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Our on-line
newsletter bulletin now going on our sixth year!
Offering our clients and readers news items and headlines
often not covered by the mainstream media, articles of interest
regarding banking, economics, real estate, taxes, living or investing
abroad, plus much more. Finally, our very popular readers write
in section, with answers to some of the questions many of our readers
have - that no one else wants to answer truthfully, except us!
Want to See our Other Back Issues from 2002 - 2005?........Click Here
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Visit The Main Newsletter Section & Read Past Issues On-Line:
Dominican Republic Real Estate, Residency Filing, Banking and Interest Rates.
Panama Residency and Retirement. Naturalization and Dual Citizenship - Expatriate Issues.
Economics commentary, inflation, housing, stock markets and investing -
Plus a Whole Lot More !
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Our June 15, 2006 Newsletter Edition
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IN THE NEWS:
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U.S. EXECUTIVES WARN EXPATRIATE TAX INCREASE MAY BACKFIRE
By Keith Bradsher and David Cay Johnston - The New York Times
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The sudden, and retroactive, imposition by the U.S. Congress last week
of much higher taxes on Americans living abroad has left individuals
and companies scrambling to regroup, while many executives and
entrepreneurs assert that the move could backfire by hurting U.S.
business interests at home and abroad. The $69 billion tax cut
signed into law May 17 raises taxes on Americans living overseas by
$2.1 billion over the coming decade. The law effectively forces
many overseas Americans into higher tax brackets by imposing complex
new requirements for calculating the value of housing allowances and
then taxing the allowance at the lowest rates. Americans in no-tax or
low-tax jurisdictions with high housing costs, like Bermuda, the Middle
East, Singapore and Hong Kong, will be hit hardest, partners at two
major accounting firms said. The legislation will more than
triple the U.S. tax bill for Kristine Kraabel, a gift shop owner in
Singapore, and her husband, a former marine who is now the regional
human resources director for an American company there. Their tax
adviser calculates that they will now owe more than an additional
$17,000 in U.S. taxes, even as they continue to pay $20,000 in
Singapore taxes. Increasing taxes on overseas Americans was cited
in a report last year on tax reform - - and improving tax compliance by
the Congressional Joint Committee on Taxation. The new law does
nothing about the hundreds of thousands of Americans living overseas
who have stopped filing income tax returns, even though Congress taxes
Americans on their worldwide income regardless of where they live. This
law is targeted at those who are filing tax returns, not those who have
stopped filing, said Peter Merrill, a partner in the national economic
practice of Price-Waterhouse Coopers in Washington. Merrill also
said that he could see no deep tax policy reason for this change, which
he characterized as a way to raise money from one group of taxpayers to
offset cuts for others. Other tax experts said they concurred in that
assessment.
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http://iht.com/articles/2006/05/25/business/tax.php
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EDITORS NOTES:
The article says: Increasing taxes on overseas Americans was cited in a
report last year on tax reform, and characterized as a way to raise
money from one group of taxpayers to offset cuts for others. They
call it tax reform to increase taxes for a particular group of people -
a very interesting definition of the term reform. So, they mean
to tell us that it is now in fashion to tax expatriates even more? We
talked about this concept before (using expatriates as a scapegoat
group), so we are not surprised. It is and will be politically
very difficult to increase any US domestic taxes, but of course those
damn expatriates (probably right there up on the list along side those
radical Arabs) are fair game. Interestingly enough, the article
also says: The new law does nothing about the hundreds of
thousands of Americans living overseas who have stopped filing income
tax returns, even though Congress taxes Americans on their worldwide
income regardless of where they live. Really? They claim
there are hundreds of thousands of Americans living overseas who do not
file. Can you imagine, as just one example, the Italian
Government asking the IRS to collect taxes for them - to be forwarded
along to Italy from Italian residents living inside the US? How
about the case of the US government asking the Italians to start
collecting taxes from Americans living in Italy? I am quite sure
the Italians would have something other than Bon Journo to say about
it. The Italian and most other governments have enough of their
own problems trying to collect taxes inside their own country from
their own citizens. You think they are going to feel motivated to
collect taxes inside their own borders for another foreign
country? Wake up and smell the oregano.
