Philanthropy, Corruption, and Dave’s Volunteer Journey in the Dominican Republic

Natalia Garcia ’23 graduated with a major in economics and minor in international business and was a 2022-23 Hackworth Fellow with the Markkula Center for Applied Ethics.

Background

While volunteering in the Dominican Republic, Dave discovered that the non-profit he had partnered with was exchanging his donor money on the black market, prompting him to navigate a series of complex decisions with significant ethical implications. 

At 27 years old, Dave began volunteering with an organization for which he worked in a developing country - the Dominican Republic (DR) - for a couple of years while he earned a stipend. Dave’s project there involved building houses for the poor. He was part of a team that would offer people in poor communities zero interest loans funded with donor money. In turn, the recipients of the funds would build a house (using the funds for labor and construction materials). Then the recipients would owe a mortgage and in turn their payment of the mortgage would go into a revolving fund that allowed the organization to make additional loans and thus build more houses.

As part of a United States-based international organization, Dave and his team worked with a non-profit in the DR in order to have local help administering the project. Not only did the local non-profit help with the management and administration of the project, but it also had a bank account in which Dave could exchange his donor money (which was in U.S. dollars) for Dominican pesos that would then allow the recipients of the loans to purchase the labor and building materials locally. 

Dave got to know the guys at the non-profit in the DR, and he knew that they were pretty entrepreneurial in figuring out how to attract donor and aid money. After a couple months of working with them, though, he started to feel uncomfortable with the way the currency exchange was being handled. 

The DR’s system of capital control required that the exchange of currency go through official banks and exchange windows. Moreover, the exchange rate was set by the government at four pesos per U.S. dollar. It was illegal to buy and sell currencies outside of official banks and windows. But there was nevertheless a thriving black market exchange in which you could get eight pesos per U.S. dollar. From speaking with the non-profit managers through whom he had to go in order to exchange dollars for pesos, Dave became aware that they were in fact selling the dollars on the black market, not on the legal market.

It went down like this. He would give them a $30,000 check each month; the non-profit managers would exchange it and give him 120,000 pesos so he could make zero interest loans to help the unhoused. Then the managers would pocket the additional money they made from the higher and illegal exchange rate (another 120,000 pesos that went straight into their pockets). 

Dave was genuinely confused. The managers didn’t hide what they were doing. Plus he liked them and knew about their lives and their struggles. He knew they were only making about 8,000 pesos per year and it was barely enough for them and their families to get by. And he wondered what they were doing with all that excess money. 

But Dave also knew that if they were getting such a good exchange rate on the black market and pocketing the money, he also could go to the black market in order to raise even more money to help the poor build houses. Why go through the nonprofit and miss out on the chance to help even more of the unhoused? 

Then he got an idea. 

After some time of working in the DR, Dave got to know a Dominican businessman Alex who was in his mid thirties, married with two kids, and with a middle class lifestyle. Alex owned a sandpaper company and sold his product mostly in the DR. However, he also had one key input for the sandpaper - the adhesive - that had to be imported. And he needed U.S. dollars to buy it. 

Because of the high demand for dollars, it was extremely difficult to get them - a difficulty compounded by going through the official government process. Alex had to get in line and wait his turn until a government official checked his request and decided to give him the dollars. But this process could be lengthy and, in the meantime, Alex often had to shut down his factory until he could get the dollars to buy the adhesive essential to production of sandpaper. 

So Dave and Alex decided to strike up a deal. Instead of writing his $30,000 monthly check to the non-profit organization, Dave began to write it to Alex instead. In return, Alex gave Dave a duffle bag with 200,000 pesos (which is 80,000 more pesos than Dave would have gotten at the legal exchange rate from the non-profit, but still under the black market exchange rate). Dave was now able to almost double everything for his project and, most importantly, build more houses for unhoused or under-sheltered persons. 

Dave was happy to help more people live in decent housing. He thought as well that he was making the most of the funds generously donated to his organization. But he also felt uneasy. He knew the transaction with Alex was illegal and, if either one of them were to be caught, they could go to jail. He was taking a risk himself, but also felt responsible for the risk that Alex was taking. Dave also felt guilty that he took away extra income from his friends at the nonprofit. Finally, he had been reading a lot about development economics and was aware of the way that corruption lowers investment and hinders economic growth. He wasn’t sure if he was part of the solution - or part of the problem. 

Should Dave keep up the arrangement with Alex? 

Questions to Consider:

1. Please identify what you think are the most significant ethical values at stake in Dave’s decision? It will be important to identify these values on all sides of this dilemma. 

2. For assistance in this matter, please consult the section called the “Six Ethical Lenses” from the Framework for Ethical Decision Making by the Markkula Center for Applied Ethics.

3. What do you consider to be the most important aspect of this case? Why do you think it holds particular significance in understanding the ethical challenges and dilemmas faced by Dave and the broader implications of his actions?

4. Is it ever acceptable to break the law or engage in unethical behavior for the greater good? Why or why not? 

5. Reflect on your personal values and decision-making processes. How would you approach a similar situation if you were in Dave’s position? What ethical principles would guide your actions and why?

Additional Sources: 

“Collective Action Combats Corruption and Strengthens Accountability in the Dominican Republic.” The World Bank, World Bank Group, 9 Dec. 2015.

Mauro, Paolo. “Economic Issues No. 6 - Why Worry About Corruption?” International Monetary Fund, Feb. 1997.¹

_{¹ According to The World Bank and the International Monetary Fund, the Dominican Republic has faced corruption challenges for almost a century. There have been many efforts to combat corruption in the DR as citizens demand progress, and the U.S. government has also worked with Dominican authorities to address these issues. With a strong interest in economics, Dave was aware of these efforts and knew the consequences of such corruption - it lowers investment and hinders economic growth. Particularly in relation to aid and donations, “many donor countries have focused on issues of good governance, and in cases where governance is judged to be especially poor, some donors have scaled back their assistance” (Mauro 1997). Although Dave intended to support development through his donor-funded housing project, it pained him to realize that he could be actively contributing to the negative consequences of corruption in this developing country.}