With presidential elections taking place later this month, the government of the Dominican Republic has announced a slate of new subsidy schemes that the opposition are labeling ill-conceived election posturing.

President Leonel Fernandez of the ruling  Dominican Liberation Party (PLD by its initials in Spanish) is fighting for at least 50%  plus one of the vote in the 16 May elections, in order to avoid a runoff under Dominican elections law.

A runoff would likely pit Fernandez, who a recent Gallup poll gave 51.7% of the vote, against Miguel Vargas, the candidate of the Dominican Revolutionary Party (PRD), who received 37.4% of the vote in the same poll. A runoff could present problems for Fernandez, as smaller unaligned parties eliminated in the first vote could seek to leverage their positions by joining Vargas.

In the midst of its reelection campaign, the PLD government has initiated a host of new spending initiatives.  On 22 February the government announced it was issuing the so-called Solidarity Card to 50,000 students of limited resources attending the Autonomous University of Santo Domingo (UASD).  The first 10,000 of these cards were issued a month later amid fanfare and opposition criticism.

The Solidarity Card is a debit card used by the government to provide social assistance to low-income Dominicans. The social assistance program provides 400,000 qualifying families RD$ 550 (1 US dollar equals approximately 34 Dominican Republic Pesos) a month, plus bonuses of RD$ 150 for children in the family attending school and RD$ 350 for elderly family members. 
 
An official at the Secretariat of State for Superior Education, Science and Technology (SEECYT), contacted by Subsidy Watch, explained that the new student Solidarity Card will provide students RD$ 500 a month to help with tuition, supplies and transportation. The official added that the government planed to issue a second batch of 19,000 Solidarity Cards to students in the week before the elections.

Another recently announced government subsidy seeks to target rising food prices, which have become a major problem throughout the developing world. The Secretary of State for Industry and Commerce, Melanio Paredes, has announced that the government will place price controls on basic food items, such as rice, beans, plantains, eggs and chicken.

A spokesperson for the Department of Industry and Commerce (SEIC) said that under the government’s plan, basic food items will be sold at predetermined prices, with the government providing subsidies to retailers so they can make a reasonable profit.  When asked about the potential costs of these subsidies, the SEIC official said figures were not available.

The government’s spending announcements have received extensive coverage in recent weeks, with opposition parties criticizing the policies as election-motivated and unsustainable.

In an interview with Subsidy Watch, Maria Teresa Cabrera, president of the Dominican Association of Teachers (ADP) and a candidate for vice president for the Independent Movement for Unity and Change, said that in general “subsidies reflect a failure of the economic model,” and that “if they are to be part of public policy they should strive to eliminate the causes that give rise to their need.”

Ms. Cabrera argued that the student Solidarity Cards were “obviously part of the government’s election strategy, particularly given that student groups visited the presidential palace to show their support for the government the week the first cards were issued.”

Ms. Cabrera is similarly critical of the the government’s food price stabilization program, pointing out that the program is set to last only until shortly after after the elections.  This was confirmed by the Department of Industry and Commerce. However, an SEIC spokesperson explained that the program was short-term because one of the reasons for the high food prices in the Dominican Republic was temporary:  two late-season storms that hit the island last fall, damaging farms. Agricultural production should begin recovering by June, said this person, and as it does food prices would come down, relieving the need for the government subsidies.

Commenting on subsidy policies in the Domincan Republic, the economist Henri Hebrard said that they have rarely reached their intended goals in the country.

As an example Mr. Hebrard pointed to the government subsidy to liquefied petroleum gas(LPG). The subsidy was intended to help Dominican families who use LPG for cooking, but because LPG is also used in transport vehicles, much of the government subsidy has instead been going to help fuel cars and trucks that have been switched to LPG to avoid high gasoline prices.

Last year the government spent RD$ 5.5 billion subsidizing LPG, and with skyrocketing fuel prices this year causing more people to convert their vehicles to LPG, the subsidy has already cost RD$ 2.4 billion in the first three months.

Asked about the recent subsidy announcements by the ruling government, Mr. Hebrard said that the student Solidarity Cards, assuming they were given to those that met the criteria, seemed like a more targeted subsidy and therefore less worrying. However, he would like to see rules attached to the cards that ensures that the money is spent on something useful, rather than local lottery kiosks.