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Want to continue motivating even more Americans to renounce US
citizenship, with a hearty - you can kiss my CANOLI (that's Italian)
right back at you? All we can say to the US politicians is: keep
it up guys, keep doing what you are doing. We highlighted in the
last newsletter, a story about many middle class Americans taking on
Mexican Citizenship (while poorer uneducated Mexicans continue moving
in droves across the border to the US - once again as we stated before,
a case of Trading Places). Keep your eyes on the statistics, my
sixth sense tells me this trend of middle class Americans heading for
the exit will continue (unless of course they try to take everyone's
passport away, or refuse to renew the passports for those people they
think are would be tax exiles, which could very well be the next round
of fun and games to follow).
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SPEAKING OF ITALY: POLICE SEIZE MARADONA'S WATCHES
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Italian police have stripped two Rolex watches from Argentine football
legend Diego Maradona to pay off some of his 30m euros ($39m) in back
taxes. The incident happened as the former star was visiting the
city of Naples on Tuesday to play in a charity match. The tax
police said it had a judicial order authorizing the seizure of anything
of value within plain sight. Maradona ran up the debt while
playing for Naples in 1984-1990. He says the club should have paid the
taxes. We were surprised he was wearing the Rolexes because he
knows that when he comes to Italy he risks losing something, Napoli tax
police officer Geremia Guercia told the Associated Press news agency.
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http://news.bbc.co.uk/2/hi/europe/5057422.stm
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EDITORS NOTES:
Well, at least they left him with his underwear. Interestingly
enough, this is a case of an Argentine Citizen who briefly played for a
team in Italy and now they want their pound of flesh, or Rolex watches
as the case may be.
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ON THAT NOTE, LETS TALK ABOUT TAX FREEDOM DAY:
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Tax Freedom Day will fall on April 26 in 2006, according to the Tax
Foundation's annual calculation using the latest government data on
income and taxes. Tax freedom will come three days later in 2006
than it did in 2005, said Tax Foundation President Scott A. Hodge, and
fully 10 days later than in 2003 and 2004 when a combination of slow
income growth and tax cuts caused Tax Freedom Day to arrive
comparatively early, on April 16. Despite the tax cuts passed by
the federal government recently, Americans will still spend more on
taxes than they spend on food, clothing and housing combined, said
Hodge. In 2006, Americans will work 77 days to afford their
federal taxes and 39 more days to afford state and local taxes. That
makes taxation a bigger financial burden than housing and household
operation (62 days), health and medical care (52 days), food (30 days),
transportation (30 days), recreation (22 days), or clothing and
accessories (14 days).
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http://www.taxfoundation.org/taxfreedomday/
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THERE'S NO BREAK FROM TAXES - By Michelle Singletary
Thursday, June 8, 2006
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And you thought you could have the summer off with no tax issues to
think about? Fuhgeddaboudit. In many cases, however, some
summertime moves could land you some welcome tax breaks. For
example, working teenagers or college students should be careful how
they fill out their W-4 forms for their summer jobs to avoid having too
much tax withheld. This is the time to be mindful of your child's
tax situation and fix it so taxes aren't taken out, Dupree said.
To claim exemption from withholding, you generally would need to have
had no tax liability the previous year and expect none this year.
However -- isn't there always one with the IRS? -- Your child will
still have to pay Social Security and Medicare taxes.
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EDITORS NOTES:
I would love to see the face of a 15-year old American boy working for
the first time, and looking at all the deductions taken out of his very
first minimum wage paycheck. Maybe the conversation would go
something like this (from the mouths of children, as they say):
Mom, Dad - look at all the money the government took away from me, and
they made me contribute to Social Security too. Yes son, now you
know, our government is broke, and they need to tax children as
well. But dad, that's not fair. Well son, that is the price
you pay to live in the best country in the world. But, dad,
Enrique, the high school exchange student from the Dominican Republic,
told me he does not pay taxes from his summer job. Well son,
Enrique lives in one of those poor, third world countries, without all
the wonderful government programs and social safety nets we have
here. But dad, Enrique is not poor and he lives just like
us. In fact dad, Enrique's mom has a live-in maid, and we don't
have a maid. Go out and do your chores son, and stop asking silly
questions. But dad, I don't understand.
