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Haiti - The Economy

HAITI'S LOW-INCOME, PEASANT-BASED economy faced serious economic and ecological obstacles to development in the late 1980s. The country's gross domestic product (GDP) in 1987 was approximately US$1.95 billion, or about US$330 per capita, ranking Haiti as the poorest country in the Western Hemisphere and as the twenty-seventh most impoverished nation in the world. The only low-income country--defined by the World Bank as a country with a per capita GDP in 1988 below US$425--in the Americas, Haiti fell even farther behind other low-income countries in Africa and Asia during the 1980s.

Haiti's economy continued to be fundamentally agricultural in the 1980s, although agriculture's role in the economy--as measured by its share of GDP, the labor force, and exports--had fallen sharply after 1950. Highly inefficient exploitation of the scarce natural resources of the countryside caused severe deforestation and soil erosion and constituted the primary cause of the decline in agricultural productivity. Manufacturing became the most dynamic sector in Haiti during the 1970s, as the country's abundant supply of low-cost labor stimulated the growth of assembly operations. Services such as banking, tourism, and transportation played comparatively minor roles in the economy. Tourism, a potential source of foreign-exchange earnings, expanded rapidly in the 1970s, but it contracted during the 1980s as a consequence of political upheaval and news coverage that erroneously identified Haiti as the origin of acquired immune deficiency syndrome (<>AIDS).

Haiti's agricultural wealth, coveted by many in colonial times, had waned by the mid-nineteenth century as land reform divided the island's plantations into small plots farmed by emancipated slaves. Changes in land tenure contributed significantly to falling agricultural output, but the failure of Haiti's leaders to manage the economy also contributed to the country's long-term impoverishment. Haiti's economy reflected the cleavages (i.e., rural-urban, black-mulatto, poor-rich, CreoleFrench , traditional-modern) that defined Haitian society. The mulatto elite dominated the capital, showed little interest in the countryside, and had outright disdain for the black peasantry. Disparities between rural and urban dwellers worsened during the twentieth century under the dynastic rule of François Duvalier (1957-71) and his son, Jean-Claude Duvalier (1971-86); Haiti's tradition of corruption reached new heights as government funds that could have aided economic and social development enriched the Duvaliers and their associates. By the 1980s, an estimated 1 percent of the population received 45 percent of the national income, and an estimated 200 millionaires in Haiti enjoyed a life of unparalleled extravagance. In stark contrast, as many as three of every four Haitians lived in abject poverty, with incomes well below US$150, according to the World Bank. Similarly, virtually every social indicator pointed to ubiquitous destitution.

As a result of the traditional passivity of the government and the country's dire poverty, Haiti has depended extensively, since the mid-1970s, on foreign development aid for budget support. The United States has been the largest donor, but it has frequently interrupted the flow of aid because of alleged human rights abuses, corruption, and election fraud. Most other development agencies have followed the United States lead, thus extending United States influence over events in Haiti. Although the major multilateral and bilateral development agencies have provided the bulk of foreign funding, hundreds of nongovernmental organizations have also played a prominent role in development assistance. These nongovernmental organizations, affiliated for the most part with religious groups, have sustained hundreds of thousands of Haitians through countrywide feeding stations. They also contributed to the country's political upheaval in 1986 by underscoring the Duvalier regime's neglect of social programs. The accomplishments of the nongovernmental organizations have proved that concerted efforts at economic development could achieve results in Haiti.

The prospects for development improved temporarily following Jean-Claude Duvalier's February 1986 departure; some important economic reforms took place, and the economy began to grow. Subsequently, however, renewed political instability forestalled continued reform. Economic progress was feasible, but entrenched political and social obstacles prevented Haiti from reaching that goal.


After Christopher Columbus's discovery of Hispaniola (La Isla Española) in 1492, Spanish mercantilists generally neglected the island and instead focused their endeavors on the more richly endowed areas of Mexico and Peru. In 1664 France successfully converted the western third of Hispaniola into an unofficial territory; over the next 140 years French colonialists transformed the colony of Saint-Domingue into a slave-based plantation economy known as the "pearl of the Antilles." By the late eighteenth century, SaintDomingue boasted thousands of profitable plantations: 800 produced sugar; 3,000, coffee; 800, cotton; and nearly 3,000, indigo. Haiti became France's most lucrative overseas possession. In his classic 1776 publication, The Wealth of Nations, economist Adam Smith declared Saint-Domingue "the most important of the sugar colonies of the West Indies."

The Haitian Revolution (1791-1803) devastated agricultural output. The leadership of the new nation faced the daunting task of reviving economic activity without relying on slavery. After the 1806 assassination of Haiti's first national leader, JeanJacques Dessalines, Haiti operated under a dual economy, with forced labor on large plantations in the north and small-scale farming in partitioned land in the south. The 1820 unification of the nation entailed the abandonment of plantation agriculture and the establishment of a peasant-based agricultural economy. Although policies of land redistribution and limited social and economic reform improved the lives of the former slaves, the policies also produced a severe and ultimately irreversible decline in agricultural production.

Successive Haitian presidents gave priority to selfenrichment and to the payment of a controversial debt with France, which left little capital for improving the standard of living. The rigid social stratification and the political disparity between mulattoes and blacks further widened the gap between the rich elite and the poor.

The nineteen-year United States occupation of Haiti (1915-34) brought unquestionable economic benefits. United States administrators controlled fiscal and monetary policy largely to the country's benefit. The United States military built major roads, introduced automatic telephones in Port-au-Prince, constructed bridges, dredged harbors, erected schools, established clinics, and undertook other previously neglected public works. The troops departed in 1934, but economic advisers remained in Haiti to manage the national treasury until 1941. The Haitian economy enjoyed some growth in the 1940s and the early 1950s, partly because of improvements in the country's infrastructure, but mostly because of improved prices for its exports.

François Duvalier fashioned the modern Haitian economy into a system dominated by personal patronage, institutionalized corruption, and internal security concerns. Bent on retaining power at all costs, Duvalier heavily taxed the citizenry to finance the military, the paramilitary security forces known as the tonton makouts, and his family's vast expenses. His subordinates, from cabinet ministers to rural section chiefs (chefs de sections), followed Duvalier's example, essentially plundering the peasantry at every level of the economy. The most notorious example of Duvalier's overt corruption was his administration of a tax agency, the Régie du Tabac (Tobacco Administration), for which no accounting records were kept. Although he proclaimed himself a champion of black nationalism, Duvalier almost completely ignored the impoverished rural black population in his government expenditures. As a result, many Haitians--rich, poor, educated, and uneducated--left the countryside or fled the country altogether. "Brain drain" became a serious problem. In 1969, for example, some observers believed that there were more Haitian health professionals in <"http://worldfacts.us/Canada-Montreal.htm"> Montreal than in all of Haiti.

Overall, Duvalier's policies had no positive effect in Haiti. According to the United Nations (UN), Haiti was the only country in the world that did not experience real economic growth for most of the 1950s and the 1960s, a period when the world economy expanded at its most rapid rate in history.

During the 1970s, Haiti enjoyed a 5 percent annual economic growth rate as foreign aid, overseas investment, and higher commodity prices buoyed the economy. A key factor in this growth was the 1973 renewal of foreign aid from the United States and other donors after a ten-year suspension. The rapid development of assembly manufacturing that began in the late 1960s also stimulated economic expansion. Higher prices for coffee, sugar, cacao, and essential oils boosted previously depressed cash-crop production. Infrastructure development proceeded, construction boomed, banking prospered, and tourist arrivals more than doubled. Haiti modernized considerably, especially in Port-au- Prince and the major provincial cities. Agriculture stagnated, however, and per capita food production in real terms continued to decline. Jean-Claude Duvalier showed some interest in developing the nonagricultural sectors of the economy during his regime, and the state slowly expanded its role.

