Economy of Haiti

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Economy of Haiti
Currency	1 Haitian Gourde (HTG)
Fiscal year	1 October – 30 September
Trade organisations	CARICOM and WTO
Statistics [1]
GDP ranking	128th by volume (at PPP) (2005); 159th by per capita (at PPP) (2005)
GDP (PPP)	$12.05 billion (2004 est.)
GDP growth	-3.5% (2004 est.)
GDP per capita	$1,500 (2004 est.)
GDP by sector	agriculture (30%), industry (20%), services (50%) (2004 est.)
Inflation	22% (2004 est.)
Pop below poverty line	80% (2003 est.)
Labour force	3.6 million
Labour force by occupation	agriculture (66%), industry (9%), services (25%)
Unemployment	widespread unemployment and underemployment; more than two-thirds of the labor force do not have formal jobs (2002 est.)
Main industries	sugar refining, flour milling, textiles, cement, light assembly, industries based on imported parts
Trading Partners [2]
Exports	$338.1 million f.o.b. (2004 est.)
Main partners	U.S. 81.8%, Dominican Republic 7.2%, Canada 4.2% (2004)
Imports	$1.085 billion f.o.b. (2004 est.)
Main Partners	U.S. 52.9%, Dominican Republic 6%, Japan 2.9% (2004)
Public finances [3]
Public debt	N/A
External debt	$1.4 billion (2006 est.)
Revenues	$330.2 million (2004 est.)
Expenses	$529.6 million, including capital expenditures of NA (2004 est.)
Economic aid	$150 million (FY04 est.)
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1 Economic Overview
2 U.S. Economic and Development Assistance
3 Agriculture
- 3.1 Coffee
4 Labor Force
5 See also
6 Reference
7 External links

[edit] Economic Overview

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 and one of the poorest in the world. Comparative social and economic indicators show Haiti falling behind other low-income developing countries (particularly in the hemisphere) since the 1980's. 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.

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) applies to most workers in the formal sector.

Haiti is a third world country where nearly 70% of the populace depends mainly on agriculture, which employs 68% of the labor force.

[edit] U.S. Economic and Development Assistance

Political insecurity and the failure of Haiti's governments to invest in developing the country's natural and human resources contribute significantly to the country's current state of underdevelopment. U.S. efforts to strengthen democracy and to rebuild Haiti's economy aim to rectify this condition. The U.S. has been Haiti's largest donor since 1973. Between FY 95 and FY 99, the U.S. has contributed roughly $884 million in assistance to Haiti. These funds have been used to support programs that have addressed a variety of problems. Among the initiatives funds have supported are:

Food assistance programs that include a school lunch program that feeds around 500,000 children daily.
Agricultural development programs that have endeavored to revitalize Haiti's coffee sector and to help thousands of Haitian farmers adopt sustainable agricultural practices and protect the environment.
Teacher training programs that have included 6,000 educators at the primary and secondary level.
Population programs that have expanded modern family-planning practices in many rural areas.
Health care programs that have supported child immunization and have helped provide primary care to nearly half of the Haitian population.

In addition to financial support, the U.S. provides human resources. U.S. Peace Corps volunteers returned to Haiti in 1995, largely focusing their efforts on income generation programs in Haiti's rural areas. Many private U.S. citizens travel regularly to Haiti or reside there for extended periods to work in humanitarian projects.

Haiti has been plagued for decades by extremely high unemployment and underemployment. The precipitous decline in urban assembly sector jobs, from a high of 80,000 in 1986 to fewer than 17,000 in 1994, exacerbated the scarcity of jobs. To revitalize the economy, U.S. assistance has attempted to create opportunities for stable, sustainable employment for the growing population, particularly those who comprise the country's vast informal economy. A post-intervention transitional program of short-term job creation, principally in small towns and rural areas, provided employment to as many as 50,000 workers per day throughout the country. More recently, programs that help to increase commercial bank lending to small- and medium-scale entrepreneurs, especially in the agricultural sector, have helped to create jobs and foster economic growth.

Additional U.S. efforts in economic revitalization include the establishment of the U.S.-Haiti Business Development Council, an Overseas Private Investment Corporation commercial loan program, and inclusion of Haiti within the Caribbean Basin Initiative. These efforts all provide greater market opportunities for American and Haitian businesses. Current Congressional prohibitions on providing assistance to or through the Haitian Government has accelerated the move to private voluntary agencies as contractors to oversee use of U.S. aid funds.

[edit] Agriculture

Agriculture occupies the dominate position in Haiti's economy. However, migration to the cities has changed much of this since the 1950's. As of the late 80's, agriculture occupied about 35% of the GDP (2), though the continued migration to the cities, as well as poor technology and undernourished farmers probably has dropped agriculture's role in the economy since that time. In 2001 production of agricultural products contracted by 5% (4). The cash crops of Haiti include coffee, mangoes, sugarcane, rice, corn, sorghum, wood (1).

[edit] Coffee

As in many other Latin American nations, Coffee was long the the primary agricultural export and cash crop. However, lower prices for coffee worldwide have made it unprofitable for small farmers, and in 2001, coffee stopped being the main export (3). As a result of the price drop, many Haitians have chosen to take advantage of the Fair Trade movement in selling their export. Other than the drop in price, other factors have contributed to the decline in coffee production, such as poor road conditions leading from the isolated areas in which coffee is grown in Haiti (5). Political instability and national debt have allowed many, previously only rock roads, deteriorate until now the farmers are having trouble getting the crop to Port-au-Prince to sell. In addition in the early 90's a fungal disease known as coffee rust ravaged the crop throughout the country.

[edit] 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 controversy over the 2000 elections or the 2004 rebellion, though it is widely believed that unemployment has risen since then. gross