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1040 CHECKMATE? DOJ Dismisses Felony Tax Prosecution
June 9, 2006
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On May 12, 2006 in Peoria, Illinois, the attorney for the U.S.
Department of Justice (DOJ) begged the court to dismiss all charges
against IRS victim Robert Lawrence in federal District Court. The
motion for dismissal came on the heels of a surprise tactic by
Lawrence's defense attorney Oscar Stilley. The tactic
threatened exposure of IRS's on-going efforts to defraud the
public. The move put DOJ attorneys in a state of panic that left
them with only one alternative: beg for dismissal, with
prejudice. Stilley's tactic paid off. Sixty days earlier,
the DOJ had indicted Lawrence on three counts of willful failure to
file a 1040 form, and three felony counts of income tax evasion. The
federal Judge dismissed all charges with prejudice, meaning the DOJ
cannot charge Lawrence with those crimes again. The trial was to
have started on Monday morning, May 15th. On Wednesday, May
10, Stilley mailed a set of documents to the DOJ in response to DOJ's
discovery demands. The documents revealed to DOJ for the first time
that Lawrence was basing his entire defense on an act of Congress, 44
U.S.C. 3500 - 3520, also known as the "Paperwork Reduction Act" (PRA).
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In Section 3512 of the Act, titled "Public Protection," it says that no
person shall be subject to any penalty for failing to comply with an
agency's collection of information request (such as a 1040 form), if
the request does not display a valid control number assigned by the
Office of Management and Budget (OMB) in accordance with the
requirements of the Act, or if the agency fails to inform the person
who is to respond to the collection of information that he is not
required to respond to the collection of information request unless it
displays a valid control number. In Section 3512 Congress went on
to authorize that the protection provided by Section 3512 may be raised
in the form of a complete defense at any time during an agency's
administrative process (such as an IRS Tax Court or Collection and Due
Process Hearing) or during a judicial proceeding (such as Lawrence's
criminal trial). In sum, the PRA requires that all government
agencies display valid OMB control numbers and certain disclosures
directly on all information collection forms that the public is
requested to file. Lawrence's sole defense was he was not required to
file an IRS Form 1040 because it displays an invalid OMB control number.
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http://www.givemeliberty.org/RTP2/UPDATES/Update2006-06-09.htm
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EDITORS NOTES:
I offer this to you for information only, as I find it hard to believe
this case (if true and I can only assume that it is) will force any
changes going forward. All of you who know me indeed have heard
me say time and time again that the IRS or the US income tax will not
go away, due to legal arguments or otherwise (regardless of the
validity of such arguments). In fact, this site and article also
touches upon the idea of a US national sales tax replacing the income
tax. I disagree. If anything, since it will be politically
unpopular to raise income tax rates (other than chasing after
expatriates as we noted earlier) and since also I think the government
is deeply in the hole financially, there will be a national sales tax
in addition to the existing income tax. In any event, as Mr.
Ripley used to say: Believe it or not.
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SOARING COMMODITY PRICES POINT TOWARD DOLLAR DEVALUATION
May 28, 2006
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The astonishing rally of commodity prices during the past 12 months has
taken most analysts, economists and investors by surprise. Rather than
a dramatic change in the relationship between supply and demand for the
underlying commodity, surging commodity prices have been driven by the
devaluation of the preeminent marker of international commodity values
-- the U.S. dollar. In the months ahead, the dollar's devaluation will
increasingly register against other major currencies. Rapidly
deteriorating U.S. economic fundamentals, questionable policy at the
Federal Reserve, increasing political instability and extreme global
geopolitical instability may trigger significant foreign capital flight
from the United States.
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Brief History of Commodity Prices: In late 2005, the Commodity
Research Bureau's broad commodity price index, known as the C.R.B.
Index, quietly surpassed record high levels set in the early 1980s. By
the third week of May 2006, the C.R.B. Index gained another 12 percent.
Behind this year's rise in the C.R.B. Index have been unprecedented
price rallies of individual commodities. In the first five months of
2006, crude oil prices have increased by a mere 14 percent followed by
gains in corn and wheat of about 10 percent. Price gains for other
commodities have far outpaced the gains of oil and grains. Zinc
prices have doubled in the past five months, copper prices are up 80
percent, silver has risen by 60 percent and palladium, tin, gold,
aluminum and platinum have gained 50 percent, 40 percent, 39 percent,
36 percent and 35 percent respectively. Prices for other commodities
including lead, iron and scrap iron have followed a similar path this
year. While these commodities have vastly varied uses from industrial
to food production, they all have one common feature -- they are
denominated and traded internationally in U.S. dollars.
