How the Dominican Republic can escape the ‘middle-income trap’

Evolution of freedom

The Dominican Republic’s recent political history is defined less by rupture than by consolidation. By the mid-1990s, the country had already resolved the most consequential question of its institutional life: how political power is contested and transferred. Since the decisive elections of 1996, Dominican politics has been characterized by regular, competitive elections, peaceful alternation in power, and the absence of constitutional ruptures or electoral breakdowns. Governments have come and gone, and parties have risen and declined, but the basic rules of the game have remained intact.

In a regional context marked by institutional volatility—coups, impeachments, constitutional rewrites, and contested elections—this continuity stands out. The Dominican Republic institutionalized electoral competition early and maintained it across political cycles—including long periods of single-party dominance—without sliding into electoral authoritarianism. The result has been more than procedural stability. Over time, this durability has produced cumulative institutional returns: greater predictability for investors, incremental strengthening of legal frameworks, and an environment in which political dissatisfaction is resolved through elections rather than systemic crisis. For three decades, this steadiness has underpinned one of the strongest growth performances in Latin America. The Freedom Index captures this trajectory, showing sustained gains from 1995 onward and further consolidation after 2020.

This pattern is most visible in the political dimension, which provides the clearest entry point into the country’s broader institutional evolution. The Dominican Republic’s democratic transition was prolonged and uneven, beginning with the assassination of dictator Rafael Leonidas Trujillo in 1961 and unfolding through cycles of hope and reversal—including a coup, civil war, US intervention, and decades of semi-competitive elections under Joaquín Balaguer. The decisive consolidation came in 1996, when competitive elections finally became the uncontested mechanism for political power. This continuity is reflected in the consistently high level of the elections component of the political subindex over the entire period.

What is particularly notable is that even prolonged periods of single-party dominance did not translate into electoral authoritarianism. Between 2004 and 2020, when the Dominican Liberation Party governed for sixteen consecutive years, concerns arose about institutional sclerosis, clientelism, and attempts to alter constitutional term limits. The suspension of the February 2020 municipal elections following failures in a new electronic voting system further exposed procedural weaknesses and eroded public trust. Yet constitutional boundaries ultimately held, the electoral framework was restored, and power transferred peacefully to the opposition later that year.

The evolution of political rights over the past two decades reflects a more nuanced reality. From roughly 2010 to 2020, the political rights component shows a gradual decline. This movement does not suggest a drift toward authoritarianism, but rather the accumulated effects of prolonged incumbency. Media outlets became increasingly entangled with government advertising, patronage networks expanded, and civil society grew more skeptical of the political class. These tensions culminated in the large “Marcha Verde” protest movements that began in 2017 and persisted until the 2020 elections, demanding an end to corruption and impunity. Rather than weakening democracy, these mobilizations ultimately reinforced it by channeling discontent through institutional means and contributing to a legitimate transfer of power.

The rebound in political rights after 2020 appears to reflect shifts in political tone and enforcement patterns more than sweeping institutional reform. The arrival of the Luis Abinader administration brought a clearer rhetorical commitment to transparency and accountability, reduced pressure on critical media, and signaled greater tolerance for scrutiny, contributing to improved perceptions of political openness. Civic space widened, even if the formal legal framework governing political rights remained largely unchanged.

Civil liberties, by contrast, have remained relatively stable and high throughout the period. The country did not experience the sharp pandemic-related declines seen in many advanced democracies, particularly with respect to restrictions on movement or assembly. This stability reinforces the broader picture of an open political system that, despite its imperfections, has avoided the authoritarian and electoral backsliding observed elsewhere in the region.

The most puzzling feature of the political subindex is the persistently low score on legislative constraints on the executive, a pattern that in the Dominican case reflects institutional design rather than weak democratic competition. The country operates under a robust presidential system, and the 2010 constitutional reforms aligned legislative and presidential elections on the same electoral calendar. As a result, the party that wins the presidency almost invariably controls Congress as well, reducing incentives for legislative oversight. The limited professionalization of the legislature compounds this structural feature.

However, this does not mean that the executive operates without constraints. In practice, civil society organizations, business associations, trade unions, and protest movements play a decisive role in shaping and blocking legislation. A clear example was President Luis Abinader’s withdrawal of an ambitious fiscal reform proposal in 2021 after strong opposition from business groups and civil society. Similar dynamics have constrained reform efforts in areas such as education, transportation, and labor markets. The low legislative constraint score therefore reflects a misalignment between formal institutional checks and the informal, societal forces that operate in the Dominican political system.

