Economy of Haiti

Haiti is the poorest country in the Western Hemisphere; however its potential for leaving its long-associated status is growing. Two-thirds of all Haitians depend on the agriculture sector, mainly small-scale subsistence farming, and remain vulnerable to damage from frequent natural disasters, exacerbated by the country's widespread deforestation. A macroeconomic program developed in 2005 with the help of the International Monetary Fund helped the economy grow 1.8% in 2006, the highest growth rate since 1999. Haiti suffers from higher inflation than similar low-income countries, a lack of investment (increasing however since the recent presidential seating), and a severe trade deficit. In 2005, Haiti paid its arrears to the World Bank, paving the way for reengagement with the Bank. The government relies on formal international economic assistance for fiscal sustainability. In 2006, Haiti held a successful donors conference in which the total aid pledged exceeded Haiti's request. Remittances are the primary source of foreign exchange, equaling nearly a quarter of GDP.

Economic history

Since the demise of the Duvalier dictatorship in 1986, international economists have urged Haiti to reform and modernize its economy. Under President René Préval, the country's economic agenda included trade and tariff liberalization, measures to control government expenditure and increase tax revenues, civil service downsizing, financial sector reform, and the modernization of state-owned enterprises through their sale to private investors, the provision of private sector management contracts, or joint public-private investment. Structural adjustment agreements with the International Monetary Fund, World Bank, Inter-American Development Bank, and other international financial institutions are aimed at creating necessary conditions for private sector growth, have proved only partly successful.

In the aftermath of the 1994 restoration of constitutional governance, Haitian officials have indicated their commitment to economic reform through the implementation of sound fiscal and monetary policies and the enactment of legislation mandating the modernization of state-owned enterprises. A council to guide the modernization program (CMEP) was established and a timetable was drawn up to modernize nine key parastatals. Although the state-owned flour mill and cement plants have been transferred to private owners, progress on the other seven parastatals has stalled. The modernization of Haiti's state-enterprises remains a controversial political issue in Haiti.

External aid is essential to the future economic development of Haiti, the least-developed country in the Western Hemisphere. Comparative social and economic indicators show Haiti falling behind other low-income developing countries (particularly in the hemisphere) since the 1980's. Haiti's economic stagnation is the result of earlier inappropriate economic policies, political instability, a shortage of good arable land, environmental deterioration, continued use of traditional technologies, under-capitalization and lack of public investment in human resources, migration of large portions of the skilled population, and a weak national savings rate.

Haiti continues to suffer the consequences of the 1991 coup and the irresponsible economic and financial policies of the de facto authorities greatly accelerated Haiti's economic decline. Following the coup, the United States adopted mandatory sanctions, and the OAS instituted voluntary sanctions aimed at restoring constitutional government. International sanctions culminated in the May 1994 United Nations embargo of all goods entering Haiti except humanitarian supplies, such as food and medicine. The assembly sector, heavily dependent on U.S. markets for its products, employed nearly 80,000 workers in the mid-1980s. During the embargo, employment fell from 33,000 workers in 1991 to 400 in October 1994. Private domestic and foreign investment has been slow to return to Haiti. Since the return of constitutional rule, assembly sector employment has gradually recovered with over 20,000 now employed, but further growth has been stalled by investor concerns over safety and supply reliability.

If the political situation stabilizes, high crime levels wane, and new investment increases, tourism could take its place next to export-oriented manufacturing (the assembly sector) as a potential source of foreign exchange. Remittances from abroad now constitute a significant source of financial support for many Haitian households.

Haiti's real GDP growth turned negative in FY 2001 after six years of growth. Real GDP fell by 1.1% in FY 2001 and 0.9% in FY 2002. Macroeconomic stability was adversely affected by political uncertainty, the collapse of informal banking cooperatives, high budget deficits, low investment, and reduced international capital flows, including suspension of IFI lending as Haiti fell into arrears with the Inter-American Development Bank (IDB) and World Bank.

Haiti’s economy stabilized in 2003. Although FY 2003 began with the rapid decline of the gourde due to rumors that U.S. dollar deposit accounts would be nationalized and the withdrawal of fuel subsidies, the government successfully stabilized the gourde as it took the politically difficult decisions to float fuel prices freely according to world market prices and to raise interest rates. Government agreement with the International Monetary Fund (IMF) on a staff monitored program (SMP), followed by its payment of its $32 million arrears to the IDB in July, paved the way for renewed IDB lending. The IDB disbursed $35 million of a $50 million policy-based loan in July and began disbursing four previously approved project loans totaling $146 million. The IDB, IMF, and World Bank also discussed new lending with the government. Much of this would be contingent on government adherence to fiscal and monetary targets and policy reforms, such as those begun under the SMP, and Haiti’s payment of its World Bank arrears ($30 million at 9/30/03).

