DECEMBER 1985 - VOLUME 6 - NUMBER 18
A Government Gone Awryby William Steif
PORT-AU-PRINCE, Haiti-The French Cultural Center on Harry Truman Boulevard in this swarming city of more than 800,000 people is holding an exhibit entitled "Poems on Stones."
Haitian poet Jean-Claude Chery has carefully written his poetry in India ink on dozens of large, flat stones. One is dedicated to the memory of Charlemagne Peralte, who was a brilliant, young Haitian army general who led a guerrilla action against the U.S. Marines when they occupied this Maryland-sized Caribbean nation during and after World War I. He was killed by the Marines-and some Haitian treachery in 1919, and the resistance collapsed. The Marines remained in Haiti for 19 years; they were finally withdrawn by President Roosevelt in 1934.
Another "poem on stone"-written in French, as all are-asks this question: "How can we celebrate our bicentenary (of independence) wearing the cap of `least developed'?"
In the year 2004 Haiti will have been an independent nation for two centuries. Independence followed a 13-year revolution led by such historic figures as Toussaint L'Ouverture. Napoleon's army was beaten and withdrew in 1804.
But Haiti today remains the poorest country in the Western Hemisphere, with a per capita annual income of only $320, according to the World Bank. In the Third World it joins a half dozen distant African nations, independent only a decade or two, as "least developed". Its six million people average only a quarter of the per capita income of the Dominican Republic, which occupies the eastern two thirds of the island of Hispaniola.
Haiti, the crown jewel of France's 18th Century Caribbean colonies, is an economic disaster today. Its mountains, reaching 8,800 feet above sea level, were stripped of timber by the French. Now they pour mud into the valleys. Three quarters of the people are rural; they eke out a subsistence existence on farms whose average size is under two acres, and those who can't get enough to eat on the farms come to the towns and cities-principally Port-auPrince, the capital-to live in squalor that is unimaginable to most Americans. Others, squander their savings trying to escape by leaky sailboats to Florida; the U.S. Coast Guard stops and "repatriates" them because U.S. law allows only for political refugees, not "economic" refugees.
The country's infrastructure is in sad shape. Although roads now link the north coast city of Cap Haitian and the south coast city of Jacmel, roads within Port-au-Prince are a shambles, overburdened by increasing numbers of autos. Power outages are common, partly because tankers carrying diesel fuel for Haiti's generators won't unload until they're paid in advance with U.S. Currency. The sewage system, built for a city of 100,000, is also falling apart. Only 20 percent of the capital's residents have access to safe drinking water, according to the U.S. Agency for International Development. The lake behind the Italian-built Peligre Dam is badly silted, and only two of its four penstocks are usable; funds provided for a suction dredge in the lake were never used for that purpose-they disappeared.
One of Port-au-Prince's newer businesses is selling water by the bucket. Entrepreneurs drive tank trucks into the mountains, fill up and return to the city to sell the water at exorbitant prices. Yet, at the same time, Haiti:
In Haiti, where too many are malnourished, too many die in infancy, and too few have work or a place to sleep, expenditures on such frivolities cast a grim shadow on the government's already tarnished image. The "cap of the least developed" rests heavily here, only 700 miles from Miami.
The World Bank took a hard look at Haiti in mid-1985 and in a 201-page report, dated June 10 and inscribed "FOR OFFICIAL USE ONLY," said:
In flat bureaucratic language, the World Bank lambastes Baby Doc's regime and, by implication, the U.S. Government, chief support of the Haitian regime. The Bank says:
"Haiti's economy has suffered from stagnation and disequilibrium in recent years, despite considerable structural change... Economic growth has been well below its potential because of population pressure and inappropriate policy in agriculture; protection in industry; and insufficient tax revenues for expanding current public expenditures, resulting in public savings inadequate to finance the development effort. The short-term priority for public policy must be financial and economic stabilization."
The Bank goes on to offer its prescription.
Oddly, a great deal of what is in the Banks report came from U.S. sources, who have to play a sort of double game, currying the Haitian regime's favor in international forums so that it stays on "our side," and simultaneously deploring the excesses and corruption fostered by Duvalier's authoritarianism.