Governments of different political orientations have combined pro-market and social welfare objectives in varying proportions, reducing the likelihood of sharp policy reversals.

The economic subindex reinforces the broader picture of institutional continuity that characterizes the Dominican Republic’s experience since the mid-1990s. Rather than reflecting abrupt policy shifts or ideological swings, the data point to a gradual and largely uneventful expansion of economic freedom, aligned with a stable political environment. One reason for this continuity lies in the country’s distinctive political economy: Across party lines, there has been broad consensus around openness to trade and foreign investment, while redistributive policies have not been the exclusive domain of the left. In practice, governments of different political orientations have combined pro-market and social welfare objectives in varying proportions, reducing the likelihood of sharp policy reversals. Over the same period, the country completed a structural transition from an agriculture-centered economy to a highly diversified one in which tourism, manufacturing, mining, construction, and services contribute in comparable proportions to GDP, strengthening resilience to external shocks. As a result, changes in economic policy have tended to be incremental, allowing the Dominican Republic to maintain a consistently business-friendly framework while adjusting gradually to social and fiscal pressures.

Trade freedom has been among the most stable components throughout the period. The country adopted an outward-looking growth model early on, anchored in tourism, free trade zones, and export-oriented manufacturing. This openness has proven resilient to changes in government and political cycles. Across party lines, successive administrations have actively pursued and ratified trade agreements with regional blocs and major economies, reinforcing a broad political consensus in favor of international economic integration. As such, trade policy has not been subject to abrupt reversals.

Investment freedom follows a similarly stable, though slightly more uneven, path. The Dominican Republic has long been perceived as relatively business-friendly within the regional context. Periodic fluctuations in this component appear to capture moments of regulatory or fiscal uncertainty rather than shifts toward state intervention or capital controls.

Property rights show gradual improvement but remain an area where institutional limitations are most visible. While large investors tend to operate within a relatively predictable legal environment, smaller firms and households continue to face slower judicial processes and administrative bottlenecks. This uneven protection of property rights contributes to the persistence of informality and limits the diffusion of economic freedom across the broader economy.

Women’s economic freedom registers a clear upward trend over the past three decades, reflecting the steady removal of formal legal barriers to women’s participation in economic life. This formal progress has coincided with increased visibility of women in both political and business leadership, including sustained cross-partisan representation at the vice-presidential level. As in many middle-income countries, improvements in formal equality coexist with persistent gaps in labor market outcomes, suggesting that social norms and institutional rigidities continue to constrain full convergence.

The sharp improvement in legal indicators subindex after 2020 aligns closely with a combination of legal reform and changes in prosecutorial practice. On the legislative side, reforms to the penal code helped modernize the criminal justice framework, clarify legal definitions, and strengthen sanctions for corruption-related offenses, contributing to greater clarity of the law and procedural coherence. At the same time, the appointment of an unusually independent attorney general marked a clear departure from past patterns in the enforcement of those laws. For the first time in decades, high-profile corruption cases were brought not only against figures associated with previous administrations, but also against politicians and officials linked to the governing coalition. Investigations involving senior legislators, mayors, and politically connected actors sent a strong signal that prosecutorial discretion was no longer being exercised along partisan lines, and this shift had an immediate effect on perceptions of judicial independence and effectiveness, as reflected in the legal subindex. However, the conversion of investigations into final convictions has been slower and more uneven, reflecting judicial inertia and inherited procedural constraints. This underscores that prosecutorial autonomy does not necessarily amount to systemic judicial transformation.

At the same time, this episode raises an important institutional question. The recent strengthening of the rule of law appears to rest heavily on the personal credibility and independence of the prosecutor, rather than on a fully consolidated system of judicial autonomy. Whether these gains can be normalized—embedded in procedures, safeguards, and professional norms that outlast individual officeholders—remains to be seen. Taken together, the evolution of freedom in the Dominican Republic shows an institutional trajectory shaped by steadiness rather than spectacle. Political competition has remained credible over time, legal institutions have strengthened without abrupt breaks, and economic rules have evolved through adjustment rather than ideological swings. This pattern stands in contrast to much of the region, where institutional change has often been driven by sharp turns, constitutional resets, and recurrent political crises. In the Dominican case, stability has carried weight. It has allowed investment decisions to be taken without persistent institutional uncertainty and has given economic activity room to expand without the disruptions associated with repeated policy reversals. Social demands, in turn, have tended to find expression through elections, courts, and public debate rather than through systemic crisis. The payoff from this understated but resilient institutional framework becomes clearer when attention shifts from rules to results. The following section examines how this steady expansion of freedom has translated into sustained improvements in income, health, education, and overall standards of living.

