A number of keen observers of the Dominican Republic (D.R.) are heartened by signs emerging of a smooth transition from the rejected administration of President Hipolito Mejia to the incoming administration of President-elect Leonel Fernandez which will take office August 16. But others are expressing concern over what could occur during the period of more than two months given Mejia’s notorious reputation for his chaotic and unpredictable management style.

The final results of the elections May 16 indicate Fernandez (Liberation Party) won by 57.11% to 33.65% for Mejia (Revolutionary Party) with Eduardo Estrella (Reformist Party) getting only 8.65%.

“I perceive encouraging signs from the outgoing Mejia administration that the three-month transition period until the new Fernandez administration assumes power may be smoother than anticipated,” said Franco Uccelli of the Bear Stearns brokerage firm in New York which monitors the D.R. closely.

“The (Mejia) government will set an example of austerity in these three months,” said Carlos Despradel, the Technical Secretary of the Presidency. “President Mejia has told us that his goal is one of austerity and to meet the commitments to the International Monetary Fund (IMF). It will be a model, exemplary transition.”

“The call for total austerity during the transition allays concerns that the Mejia administration would resort to fiscal slippage and policy inaction during its remaining time in office,” said Uccelli of Bear Stearns.. Other observers noted that a Fernandez transition team will be interacting with key government sectors.

There is a certain irony in the situation since Mejia received the government in 2000 from the personnel of the outgoing Fernandez administration and he must now turn it back over to the same people.

U.S. Ambassador to the D.R. Hans Hertell visited President-elect Fernandez at the Global Foundation for Democracy & Development which he heads and offered the assistance of the Bush administration in dealing with the multilateral institutions so that the agreement which the Mejia administration concluded with the IMF remains on track. “I’m optimistic about the economic future of the D.R.,” said the U.S. envoy after the meeting.

The gracious manner in which President Mejia accepted electoral defeat was positive,” said Uccelli. “The transition months may very well prove to be a positive period of consensus and institution-building for the D.R., contrary to market expectations.”

In a move considered significant, Luis Gonzalez Fabra, Mejia’s press secretary, refuted rumors that Mejia would resign before the end of the transition period.

Potential problems could be ahead

“There could be potential problems ahead until the government changeover,” alerts Frederic Emam Zade, the director of economic development for the Global Foundation
headed by Fernandez. “Measures must be taken to prevent a repeat of the massive sacking of government assets that occurred in 1986 in the interim between the Revolutionary Party government of then President Salvador Jorge Blanco and then incoming President Joaquin Balaguer of the Reformist Party.

“This pillaging not only involved irregular distribution of government property but also important government documents,” recalled Emam Zade, who served in both the previous Fernandez and Balaguer administrations. “In numerous government offices filing cabinets were received empty, and it was never clear whether it was that the outgoing government did not archive important documents or whether they had taken them with them so as not to leave traces of what it did not want to be known.”

Emam Zade also cautioned that during that previous transition (from Jorge Blanco to Balaguer) “the outgoing government paid many debts to friends using money not backed by reserves, leaving a virtual time bomb of excess money in circulation for the new government to confront, thus affecting the purchasing power of all Dominicans.” The internationally recognized economist received high marks from the U.S. government for his administration of multimillion dollar programs during the administration of former President Ronald Reagan.

Appealing to government employees “who witness wrong doing to denounce such acts to the appropriate officials and to the press if they do not trust the authorities. “Any disorder during the transition period could potentially penalize the government’s own partisans who are presently employed in public offices,” warned Emam Zade.

Reacting to reports that PRD legislators could go through with their campaign threats not to approve any fresh resources to the government, Emam Zade said the incoming new government “would have to resort to cutting current expenditures and the bloated bureaucracy which would end up affecting the political clientele of the defeated PRD.”

Outlining the priorities of Fernandez, Emam Zade said “external problems will top the list. The new administration will need to negotiate a new agreement with the IMF as soon as possible because the Mejia government does not have any incentive to adhere to the present agreement and thus is not expected to do so. Fernandez expects to inherit major arrears in the payment of foreign debt and the sovereign bond issues.”

Inflation time bomb could be coming

On the domestic front, Emam Zade said the new government “expects to inherit a massive domestic debt. Nevertheless, it is expected that the quasi-fiscal debt of the Central Bank will have been significantly diminished, as during the transition period the Mejia government will surely succumb to the economic incentive of redeeming the maximum amount of financial certificates of its ‘friends’ and, given the political incentive, to leave a time bomb of inflation for the new Fernandez government so that it may explode in the initial months and end the honeymoon for the new administration and the Dominican people.”

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