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http://www.pinr.com/
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EDITORS NOTES:
This is an event we have discussed before. Part of the reason may
indeed be the predicted commodities rally as we discussed in previous
bulletins. On the other hand, as one currency is inflated and
losses it value in the world markets, it stands to reason one would see
price increases (asking for more money because that particular money is
worth less and less) for commodities and products purchased from
abroad. Obviously it is not just about oil and radical nations
seeking to increase prices, as we have seen other commodities go up in
price dramatically as well.
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READERS WRITE IN:
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Hi John - I am a Danish citizen and very, very tired of our tax system!
Do you know, that we hold the world record in taxing? Of every Danish
crown (our currency) 91 (ninety-one!) percent goes back to the state.
On cars alone we have a registration tax for 180 (one-hundred-eighty!)
percent and then we pay an additional USD 1.000 plus in road taxes
every year. 30 years ago this used to be a sleeping beauty
country. Today we have a lot of criminality especially with the Muslim
new citizens - that have been invading Europe. Our healthcare
system is sinking at an alarming speed, and besides, we have a lousy
climate. Right now (31st of May) I am wearing a thick sweater and
looking out at the rainy clouds gathering again-again-again! We
spend January in Costa Rica and loved it, but real estate seemed quite
expensive.
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My wife and I have for some time now with great interest read your
newsletter and likes your articles and points of view. It is always
nice to read something, one agrees with! Also I share your concern for
the future. We are very interested in moving out, and after
looking at most of the world - we tend to prefer a Caribbean
destination. Of course your sweet talk about DR have made us
search the net for info, and I have to admit, the prices of real estate
are amazing. As we would prefer to have something to do, we
looked at restaurants and hotels, especially on the north coast.
One thing jumps to the eye, though: It seems like about 30 percent of
hotels are for sale, as are a lot of real estate, and the figures we
received for a restaurant did not turn out as good as one might expect
for a restaurant of that kind should. How come? Is tourism bad,
or is the expectation of a deflation in US economy making people in the
tourist-and real estate industry fear that tourist and immigrants will
soon stay away or? Maybe you have an answer to the amazing low
prices and the huge stacks of real estate and businesses for sale?
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EDITORS REPLY:
Thank you for your letter, and the truth is, problems with the welfare
state going bankrupt, the aging of the population plus new poorer
immigrants coming in and putting pressures on the already over burdened
welfare system is a common problem both inside the EU and the US.
However, while the US has its problems with illegal Mexicans, it
probably is true that Europe could be even more of a social powder keg
considering all the poor and unemployed Muslims coming in. Not
only that, the cost of housing has certainly gone up much, much faster
than salaries, also both in the US and the EU. If the younger
generation coming up (people aged 20 to 35) cannot afford even a basic
middle class home, or simply maintain the same kind of average
lifestyle their parents had - then what will the outcome be going
forward? I tend to think you are going to have a large number of
very angry young people, who will not tolerate higher taxes later on to
support the failing and insolvent social welfare system (and pensions
of the very large percentages of aging baby boomer populations)
especially when they find out their benefits will most likely be cut or
reduced in the future (or certainly will not be as generous as what
their parents received). It will develop into a severe social
problem, and of course the poorer immigrants coming in will only
aggravate it. In any event, I have made the comment that in the
last few years, we have seen more and more younger people (under the
age of 40) expatriating, where as such an idea used to be primarily for
those close to retirement age. This is a very telling sign or
event, as some very smart and intelligent younger people see the
writing on the wall, so to speak, and are leaving while they still
can.
