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Cuba, Dominican Republic and Puerto Rico Country Risk Report Q4 2016

  • August 2016
  • -
  • Business Monitor International
  • -
  • 53 pages

Core Views


Growth in the Dominican Republic will moderate amid declininggold output, but relatively robust private consumption and tourismwill help to sustain the economy.Puerto Rico's economy will remain in recession in the next severalyears as fiscal austerity and a restructuring of the territory's debtdepress household and government consumption.The Cuban economy holds immense potential given the island's largesize and proximity to the lucrative US market. However, investmentand growth will depend on political dynamics on both sides of theFlorida Straits.



Major Forecast Changes

We have delayed our expectations for the unification of Cuba's dualexchange rate regime, and we now expect it will take place by theend of 2018 rather than end-2017. A lack of information regardingthe timeline for unification, combined with policymakers' failure toaddress it during the Communist Party's congress in April, suggestthat it will take longer than we previously expected to come to fruition.

Table Of Contents

Cuba, Dominican Republic and Puerto Rico Country Risk Report Q4 2016
BMI Indices - Brief Methodology.. 5
BMI Risk Index - Cuba6
BMI Risk Index - Dominican Republic..7
BMI Risk Index - Puerto Rico.8
BMI Risk Index League Tables...9
Regional SWOT Analysis 10
Regional Executive Summary ... 13
Core Views 13
Major Forecast Changes ..13
Key Risks...13
Chapter 1.1: Economic Outlook - Cuba 15
Economic Growth Outlook.. 15
Tourism Expansion To Significantly Outpace Broader Economy15
The Cuban tourism sector will continue to experience extremely rapid growth as the number of travel firms servicing the island steadily
expands.
Exchange Rate Policy.. 16
Currency Unification Delayed But Not Discarded..16
Cuban government officials have repeatedly indicated that currency unification is a top reform priority, but we expect that ideological
hesitancy and practical implementation considerations will result in significant delays.
TABLE: CUBA - MACROECONOMIC FORECASTS..16
Chapter 1.2: 10-Year Forecast - Cuba... 19
The Cuban Economy To 2025. 19
Reforms And Global Integration To Drive Stronger Growth.19
Economic growth in Cuba will pick up in the coming decade due to incremental reforms on the part of the government and greater
engagement with the global economy.
TABLE: CUBA - LONG-TERM MACROECONOMIC FORECASTS...19
TABLE: THE CUBAN BUSINESS ENVIRONMENT TWO-STEP.20
Chapter 1.3: Political Outlook - Cuba... 23
Domestic Politics. 23
Further Foreign Policy Reform On Ice Until After US Election.23
US-Cuba relations will not take significant steps forward over the coming months, as US President Barack Obama and his Democratic
Party will avoid flirting with controversy in the lead-up to the country's general elections in November.
TABLE: CUBA - POLITICAL OVERVIEW...23
Long-Term Political Outlook... 24
Political Change To Come, Despite Legacy Of Intransigence..24
The Cuban political system is heading for substantial change and uncertainty as the Castro brothers prepare to leave office in 2018 after
more than 50 years in power.
Chapter 2.1: Economic Outlook - Dominican Republic.. 29
Monetary Policy 29
Policy Rate On Hold Through 2016..29
The Banco Central de la República Dominicana held its policy rate steady through end-2016 in light of rising inflation and strong
economic growth.
Fiscal Policy And Public Debt Outlook . 30
Fiscal Consolidation Efforts Will See Deficit Narrow Beginning In 2017.30
The Dominican Republic's budget deficit will widen in 2016 as decelerating economic growth dampens tax revenue. However,
government efforts to consolidate the fiscal accounts will ensure that the deficit narrows beginning in 2017.
Chapter 2.2: 10-Year Forecast - Dominican Republic. 33
The Dominican Republic Economy To 2025.. 33
Recovery In Tourism To Drive Growth33
The Dominican Republic's economic outlook over the next decade is bright, with the country set to benefit both directly and indirectly
from growth in the US.
TABLE: DOMINICAN REPUBLIC - LONG-TERM MACROECONOMIC FORECASTS.. 33
Chapter 2.3: Political Outlook - Dominican Republic.. 35
Domestic Politics. 35
Medina Agenda To Face Little Resistance..35
Following his landslide electoral victory in May, Dominican Republic President Danilo Medina will face little significant opposition to his
business-friendly agenda.
Long-Term Political Outlook... 36
Economic Improvements To Support Policy Continuity...36
Government policies will remain business-friendly in the Dominican Republic in the coming years, as strong economic growth ensures
the current political direction of the country remains popular.
Chapter 3.1: Economic Outlook - Puerto Rico. 39
Fiscal Policy And Public Debt Outlook.. 39
PROMESA's Passage Only The Beginning Of Road To Recovery...39
Economic Growth Outlook.. 40
Restructuring Will Keep Economy In Recession...40
Puerto Rico's recession will persist in the next several years as the economy continues to undergo a painful internal devaluation.
TABLE: PUERTO RICO - GDP GROWTH FORECASTS...40
Chapter 3.2: 10-Year Forecast - Puerto Rico... 43
The Puerto Rican Economy To 2025.. 43
Growth Will Remain Subdued Amid Unfavourable Demographics..43
Puerto Rico will remain in recession in the next few years due to a painful internal devaluation. The economy will return to growth
in the latter part of our 10-year forecast period, but unfavourable demographics and labour market dynamics will limit the pace of
expansion.
TABLE: PUERTO RICO - LONG-TERM MACROECONOMIC FORECASTS43
Chapter 3.3: Political Outlook - Puerto Rico 45
Domestic Politics. 45
Opposition Candidate Likely To Secure Governorship.45
Opposition candidate Ricardo Rosselló of the PNP is likely to win Puerto Rico's November gubernatorial election, leveraging his outsider
status to defeat David Bernier of the incumbent PPD.
Long-Term Political Outlook... 46
No Change In Sight To Political Status With The US.46
Puerto Rico's political status as a territory of the US is unlikely to change over the coming decade given the unfavourable tax effects that
statehood would imply for residents.
TABLE: PUERTO RICO - IMPACT OF STATEHOOD ON SELECT FEDERAL PROGRAMMES.. 47
Chapter 4: BMI Global Macro Outlook... 49
Global Macro Outlook.. 49
Brexit To Hit Global Growth.49
TABLE: GLOBAL ASSUMPTIONS..49
TABLE: DEVELOPED STATES, REAL GDP GROWTH, %50
TABLE: EMERGING MARKETS, REAL GDP GROWTH, %...51
TABLE: CUBA, DOMINICAN REPUBLIC and PUERTO RICO - MACROECONOMIC DATA and FORECASTS. 53

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