Haiti's fortunes soured in the 1980s, as real economic growth declined by 2.5 percent a year from 1980 to 1985. Inflation rose over the same period from 6 to 8 percent, and official unemployment jumped from 22 percent to more than 30 percent. After an interval of positive growth in 1986 and 1987, the negative growth trend continued in 1988, when the economy contracted by 5 percent. Although the country's poor performance in the 1980s to some extent reflected hemispheric trends, Haiti faced its own peculiar obstacles, many of which stemmed from decades of government indifference to economic development. Uneven foreign aid flows, resulting from disputes over human rights violations and a lack of progress toward democracy, hampered government spending.Worsening ecological problems hindered agricultural development, and tourist arrivals plummeted because of negative media coverage of the island's political situation and the high incidence of AIDS among Haitians.

The most fundamental problems of the Haitian economy, however, were economic mismanagement and corruption. More avaricious than his father, Jean-Claude Duvalier overstepped even the traditionally accepted boundaries of Haitian corruption. Duvalierists under Jean-Claude engaged in, among other activities, drug trafficking, pilferage of development and food aid, illegal resale and export of subsidized oil, fraudulent lotteries, export of cadavers and blood plasma, manipulation of government contracts, tampering with pension funds, and skimming of budgeted funds. As a result, the president for life and his wife lived luxuriously, in stark contrast to the absolute poverty of most Haitians. Allegations of official corruption surfaced when Duvalier appointed a former World Bank official, Marc Bazin, to the post of finance minister in 1982. Bazin sought to investigate corruption and to reform fiscal accounting practices in connection with a 1981 International Monetary Fund (IMF) economic stabilization agreement. More zealous than Duvalier had anticipated, Bazin documented case after case of corruption, determined that at least 36 percent of government revenue was embezzled, and declared the country the "most mismanaged in the region." Although quickly replaced, Bazin gave credence to foreign complaints of corruption, such as that contained in a 1982 report by the Canadian government that deemed Duvalier's Haiti a kleptocracy.

After the fall of Duvalier, the provisional National Council of Government (Conseil National de Gouvernement--CNG) enacted numerous policy reforms mandated by structural adjustment lending programs from the IMF and the World Bank. These reforms included the privatization of unprofitable state-owned enterprises, trade liberalization, and export promotion. The CNG, however, never fully implemented the economic reforms because of nagging political instability. At the close of the decade, the economic direction of the military government, led by Lieutenant General Prosper Avril, remained unclear.


Fiscal Policy

Despite irregularities in the allocation of funds under the François Duvalier regime, government revenues traditionally equaled, or surpassed, budget outlays, technically yielding balanced budgets. Jean-Claude Duvalier's unprecedented intervention in the economy in the 1980s, however, broke this tradition. The public sector under Duvalier established, or expanded, its ownership of an international fishing fleet, a flour mill, a cement company, a vegetable-oil processing plant, and two sugar factories. Duvalierist officials based these investment decisions primarily on the amount of personal profit that would accrue to themselves, to Duvalier, and to the rest of his coterie. They ignored the potential negative impact on the economy. Poorly managed, the state's newly acquired enterprises drained fiscal accounts, causing the overall public-sector deficit to reach 10.6 percent of GDP in fiscal year (FY) 1985, despite sharp reductions in spending on already meager social programs in accordance with an IMF stabilization program. In July 1986, the Ministry of Finance, under the CNG, revamped fiscal policies through tax reform, privatization, and revisions of the tariff code. Although the CNG greatly increased spending on health and education, the reform measures served to lower the government's deficit to 7 percent of GDP by FY 1987. General Avril's FY 1989 budget attempted further to curtail deficit spending, but that prospect remained unlikely without stable flows of economic assistance.


The misallocation of public revenues for private use and the low government allocations for economic and social development have contributed directly to Haiti's extreme poverty. After 1986, national budgets included a significantly larger portion for development efforts, but they continued to allocate the largest share--17 percent in FY 1987-88--to the armed forces and internal security forces. About 57 percent of FY 1988 expenditures were for wages and salaries; 26 percent, for goods and services; 10 percent, for interest payments; 4 percent, for extrabudgetary spending; and 3 percent, for transfers and subsidies. Compared with previous budgets in the 1980s, this budget included increased spending on wages and interest payments and decreased spending on goods and services, as well as an allocation for unspecified expenses. The FY 1989 budget continued these fiscal trends. The leading expenditure items in the FY 1989 budget were defense (16.4 percent), debt payments (15.8 percent), education (14.5 percent), health and social services (13.7 percent), and finance, public service, and commerce (12.4 percent). According to some reports, however, discrepancies existed between budget allocations and actual disbursements.


The structure of government revenues changed distinctly as a consequence of the tax and tariff revisions of 1986. Haiti's taxes and tariffs historically exacted revenues from directly productive activities--mainly agriculture--and from international trade. This revenue structure eventually created disincentives for the production of cash crops and other export products, while it stimulated the development of uncompetitive industries. Over time, Haiti's authorities created a public-finance pattern that, when combined with a highly regressive income tax, raised approximately 85 percent of its revenue from the rural population, but spent only about 20 percent on those same taxpayers.

A 10 percent value-added tax was introduced in 1983, but it was not until 1986 that tax and tariff reforms began to shift the source of revenues. New tax laws simplified the income-tax process, altered tax brackets, and strengthened tax-collection efforts. In the area of trade regulations, the new government phased out export taxes and replaced quantitative restrictions on all but five goods with ad valorem tariffs of a maximum of 40 percent, thus essentially lowering import protection and liberalizing trade. As a result of these policies, revenues derived from international trade dropped from 35 percent in FY 1984 to an estimated 22 percent in FY 1989; the revenue balance in both years was derived from internal taxes.

Monetary and Exchange-Rate Policies

The Bank of the Republic of Haiti (Banque de la République d'Haiti--BRH) represented one of the few well-established, public-sector institutions dedicated to economic management. Founded in 1880 as the National Bank of Haiti, the BRH--a commercial bank--did not begin to act as a central bank until 1934, when it became known as the National Republic Bank of Haiti. Since the 1930s, the bank has performed the functions of a central bank, a commercial bank, and a development-finance institution; it also has been involved in other matters, such as the management of the Port-au-Prince wharf. As a central bank, the BRH also issued Haiti's national currency, the gourde.

On August 17, 1979, new banking laws gave the BRH its present name and empowered it with the monetary-management responsibilities associated with most central banks. The BRH subsequently became actively involved in controlling credit, setting interest rates, assessing reserve ratios, and restraining inflation. In the late 1980s, the BRH pursued generally conservative monetary policies, and it employed high cash-reserve ratios in commercial banks as the key policy tool to regulate the money supply. In an effort to increase the dynamism of the economy, the BRH sought to inject more credit into the private sector, particularly for long-term uses.

