Dominican President-Elect Will Inherit Economy in Crisis

SANTO DOMINGO, Dominican Republic — When President-elect Leonel Fernandez took his bows before supporters early Monday, the jubilation of his victory over populist incumbent Hipolito Mejia was visibly tempered by fear for what will, literally, be dark days ahead.

Nightly power outages that have provoked riots this year are again expected to confront the Dominican Republic’s 9 million people in the coming weeks. Because of skyrocketing oil prices and strangling budget constraint, the government can’t afford to keep recently nationalized electrical plants running.

The rise of food prices and the fall of the peso, both in part consequences of Mejia’s bailout of a collapsed pyramid-banking scheme, also threaten to dampen the joyous atmosphere that spread through this Caribbean capital when the vote tally from Sunday’s election showed Fernandez handily won with 55% to the incumbent’s 35%.

“Everyone is celebrating now, and it’s good that Leonel won, but we won’t be out of this crisis for a long time,” said Fermin Ramos, a parking lot manager watching horn-honking, flag-waving Fernandez supporters burning up precious gasoline in a victory lap around the capital’s colonial quarter. “We have to regain the confidence of foreign investors, and that is not something that happens overnight.”

On Aug. 16, when Fernandez takes over as president, he will inherit a country that has been in an economic tailspin for more than a year. No matter how quickly or diligently he cuts government spending and raises taxes in a promised effort to bring the nation’s finances in order, times are expected to get worse before they get better.

Inflation may reach 50% this year; the country’s $7.6 billion in foreign debt is siphoning its vibrant tourism revenue, and two-thirds of the nation lives in poverty. Fernandez warned citizens in a subdued victory speech that recovery from their worst economic crisis in four decades of democratic rule would be slow, painful and dependent on national reconciliation.

“There must be an end to the fighting, the confrontation, the conflict,” Fernandez told cheering members of his Dominican Liberation Party early Monday, alluding to the bruising campaign in which he and Mejia traded insults and voting that was marred by scattered violence. “Now is the time for all of us to work together to get the country out of economic and social crisis.”

Analysts praised Fernandez for running a sober campaign. But he inherits what one referred to as “a poisoned chalice” -- a bloated government payroll that he will have to trim to meet spending controls in exchange for International Monetary Fund loans.

“He will have to be like Lula,” said political analyst Bernardo Vega, referring to Brazilian President Luiz Inacio Lula da Silva. “He’s going to have to say the first day he’s in office that he will honor the IMF agreement. He has to do the opposite of what the other candidates promised, which was to increase wages and cut taxes.”

Fernandez, a 50-year-old lawyer whose 1996-2000 tenure as president was tainted by corruption scandals, made none of the populist promises of Mejia, who emptied the public coffers to provide urban supporters with motorbikes and peasant constituents with lumber and livestock.

The Dominican Republic has been on a tight financial leash since the IMF granted it standby loans after the collapse of Banco Intercontinental, or BanInter. Mejia’s decision to bail out the bank’s depositors -- many of them wealthy supporters of his Dominican Revolutionary Party -- saddled the country with more than $2 billion in new debt and gutted the peso. Food prices have at least tripled as the result of devaluation that has dropped the Dominican currency’s value from 17 to the dollar to 45 in little more than a year.

“Leonel won’t be able to change anything for at least a year,” predicted Rudolph Delacruz, a photographer who augments his meager newspaper salary by taking pictures of tourists along the Malecon, the seafront promenade. “But people understand this. They voted for Leonel because they wanted to throw out Hipolito. They don’t want Leonel, they just want change.”

Fernandez presided over this country’s late-1990s emergence as the Caribbean’s most popular and fastest-growing tourist destination. The vital sector was initially hurt by the slowdown in global travel after the Sept. 11 attacks but posted record revenue in 2003, giving hope to the incoming government of returning to times of growth.

Mejia recently used state funds to buy electrical networks from private operators in order to prevent blackouts from becoming a campaign issue. But because of rising oil prices, the government will be unable to afford fuel for the networks.

Mejia also expanded the armed forces and civil service payrolls by more than 50%, but many of those jobs will have to be eliminated to keep within IMF spending limits -- a step that probably will be highly unpopular in a country already suffering 17% unemployment.

Many urban residents insist that, though they will continue to suffer in the short run, ousting Mejia will transform their national image and restore self-respect.

“Our current president is a brute. We would never get out of crisis with him,” said Darline Meldes, a 21-year-old business student, recalling Mejia’s crude claims that his opponent dabbled in Satanism and was the real culprit in the economic crisis. “Leonel will have difficulty. Maybe he won’t make a huge difference. But at least he’s not an embarrassment.”