Despite massive obstacles, foreign investors are looking tentatively toward Haiti.
Michael Deibert reports on what they will find once they get there.
Foreign Direct Investment Magazine
Financial Times Business Ltd,
http://www.fdimagazine.com/news/fullsto ... water.html
Testing the water
October 03, 2005
Despite massive obstacles, foreign investors are looking tentatively toward Haiti. Michael Deibert reports on what they will find once they get there.
Thirty-five years after his family fled Haiti for the US, New York real estate broker Jean-Marie Wolff finds himself among a group of Haitian-Americans at the forefront of forming the first-ever investment bank in the troubled Caribbean country. Working with others, they are encouraging the flow of foreign capital to his homeland.
e resources here in the US that need to be used and integrated into the economy of Haiti,” says Mr Wolff, 60, a native of the picturesque southern coastal town of Jacmel, Haiti, as he sits in a diner in the New York City borough of Queens.
He is referring to PromoCapital. Formed in 2004, PromoCapital has dubbed itself the ‘Haitian-American Investment Bank'. Growing out of Haiti's PromoBank, a commercial entity, the firm has 70 partners and its equity structure is that of a 50/50 joint venture between Haitian and US shareholders.
With branches both in the US – where Census Bureau figures from the year 2000 estimate nearly 420,000 Haitians live – and Haiti, PromoCapital's equity is modest, significantly less than the $65m in shareholder equity that is the combined worth of all Haitian commercial banks. But its shareholders believe its mission is nevertheless an important one.
Its US operations are headed up by Dumarsais M Siméus, who was born to an impoverished Haitian peasant family before moving to the US. He eventually founded Siméus Foods International, the largest black-owned food processing company in the US and the largest black-owned business in the state of Texas. In Haiti, the bank is steered by Henri Deschamps, a well-known printing and media executive.
Necessities of life
“The fact that Haiti is politically unstable doesn't really faze us because the fact is, eight million people live in Haiti and they need electricity, they need housing, they need all of those things,” says Mr Wolff, noting that PromoCapital has thus far invested in an electricity generation company to help provide power to Electricité d'Haiti (EDH), Haiti's state power company.
Another venture deemed worthy of investment has been a project involving Haiti's long moribund textile industry. The project seeks to take advantage of a change in US law that allows more flexibility in how the industry assembles and imports its products to its massive northern neighbour. “Even in Iraq, which is in a state of war, people go and do business. So there is a risk, but the risk is highly compensated,” says Mr Wolff.
The political risks he refers to are no idle concern, however. Haiti's tumultuous political situation – in which president Jean-Bertrand Aristide was ousted amid an armed rebellion and street protests against his rule in February 2004 – has repeatedly scuppered any effective attempts to create long-term development projects and large-scale foreign investment.
Haiti's current interim government, headed by president Boniface Alexandre and prime minister Gerard Latortue, has been beset on one side by a violent urban campaign in the capital, Port-au-Prince (launched by street gangs supportive of Mr Aristide), and on the other by a series of natural disasters. With local, parliamentary and presidential elections expected in November, the violence has escalated. Recently, Jacques Roche, one of Haiti's most foremost journalists, was kidnapped and killed and the US Peace Corps has departed the island because non-essential US residents were urged to evacuate.
No poverty relief
These problems have kept Haitian officials largely too busy to spend time on issues such as job creation and foreign investment that could help stem the chronic poverty: 80% of Haiti's population lives in poverty and the rate of hunger there is now ranked as the world's third highest, surpassed by only Somalia and Afghanistan. The economy shrank 3.5% in 2004 and two-thirds of the labour force have no formal jobs.
The problem has been worsened by the collapse of the agricultural system, which has resulted in tens of thousands of people flooding into cities such as Port-au-Prince, Cap Haitien and Gonaives in search of work. Although Haiti at one time exported substantial quantities of coffee, essential oils, cocoa and mangoes, a significant blow was dealt to the farming sector by the US-Canadian funded Program for the Eradication of Porcine Swine Fever and Development of Pig-Raising in the early 1980s. The programme destroyed 1.2 million of the country's Creole pigs, which formed one of the backbones of its peasant economy, when tests showed nearly a quarter of the island's pigs were infected with African swine fever.
Haiti, which had also produced low-cost, inexpensive rice for domestic consumption for many years until the 1990s, lost the ability to do so competitively in 1995. This stemmed from a move by the Aristide government to implement an economic adjustment plan mandated by the IMF that cut tariffs on rice imports to the country to 3%, from 35%.
Massive deforestation, which has resulted in 90% of Haiti's tree cover being destroyed for charcoal and to make room for farming in the past 50 years, has only exacerbated the problem, leaving little left to hold the topsoil when the rains fall. “We have a serious environmental crisis in the country,” says Camille Chalmers, director of the Haitian Platform to Advocate Alternative Development, which pushes for grassroots developmental initiatives on behalf of Haiti's poor. “But the [root] cause is misery; people are born here with a lot of desperation and their sole source of liquidity is the trees.”
As the environmental crisis continues, Haiti's GDP per capita hovers at about $1500 and current exports stand at $338m per year, with 83% of that going to the US.
There are those, though, who sense opportunity even in such dire circumstances. Lance Durban, a 57-year-old US businessman who first arrived in Haiti in 1979 to help construct a low-cost housing project in Cite Soleil, the capital's shantytown, now runs a company that employs about 400 people. He agrees that Haiti's political struggles and economic development can be decoupled.
“I like to say that our real product is inexpensive people fairly close to the US,” says Mr Durban, whose company, Manutech, makes electronics transformers and inductors – a key part of any power supply. “The governments here have been trying to solve the political problems of the day, which may or may not be solvable, and as a result job creation has sort of taken a back seat,” he says.
Manufacturing-centred jobs, such as those that Manutech provides, are centred on Haiti's capital where workers compete for a few thousand assembly jobs, which pay on average about $2 per day. To help offset such meagre wages in a country that has been hard-hit by petroleum prices, Manutech subsidises a daily meal programme, served twice a day, and has instituted maternity leave and school loan programmes as well.
Despite the struggles, Mr Durban says he has “no regrets” about having ended up in Haiti all those years ago, a sentiment that is echoed by those who have begun to dip their toes back in the country's economic waters with PromoCapital.
“We think there is a better way to do things,” says Mr Wolff, advocating for those who are looking to invest in his native land to see beyond the strife. “There is a more rational way, putting money together to invest in companies that are well run, well planned out and well funded. The development in Haiti is not going to be done by the government or by international agencies, but by us, the investors, together.”
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