Two-thirds of the FDI in the first half of the year, some US$2,194.6 million, corresponded to new capital contributions, according to the Central Bank
SANTO DOMINGO. – Four months after Fitch Ratings changed the Dominican Republic's credit outlook from positive to stable and warned that a sufficiently strong oil shock could lead the Central Bank to raise interest rates before the end of 2026, the data shows two simultaneous movements: the weighted average lending rate of multiple banks has risen for three consecutive days, while foreign direct investment has not only not declined, but actually increased during the first half of the year.
The coincidence does not allow us to establish a causal relationship between the two phenomena, but it raises a relevant question for foreign investment: what effect would a scenario in which the cost of financing and the risks associated with international oil prices increase simultaneously have on future capital decisions?.
In April 2026, Fitch Ratings lowered the Dominican Republic's credit outlook from positive to stable and maintained the sovereign rating at BB-, a decision that did not represent a reduction of the rating, but modified the assessment that the agency made about the country's credit risk trajectory.
An opinion column signed by Daniel Toribio, economist and former finance minister, published in Acento and Hoy, described the decision as a “warning” that, while not implying “an immediate collapse”, was also not “an insignificant formality” because it could affect confidence, the cost of credit and the perception of risk.
The sovereign rating also has a dimension linked to the State's financial strategy: the Ministry of Finance and Economy, in its document "Road to Investment Grade", uses the evaluations of Fitch, Moody's and Standard & Poor's as references to measure the progress of the Dominican Republic towards investment grade and points out that reaching that category contributes to reducing financing costs in international markets.
Currently, all three agencies keep the country below that category: the quarterly country risk report of the Executive Secretariat of the Central American Monetary Council, updated to June 2026, records a rating of BB- in Fitch, Ba2 in Moody's and BB in Standard & Poor's.
According to Diario Libre, citing the Fitch report, the rating agency based the change in outlook, among other factors, on the fact that Dominican growth had fallen below its historical average, with an expansion of 2.1% in 2025, and pointed to the weakness of sectors such as construction and manufacturing.
But the agency also outlined a forward-looking scenario, warning that if the impact of oil prices proved "large enough," the Central Bank of the Dominican Republic could raise official interest rates toward the end of 2026.
Four months later, the rate that the Central Bank sets directly has not increased: the monetary policy rate remains at 5.25%, according to the historical series published by the agency.
The rate that has moved is the weighted average active rate of multiple banks, which responds to financial intermediation and market conditions.
That rate had fallen from 14.99% in May 2025 to 13.28% in March 2026, a reduction of 171 basis points within the context of the monetary easing cycle. The decline subsequently halted, and the rate fell to 13.79% in July and 14.08% in August 2026.
The August figure represents a 29 basis point increase compared to July and is 80 basis points above the March level, although this comparison does not imply that the increase in the lending rate was caused by Fitch's decision or by oil prices. The Central Bank has not publicly established this causal relationship.
What the Central Bank has acknowledged is the pressure coming from the oil market, and it stated this in its communication for August, in which it noted that the price of Texas Intermediate oil remained high during the month due to the prolongation of the conflict in the Middle East, settling at around US$85 per barrel at the end of that month.
He also indicated that the prices of refined fuels had increased by a greater amount than crude oil, generating additional pressure on domestic costs.
In this context, year-on-year inflation fell from 5.67% in June to 5.13% in August, according to the Central Bank, while core inflation stood at 4.76%. Accumulated inflation through August was 2.60%, and the Central Bank's inflation target is 4.0%, with a tolerance range of plus or minus one percentage point.
However, the behavior of interest rates and oil prices has not so far coincided with a reduction in foreign direct investment.
Data from the Central Bank shows that the Dominican Republic received US$3,276.5 million in foreign direct investment during January-June 2026. This amount exceeds by US$233.4 million, equivalent to 7.7%, the US$2,892.8 million received during the same period in 2025.
Even more relevant for evaluating the behavior of new projects is the composition of the flow: of the US$3,276.5 million recorded in the first half, approximately US$2,194.6 million corresponded to new capital contributions, around two-thirds of the total.
Investment did not stop after Fitch's decision, as data reveals that during April-June, the second quarter of the year and the period that began a few weeks after the rating agency's change of outlook, the flow of foreign direct investment reached approximately US$1,604.6 million, according to figures from the Central Bank.
This fact does not allow us to conclude that Fitch's decision was irrelevant to investors, because investment decisions and their disbursements can respond to previously approved projects and be executed over several periods.
Nor does it allow attributing the increase in FDI to the absence of an increase in the monetary policy rate.