It is, for example, an open secret in Port-au-Prince that Ernest Bennett, the father of Michele Duvalier (often referred to as "Haiti's Eva Peron") has jumped from below the top 10 coffee exporters of Haiti to number-one exporter since his daughter married Baby Doc four years ago. Bennett's auto import firm, which brings in BMWs, has added Soviet-made Ladas and Nivas to its line, and he has opened Air Haiti, which flies to New York, round trip-$299.
Other palace favorites have done well, too. Over and over, the Bank's report refers to "corruption" and "extra-budgetary expenditures," without nailing down specifics. It is not difficult, however, to read between the lines.
The Bank's seven-member economic mission to Haiti found "significant" structural changes in the economy here in recent decades, changes that a repeat visitor sees with his own eyes.
The move has been away from agriculture, the Bank report says. Today agriculture makes up about a third of the
GDP, as opposed to half in the 1950s. There has also been a significant decline in agriculture exports as a percent of total exports, from 93 percent to 43 percent. With this decline has come a drop in agricultural employment, forcing thousands of Haitians to flee the country to find work, according to the Bank.
The flight of the Haitian farmer has increased the Haitian people's reliance on imported goods and the public sector. The consumption of imported products wastes precious currency and strains already over-extended budgets. A seven-ounce package of Kellogg's Special K costs $2.85, a two-quart bottle of Downy fabric softener $5.85 here.
Although the Haitian government has committed money to improve health and nutritional services, severe poverty remains.
Papa Doc's 14-year rule, enforced by his terrifying secret police, the Tonton Macoutes, isolated Haiti from the Western World. U. S. aid was cut off for 10 of those years. Baby Doc's rule has been less harsh. The Tonton Macoutes were replaced by Volunteers for National Security (VSN), who haven't had quite the same predilection for maiming and murder as the Macoutes.
The resumption of U. S. aid in 1973, swiftly followed by international aid, helped the country. The Bank says:
"Structural change lifted Haiti's annual output and labor productivity growth rates to respectable international levels of 5 percent and 4.6 percent by the late 1970's. Both have since declined, however, reflecting two factors. First, agricultural output and productivity have fallen from their already stagnating levels of the late 1970's. Second, a new phenomenon has emerged with profound consequences for future growth and employment creation: Labor productivity outside agriculture has declined since fiscal 1980. Though the real GDP per capita did grow in fiscal 1984, for the first time in four years, it was still nine percent below its fiscal 1980 level."
The major cash crop of a majority of the peasants, who live on tiny farms on "steep hillsides," is coffee. "Yet," says the Bank, "coffee is subject to an export tax that represents half the producer price, reducing the incentive to grow coffee."
The result: Coffee exports have fallen in value from $90.9 million in fiscal 1980 to $53.8 million in fiscal 1984. That's partly a result of lower prices in the world market, but it's also a result of tonnage shipped dropping almost a quarter.
The Bank has been pounding the Haitian regime to remove the coffee export tax, along with export taxes on all other agricultural products. The response was a 10 percent cut in the coffee export tax in 1984, a further 15 percent for 1985, and elimination of the export tax on essential oils, from which perfume is made, in 1985. The taxes on cocoa and sisal remain, and the cut in the coffee tax may not have the desired effect. The Bank says "some studies have shown that oligopoly is present among [coffee] marketing intermediaries and/or exporters, which means that the bulk of a tax reduction would accrue as unearned rent to the oligopolists" - in short, the middlemen will simply make more money from the export tax cut, leaving the farmers as poor as ever.
No other crop cocoa, cotton, corn, rice, sugar or mangoes-comes close to earning what coffee does. Yet Haiti's coffee exports are half what they were in 1900. The Haitian coffee grower gets only about half the price of his crop; the Costa Rican coffee grower gets more than two thirds.
"Agriculture has slowly and inexorably deteriorated for 30 years and per capita agricultural production has declined regularly," says the Bank. "The problem in industry, by contrast, is much more recent. Manufacturing output grew at a very rapid 10 percent yearly in real terms throughout the 1970's. It has since declined sharply, in part because of the global recession of fiscal 1981-83 but more fundamentally because of the consequences of protection ...it is characterized by stagnant protected importsubstitution industries and a growing export assembly subsector; only the latter was responsible for possible growth in fiscal 1984."
The protected industries are food products, beverages, tobacco, textiles, leather, chemicals, plastics and rubber products. "None has done well since fiscal 1980," the Bank says. They have "high production costs because of unutilzed capacity, poor management, outdated equipment... lack global competitiveness, cannot export or sell to other export industries, and cause excessive dependence on imports of the intermediate products they need."
