Haiti: Grants to repay an odious debt ?

18 January 2010 by Eric Toussaint , Sophie Perchellet


There is a great risk that one of the largest relief operations in history will be similar in nature to the tsunami relief efforts in 2004, unless a radically different approach to a reconstruction model is adopted. Haiti was partially destroyed by an earthquake measuring 7 on the Richter scale. We have all shed tears and the media, as they bombard us with apocalyptic images, report on financial pledges generous States have made. We know that Haiti needs to be rebuilt, this country hard-hit by poverty and “its curse”. Therefore, at the moment, the focus is on Haiti. Comments fail to look beyond the terrible earthquake. We are told that it is one of the poorest countries in the world without any explanations provided. We are led to believe that poverty just happened, that it is a situation beyond remedy: “Haiti is an accursed land”.

There is no doubt that this recent natural disaster has lead to considerable and unforeseeable material and human damage. Emergency aid is therefore needed and everyone can agree on this point. However, this earthquake was not the root cause of poverty and squalor. This country needs to be re-built because it has been stripped of its means to rebuild itself. Haiti is neither a free nor a sovereign country. In recent years, its domestic policy choices have been made by a government constantly under pressure by orders coming from outside the country and by manœuvres carried out by the local elites.

At best, Haiti is described as a violent, poor and repressive country. There are few comments remembering the independence gained in 1804, after a hard-fought struggle against Napoleon’s French armies. Rather than focusing on their humane approach and their fight for Human Rights, savagery and violence are the traits attributed to Haitians. Eduardo Galeano talks about “the white curse.”
At the border where the Dominican Republic ends and Haiti begins, there is a large sign with the following warning: The bad path. On the other side, it is black hell. Blood and hunger, poverty, plagues [1].”

It is therefore necessary to look back at the struggle for emancipation waged by the Haitian population, because in retaliation against this double-faceted revolution, both anti-slavery and anti-colonial in nature, the country inherited the ransom France demanded for independence, amounting to 150 million francs (that is, France’s annual budget at the time). In 1825, France decided that “The current inhabitants of the French part of Santo Domingo will pay into France’s Federal deposit and consignment offices, the sum of one hundred and fifty million francs, to be paid in five instalments, year after year, with the first term due 31 December 1825. The money will be used to compensate the former colonists who will demand compensation. [2] ” That is equivalent to approximately 21 billion dollars nowadays. From the outset Haiti had to pay a very high price. Debt became the neo-colonial instrument used to maintain access to this country’s many natural resources.

The payment of this ransom is therefore the founding element of the Haitian State. In legal terms, this means that it was contracted by a despotic regime and this contract was used against the interests of the people. First France, then the United States, whose sphere of influence expanded to Haiti from 1915, are entirely responsible for this.
Now, whilst it would have been possible to face up to their painful responsibilities of the past in 2004, the Régis Debray Commission [3] report preferred to scrap the idea of repaying this sum on the pretext that it was “legally unfounded” and that this action would open a “Pandora’s box.” The Haitian government’s request was rejected by France: no compensation was warranted. Moreover, France does not recognize the role it played in the shameful present it gave to the dictator in exile “Baby Doc” Duvalier, by granting him political refugee status and thus, immunity.

The Duvaliers’ rule began with the help of the United States in 1957: it lasted till 1986, when the son “Baby Doc” was thrown out of power by a popular uprising. The violent dictatorship, broadly supported by Western countries, ravaged the country for almost 30 years. It was marked by an exponential growth in its debt. Between 1957 and 1986, foreign debt had multiplied by 17.5. At the time Duvalier fled, it amounted to 750 million dollars. It then rose, through 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. and penalties, to over 1,884 million dollars [4]. This debt, far from serving the interests of the impoverished population, was actually aimed at enriching the ruling regime: it is therefore an odious debt. A recent inquiry reveals that the Duvalier family’s personal wealth (well protected by their western bank accounts) amounted to 900 million dollars, or in other words, a greater sum than the total debt of the country at the time “Baby Doc” fled. A trial is currently taking place before the Swiss courts for the restitution of goods and assets to the state of Haiti, embezzled during the Duvalier dictatorship. For the moment, these assets remain frozen by the Swiss bank UBS, which has put forward unacceptable conditions for the restitution of these funds. [5] Jean-Bertrand Aristide, by contrast, was enthusiastically elected, however he was soon accused of corruption, before being put back in office as a United States puppet and finally ousted by the US army. So Aristide, unfortunately, is not innocent in relation to debt and embezzlement of funds. Furthermore, according to the 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.

