Thursday, June 20, 2024

Haiti: No sweat


This is an edited version of a longer article by Haiti Support Group, which can be viewed in the original here

Bill and Hillary Clinton hyperbole aside, even its leading cheerleaders never actually expected much of the Caracol Industrial Park (CIP) assembly plant complex, the flagship development project of post-earthquake reconstruction in Haiti. Acknowledged as a huge risk for Haiti and the foreign tax-payers who subsidized it, promoted as a job-creation machine that would pay only poverty wages, admitted to be a capital cost rather than tax benefit to the Haitian government on whom it was foisted, the only justification was, in one frank foreign financier’s words, that it was “better than nothing.”

Now even that seems an exaggeration.Nearly 18 months after production began, fewer than 2,000 of the 65,000 less-than-minimum-wage jobs promised have been delivered. The port on which the project depends may never be built, and the farming families who were displaced from some of themost fertile land in Haiti to build it have yet to be relocated.

Local food markets remain depleted, workers’ housing lies unoccupied, and the few that are employed behind its huge metal gatesare being ripped off by systematic wage theft . Welcome to Caracol Industrial Park, as the roadside billboards proclaim. Welcome to the best example yet of the fatally-flawed development model that has singularly failed Haiti for more than 40 years.

Caracol Industrial Plant. Photo: Joris WilliamsThe state of the staggeringly expensive $424m CIP reflects that of the assembly-plant sector as a whole – even as measured by the highly selective criteria of those who continue to promote the industry as the main solution to Haiti’s problems. The empirical evidence, as recorded by those promoters’ main agents, the World Bank, IDB and USAID, is now indisputable.

By all their preferred yardsticks –wage growth, ancillary business development, technology and skills transfer – assembly-plant production in Haiti has failed. Today, the real wages of the 28,591 people working in the 24 assembly plants located in the country are lower than at any time in the past 40 years. Private domestic industry, in particular, which was supposed to benefit from assembly-plant investment – construction, transportation, engineering, services – is weaker and less diverse in Haiti than it was thirty years ago.

The CIP had to be designed, built and is now maintained by foreigners, demonstrating perfectly why the number of Haitians who have acquired  transferable skills from the industry is so negligible. Even the sector itself has stubbornly refused to diversify as anticipated. Haiti’s assembly plants cut and stitch material for underwear, sportswear and sleepwear, making and shipping the lowest value products, on the lowest rung of the assembly plant ladder, textiles.

This may benefit foreign investors and consumers in terms of price per unit. It certainly does not profit Haitian workers in terms of wages or skills or their government in terms of taxes or revenue. All this is the inevitable consequence of a business model whereby all the raw materials are shipped into Haiti, duty-free, and shipped out into the US market on the same terms – zero tariffs. The other duty-free assembly plant complexes that the CIP has now joined in Haiti are physical, economic and social enclaves whose only domestic input from their hinterland – all too often slums – is the workforce.

 From Disaster to Disaster

The CIP’s desultory results to date reflect its inception – post-earthquake “reconstruction” in a region with no earthquake damage. In December 2010, 11 months afterone of the world’s deadliest natural disasters, in and around the capital, Port-au-Prince, donors pushed through a $174m investment by USAID and the IDB, at a 250-hectare site more than 100 miles to the north-east. While more than a million people continued to live on the streets, rubble remained piled up on every corner, publicly-funded house building had not even begun and hundreds of Haitians, lacking access to the most basic sanitation or clean water, were dying of cholera introduced by UN troops, yet another assembly-plant complex, bigger than anything to date, was deemed the priority.

First, at least 366 extended farming families, probably as many as 3,250 people, were dispossessed of their land at the site, with absolutely no advance notice, let alone consultation. The alternative land they were eventually promised as their plight became known has still yet to materialize.

The CIP site was chosen before the full environmental, hydrological and topographical reports required by IDB procedures were done. Indeed, the rectangular shaped tract, bounded by the village of Fleury to the west and the hamlet of Volant to the East, was described by the IDB-contracted consultants, Koios Associates, in an initial study as “devoid of habitation and intensive cultivation.”

The absence of a basic environmental impact study meant that even the US Treasury, Washington’s representative on the board of the IDB, was legally obliged to abstain from the vote to commit funds to the construction of the park. “The urgency of the project, required some shortcuts,” explains José Agustín Aguerre –shortcuts that were actually illegal under US law. Had any real survey been done, any real consultation taken place, the plant would surely never have been built – here at least. The Caracol Bay into which the river that dissects the site flows, is home to the country’s most extensive mangrove reserve and several critically endangered species including the Atlantic leatherback turtle and the black jewfish.

The bay which is supposed to house a new port on which the whole project depends is enclosed by a large strip of coral reef. Such pristine sites are so rare in Haiti that it had been selected from more than 1,100 miles of coastline to become the first marine protected area in Haiti.

But that was pre-earthquake. Now this sensitive site is home to the world’s most polluting kind of power plant, burning fuel oil or bunker fuel, 2-3% sulphur. Surges of waste water from inside the park have already ruined crops outside en route to polluting the sea and there are serious concerns about ground water pollution.

In 2011, with this reality becoming public, Koios Associates returned to do a full environmental study. With the decision made and the land now being cleared, the project was suddenly rated high risk. Some of those risks could not be mitigated: the bay, for instance, was designated endangered even if the waste water was treated.

