The Multinational Monitor


T H E    F R O N T

Haiti Bucks Privatization

A RISING WAVE OF Haitian protests culminated in mid-October 1995 with the resignation of Prime Minister Smarck Michel, a key promoter of neo-liberal structural adjustment policies. Michel's exit leaves the future of these policies -- and the international aid conditioned upon them -- in question.

A year after President Jean-Bertrand Aristide returned to power, Foreign Minister Claudette Werleigh, a product of Haiti's democratic movement, replaced Michel -- a member of Haiti's tiny business elite.

Michel resigned after late September 1995 elections that swept in populist candidates who raised major obstacles to Michel's economic program, especially plans to privatize state-owned enterprises.

The setback to structural adjustment plans in Haiti became evident by early October 1995, when the World Bank held its annual meeting in Washington, D.C. The Bank and the International Monetary Fund (IMF) tried to get Haiti to sign a letter of intent that conditioned $100 million in financing on Haiti meeting structural adjustment targets.

The Bank hoped to use the letter at its annual meeting to show Haitian support for its policies. Showing the influence of the new Parliament, Haiti refused to sign.

In an October 15 visit to Port-au-Prince, a visibly angry U.S. Vice President Al Gore unsuccessfully endeavored to salvage Michel's role -- or at least his neo-liberal legacy -- through what Gore called "an intense one-on-one" with Aristide.

Rumors abounded in Port-au-Prince in late October about international donors and lenders responding to Haitian populism by cutting off aid. Aristide administration lawyer Ira Kurzban told Multinational Monitor that there is "a possibility that $4.5 million is being held up, pending the letter of intent being signed."

The money in question is a final U.S. Agency for International Development (AID) installment of the Emergency Balance of Payments Support Program for the fiscal year that ended on September 30, funding conditioned on meeting privatization and other structural adjustment targets.

Kurzban confirmed that the money already should have been released to Haiti and that some AID officials told Haitian officials that the delay resulted from the country's refusal to commit to structural adjustment plans. AID officials had denied publicly that there have been any payment hold ups.

At deadline for this story, an AID spokesperson in Washington, D.C. confirmed that "a $4.6 million payment remains in the balance of payment account,"and that this part of a $15 million package agreed upon with Haiti's government in April 1995 was being held up.

The spokesperson said that the funds have been tied up because Haiti failed to meet all the conditions attached to the aid, specifically, to draw up plans for broad civil service reforms and to prepare options for a second round of privatizations. The hold up was not related to the World Bank letter of intent, the spokesperson said.

"We've provided Haiti with an awful lot of money and support over the past year and I don't think anything should be read into this that the United States is changing or in any way limiting its support for Haiti,"the spokesperson said.

Other officials do see the potential for a policy change. "The World Bank and IMF package rejection will affect Haiti enormously because it will delay drawdowns under structural adjustment programs," says an official at the World Bank's International Finance Corporation (IFC), which helped design Haiti's privatization plans. "If the Bank fails to reach an agreement, then it is likely that other donors and lenders will follow suit."

Such a domino effect would quickly force Haiti into a serious balance of payments crisis, leaving it without money for food and oil. Haiti's heavy foreign dependence raises questions about how far the new Parliament's independence streak can go.

Although it is too early to be sure how far the neo-liberal agenda has unraveled in Haiti it clearly unraveled quickly. Just a month before his fall, officials and financiers in Washington and New York rolled out the red carpet for Michel, a prime minister who seemed to understand the need to impose the neo-liberal agenda on an independent-minded population. Aristide has "matured," Michel reassured his U.S. hosts. "I see the president regularly," he boasted. "He has never told me, 'Stop the program.' "

"Stopping the program"

While Aristide has been circumspect about much of Michel's neo-liberal plan, the president has kept the door open to Haiti's democratic organizations. Significantly, after three rounds of elections, Aristide's Lavalas ("cleansing flood") movement now dominates the Haitian Parliament. What has stalled the neo-liberal program is not so much Aristide as the widespread opposition to privatization plans among Haitian people and their representatives in the new Parliament.

"The donors should listen very carefully to what the people of Haiti are saying through their popular opposition," says Lisa McGowan, a Haiti specialist at the Washington, D.C.-based Development GAP. "The people of Haiti are very suspicious of privatization. They want to know that any economic policy that they are engaging in will benefit them and not an elite, either in Haiti or an international elite."

Perhaps because many of Haiti's public enterprises are notoriously corrupt and mismanaged, Michel and his friends in New York and Washington appear to have underestimated the potential for privatization backlash. Haiti's state enterprises have failed miserably in their job of supplying services. Just one in 15 Haitians has electricity and just one in 20 have a telephone. The state's cement company and flour mill have not operated since 1993. The port authority, Autorité Portuaire Nationale (APN), is a model of inefficiency. Of the two state-owned banks, one is financially shaky, while the other caters to the rich and ignores the financial needs of most Haitians.

