LATAM FDI: Hello. Welcome to another episode of the LATAM FDI podcast. Joining us today is Silvia Cochón. Silvia is the lead for the promotion department in the National Council of the Dominican Republic for Free zones. Today we will discuss manufacturing in the Dominican Republic with her. Hello Sylvia, welcome to the podcast. Can you introduce yourself and tell us a little bit about your organization, please?
Silvia Cochón: Hello and thank you for inviting me. My name is Silvia Cochón. As you said, I have been heading the promotion department at the National Free Zones Council of the Dominican Republic for the last 15 years. This has been a long time, but it has been a very good time. So the National Free Zone Council is a government institution composed of members of the public and private sectors to promote manufacturing in the Dominican Republic in our free zones. We promote and develop the free zone companies and industrial parks that operate in our country.
LATAM FDI: I’d like to ask you a few questions today. The first has to do with a trend that has been increasing in popularity over the last few years due to things like disruptions in global supply chains. Nearshoring has become a trend. More specifically, we’re seeing companies moving from places that are in the Far East, closer to home, and closer to their customers. Has nearshoring affected manufacturing in the Dominican Republic? Has there been an influx in companies as a result of this trend?
Silvia Cochón: It has been good, the trend, as the saying goes, is that the only constant right now is change. The world is living in a time of many challenges. Especially since the Covid-19 pandemic, many companies have had to reinvent themselves and find new ways of doing things. And for us, for many countries, the pandemic has revealed trends that have impacted our manufacturing companies. Our free zone regime is made up mostly of multinational companies that are manufacturing in the Dominican Republic that produce goods and services for international markets. For an important time, they went through a difficult period in the supply chain issues as well as many other countries in the world. In recent years we have witnessed increased investment of those companies in automation and new technologies. Companies have seen the need to reduce their risk in the supply chain and expand the supply of resources to improve flexibility. This has resulted in growth in the operations of many of the companies that are manufacturing in the Dominican Republic, both in the development of previously imported components and in the manufacture of new product lines. Since Covid, we have seen companies expanding, especially in sectors like medical devices and electronics, expanding their operations, bringing more processes home in house to their plants.
We have also seen a growth in the interest of companies to bring their operations closer to the US market, as you mentioned. Additionally, we have been approached not only by companies located in China but also like by Japan, Korea, and Turkey. This includes India and Sri Lanka. These are countries that our country has not been close to in terms of commercial relations.
LATAM FDI: We see a greater interest among global manufacturers in manufacturing and the Dominican Republic. What specific benefits does the DR offer to global companies?
Silvia Cochón: The Dominican Republic has become it is a regional hub right now for the manufacture of goods and services, including logistic solutions. One of the most powerful tools that the country has used to attract those investments in manufacturing in the Dominican Republic has been its free zone regime. It’s a regime that we started in 1969. So for over 53 years, we have been attracting foreign companies to operate in our country. The regime allows companies that allocate most of their production to international markets to enjoy special tax and customs incentives, including 100% exemption from most local taxes, such as income tax, value-added tax on goods and services, and import taxes on machinery and raw materials. Everything that the company imports for its production operations or services are free of taxes. In addition to those economic incentives, the country has been very safe, very stable in terms of political stability, and has one of the most solid investment climates in the region. We have been among the countries that have grown the most economically in the last five or six years. Also, we have preferential access to markets through the free trade agreements that we have signed with our main trading partners, including the United States and the European Union.
Of course, in terms of our geographical location, we are very close to the east coast of the United States. The quality of the transport infrastructure and maritime and air connectivity, and perhaps, most importantly, the availability of human resources have made us one of the most attractive countries for the manufacturers of goods in the region. Many companies are currently exploring the option of manufacturing in the Dominican Republic.
LATAM FDI: We had a few moments to chat before we started today, and one of the things that I found surprising that you mentioned during that time was the number of industrial parks and free zones that foreign direct investors have to choose from if they wish to begin manufacturing in the Dominican Republic. Could you tell us a little bit about the variety of places where companies can set up their operations?
