Haiti 10 years after the earthquake: the fight for social and economic justice continues

13 January by Iolanda Fresnillo


A view of Delmas 32, a neighborhood in Haiti which many residence are beneficiaries of the PRODEPUR- Habitat project (CC : World Bank Photo Collection)

On January 12 2010 an earthquake of magnitude 7.3 on the Richter scale ripped through Port-au-Prince metropolitan area and other parts of Haiti. More than 1.5 million people, representing 15 per cent of the country’s population, were directly affected by the earthquake.

According to the Haitian government, 316,000 people lost their lives. An estimated US$ 7.8 billion dollars of damage was caused - equivalent to more than 120 per cent of the GDP GDP
Gross Domestic Product
Gross Domestic Product is an aggregate measure of total production within a given territory equal to the sum of the gross values added. The measure is notoriously incomplete; for example it does not take into account any activity that does not enter into a commercial exchange. The GDP takes into account both the production of goods and the production of services. Economic growth is defined as the variation of the GDP from one period to another.
of 2009. Everyone in Haiti has a story that begins or ends on 12 January and many wounds remain open. Everyone lost someone. Everyone remembers where they were that day.

 From debt relief to oil debt

When the earthquake struck, I was with a group of European debt activists gathered by Eurodad in a Debt strategy meeting in Brussels. We reached out to our colleagues from PAPDA (Haitian Platform for an alternative development), with whom we’d been campaigning for the abolition of former Haitian President Duvalier’s odious debt and recovery of stolen assets.

We quickly organised a solidarity campaign for debt relief for Haiti. We took the chance to explain why debt relief was not only a matter of solidarity, but one of justice, as Haiti had been suffering from international interference and a legacy of odious debts since its independence. This included unjust and harmful conditionality from IMF IMF
International Monetary Fund
Along with the World Bank, the IMF was founded on the day the Bretton Woods Agreements were signed. Its first mission was to support the new system of standard exchange rates.

When the Bretton Wood fixed rates system came to an end in 1971, the main function of the IMF became that of being both policeman and fireman for global capital: it acts as policeman when it enforces its Structural Adjustment Policies and as fireman when it steps in to help out governments in risk of defaulting on debt repayments.

As for the World Bank, a weighted voting system operates: depending on the amount paid as contribution by each member state. 85% of the votes is required to modify the IMF Charter (which means that the USA with 17,68% % of the votes has a de facto veto on any change).

The institution is dominated by five countries: the United States (16,74%), Japan (6,23%), Germany (5,81%), France (4,29%) and the UK (4,29%).
The other 183 member countries are divided into groups led by one country. The most important one (6,57% of the votes) is led by Belgium. The least important group of countries (1,55% of the votes) is led by Gabon and brings together African countries.

http://imf.org
and World Bank World Bank
WB
The World Bank was founded as part of the new international monetary system set up at Bretton Woods in 1944. Its capital is provided by member states’ contributions and loans on the international money markets. It financed public and private projects in Third World and East European countries.

It consists of several closely associated institutions, among which :

1. The International Bank for Reconstruction and Development (IBRD, 189 members in 2017), which provides loans in productive sectors such as farming or energy ;

2. The International Development Association (IDA, 159 members in 1997), which provides less advanced countries with long-term loans (35-40 years) at very low interest (1%) ;

3. The International Finance Corporation (IFC), which provides both loan and equity finance for business ventures in developing countries.

As Third World Debt gets worse, the World Bank (along with the IMF) tends to adopt a macro-economic perspective. For instance, it enforces adjustment policies that are intended to balance heavily indebted countries’ payments. The World Bank advises those countries that have to undergo the IMF’s therapy on such matters as how to reduce budget deficits, round up savings, enduce foreign investors to settle within their borders, or free prices and exchange rates.

loans.

