The Challenge of Adjustment in the Dominican Republic’s Free Zones
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Figure 7.4 Index of Free Zone Exports: Textile versus Nontextile (1995 = 100) 300 275 250 225 200 175 150 125 100 75
textile exports
08 20
07 20
06 20
05 20
04 20
03 20
02
01
20
00
20
99
20
98
exports
19
97
19
19
96 19
19
95
50
nontextile exports
Source: Calculations based on data from CNZFE (2009).
past decade, this represented a massive shock to the program, and the economy more widely. Figure 7.5 sets out clearly the level of decline in the Dominican Republic’s position as a textile and apparel sector exporter to the United States. The first graph shows that exports of knitwear to the United States fell by more than half between 2004 and 2008, as the Dominican Republic was replaced mainly by Asian exporters, as well as Nicaragua. Although most other producers in the region also experienced declines, none was as deep as in the Dominican Republic. The graph on the right suggests that this pattern is deepening through the recent global crisis. The Dominican Republic not only experienced a much deeper decline in textiles and apparel exports to the United States in 2009 than most other countries, but it continued to face declining exports in 2010, whereas almost all other countries experienced considerable recovery. The key question is whether the FZ program, which was heavily reliant on one sector (textiles and garments) and one market (the United States) can diversify and upgrade itself, in the face of commoditization and increasing competition in this sector. Figure 7.4 shows that nontextile exports have grown rather well, offsetting much of the decline in textile exports. What also is clear, however, is that the growth