The Front

Aristide Banks on Austerity

THE ARISTIDE GOVERNMENT of Haiti has agreed to a structural readjustment plan which adapts the economic approach favored by the World Bank and International Monetary Fund (IMF). The plan appears to veer away from the more populist line President Jean-Bertrand Aristide took before being ousted in a 1991 army coup. Entitled the "Strategy of Social and Economic Reconstruction," it was presented in August 1994 by Aristide advisers Leslie Voltaire and Leslie Delatour to a Paris donor meeting held in World Bank offices.

 Under the August 22 plan, obtained by the Multinational Monitor from diplomatic sources, Haiti commits to eliminate the jobs of half of its civil servants, massively privatize public services, "drastic[ally]" slash tariffs and import restrictions, eschew price and foreign exchange controls, grant "emergency" aid to the export sector, enforce an "open foreign investment policy," create special corporate business courts "where the judges are more aware of the implications of their decisions for economic efficiency," rewrite its corporate laws, "limit the scope of state activity" and regulation, and diminish the power of President Aristide's executive branch in favor of the more conservative Parliament. In return, Haiti is to receive $770 million in financing, $80 million of which goes immediately to clear up debt owed to international financial institutions. Compliance with the plan is to be closely monitored by missions from the World Bank, the IMF and the Inter-American Development Bank (IDB).

 Though the plan talks in general terms about investing in public works and "education and health for the neediest," it then admits that due to the planned elimination of much of the State's tariff revenue, "the very depressed status of the economy, the improbability of a short term quick rebounding of the economy and the likely sorry state of tax administration forbid optimism with respect to the immediate prospects for domestic resource mobilization."

 Anticipating the shock of its "comprehensive reform program," the plan says it will be "essential" to create a "social safety net" over the next 18 months. It does not specify how that net will be assembled or how the government will be able to afford it.

 The presentation of the plan comes as Aristide is under growing pressure to cooperate with Clinton administration plans for an armed occupation of Haiti. The Haitian government economic plan includes a discussion of the revamping of the Haitian armed forces, a matter to be closely coordinated with the U.S. Pentagon.

 A World Bank release says the plan received "broad support" at the Paris meeting, which was attended by representatives of the United States, Japan, Europeancountries, Argentina, Korea, as well as various international financial institutions and UN agencies. It says the financing would proceed "soon after" President Aristide returns to Haiti and the "constitutional crisis" is resolved, and after the IMF has certified that the plan is based on "a sound macroeconomic framework."

 Axel Peuker, a World Bank Haiti desk officer, says Aristide's advisers "did consult with relevant donors" as the plan was being written, and the final product was "well received." He added that "there is this tension between the public image of Aristide" and the "rather conservative approach, financial and otherwise" adopted by his Ministers when his government was still in Haiti. Peuker noted that the new plan "goes a step farther in this direction."

 Asked about the fact that the plan seems to have abandoned Aristide's past efforts to substantially increase the Haitian minimum wage, Peuker dismissed it as a "non-issue," saying "you just don't regulate that in a country like Haiti where the government's enforcement capacity is nil." He says the same applies to Aristide's old attempts to create and enforce a Haitian social security pension system: "It's not on the agenda."

 Peuker contends that since Haiti lacks the kind of subsidies for basic goods that the IMF and World Bank usually target for elimination, the structural adjustment in Haiti "is not going to hurt the poor to the extent it has in other countries."

Peuker says that the plan would hurt the poor "to some extent," mainly in terms of the massive cutbacks in public sector employment. He contends the new plan's free-trade changes would be a boon for the "more open, enlightened, business class," adding that "this will mean a chance to make Haiti interesting for foreign investors, and not just because it's a low-wage country," but also because of new economic benefits and the prospect of more "political stability."

 When asked for comment, Chavannes Jean-Baptiste, a prominent Haitian peasant leader who is also a member of Aristide's cabinet, responded that he had not been consulted about the plan and had not yet been able to obtain a copy. He says that though his portfolio in the cabinet includes rural development and agrarian reform, "I don't know anything about this document." When read excerpts from the plan, Jean-Baptiste said, "This is the plan of the World Bank and the IMF. It's the same plan they've always offered for years, what they used to call ŠThe American Plan.'"

