Cable de WikiLeaks sobre RD

Source: Embassy Santo Domingo 

Classification: CONFIDENTIAL 

Dunno: 08SANTODOMINGO141 08SANTODOMINGO1456 

Destination: VZCZCXYZ0008

PP RUEHWEB

DE RUEHDG #0570/01 1381729

ZNY CCCCC ZZH

P 181729Z MAY 09

FM AMEMBASSY SANTO DOMINGO                    

TO RUEHC/SECSTATE WASHDC PRIORITY 2771

INFO RUEHZA/WHA CENTRAL AMERICAN COLLECTIVE PRIORITY

RUEHLP/AMEMBASSY LA PAZ MAY 0569

RUEHME/AMEMBASSY MEXICO PRIORITY 1158

RUCPDOC/USDOC WASHDC PRIORITY 1793

RHEFDIA/DIA WASHDC PRIORITY

RUEAIIA/CIA WASHINGTON DC PRIORITY

 

C O N F I D E N T I A L SANTO DOMINGO 000570 

SIPDIS 

STATE FOR WHA/CAR, 

LA PAZ FOR A/DCM C LAMBERT 

E.O. 12958: DECL: 05/17/2019 

TAGS: EAIR, KCOR, EINV, ECON, DR 

SUBJECT: DOMINICAN REPUBLIC IS BAD FOR BUSINESS, SAYS 

ADVENT INTERNATIONAL 

REF: A. 08 SANTO DOMINGO 141 

B. 08 SANTO DOMINGO 1456 

Classified By: Richard Goughnour, Charge d'Affaires, Reasons 1.4(b), (d) 

 

1. (C) Summary: Managers from U.S. investment company Advent International told EconOffs that they have faced numerous barriers to their conduct of business since acquiring the airport concessionaire Aerodom Dominicana Siglo XXI in October 2008. Among these is a GODR official who has harassed, threatened and sought bribes from the company. Also, President Fernandez issued a decree directly undercutting Aerodom revenue, in direct violation of the company's concession. As a result of this difficult business environment, the Aerodom CEO told EconOff that Advent plans to turn around the Aerodom asset within five to seven years and has nixed earlier plans to broaden its investments in the Dominican Republic. End Summary. 

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Never again, says Advent executive 

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2. (C) The CEO of airport concessionaire Aerodom Dominicana  Siglo XXI, a subsidiary of the U.S. investment fund Advent  International, told EconOffs that he has become disillusioned  with the Dominican Republic as a target for investment. 

Shortly after Advent purchased Aerodom in October 2008, CEO  Rodolfo Salgado told the Ambassador that this would be the  first of many Advent investments in the Dominican Republic. 

 

Just seven months later, however, Salgado confided to EconOff  that Advent would make no further investments in the country  and sought to turn around Aerodom within five to seven years. 

He expressed grave misgivings about a government that  succeeds in attracting investment through good public  relations, pro-business rhetoric and even signing contracts  with favorable terms for investors when in reality the  panorama for foreign investors is muddled with corrupt intermediaries and a legal framework that is bent to satisfy  the whims of public officials. 

 

3. (C) Salgado echoed a growing refrain that the Embassy is  hearing from U.S. investors in the Dominican Republic. "The  Dominican Republic needs to realize that it is becoming  integrated into the global economy and it needs to start  behaving as such," Salgado said. He noted that Advent has been investing in Latin America for over 20 years and has  never faced this level of government resistance to the  uninhibited operation of its business. Salgado noted two  particular issues that the company is facing.

 

One is the  harassment by Andres Van Der Horst, the director of the  Airport Department, who has sought to disrupt Aerodom  operations in an apparent attempt for personal gains. The  other is a presidential decree that directly violates  Aerodom's concessionary contract, the terms of which were  ratified by the Fernandez government at Advent's request last  October.  

 

4. (SBU) Aerodom has completed Foreign Commercial Service  advocacy forms but has not requested Embassy advocacy as of  this time. 

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Aviation official pressures Aerodom for a bribe 

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5. (C) Aerodom CEO Rodolfo Salgado and Advent executive Luis  Solorzano told EconOffs that Van Der Horst has harassed,  threatened and even explicitly solicited a bribe from the  company. The Airport Department, which manages the  state-owned airports not included in the Aerodom concession, has no direct supervisory role over the Aerodom-operated  facilities. The only legal relationship between the Airport  Department and Aerodom is the fact that Van Der Horst sits on  the Airport Commission, the government agency that oversees  the concession and is chaired by Secretary of Public Works  Victor Diaz Rua. 

Salgado noted that although the Airport Commission had not  met for five years prior to Advent's purchase of Aerodom in  October 2008, it has already met twice since the purchase.  The content of the meetings has focused on what Salgado  described as Van Der Horst's nitpicky complaints about out-of-order toilets or damage to a non-essential wall  surrounding the perimeter fence at Las Americas International  Airport (SDQ) in Santo Domingo. 

6. (C) These complaints and other similar attcks, contained  in what Van Der Horst presented a an official audit of Las  Americas operations autored by the Airport Department (even  though the irport Department has no authority or oversight  f that airport), gained wide coverage in many Domiican 

daily newspapers, particularly in late Janury and early  February. At first, Salgado said, h did not understand why  Van Der Horst was attackng his firm. Then, Van Der Horst  asked Salgado o provide free storage space at the airport  for gricultural exporters, a business area where Van Dr Horst has personal and family interests. When algado  refused this request, Van Der Horst escalated the attacks. 