Silvia Cochón: As of today, we have 84 industrial parks operating in 28 of the 32 provinces on the island. So, throughout the island, you find industrial parks. In those facilities we have 784 companies operating. Those companies can be foreign companies, they just have to register here, or the companies can form a Dominican company or register as an offshore entity. So you have three ways to operate.
LATAM FDI: In the country beyond the tax exemptions that you mentioned in the free zone and beyond the special customs treatments that companies enjoy when they’re manufacturing in the Dominican Republic. What other reasons are the principal reasons that executives in manufacturing have given to you as their motivation for relocating or expanding in your country?
Silvia Cochón: If I have to choose, maybe five. I will say that proximity to the US market is number one. We have very close connectivity. We are very well connected both by air and by sea, and not only to the US but to the entire world. The legal framework and the incentives provided by our free zone law is also important. Additionally, there is the availability of labor, human resources, and of course, the competitive cost structure that we offer to companies manufacturing in the Dominican Republic.
LATAM FDI: In addition to proximity to the US and a wide offering of industrial parks, can you tell me what benefits specifically are enjoyed by the Dominican Republic as a result of their being a part of the DR-CAFTA agreement?
Silvia Cochón: The benefits, yes. We used to have a free trade agreement, a one-way agreement with the US. In the past through the Caribbean Basin Initiative. But now with the DR-CAFTA, which is bilateral with the US and Central American nations, we can also import from the on a duty-free basis. Well, but if you are in the free zone, everything that goes into the free zone is tax-free for operations. We have very clear rules and norms to enter free of duty to the US. That’s one of the main reasons that companies, foreign companies, in the last years have come to establish manufacturing in the Dominican Republic. They’ve come with the purpose to enter free into the US. Market. So, the DR-CAFTA the basis for that.
LATAM FDI: And to say what the DR-CAFTA means. It’s the Dominican Republic-Central American Free Trade Agreement. This is something I’m curious about. Has that agreement had any effect on the trade between the Dominican Republic and the countries in Central America? Is there any activity that has been increased as a result of that agreement?
Silvia Cochón: Yes, but not as much as there could be. We should be having more integration.
LATAM FDI: So, it’s a secondary benefit, obviously.
Silvia Cochón: We have some companies, especially companies that are located in both regions, like in the Dominican Republic, and maybe they have another operation in one of the countries in Central America, you see a lot of goods coming back and forth. With Central America, we have other free trade agreements besides the DR-CAFTA. So sometimes companies use other agreements. Now it depends.
LATAM FDI: In the case of your office, if I hypothetically have a company and I’m looking to begin manufacturing in the Dominican Republic, as an industrialist, what kind of services can your office provide to help me to bring my project to fruition?
Silvia Cochón: We work as a one-stop shop since the beginning. We assist foreign investors. Either we find them and go after them, or they come to us. We help them in the analysis process when they are establishing their operation and later when they’re operating. We help them all through the process. Since they are looking for information, until they apply and start their operation, we’re going to be next to them to provide them assistance in their efforts to begin manufacturing in the DR.
LATAM FDI: I think that in a short period of time today, we’ve covered a lot of information. The people that listen to our podcasts inevitably have further questions that are a little bit more detailed than the ones that perhaps you and I have had the opportunity to go over. If somebody wants to get in contact with you with further questions. How would they do that? Do you have a website?
Silvia Cochón: Yes, you can go to www.drfreezones.com, it’s a web page. We are also under DR Free Zones on LinkedIn and Instagram. Or you can contact us directly by email or WhatsApp.
LATAM FDI: Okay. In the transcript part, we’ll include your email address. And just out of curiosity, do you have a LinkedIn profile? We at LATAM FDI will also be happy to direct potential customers to you, as well.
Silvia Cochón: Yes, I do.
Okay. We’ll put a link to both of those pages on the transcript portion of our website for this podcast. I want to thank you today for joining me and I want to wish you all the luck in the world with regard to helping the Dominican Republic to further its economic development through manufacturing there.
Silvia Cochón: My pleasure and hope to see you soon. Thank you.