 - Allan Nairn



Haiti's Strategy of Social and Economic Reconstruction

What follows is a slightly condensed version of the Haitian economic plan presented in Paris:

 1. Background. The fundamental objective of the government is to substantially transform the nature of the Haitian state as the prerequisite for a sustainable development anchored on social justice and the implementation of an irreversible democratic order. The Government is profoundly convinced of the necessity to shift the social balance of power away from the executive branch, where too much has traditionally been concentrated, towards Civil Society and local government, which so far has been too enfeebled to provide an effective counterweight to the encroachment of the executive. The empowerment of several components of Civil Society (political parties, labor unions, grass roots organizations, cooperatives, community groups) and local government is the main object of state reform. The Government also believes that a vibrant, private sector with an open foreign investment policy is vital for long term growth. A sound macroeconomic policy eschewing foreign exchange controls, price controls and other policy-induced distortions will be the required environment for such a private sector. Such a transformation must:

 2. ... The Government wants to commit the future so as to insure the long-term continuation of pledges taken today. ... It is thus necessary to articulate clear, bold, and explicit commitments and to start implementing them as quickly as possible. To successfully complete the task, the Government plans to have recourse to the resources of Civil Society and especially the private sector, grassroots organizations, cooperatives, and non-governmental organizations, for both the design and the execution of the relevant programs and economic and social policies.

 3. To reinforce credibility, the Government must move fast on a broad front of policy reforms that will signal the Government's commitment to a bold course of action. To this end the Government will request a visit by a Joint Mission of the IMF/IDB/World Bank within the first days of the return of the constitutional authorities. In the wake of the Joint Mission, the Government will send to the IMG Managing Director a Letter of Intent no later than ten (10) working days following the departure of the IMF mission. It will also forward to the President of the World Bank a Development Policy Letter to support an adjustment operation no later than twenty (20) working days after the departure of the Bank's Mission. The clearance of the accumulated arrears to the International Financial Institutions [IFIs] represents the first step to the resumption of normal business with the IFIs. The Government will contribute US$13 million to expedite the process. The Government urges Haiti's friends and partners to take quick action to complete the process no later than thirty (30) days after the return of the constitutional authorities.

 4. Army and Police Reforms. The key feature of the new democratic order must be the professionalization of the Armed Forces. The Government will reduce the current apparatus to a small (no more than 1,500 officers and men) professional force based outside of the Port au Prince metropolitan area. ... The new force shall not incorporate any member past or present of paramilitary groups or individuals who have committed human rights violations.

 5. Law enforcement will be carried out by a newly created police force. While some functions ... will be kept under the centralized control of the Minister of Justice, the basic law enforcement functions shall be progressively transferred to the responsibility of the Commune. The creation of this new decentralized police force will be costly as there is no current infrastructure designed for the protection of citizens in the great bulk of the population centers.

 6. Judiciary and Parliamentary Reform. The blatant disregard for the rule of law remains at the root of our country's problem; both human and property rights are inadequately protected. Thus, the second cornerstone for both a peaceful democratic society and a prosperous economy is represented by the establishment of an independent Judiciary that is able to fairly arbitrate conflicts among the members of society, and provide adequate protections for private sector activity, property rights, and fundamental human rights. ... Most of the basic economic laws (i.e. Code de Commerce, Code Civil, etc.) are old, obsolete, and need to be revamped. The establishment of specialized economic and commercial courts is required to both unclog the normal civil courts, and also to create a specialized legal system where the judges are more aware of the implications of their decisions for economic efficiency. ...

 7. Parliament has a critical role to play in the modernization of both the economy and society. It has been severely emasculated in the recent crisis, yet it remains an essential component in any reform aiming at curbing the powers of the executive branch. The bulk of the economic reforms must be enacted through laws; yet Parliament is not equipped to deal effectively with these complex issues. The improvement of transparency and a greater degree of public agent accountability depend on the organizational capability of Parliament and the Superior Court of Accounts. ...