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Moving on to your questions about the Dominican Republic and real
estate or businesses, I do think you need to forget about tourism
related businesses and look at the various other opportunities that
exist. Many people have this dream of moving to the Caribbean and
setting up a beach bar or restaurant, but in many cases, you have
people going into these businesses with no restaurant or tourism
experience - - and you also have the case whereby there are too many of
these kind of businesses in a compact area as well. I would say
the later is probably the case with areas such as Sosua. Which is
to ask, how many small beach bars and tourist restaurants can one small
town support? I tend to think part of the reason you are seeing
so many for sale signs is that many of these people (Europeans mostly)
have flooded a very small and seasonal market with food and bar
businesses, whereby there are just too many to begin with. My
personal opinion is, unless you have something unique to offer (and
difficult to copy) in regards to tourism, you will have a rough time
competing with the all-inclusive resorts. However, the good news
is that there are many, many worthwhile business opportunities to
consider. For example, we have one client that grows high-end
produce (herbs) for export. We talked before about a Japanese
gentleman that started a shrimp farming business. Another started
what may be the very first vineyard and local winery in the
country. Yet another exports crafts and local paintings.
Yet another brought in a new building product from the US not available
in the local market and has started doing that. There are many
good opportunities and also many products and services common in Europe
or the US, that has not yet arrived in the country. Why should it
not be you to introduce it?
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On the real estate question, you ask why is the real estate is so much
more affordable in the Dominican Republic? A very good question,
and I tend to think the local real estate market has not gotten out of
control as it has in some other jurisdictions. There are
exceptions regarding the high-end (and very high priced) projects
marketed to foreigners, but overall the local real estate market is
very, very affordable. Why is this so? Well, I tend to
think anywhere you find Americans rushing in, you will find inflated
housing prices. The tourism ratio is still about 80 percent
European and about 20 percent American, so for whatever reason, the
Dominican Republic still remains to be a somewhat unknown destination
for Americans. The silver lining to this may be the real estate
costs. Certainly we have seen real estate costs go through the
roof (no pun intended) in Costa Rica, parts of Panama, and numerous
other Caribbean jurisdictions. In most cases, the common
denominator seems to be floods of Americans coming in and buying up all
the real estate, creating a sort of inflated feeding frenzy bubble
along with it. As we pointed out in our last newsletter, I like
St. Lucia and think it to be a nice place, but they must be smoking
something to push a one-bedroom apartment for US$450,000.
When purchasing real estate, just like anything else, you must ask
yourself if there is value in the price versus what you are getting for
your money. I will take a 1,500 square foot ocean front villa in
the Dominican Republic for US$125,000 over an overpriced one-bedroom
apartment someplace else any day of the week.
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ANOTHER READER WRITES:
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John - I live in the D.R. I left the states 8 years ago. I
started a small tourist business with just US$5000.00.I just sold it
for US$300,000.00. My husband wants to convert the money to pesos
and put it in a Plazo Fijo and live off the interest. I am really
concerned to convert all those dollars to pesos. Do you have any
advise?
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EDITORS REPLY:
Aha, someone that has set up a tourist business on a shoestring budget,
made it work and sold it for a healthy profit. Good for you,
these are the kinds of success stories I like to hear about, and know
very well from some of our other clients similar stories like this one
(so, it can be done). In any event, to answer your question about
depositing funds into Pesos in order to live off the interest: I
would say you should consider putting some funds aside like this, but
dollar cost average as you go forward. Meaning, while it
certainly may be true that the US Dollar will have the tendency to
loose value going forward, certainly other smaller (and potentially
weak) currencies could also weaken versus the Dollar (although perhaps
not as much as they might otherwise do). So, the game plan should
be dollar cost average and tread lightly over time as you make the
switch into another currency. Also, even though the higher
interest rates in Pesos are attractive, chances are you will also see
US Dollar interest rates outside the US go up as well (as higher rates
inside the US place pressure for outside deposits in terms of
competition for those deposits). Stated very simply, it is not a
foolish idea to perhaps take perhaps half (US$150,000) and convert into
pesos at the current exchange rate, and keep the rest in US Dollar (or
Euros) for the moment. With that amount in pesos invested at the
worst case of 10 percent in a bank CD, you should be getting about
RD$40,000 per month (which hopefully is enough to cover your basic
monthly living expenses, assuming you own your own home). If you
wish to put some of that into commercial paper, then you might get 12,
14 or 15 percent in pesos, which of course might give a bit more each
month in interest. Again, it all depends upon your lifestyle and
how much you need, but the idea is to be flexible. As you know,
many of the car dealers have started to price new car prices in US
Dollars again. There are times when paying in US Dollars in
cheaper than in pesos, and vice versa as well. The trick is to
have both, so you can take advantage of each case as it comes
along. None of us have much control over economic factors in
other countries (the price of oil) or what politicians do at times as
well. However, in the least, we can be smart enough to plan our
personal finances so we are in the best position to take advantage no
matter what.