Haiti's total external debt is estimated at 1.4 billion dollars, including half a billion dollars to the Inter-American Development Bank, Haiti's largest creditor. In April, Haiti qualified for the IMF and World Bank debt relief initiative, but under the program, Haiti will not formally qualify for relief until 2009 at the earliest and will be contingent on Haiti's implementation of IMF and World Bank conditionalities. The initiative also excludes debt owed to the Inter-American Development Bank.

The IMF estimates real GDP was flat in FY 2003 and projects 1% real GDP growth for FY 2004. However, GDP per capita-- $425 in FY 2002-- will continue to decline as population growth is estimated at 1.3% p.a. While implementation of governance reforms and peaceful resolution of the political stalemate are key to long-term growth, external support remains critical in avoiding economic collapse. The major element is foreign remittances, reported as $931 million in 2002, primarily from the U.S. Foreign assistance, meanwhile, was $130 million in FY 2002. Overall foreign assistance levels have declined since FY 1995, the year elected government was restored to power under a UN mandate, when over $600 million in aid was provided by the international community.

Workers in Haiti are guaranteed the right of association. Unionization is protected by the labor code. A legal minimum wage of 36 gourdes a day (about U.S. $1.80) was set in 1995, and applies to most workers in the formal sector. It was later raised to 70 gourdes per day.

Foreign aid

U.S. economic and development assistance

Political insecurity and the failure of Haiti's governments to invest in developing the country's natural and human resources contribute significantly to the country's current state of underdevelopment. U.S. efforts to strengthen democracy and to rebuild Haiti's economy aim to rectify this condition. The U.S. has been Haiti's largest donor since 1973. Between FY 95 and FY 99, the U.S. has contributed roughly $884 million in assistance to Haiti. These funds have been used to support programs that have addressed a variety of problems. Among the initiatives funds have supported are:

• Food assistance programs that include a school lunch program that feeds around 500,000 children daily.
• Agricultural development programs that have endeavored to revitalize Haiti's coffee sector and to help thousands of Haitian farmers adopt sustainable agricultural practices and protect the environment.
• Teacher training programs that have included 6,000 educators at the primary and secondary level.
• Population programs that have expanded modern family-planning practices in many rural areas.
• Health care programs that have supported child immunization and have helped provide primary care to nearly half of the Haitian population.

In addition to financial support, the U.S. provides human resources. U.S. Peace Corps volunteers returned to Haiti in 1995, largely focusing their efforts on income generation programs in Haiti's rural areas. Many private U.S. citizens travel regularly to Haiti or reside there for extended periods to work in humanitarian projects.

Haiti has been plagued for decades by extremely high unemployment and underemployment. The precipitous decline in urban assembly sector jobs, from a high of 80,000 in 1986 to fewer than 17,000 in 1994, exacerbated the scarcity of jobs. To revitalize the economy, U.S. assistance has attempted to create opportunities for stable, sustainable employment for the growing population, particularly those who comprise the country's vast informal economy. A post-intervention transitional program of short-term job creation, principally in small towns and rural areas, provided employment to as many as 50,000 workers per day throughout the country. More recently, programs that help to increase commercial bank lending to small- and medium-scale entrepreneurs, especially in the agricultural sector, have helped to create jobs and foster economic growth.

Additional U.S. efforts in economic revitalization include the establishment of the U.S.-Haiti Business Development Council, an Overseas Private Investment Corporation commercial loan program, and inclusion of Haiti within the Caribbean Basin Initiative. These efforts all provide greater market opportunities for American and Haitian businesses. Current Congressional prohibitions on providing assistance to or through the Haitian Government has accelerated the move to private voluntary agencies as contractors to oversee use of U.S. aid funds.

Throughout the 2001-2004 time period the US and Chamber of Commerce backed a government aid embargo upon Haiti's elected Aristide government. This led to economic decline and inumberable suffering. Haiti's government budget was approximately 30-40 percent dependent on the cut off aid.

Aid from Venezuela and Cuba

Haiti has benefited in a rather solid economic partnership with Venezuela. This recently-forged friendship between Venezuelan president Hugo Chavez and Haitian president Rene Preval has resulted in various economic agreements. After a visit by Chavez in March 2007, Venezuela and Cuba announced a $1 Billion fund to develop energy, health, and infrastructure in Haiti. As part of this deal, 4 power plants will be constructed in Port-au-Prince, Cap-Haitien, and Gonaives, increasing the country's power production by 160 MW by the end of 2007. An oil refinery will also be constructed in Haiti, with a production capacity of 10,000 barrels of oil per day. In the meantime, Venezuela has increased the amount of petroleum it provides Haiti to 14,000 barrels per day, at the same terms afforded to ALBA member countries - these terms are more favorable than the Petrocaribe terms.

Venezuela's assistance to Haiti is founded upon a historic act where the newly-independent Haiti welcomed and tended to first Francisco de Miranda, then to Simón Bolívar and provided both with military assistance in the liberation of much of South America. Haiti's Latin American alliance provides the country with much of its foreign aid. Cuba has thanked Haiti for consistently voting in the United Nations General Assembly against the embargo put upon Cuba by the United States.