Since 1919 the Haitian currency has been pegged to the United States currency at the rate of five gourdes to the dollar. Since that same date, the United States dollar has served as legal tender on the island and has circulated freely. Remarkably, the value of Haiti's fixed exchange rate remained strong for decades; it fluctuated only with the movements of the currency of the United States, its main trading partner. Until the 1980s, no black market existed for gourdes, but unusually high inflation and large budget deficits eroded their value and brought premiums of up to 25 percent for black-market transactions in the early 1980s. The black market subsided considerably in the late 1980s, but the gourde's real rate of exchange remained above the 1980 level.

Haiti - LABOR

Haiti's 1989 labor force was estimated at 2.8 million people. The economically active population (those over age ten), however, represented more than half of the country's total 6.1 million population. Forty-two percent of the official work force was female, ranking the country's female participation as one of the highest among developing countries. In rural areas, however, the role of women in production and commerce was apparently much greater than these statistics indicated.

The distribution of the labor force by economic sector from 1950 to 1987 reflected a shift from agriculture to services, with some growth in industry. Despite these changes, agriculture continued to dominate economic activity in the 1980s, employing 66 percent of the labor force; it was followed by services, 24 percent, and industry, 10 percent. Based on these figures, Haiti continued to be the most agrarian, and the least industrial, society in the Western Hemisphere. The country's employment of only 50,000 salaried workers in 1988 was further evidence of the traditional character of the work force.

Statistics on employment and the methodologies used to gather such data varied widely; most unemployment figures were only estimates. In 1987 the United States Department of Labor estimated that Haiti's unemployment rate was 49 percent. Other estimates ranged from 30 to 70 percent. Official unemployment was severe in Port-au-Prince, but comparatively low in rural areas, reflecting urban migration trends, rapid population growth, and the low number of skilled and semi-skilled workers.

Haiti established a labor code in 1961, but revised it in March 1984 to bring legislation more in line with standards set by the International Labour Office (ILO). Conformity with ILO guidelines was a prerequisite for certification under the Caribbean Basin Initiative (CBI--see Appendix B) enacted by the United States Congress in 1983.

Haiti's most fundamental labor law, the minimum wage, was also the most controversial. Low wage rates attracted foreign assembly operations. In 1989 the average minimum wage stood at the equivalent of US$3 a day, with some small variations for different types of assembly work. The minimum wage in the late 1980s was below the 1970 level in real terms, but assembly manufacturers and government officials refused to increase wages because they needed to remain competitive with other Caribbean countries. Labor laws included an array of provisions protecting workers in the areas of overtime, holidays, night-shift work, and sick leave. The government, however, did not universally enforce many of these provisions. The greatest number of workers' complaints came from assembly plants where seasonal layoffs were common.

The organized-labor movement, generally suppressed under the Duvaliers, grew rapidly in the wake of the dynasty's collapse. Three major trade unions dominated organized-labor activity in the 1980s. The newest of these three was the Federation of Union Workers (Féderation des Ouvriers Syndiqués--FOS). Established in 1983 after negotiations over the CBI opened the way for public labor organization, the FOS by 1987 represented forty-four member unions, nineteen of which were registered with the government. Its combined membership in Port-au-Prince and Les Cayes totaled approximately 15,000. Politically moderate, the FOS was affiliated with the American Federation of Labor-Congress of Industrial Organizations (AFL-CIO) and with the International Confederation of Free Trade Unions in Brussels. The oldest union of influence, the Autonomous Federation of Haitian Workers/Federation of Latin American Workers (Centrale Autonome des Travailleurs Haïtiens/Centrale Latino-Américaine des Travailleurs--CATH/CLAT), was affiliated with the Latin American trade-union movement and shared its history of political activism. CATH/CLAT consisted of 150 unions, including 63 that were registered with the government. It professed a membership of 7,000. Haiti's third principal union, the CATH, had splintered from CATH/CLAT in 1980; it had managed to take with it forty-four member unions, all recognized by the state. CATH claimed a membership of 5,000. CATH and CATH/CLAT primarily represented assembly workers. The Ministry of Social Affairs registered only unions and not individual members; this practice allowed unions to exaggerate their membership, which probably amounted to fewer than 5,000 by 1987. By the end of the decade, trade unions had made only small organizational inroads among assembly workers; the role of union activity in that sector was the central point of debate in the organized-labor movement.


Agriculture continued to be the mainstay of the economy in the late 1980s; it employed approximately 66 percent of the labor force and accounted for about 35 percent of GDP and for 24 percent of exports in 1987. The role of agriculture in the economy has declined severely since the 1950s, when the sector employed 80 percent of the labor force, represented 50 percent of GDP, and contributed 90 percent of exports. Many factors have contributed to this decline. Some of the major ones included the continuing fragmentation of landholdings, low levels of agricultural technology, migration out of rural areas, insecure land tenure, a lack of capital investment, high commodity taxes, the low productivity of undernourished farmers, animal and plant diseases, and inadequate infrastructure. Neither the government nor the private sector invested much in rural ventures; in FY 1989 only 5 percent of the national budget went to the Ministry of Agriculture, Natural Resources, and Rural Development (Ministère de l'Agriculture, des Resources Naturelles et du Développement Rural--MARNDR). As Haiti entered the 1990s, however, the main challenge to agriculture was not economic, but ecological. Extreme deforestation, soil erosion, droughts, flooding, and the ravages of other natural disasters had all led to a critical environmental situation.

<>Land Tenure and Land Policy
<>Land Use and Farming Technology
<>Cash Crops
<>Food Crops
<>Livestock and Fishing

Haiti - Land Tenure and Land Policy

After independence from France, Alexandre Pétion (and later Jean-Pierre Boyer) undertook Latin America's first, and perhaps most radical, land reform by subdividing plantations for the use of emancipated slaves. The reform measures were so extensive that by 1842 no plantation was its original size. By the mid-nineteenth century, therefore, Haiti's present-day land structure was largely in place. The basic structures of land tenure remained remarkably stable during the twentieth century, despite steadily increasing pressure for land, the fragmentation of land parcels, and a slight increase in the concentration of ownership.

For historical reasons, Haiti's patterns of land tenure were quite different from those of other countries in Latin America and the Caribbean. Most Haitians owned at least some of their land. Complex forms of tenancy also distinguished Haitian land tenure. Moreover, land owned by peasants often varied in the size and number of plots, the location and topography of the parcels, and other factors.

Scholars have debated issues related to land tenure and agriculture in Haiti because they considered census data unreliable. Other primary data available to them were geographically limited and frequently out of date. The three national censuses of 1950, 1971, and 1982 provided core information on land tenure, but other studies financed by the United States Agency for International Development (AID) supplemented and updated census data. The final tabulations of the 1982 census were still unavailable in late 1989.

The 1971 census revealed that there were 616,700 farms in Haiti, and that an average holding of 1.4 hectares consisted of several plots of less than 1 hectare. Haitians, however, most commonly measured their land by the common standard, a carreau, equal to about 3.3 hectares. The survey concluded that the largest farms made up only 3 percent of the total number of farms and that they comprised less than 20 percent of the total land. It also documented that 60 percent of farmers owned their land, although some lacked official title to it. Twentyeight percent of all farmers rented and sharecropped land. Only a small percentage of farms belonged to cooperatives. The 1950 census, by contrast, had found that 85 percent of farmers owned their land.

Studies in the 1980s indicated a trend toward increased fragmentation of peasant lands, an expanding role for sharecropping and renting, and a growing concentration of higherquality land, particularly in the irrigated plains. As a consequence of high rural population density and deteriorating soils, competition over land appeared to be intensifying. Haiti's land density, that is, the number of people per square kilometer of arable land, jumped from 296 in 1965 to 408 by the mid-1980s-- a density greater than that in India.

