Investing in emerging countries: the case of the Dominican Republic

In previous articles we analyzed the differences between financial and real estate investments. On this occasion, we want to focus on the appeal of investing in emerging countries, especially in contexts of high economic and political global uncertainty.

We'll take as our main reference the Dominican Republic, a country that's consolidating itself as one of the region's most promising investment destinations.

Why invest in emerging countries?

In a scenario where many governments adopt aggressive fiscal policies and the economic environment shows signs of instability, more and more investors seek to protect and diversify their wealth by moving part of their resources abroad. The real estate sector of emerging countries — driven by the growth of tourism and the arrival of new residents — offers an excellent combination of profitability, growth, and opportunity. However, it's essential to take into account factors for assessing the country's future, including country risk.

Major economies of South America, Central America, and the Caribbean (May 2025)

What is country risk?

Country risk measures a nation's economic and political stability. In financial markets, it's commonly expressed as the premium a country pays compared to U.S. Treasury bonds. A reference instrument for measuring it is the EMBI (Emerging Markets Bond Index), developed by JP Morgan in the 1990s, which allows comparing risk between different countries. The greater the spread, the greater the risk perception for investors, and vice versa.

Venezuela stands out with the region's highest country risk, recording 17,086 points — reflecting a very high perception of economic and political instability by international markets.

A country that draws attention for its evolution and growth in the last three years is the Dominican Republic. With a tourism growth rate of approximately 10% annually, economic policies that promote foreign investment, along with economic stability and a legal framework that protects investments, it's consolidating itself as one of the region's best economies.

In the first half of this year 2025, the number of visitors exceeded 6 million people, reflecting the strength of the tourism sector.

Dominican Republic: stability, growth, and opportunity

In the Latin American and Caribbean context, the Dominican Republic stands out for its low level of country risk — with just 200 points as of May 2025, the lowest in its environment, compared to the 530 points recorded in 2022. This positions it below tourism competitors such as Mexico, Colombia, Costa Rica, Brazil, or Panama.

This solid performance has led agencies like Fitch Ratings to give the country a positive outlook in its risk rating — the only one in Central America with that projection.

Main strengths of the Dominican economy:

• Economic growth: in 2024, the country led the region with 5% growth, far exceeding the South American area average.
• Controlled inflation: with an interannual index within the Central Bank's target range (4.0% ± 1.0%).
• Solid employment: the unemployment rate stood at a low 8%, with more than 5 million people employed.
• Expanding GDP: reached US$124.5 billion, with a GDP per capita of approximately US$11,500.
• Foreign Direct Investment (FDI): exceeded US$4 billion annually in the last three years, projected to reach US$4.7 billion by the end of 2025.

In addition, the country has consolidated three key pillars of its balance of payments:

• Remittances: more than US$10,756 million in 2024.
• Tourism: a contribution of US$10,975 million from 2 million visitors.
• Exports: reached US$12,925 million, 7% more than in 2023.

The combination of these activities has generated income exceeding US$43 billion, reflecting a diversified and resilient economy.

Future outlook

For 2025, projections point to growth of 4.5%, maintaining the regional advantage even in an uncertain global context. In addition, the Dominican financial system remains solid and well capitalized, with no signs of relevant macroeconomic risks, according to the Central Bank.

Key opportunities also open in sectors such as nearshoring, (corporate relocation), export diversification, and tourism and real estate infrastructure — where greater foreign capital attraction is expected. And as we mentioned in a previous article, the Golden Age: a retiree population of more than 28 million people over the next five years.

Key considerations when investing

While the environment is favorable, it's essential to take the following factors into account before investing:

• Political and economic stability: evaluate institutional strength, confidence in the currency, and growth prospects.
• Legal certainty: verify the transparency of the legal system and the protection of property rights.
• Tax system: analyze tax regimes, double-taxation treaties, and tax burdens.
• Local regulations: learn about laws related to foreign investment, real estate ownership, and specific requirements.
• Market risks and opportunities: evaluate appreciation potential, demand, and sector volatility.
• Associated costs: take into account commissions, taxes, paperwork, and expenses.

Investing in the real estate sector of emerging countries like the Dominican Republic not only allows diversifying your wealth and accessing returns higher than those of many Western economies — it also offers attractive tax advantages and migration facilities for foreign investors. All this framed in a clear legal environment, with a solid banking system and notable economic and political stability.

The Dominican Republic thus positions itself as a destination in full expansion, with consistent macroeconomic fundamentals and a growing appeal for international investment.

By Luis Velázquez Moreno

Account Executive

Larimar City & Resort