As derelict as state enterprises may be, however, they are a source of jobs and some services. Moreover, not all of them are money losers. The state telephone company, Telco, provided the government with $80 million in revenue last year. "There are people in Haiti who believe that it makes more sense to use revenue from Telco rather than to borrow money internationally which is subject to onerous conditions," McGowan says.

Michel and the international institutions failed to convince Haiti's poor majority that they would be better served if these enterprises were sold to the country's ruling families or to foreign investors. Shrouding privatization plans in secrecy fed public suspicions. Haiti has yet to have an open debate on the pros and cons of privatization. Haitians have not been given accurate information on enterprises slated for the auction block.

Public assets, private plans

The World Bank's IFC issued draft "Options Reports" on eight state enterprises to a select circle of economic experts in May 1995. By early August, the IFC drafts on Haiti's cement company and flour mill had been polished into "Information Memoranda" and sent to potential investors. Still, this information was not distributed to the Haitian people, whose assets were being prepared for sale.

Based on who registered to bid on assets, sources inside the Aristide administration said a total of nine bids for the cement company and flour mill had been received, eight from multinationals and one from a Haitian bidder. The bids were to have been opened September 30, but the government has kept them sealed, with Parliament members criticizing the privatization plans for failing to promote broad, private ownership, as opposed to selling the assets to Haiti's wealthiest families. Reflecting this goal, Haitian government officials often talk of the "democratization" rather than the "privatization" of state enterprises.

The IFC is more comfortable with old-fashioned privatization than Lavalas democratization. The IFC reports and memoranda, copies of which were obtained by the Multinational Monitor, suggest that the Haitian population had cause to question Haiti's privatization plans.

The IFC documents that were kept from the Haitian public call for public participation. "The process should be open to public scrutiny, possibly through an awareness campaign and open debates," the cement plant report says. "If the rationalization of the labor forces at the port is to succeed," the APN report says, "the government must achieve both popular grass-roots support and political consensus."

An IFC official who has worked on Haiti's privatization plans acknowledges that information about the privatizations did not reach future members of Parliament or the public. Asked about his agency's reports, the official says, "We gave the reports to the government; the government is, in effect, our client. It is not our business to widely disseminate the documents."

The IFC documents recognize that the privatization agency has a mandate "to avoid an increase in the concentration of wealth in Haiti while ... attracting investors to enhance [an enterprise's] contribution to the Haitian economy." Despite this mandate, none of the IFC's reports say how the privatization process will prevent Haiti's wealthiest families from snapping up all the enterprises. Similarly, although the Haitian government expressed a commitment to democratization of ownership (which could include public investment trusts, employee ownership plans or consumer cooperatives), none of the reports suggest how this goal would be met.

By the IFC's own reckoning, the financial data on the enterprises are woefully incomplete. The report on the national telephone company says that "the overall quality of the data available at Telco is very poor." The IFC cement company report notes that, "Access to the Company's records was denied." As for the corruption-rife port, the IFC concludes that, "An audit of finances and business activities is advisable ... the financial statements provided appear to be understated." The IFC report on Haiti's second-largest bank, Banque Nationale de Crédit, finds that this financial institution has not been fully audited for 10 years. "Accumulation of interest on past-due loans could have overstated earnings and generated fictional profits," the report warns.

Despite a May 1995 World Bank report that noted that "the government emphasized the need to assist those employees who might be affected by" privatization, the IFC projected enormous layoffs in the absence of any employment assistance plans. At the cement plant, for instance, the IFC expected "massive, or even total dismissals, possibly followed by selective re-hiring." IFC also recognized "an immediate need to rationalize the labor force at the port (APN has 800 employees excluding dock workers, but should be able to function effectively with less than 100 employees)."

The IFC discussed the need to: prevent further ownership concentration; disseminate accurate financial information; square privatization with important development goals; and have an informed public debate. Then, however, the IFC and its Haitian government client pursued privatization schemes that seemed more concerned with privatizing public assets as rapidly as possible.

Whither Haiti?

The popular backlash against the privatization rush appears to have bought some time for the Parliament to demand more information about existing privatization plans and to evaluate whether or not they are in the public interest. Regardless of what the Parliament decides, however, Haiti's deep dependence on international institutions to meet its balance of payments needs will severely constrain its aspirations for economic independence.

On the other hand, the Haitian people are no strangers to economic hardship, having endured a two-year embargo prior to the restoration of democracy. Furthermore, the Clinton administration counts Haiti as a foreign policy success and does not want an ugly showdown or an economic crisis that might encourage a spurt in Haitian immigration to the United States.