What it does allow us to establish is that, up to June, there is no evidence in the flows recorded by the Central Bank of a contraction in foreign investment after the change in outlook.
The Central Bank is cautious about the future
However, the increase in foreign direct investment does not mean that the conditions that have allowed these flows to be attracted are guaranteed going forward.
In an analysis published on September 8 in the Central Bank's Open Page, economist Elisa Vilorio de Painter places the attraction of foreign capital within an international environment characterized by geopolitical and trade tensions, new tariffs, and greater caution in investment decisions.
In that context, Vilorio cites stability, the depth of the foreign exchange market, institutional strength and the capacity to withstand scenarios of high uncertainty, which, in addition to business costs, are also determining factors for attracting foreign investment.
The text argues that investors look not only at tariffs or operating costs, but also at macroeconomic stability, foreign exchange availability, market access, and a country's ability to maintain its competitiveness.
The author also argues that competition for foreign investment will increase and that investors will become more selective. In light of this scenario, she identifies the following challenges for the country: continuing to strengthen institutions, improving human capital, increasing productivity, deepening linkages between national and foreign companies, promoting innovation, and diversifying both export markets and sources of investment.
This approach introduces an additional dimension to the discussion opened by Fitch's warning: foreign direct investment can continue to grow even when the conditions under which new projects are evaluated change.
Data from the first half of the year shows that capital flows to the Dominican Republic continued to increase, but the analysis published by the Central Bank focuses on the factors that will need to sustain the country's ability to compete for those resources in a more demanding international environment.
Looking ahead, the Central Bank projects that foreign direct investment will exceed US$5.3 billion during 2026 and that foreign exchange earnings from FDI, remittances, tourism, exports of goods and other services will exceed US$50.2 billion by the end of the year.
The current situation puts two distinct signals on the same table; on the one hand, foreign investment continues to arrive and new capital contributions represent a significant proportion of the flow recorded during the first half of the year.
On the other hand, Fitch introduced a risk scenario in April linked to oil and interest rates, while in the following months the active rate of multiple banks began to rise although the monetary policy rate remained unchanged.
For a foreign investor, the difference is relevant because a potential rise in rates not only affects the cost of loans taken out by local companies, but also has a direct impact on projects that require financing, since a higher rate can raise the cost of capital and modify the expected profitability, particularly in activities with high initial investments and long recovery periods.
That possibility is a financial implication of the scenario presented by Fitch, not a consequence that the available data already allows us to attribute to foreign investment in the Dominican Republic.
Although a lower sovereign rating or a less favorable outlook can influence the perception of country risk and, depending on market conditions, the cost at which the State, companies and projects linked to the country obtain financing.
But in the Dominican case there was no downgrade in April: Fitch maintained the BB- rating and changed the outlook from positive to stable.
Therefore, the data available up to June show a different situation than that of a withdrawal of foreign capital: foreign direct investment grew 7.7%, reaching US$3,276.5 million and approximately two-thirds of the flow corresponded to new capital contributions.
At the same time, the average active rate of multiple banks went from 13.28% in March to 13.79% in July and 14.08% in August, while the monetary policy rate remained at 5.25%.
Oil is the connecting point between the two stories, but not an automatic explanation for them:
- Fitch identified it in April as a risk that could lead to an increase in official rates if the shock was strong enough.
- In August, the Central Bank again pointed to the increase in oil and refined fuel prices as a source of pressure on domestic costs.
- The monetary policy rate, however, remained unchanged, while the weighted average lending rate of multiple banks increased.
- Foreign direct investment, meanwhile, continued to grow during the first half of the year, while the analysis published by the Central Bank warns that the country's ability to sustain the attraction of capital will also depend on institutional strengthening, human capital, productivity, innovation and the diversification of markets and sources of investment.
The picture offered by the data so far is therefore less linear than Fitch's warning: the Dominican Republic maintains the flow of foreign investment and registers new capital contributions, while facing a financial environment in which lending rates have begun to rise and international oil prices maintain a pressure that the Central Bank acknowledges in its reports.
The question that remains is whether a scenario of high oil prices and higher financial costs will ultimately alter the pace, cost, or structure of new investments, especially if the pressure on rates were to shift from the banking market to monetary policy.
For now, the data allows us to establish the starting point: the credit warning came first; foreign investment continued to grow afterwards; and lending rates began to rise while the monetary policy rate has remained stable.
The evolution of these three variables—sovereign risk, cost of money, and foreign investment—will determine whether the April warning remains a preventative signal or becomes a factor with observable effects on investment decisions.
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