Thursday, February 24, 2011

Fuel Prices Set Off a Chain of Protests and Strikes in the Dominican Republic

WTO: Trade Policy Review Body - Trade Policy Review - Report by the Secretariat - The Dominican Republic – Revision (IV. Trade Policies by Sector)
EIU: Dominican Republic Regulations: Hydrocarbons Law is Finally Passed
Dominican Today: On Fare Hike Threats, Dominican Republic’s “Owners” Again Get Major Perks
Diario Libre: Gasoline Sales Will Be Suspended Today by Anadegas
Diario Libre: Government and Anadegas Sign Agreement
Dominican Today: Most Fuels Will Cost More
Dominican Today: Unions Propose Talks to Raise Minimum Wage and Beyond
El Nacional: Dicen Arreciarán Protestas el Lunes
El Nacional: Suben Todos Combustibles Menos GLP; alza 0.80 a 3.7

This week, President of the Dominican Republic, Leonel Fernandez, met with transport business and union leaders to address their resolution to increase transportation fares in response to the rising price of fuel. In an effort to dissuade transport union leaders from increasing fare prices, President Fernandez promised a bill amending the Hydrocarbons Law. The bill would identify new sources of funding for transportation workers’ benefits, including a propane gas subsidy for workers that did not already have one. Transportation leaders agreed to keep the current transportation fares if the President kept his side of the agreement.

Whether this agreement will continue to suffice for transportation unions is yet to be seen. Just days after the agreement between President Fernandez and the transportation unions, gasoline retailers (under the union “Anadegas”) began striking to protest the failure of government to raise gasoline prices. Under the Hydrocarbons Law the Minister of Industry and Commerce sets and adjusts the price for hydrocarbon fuels (including gasoline) according to the fluctuating price of oil in the international market. However, gasoline retailers contest that this formula for setting prices fails to account for domestic inflation, which may not correspond with the international price of oil. Gasoline retailers point to the number of gasoline retailers that have gone out of business in the past 10 years as an indicator of how the current prices for gasoline and other fuels are insufficient to cover their operating costs, placing them on the verge of bankruptcy.

The number of gas stations in the Dominican Republic has declined from 768 to 640 over the past 10 years. In contrast, businesses offering Liquid Petroleum Gas (“LPG”), an alternative fuel for vehicles, has grown by 200%, from 320 locations to 925. This increase for LPG providers is attributed to an increase in the number of vehicles that use LPG instead of gasoline. In response to the strike, the Ministry of Industry and Commerce agreed to meet with the gasoline retailers’ union. The following Friday, the Ministry of Industry and Commerce announced that beginning Saturday, February 12, there would be a price increases on every fuel except LPG, including diesel. Although the propane subsidy promised to the transportation unions by President Fernandez will not be affected by the price increase, since propane is an LPG fuel, the diesel subsidy already given to transport workers may be devalued by the price increase on diesel fuel.

Yet, just as President Fernandez and the Ministry of Industry and Commerce avoided a transportation price hike and the continued strike of gasoline retailers, a national strike over the country’s minimum wage seemed to loom ahead. Undoubtedly encouraged by the increase in fuel prices, peasants, bus passengers, and various union organizations say they plan to protest to demand a corresponding increase in the minimum wage.

Just days before the gasoline retailers’ strike, the National Salaries Committee (“CNS”) had refused to set a minimum wage higher than RD$8,465 (roughly US$225), although the Dominican Republic Central Bank stated RD$10,407 was the salary needed to cover the cost of basic staples. Further, labor unions proposed a wage increase larger than the amount stated by the Central Bank, to compensate for an anticipated price increase in fuel and other staples. Before an agreement could be reached, the announcement on increased fuel prices was released. It is yet to be seen whether the demands of labor unions and others for an increase in the minimum wage will be met with as much success as gas retailers achieved this past week.

1) Should the National Salaries Committee raise the minimum wage to the amount stated by the Central Bank? If so, should the increase go beyond the amount stated by the Central Bank to compensate for price increases and inflation?
2) Should the Central Bank be trusted to set the price for minimum wage? Likewise should the Ministry of Industry and Commerce be trusted to set the price for hydrocarbon fuels? Or should the decision for setting both the minimum wage and price require an input from affected unions?

No comments: