Searching for Momentum in the Dominican Republic
The most successful economic periods in the Dominican Republic have been fuelled in the past by growth in tourism, telecommunications and maquiladora manufacturing but a handful of entrepreneurs are working to add new pioneers across all economic sectors. As part of my recent series on Latin America, we take a quick look at developments from the Dominican Republic.
In July 2012, the Multilateral Investment Fund (MIF), the Development Bank of Latin America (CAF), and local tech-based business incubator Emprende signed a $1.2 million agreement establishing the first seed capital fund in the Dominican Republic. The authors were smart to avoid the mistakes of other governments and establish it as a co-financing mechanism, allowing entrepreneurs to raise resources from the private sector through the Enlaces angel network. Only when angel investors have allocated capital in early-stage development ventures can entrepreneurs be considered for funding.
The establishment of this fund shows how entrepreneurship is becoming a bigger priority across different sectors in the country. In fact, the Dominican startup ecosystem features several collaborating strong actors including the Ministry for Education, Science and Technology (MESCyT) which collaborated to create eight innovation centers through its National Entrepreneurship Program and has supported an Emprende incubator. Located in the Santo Domingo Cybernetic Park, Emprende and its executive director, Orlando Pérez Richiez, have become a reference point for entrepreneurship in the Caribbean. Enlaces, created a year after the launch of Emprende in 2006, is an angel investors network that identifies people who are able to support entrepreneurs and their projects, providing early stage capital and mentoring. There are also other key actors to mention, including EMPRETEC and the array of organizations assembled under Global Entrepreneurship Week effort in the country.
A question remains as to whether this interest is starting to be translated into pro-entrepreneurship government policies. On the positive side, according to the World Bank and the Index of Economic Freedom, the cost of completing license requirements has been reduced and launching a business takes a reasonable number of procedures (seven). Plus, tax rates are moderate. However, starting a company takes at least half a Dominican’s average annual income, and labor regulations are tough on startups in that they restrict work hours.
What the Dominican Republic needs is renewed political momentum for economic growth, one that looks beyond foreign investment, to organic entrepreneurial expansion. In the past, the government has proven capable of promoting economic diversification and modernization by introducing structural reforms and opening the economy to global trade and investment. The emerging communities of startups and those that support them should now create political momentum for deeper institutional reforms that will tackle such issues for entrepreneurs as poor contract enforcement, widespread corruption, political interference in court enforcement of property rights and rigid labor regulations.
Perhaps we should be encouraged by the formal visit last December of the Dominican Republic’s three-term former President Leonel Antonio Fernandez Reyna to one of the world’s top seed investment companies, Oasis500 in Jordan. As Chile is showing us, political will, cross-sector collaboration and building bridges to other entrepreneurship ecosystems around the world may be all that is necessary to achieve momentum in the mission to see more locally-grown new firms.