Haiti's regime has increasingly provided "tax exemptions to investors and exporters to stimulate industrial growth." The assembly industry sprang up here in the 1970's because 2,500 items could enter the U.S. duty-free, if at least 35 percent of their value was added in Haiti (or other countries covered by the Generalized System of Preferences). The Caribbean Basin Initiative is simply an extension of the same principle.
Baseballs and softballs are the best-known assembly industry here. Seven companies, one independent and six divisions of much larger corporations, keep hundreds of women stitching balls at around $3 a day. (See "Un-sporting Multinationals," this issue.)
Jule Tomar, who runs the independent Home of Champions company, says he employs 350 persons who manufacture 400 to 500 dozen balls daily. The Camden, N. J. native has been operating in Haiti since 1953-first in sisal sandals, then high-fashion shoes, and since 1973 in baseballs.
For some assembly industries it has been difficult to assimilate in Haiti. General Mills, says Tomar, "didn't adapt" to Haitian ways. General Mills is the current ogre on the Haitian business scene. It arrived in late 1983 to assemble stuffed toys through its subsidiary, General Mills Products Haiti. Its factory employed more than 200 persons, had a payroll of $600,000 a year, and subcontracted work to other firms with about 1,000 employees. But as of Nov. 1, 1985, at a cost of around $1 million, it pulled out of Haiti, claiming:
But the Haitian subcontractors say this was all a sham on the part of a $9 billion-a-year Minnesota-based company. They say General Mills had made a decision early in 1985 to pull out of the toys and fashion business entirely in order to invest $1.5 billion in food products in the next few years.
Tomar says the giant corporation never learned how to do business "Haitian-style."
Other companies have. GTE, for example, reportedly plans to expand its large operation here, and other electronics firms now assemble transformers, coils, complex circuits and wiring harnesses in Haitian plants.
"Quality control is excellent and output per man hour is approaching that of Singapore," says the Bank. The problem is that "the export assembly industries can buy very little from local industries because the latter's prices are high and quality is low." Another problem: "A severe shortage of middle-level managers, supervisors and skilled technical workers," is a result of Haiti's continuing "brain drain." There are more Haitian doctors in the U.S. than in Haiti.
Consequently, says the Bank, the regime's "revenues from these assembly industries are practically nill because of the generous tax exemptions." Materials for these industries are shipped in from the United States, assembled here and shipped back to the U.S., duty-free. The only benefit to the Haitian economy is the creation of 50,000 $3-an-hour jobs. That's a drop in the bucket for a labor force of more than 2.5 million people.
Indeed, that labor force could include considerably more people, if children who should be in school, but are actually looking for work, are included. Many Haitian children get little or no schooling. The 1983 figures show a total of 723,041 pupils in primary and secondary schools, more than half of whom were in private-mostly church-operated-schools. In the same year only 117,081 children were in secondary schools (over 97,000 in private schools). That means that between the ages of 10 and 14 most Haitian children must go to work, even if only as "tiny touts" harassing tourists for a gourde or two on the street.
The gourde is the official Haitian currency, and has been pegged at five to the U.S. dollar since 1919. But the dollar is also legal currency in Haiti, and is eagerly desired. The regime forces all Haitian exporters to deposit half of their dollar receipts in the central bank, in what is becoming an increasingly vain gesture to prop up Haiti's foreign reserves.
A "parallel market" has sprung up in downtown Port-au-Prince in recent months with hustlers tugging at the coats of anyone suspected of having dollars, in an effort to sell six or more gourdes for a dollar.
"Tourism could be a major foreign exchange earner and source of growth," says the World Bank, noting Haiti's "attractive beaches, clear coral waters and a pleasant sunny climate" and its "unique blend of African heritage, French colonial influence and present-day Caribbean lifestyles."
But tourism has sagged badly. In 1980 the total number of travelers arriving in Haiti was 306,500; in 1984 the total was 214,600. The biggest decline was in cruise ship passengers, down from 162,600 to 93,000. The drop meant a fall off in net dollars produced by tourism from almost $36 million in 1980 to $28 million in 1984. Hotel-keepers remain pessimistic, and Michel-Ange Voltaire, director-general of Haiti's tourist board, notes that about 45 percent of travelers arriving by plane aren't really tourists: They are Haitians visiting their families, people on religious missions or businesspeople. Only the latter group spend somewhat the way tourists do.