The three major forms of land tenancy in Haiti were ownership, renting (or subleasing), and sharecropping. Smallholders typically acquired their land through purchase, inheritance, or a claim of long-term use. Many farmers also rented land temporarily from the state, absentee landlords, local owners, or relatives. In turn, renters frequently subleased some of these lands, particularly parcels owned by the state. Renters generally enjoyed more rights to the land they worked than did sharecroppers. Unlike sharecroppers, however, renters had to pay for land in advance, typically for a period of one year. The prevalence of renting made the land market exceedingly dynamic; even small farmers rented land, depending on the amount of extra income they derived from raising cash crops. Sharecropping, also very common, was usually a shorter-term agreement, perhaps lasting only one growing season. Sharecropper and landowner partnerships were less exploitive than those in many other Latin American countries; in most agreements, farmers gave landowners half the goods they produced on the land.

Other land arrangements included managing land for absentee landlords, squatting, and wage labor. The practice of having an on-site overseer (jéran) manage land for another owner, usually another peasant residing far away, was a variation of sharecropping. Jérans were generally paid in-kind for their custodial services. Overgrazing, or unregulated gardening, was the most common form of squatting, which took place on most kinds of lands, especially state-owned land. A small minority of peasants were landless; they worked as day laborers or leased subsistence plots. In addition, thousands of Haitians migrated seasonally to the Dominican Republic as braceros (temporary laborers) to cut sugarcane under wretched conditions.

Haiti - Land Use and Farming Technology

It is difficult to understand the complex variations in land tenancy without an appreciation of land use and peasant attitudes toward land. More mountainous than Switzerland, Haiti has a limited amount of cultivable land. According to soil surveys by the United States Department of Agriculture in the early 1980s, 11.3 percent of the land was highly suitable for crops, while 31.7 percent was suitable with some restrictions related to erosion, topography, or conservation. The surveys revealed that 2.3 percent was mediocre because of poor drainage, but was acceptable for rice cultivation, and 54.7 percent was appropriate only for tree crops or pastures because of severe erosion or steep slopes. According to estimates of land use in 1978, 42.2 percent of land was under constant or shifting cultivation, 19.2 percent was pasture land, and 38.6 percent was not cultivated.

The use of purchased inputs, such as fertilizers, pesticides, machinery, and irrigation, was rare; farmers in Haiti employed traditional agricultural practices more than did farmers in any other part of the Western Hemisphere. Although Haitian farmers used increased amounts of chemical fertilizers in the 1970s and the 1980s, their use of an average of only seven kilograms per hectare ranked Haiti ahead of Bolivia, only, among Western Hemisphere countries. Peasants applied mostly natural fertilizers, such as manure, mulch, and bat guano. Large landowners consumed most of the country's small amounts of chemical fertilizers, and they benefited from subsidized fertilizers imported from the Dominican Republic and mixed in Port-au-Prince. Five importers controlled the 400,000 kilograms of pesticides that entered the country each year; malariacarrying mosquitoes and rodents in the rice fields were the main targets of pesticide application. Most rural cultivators used small hand tools, such as hoes, machetes, digging sticks, and a local machete-like tool called the serpette. There was an average of one tractor per 1,700 hectares; most farmers considered such machinery inappropriate for use on tiny plots scattered along deeply graded hillsides. The insecurity of land tenure further discouraged the use of capital inputs.

The amount of irrigated crop land in the 1980s, estimated at between 70,000 and 110,00 hectares, was substantially less than the 140,000 hectares of colonial times. Of the nearly 130 irrigation systems in place, many lacked adequate maintenance, were clogged with silt, or provided irregular supplies to their 80,000 users. By the 1980s, the irrigation network had been extended as far as was possible.

The minimal amount of research on agriculture and the limited number of extension officers that MARNDR provided gave little assistance to already low levels of farming technology. Foreign organizations, such as the Inter-American Institute for Cooperation in Agriculture, carried out the most research. Foreign organizations also provided more technical assistance in agriculture than the government.

Peasant attitudes and limited access to credit also helped to explain the traditional nature of farming. Most observers blamed agricultural underdevelopment on peasants' individualistic nature, their proclivity toward superstition, and their unwillingness to innovate. Small farmers also lacked access to credit. Informal credit markets flourished, but credit was not always available at planting time. When credit was available, it was usually provided at usurious rates. The country's major public financial institutions provided loans to the agricultural sector, but this lending benefited less than 10 percent of all farmers. Major credit sources included the Agricultural Credit Bureau, agriculture credit societies, credit unions, cooperatives, and institutions created by nongovernmental organizations.

Haiti - Cash Crops

Despite its relative decline, coffee endured as the leading agricultural export during the 1980s. The French had introduced coffee to Haiti from Martinique in 1726, and soon coffee became an important colonial commodity. Coffee production peaked in 1790, and it declined steadily after independence. Production dropped precipitously during the 1960s. After a boom in prices and in the production of coffee in the late 1970s, output declined again from 42,900 tons in 1980 to 30,088 tons by 1987. Coffee trees covered an estimated 133,000 hectares in the 1980s, with an average annual yield of 35,900 tons. Haiti was a member of the International Coffee Organization (ICO), but found itself increasingly unable to fulfill its ICO export quota, which stood at 300,000 bags, of 60 kilograms each, in 1988. Most analysts believed that excessive taxation and the low prices afforded to peasant farmers had contributed to the decline in coffee production.

Coffee provides one of the best examples of the market orientation of Haiti's peasant economy. Most peasants grew coffee, usually alongside other crops. More than 1 million Haitians participated in the coffee industry as growers, marketers (known as Madame Sarahs), middlemen (spéculateurs), or exporters. The peasants' widespread participation throughout the coffee industry demonstrated that they were not merely subsistence farmers, but that they were also actively engaged in the market economy. After harvest by peasants, female Madame Sarahs transported coffee to local and urban markets and sold the beans. Middlemen, in turn, sold coffee to members of the Coffee Exporters Association (Association des Exportateurs de Café--Asdec), which set prices and thereby passed on the traditionally high coffee-export taxes directly to producers. Because of its prominent role in agriculture and the inequitable nature of the trade, the coffee industry was the subject of numerous studies. The majority of these studies highlighted imperfect competition and the systematic enrichment of a small group of Port-au-Prince exporters.

Sugar was another cash crop with a long history in Haiti. Columbus brought sugarcane to present-day Haiti on his second voyage to Hispaniola, and sugar rapidly became the colony's most important cash crop. After 1804, production never returned to preindependence levels, but sugar production and low-level exports continued. Unlike the system in other Caribbean countries, sugar in Haiti was a cash crop raised by peasants rather than by large-scale plantations. The sugar harvest dipped to under 4 million tons by the early 1970s, but it rebounded to nearly 6 million tons of cane by the middle of the decade with a sharp increase in the world price of the commodity. Lower world prices and structural problems combined to cause a drop in sugar output in the 1980s; by the end of the decade, sugarcane covered fewer than 114,000 hectares of the coastal plains, and it yielded fewer than 4.5 million tons annually.

Further expansion of the sugar industry faced serious deeprooted obstacles. For example, the production cost of Haitian sugar was three times more than the world price in the 1980s. Shifts in the world sugar market, caused mainly by the international substitution of corn-based fructose for sugarcane, exerted further pressure on Haitian producers. One result of this situation was the practice of importing sugar, which was then reexported to the United States under the Haitian sugar quota. Reductions in Haiti's quota during the 1980s, however, limited exchanges of this sort.

