Forty new companies have set up garment assembly operations in Dominican free zones in the first half of this year, poised to take advantage of a new law allowing duty-free access to the US for their apparel exports.

The Caribbean Basin Trade Partnership Act, which became effective October 1, 2000, is an extension of the Caribbean Basin Initiative (CBI) implemented in 1984. The law is intended to restore advantages to the US’s Caribbean and Central American trade partners equal to those enjoyed by Mexico since 1994 under the North American Free Trade Agreement.

As the region’s biggest exporter, the Dominican Republic expects a 20% increase in garment exports in the first year of the new trade regime, says Fernando Capellan, president of the Dominican Association of Free Zones. About 65,000 new jobs are anticipated in the next four years, he adds. Dominican apparel exports to the US in 1999 reached $2.81 billion, 10% more than in 1998.

The industry feared a collapse when many clothing plants were closed and transferred to Mexico, says Joseph Genoa, manager of Glenn Enterprises, a manufacturer in the Dominican Republic’s La Romana free zone. “Things have changed since [the announcement of the Trade Partnership Act]. We started the year at this company with 1,200 workers, and we now have 2,100. Some of the companies that went to Mexico are coming back.”

The country’s own initiatives to boost the free zones have helped. Companies operating in the country’s 46 free zones are given a 20-year tax reprieve and import duty relief on raw material and machinery imports. Exports from free zones have grown at an average 12% per year between 1996 and 1999, when they were valued at $4.3 billion. Employment in the free zones grew to 200,000 in 1999, from 160,000 four years earlier.

Twenty eight of the country’s free zones are privately owned, 16 are state owned and two are of mixed ownership. Although six of every 10 free zone enterprises are in clothing, the industrial parks also host assembly plants producing cigars, footwear, pharmaceuticals, and electronic components.

Dominating Cigar Exports
The facilities offered by free zones have allowed the Dominican Republic to become a major player in the international cigar market. The country exports over 250 million cigars per year, earning over $200 million in the process.

“The Dominican Republic is now the world’s biggest cigar exporter, followed by Cuba and Honduras,” says José Seijas, general manager of Tabacaleras de García. The company, located in the La Romana free zone, employs 5,000 people to make hand-rolled cigars, and is the largest such factory in the world, says Seijas.

The Dominican cigar industry has benefited from a boom in consumption in the US, where there has been a fivefold increase of the market in four years. “Dominican cigar exports have been growing between 8% and 10% per year, and will continue to grow, but at a slower rate,” Seijas says, noting that the industry has worked to maintain high standards through close cooperation among the major producers, which are members of the Dominican Cigar Manufacturers Association.