Dominican president faces toughest term

The Dominican Republic has been transformed in recent years from a nation of sugar cane fields to one of shopping malls and designer golf courses for tourists -closely linking its economy to the United States.

That shift helped carry Fernandez to victory on Friday. But, he warned on Saturday, economic woes are approaching.

"Now we unite as a country, so as a nation we can confront those challenges and obstacles that are upon us," Fernandez said.

Experts predict an economic slowdown could hit the Caribbean nation in coming months -"just in time for the beginning of his new government," said David Lewis, vice president of Washington-based consulting group Manchester Trade Ltd.

Close ties with the United States will likely accelerate that downturn.

Americans buy about 80 percent of Dominican exports and have invested heavily in manufacturing and real estate. The U.S. is also a major source of tourists and home to more than 1 million Dominican emigrants, who provide a tenth of the country's gross domestic product through remittances.

A slump in U.S. credit markets, the falling dollar and rising oil prices end a period of worldwide prosperity, according to an economic plan that Fernandez released during the campaign. In the proposal, he suggests refinancing public debt, aiding farmers and investing in alternative fuels.

Fernandez led the country to double-digit growth in 2006 and 2007 after an economic crisis sparked by the 2003 collapse of its central bank brought soaring inflation and undermined the peso.

But unemployment is still at 16 percent, and one in four Dominicans live in poverty. Gas sells for more than US$5 (euro3) a gallon and the government has subsidized food to offset rising prices.

If the economy slows, millions of Dominicans will find themselves without a safety net.

Giselle Taveras, a 32-year-old beauty product saleswoman, said her working-class Santo Domingo neighborhood is suffering. "Things are terrible. There is a lack of work, there are no good hospitals," she said.

Much of the economic growth that helped Fernandez win at least 2.2 million of more than 4 million votes cast Friday is credited to a US$695 million (euro448 million) loan package from the International Monetary Fund.

The cash helped stabilize the peso and draw foreign investors, who expect returns on their sprawling new resorts and improved airports. For that, they need a steady diet of tourists with disposable incomes.

Fernandez needs a return on his own big bets, such as a US$710 million (euro458 million) subway system that has not yet opened in the capital. He plans to refinance some of the country's US$8.8 billion (euro5.68 billion) public debt and look for ways to boost expected declines in exports and remittances.

Fernandez has also proposed investing in domestic ethanol production and natural gas to slash oil dependence, and aiding farmers in a bid to boost agricultural output.

But his administration may have tried to dress up the economy ahead of elections with food subsidies and investment in big-ticket items like bridges and the public subway, said Jonathan Hartlyn, a University of North Carolina political scientist who studies Latin America.

"There is a bit of a question mark about how favorable the economy is going to look a year from now," he said.