Total sugar exports dropped from 19,200 tons in 1980 to 6,500 tons in 1987. In 1981, 1982, and 1988 Haiti exported no sugar. Haiti's four sugar mills closed temporarily on several occasions during the decade. The oldest mill, the Haitian American Sugar Company (HASCO), was the only plant that maintained a large cane plantation. Realizing the dim future for sugar, outside development agencies proposed alternatives to sugar, such as soybeans, for Haiti's plains.

Cacao, sisal, essential oils, and cotton were other significant cash crops. Cacao trees covered an estimated 10,400 hectares in 1987, and they yielded 4,000 tons of cocoa a year. Mennonite missionaries played a growing role in the cocoa industry, mostly around southern departments, especially Grande'Anse. Sisal, exported as a twine since 1927, peaked in the 1950s, as the Korean War demanded much of the nation's 40,000-ton output. By the 1980s, however, Haiti exported an average of only 6,500 tons a year, mainly to the Dominican Republic and Puerto Rico. The substitution of synthetic fibers for sisal reduced most large-scale growing of the plant, but many peasants continued to harvest the natural fiber for its use in hats, shoes, carpets, and handbags. The export of essential oils, derived from vetiver, lime, amyris, and bitter orange, peaked in 1976 at 395 tons. Exports leveled off at a little more than 200 tons during the 1980s, generating an average of US$5 million in foreign exchange. Cotton cultivation peaked in the 1930s, before Mexican boll weevil beetles ravaged the crop. Growers introduced a higher quality of cotton, in the 1960s, which was processed in local cotton gins and then exported to Europe. Cotton prices fell in the 1980s, however, and cotton plantings shrank from 12,400 hectares in 1979 to under 8,000 hectares by 1986. Exports ceased. Government policies in the 1980s emphasized diversification into nontraditional export crops that would benefit under the terms of the CBI; the poor performance of traditional cash crops enhanced the importance of these efforts for the Haitian economy.

Haiti - Food Crops

Food crops fared somewhat better than cash crops in the 1980s, as prices for cash crops dropped, and economic uncertainty increased. Nonetheless, real per capita food production declined, and the country continued to import millions of tons of grains. The trend toward increased production of food crops had negative ecological consequences as the planting and the harvesting of tuber staples accelerated soil erosion. Haiti's peasants were already underfed. It was therefore unlikely that farmers would grow tree crops in place of staples without appropriate incentives.

Peasants cultivated a variety of cereals for food and animal feeds, notably corn, sorghum, and rice. Corn, also referred to as maize, was the leading food crop; it was sown on more hectares-- 220,000 in 1987--than any other crop. Farmers in southern departments grew corn separately, but elsewhere they mixed it with other crops, mostly legumes. Total production averaged approximately 185,000 tons during the 1980s; yields increased in some areas. Drought-resistant sorghum often replaced corn during the second growing season as the leading crop, but total hectares planted and total production averaged only 156,250 and 125,000 tons, respectively. Rice became an increasingly common cereal, beginning in the 1960s, when increased irrigation of the Artibonite Valley aided larger-scale farming. Rice production, however, fluctuated considerably, and it remained dependent on government subsidies. An estimated 60,000 hectares of rice yielded an average of 123,000 tons, from 1980 to 1987.

Tubers were also cultivated as food. Sweet potatoes, one of the nation's largest crops, grew on an estimated 100,000 hectares, and they yielded 260,000 tons of produce a year in the 1980s. Manioc, or cassava, another major tuber, was mix-cropped on upwards of 60,000 hectares to produce between 150,000 and 260,000 tons a year, much of which was for direct consumption. The cultivation of yams, limited by the lack of deep moist soils, took up only 26,000 hectares. The tropical Pacific tuber taro, called malangá in Haiti, grew with other tubers on more than 27,000 hectares.

Haitians also cultivated dozens of other food crops. Red, black, and other kinds of beans were very popular; they provided the main source of protein in the diet of millions. As many as 129,000 hectares provided 67,000 tons of beans in 1987. Banana and plantain trees were also common and provided as much as 500,000 tons of produce, almost entirely for domestic consumption. Although the flimsy trees were vulnerable to hurricanes and to droughts, rapid replanting helped sustain the crop. Mangoes, another tree crop, were a daily source of food, and they provided some exports. Other food crops included citrus fruit, avocados, pineapples, watermelons, almonds, coconut, okra, peanuts, tomatoes, breadfruit, and mamey (tropical apricot). In addition, Haitians grew a wide variety of spices for food, medicine, and other purposes, including thyme, anise, marjoram, absinthe, oregano, black pepper, cinnamon, cloves, nutmeg, garlic, and horseradish.

Haiti - Forestry

Nothing better symbolized the vicious cycle of poverty in Haiti than the process of deforestation. Haiti was once a lush tropical island, replete with pines and broad leaf trees; however, by 1988 only about 2 percent of the country had tree cover.

The most direct effect of deforestation was soil erosion. In turn, soil erosion lowered the productivity of the land, worsened droughts, and eventually led to desertification, all of which increased the pressure on the remaining land and trees. The United Nations Food and Agriculture Organization estimated that this cycle destroyed 6,000 hectares of arable land a year in the 1980s. Analysts calculated that, at the rate of deforestation prevailing in the late 1980s, the country's tree cover would be completely depleted by 2008.

Deforestation accelerated after Hurricane Hazel downed trees throughout the island in 1954. Beginning in about 1954, concessionaires stepped up their logging operations, in response to Port-au-Prince's intensified demand for charcoal, thus accelerating deforestation, which had already become a problem because of environmentally unsound agricultural practices, rapid population growth, and increased competition over scarce land.

Most of Haiti's governments paid only lip service to the imperative of reforestation. As was the case in other areas of Haitian life, the main impetus to act came from abroad. AID's Agroforestry Outreach Program, Projè Pyebwa, was the country's major reforestation program in the 1980s. Peasants planted more than 25 million trees under Projè Pyebwa, but as many as seven trees were cut for each new tree planted. Later efforts to save Haiti's trees--and thus its ecosystem--focused on intensifying reforestation programs, reducing waste in charcoal production, introducing more wood-efficient stoves, and importing wood under AID's Food for Peace program.

Haiti - Livestock and Fishing

Most peasants possessed a few farm animals, usually goats, pigs, chickens, and cattle. Few holdings, however, were large, and few peasants raised only livestock. Many farm animals, serving as a kind of savings account, were sold or were slaughtered to pay for marriages, medical emergencies, schooling, seeds for crops, or a voodoo ceremony.

From the perspective of rural peasants, perhaps the most important event to occur in Haiti during the 1980s was the slaughter of the nation's pig stock, which had become infected with the highly contagious African Swine Fever (ASF) in the late 1970s. Having spread from Spain to the Dominican Republic and then to Haiti via the Artibonite River, ASF infected approximately one-third of the nation's pigs from 1978 to 1982. Farmers slaughtered their infected animals. Fear of further infection persuaded peasants to slaughter another one-third in panic sales. A government eradication program virtually wiped out what remained of the 1.2-million pig population by 1982.

