeze is certain to continue, but prices will surely spiral as electric rates are increased to counter the state utility's deficit, lessened export restrictions diminish local food supply and the parallel market rate reduces the import purchase power of the peso by half. That Jorge Blanco will provide a climate of economic freedom to business has never been a question. The central concern now, given how the population responded over the last four years to price increases and economic malaise, is whether he can maintain a climate of political freedom for all. The IMF, short on tolerance for the often drawn-out strikes and mobilizations which characterized the Guzmin period, will be measuring government performance every three months. With the clash between expecta- tions and reality promising to be more acute than ever, the future of the popular movements, the PRD and Jorge Blanco himself is at best uncertain.

Tags: Dominican Republic, PRD, Jorge Blanco, economic freedom, IMF

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