 8. Reform of The State: The state sector needs to be modernized. The civil service needs to be reduced while the average level of professional competence needs to be improved. The goal is to have a smaller, more performing instrument. The objective is to secure the voluntary departure of about half of the 45,000 civil servants. To reach this goal, a generous severance package will be offered. ... In addition, all arrears on the wages of the public employees must be settled.

 9. The reform of the civil service is just one of the components of the contemplated reform. The scope and content of government activity also need to be redefined with a view of moving away from tedious micro management towards a more strategic approach. The smaller civil service must concentrate its energy on a more limited number of objectives. It should refrain from excessive regulation and focus on broad policy questions. Service delivery and the associated resources will be gradually delegated to local authorities. Extensive use will be made of grassroots organizations, the private sector or qualified [non- governmental organizations (NGOs)]. ...

 10. The renovated state must focus on an economic strategy centered on the energy and initiative of Civil Society, especially the private sector, both national and foreign. This implies a rigorous macroeconomic framework anchored on programs supported by international financial institutions. Given the extent of the damages brought about by the current crisis, it would be unrealistic to anticipate a quick reaction by private investors. As a result of the turmoil of the last three years, the private sector is virtually bankrupt and thus requires emergency assistance, especially for the export sector. Yet, the solid and appropriate policy determinants of long-term growth should be put in place. Haiti is a small, open economy; it should not be a ghetto; it needs to export to prosper. ...

 11. As far as the trade regime is concerned, the remaining quantitative restrictions to imports will be immediately abrogated and the tariff removed except for the following products: rice, corn, beans, sorghum. For these products the tariff level will be cut in half immediately. For a very limited number of sensitive products, a transitory adjustment period not exceeding seven years might be provided. Such a tariff policy will have significant benefits in that:

 12. Such a tariff posture has three main implications.

 13. Democratization of Asset Ownership. The control of substantial productive assets by the state has proven to be a major economic and social catastrophe. Such control has imposed serious economic and financial costs on the rest of the economy because of mismanagement. The control over these assets has also been a major political problem because of the associated opportunities for corruption. The desire for control of the state apparatus by the country's illegitimate rulers has not been divorced from the wish to quickly accumulate wealth through the capture of publicly owned companies. The consolidation of a democratic social order compels the Government to dispose of these assets.

 14. A comprehensive divestiture needs to be accompanied by the implementation of the appropriate regulatory framework and antitrust legislation. The lack of financial markets constrains the proper valuation of the state-owned enterprises and will handicap the divestiture process. Furthermore, such a divestiture must be implemented in a way that will prevent increased concentration of wealth within the country. Consequently the transfer of ownership will be done to a category of proprietors. The Government will seek out foreign investors, domestic savers from the professional categories and the members of the Haitian diaspora. Additionally, arrangement must be made to ultimately transfer part of the ownership to traditionally excluded segments of society, with particular attention given to the families of the victims of the recent political turmoil. The practical modalities of such transfers are not yet specified but the Government will explore such alternatives as: a variant of the Czech Republic's program; a modification of the Bolivian Capitalization Law; and the use of the International Finance Corporation (IFC) to temporarily warehouse these shares until they can be properly transferred to the designated target groups.

 Last, the required reform of the retirement and social security system will expand the opportunity to widen the ranks of financial asset owners. To further strengthen the redistributive objectives, the Government will invest half of the proceeds from the divestiture into infrastructure investments in the poorest areas and low-cost urban and rural housing. The other half will be invested in a permanent trust fund whose annual proceeds will be used to subsidize education and health for the rural poor.

 15. Reducing the Immediate Effects of the Embargo. The embargo has had widespread negative economic and social consequences. ... To stabilize the volatile political situation, it is imperative not to wait for the resumption of Haitian exports to rebuild short-term import capacity. Too long a waiting period can have fatal social consequences. The prices of the critical products must be rapidly deflated through the release of stocks to be constituted prior to the return of the constitutional authorities. The distribution of these products will be handled through established appropriate commercial channels.