-- Cam Duncan

Mahogany Coffins

DEMAND FOR mahogany caskets among rich people in the United States who want to take some wealth to the grave is propelling illegal attacks on rainforests and indigenous people in Brazil, say activists who are trying to open a Northern front in the tropical timber battle.

"The U.S. is the largest importer of Latin American mahogany and the high price the wood gets on the international market lures outlaw timber profiteers to log illegally on indigenous peoples' land," says an October 1995 statement from San Francisco, California-based Rain Forest Action Network (RAN). "They harass, maim and murder those who dare stand in the way."

Motivated by mounting mahogany demand, armed gangs of illegal loggers killed 14 Tikuna Indians in Alto Rio Soli in Amazonas state in 1990. A few days after denouncing invasions by mahogany loggers in May 1993, rubber tapper Arnaldo Ferreira was killed in southern Para state, according to Roberto Smeraldi of Friends of the Earth's Amazonia Program. A Nhambiquara Indian was killed in neighboring Rondonia state in 1994. Loggers who wanted to harvest mahogany on Nhambiquara land were again considered likely suspects, Smeraldi says.

RAN argues that most legally available mahogany has been harvested, pushing loggers into wildlife protection areas and territories that are supposed to be under indigenous control. Brazilian media have reported suspected links between loggers and killings of people belonging to eight different indigenous groups: the Korubu, Flecheiros, Tikuna, Awa-guaja, Zoro, Mura-Praha, Guapore, and Uru-Eu-Wau.

Mahogany is in danger of being cut into extinction in the Amazon, according to the Brazilian Institute of Environment in Brasilia. Representatives meeting under the auspices of the Convention on International Trade in Endangered Species in Miami, Florida in November 1994 considered listing mahogany as an endangered species, though the step has yet to be taken. Loggers have carved more than 3,000 miles of illegal roads through the Brazilian Amazon, destroying 3,000 square feet of forest for every cut tree, according to RAN.

"Rolls Royce" rites

In an attempt to head off further killings of people and trees, activists shouting "Mahogany is murder," protested in October 1995 at the High Point Furniture Market in North Carolina, where hundreds of U.S. furniture dealers gathered. Black-clad RAN and Environmental Awareness Foundation protesters staged a mock funeral procession for indigenous victims of the growing U.S. mahogany market. Traditionally used for fine furniture, mahogany also is becoming trendy for last rites in the United States, where 80 percent of the 2.2 million people who die each year wind up in a box. An increasing number of wealthier stiffs are buried in hand-made mahogany caskets that fetch as much as $10,000 each.

The lumber and coffin industries welcome the trend. Asked why people are buried in mahogany, David Buck, president of Columbus, Ohio-based Clark Grave Vault Company, told the San Jose Mercury News, "Why does someone buy a Rolls Royce rather than a Yugo?" Beck, who is also president of the Coffin Manufacturers Association, said $1 billion in coffins are sold in the United States each year.

Commerce Department records indicate that the United States imported 48,648 cubic meters (CM) of mahogany in 1991 and 66,416 CM in 1992, declining thereafter to 48,740 CM in 1994. Despite this reduction in the volume of mahogany imports, demand kept the value of imports high. U.S. mahogany imports, which were worth approximately $27 million in 1991, kept at a steady value of approximately $32 million for the years 1992 through 1994, even with declining volumes. The import value of a cubic meter of mahogany in 1994 was $661.

Almost half of all Latin American mahogany is exported to the United States, where half of it is used for furniture and the rest is sold as lumber and coffins, according to RAN. The top 10 U.S. importers, including the North Carolina-based industry leaders Nordisk of Greensboro and Dan K. Moore of Lexington, handle 80 percent of all mahogany imports. RAN says customs records indicate that U.S. importers regularly buy mahogany from suppliers that Brazilian courts have convicted of illegal logging.

Stumping for imports

"Despite being convicted, these exporters don't lose their export licenses, which gives them access to American markets," says Mark Westlund, a RAN campaigner in San Francisco.

The furniture industry denies links to illegal logging. "No logging company is involved in attacks" on indigenous people, says Robert Waffle, government affairs director of the Alexandria, Virginia-based International Wood Products Association. "I think there may be some independent people doing this."

"Given the poor law enforcement and corruption prevalent in Brazil and Bolivia, there is just no way to ensure that a given mahogany shipment is legal and not stolen from Indian communities," says RAN activist Atossa Soltani. To avoid these complications, Soltani says furniture companies should stop buying mahogany.

"It's stupid to say that mahogany imports should be banned," Waffle says. Activists "don't understand that indigenous people would like to raise their income" through mahogany sales, he says.

-- Haider Rizvi

Top Mahogany Furniture Makers

Universal Furniture
Drexel Heritage
Hickory Chair
La-Z-Boy Chair
Bernhadt Contract
Cabot Wrenn
Bruenton Industries

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