Haiti family builds new shelter

Idasa’s Nancy Dubosse just returned from Haiti. See this documentary, which she had a hand in producing.

The Laduceur Family of Leogane, Haiti, is one of thousands affected by the January 12 earthquake. Hands on Disaster Recovery (HODR) volunteers have helped this family clear their property of rubble, and are moving forward to build transitional shelters for families like the Laduceurs’s. Nancy has been working with HODR.

More on volunteering in Haiti

Idasa’s Nancy Dubosse (head of research; EGP) is in Haiti with Hands on Disaster Response, an organisation that specializes in rubble removal and other post-disaster needs. She is based in the city of Leogane. Here she shares some of the anxieties inherent in her work …

Last week we experienced four aftershocks in two days. There was one the week before, which was rated a 6.1. The two other tremors were rated as 4.7. For the first one, I was in such a state of panic, I couldn’t unzip my tent. By the time I was able to do so, the tremor was over. The next night was the same and tension prevented us from sleeping.  As a group we are normally quite communal and the mornings have a family-like atmosphere. The morning after was very quiet, anxieties high; our fear was palpable. We had had a lovely day at the beach the day before and the tremor was a rude awakening. From many accounts, the earthquake on 12 January was nothing in comparison to the aftershocks. But I think the feeling of helplessness is the same. The fact of the matter is that the only thing that we have control over is how we react to circumstances, our comportment and integrity.

See Nancy’s first post here.

Volunteering in Haiti

Idasa’s Nancy Dubosse (head of research; EGP) is in Haiti with Hands on Disaster Response, an organisation that specializes in rubble removal and other post-disaster needs. She is based in the city of Leogane. They have already cleared four homes that had collapsed. One belonged to the neighbourhood TV/radio repairman. The same day as the quake, he was robbed by looters. The only thing left of the house was the perimeter wall; the rest was rubble. Nancy continues …

“Another home we cleared belonged to a single woman with two children. Besides having a broken foot, she also had to live with the horror of the death of a neighbour’s child, who had come over to play and never made it back home.

“Although they have cleared away the physical evidence of the quake, they can’t offer anything beyond that. These families have no shelter, no schools to send their children, no work.

“Upon seeing a group of ‘whites’, one old man asked me for money to buy coffee. When I explained that we are volunteers, who have left our families, homes and jobs to come and assist, he apologized, adding that it should be him offering us the coffee. The next day, that same gentleman sent his son with a wheelbarrow full of coconuts, and we had a lovely break.”

History of Haiti’s debt relief

– By Nancy Dubosse –

A lot has been written about Haiti’s unserviceable debt, given its poverty.  I would like to turn the spotlight onto the reasons why debt relief has been given.

When the G7 announced that it would be cancelling outstanding bilateral debt and urging the international financial institutions to do the same, the reason given was pretty flimsy.  British Prime Minister Gordon Brown is quoted as saying: “It must be right that a nation buried in rubble must not also be buried in debt”.

It has been buried in endemic poverty, rife with violence and corruption for two centuries!  The earthquake wasn’t even the tipping point.

Haiti’s predicament has been replicated the world over: loans given to despots and dictators in exchange for developed countries’ exploitation of resources and/or manipulation of regional politics.

Haiti’s debt should be cancelled, not because it is too poor and to repay it, but because the debt is ILLEGITIMATE.

Haiti’s first “debt” was an indemnity imposed by France (in 1838) as compensation for loss of its most profitable colony and also in exchange for its recognition of Haiti as an independent country. The amount was originally for 150 million francs, which was reduced to 60 million, payable over 30 years in gold.  It was paid off.  Conservative estimates place it at a current value of Euro22 billion.  This debt is ILLEGITIMATE.

During the US occupation (1915-1929), Haiti was forced to take a loan of $40 million in 1922, supposedly to finance development efforts in the country.  There are a number of propositions as to why the United States invaded the sovereign country.  Two of the most plausible are that 1) the Panama Canal had just opened, the path to what is the Winward Passage, of where Haiti lies at the entry way; and 2) the First World War had been declared the year prior and an unstable country, situated so close to the US, was simply not an option; as the possibility was high that it would become a staging point for the Germans.  Whatever the reason, the debt is ILLEGITIMATE.

Everyone has heard mention of Papa Doc and Baby Doc.  The Duvalier father and son regime lasted 29 years.  Though the presidency of Francois (Papa Doc) Duvalier could have be argued as legitimate, in the sense that elections took place, the one of Jean-Claude (Baby Doc) was clearly dictatorial, with no elections having been held.    Of the loans made to Haiti, $238 million was loaned while Baby Doc was in power.  The ILLEGITIMACY of the debt is glaring, and responsible financial lending dictates that they should never have been approved.  According to Duhaime (2002), partly in recognition of this, in 1994, the bilateral creditors, who allowed these loans, annulled part of the debt totalling USD$156 million; specifically, $68 million by France, $84 million by the United States, and $2 million by Canada.

Between 1973 and 1980 (Baby Doc), Haiti’s external debt increased from $53 million to $366 million.  A portion of that was credited from the Inter-American Development Bank (IADB).  During its membership in the IADB, Haiti has been the recipient of 67 loans, amounting to $1.3 billion and 330 grants, totalling $92.7 million.  A significant portion of that was loaned during the Duvalier era (1957-1986), approximately $250 million.

The period after Baby Doc, 1986 and 1991 was one of political instability, as the country was mainly led by the military.  The Inter-American Bank also made several loans to the junta, totalling approximately $115 million.

In 2007, the IADB agreed to extend total debt relief to Haiti, dating from only 1997, provided it completes the HIPC programme.  What about the principal and debt service accruing from the ILLEGITIMATE loans?

Why was so much foreign money poured into the Duvalier dictatorship? Two plausible reasons account for this. The first reason was geopolitical. Haiti is just across the Windward Channel from Cuba. After the 1959 Revolution that brought Fidel Castro to power, it was feared that Haiti might be next.  When the US wanted to block Cuba’s entry into the Organization of American States in 1962, Haiti cast a decisive vote that President Kennedy needed in order to keep Cuba out, and Duvalier got more aid.

The other reason for the inflow of loans to Haiti was economic. During the 1970s, unstable oil prices caused a financial shock the world over. In addition, President Nixon removed the dollar from the gold standard, causing extreme fluctuations in its value and spurring intense buying and selling of currency itself. Wealthy investors desperately needed another place to spend their liquid assets, so they poured money into international financial institutions such as the World Bank.

Duhaime estimates that the Duvalier family took $900 million in multinational and bilateral loans for their personal uses. Note that the Duvalier regime ended on February 7, 1986. While in 1970, Haiti’s debt was $40 million, by 1987, the first full fiscal year after the Duvaliers left, it was $844 million, 60% of the amount owed in 2004. The debt service alone Haiti owed from 1987 to 2005 was $779.04 million (Schuller, 2006).  In 2004-05, debt service amounted to 22% of government expenditures, of which 40% to service loans made to the Duvalier regime (McGuigan, 2006).

The concept of illegitimate debt entails the following:
 The Versailles Treaty bans the transfer of the debt of colonies can not be transferred to newly independent countries.
 Leaders, who do not represent their populations through some sort of electoral mechanism, can not borrow on their behalf.
 Any loans taken out for war, torture, and crimes against humanity are illegitimate, as provided for by the Vienna Convention.
 Any loan given for policies that run contrary to the UN Charter of Economic Social and Cultural Rights is illegitimate.
 States have the obligation to fulfil human rights and any state using such resources to service debt is in violation of this.

Illegitimate debt is not a new concept nor is the campaign for international arbitration on the issue.  Three organisations working on this are The Committee for Annulation for Third World Debt (CADTM), the European Forum and Network for Debt and Development (EURODAD), and the African Forum and Network for Debt and Development (AFRODAD).  There are inherent power imbalances between creditor and debtor nations.  The establishment of a Fair and Transparent Arbitration (FTA) mechanism under the United Nations, would enable issues to be resolved in a way that preserves the integrity of countries and ensures creditors share the responsibility for the failure of their bad development policy advice and the rise of the debt crises.  EURODAD has done a lot of work on responsible lending.  The FTA mechanism would deal with cases of illegitimate debts individually as well as the repatriation of stolen wealth.

The fact that Haitian debt service payments and the debt stock itself has been cancelled by a number of parties does not remove the need to identify certain loans as illegitimate; if only to set the standard by which nations interact with each other financially and in keeping with human rights principles.

Here is a bit of irony.  In 2005, after Aristide’s resignation, the interim President, Alexandre Boniface, announced that Haiti would forgive France’s debt.

Haiti, debt and IFIs

– By Nancy Dubosse –

This week the scarlet letter is worn by the international financial institutions (IFIs).

Two weeks ago, the IMF scored some kudos in the realm of public opinion, even among staunch IMF critics, for rescinding an emergency loan of $100 million to Haiti and re-offering it as a grant.  But how did Haiti get to the point where taking on another loan could actually put lives in danger?

Haiti’s debt is often in the news, but not enough attention is paid to its debt service.  Given fixed resources, servicing a public debt implies fewer resources for social services and development programmes.  According to Paul Farmer, in Haiti’s case, by the end of the 19th century, 80% of the national revenue was earmarked to repay debt.  The Haitian Platform Lobbying for Alternative Development has also written extensively on the tension between debt service and human rights.  It estimates that by 1999, the country was paying $38 million in debt service; while the health budget the same year was $26 million.  Between 1995 and 1996 in particular, Haiti paid 900 million gourdes in debt service.  During the same period, only 120 million was invested in agriculture.  Please note that half the population lives in rural areas.  According to the Haitian Central Bank, in 2006 alone, total debt service paid was $57 million, with 47% going to IADB, 30% to the World Bank, and 10% to the IMF.  Voila!

Internationally, the ineffectiveness of development assistance became the subject of international discussions in Paris in 2005.  The outcomes of this meeting was a document outlining the way in which aid should be delivered, coordinated, managed and monitored.

The baseline for engagement of international financial institutions (IFIs) with developing countries has been laid by the Paris Declaration for Aid Effectiveness (2005).  All the major IFIs and most developing countries are signatories to the Paris Declaration.  It sets the criteria for ensuring both the effectiveness and efficiency of development under five governing principles:

  1. The principle of ownership dictates that development programmes should be the result of a consultative process within country.
  2. The principle of alignment dictates that donors should direct their assistance to the identified priorities of recipient countries, using the latters’ public financial management systems.
  3. The principle of harmonization dictates that donors must coordinate their assistance so as to minimize transaction costs and duplication of administrative functions for developing countries.
  4. The principle of managing for results dictates that development programmes should be monitored and evaluated according to mutually agreed targets.
  5. The principle of mutual accountability dictates that donors should report to both their peers and their own constituencies regarding the nature, scope and destination of development assistance.

A historical analysis of World Bank development assistance in Haiti cited the use of aid towards the privatization of infrastructure and the delivery essential social services (e.g. education and health) by NGOs, instead of government. Obviously, this practice undermined the capacity of the central government to provide these services and improve its management capabilities.

Marc Bazin, former Minister for Planning and External Cooperation, in a response to the World Bank Country Assistance Evaluation of Haiti (2002), argued for a development assistance programme in two parts. The first would be directed towards immediate relief, as hunger, malnutrition, HIV/AIDs, et al, were endemic and life threatening.  The second would be a programme with the long-term goal of sustainability and good governance, as well as enhancing economic livelihoods.

Even as Bazin’s response to the WB was pre-Paris Declaration, he also spoke directly to the use of conditionalities that have traditionally accompanied development assistance, expressing the view that aid to the first, given its urgency, should be “ad hoc in nature and would be judged mainly on their ability to contribute directly to the success of poverty alleviation efforts instead of needlessly obstructing them”.  Among the suggested conditions that Bazin proposed were close links between external financing and broad participation and integration of the poor, the promotion of decentralized implementation structures, an increase in the contribution of the State to education, health and nutrition, and convening national dialogues on poverty reduction. Wow!

The Inter-American Development Bank (IADB) is the single most important creditor of Haiti. The Bank holds 40% of Haiti’s external debt (US$550 million out of US$1.3 billion), which represents 13% of the country’s GDP.  Presciently, the recommendations in the IADB’s Country Performance Assessment: Haiti (1990-2000) reflected the main grievances of the high-level meeting in Paris.

On general ineffectiveness:

“The Bank did not follow through and did not generate a relevant body of knowledge on the development challenges that Haiti faces. …. when the presence and engagement of the IDB should have been capitalized in terms of generating a solid body of knowledge on the Haitian challenges… Key studies are missing, for example regarding the investment gap needed to attain desirable levels of infrastructure and services in key areas such as health, education and transportation that could inform policy making, or the long terms prospects of a sustainable fiscal system in Haiti.”

On the absence of ownership:

“Based on the accumulated experience in Haiti over the last twenty years –that shows that donors do not know how to work to tackle the country’s development challenges in face of the implementation challenges— operations should be meticulously drafted with a demonstrative design in mind. However, the current portfolio was not designed with these considerations.”

On non-alignment:

“[The IADB] has continued to work through project executing units that are in part justified by the lack of confidence on the public management system, to which the reform efforts supported by the policy-based loans are directed. Besides this contradiction, the technical assistance and analytical work required to tackle the root causes of the problems faced in terms of public finance and fiscal management have not been sufficient.”

Back to the IMF.

In 1996, it launched the Highly Indebted Poor Countries Initiative, which was meant to alleviate the debt burden of poor countries provided they met certain criteria and fulfilled certain conditions. The lure of HIPC, after graduating, is that poor countries would have more fiscal space for development financing and a sustainable level of debt.

Haiti is also a good example of the arbitrariness of the IMF’s HIPC criteria.  Haiti could not qualify for HIPC until 2006, when its debt to exports ratio rose to 189%, though the IMF threshold is 150%.  Yet all along, the IADB, which held 40% of Haiti’s external debt stock, represented 13% of the country’s GDP.  The failure to evaluate a country’s potential to repay as an indicator is one of the main concerns with the IMF’s debt sustainability framework.  Until very recently, Haiti had been a haven for export processing activity, yet the government’s ability to raise revenue internally was impaired.  This was somehow not perceived as a source of potential instability.

An additional disparity is yet to be acknowledged.  The volume and value of total exports does not necessarily reflect the revenue from exports.  This is because Haiti, like other countries engaged in export processing and assembly activities, allows repatriation of profits. Further, income distribution effects are minimal, since the main lure of export processing is the lower-than- average labour costs.

Further, loans undertaken after 2006 have not been factored into the fiscal space assumed to be created by the debt relief. As of end 2006, outstanding external debt amounted to $1418.6 million.  In spite of the risks and the $32.4 million, as of 2006, that Haiti already owes the IMF, the former’s debt to the IMF is projected to rise to 4.2 billion gourdes by 2009, 86% of debt service in 2007, and 6% of net international reserves.

The IFIs cannot be absolved of the questionable lending practices to dictators and military juntas.  The World Bank has admitted as much in its evaluation of the historical performance of its development assistance.

“The efficacy of the Bank’s programme has been negligible and it efficiency, low…..lending has had little impact.  Based on both its impacts and the ratings of its individual components, the outcome of the assistance programme is rated unsatisfactory (if not highly so), the institutional development impact, negligible, and the sustainability of the few benefits that have accrued, unlikely.  The Bank and other donors erred by offering traditional assistance programmes without identifying the fundamental governance and political barriers to development.”

Ironically in 2002, the World Bank identified its own comparative advantage, among a field of crowded donors, as working with government and civil society to build institutional capacity and improved governance.

From an economic rights perspective, any fiscal space created by debt relief should be directed toward essential social services and decreasing the dependency on aid and not on new loans.  Further, the international financial community had 206 years (Haiti won its independence in 1804) to assist with strengthening the capacity of the State and didn’t do so.  Why do we need them now?

How did Haiti get here?

– By Nancy Dubosse –

I appreciate Pat Robertson’s historical analysis on the causes of the earthquake in Haiti.   By all accounts, the Haitian Revolution has everything a great story should have.  It starts off with the search for and struggle over gold, then sugar, then coffee.  There are fascinating military manoeuvres, which occurred in and around the country’s exceptionally mountainous terrain. It has more than enough drama (e.g. the rage demonstrated by Jean Jacques Dessalines, the Commander in Chief, when he ripped out the white part of the French flag to form the Haitian flag).  It has memorable speeches.  It has vodou ceremonies, sex, and yellow fever.  It has revenge, incidents of both black and white genocide; it even has some instances of mercy.

But that is the story up to 1804, and Robertson forgot to point out what has transpired in the country since then.  So, in order to remind everyone of what Haitians have experienced, I’ll be writing a series of blog entries on how Haiti arrived at this point (and it wasn’t because of a vodou ceremony).

In case you were wondering why a city with a capacity to accommodate only about 400,000 had a population of an estimated 4,000,000 people, a short story of the rice industry might help in understanding why there was a mass migration to the capital of Port-au-Prince.

Rice is the Haitian staple food.  Rice has been grown in Haiti for centuries, and until thirty years ago, Haitian farmers produced about 170,000 tonnes of rice a year, enough to cover 95% of domestic consumption. Rice farmers received no government subsidies, but, as in every other rice-producing country at the time, their local markets were protected by import tariffs.

The number of families engaged in rice production in the early 1990s was 93,000 (cultivation and processing).  Other groups included supplemental agricultural workers (22,000), local traders (8,000), and millers (400). But that all disappeared and two culprits are trade liberalization and bad governance.

Under pressure from donors, import tariffs were cut from 35% to 3%.  In comparison, the CARICOM, the Caribbean economic community, tariff is around 25%.  Haiti eventually became the fourth largest market for US rice in the world.  Rice imports increased by more than 150% between 1992 and 2003, with 95% of imports coming from the USA.  According to Oxfam, the price of rice in urban areas fell by 25%, which raised the perpetual conflict between urban and rural populations.  The lowering of tariffs made rice more affordable in urban areas and caused the decline of rural incomes, as rice farmers were now unable to compete.  This is one of the reasons that they migrated to the city.

In 2002, a scandal was unveiled concerning senators and deputies from Fanmi Lavalas, who imported 70,000 metric tons of rice, duty-free, under a cooperative arrangement associated with the Aristide Foundation for Democracy.  It has been estimated that the duty exemption translated into a 117 million gourdes loss ($4.68 million) for the Haitian treasury.

Here is where governance plays a key role in assuring the livelihoods of its citizens, ensuring compliance with customs laws, and stemming corruption.

Parliamentarians were each given a card by the Aristide Foundation to claim 400 sacks of rice to be distributed among their constituencies.  The rice, which normally sold for $32 per 110lb sack, was not freely distributed but sold by the parliamentarians for 250 gourdes ($10) a sack.

Aside from the scandalous arbitrage, there are systemic issues fueling the decline of the rice industry.  It has been reported that it was the de facto Prime Minister Marc Bazin, who granted the U.S.-based Rice Corporation the monopoly for importing rice, which continues to destroy national production. In short, Haiti was forced to abandon government protection of domestic agriculture – and the U.S. then used its government protection schemes to take over the market.

If you were thinking that the US is just a more efficient rice producer, you would be wrong.  The global rice regime notwithstanding, the dumping of rice by the US has been tolerated by Haitian authorities.  The marginal cost of producing one tonne of milled rice in the US was $415 between 2000-2003.  However, with government subsidies it was able to dump rice on international markets at $274 per tonne, a margin of 34%.  Now having put the Haitian rice industry out of business and that of other developing countries, global food price began to rise, with a bag of rice in Haiti going for $51 for 110lb bag just before the riots against food prices in April 2008.

Why hadn’t the Haitian government banned US rice imports?  Why hadn’t it filed a case at the WTO against the US for dumping?  Dumping is defined as a situation of international price discrimination, where the price of a product when sold in the importing country is less than the price of that product in the market of the exporting country.  Why hadn’t it created other opportunities in the countryside to sustain rural livelihoods?