Ultimately, Haiti received debt relief before and after the earthquake under the HIPC Heavily Indebted Poor Countries
HIPC
In 1996 the IMF and the World Bank launched an initiative aimed at reducing the debt burden for some 41 heavily indebted poor countries (HIPC), whose total debts amount to about 10% of the Third World Debt. The list includes 33 countries in Sub-Saharan Africa.

The idea at the back of the initiative is as follows: a country on the HIPC list can start an SAP programme of twice three years. At the end of the first stage (first three years) IMF experts assess the ’sustainability’ of the country’s debt (from medium term projections of the country’s balance of payments and of the net present value (NPV) of debt to exports ratio.
If the country’s debt is considered “unsustainable”, it is eligible for a second stage of reforms at the end of which its debt is made ’sustainable’ (that it it is given the financial means necessary to pay back the amounts due). Three years after the beginning of the initiative, only four countries had been deemed eligible for a very slight debt relief (Uganda, Bolivia, Burkina Faso, and Mozambique). Confronted with such poor results and with the Jubilee 2000 campaign (which brought in a petition with over 17 million signatures to the G7 meeting in Cologne in June 1999), the G7 (group of 7 most industrialised countries) and international financial institutions launched an enhanced initiative: “sustainability” criteria have been revised (for instance the value of the debt must only amount to 150% of export revenues instead of 200-250% as was the case before), the second stage in the reforms is not fixed any more: an assiduous pupil can anticipate and be granted debt relief earlier, and thirdly some interim relief can be granted after the first three years of reform.

Simultaneously the IMF and the World Bank change their vocabulary : their loans, which so far had been called, “enhanced structural adjustment facilities” (ESAF), are now called “Growth and Poverty Reduction Facilities” (GPRF) while “Structural Adjustment Policies” are now called “Poverty Reduction Strategy Paper”. This paper is drafted by the country requesting assistance with the help of the IMF and the World Bank and the participation of representatives from the civil society.
This enhanced initiative has been largely publicised: the international media announced a 90%, even a 100% cancellation after the Euro-African summit in Cairo (April 2000). Yet on closer examination the HIPC initiative turns out to be yet another delusive manoeuvre which suggests but in no way implements a cancellation of the debt.

List of the 42 Heavily Indebted Poor Countries: Angola, Benin, Bolivia, Burkina Faso, Burundi, Cameroon, Central African Republic, Chad, Comoro Islands, Congo, Ivory Coast, Democratic Republic of Congo, Ethiopia, Gambia, Ghana, Guinea, Guinea-Bissau, Guyana, Honduras, Kenya, Laos, Liberia, Madagascar, Malawi, Mali, Mauritania, Mozambique, Myanmar, Nicaragua, Niger, Rwanda, Sao Tome and Principe, Senegal, Sierra Leone, Somalia, Sudan, Tanzania, Togo, Uganda, Vietnam, Zambia.
and MDRI processes1 and in some cases this was topped up with additional cancellations of bilateral debt from Venezuela, France, Italy, Norway and Finland. External public debt stocks were reduced by 60 per cent, reaching a minimum of US$ 775 million. However, debt service Debt service The sum of the interests and the amortization of the capital borrowed. remained a challenge, as Haiti had - and still has - one of the lowest domestic resource mobilisation rates in the western hemisphere: according to the World Bank, “at just 14 percent of GDP, domestic tax revenues finance less than three-quarters of total public spending” (2018).

External public debt also increased further due to the Petrocaribe program with Venezuela. Under this scheme, the Haitian government could purchase oil from Venezuela at 60% of the price, deferring the rest as debt, which incurred one per cent interest Interest An amount paid in remuneration of an investment or received by a lender. Interest is calculated on the amount of the capital invested or borrowed, the duration of the operation and the rate that has been set. over 25 years. The Haitian government was supposed to use the revenue for development projects. However, much of the money disappeared through corruption, which led to massive demonstrations in 2018.

At the same time, following the recommendations of the IMF, the Haitian Government reduced fuel subsidies, resulting in drastic price hikes of up to 51 per cent. In March 2019, the Haitian government secured a new IMF loan of US$ 299 million, which included further conditionalities on deficit reduction.