 16. As regards medium-term social policy, the Government will intervene with programs in education and health for the neediest. The Government believes economic progress and growth call for an educated and healthy population, and a flexible labor force that can quickly adjust to changes in economic conditions, As a major priority, it will invest in basic education for the poor, the rural segment of the population, with a special attention to young women's schooling and an adult literacy program. Basic health care and population policy are also required for a healthier and more educated work force. ...

 17. To initiate the recovery process the Government will endeavor to implement the projections identified by the multi agency task force of 1993. The assessments and cost estimates will need to be updated as the conditions on the ground have deteriorated. In view of the comprehensive reform program to be implemented it will be essential to create over the next 18 months a social safety net through income generating activities all over the country. Thus the Government believes that a self-standing major public works program needs to be implemented.

 18. Financing Requirements. Given the magnitude of the emergency confronting the country, the Government estimates the amounts of financial resources to be committed at about US$800 million for the next 12 to 15 months. This excludes the cost associated with the maintenance of the civilian and military peace keepers. The allocation of the indicative financing is as follows: Governance US$175 million; Arrears Clearance US$80 million; Budgetary Assistance US$175 million; EERP and Ongoing Projects US$250 million; Humanitarian Assistance US$90 million.


Gene Wars

NAIROBI - Several government delegates at a Biodiversity Convention meeting held here in late-June 1994 expressed concern over reports that the World Bank was attempting to take control of the Consultative Group on International Agricultural Research (CGIAR) and its valuable gene banks.

 At a session of the Intergovernmental Committee of the Biodiversity Convention (ICCBD), delegates from India, Malaysia , Sweden and the Philippines spoke up against the reported bid of the World Bank to take over the management of the CGIAR system and the process of determining the ownership and control of the genetic materials stored in agricultural research institutes linked to CGIAR.

 "We are concerned about a dawn raid by the World Bank to take over control of the gene banks," said Ambassador Ting Wen Lian of Malaysia, who noted that the failure of the Biodiversity Convention to cover genetic materials stored in agricultural gene banks constituted a serious weakness.

 "If these reports are true, it would compromise the basis on which the materials were collected from developing countries," she added. "We allowed them to be taken in good faith, for the benefit of science and enhancing crop productivity. We are extremely concerned because through the [UN 's Food and Agriculture Organization (FAO)] we are involved in a process to bring these ex-situ resources within the control of an intergovernmental framework. We hope this process will be allowed to continue."

 The Bank's reported attempt to take over the CGIAR was the most controversial topic of the Convention meeting. Reports of this issue had been published in a paper prepared by the Rural Advancement Fund International, GRAIN and the Third World Network, in the bulletin Eco (circulated at the Convention), as well as in an article in the Financial Times of London.

 The issue dominated corridor conversation during the first several days of the Convention meeting, and was first raised in an open meeting by Third World Network Director Martin Khor.

 The genetic collections under the CGIAR system are worth billions of dollars, and could be used as an innovative financial instrument for implementing biodiversity programs, Khor said. It is thus important to recognize the rights of developing countries to the assets and to a fair share of the stream of financial benefits derived from the use of these genetic materials, he contended.

 He said nongovernmental organizations were extremely concerned about reports of the World Bank's recent move to take control of the CGIAR institutions' genetic collections, which account for 40 percent of the total worldwide unique collections of agricultural genetic materials.

 This move was apparently made at the CGIAR meeting in Delhi at the end of May. According to reports, the Bank offered to forgive the CGIAR's $5.6 million debts, to raise its annual grant by some $5 million and provide up to $20 million of new funds to match other donor funds.

In turn, the CGIAR would, for the first time, create a steering committee and a finance committee, both of which the Bank would chair. The Bank would also consult the World Trade Organization regarding the General Agreement on Tariffs and Trade provisions on intellectual property rights and CGIAR's germplasm. The Bank would also take the lead in dealing with the status of control and ownership of CGIAR's genetic resources, thus displacing the role played until now by the FAO.

