Banks in the Dominican Republic are in the position to expand internationally in the next couple of years as cross-border deals become more feasible thanks to increased economic integration, international banking analysts have said.

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    Dominican banks looking to enter foreign markets would either go-it-alone or enter into strategic alliances with a local player, Fitch Ratings analyst Franklin Santarelli says, adding that regional integration is making alliances increasingly attractive.

    Banco Popular is the most likely candidate to make an international foray given its dominance in the local market, with a deposit market share above 20%.

    The operating environment in the

    • Dominican Republic gives banks a competitive advantage over many of their Central American peers. “It’s hard to go overseas when you have troubles at home,” adds an analyst at another ratings agency.

     

    However, leading banks in other Central American countries are also eying the Dominican market. The region’s largest financial group, El Salvador’s Cuscatlan, sees the island as a new market in the future.

    The Dominican Republic is a potential long-term bet for Cuscatlan as part of the group’s internationalisation strategy, particularly in light of the country’s free trade agreement with El Salvador, Cuscatlan chairman Mauricio Samayoa said in the press in November.

    Santarelli also believes large international groups could be interested in the Dominican market in the future. Foreign banks could target the nation with a country-based strategy, but the integration trends in Central America and the Caribbean today are likely to make such a move part of a regional strategy, he said.

    The presence of international players in the Dominican Republic is so far limited to just a couple of foreign banks such as Citibank and Scotiabank, which operate through branches.

    Although the Dominican banking system has experienced significant growth for a number of years due to its flourishing economy, there is still considerable untapped potential, especially in the consumer-banking segment.

    Prudent macro-economic management made the Dominican Republic the star performer in the Caribbean throughout the 1990s, with an impressive average annual growth of 6%, according to the World Bank. Growth cooled off after 9/11 and the global economic slowdown, but the World Bank is betting on continued strong growth once the world economy recovers.

    It has also attracted a lot of trade finance interest (see GTR, Sept/Oct 2002, p34).