Caribbean's largest democracy staves off riots and economic slide

Ask the leader of the Dominican Republic when he expects to raise the price of gasoline, and he responds almost angrily. ''It will be decided when I decide it,'' President Salvador Jorge Blanco told this reporter at a mid-July meeting in South Carolina.

Much depends on how the Dominican leader goes about raising the price of gasoline and other fuels. The International Monetary Fund (IMF) is demanding a major price increase as a condition for further loans. As part of an IMF-proposed austerity package, the international lending agency is also calling for a sharp increase in electricity rates.

The Dominican Republic badly needs further IMF loans as well as other assistance. But it was increases in the prices of food and medicine, ordered by Jorge Blanco at the urging of the IMF last April, that sparked three days of rioting in which some 60 persons were killed.

So when Jorge Blanco is asked about an increase in the price of gasoline, it's understandable that he comes across as slightly testy. His opponents are waiting for that very moment to launch new protests. The Dominican leader is expected to announce his decision on gasoline prices shortly.

Unhappiness with the ruling social democratic party is widespread. The Dominican Revolutionary Party, known by its Spanish initials as the PRD, came to power in 1978 promising change - an end to corruption and a more equitable distribution of wealth. But it has not delivered.

By all accounts, corruption remains pervasive. Foreign experts say that the many government-controlled companies, such as the state sugar company, are inefficient.

The tense situation is exacerbated by a high - 2.7 percent - level of population growth and a fear that the military might some day put an end to civilian rule.

Average income in the Dominican Republic is reported to be more than $1,000 a year, but many rural people earn in cash terms less than a tenth of that amount. In some areas, potable water is in short supply. The gap between rural and urban living standards is a large one. But it is in the cities, where expectations are perhaps highest, that the greatest unrest has been evident recently.

The Dominican Republic has seen protests and violence before, but last April's riots seemed to contain a new element: a high degree of organization and coordination, a level of urban guerrilla expertise not seen here before. Protesters on trucks dropped off tires at key intersections. Then men on motorbikes appeared with gasoline to set the tires aflame. Actions were synchronized in major cities and towns throughout the country.

Some Dominican officials are convinced that the organizers of the April protests benefited from highly professional training and advice - much of it coming from Cuba.

''The Cubans calculated the mood of the people absolutely on the dot,'' said one official here.

The Dominican Republic, the largest democracy among the Caribbean islands, is in deep trouble. It doesn't take Cubans to stir people up and get them into the streets. But the suspicion of Cuban influence in the recent violence shows how high the stakes could become.

''But the issue at the moment is not Cuban influence,'' says a foreign diplomat. ''The issue is a foreign-exchange crisis precipitated by a fall in world prices for the country's exports and an increase in the price of imports.''

All of this makes a difference to the United States because of the strategic location of the Dominican Republic between Cuba and Puerto Rico. Shipping lanes linking the United States with South America, the Middle East, and Africa pass by the Dominican Republic, located only two hours by air to the southeast of Miami.

Equally important, as far as the US State Department is concerned, the Dominican Republic shows what can be accomplished in the way of democratic politics in the Caribbean. The Dominican Republic had to break with a tradition of tyranny to get where it is today. It was only in 1978 that the country had its first peaceful transfer of power from one elected government to another.

The economic and financial problems facing President Jorge Blanco are formidable. Low prices for sugar, the country's main export, and the high cost of oil imports, are partly responsible for the current crisis. Unemployment is estimated at much more than 20 percent of the labor force. Half of the population of the some 6 million is under the age of 16.

Wealth is unequally distributed. Most traditional imports and exports - fertilizer, cocoa, coffee, cotton, vegetable oil - are in the hands of the state and a relatively small number of Dominicans.

But the most pressing problem of the moment, as the Dominican government sees it, is the foreign-exchange and debt crisis. With the encouragement of the IMF, President Jorge Blanco embarked on an austerity program to reduce imports and government spending and encourage exports. Further foreign aid, as well as a renegotiation of the country's $2.4 billion debt, depend on reaching agreements with the IMF.

The Dominican government subsidizes petroleum products by selling them at an artificial exchange rate of one Dominican peso to the US dollar. On the free market, the dollar is worth much more. Jorge Blanco said recently that the IMF had accepted a proposal that a partial subsidy be maintained through an exchange rate for oil imports of 1.50 pesos to the dollar.

Labor unions have in the past urged the government to break off its negotiations with the IMF. Jorge Blanco himself has questioned the wisdom of the international lending agency, arguing that severe austerity measures might endanger the stability of the country's democratic system. But after first suspending talks with the IMF in May, the Dominican leader decided in June that he had no choice but to continue them. The IMF has been withholding the second installment of a three-year, $430 million loan.

Exports to the US have increased, thanks, apparently, to the American economic recovery. It is too early to tell whether President Reagan's Caribbean Basin Initiative, or CBI, will have a long-range impact here. Some economists say that the Dominican Republic is in the best position of all the islands to benefit from the CBI.

Jonathan Russin, Washington representative and counsel to the American Chamber of Commerce of the Dominican Republic, predicts, however, that foreign businessmen are likely to make ''significant new investments'' in the Dominican Republic's industrial free-trade zones. They will be encouraged in part, he says , by the duty-free privileges now attached to exports from the Caribbean under the CBI. The Dominican Republic's free-trade zones are ''dollar economy'' enclaves which enjoy exemptions from taxes and currency restrictions.

The Dominican Republic has other advantages for investors, including an elected, seemingly stable government and a stronger agricultural base than most of the other Carribean islands. But President Jorge Blanco's political party, the PRD, is in a state of crisis brought about by factional splits and a loss of public confidence.

Jose Francisco Pena Gomez, the mayor of Santo Domingo and the principal leader of the PRD, indicated in a speech in mid-June that the party in its present state might not be able to win new elections. He said that the Dominican Liberation Party, a pro-Cuban Marxist party led by Juan Bosch, had grown to the point where it might be able to take enough votes away from PRD to drive it out of power, thus opening the way for the return to power of the conservative party of former President Joaquin Balaguer.

The dynamic Pena Gomez gives every indication he has been persuaded that he should make a bid for the presidency in an effort to revive his party's fortunes when the next election comes in 1986.

''Pena is our last hope,'' said a PRD analyst.

The uncertainty about the future is such that some people now speak of the need for another strong, dictatorial leader. This is a sign of desperation, perhaps. But it is the kind of sentiment that could undermine democrats and bolster demagogues.

Low-key, cautious, and unpretentious, President Jorge Blanco does not cater to those who yearn for an authoritarian leader. His is a pragmatic style. One step at a time, he has been getting people used to facing a rise in gasoline prices. Then, if violence can be contained, he seems to say, better times will follow.velopment. Next: Haiti, no quick solutions for the poorest nation in the Western Hemisphere.

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