Bribes, Bungs, Name Your Price

In fact, even the anchor tenant of the CIP, the South Korean firm, Sae-A, currently employing three-quarters of the workers at the CIP, did not want to invest here. The scale.and depth of the inducements required to entice them amount to corporate welfare on steroids, with, of course, Haitian and US taxpayers picking up the tab.

By 2011, Sae-A, with well-established textile assembly plants in Guatemala and Nicaragua, had actually been rejecting all inducements to invest in Haiti for two decades. Perhaps it was all a bargaining ploy. When negotiations broke down with Hansoll Textile, another Korean firm, the Clintons could see no options beyond Sae-A. With no competition, it was a straight trade off – number of jobs (promised) for the price to be paid (upfront).

The 65,000 jobs figure was always just fantasy – and not Sae-A’s. It is the number the IDB consultants calculate could work in the CIP given the size of the facility being built. Nominally Sae-A, or more accurately now, S&H Global, Sae-A’s wholly-owned Haiti subsidiary, has pledged to invest $78m to “develop operations in the Park.” But neither that, nor anything else about Sae-A’s investment in the CIP is binding. Indeed, since signing up, Sae-A has publicly halved its pledged investment, mostly equipment and “operating funds,” to $39.3m.

The Memorandum of Understanding (MOU) signed by the Haitian government, Hillary Clinton and Sae-A in New York in September 2010 reflects all this. It guarantees Sae-A a 15-year tax holiday on all its activities, a four-year rent holiday on its factory facilities, leaving docking fees for a port that does not yet exist –a mere $17,500 a year – its only known cost.

Although the MOU only runs until 2020, it contains a general “get-out” clause that means Sae-A guarantees nothing: “Participation under this MOU for Sae-A is contingent upon the existence of adequate infrastructure, labor force, labor policies, favorable access to export markets, access to sufficient funding and any other circumstances that affect the feasibility of investment by Sae-A.”

As things stand, it is clear that USAID could not have given Sae-A more excuse to go-slow, renege or walk away. According to a devastating report published in June by the Government Accountability Office (GAO), the US Congress’ watchdog, poor planning, incompetence, cost overruns and lack of expertise now threaten the viability of even the most basic infrastructure at the CPI.

The GAO’s key complaint was USAID’s failure to even begin planning the CIP’s port, which all parties accept is essential. With work now two years overdue, the GAO reported that even when it does begin, what was projected to take 2.5 years could now take “up to 10 years”. Delays, underestimates and environmental mitigation mean that USAID now has significantly less funding to allocate to a project that has effectively doubled or more in cost to an estimated $185-257m. Somewhat inevitably, the private partner essential for the project is now nowhere to be found. Privately, GAO officials have concluded the port may never be built.

USAID-funded housing in the area has been equally disastrous. The main reason is cost, with the price per house rising a stunning 336% from $9800 to $33,007. As a result, the units considered close enough to the CIP to house workers are now expected to number 1,967 – down from 5,000.

Back to the Plantation

For all these reasons, the viability and basic sustainability of the CIP has now become doubtful – even in its current skeleton form. Jobs are dependent on infrastructure – the port, housing, a waste water treatment plant, schools. Investment in all of these is, in turn, dependent on there being enough jobs to justify even trying to find the funds to build them.

Some of the current failure can be traced back to the failure of reconstruction throughout 2010. A chorus of criticism was countered by a determination to do something visible, grand and conceptional – something the Clintons, in particular,could plant a flag and a reputation on. In 2010-11, the basic reconstruction necessities – rubble clearing, low-cost permanent housing, piped water or toilets – were not sexy or grand enough to meet the publicity needs of the donors in their capitals, however vital they were to the desperate in their IDP camps.

It was at this point that an old project collecting dust on the shelf was put into play. Conceived in 2008-09, what became the CIP was, like so much else in Haiti,orphaned and shelved when the delivery of donors’ development dollars fell woefully short of their pledges. Even Bill Clinton, appointed UN Special Envoy to Haiti in May 2009, could not arouse any interest in this pet project for his pet solution – assembly plants – from the billionaires he led to a Port-au-Prince investment conference six months later.

When the earthquake yielded a landslide of dollars, Bill and Hillary Clinton devised their own riff on Naomi Klein’s disaster capitalism thesis, Shock Doctrine, to match up USAID, the IDB and Sae-A. It was a classic push-pull operation, with the US Congress virtually trebling the country’s duty-free textile access quota under the Haiti Economic Lift Program (HELP) Act in May 2010 after sharp prodding from both Clintons.

None of these cheerleaders seem to have noticed that the CIP is actually built on the site of a previous economic experiment exploiting the same “advantages.” For about 60 years the land here was a series of foreign-owned sisal and sugar plantations, a legacy of efforts to “modernize”Haiti’s economy during the US occupation of 1915-34.

Sae-A, USAID and the IDB know nothing of this or indeed the fierce history of agrarian struggle to cultivate this land after 1986 when the plantation economy here collapsed as completely as the Duvalier dictatorship.

As he cut into the rich soil  to inaugurate the CIP in November 2011, Bill Clinton declared: “This will be the match that strikes the fire and gets thingsgoing.” He meant the Haitian economy, not another Haitian Revolution – we think. The heirs of Toussaint Louverture, Jean-Jacques Dessalines and Charlemagne Péralte, may think otherwise.


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