The Dominican Republic is seeking to shore up its self-promotion as a logistics hub in Latin America, using the strength of its links to the United States. More than US$5 billion in foreign investment is further transforming the Dominican economy from an international tourist destination to a production and distribution center in the region.
Turning from Sun & Beach to a Gateway
“The Dominican Republic is not sun and beach, it is much, much more than that,” said the Minister of Industry, Commerce and SMEs, Víctor (Ito) Bisonó, in an interview with Europa Press. The Caribbean nation, which has been “recalibrating” its international image in recent years, now aspires to be positioned as a logistics hub in Latin America, “as a gateway between the United States and Latin America,” a rebranding that puts it in competition with its neighbor, Panama, among others.
“In this case, the near-shoring (supply-chain relocation closer to final markets) gives us a huge advantage because the United States is seeking the recomposition of supply-chain logistics,” adds Bisonó. “The closest country with the greatest facilitation is the Dominican Republic, given the proximity, the country’s stability, a very skilled young labor force, and the capacity that we already have to produce important brands of medical equipment and electronics and export to the United States.”
In fact, the information shared by the minister and official sources consulted for this report echoes the characterization of the Dominican Republic as a rising manufacturing and distribution pole. Location, availability of infrastructure and free zones, and free trade agreements in hand, “we have all the cards on the table to be that logistics hub in Latin America,” Bisonó says.
The minister specifically points out as advantages of this repositioning the physical closeness to the US market (ports and airports) and by air (Dominican distance to Miami by sea is around 2 hours and by air is similar), the age of the labor force and its level of preparation, and the already known production capacity for certain high-value added categories destined for the US market. For its part, analysis provided by other industry actors indicates that over time the Dominican Republic has been able to consolidate a broad and complementary industrial ecosystem of advanced manufacturing. According to official sources, Dominican free zones host more than 850 companies, and over 60% of national exports are already channeled from free zones, with excellent logistics connectivity to external markets.
The island also has, they claim, advantages in the trade policy arena. The Dominican Republic is one of the very few countries where US tariffs on goods that meet certain eligibility criteria do not exceed 10 %, and in some cases could be lower. This policy framework, together with political, economic, and social stability, “more solid than the rest of the region,” forms part of the country’s differential for granting legal certainty to foreign investors. A more formal government position, supported by numerous analysts, is that the Dominican Republic is consolidating as a logistics hub in Latin America in a way that changes the narrative, from a purely tourist country to a modern country with an economy integrated into international value chains. Thus, for example, the director general of customs has qualified the logistics sector “as our new economic axis.”
Receiving US $ 5 Billion in Foreign Investment
The Dominican Republic receives about 30 % of the foreign investment going to Central America and the Caribbean, and as of this October, it expects to close this year with more than US $5 billion in investments.
Spanish companies in particular have made significant investments in recent years, across multiple sectors. The most active areas where Spanish capital is present include renewable energies and agro-industry, but also take advantage of the free zones. To this end, an official and business delegation participates in the week of “Dominican Week” in Spain (27-31 October), with the goal of deepening the relations of commercial and investment cooperation with Spanish firms, Spain being the country’s leading European partner. Commercial flows between Spain and the Dominican Republic already total nearly US $993.35 million, with rum, raw cocoa, and premium cigars being exported, and premium gasoline, glazed tiles, and frozen orange juice concentrate being imported, among other products.
Notable Spanish investments in the Dominican Republic include Acciona (airport construction, in Pedernales), Grupo Eulen (services), Ron Barceló (distilling), Mapfre (insurance), and Banco Sabadell (finance). Among Dominican entrepreneurs of Spanish origin, the presence of large platforms and hardware store chains, owned by second and third-generation Spanish-Dominicans, stands out.
Main Infrastructure Developments: Ports, Routes, and Free Zones
One of the flagship projects of these next months that will help cement this transformation is the new maritime route between the Dominican Republic and Puerto Rico. To cover the route, Baleària, an experienced player in ferry connections, has announced services. “In the Dominican Republic, everything is ready and permitted; what remains is the Puerto Rico side,” the minister indicated.
The logistics infrastructure in place or being put into place is not negligible. For example, the Multimodal Caucedo Port, currently managed by DP World, as well as the associated free-trade zones, can be considered an integrated maritime-industrial-logistics ecosystem. Port experts point out that goods shipped from Dominican ports to various US East Coast destinations arrive in just 3 to 4 days, much faster than those from Asia.
Likewise, the network of free zones is not anecdotal: as mentioned, more than 850 companies are installed in these more than 60% of total exports, many of them in electronics, medical devices, and manufacturing. Thus, from production to commercialization, the Dominican Republic is presenting itself as a logistics hub in Latin America capable of offering complete chains of manufacturing, warehousing, and distribution, and integration into US, Latin American, and Caribbean markets. This model makes it particularly attractive for businesses looking to nearshore or diversify away from longer and more vulnerable supply chains.
Outlook and Challenges
In short, by betting on the relocation of supply chains and nearshoring as a key pillar for its economic diversification, the Dominican Republic is not only betting on the momentum of a logistics brand that helps it break the image of being a one-trick economic pony focused on tourism, but it is in fact re-positioning itself as the leading logistics hub in Latin America for those firms that decide to relocate or diversify outside Asia.
The country’s geographical advantages, coupled with a diversified infrastructure with deep investment experience, a free trade agreement with the United States, and financial incentives to attract investment, among other ingredients, seem to be more than enough for the Dominican Republic to start to rebrand itself as a logistics hub in Latin America. This points to it not only being on the rise, but in fact setting out to change its economic identity.
However, both the government and industry sources interviewed for this report recognize that there is still work to do in order to gain positions in the center of the logistics chessboard in Latin America. Infrastructure, improvement of regulations, skills and training of the labor force, and investment in the digitalization of the supply chain are some of the areas of improvement mentioned in this regard.