, between 1995 and 2001, the debt service Debt service The sum of the interests and the amortization of the capital borrowed. , that is to say capital and the reimbursed interests, had reached the considerable sum of 321 million dollars.

All current financial aid announced following the earthquake is already lost to the debt repayment!

According to recent estimates, the Inter-American Development Bank and the 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
, with 417.5 and 165 million dollars respectively, are the largest multilateral creditors of Haiti. The World Bank, in the meantime, stand in third place with loans amounting to 38.8 million dollars. Under their leadership, the government applied “structural adjustment Structural Adjustment Economic policies imposed by the IMF in exchange of new loans or the rescheduling of old loans.

Structural Adjustments policies were enforced in the early 1980 to qualify countries for new loans or for debt rescheduling by the IMF and the World Bank. The requested kind of adjustment aims at ensuring that the country can again service its external debt. Structural adjustment usually combines the following elements : devaluation of the national currency (in order to bring down the prices of exported goods and attract strong currencies), rise in interest rates (in order to attract international capital), reduction of public expenditure (’streamlining’ of public services staff, reduction of budgets devoted to education and the health sector, etc.), massive privatisations, reduction of public subsidies to some companies or products, freezing of salaries (to avoid inflation as a consequence of deflation). These SAPs have not only substantially contributed to higher and higher levels of indebtedness in the affected countries ; they have simultaneously led to higher prices (because of a high VAT rate and of the free market prices) and to a dramatic fall in the income of local populations (as a consequence of rising unemployment and of the dismantling of public services, among other factors).

IMF : http://www.worldbank.org/
plans”, now disguised as “Poverty Reduction Strategy Papers” (PRSP Poverty Reduction Strategy Paper
PRSP
Set up by the World Bank and the IMF in 1999, the PRSP was officially designed to fight poverty. In fact, it turns out to be an even more virulent version of the structural adjustment policies in disguise, to try and win the approval and legitimation of the social participants.
). In exchange for contracting more loans, Haiti has been given some insignificant amount of debt relief or cancellations, which cast the creditors in a positive light. The Highly Indebted Poor Countries initiative (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.
), for which Haiti was accepted, is a typical odious-debt laundering manœuvre, as was the case with the Democratic Republic of Congo [6]. Odious debt is replaced by new so-called legitimate loans. CADTM views these new loans as a key part of odious debt as they are used to pay off the old debt. The offence continues to be committed.

In 2006, when the IMF, the World Bank and the Paris Club Paris Club This group of lender States was founded in 1956 and specializes in dealing with non-payment by developing countries.

accepted that the HIPC initiative include Haiti, the whole stock of public foreign debt totalled 1,337 million dollars. At the time of completion of the initiative (in June 2009), the debt totalled 1,884 million. The cancellation of a debt totalling 1,200 million dollars was decided so as to “make the debt bearable”. Meanwhile, the structural adjustment plans wreaked havoc, especially in the agricultural sector, the effects of which reached its peak at the time of the 2008 food crisis. Haitian peasant farming suffered from US agricultural goods dumping. “The macro-economic policies supported by Washington, the UN, the IMF and the World Bank do not concern themselves at all with the need to develop and protect domestic markets. The only concern of their policies is to produce at the lowest price for exportation on the global markets. [7]” It is therefore a scandal to hear the IMF say that they are, “ready to play their role with the appropriate support in these areas of competence. [8]

As stated in the recent international appeal, “Haiti calls for solidarity and the respect for the sovereignty of the people”: “ Together with many Haitian organizations, over recent years we have denounced the military occupation of the country by United Nations (UN) troops and the impacts of the domination imposed via the mechanisms of debt, free trade, the looting of its natural habitat and the invasion of transnational interests. The vulnerability of the country to natural tragedies – provoked to a large extent by the environmental devastation, the non-existence of basic infrastructure, and the systematic weakening of the state’s capacity to act - should not be seen as something disconnected from these policies, which have historically undermined the sovereignty of the people.

