The Plaza del Mercado, Puerto Plata, ca 1873

LONG DEPENDENT ON SUGAR, the Dominican Republic diversified its economy during the 1970s and the 1980s to include mining, assembly manufacturing, and tourism. In 1987, the country's gross domestic product (GDP--see Glossary) was approximately US$5.6 billion, or roughly US$800 per capita, which made the island nation the third poorest state in Latin America. A lower-middle- income country by World Bank (see Glossary) standards, the Dominican Republic depended on imported oil and, despite diversification, retained its historical vulnerability to price fluctuations in the world sugar market. Although poverty continued to be acute for many rural citizens in the 1980s, the economy had progressed significantly since the 1960s.

Beginning in the late 1960s, the Dominican economy began the arduous task of diversifying away from sugar. By 1980 the mining industry had become a major foreign exchange earner exports of gold, silver, ferronickel, and bauxite constituted 38 percent of the country's total foreign sales. In the 1980s, the assembly manufacturing industry, centered in Industrial Free Zones (see Glossary), began to dominate industrial activity. During this decade, the number of people employed in assembly manufacturing rose from 16,000 to nearly 100,000, and that sector's share of exports jumped from 11 percent to more than 33 percent. Tourism experienced a similarly dramatic expansion during the 1980s, when the number of hotel rooms quadrupled. Revenues from tourism surpassed sugar earnings for the first time in 1984, and by 1989 total foreign exchange earnings from tourism nearly matched earnings from all merchandise exports.

Despite indisputable advances, by 1990 the country also faced serious inflation, chronic balance-of-payments deficits, and a large foreign debt. More important, whereas the Dominican Republic had made great strides since the dictatorial rule of Rafael Leónidas Trujillo Molina (1930-61), the nation's political economy continued to be strongly influenced by patronage, graft, and a lingering lack of political will to confront the traditional institutions that continued to restrain economic performance.

Data as of December 1989