Agriculture

Main article: Agriculture in Haiti

Agriculture was the mainstay of the economy of Haiti in the late 1980s; it employed approximately 66 percent of the labor force and accounted for about 35 percent of GDP and for 24 percent of exports in 1987. The role of agriculture in the economy has declined severely since the 1950s, when the sector employed 80 percent of the labor force, represented 50 percent of GDP, and contributed 90 percent of exports. Many factors have contributed to this decline. Some of the major ones included the continuing fragmentation of landholdings, low levels of agricultural technology, migration out of rural areas, insecure land tenure, a lack of capital investment, high commodity taxes, the low productivity of undernourished farmers, animal and plant diseases, and inadequate infrastructure. Neither the government nor the private sector invested much in rural ventures; in FY 1989 only 5 percent of the national budget went to the Ministry of Agriculture, Natural Resources, and Rural Development (Ministère de l'Agriculture, des Resources Naturelles et du Développement Rural--MARNDR). As Haiti entered the 1990s, however, the main challenge to agriculture was not economic, but ecological. Extreme deforestation, soil erosion, droughts, flooding, and the ravages of other natural disasters had all led to a critical environmental situation.

Labor force

The labor force, as of 1995, was estimated at 3.6 million, but with a shortage of skilled labor.

File:Haitiunemployment.GIF

Sources: CIA World Factbooks, Agency for International Development

Finding unemployment statistics from Haiti is very difficult because of the lack of publication of such data from the Haitian agencies in charge of collecting it. Most sources that we do have available come from United States agencies such as the Agency for International Development (USAID).

These numbers are highly speculative; many sources give vague ideas of the unemployment rating being (for example, in 2003) around 50%, giving the impression that the actual rate could be several percentage points higher or lower. Still, given that the sources of this data has remained the same for the past 15 years, we can at least see a trend of unemployment staying high throughout this period, but rising sharply in the mid to late 90's peaking at 70% in 1999 (2000 CIA World Factbook is the source for that number), and then decreasing to the usual rates of around 50% in recent years. We do not currently have data for the years since the political turmoil that resulted from the foreign financing of elite civil society groups, ex-military intervention, and Bush administration backed embargo on government aid to Haiti. The 2004 Haiti coup d'État and years of foreign backed destabilization increased unemployment. One of Haiti's largest trade unions, Confederation des Travailleurs Haïtiens, continually opposed the destabilization campaign waged against Haiti's elected Jean-Bertrand Aristide government. Trade union leaders point out that following the coup the international community and the illegal Latortue government backed a neo-liberal privatization plan for Haiti which laid off thousands of public sector workers. The Preval government, like it did in 1996, is now promoting a mass privatization campaign.

Tourism and crime

Due to recent political instability, tourism - once a significant industry - has suffered in Haiti, with the exception of Labadee, a port located on the country's northern coast. Labadee is a resort owned by Royal Caribbean International. Although sometimes described in advertisements as an island in its own right, it is actually contiguous with the rest of Hispaniola. Labadee is fenced off from the surrounding area. The cruise ships anchor offshore, and passengers are tendered to the resort, often without being told they are in Haiti. Attractions include a Haitian Flea Market, traditional Haitian dance performances, numerous beaches, watersports, and a waterpark.

Despite obstacles, Haiti's rich culture and history has allowed the country to maintain a moderate and potentially rising tourist industry.

Though kidnappings have been increasing rapidly over the last year. Despite this, Haiti has a very low murder rate in the Caribbean with a 2005 murder rate of approximately 11.5 per 100,000 inhabitants. The vast majority of the murders have taken place in the capital, and rural areas of the country are relatively safe compared to urban areas. The Dominican Republic's murder rate of approximately 26.7 per 100,000 inhabitants and Jamaica's regional-record murder rate of 62 per 100,000 inhabitants are extremely high compared to Haiti's.

See also

• Haiti
• Haiti's external debt
• List of Haitian companies
• Freeport Tortuga
• Official website of the Confédération des travailleurs haitiens (CTH)

References

Much of this article is based on public domain material from the U.S. government. See: http://www.state.gov/r/pa/ei/bgn/1982.htm

1. CIA World Factbook: Haiti
2. Haiti Agriculture
3. Inter-American Bank Grant To Benefit Haitian Coffee Growers
4. Haitian Free Trade Zone
5. IICA plants for Haiti's environment
6. Defending Labor Rights in Haiti
7. CTH Secretary General Paul Chery interviewed on the 2004 coup and labor issues
8. HAITI: Pain at the Pump Spurs Strike Actions
9. HAITI: Workers Protest Privatisation Layoffs

External links

• Haiti's Economic Challenge U.S. Institute of Peace, July 2006
• False H.O.P.E. for Haiti A critical look at the United States' H.O.P.E. bill