External public debt is now higher than before the HIPC/MDRI debt relief, reaching US$ 2.21 billion in 2018. Increasing debt service (four times higher than in 2011), decreasing donor support and a low capacity to generate revenue, has placed the Haitian government in deadlock, not being able to pay even the most basic bills such as electricity.

 From disaster aid to aid disaster

Along with debt relief, donors from around the world pledged massive amounts of humanitarian and reconstruction aid. Thousands of humanitarian workers were deployed to Haiti and NGOs raised more than US$3 billion within a year of the disaster. Additionally, governments and multilateral agencies promised US$13.34 billion for the 2010-2020 period. Unfortunately, the Office of the Special Envoy to Haiti, who kept track of disbursements, ended its surveillance in 2012. At that time, only 48.2 per cent of what was promised had been disbursed, a total of US$6.43 billion.

Since then, it has proved difficult to ascertain how much of the total pledged has actually been disbursed. According to the World Bank, the total official development assistance ODA
Official Development Assistance
Official Development Assistance is the name given to loans granted in financially favourable conditions by the public bodies of the industrialized countries. A loan has only to be agreed at a lower rate of interest than going market rates (a concessionary loan) to be considered as aid, even if it is then repaid to the last cent by the borrowing country. Tied bilateral loans (which oblige the borrowing country to buy products or services from the lending country) and debt cancellation are also counted as part of ODA. Apart from food aid, there are three main ways of using these funds: rural development, infrastructures and non-project aid (financing budget deficits or the balance of payments). The latter increases continually. This aid is made “conditional” upon reduction of the public deficit, privatization, environmental “good behaviour”, care of the very poor, democratization, etc. These conditions are laid down by the main governments of the North, the World Bank and the IMF. The aid goes through three channels: multilateral aid, bilateral aid and the NGOs.
and official aid received by Haiti between 2013 and 2017 was US$ 5.3 billion, which falls considerably short of the total resources promised.

More important than the amount of aid money is how it was spent. The promise, expressed by Haiti Special Envoy Bill Clinton in the donors’ conference in New York in 2010, was to Build Back Better. However, in the rush to deliver emergency aid and reconstruction, a lack of coordination and failure to put local actors in the driving seat led too often to inadequate action. The lack of participation of Haitian authorities and CSOs contrasted with the high percentage of foreign companies being awarded reconstruction contracts. EuropeAid, for instance, awarded 76.6 per cent of the value of the contracts in Haiti in 2010 and 2011 to European corporations. In total between 2010 and 2012, 84 per cent of public funds for the reconstruction were managed outside the Haitian administration.

 What now?

Ten years after the earthquake, around 30, 000 people are still living in camps and 300,000 people live in Canaan, a new informal settlement on the outskirts of Port-au-Prince. Despite the billions of dollars that flooded the country after the earthquake, and the promises to Build Back Better, according to the Humanitarian Needs Overview of the United Nations Office for the Coordination of Humanitarian Affairs (OCHA), 4.6 million Haitians (about 40 per cent of the population) will require urgent humanitarian assistance in 2020, and there are 3.7 million people in acute food insecurity. The political situation does not help economic prospects, according to the IMF and other development institutions.

The 10th anniversary of the earthquake is a good moment for the international community to assess its relationship with Haiti. Untying aid and promoting local and regional procurement are basic principles of effective development that should be prioritised by development agencies, together with the need to extend these principles to any engagement with the private sector in development.

On fiscal and debt management, it is clear that much of the progress made through debt relief has already been lost. Haiti’s recent history starkly highlights the importance of a new approach to debt crisis prevention and the need for a durable resolution that puts people first. That includes binding global rules on responsible lending and borrowing.



Source: Eurodad

Iolanda Fresnillo

is a member of La PACD (Plataforma Auditoria Ciudadana de la Deuda) and Eurodad.

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