Voltaire attributes some of the decline to "the AIDS scare of three years ago," but he's candid enough to concede the drop began before the AIDS panic. He complains he doesn't have a big enough ad budget, only $400,000 compared to the millions such Caribbean destinations as Jamaica, Barbados and the U.S. Virgin Islands throw around. But the World Bank says: "Were there a long-run vision, Haiti might have a more successful and internationally competitive tourist trade."
The Bank says "the potential is there in agriculture, agro-industry, industry, tourism. It has not been realized because society at all levels has ignored the long term."
The authoritarian regime, says the Bank, "has had different priorities, which have swollen its employment rolls but not its revenue" -government employees jumped from 28,056 in 1980 to 32,385 in 1984.
"Tax revenues have remained low as a proportion of GDP," says the Bank. The reasons:
Result: The regime's revenues are stuck at "around one-tenth of GDP. This compares very unfavorably to an average of 16.7 percent for countries with 1981 per capita incomes below $400:'
In a fiscal 1985 budget of $190 million, nearly $20 million goes to the armed forces, another $8-plus million to "interior and defense," $6.4 million to "information and public relations," nearly $8 million to "foreign affairs" and $3.2 million to the "presidency of the republic." Spending for the armed forces is almost identical to spending for public education, and more than spending for health. The only obvious use for the armed forces is within Haiti.
But the biggest single item in the 1985 budget is $51.8 million earmarked for the "amortization fund"-to service debts, to keep the wolf from the door.
In 1982 the regime negotiated a standby agreement with the International Monetary Fund (IMF) for the $34.5 million in special drawing rights because the worldwide recession had put the Haitian economy into a tailspin. The regime agreed to spending cuts and revenue increases and this tough fiscal medicine worked for a while. But there was no follow-through and the IMF agreement's 15-month term was too short to restore full equilibrium. Now Baby Doc's government is seeking another standby agreement with the IMF, again at favorable terms. Negotiations are just starting.
By the end of fiscal 1984 Haiti's external medium- and long-term debt stood at $676.6 million, up from $411.2 million in fiscal 1980. The country's chief resource is its ability to wrangle grants and concessional loans from rich nations and the international bodies funded by these nations, primarily the United States. In fiscal 1984 the total of this "free money" available to Haiti was $155 million, compared to $87 million in 1980. More than half of these sums were outright grants.
"The trends of the past cannot be allowed to continue," the Bank says.
Short-term, Baby Doc's regime "can do little more than redress the fragile financial situation"-balance the budget by more efficient administration, halt government waste, plan ahead. Haitians laugh and tell American visitors, "that is the same prescription you ought to use for the U.S. Government."
In the long term, the World Bank says "Haiti's development strategy has very few degrees of freedom. It will have to be export-oriented. Consumption, especially that of the public sector, will have to be markedly restrained in order to limit the growth of consumer goods imports and to shift most of GDP growth into exports. .. Haiti will continue to need substantial inflows of external assistance on the best possible terms."
Even with dozens of its specific recommendations put into effect, the World Bank projects only a modest annual growth rate of 3.1 percent from 1986 through 1991, with GDP reaching $2.4 billion in the latter year.
Last September, say U.S. diplomats, was "encouraging" -Baby Doc's regime actually balanced its budget for a month.
But a month is not the long haul. Personal and political considerations impinge on the best-laid plans of economists, especially in authoritarian regimes. The United States is holding Baby Doc's hand; so is the World Bank, other international agencies and private, U.S.-backed organizations.
American motives are clear enough. They are a mixture of idealism and political realism, with an occasional over-the-shoulder glance at Cuba, only 60 miles away from Haiti's northwest tip. The pressure is on Baby Doc to loosen up, to "democratize" his government and to provide more effective management. No one mentions that between 1843 and 1914 Haiti had 24 presidents, only one of whom served his entire term-or that the 1915 assassination of President S.D. Sam brought in the U.S. Marines.
Today a Marine landing is unlikely. But the United States knows Haiti must get its house in order. The more important question is: Does Baby Doc know it?
William Steif is a freelance writer currently based in the Virgin Islands.