From freedom to prosperity

The Dominican Republic’s experience over the past three decades suggests that institutional stability, while rarely dramatic, can be economically productive. The country has recorded the fastest GDP growth in Latin America in the last half-century, averaging approximately 5 percent annually—well above the regional average of 3.2 percent. This performance has translated into the fastest income convergence with the United States of any major Latin American economy: From one of the poorest countries in the hemisphere in the 1960s, the Dominican Republic now has a standard of living roughly one-third that of the United States, compared to one-quarter for the region as a whole. This remarkable performance reflects the cumulative effect of a predictable institutional environment in which economic activity could expand over time rather than being repeatedly disrupted. The Prosperity Index captures this payoff, showing steady improvements in income and basic social indicators since the mid-1990s.

The [Dominican Republic] has recorded the fastest GDP growth in Latin America in the last half-century, averaging approximately 5 percent annually.

Rather than relying on a single engine of expansion, the Dominican Republic has built a diversified growth model that has evolved gradually over time. Economic activity has been rooted in a combination of tourism, free trade zones, mining, construction, and services, with each sector playing a stabilizing role at different phases of the cycle. Tourism has provided a steady source of foreign exchange, while export-oriented manufacturing in free trade zones has integrated the country into global value chains, especially in medical devices and electronics. Gold mining—anchored by Pueblo Viejo, Latin America’s largest gold mine—has emerged as the country’s leading export and proved especially valuable during the pandemic when mineral revenues helped offset the collapse in tourism. Construction and related services have supported domestic demand, partly reflecting sustained population growth and urbanization. This diversification has reduced exposure to commodity price volatility and limited the risk of abrupt downturns, distinguishing the Dominican Republic from many regional peers whose growth paths have been more narrowly concentrated.

The United States occupies a central place in the Dominican Republic’s external economic relations, but it does so within a relatively diversified trade structure. Geographic proximity, preferential trade arrangements under DR-CAFTA, and long-standing commercial ties have made the United States the country’s most important single trading partner. The relationship cuts in both directions: The Dominican Republic exports free trade zone manufactures and traditional agricultural commodities—tobacco, sugar, cocoa, coffee—while importing energy, machinery, and consumer goods from the United States. This two-way integration has provided a stable demand anchor and supported export-oriented sectors from traditional agriculture to modern manufacturing, with growing nearshoring opportunities. At the same time, the Dominican Republic has avoided excessive concentration on a single market. Trade links with Europe, the Caribbean, and Latin America have expanded over time, and tourism revenues draw on a broad set of source countries. This diversification has reduced vulnerability to shocks originating in any one economy, allowing the country to benefit from deep integration with the United States while maintaining a degree of external balance.

Education presents a more ambivalent picture. The Dominican Republic made a highly visible and politically salient commitment to education funding during the 2010s, following sustained social pressure to comply with constitutional spending mandates. Public investment expanded rapidly, leading to clear improvements in access, school infrastructure, and enrollment. These efforts marked an important shift in public priorities and are reflected in gradual gains in educational attainment indicators captured by the Prosperity Index.

However, improvements in educational quality have lagged far behind the scale of financial effort. Learning outcomes remain weak by international standards, as reflected in the Dominican Republic’s consistently low performance in the Programme for International Student Assessment, where students score well below the OECD and Latin American averages in reading, mathematics, and science. This gap points to institutional constraints rather than a lack of resources. Rigidities in the public education system—particularly regarding teacher evaluation, incentives, and accountability—have proven difficult to overcome. Opposition to reforms aimed at improving performance has often succeeded in preserving existing arrangements that disproportionately benefit a relatively protected group of workers, while limiting gains in system-wide quality and student outcomes. As a result, education has yet to play the role in productivity growth and social mobility that is required for sustained income convergence.

Health outcomes have followed a more linear trajectory. Life expectancy has increased steadily over the period, reflecting income growth, expanded access to basic healthcare, and incremental improvements in coverage. The Dominican Republic did not undertake a radical overhaul of its healthcare system, but rather expanded it gradually, with uneven quality but broad reach. These gains are consistent with the country’s level of development and contribute meaningfully to improvements in overall well-being, even as efficiency and quality challenges persist.

Inequality has improved markedly over the past decade. The Prosperity Index shows a substantial reduction in income inequality since around 2010, with the inequality component increasing by roughly twenty-five points, placing the Dominican Republic among the stronger performers in the region on this dimension. This improvement reflects a combination of sustained economic growth, rising employment, and gradual formalization, which together helped lift incomes at the lower end of the distribution. Unlike in many neighboring countries, these gains were achieved without the boom-and-bust cycles that tend to reverse distributional progress.