At the grassroots level, the government's eradication and repopulation programs became highly controversial. Farmers complained that they were not fairly compensated for--or not paid at all for--their slaughtered livestock and that the sentinel breed of pigs imported from the United States to replace the hardy creole pigs was inappropriate for the Haitian environment and economy. Nonetheless, repopulation of the nation's pigs with both sentinel and Jamaican creole pigs augmented the national stock from an official figure of zero in 1982 to about 500,000 by 1989. Many analysts noted, however, that ASF and the pig slaughter had further impoverished already struggling peasants. The disaster forced many children to quit school. Small farmers mortgaged their land; others cut down trees for cash income from charcoal. The loss of the creole pigs to ASF undoubtedly increased the hardships of the rural population, and it may well have fueled to some degree the popular revolt that forced JeanClaude Duvalier from power.

Goats were one of the most plentiful farm animals in Haiti. Like the creole pigs, they were well adapted to the rugged terrain and sparse vegetation. Approximately 54 percent of all farmers owned goats; the total had climbed from 400,000 in 1981 to more than 1 million by the late 1980s. Peasants owned the majority of the country's estimated 1 million head of cattle in 1987; about 48 percent of the farmers owned at least one head of cattle. Until 1985 the primary export market for beef cattle was the American baby food industry. Farmers raised sheep in some areas, but these animals were not particularly well adapted to the country's climate. Chickens, ducks, turkeys, and guinea hens were raised throughout Haiti under little supervision, although one medium-sized hatchery raised chickens for domestic consumption. After the swine-fever epidemic and the subsequent slaughter of pigs, chicken replaced pork as the most widely consumed meat in the Haitian diet.

About 11,000 Haitians fished the nation's 1,500-kilometer coastline on a full-time or part-time basis, netting an average annual catch of 5,000 tons. The country imported an additional 12,000 tons a year of fish products to satisfy domestic demand. The island's coastal waters suffered from low productivity, and few fisherman ventured far from shore. Nevertheless, Haiti managed to export about US$4 million worth of lobster, conch, and other shellfish in the 1980s. Some minor aquaculture also existed.



Manufacturing was the most dynamic sector of the economy in the 1980s. Growth in this sector had averaged more than 10 percent a year during the 1970s; manufactures replaced agricultural commodities as the country's leading export goods during this decade. In 1988 manufacturing accounted for 17 percent of GDP and for 53 percent of exports; it employed about 6 percent of the labor force. In addition to the dynamic assembly subsector, which experienced 22 percent real annual growth in the 1970s, included small-scale local manufacturing enterprises and large-scale, state-owned organizations.

The manufacturing sector in the late 1980s comprised 500 enterprises, most of which were small or medium in size and family-owned. Their major products included processed foods, electrical equipment, textiles, and clothing. Small enterprises, employing up to 50 workers, represented 57 percent of all manufacturing firms, but they employed only 10 percent of the industrial labor force. Medium enterprises, with 51 to 300 workers, accounted for 35 percent of the sector's firms and employed 44 percent of the industrial labor force. Large enterprises, those with more than 300 employees, constituted only 8 percent of the companies, but they employed 43 percent of all manufacturing workers, mostly in large assembly factories in the industrial parks of Port-au-Prince.

<>Assembly Manufacturing
<>Domestic Manufacturing

Haiti - Assembly Manufacturing

The development of assembly manufacturing in Haiti was an outgrowth of the island's cheap labor, its proximity to the United States market, the increasing multinational nature of modern firms, and changes in the United States Tariff Code, which in 1962 began to exact duties only on the value-added of products assembled overseas. Assembly operations--typical examples included the sewing of garments, the stuffing of toys, or the stringing of baseballs--grew modestly in the depressed economic climate of the 1960s, but they accelerated rapidly in the early 1970s in response to new fiscal incentives enacted by the government. The warming of Haitian-United States relations after 1973 encouraged foreign investment. The number of assembly enterprises swelled from only 13 companies in 1966 to 67 by 1973 and then to 127 by 1978. When the subsector peaked in 1980, an estimated 200 assembly firms employed nearly 60,000 workers. Political instability, increased regional competition under the CBI, nascent union activity, and the failure of government institutions to attract further investment all contributed to a decline in assembly investment and employment after 1986. In 1989 approximately 150 assembly companies employed only 41,000 workers, more than three-quarters of them women. Assembly exports continued to expand, however, as a result of increased productivity on the part of assembly exporters.

Despite the low wages paid to workers, future growth in the assembly subsector was uncertain. Numerous constraints to growth included the highest utility costs in the Caribbean, excessive shipping and warehousing costs, underdeveloped infrastructure, a largely illiterate work force, scarce managerial personnel, foreign-exchange shortages, expensive or inferior-quality local inputs, political instability, and the personalized nature of business activity. Some United States officials predicted in the 1980s that Haiti would progress to become the "Taiwan of the Caribbean." The implementation of the CBI, however, appeared to hurt Haiti's position in assembly production, as other countries, such as the Dominican Republic, Jamaica, and Costa Rica, began to capitalize more effectively on the advantages of the initiative. In the mid-1980s, more than 40 percent of all assembly operations were owned by Haitians. The other operations were either owned by firms based in the United States or jointly owned by Haitian and United States interests. Asian investment in the country continued to grow.

Four industrial parks catered to the assembly industry; two were run by the government's National Industrial Park Company (Société Nationale des Parcs Industriels--Sonapi) and two by a private company. Most firms operated with short-term subcontracting arrangements under which Haitian factories filled requests of American companies that provided partial products, inputs, and machinery. Workers earned piece-work wages, with a guaranteed minimum wage of US$3 a day in 1989, and most made slightly more than that amount. These workers were among the best paid in Haiti, but most of them supported an average of four people on their wages.

The major products assembled in Haiti were garments, electronics, baseballs, games, sporting goods, toys, footwear, and leather products. The largest assembly activity in the late 1980s produced garments. The fastest-growing activity produced electronics; it included subcontracting work for the United States Department of Defense. One of the island's major baseball producers, MacGregor Sporting Goods, decided in 1988 to move its baseball-sewing operations to Mexico, however; and, as a result of the deteriorating political situation in Haiti, other assembly companies decided to fill their orders at the Free Zone of San Isidro, Dominican Republic.

Many Haitians were eager to find jobs in the assembly sector, but some criticized the effects of the industry on workers and on the economy. For example, unions complained that new employees earned only 60 percent of the minimum wage for their first few months and that short-term contracts and seasonal demand led to job instability and the annual dismissal of as many as 5,000 workers with no compensation. Some economists noted that, although assembly operations provided badly needed urban jobs, these operations industries forged few linkages with the rest of the economy. A few local plants utilized domestically produced glue, thread, sisal, and textiles, but the overwhelming share of producers opted for imported inputs, which were generally cheaper, of better quality, and more plentiful. Finally, others disapproved of the generous tax holidays and the duty-free imports that both domestic and foreign manufacturers enjoyed.

Haiti - Domestic Manufacturing

Attempts at import-substitution manufacturing gave most local factories generous import protection from the 1970s to the mid-1980s, thereby insulating them from foreign competition. Industries of this kind produced paper, matches, cardboard, footwear, leather, food products, beverages, rubber, plastics, metals, building materials, textiles, cigarettes, soap, beer, and other basic goods. Most local factories were small or medium in size. Some very small producers demonstrated incredible ingenuity in transforming virtual junk into usable goods, but the limited domestic market and the weak purchasing power of most Haitians severely limited economies of scale, forcing most enterprises to function inefficiently and below capacity. A handful of local manufacturers, who produced rum, paints, essential oils, leather, and handicrafts, were able to expand their businesses through exports. Haitian rum was of exceptional quality, as were the country's handicrafts. Nongovernmental organizations were particularly active in marketing handicrafts in the United States and Europe.

