While there has been significant progress in diversification efforts, the United States remains in an essential position.
In 2024, DR free zones maintained their heavy reliance on raw materials from the United States, which constituted 61% of their total inputs. The United States maintains its leading role by sustaining the operational base of the Dominican Republic’s export-driven industrial sector, which demonstrates their historical commercial partnership.
The latest CNZFE report contains data that demonstrates significant changes in the sources of inputs used by companies in DR free zones. The unchanged U.S. leadership position exists alongside global sourcing shifts that drive procurement strategy changes through diversification and realignment.
The United States: A Critical Link in the Supply Chain
The data showing that 61% of imported raw materials came from the United States in 2024, while China supplied only one-sixth of that amount demonstrates a significant reliance that presents both benefits and potential disadvantages. The combination of geographic closeness and robust diplomatic relationships with established trade frameworks like CAFTA-DR has resulted in a reliable trade infrastructure between the two countries. The substantial concentration of imports creates risks regarding the potential effects of trade policy changes or supply chain interruptions, as well as currency volatility.
A total of 579 companies in DR free zones sourced raw materials from the U.S. in 2024, which represents an increase of 11 companies from 2023. The steady increase reflects both consistent trade patterns and growing trust in U.S. supply channels. Even with ongoing talks about diversification and nearshoring to other regions, the United States continues to be the fundamental element of the free zone supply chain.
China and Italy: Significant Players, Diminished Momentum
China secured the second position with 10% of imported inputs, while Italy came in third with 9.1%. The operational activity of China declined significantly while Italy maintained its position without major changes. The number of companies sourcing from China decreased from 581 in 2023 to 497 in 2024, resulting in a decline of 84 companies. The significant reduction in sourcing activity from China represents concerns about rising freight costs and instability in Asia-Pacific trade routes, along with efforts to diversify suppliers.
The top tier of sourcing destinations comprised Puerto Rico at 3%, along with a group of diverse countries, which included Ecuador at 1.8%, Mexico at 1.4%, Germany at 1.2%, and Honduras at 1.0%.
The use of domestic sources is growing but remains relatively small in scale.
The rise in local sourcing during 2024 represented a potentially strategic development. The Dominican Republic sourced raw materials only make up 0.4% of total raw materials, but companies buying local inputs increased from 209 in 2023 to 234 in 2024, which represents a 25% rise. The current trend reflects endeavors to integrate domestic operations within the free zone ecosystem, which may lead to industrial symbiosis, minimized logistics expenses. and reinforced economic resilience.
The Dominican Republic’s raw material sourcing stands alongside the Philippines, Turkey, and the Netherlands, yet falls short when compared to regional countries Guatemala, Costa Rica, and Haiti, which each have 0.3%.
Diversification and Emerging Supply Hubs
Free zones in the DR are increasingly pursuing alternative supply markets based on emerging evidence. The number of supplying companies in Sri Lanka grew substantially from 22 in 2023 to 79 by the following year. Thailand has gained relevance by adding 14 companies, while Turkey and Guatemala both increased by 10 companies, and the Czech Republic added 8 companies. Companies adjust their supply chain approaches to emphasize supplier flexibility and risk mitigation alongside cost-efficiency as part of global supply chain strategy evolution.
In contrast, some countries lost ground. Canada experienced a reduction of 29 companies, while Taiwan faced a decrease of 16 companies, next to Japan’s 17 company loss, and El Salvador’s 12 company reduction, with Chile losing 11 companies and Pakistan seeing a nine company decline. The reasons for these changes include variations in shipping fees, diplomatic relationships, product standards, and other logistical factors.
The category for “other countries,” which represents 2.1% of total inputs, saw a slight decrease from 213 to 194 companies, indicating a tendency towards industry consolidation instead of expansion in diverse sourcing.
Sectoral Growth and New Investments
The uninterrupted expansion and vibrancy of DR free zones benefit from data sources that extend beyond raw material procurement. The Dominican Republic approved 74 new companies for operation under its free zone regime during 2024. The projects should create 7,086 direct jobs, while drawing US$196 million in investments and US$103.1 million in foreign exchange.
The Dominican Republic has proven to be an increasingly appealing location for manufacturing and services due to its stable political environment, cost-effective labor market, advantageous trade deals, and enhancements in logistics infrastructure.
Tobacco and its derivatives emerged as the top subsector among new entrants with 18 new companies joining the market. Other growing segments included:
- Call centers (15 new companies)
- General services (8)
- Apparel and textiles (6)
- Electrical and electronic products (5)
- Medical and pharmaceutical goods (4)
DR free zones now feature a diverse range of industries because they have expanded beyond their traditional focus on textile manufacturing.
Infrastructure, Services, and Institutional Contributions
Businesses operating within DR free zones serve as significant supporters for both public service structures and national institutions. Free zone companies spent RD$23.35 billion on multiple services in 2024.
- Social security: RD$14.77 billion
- Electricity: RD$6.41 billion
- Telecommunications: RD$1.34 billion
- INFOTEP (training and development): RD$613.7 million
- Water supply: RD$218.1 million
The sector demonstrates its extensive contribution to national socio-economic development by creating jobs and exporting goods, alongside supporting public service stability and developing human capital.
Free Zones in DR play a strategic role in the country’s development process
The Dominican Republic’s industrial and export capacity now relies heavily on DR free zones, which have transformed into essential operational hubs over the past several decades. Free zones in the Dominican Republic generate over 190,000 direct employment opportunities, while accounting for 60% of the nation’s export volume and driving innovation alongside logistics and trade activities.
The sector’s performance during global shocks such as the COVID-19 pandemic and recent geopolitical trade disruptions proves its ability to remain strong and adjust to changes. By diversifying its sourcing patterns and maintaining strong connections with the United States, the Dominican Republic creates advantageous conditions for deeper involvement in global value chains.
Conclusion: Balancing Dependence with Strategic Flexibility
The Dominican Republic’s free zone sector demonstrates healthy growth alongside prudent diversification and strategic investment as of 2024. The Dominican Republic benefits from its dependable U.S. raw material supplies but must seek other suppliers to ensure its economic resilience.
DR free zones maintain their powerful status as tools for economic development and industrial transformation in the Caribbean through expanded domestic sourcing practices and relationships with emerging supply hubs like Sri Lanka and Thailand, as well as special incentives for high-value industries.
As more firms enter the industry and supply chains evolve toward greater flexibility, the Dominican Republic stands ready to improve its position in international manufacturing and services markets.