At the same time, the decline in measured inequality masks emerging forms of segmentation that could become more consequential over time. High levels of informality continue to limit upward mobility for a large share of workers, constraining access to stable income trajectories and social protection. While overall income dispersion has narrowed, disparities in job quality and long-term opportunity persist. The Dominican Republic’s experience illustrates that inequality can fall meaningfully even as structural dualities remain entrenched—a pattern consistent with a growth model that has been inclusive in aggregate terms but uneven in how opportunities are distributed across the labor force.

These distributional patterns also shape how migration from Haiti features in the prosperity debate. The issue is deeply polarizing, and this polarization has produced policy incoherence rather than resolution. The 2013 Constitutional Court ruling (TC 168-13) held that tens of thousands of Dominican-born individuals of Haitian descent had never been entitled to citizenship—a decision that drew accusations of creating statelessness from the Inter-American Court of Human Rights.  Subsequent regularization efforts reached only a fraction of the affected population, constrained not only by domestic political backlash but also by Haiti’s limited administrative capacity and inability to provide basic civil documentation for many affected individuals. Meanwhile, mass deportations coexist with the massive use of undocumented labor in construction, agriculture, and services, while Haitian migrants and their descendants represent a substantial share of public spending on schooling and healthcare. The result is neither exclusion nor integration but an intractable ambiguity: pervasive informality, legal precarity, and administrative inconsistency that entrenches inequality even as aggregate indicators improve.

The more consequential challenge lies in the longer-term implications of informal integration. When access to services, education, and employment relies on ad hoc arrangements rather than clear institutional pathways, the risk is not immediate marginalization but gradual stratification. Over time, this can translate into persistent differences in educational trajectories, job quality, and social mobility, even without explicit barriers or discriminatory intent. Haitian migration, therefore, does not currently undermine prosperity outcomes, but it does test the capacity of Dominican institutions to transform informal inclusion into sustainable integration and to prevent new forms of segmentation from emerging alongside otherwise improving inequality indicators.

The path forward

The Dominican Republic approaches the coming years from a comparatively favorable position within Latin America. Democratic norms are consolidated, institutional performance has improved incrementally, and prosperity gains have accumulated without major reversals. The central question ahead is therefore not one of stability, but of trajectory. The challenge is whether the country can move beyond a successful middle-income equilibrium and sustain the kind of productivity gains required to converge toward high-income status.

The central question ahead is therefore not one of stability, but of trajectory.

Externally, the Dominican Republic is unusually well positioned, particularly in its relationship with the United States. Close economic, political, and security ties have long defined the country’s development path, and recent shifts in US trade and industrial policy have, in principle, reinforced this advantage rather than undermined it. Even amid more protectionist rhetoric and policy experimentation in Washington, the Dominican Republic has remained a trusted partner, benefiting from geographic proximity, established supply chains, and a reputation for macroeconomic and political reliability. Yet this favorable positioning has not always translated into concrete gains at the scale one might expect. A telling example is the presence of a US International Development Finance Corporation office in the country, which was initially seen as an opportunity to channel investment and support strategic projects but has so far had very limited activity. This gap highlights a broader risk: Close alignment with the United States creates opportunities, but capturing them requires domestic institutional capacity, project readiness, and strategic coordination. Without these, proximity and trust alone may result in underused potential rather than accelerated convergence.

This places the question of the middle-income trap at the center of the country’s outlook. The Dominican Republic has already captured most of the gains associated with macroeconomic stability, openness, and sectoral diversification. What lies ahead is a more demanding transition toward productivity-driven growth. The risk is not a return to instability or crisis, but a gradual settling into growth rates that are sufficient to sustain middle-income status yet insufficient to achieve convergence with advanced economies. Persistently low educational quality, high informality, limited innovation capacity, and weak spillovers from export sectors continue to constrain productivity. Escaping the middle-income trap will depend on transforming these underlying drivers through improvements in learning outcomes, technical training, and innovation capacity to enable diversification toward higher-value sectors.