In 1986 the CNG enacted broad import-liberalization policies and abolished long-standing import protection, forcing local producers to compete internationally. As a consequence, domestic manufacturing, already hampered by competition with lower-priced goods smuggled into Haiti from the Dominican Republic, experienced a painful transition in the late 1980s. Many manufacturers closed their doors.

The other major manufacturing subsector was large-scale production by state-owned enterprises of items such as vegetable oils, sugar, flour, and cement. From 1980 to 1985, the government either built, or bought, a majority share in five of the country's largest manufacturing companies. As the losses of these inefficient parastatals mounted, reaching more than 4 percent of GDP from 1982 to 1985, international lenders increasingly pressured the government to divest its interests in these ventures, a process that began after 1986.

Haiti - Construction

After a meager annual growth rate of 1.8 percent a year in the 1960s, construction boomed in the 1970s, expanding nearly 14 percent a year, faster than any other sector except assembly manufacturing. From the 1970s onward, the construction industry had concentrated on infrastructure developments, industrial structures related to the assembly subsector, and extravagant residential housing in Port-au-Prince and its exclusive suburb, Pétionville. The growing demand for construction caused cement output to increase from 150,000 tons a year in 1975 to 220,000 tons a year by 1985. Growth was positive, but uneven, in the 1980s, mainly as a result of political and economic turmoil. The construction industry generally failed to benefit Haiti's poor, who continued to build their own dwellings with a mixture of raw materials, mostly wood and palm thatch in rural areas and corrugated metal, cardboard, or wood in urban shantytowns.

Haiti - Mining

Endowed with few commercially valuable natural resources, Haiti maintained only a small mining sector in the late 1980s; mining accounted for less than 1 percent of GDP, and it employed less than 1 percent of the labor force. The country's only bauxite mine, the Miragoâne mine in the southern peninsula, produced an average of 500,000 tons of bauxite a year in the early 1980s; however, in 1982 the declining metal content of the ore, high production costs, and the oversupplied international bauxite market forced the mine to close. Bauxite had at one time been the country's second leading export. Copper also was mined, beginning in the 1960s, but production of the ore was sporadic.

Haiti contained relatively small amounts of gold, silver, antimony, tin, lignite, sulphur, coal, nickel, gypsum, limestone, manganese, marble, iron, tungsten, salt, clay, and various building stones. Mining activity in the late 1980s focused on raw materials for the construction industry. The government announced the discovery of new gold deposits in the northern peninsula in 1985, but long-standing plans for gold production proceeded slowly. With funding from the Inter-American Development Bank (IDB), the government planned to perform its first comprehensive geological survey in the late 1980s.

Haiti - Energy

Haiti had limited energy resources in the late 1980s. The country had no petroleum resources, little hydroelectricity potential, and rapidly diminishing supplies of wood fuels. Wood accounted for 75 percent of the nation's energy consumption. Petroleum accounted for 15 percent; bagasse (sugarcane residue), for 5 percent; and hydroelectric power, for 5 percent. Energy consumption was paltry, even for a low-income country. Haiti's per capita energy use in 1985 was equivalent to that in Bangladesh and about seventeen times less than that of neighboring Jamaica. Having virtually no access to electricity, Haiti's poor depended on the felling of trees for the production of charcoal. Similarly, many rural and provincial small businesses used wood as a fuel in powering their operations.

Beginning in the late 1940s, various international oil companies had unsuccessfully explored for oil in Haiti's Artibonite Basin and Cul-de-Sac Basin. The prospects for drilling deeper wells or attempting even higher-risk offshore exploration were not promising. Oil imports, mainly from the Netherlands Antilles and Trinidad and Tobago, amounted to about 15 percent of total imports.

Electricity consumption increased sixfold between 1970 and 1987, but only 10 percent of the population had access to electricity by 1986. About 45 percent of the residents of Portau -Prince had access to electricity--a reflection of the concentration of national economic efforts and resources in the capital--while a mere 3 percent of those outside the capital enjoyed similar access.

Installed electricity capacity in the late 1980s was estimated at 147 megawatts (MW), and it was expected to increase to 190 MW by the late 1990s. The National Electricity Company (Electricité d'Haiti--EdH), created in 1971 to control the newly built Péligre hydroelectric plant, operated the nation's power system in the late 1980s. As was true of other enterprises throughout the economy, the president was the nominal head of EdH. The company administered the 47-MW Péligre hydroelectric plant, the 22-MW Guayamouc hydroelectric plant, a series of smaller hydroelectric plants, two large thermo-electric operations (42-MW Varreux and 38-MW Carrefour), small generators, and the distribution system. The national system, however, was highly disjointed; no power links extended from the capital to provincial cities. Supplies of imported petroleum used in thermal plants fluctuated because of foreign-exchange shortages, and dryseason water shortfalls hampered production at hydroelectric dams. EdH's generation was unreliable. Under these conditions, rationing of electricity was common in the 1980s, and most larger businesses maintained back-up generators. EdH, which had suffered financial problems in the 1970s, charged the highest electricity rates in the Caribbean in the 1980s. Many people illegally tapped into power lines, and by the late 1980s, as many as one in four urban residents reportedly engaged in this practice. International development agencies had explored alternative sources of energy, such as wind power, solar power, methanol production from sorghum, and power generation from organic waste, but none appeared to be immediately feasible.


Banking and Financial Services

Banking and financial services expanded by almost 10 percent a year during the 1970s, in the wake of the growth of assembly manufacturing, construction, and tourism. By the 1980s, however, the country's financial institutions suffered from negative growth as a result of political instability and the consequently insecure investment climate. In the late 1980s, banking and related services accounted for 10 percent of GDP, and they employed about 4 percent of the labor force.

Nine commercial banks--five Haitian and four foreign-- constituted the heart of the financial system. In 1989 the five local banks were the Haitian Popular Bank (Banque Populaire Haïtienne), Union Bank of Haiti (Banque de l'Union d'Haiti), Industrial and Commercial Bank of Haiti (Banque Industrielle et Commerciale d'Haiti), Commercial Bank of Haiti (Banque Commerciale d'Haiti), and the Haitian General Banking Society (Société Générale Haïtienne de Banque--Sogebank). Sogebank expanded its holdings in 1986 to encompass the two branches of the Royal Bank of Canada, previously the oldest and largest foreign-owned bank in Haiti. Of the four foreign-owned banks, two were based in the United States (Citibank and the Bank of Boston), one in Canada (the Bank of Nova Scotia), and one in France (Banque Nationale de Paris). Haiti considered the United States dollar legal tender, but the government prohibited foreign banks from maintaining foreign-currency accounts. Seventy-five percent of all commercial credit went to manufacturing and commerce; only 3 percent went to agriculture. Excessive collateral requirements, high interest rates, and a proclivity toward short-term financing diminished the role of commercial banks in stimulating output, especially among small producers.

