Haiti is the poorest country in the Western Hemisphere. Two-thirds of all Haitians depend on the agriculture sector, mainly small-scalesubsistence farming, and remain vulnerable to damage from frequent natural disasters, exacerbated by the country's widespreaddeforestation. A macroeconomic program developed in 2005 with the help of the International Monetary Fund helped the economy grow 1.8% in 2006, the highest growth rate since 1999. Haiti suffers from higher inflation than similar low-income countries, a lack of investment (increasing however since the recent presidential seating), and a severe trade deficit. In 2005, Haiti paid its arrears to theWorld Bank, paving the way for reengagement with the Bank. The government relies on formal international economic assistance for fiscal sustainability. In 2006, Haiti held a successful donors conference in which the total aid pledged exceeded Haiti's request.Remittances are the primary source of foreign exchange, equaling nearly a quarter of GDP.[1]
Economic history
Since the demise of the Duvalier dictatorship in 1986, international economists have urged Haiti to reform and modernize its economy. Under President René Préval, the country's economic agenda included trade and tariff liberalization, measures to control government expenditure and increase tax revenues, civil service downsizing, financial sector reform, and the modernization of state-owned enterprises through their sale to private investors, the provision of private sector management contracts, or joint public-private investment. Structural adjustment agreements with the International Monetary Fund, World Bank, Inter-American Development Bank, and other international financial institutions are aimed at creating necessary conditions for private sector growth, have proved only partly successful.
In the aftermath of the 1994 restoration of constitutional governance, Haitian officials have indicated their commitment to economic reform through the implementation of sound fiscal and monetary policies and the enactment of legislation mandating the modernization of state-owned enterprises. A council to guide the modernization program (CMEP) was established and a timetable was drawn up to modernize nine key parastatals. Although the state-owned flour mill and cement plants have been transferred to private owners, progress on the other seven parastatals has stalled. The modernization of Haiti's state-enterprises remains a controversial political issue in Haiti.
External aid is essential to the future economic development of Haiti, the least-developed country in the Western Hemisphere. Comparative social and economic indicators show Haiti falling behind other low-income developing countries (particularly in the hemisphere) since the 1980s. Haiti's economic stagnation is the result of earlier inappropriate economic policies, political instability, a shortage of good arable land, environmental deterioration, continued use of traditional technologies, under-capitalization and lack of public investment in human resources, migration of large portions of the skilled population, and a weak national savings rate.
Haiti continues to suffer the consequences of the 1991 coup and the irresponsible economic and financial policies of the de facto authorities greatly accelerated Haiti's economic decline. Following the coup, the United States adopted mandatory sanctions, and the OAS instituted voluntary sanctions aimed at restoring constitutional government. International sanctions culminated in the May 1994 United Nations embargo of all goods entering Haiti except humanitarian supplies, such as food and medicine. The assembly sector, heavily dependent on U.S. markets for its products, employed nearly 80,000 workers in the mid-1980s. During the embargo, employment fell from 33,000 workers in 1991 to 400 in October 1994. Private domestic and foreign investment has been slow to return to Haiti. Since the return of constitutional rule, assembly sector employment has gradually recovered with over 20,000 now employed, but further growth has been stalled by investor concerns over safety and supply reliability.
If the political situation stabilizes, high crime levels wane, and new investment increases, tourism could take its place next to export-oriented manufacturing (the assembly sector) as a potential source of foreign exchange. Remittances from abroad now constitute a significant source of financial support for many Haitian households.
Haiti's real GDP growth turned negative in FY 2001 after six years of growth. Real GDP fell by 1.1% in FY 2001 and 0.9% in FY 2002. Macroeconomic stability was adversely affected by political uncertainty, the collapse of informal banking cooperatives, high budget deficits, low investment, and reduced international capital flows, including suspension of IFI lending as Haiti fell into arrears with the Inter-American Development Bank (IDB) and World Bank.
with the Inter-American Development Bank (IDB) and World Bank.
Haiti's economy stabilized in 2003. Although FY 2003 began with the rapid decline of the gourde due to rumors that U.S. dollar deposit accounts would be nationalized and the withdrawal of fuel subsidies, the government successfully stabilized the gourde as it took the politically difficult decisions to float fuel prices freely according to world market prices and to raise interest rates. Government agreement with the International Monetary Fund (IMF) on a staff monitored program (SMP), followed by its payment of its $32 million arrears to the IDB in July, paved the way for renewed IDB lending. The IDB disbursed $35 million of a $50 million policy-based loan in July and began disbursing four previously approved project loans totaling $146 million. The IDB, IMF, and World Bank also discussed new lending with the government. Much of this would be contingent on government adherence to fiscal and monetary targets and policy reforms, such as those begun under the SMP, and Haiti's payment of its World Bank arrears ($30 million at 9/30/03).
Haiti's total external debt is estimated at 1.4 billion dollars, including half a billion dollars to the Inter-American Development Bank, Haiti's largest creditor. In April, Haiti qualified for the IMF and World Bank debt relief initiative, but under the program, Haiti will not formally qualify for relief until 2009 at the earliest and will be contingent on Haiti's implementation of IMF and World Bank conditionalities. The initiative also excludes debt owed to the Inter-American Development Bank.
The IMF estimates real GDP was flat in FY 2003 and projects 1% real GDP growth for FY 2004. However, GDP per capita-- $425 in FY 2002-- will continue to decline as population growth is estimated at 1.3% p.a. While implementation of governance reforms and peaceful resolution of the political stalemate are key to long-term growth, external support remains critical in avoiding economic collapse. The major element is foreign remittances, reported as $931 million in 2002, primarily from the U.S. Foreign assistance, meanwhile, was $130 million in FY 2002. Overall foreign assistance levels have declined since FY 1995, the year elected government was restored to power under a UN mandate, when over $600 million in aid was provided by the international community.
Workers in Haiti are guaranteed the right of association. Unionization is protected by the labor code. A legal minimum wage of 36 gourdes a day (about U.S. $1.80) was set in 1995, and applies to most workers in the formal sector. It was later raised to 70 gourdes per day.
]Foreign economic relations and foreign aid
See also: Foreign aid to Haiti and External debt of Haiti
The World Economic Forum ranked Haiti last in its 2003 Global Competitiveness Report. Thus, Haiti’s role in the global economy often has been confined to receiving foreign aid. The United States has been the leading donor to development in Haiti and plays a vital role in Haiti’s economy. Haiti maintains active membership in a variety of multinational economic organizations, including the International Coffee Organization, Latin American Economic System, and Caribbean Community and Common Market. Haiti also is a signatory to the Cotonou Convention--an economic community seeking to foster trade among African, Caribbean, and Pacific countries.
Haitian imports totaled an estimated US$1.5 billion in 2005 and 2.1 billion in 2008 [1]. About 35 percent of imports came from the United States. Other significant sources of imports that year included the Netherlands Antilles, Malaysia, and Colombia. Haiti’s primary import items are food, fuels (including oil), machinery, and manufactured goods. In 2005 Haiti’s exports totaled an estimated US$391 million. By 2008, exports totaled an estimated 490 million US dollars. [2] 68 percent of that revenue came from exports to the United States. Other major export partners in 2005 included the Dominican Republic and Canada. Apparel, coffee, edible oils, cocoa, and mangoes compose the majority of Haiti’s exports.
Haiti annually has a large trade deficit. In 2005 the country had an estimated trade deficit of about US$1.1 billion. In 2003 Haiti’s balance of payments was negative US$4.6 million. Haiti’s large trade deficit is partially offset by transfers received, including international aid.
Haiti’s total external debt surpasses US$1 billion. In 2005 it reached an estimated US$1.3 billion, which corresponds to debt per capita of US$169, in contrast to the debt per capita of the United States which is US$40,000 [3]. Following the democratic election of Aristide in December 1990, many international creditors responded by canceling significant amounts of Haiti’s debt, bringing the total down to US$777 million in 1991. However, new borrowing during the 1990s swelled the debt to more than US$1 billion.
Haiti has received very little foreign investment over the past 20 years. Development aid and loans have been the only consistent source of outside capital. In order to encourage foreign investment, in 2004 the interim government approved a three-year “tax holiday” for all foreign businesses that invest in Haiti.
Between 1999 and 2004, Haiti’s foreign benefactors—the United States, the European Union, the Inter-American Development Bank and the World Bank—jointly suspended aid disbursements in response to evidence of systematic electoral fraud and the failure of the Haitian government to implement accountability measures. Aid was restored in July 2004 after an interim administration was named. Haiti was scheduled to receive more than US$1 billion in pledged aid for 2005 and 2006. The United States pledged US$230 million in aid through fiscal year 2006.
Haiti has benefited from a solid economic partnership with Venezuela. This recently-forged friendship between Venezuelan president Hugo Chavez and Haitian president Rene Preval has resulted in various economic agreements. After a visit by Chavez in March 2007, Venezuela and Cuba announced a US$1 billion fund to develop energy, health, and infrastructure in Haiti.
]Industries
]Agriculture, forestry, and fishing
See also: Agriculture in Haiti
Although many Haitians make their living through subsistence farming, Haiti also has an agricultural export sector. Agriculture, together with forestry and fishing, accounts for about one-quarter (28 percent in 2004) of Haiti’s annual gross domestic product and employs about two-thirds (66 percent in 2004) of the labor force. However, expansion has been difficult because mountains cover much of the countryside and limit the land available for cultivation. Of the total arable land of 550,000 hectares, 125,000 hectares are suited for irrigation, and of those only 75,000 hectares actually have been improved with irrigation. Haiti’s dominant cash crops include coffee, mangoes, and cocoa. Haiti has decreased its production of sugarcane, traditionally an important cash crop, because of declining prices and fierce international competition. Because Haiti’s forests have thinned dramatically, timber exports have declined. Roundwood removals annually total about 1,000 kilograms. Haiti also has a small fishing industry. Annual catches in recent years have totaled about 5,000 tons.
]Mining and minerals
Haiti has a small mining industry, extracting minerals worth approximately US$13 million annually. Bauxite, copper, calcium carbonate, gold, and marble are the most extensively discovered minerals in Haiti. Lime and aggregates and to a lesser extent marble are extracted. Gold was mined by the Spanish in early colonial times. Bauxite was mined for a number of years in recent times at a site on the Southern peninsula. There are attempts to find commercially viable copper and gold deposits but thus far none have begun.
]Industry and manufacturing
The leading industries in Haiti produce beverages, butter, cement, detergent, edible oils, flour, refined sugar, soap, and textiles. Growth in both manufacturing and industry as a whole has been slowed by a lack of capital investment. Grants from the United States and other countries have targeted this problem, but without much success. Private home building and construction appear to be one subsector with positive prospects for growth.
In 2004 industry accounted for about 20 percent of the gross domestic product (GDP), and less than 10 percent of the labor force worked in industrial production. As a portion of the GDP, the manufacturing sector has contracted since the 1980s. The United Nations embargo of 1994 put out of work most of the 80,000 workers in the assembly sector. Additionally, the years of military rule following the presidential coup in 1991 resulted in the closure of most of Haiti’s offshore assembly plants in the free zones surrounding Port-au-Prince. When President Aristide returned to Haiti, some improvements did occur in the manufacturing sector.
Haiti’s cheap labor brought some textile and garment assembly work back to the island in the late 1990s. Although these gains were undercut by international competition, the apparel sector in 2008 made up two-thirds of Haitian exports (350 million US dollars). USA economic engagement under the Haitian Hemispheric Opportunity through Partnership Encouragement (HOPE) Act, from December 2006, increased apparel exports and investment by providing tariff-free access to the USA. HOPE II, in October 2008, further improved the situation by extending preferences to 2018.
]Energy
See also: Electricity sector in Haiti
Haiti uses very little energy, about 250 kilograms of oil equivalent per head per year. In 2003 Haiti produced 546 million kilowatt-hours of electricity while consuming 508 million kilowatt-hours. Most of the country’s energy comes from burning wood. Haiti imports oil and consumes about 11,800 barrels per day, as of 2003. The Péligre Dam, the country’s largest, provides the capital city of Port-au-Prince with energy. Thermal plants provide electricity to the rest of the country. Traditionally, the supply of electricity has been sporadic and prone to shortages--even with the country’s low demand. Mismanagement by the state has offset more than US$100 million in foreign investment targeted at improving Haiti’s energy infrastructure. Businesses have resorted to securing back-up power sources to deal with the regular outages. The potential for greater hydropower exists, should Haiti have the desire and means to develop it. The government controls oil and gas prices, insulating Haitians, to an extent, from international price fluctuations.
[]Services
Haiti’s services sector made up 52 percent of the country’s gross domestic product in 2004 and employed 25 percent of the labor force. According to World Bank statistics, the services sector is one of the only sectors of Haiti’s economy that sustained steady, if modest, growth throughout the 1990s.
]Banking and finance
Lack of a stable and trustworthy banking system has impeded Haiti’s economic development. Banks in Haiti have collapsed on a regular basis. Most Haitians do not have access to loans of any sort. When reelected in 2000, President Aristide promised to remedy this situation but instead introduced a non-sustainable plan of “cooperatives” that guaranteed investors a 10 percent rate of return. By 2000 the cooperatives had crumbled, and Haitians collectively had lost more than US$200 million in savings.
Haiti’s central bank, the Banque de la République d’Haïti, oversees 10 commercial banks and two foreign banks operating in the country. Most banking takes place in the capital city of Port-au-Prince. The United Nations and the International Monetary Fund have led efforts to diversify and expand the finance sector, making credit more available to rural populations. In 2002 the Canadian International Development Agency led a training program for Haitian Credit Unions. Haiti has no stock exchange.
]Tourism
Main article: Tourism in Haiti
Tourism in Haiti has suffered from the country’s political upheaval. Inadequate infrastructure also has limited visitors to the island. In the 1970s and 1980s, however, tourism was an important industry, drawing an average of 150,000 visitors annually. Following the 1991 coup, tourism has recovered slowly. The Caribbean Tourism Organization (CTO) has joined the Haitian government in efforts to restore the island’s image as a tourist destination. In 2001, 141,000 foreigners visited Haiti. Most came from the United States. Further improvements in hotels, restaurants, and other infrastructure still are needed to make tourism a major industry for Haiti.
[]Labor force
The labor force, as of 1995, was estimated at 3.6 million, but with a shortage of skilled labor.
Sources: CIA World Factbooks, Agency for International Development
Finding unemployment statistics from Haiti is very difficult because of the lack of publication of such data from the Haitian agencies in charge of collecting it. Most sources that we do have available come from United States agencies such as the Agency for International Development(USAID).
These numbers are highly speculative; many sources give vague ideas of the unemployment rating being (for example, in 2003) around 50%, giving the impression that the actual rate could be several percentage points higher or lower. Still, given that the sources of this data has remained the same for the past 15 years, we can at least see a trend of unemployment staying high throughout this period, but rising sharply in the mid to late 90's peaking at 70% in 1999 (2000 CIA World Factbook is the source for that number), and then decreasing to the usual rates of around 50% in recent years. We do not currently have data for the years since the political turmoil that resulted from the foreign financing of elite civil society groups, ex-military intervention, and Bush administration backed embargo on government aid to Haiti. The 2004 Haiti coup d'État and years of foreign backed destabilization increased unemployment. One of Haiti's largest trade unions,Confederation des Travailleurs Haïtiens, continually opposed the destabilization campaign waged against Haiti's elected Jean-Bertrand Aristide government. Trade union leaders point out that following the coup the international community and the illegal Latortue government backed a neo-liberal privatization plan for Haiti which laid off thousands of public sector workers. The Preval government, like it did in 1996, is now
experiences a wave of optimism being led by its hotel industry. After years of instability and political infighting the country is experiencing relative calm that is leading to tens of millions of dollars in investments in new hotels, expansions and renovations.
Parker -- who first visited Haiti last year and stayed at the newly opened Karibe Hotel and Convention Center in Port-au-Prince and later attended the grand opening of the Oasis, a newly opened restaurant and soon-to-be boutique hotel -- said he's impressed with what Haiti's independent hoteliers have done.
