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Republic under pressure

< TD>
President Hipolito Mejía failed
to live up to the IMF agreement
after his government took over
two electricity distributors. 
Blackouts became a daily part
of life in the Dominican Republic.

The Dominican Republic, formerly a star regional economic performer, is officially the most risky country in the Caribbean in 2004. After the collapse of one of the nation's largest banks, investors are looking to presidential elections this May as a way out of the financial gloom. "The country is going through a very delicate time," says Carl Ross, head of Latin American sovereign research at Bear Stearns in New York.

The troubles began half way through 2003 after Banco Intercontinental went bankrupt amid accusations of fraud. Baninter's spectacular crash damaged the financial system, which was weighed down with debts, hitting the currency and sending inflation spiralling to 42.8% in 2003, compared with 10.5% in 2002.

Rescue packages Analysts estimate that the country's GDP will have contracted by 1.2% in 2003 compared with growth of 4.2% in 2002. According to the Economist Intelligence Unit, GDP is set to contract by 1% in 2004, hurt by high inflation, high interest rates and a fall in business confidence and investment levels.

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