I just saw a posting on one of our DR Escapes youtube videos that I felt was worthy of a little more analysis. The writer obviously has done some research to form his perspectives and opinions, however I would challenge our readers to form their own opinions after thinking about it. The point of this gentleman’s post was to share the outcome of a Forbes magazine article ranking that placed the DR at the bottom of a list for places to do BIG business. Forbes based their opinion on 9 key factors…. but again I challenge you to think about how these 9 factors actually impact you as a small business owner if you chose to set up shop in the DR.
This is the youtube comment by this gentleman.
I am troubled by hawkers of real estate, business opportunities making claims to attract unknowledgable investors. I encourage everyone to do REAL due dillegence before investing. Please don’t buy anything nor start any business in the DR until you have lived there for two full years. I promise you your views will change once the shine wears off. That said I like the DR so I am not here to disrespect the DR. Last year Forbes Magazine rated the DR the least reliable nation and is considered very hard to do business by international standards. If you think just because you can show up with more money in your pocket than the locals have and that somehow makes you impervious to the perils of living and investing in a 3rd world country i can PROMISE you that you will leave the country with a lot less money than you arrived with. Please read the article @ www.forbes.com/sites/susanadams/2014/06/11/the-most-and-least-reliable-countries/
While I applaud this guy’s apparent interest in proceeding with caution and research, I have to question how the article he quoted really applies to small business owners that choose to set up shop here in the DR or choose to live here….
Like I said, Forbes used 9 criteria to rate the DR at the bottom of their “business friendly” list, yet I find many things that Forbes rates as a negative for BIG business in the DR, are really significant positives for small business owners and normal expats.
Lets analyze them one at a time.
1. GDP per capita is low in the DR – True, but the other side of that factor is that there is an eager labor pool that actually wants to work for a small business owner at a labor rate of less than 20% of the cost in the US. Combine the low labor rates with the minimal government intervention in allowing you to set up and run a small business, no Obama-care, no meddlesome EPA and minimal licensing and you may actually have a distinct advantage over running a similar business in the US. To top off all those savings, many of the smaller businesses here in the DR are able to operate open-air with minimal operating costs. Maybe what is bad for BIG business is great for small business in this instance.
2. political risk including terrorism – it is highly unlikely the DR will be singled out for terrorist attacks, unlike the US. and many European countries. The DR has also not suffered from the very frequent drug wars and personal kidnappings that have plagued many places in Mexico. For BIG business, being “off the radar” may be a negative, however for the typical small business owner or expat living “off the radar” might be a real advantage.
3. oil intensity, meaning the chance the country will experience an oil shortage – Now that might be a possibility. Much of the oil supply today in the DR is provided by Venezuela, which is certainly not the king of stability. Of course, much of the oil supply in Europe is provided by an unstable Russia piping it through a war-torn Ukraine, and much of the oil supply of the US is still supplied by the unstable Arab states. Pick your instability I guess. At least the US is trying to tap into more domestic supplies if a politically correct congress and President can ever get together on a plan to allow it. I expect we will all finally see a cost effective solar-based power grid before all the instability fades away.
4. exposure to natural hazards – The southern coast of the DR is subject to more tropical storm activity, very similar to Florida, the Gulf states and the east coast of the US. One of the prices residents of these states and the Caribbean pay for better weather most of the year. The North Coast of the DR tends to be more sheltered from typical hurricanes and nasty tropical storms because of the mountain range that runs across the middle of the island and tends to deflect or weaken tropical storm activity on much of the North Coast.
5. quality of natural hazard risk management, meaning the country’s preparedness to deal with a disaster like an earthquake or a flood – True the government of the DR does not have an extensive and expensive Homeland Security Agency or extensive civil defense network It hasn’t been necessary yet and in some ways the people have established much of their own self sufficiency emergency plan. Most expats in the DR are better prepared for power shortages and at least as prepared for tropical storms as the typical American in one of the hurricane states. Which is better, an expensive government nanny state or some self sufficiency?
6. ability to handle fires – Most of the towns in the DR have some level of fire coverage, but certainly not to the level of most US towns. However I would guess that most people (certainly most expats) on the North Coast of the DR may be better prepared for a fire than most Americans or Europeans. Certainly on the North Coast, most of the homes and commercial buildings are constructed of concrete block filled with poured concrete. This type of construction is not very prone to fire damage and also serves as a very substantial deterrent to weather related damage.
7. control of corruption – now here you may have a legitimate point. Not that the US is not ripe with governmental corruption and unnecessary over regulation too, but here corruption is a little more in your face. You might get stopped in a nuisance traffic stop which might cost you less than 5$ US to get through. You might run into a customs agent or immigration agent with his hand out too. I am not sure those events are any worse than the traffic speed traps in the US that cost hundreds of dollars to get out of. Or the never-ending taxes, licenses, fines, and over regulation in the US. In some way, the runaway taxation of property, income taxes, road taxes, school taxes, excise taxes, etc. in the US and Europe are a gross example of “corruption” if you believe that much of the money is wasted.
The same house you might own on the North Coast of the DR might cost you 2 to 5 times as much in many areas of the US. In the US, that same house would have an annual property tax bill of 8 to 10 times what it would be in the DR. The monthly living costs for maintenance, heating, air, etc might be anywhere from 2 to 10 times as much in the US due to the “open air lifestyle” in the DR. While this is certainly not “corruption” per se, the end result is the same. Your money out of your pocket with very little to show for it.
8. quality of the infrastructure – I can certainly understand this ding from a big industry perspective and there is some element of truth to this ding for everyone in the DR. The electricity infrastructure is a bit hit or miss in a lot of the towns, with periods of “on” service and “off” service each day. Coming from the US, I know that sounds both ridiculous and a major hardship. But the reality of that “hardship” is that most expats, businesses and many local families have equipped their homes and businesses with battery backup systems that keep the power to your home or business up 24/7 as you would expect in the US, operating very much like the typical solar powered system. I dare say that many of us in the DR are actually better prepared to “weather a storm” or handle a brown out better than most US families. Regarding water in the DR, most people drink bottled water which is pretty cheap comparatively speaking (about 75 to 90 cents per 5 gallon jug. Compared to about $5 in the US). Most towns do not have chlorinated water treatment systems. Many of the roads have been resurfaced with adequate guttering. I dare say in many towns the roads rival or surpass what you would find in most towns in the US. The major highways are top quality.
9. quality of local supplies – While you may need to go to the larger cities for some of your more exotic purchases or to find the lowest prices, I doubt you will find many of the things you buy now in the US to be missing here. The transport ships from every major supply port dock in the DR just like they do in US ports. Some things will be a little more expensive in the DR, while other local products like organic vegetables, fruits, seafood, etc will be substantially less expensive. I have also found construction to be substantially lower cost on the north coast of the DR than anywhere in the US. If you do find that you cannot find something you can always have it shipped over from the US in a few days.
So I don’t know. What do you think? Someone at Forbes certainly felt that the DR was not the best choice for BIG business…. but I, for one, find the North Coast of the Dominican Republic pretty favorable for the typical small business and for expats looking for a tropical escape “off the radar”.
This is one article I would like to hear YOUR perspective in the comments below. Please take a minute to let me and others know what you think.
For now, it is Barry in the DR.