 This, said Khor, would be a "good bargain" for the Bank, noting that the stream of benefits from CSIAR's genetic materials is invaluable. For instance, increased productivity due to using improved varieties made possible by the genetic materials is worth $500 million annually in the U.S. wheat sector alone.

Khor added that the Bank's move would put a serious obstacle in the way of negotiations between the FAO, governments and the CGIAR's agricultural research centers to place their genetic collections under the trusteeship of a democratic intergovernmental mechanism such as the Commission on Plant Genetic Resources, and later within the Biodiversity Convention.

 "We fear that control over these valuable assets would be diverted instead to the Bank," said Khor. "Our concern is that the Bank's decision-making and governance structures are under Northern governmental domination. The genetic materials were collected from Southern countries and should rightfully be under their control. This would be more likely if the collections come under the purview and trusteeship of a democratic one-country, one-vote intergovernmental organ."

 He requested that the World Bank respond to the allegation that it was increasing its control of the CGIAR; what measures would be taken to ensure full representation of developing countries in the governance of the CGIAR system and its genetic materials; how the equitable sharing of benefits from use of these materials would be arranged; and whether the FAO negotiations with CGIAR institutions would be allowed to continue.

 In the discussion that followed Khor's presentation, the Philippines delegation chief said there was a "sheer injustice" in the situation where biological materials collected before the Biodiversity Convention came into force were excluded from its purview. "I have a list of 26 commercially useful biological materials collected by Northern agencies from the Philippines, and they are excluded from the Biodiversity Convention," he said.

 He gave two examples of materials found in soil samples collected from the Philippines by multinational companies which were subsequently found to contain valuable anti-tumor, anti-bacterial properties and patented. "Even countries from which these materials originated are now thus prohibited from sharing the benefits of these materials. In light of this basic injustice, our countries are concerned that due redress be made."

 A senior Swedish official agreed that it was an injustice that the Convention did not cover biological materials collected prior its coming into force. This realization prompted Sweden, together with other countries, to support an initiative, approved by the governments in the FAO Conference, to negotiate with the CGIAR centers to place their genetic materials under the trusteeship of the FAO. Ultimately, under this plan, the materials in gene banks would come under democratic intergovernmental governance, through a protocol under the Biodiversity Convention.

 "I am thus hopeful that through this process, the collections will be in good hands," the Swedish official concluded.

 - Third World Network


Ruining a River

A CENTURY OF MINING and decades of clearcutting has taken its toll on Western Nevada's once pristine Blackfoot River. Once a world-class trout stream and the subject of Norman McLean's classic novel A River Runs Through It, the river has been transformed into a muddy concoction of heavy metals and silt flowing west from the Continental Divide into the Clark Fork River just east of Missoula, Montana.

 There are virtually no fish in the river now and the Blackfoot drainage has been so badly denuded by Wall Street robber barons that when Robert Redford came to Montana to produce the recent movie based on McLean's novel, he chose to film on the Gallatin River instead. In April 1992, American Rivers listed the Blackfoot among the 10 most endangered rivers in the United States, noting that the river may not be able to withstand another industry onslaught. It now appears this day of reckoning is just around the bend.

 In 1989, while Champion International was busy clearcutting the lower Blackfoot to feed its newly retooled mill at Bonner, Montana, mining firms began exploring for gold east of Lincoln, Montana, near the headwaters of the river. The two companies, Phelps Dodge and Canyon Resources, formed the Seven-Up Pete Venture, later renamed the McDonald Gold Project. By 1992, it had become apparent that the project site contained 8.2 million ounces of gold. If the project is given the go-ahead, it will be the largest gold mine in North America, and one with potentially dire ecological consequences.

 "A century of mining, grazing and logging have all but destroyed [the Blackfoot] river," says Dan Funsch, outreach director for the Missoula-based Alliance for the Wild Rockies. "Now, for a few lousy wedding rings, the McDonald Gold Project wants to finish it off."