Five development-finance institutions--both public and private--helped to offset deficiencies in commercial-bank financing. The main lenders for agriculture were the Agricultural Credit Bank (Bureau de Crédit Agricole--BCA) and the National Agricultural and Industrial Development Bank (Banque Nationale de Développement Agricole et Industriel--BNDAI). BCA provided shortterm credit to nearly 20,000 small-scale farmers for the purchase of inputs and tools. Established in 1951, BNDAI lent to all categories of farmers, but it provided mostly short-term financing to larger, more capital-intensive producers, particularly those cultivating irrigated rice. BNDAI also lent to industrial enterprises, generally on a long-term basis. Private and public funds helped to set up the Industrial Development Fund (Fonds de Développement Industriel--FDI) and the Haitian Financial Development Society (Société Financière Haïtienne de Développement--Sofihdes) in the 1980s. FDI, founded in 1981 to aid firms with ownership that was at least 51-percent Haitian, offered no direct lending to industry, but it assisted existing companies or new ventures in acquiring credit, supplied guarantees on new loans, and provided technical assistance. Sofihdes, established in 1983 with funds from the CBI, AID, and the Haitian private sector, supplied credit with extended repayment schedules to manufacturing firms and agribusinesses ineligible for commercial bank loans. A fifth development-finance institution was the Mortgage Bank (Banque de Crédit Immobilier-- BCI). Established in 1986 with 98 percent private capital, the BCI provided loans of up to US$100,000 for the housing industry, and it offered technical assistance and special loans for some low-income workers.

Other financial institutions included insurance companies, credit unions, finance institutions for the informal sector, and an extensive underground credit system. Several dozen companies wrote insurance policies in Haiti in the 1980s, but only a few were locally owned. Credit unions, established in the 1940s, mobilized savings primarily for agricultural cooperatives. The Haitian Development Foundation and the Haitian Fund for Assistance to Women were instrumental in the late 1980s in lending to small businesses that could not obtain commercial bank credit. There was no Haitian stock exchange.


Haiti - Tourism

A new international airport in 1965 and improved relations with the United States helped Haiti's tourism industry to flourish in the 1970s. Tourist arrivals (139,000 by air and 163,000 by sea) peaked in 1980, and net expenditures on tourism (US$44 million) reached their highest level in 1981 before a series of events made Haiti unpopular among tourists. One of these events was publicity surrounding Haiti as a possible origin of acquired immune deficiency syndrome (AIDS) and the high number of AIDS cases among Haitians. The former allegation proved false, but the portrait lingered, along with television images of political violence, dire poverty, "boat people," and general instability.

For the tourists who ventured to the "land of mountains," Haiti held a number of attractions: exotic culture, exquisite French cuisine, distinctive and colorful art and handicrafts, castles, hotels, and a resort setting virtually free of street crime. Its warm climate, friendly people, and low prices were further attractions. In the late 1980s, North Americans, especially people from the United States, continued to account for more than three-quarters of all visitors. Large numbers of Haitian emigrés also visited the country after the fall of JeanClaude Duvalier. The declining number of tourists in general forced many hotels to close, however, and the total number of rooms registered in the industry dropped from 3,000 in 1981 to 1,500 in 1987. In contrast, the number of hotel rooms in the neighboring Dominican Republic quadrupled over the same time period. Haiti's tourist industry tended to be an enclave economic activity, distinguished by all-inclusive, self-contained beach resorts and brief cruise ship dockings in Cap Haïtien or Port-au- Prince. Prospects for reviving tourism dimmed in the late 1980s, when the Haitian government closed its tourist-promotion office in New York City.


Throughout Haiti's history, foreign trade has played a major economic role. Trade provided crucial foreign exchange for Haiti, but the structure of trade and government policies resulted in falling incomes and poorly distributed wealth. In the mid-1980s, about twenty families dominated the importation of basic consumer items. Traditionally, government import-licensing schemes and tariff policies supported import monopolies, a major cause of prevailing high consumer prices. This same structure also permitted the plentiful importation of luxury items at relatively low tariffs. A small group of businessmen also controlled exports, particularly coffee, and its members generally favored commerce over more productive investment. The effects of major trade reforms enacted in 1986 remained to be seen in the late 1980s.

Officially, imports in 1987 reached US$307.7 million, the second lowest level of the decade (after the 1986 level of US$303.2 million). An export level of only US$198.4 million in 1987 created a trade deficit of US$110 million. Not reflected in these data, however, were sizable amounts of contraband. The structure of the country's imports changed little during the 1980s. Foodstuffs continued to account for the greatest share (19 percent) of imports in 1987, followed by machinery and transport equipment (17 percent), manufacturing (16 percent), petroleum (13 percent), chemicals (10 percent), edible oils (10 percent), and other categories (15 percent). The United States was the leading exporter to Haiti, supplying 64 percent of all goods and services in 1987.

In July 1986, the National Council of Government (Conseil National de Gouvernement--CNG) swiftly introduced importliberalization policies that eliminated all quantitative restrictions on import items, with the exception of seven (later amended to five) basic consumer goods. Ad valorem tariffs replaced import quotas; this reform also lowered other tariffs significantly. At the same time, authorities began a complete revision of the Tariff Code that resulted in markedly lower overall protection by the end of 1986. In addition, the government revoked the tariff subsidies enjoyed by state-owned enterprises. Additional trade reform streamlined complex importlicensing schemes, which often favored traditional merchants. The government also attempted to expedite customs procedures, something the private sector had long advocated. Import policies, however, conspicuously lacked a serious and comprehensive policy to halt widespread smuggling.

Exports generally increased during the 1980s, but political instability started to weaken export performance toward the end of the decade. The structure of exports changed dramatically as the result of the long decline in agriculture, the termination of bauxite mining, and the implementation of the CBI. In 1987 manufacturing contributed 53 percent of total exports, followed by coffee (18 percent), handicrafts (14 percent), essential oils (2 percent), cocoa (2 percent), and other goods (11 percent). Agriculture, which accounted for 52 percent of exports in 1980, contributed only 24 percent by 1987; exports of traditional commodities, such as sugar, sisal, and meat, either declined to insignificant levels or ceased altogether. Haiti exported goods mostly to the United States, the destination of 84 percent of the country's overseas sales in 1987. France and Italy, the main purchasers of Haiti's coffee, accounted for 3 percent and 4 percent, respectively, of 1987 exports. The balance of exports went to the Dominican Republic (2 percent) and other West European and Latin American countries (7 percent).

Trade policy in the late 1980s strongly favored export promotion within the framework of the CBI, the expansion of assembly manufacturing, and the maintenance of the country's export competitiveness. In an effort to generate more exports, the Duvalier government solicited increased foreign investment through revisions in the foreign investment code during 1985. With funding from AID, the private sector in February 1987 established an export-promotion office to spearhead new investment and to recoup the momentum of exports that had been lost to political upheaval. Other economic reforms, such as budget cuts that helped to maintain the value of the gourde, maintenance of low minimum wages, and trade liberalization, were intended to stimulate investment and exports. The duty-free entry of additional Haitian goods into the United States under the CBI favored the overall growth in exports. In a bid to revitalize traditional exports, the government in 1986 also eliminated longstanding export taxes on coffee, cocoa, sisal, and other items. Haiti had applied for membership in the free-trade association, the Caribbean Community and Common Market (Caricom), in the early 1970s, but it had not been accepted as of 1989.

CITATION: Federal Research Division of the
Library of Congress. The Country Studies Series. Published 1988-1999.

Please note: This text comes from the Country Studies Program, formerly the Army Area Handbook Program. The Country Studies Series presents a description and analysis of the historical setting and the social, economic, political, and national security systems and institutions of countries throughout the world.

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