Institutionally, recent improvements in the rule of law and anti-corruption enforcement have strengthened public trust and international credibility. However, the durability of these gains remains an open question. Much of the progress since 2020 has relied on leadership choices and informal norms rather than on fully entrenched institutional safeguards. Whether judicial independence, prosecutorial autonomy, and legal clarity can be preserved across political cycles will be a key determinant of future performance. Moreover, prosecution is not the same as prevention, and high-profile cases have demonstrated that corrupt practices persist even under the credible threat of enforcement. A partial rollback would not necessarily trigger immediate instability, but it would weaken the institutional foundations required for higher-quality growth and more complex economic activity, while leaving underlying vulnerabilities in procurement, asset disclosure, and political finance unaddressed.

Regionally, instability represents a more immediate and less controllable risk. The situation in Haiti has deteriorated to an unprecedented degree: Since the assassination of President Jovenel Moïse in 2021, gangs—some designated as terrorist organizations—have seized control of an estimated 90 percent of Port-au-Prince, while state institutions have effectively ceased to function. The violence has displaced over one million people and caused tens of thousands of deaths since 2018. This is not cyclical instability but a qualitatively different breakdown. Persistent institutional collapse and humanitarian distress across the border generate security concerns, fiscal pressures, and diplomatic constraints that the Dominican Republic cannot fully manage on its own. While the country has so far absorbed these pressures without major disruption, prolonged instability in Haiti could increasingly test its administrative capacity, border management, and social cohesion, particularly if international engagement remains insufficient.

A related risk stems from the very factors that have underpinned the Dominican Republic’s success. Relative political stability, improving infrastructure, and deep integration into international trade networks also make the country an attractive transit and logistics hub for illicit activities, particularly drug trafficking and associated financial flows. As enforcement pressures shift across the region, there is concern that criminal networks could seek to exploit the Dominican Republic’s ports, transportation systems, and financial channels. This risk does not reflect institutional failure—in fact, the country has achieved record drug interdictions in recent years—but exposure created by openness and connectivity. If not handled carefully, these dynamics could strain security institutions, distort local economies, and erode public trust, undermining some of the institutional gains achieved in recent years.

Finally, the political economy of reform will remain decisive. The Dominican political system continues to combine a strong presidency with a relatively weak legislature and a vibrant civil society capable of constraining government action. As earlier sections have shown, this configuration has been effective at preventing democratic backsliding and forcing accountability, but it has also made structural reform difficult. This tension is particularly evident in the fiscal sphere. A narrow tax base and extensive exemptions limit the state’s capacity to finance higher-quality public services and consistent public policy execution, as well as to strengthen social protection and further reduce structural inequalities. As a result, the government has increasingly turned to debt: Interest payments alone now approach 4 percent of GDP, and debt service consumes 25 to 30 percent of the state budget, crowding out productive public investment. Meanwhile, intractable problems persist—most notably electricity subsidies required to cover distribution losses—that continue to drain fiscal resources. The result is a budget squeezed between debt obligations, unproductive subsidies, and inadequate investment in human capital and infrastructure.

Whether leaders are prepared to make difficult and politically costly decisions—rather than merely avoiding destabilizing ones—will determine whether the next half-century is defined by incremental continuity or genuine transformation.

Without fiscal reform, efforts to improve education, infrastructure, and social protection will remain constrained, even as parts of the economy continue to advance. The risk is that inequality, which has declined in aggregate, could begin to rise again in more structural forms, producing a segmented society marked by pockets of high prosperity and opportunity alongside regions and communities that remain disconnected from growth. Whether the political system can move from preserving stability to actively reforming itself—making choices that broaden the tax base and strengthen state capacity—will determine whether the country can convert steady momentum into sustained development. In sum, sudden crises or dramatic reversals are unlikely to define the Dominican Republic’s future. Its prospects hinge instead on whether it can leverage its favorable external position, preserve recent institutional gains, and overcome domestic constraints that limit productivity, human capital formation, and social integration. Stability has served the country well. The challenge now is to turn that stability into sustained convergence—by moving beyond a political culture of indefinite deferral that has allowed structural problems to persist even as the economy expanded. Whether leaders are prepared to make difficult and politically costly decisions—rather than merely avoiding destabilizing ones—will determine whether the next half-century is defined by incremental continuity or genuine transformation.

Marino Auffant is a nonresident senior fellow at the Atlantic Council’s Scowcroft Center for Strategy and Security. He is a historian and geopolitical strategist whose work examines global macro trends, great-power competition, and economic statecraft. Based in Washington, D.C., he advises public- and private-sector leaders on structural competitiveness, supply-chain strategy, and industrial policy, with a particular focus on strategic dynamics in the Western Hemisphere and US–Dominican Republic relations. His research and advisory work spans energy markets and semiconductor nearshoring strategy. He holds a PhD in history from Harvard University.

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