According to Salgado, General Jaime Osas entered Aerodom  executive offices, placed a firearm on a desk and said he had  come "to settle a score between you and my boss." Osas  served in the military as an at-large general at the time but  made clear that he was representing Van Der Horst during that hostile encounter. Advent executives complained vehemently  about the incident and Osas was recently retired by President  Fernandez. Aerodom has succeeded in calming the media attacks by hiring a media relations specialist to explain the  situation to press representatives and correct the claims  made by Van Der Horst. 

7. (C) Salgado also told EconOffs about an incident that took  place at a recent gala dinner for the travel industry.  Talking over cocktails with a small group of people,  including Salgado and Solorzano, Van Der Horst made the  comment that "For 5 million pesos (about USD 143,000), I  could go away." While Salgado said Van Der Horst,s tone was  joking, he turned abruptly to face Salgado and Solorzano when 

he made this comment. Also present at the time were Arturo  Villanueva, the Vice President of the National Association of  Hotels and Restaurants, and Pablo Lister of the Civil  Aviation Board (JAC). Salgado said that although his tone  was lighthearted, Van Der Horst's message was clear and 

pointed. 

8. (C) In both of their meetings with EconOffs, the Aerodom  executives have reiterated their commitment to avoid corrupt  practices and assured the Embassy that they would not succumb to Van Der Horst's solicitations. In addition to discussing  this issue with EmbOffs on various occasions, including  meetings with EconOffs on February 4 and April 22, Salgado 

said he has broached this subject with Foreign Minister  Carlos Morales Troncoso, Deputy Foreign Minister Jose Manuel  Trullols, Dominican Civil Aviation Institute Director (IDAC)  Jose Tomas Perez, Defense Minister Pedro Pena Antonio, Public  Works Minister Diaz, and members of the JAC. The response  from these officials was all similar, Salgado said. Diaz  told him, "It's just Andres." Morales said, "That man is  corrupt." 

9. (C) Advent Senior Partner Juan Carlos Torres came to the  Dominican Republic on April 23 to meet with President  Fernandez. According to Salgado, during the meeting, Torres,  Salgado and Aerodom advisor Jose Luis Abraham explained in  "polite" terms that they had trouble dealing with Van Der Horst. After the meeting, Abraham, a close associate of  Fernandez, remained with the President and told him more  details of the Van Der Horst problems. President Fernandez assured Abraham that he would instruct Van Der Horst to back  off, and noted that August 16 is typically a day when personnel changes are announced. Salgado was not sure whether President Fernandez was implying that he would remove Van Der Horst in August or whether he would simply use this possibility to exert control over Van Der Horst. Salgado said that, so far, President Fernandez' intervention appears to be helping. 

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Fernandez ratified Aerodom contract, then violated it 

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10. (SBU) Aerodom also complained of a different, though related, affront on the company's business. In late February, President Fernandez issued a decree eliminating a 4 cent fee charged on air cargo exports of vegetables. This was a recommendation from the national economic summit that Fernandez held in February to address the global crisis. This fee represents one of the primary revenue generators for Aerodom and is an integral component of the concession contract. Solorzano said that this decree would cost Aerodom millions of dollars per year, cutting profits by as much as 30 percent. Salgado told EconOffs he has spoken with Economy, Planning and Development Minister Temistocles Montas and Customs Director General Miguel Cocco about the decree. They both acknowledged that the decree was illegal, but neither was willing to inform the president that he had made a mistake. Salgado said he was suspicious that Van Der Horst may have had a hand in pushing the decree to the President's desk without a diligent legal review; the decree is very favorable to agricultural exporters. 

 

11. (SBU) Salgado said that this decree was the primary reason for Torres' visit and the meeting with President Fernandez. He said that President Fernandez reacted "frankly and openly" when they told him that the decree violated their contract. But Fernandez stopped short of offering to rescind the decree, instead asking Aerodom for help in strategizing a  solution that would allow him to "save face." Salgado said that one possibility would be to impose the fee on airlines that carry cargo and let them pass the costs on to the exporters. Fernandez told the Aerodom executives that Montas would

contact them about the solution, but Salgado said he is becoming impatient as three weeks have passed without any visible progress. 

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Comment 

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12. (SBU) The Advent experience is unfortunately typical of foreign investors who arrive in the Dominican Republic enthused by a legal framework that, on paper, appears favorable to business when in reality the investment climate is much less certain. When asked in December about his impression of the new Aerodom management, the general manager of the privately owned and operated La Romana International Airport told EconOff that the American company needs to "aplatanarse", a term that refers to learning to behave like a Dominican, in order to survive. Yet if Dominican government officials wish to attract and retain foreign investors, they cannot require these investors to participate 

in the rampant corruption of "negocios aplatanados" (Dominican-style business). It is the local business climate that needs to reform, not the foreign investors. 

 

End Comment. 

 

13. (U) Please visit us at 

http://www.state.sgov.gov/p/wha/santodomingo/ 

GOUGHNOUR