Now is the time for the governments that form part of the MINUSTAH, the UN and in particular France and the United States, the governments of Latin America, to revise this action that is contrary to the basic needs of the Haitian people. We demand of those governments and international organizations that they substitute the military occupation with a true mission of solidarity, and that they take action to ensure the urgent cancellation of the debt that is still being collected of Haiti.” [9]

Irrespective of the debt issue, it is feared that the aid will take the same form as that provided after the tsunami hit several Asian countries at the end of December 2004 (Sri Lanka, Indonesia, India, Bangladesh) or after cyclone Jeanne hit Haiti in 2004. Promises were not kept and a large part of the funds were used to line the pockets of foreign or local elites. The majority of these “generous donations” came from the creditor countries. Rather than giving donations, it would be preferable that they cancel Haiti’s debt: totally, unconditionally and immediately. Can we really speak of donations when we know that this most of this money will either be used to repay foreign debt or to implement “national development projects” decided on the basis of the interests of these creditors or local elites? It is clear that without these immediate donations, it will not be possible to secure repayment of this debt, at least half of which corresponds to odious debt. The major international conferences, whether G8 G8 Group composed of the most powerful countries of the planet: Canada, France, Germany, Italy, Japan, the UK and the USA, with Russia a full member since June 2002. Their heads of state meet annually, usually in June or July. or G20 G20 The Group of Twenty (G20 or G-20) is a group made up of nineteen countries and the European Union whose ministers, central-bank directors and heads of state meet regularly. It was created in 1999 after the series of financial crises in the 1990s. Its aim is to encourage international consultation on the principle of broadening dialogue in keeping with the growing economic importance of a certain number of countries. Its members are Argentina, Australia, Brazil, Canada, China, France, Germany, Italy, India, Indonesia, Japan, Mexico, Russia, Saudi Arabia, South Africa, South Korea, Turkey, USA, UK and the European Union (represented by the presidents of the Council and of the European Central Bank). expanded to include IFIs, will not produce any progress whatsoever in terms of Haiti’s development rather, they will rebuild instruments to help them secure neo-colonial control of the country. The purpose is ensuring that debt repayments continue, the basis for submission, as has been the case since the recent debt relief initiatives.

On the contrary, in order for Haiti to rebuild itself in dignity, national sovereignty is the fundamental issue. A total and unconditional debt cancellation for Haiti must be the first step towards a more general course of action. A new alternative development model to the IFIs and the Economic Partnership Agreements (EPA signed in December 2009, the Hope II Accord…), is necessary and urgent. The most industrialized countries, which have systematically exploited Haiti, beginning with France and the United States, must pay compensation towards a fund aimed at financing the reconstruction of the country, controlled by the Haitian people’s organizations.

Translated by Francesca Denley in collaboration with Marie Lagatta.




Sophie Perchellet is vice-president of CADTM France. Eric Toussaint, president of CADTM Belgium (Committee for the Abolition of Third World Debt, www.cadtm.org ). He is the author of Bank of the South. An Alternative to the IMF-World Bank, VAK, Mumbai, India, 2007; The World Bank, A Critical Primer, Pluto Press, Between The Lines, David Philip, London-Toronto-Cape Town 2008; Your Money or Your Life, The Tyranny of Global Finance, Haymarket, Chicago, 2005.

Eric Toussaint

is a historian and political scientist who completed his Ph.D. at the universities of Paris VIII and Liège, is the spokesperson of the CADTM International, and sits on the Scientific Council of ATTAC France.
He is the author of Debt System (Haymarket books, Chicago, 2019), Bankocracy (2015); The Life and Crimes of an Exemplary Man (2014); Glance in the Rear View Mirror. Neoliberal Ideology From its Origins to the Present, Haymarket books, Chicago, 2012 (see here), etc.
See his bibliography: https://en.wikipedia.org/wiki/%C3%89ric_Toussaint
He co-authored World debt figures 2015 with Pierre Gottiniaux, Daniel Munevar and Antonio Sanabria (2015); and with Damien Millet Debt, the IMF, and the World Bank: Sixty Questions, Sixty Answers, Monthly Review Books, New York, 2010. He was the scientific coordinator of the Greek Truth Commission on Public Debt from April 2015 to November 2015.

Sophie Perchellet

CADTM France (Paris)

Other articles in English by Sophie Perchellet (3)

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