Enter Echo Bay

 With gold prices on the rise and mounting opposition from environmentalists and sports enthusiasts, Phelps Dodge Mining Company announced in June 1994 that it will sell its 72 percent majority share in the McDonald Gold Project for $150 million. Under the proposed deal, Canyon Resources Corporation would increase its share of the mine from 28 percent to 45 percent and Echo Bay Mining, a notorious Canadian gold mining company, would become the majority owner and operator of the McDonald Gold Project.

The McDonald Gold Project will employ cyanide heap leaching to recover the gold. In this process, a cyanide solution is sprayed over heaps of extracted ore. Gold settles at the bottom of the solution onto a heap leach pad and the toxified ore is hauled to a waste site. The process became popular in the mid-1970s and has resulted in a gold mining boom in Montana and elsewhere, since it is much cheaper and faster than other methods of gold mining. The environmental consequences are also much more nefarious.

 The project plans call for creating an open pit a square mile wide and 1,400 feet deep which would not be reclaimed. As a result, the pit will eventually fill with runoff containing 33 different elements, many of which will be highly toxic metals. Since the water table in the area is as high as 300 feet below the surface of the ground, many fear this toxic soup could easily contaminate the area's drinking water. The mine is located where Landers Fork, an important bull trout spawning stream, and the Blackfoot meet. Any leaks under the leaching pad could dump cyanide into the groundwater supply or into the river itself.

 Company representatives deny the cyanide heap leaching process is environmentally harmful. Contends Cheryl Martin, director of investor relations at Canyon Resources Corporation, "We feel that we can build a permittable mine that will not impact the [Blackfoot] river in any way." Rick Lambert, McDonald Gold Project chief engineer for Phelps Dodge, says, "You have to understand the geological situation. Here we have an oxide deposit since there is primarily gold. In Butte where there's been problems with acid water, the deposit is sulfide since its mostly copper. Spraying cyanide over gold is like pouring salt into water. The only problems that could occur are if cyanide reacts with other gases." An Echo Bay Mining representative declined to comment on the mine, stating, "I cannot speak for a mine that we do not own."

 Environmentalists fear other detrimental consequences of the mine. They note with concern that the mining project, which is expected to last 12 years, will produce 400 million tons of cyanide laden waste ore which will be piled near Landers Fork near Highway 200.

Some environmentalists believe that the project is actually the first stage of a grand plan by the mining industry. The mining companies will apparently be designing their facilities to accommodate more ore than they intend to extract at the McDonald Gold Project. And geological evidence points to incredible mineral wealth in the entire Upper Blackfoot Valley.

 Independent film maker and mining industry critic Gene Bernofsky of Missoula thinks Montana may be entering another round of mineral colonization. Bernofsky recently won acclaim for "A River Cries," which chronicles the Blackfoot's demise and the proposed mine. He says Montana may be heading toward a heyday for global mining firms comparable to the early 1900s, when the Rockefeller-controlled and viciously anti-union Anaconda Company created what is now the biggest Superfund site in the nation near Missoula, Montana. "Echo Bay aspires to go down in history next to the Anaconda Company. We aspire to keep them out of Montana," he says.


The Baucus connection

 The McDonald Gold Project covers 44 square miles of state and private lands. The private land is owned by Sieben Ranch Corporation, which is the largest sheep ranch in Montana and has been owned since 1896 by the Baucus family. Montana's Democratic Senator Max Baucus holds between $250,000 and $500,000 in stock in Sieben Ranch.

Whether Baucus has a financial interest in the success of the McDonald Gold Project is unclear. Curt Rich, a Baucus administrative aide who specializes in natural resources policy, says he knows of no royalties or lease agreements. "Siebens is run by Max's brother. Max does not get involved in management decisions of the corporation," says Rich, who failed to follow up on a promise to research the financial agreement between Siebens and the McDonald Gold Project and then contact Multinational Monitor.

- Dean Henderson