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ANOTHER READER WRITES:
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Hello Mr. Schroder - I just read your New 2006 Dominican Report and
think it was the best $20 I have ever spent. I have thoughts of
moving to DR from Brooklyn and your report answered a lot of questions
that I did not even think of before. I am still interested in
moving but am thinking of doing a 3-month trial to see if it is
something that I could survive doing.
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EDITORS REPLY:
Thank you the positive comments. In regards to moving to any new
country, I do think it prudent to rent first and get a feel for both
where you want to live (before buying) and also if the place (country)
is a good fit for you personally. No country is perfect and this
applies to the Dominican Republic as well. However, I do
certainly think it is the case that you can live better on less of a
monthly income than you are currently doing in the US at the
moment. Not only that, as we had discussed in previous
newsletters, one has the ability to keep up with local inflation to
some extent (which you cannot do if you are someone with all your
assets in US Dollars and are moving to another foreign country that has
adopted the US dollar as its currency as well (Panama, Ecuador,
etc.). In summary, I usually advise clients to make a checklist
of 12 or so attributes that are important to them personally and then
see what country scores highest on that list (each person will have a
slightly different list accordingly). With that said, it is true
that many of our clients, after having investigated other
jurisdictions, have elected the Dominican Republic as one of their top
choices.
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ANOTHER READER WRITES:
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I like your comments. So far, your opinions have been strait to the
point. As a Senior Citizen and Retiree, I have concluded that we
have no other option than to Evacuate the US. The US GOVERNMENT HAS
ENFORCED THE GENTRIFICATION PROCESS ON US. Another issue is Dominican
Republic, as one country for retiree to live and buy property. I agree
with your opinion. Also, let me clarify that COLDWELL BANKER IS NOT
RELATED WITH US COLDWELL BANKER. I know that you did not disclose this
information in YOUR REPORT. It requires a lot of search and
inquiry before buying, but it is worth it. Another issue is the
Electricity. It is been improved?
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EDITORS REPLY:
Thank you for your letter. On the Coldwell Banker issue, I think
most people realize that any of these national American chains are
indeed franchise arrangements. Which is to say, each office is
normally independently owned and operated, but is affiliated with the
US chain in a franchise arrangement. And that would be true for a
Coldwell Banker office in Ohio as it would in the Dominican
Republic. So, I am not sure what point you wish to make, but
there is no intended omission of information on my part, as I tend to
believe most people are aware of this.
.
The electricity issue we have talked about before, but for those
readers who have not read some of our previous newsletters, I will
repeat it here again. The electric utilities, be it retail
distribution or the generation plants themselves were previously owned
and operated by the government. As in most cases when any
government owns a public utility, they often treat it as a cash cow or
revenue source rather than a business that requires the ability to
generate a profit in order to be sustainable and one that requires
constant reinvestment also. In addition, if any government owned
utility does not make a profit (which is the majority) then in effect
it becomes a tax payer funded operation (to make up the shortfall in
revenues, which would not be the case if a private enterprise).
In any event, there were no power outages in the Dominican Republic
twenty years ago. However, the population just about doubled, as
had the electricity needs of the country without any sufficient
reinvest into new generation capacity to keep up. The result of
course was demand for electricity exceeding supply and rolling
blackouts or shortages each day, for up to 10 hours per day.
President Fernandez privatized the electric utilities and the power
generation plants when he was President the last time
(1996-2000). The result of that was private companies, both from
the US, South America and Europe that did indeed make the necessary
investments to bring the generating capacity up to speed. In
fact, the general manager at one of the plants actually told me that
because of the new equipment and improvements, the wholesale cost of
electricity per kilowatt actually had come down. So, after this
tremendous investment effort, the Dominican Republic certainly has
enough capability to offer electrical service 24 hours a day to
everyone. So, what is the problem?
