The Legal Reforms that Can Help the Dominican Republic Become an Advanced Economy
Summary: According to the International Monetary Fund (IMF), the Dominican Republic has experienced rapid economic growth, which, with the right policies, could transform the country into an advanced economy. This post outlines some of the necessary legal reforms to achieve this goal.
The International Monetary Fund, in a note published on August 3, 2023, highlights that the Dominican Republic is leading Latin America in economic growth, particularly when considering income convergence with the United States. This convergence compares the Gross Domestic Product (GDP) per capita of the Dominican Republic with that of the United States.
The note emphasizes that what stands out about the Dominican Republic’s growth is its pace, as the country has the highest convergence speed in Latin America, which has increased nearly threefold in the last fifty years. If this pace is maintained, the Dominican Republic could make the leap to become an advanced economy in the coming decades.
However, as the IMF concludes, achieving this goal requires appropriate public policies. The challenge is to sustain accelerated growth over time and translate it into inclusive development. An essential component of these public policies is to improve the rule of law quality.
According to some indexes that measure the rule of law quality and institutional capacity in the Dominican Republic, such as the Rule of Law Index, Global Governance Indicators, and Global Competitiveness Index, the rule of law quality has improved over time. Nevertheless, there are still gaps that indicate opportunities for improvement.
In that sense, to support the rapid economic growth in the Dominican Republic, it is necessary to design appropriate legal reforms that aim to improve institutional capacity and the quality of the rule of law. Specifically, four areas of reform are highlighted:
- Effective legal reforms improve the business climate and create additional incentives to promote investments.
- Reforms of the electricity regulatory framework to support the policies aimed at improving distribution, eliminating blackouts, and increasing the use of renewable energies.
- Labor reforms to support policies targeting the reduction of informality.
- Implement a framework that promotes innovation and technology, capitalizing on the opportunities presented by the Fourth Industrial Revolution.