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The problem was and still is to some extent that many Dominicans,
especially the poorer segments of the populations have been cultivated
to believe that electricity is supposed to be either very cheap or
free. After all, this was the case when the government owned the
utility, allowing for the poorer people to pay a very low fixed monthly
bill (if any at all) and were very lackadaisical about cutting people
off in these areas when they did not pay. Of course the middle
class and wealthier segments of the population pay their fair share and
always pay the bills, so this issue primarily concerns the poorer
areas. During the previous government administration, the
utilities started to push bill payment and did start cutting off
service to those who did not. The result of that was that many
people in poorer areas started rioting. Trying to avoid this kind
of social problem, the previous government told the electric utilities
to back off. Since the money has to come from somewhere, the
compromise was that the utilities could raise the cost of electricity
in the middle class and wealthier neighborhoods. So, once again
you have a case of the so-called more affluent part of the population
subsidizing the poorer segments. And for this reason, depending
upon where you live, you could pay a very different rate for
electricity all because of the neighborhood you live in (ranging from
about US equivalent 9 cents per Kilowatt up to about 22 cents per
Kilowatt). What is the situation today?
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The private utilities have started to press for bill collection once
again and it is very true that there are more blackouts (less daily
electrical service) in the poorer or economically marginal areas simply
because they are less percentages of the population in these areas that
pay their bill. I have noticed less frequent power outages and
for less time where I live within the past few months, but I have heard
complaints from people in these poorer areas about extended power
outages still and lack of consistent service. But, the reason is
economic (lack of payment) rather than the capacity of the utilities to
provide service 24 hours. With that said, I do think there is a
silver lining for the Dominican Republic going forward, and it is by
accident rather than design.
.
Most Dominicans are very, very familiar with battery inverter systems,
which allow you to have a charger - inverter connected to a series of
car batteries that provide electricity inside your home automatically
when the power goes out. Most or many, many middle class and
wealthier people either have these inverter systems in their homes (or
might have a diesel or gasoline powered generator as well). So,
the point is, for a cost of anywhere from about US$1,500 to US$3,500,
you could install a very quiet and efficient system to guarantee
electricity in your home 24 hours a day when the power goes out.
Again, this is because of the power outages that started to occur about
12 to 15 years ago, and there are currently a large number of different
brands of inverter systems (some Americans made, some European, and
some local) on the market, which means a tremendous amount of price
competition for these systems (and brands of batteries as well).
More recently, with the increase in electrical costs becoming a factor
worldwide because of the cost of petroleum, there have been a number of
companies coming into the local market (Dominican Republic) to sell and
install both home solar panel and wind generation systems. This
is a natural progression, as you do need a battery inverter system
anyway when you start working with such alternative electricity
generation systems. So, I think Dominicans are much, much better
prepared for alternative energy in this regard and emotionally as well
since they have lived with the problem for years. What I mean by
that is, when the power goes out in the Dominican Republic, Dominicans
turn on a flash light or light a candle and kill the time by playing
dominoes. In the US, all hell breaks loose and everyone goes on a
looting rampage. Very recently the power went out during the day
in Los Angeles and it was national news all day long on CNN. In
the Dominican Republic, it is no big deal. Also, the current
President has pushed for development of bio-diesel and other
alternative fuels, not to mention the approval of five new coal fired
plants to try and reduce the impact of high priced oil going
forward. In short, I have heard this complaint about electricity
issues from many foreigners as one negative regarding the Dominican
Republic and the truth is, they are correct or it is a valid
point. However, the joke is, we are starting to see the fallout
of high priced petroleum both in terms of shortages, and higher
electricity costs in many, many countries including the US. For
example, in Panama very recently there have been protests over power
outages and much higher electric utility bills. The reason for
this is that most of the electricity generated in Panama is from
petroleum. As the cost of petroleum continues to go up, expect
even higher utility bills and perhaps even shortages. So, this is
a problem worldwide. As I stated previously, due to other
circumstances, Dominicans have learned to live with it and develop
other solutions, both physically or literally and psychologically as
well (all electricians in the Dominican Republic know how to hook up an
inverter system, where as when I suggested the consideration of such a
system to some Panamanian friends living in Panama, they had no idea
what I was talking about).
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