What Happened to Haiti’s Plan to ‘Build Back Better’?

Economist James Henry discusses how the Clintons and the international community backed the development of luxury hotels and textile factories in Haiti’s capital while paying minimal attention to structural issues like rule of law and tax reform

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JESSICA DESVARIEUX, TRNN PRODUCER: Welcome to The Real News Network. I’m Jessica Desvarieux in Baltimore. And welcome to the Henry report.

Now joining us is James Henry. James a leading economist, attorney, and investigative journalist who has written extensively about global issues, and he’s a regular contributor to The Real News.

Thanks for joining us, James.

JAMES S. HENRY, SENIOR ECONOMIST, TAX JUSTICE NETWORK: Quite welcome.

DESVARIEUX: So, James, you are actually joining us from Haiti, my motherland. I know you’ve been doing extensive research down there and touring a bit of the country. So what have you been seeing? Can you just speak to the level of progress–or the lack of progress–since that earthquake in 2010?

HENRY: Well, yes. It’s five years since the earthquake, and this is a interesting turning-point year to visit Haiti. I came here with a group of six Columbia graduate students who are studying the so-called remittance system. Haiti now depends on money that’s sent back from the 2.2 million Haitians living abroad for about 25 percent of national income, which is larger than any export or foreign direct investment or any of the aid that they’ve been getting this year.

But it’s a good chance to kind of take stock of where Haiti is. The New York Times had a sensational article on Monday, which really has had a lot of impact here, about how the president, current president, Martelly, has been surrounding himself since 2011, when he first took office, with lots of dubious aides and allies, some of whom are accused of various kinds of crimes and corruption. He has also not made himself popular by postponing parliamentary elections here. And now he’s finally scheduled those for August. Presidential elections are not until the fall.

But Haiti is a turning point. The UN has just announced that they’re withdrawing they’re 3,000 peacekeepers as of April. Martelly’s protesting that ’cause he’s concerned, since this is an election year, you know, there could be a lot of political instability.

Another thing that’s happening in Haiti is that it now has a $70 million hole in its budget because the aid it was getting from Venezuela through the Petrocaribe fund has been slashed.

So, all things considered, we’re finding Haiti in much the similar kind of crisis as they had time and again in Haitian history.

But the big picture is that the fundamental problems that Haiti has are structural, and those have not really been addressed since the Martelly election.

DESVARIEUX: Let’s talk about the structural issues, James. What specifically?

HENRY: Yeah. Well, I was talking about health care. Yesterday I visited the largest hospital in the country, which is run by Paul Farmer’s Partners In Health. It’s out in Mirebalais. And they cost about $15 million a year, all of which is contributed by foreign donors. But they’re having to turn away about 500 critical care patients a day because they just don’t have resources.

The government budget for health care is trivial. There’s no health insurance system here. And many people are waiting until dire emergencies to actually try to go all the way to this place in the center of Haiti to get treated. You know. So this is just a lingering problem, but it’s one of a dozen or so structural problems that Haiti has not been able to address.

Another one is education. Yesterday I was at a school near Mirebalais. And 200 kids. The teachers haven’t been paid in two years. They figure that about two-thirds of Haitian children are in school, but maybe a third are only able to attend sporadically. And you’re talking about a population of 10 million people in which a majority are under the age of 18. So this is an important issue for the country.

DESVARIEUX: So, James, I mean, there was still a lot of money that was pledged to Haiti, about $14 billion. So where did that money end up going? Why wasn’t it attacking health care and education, those two topics that you brought up?

HENRY: Well, it’s a great question. I think much of it went into financing the current budget, aid expenditure. First of all, the $13.9 billion that was pledged, only between $6 billion and $8 billion actually have showed up.

But it’s a great question, because a lot of the money is fundamentally not well accounted for.

[snip] Yeah. I mean, that’s a great question. And some human rights groups have been suing the government to find out. But from what we can tell, quite a bit of it was spent on current spending by the government, not investment, not on programs like teaching programs or building hospitals, but on development projects that the government happened to prioritize. For example, the Caracol Project is an industrial park that was funded with USAID money. A hundred and twenty million dollars went into that in the North of the country. It was supposed to create tens of thousands of jobs and ended up creating about 6,000 so far.

So a good example of the bias of investment is that they had $1.2 billion from the Venezuelan government in terms of subsidies, and only about $43 million of that went into agriculture. And the budget for next year’s election security is already $40 million. So you know, agriculture being 30 percent of the economy, it’s hard to see that they’re really recognizing the priority that that sector should have in the investments.

A hotel development project on an island where the president and his friends have been involved is quite a few of these projects that are half-finished and standing idle. And, overall, don’t think there’s anyone who would deny that the Haitian government could have done a much better job of managing the money.

A lot of this responsibility, I think, comes back not just to the Martelly government but to the international community that’s been kind of intervening fairly aggressively in Haiti’s history. And in the latest round, I mean, the Clinton administration back in the ’90s was active in bringing Aristide back, and then Bill Clinton helped to side with Bush in removing him. And then in 2010, in the elections that year, the U.S. government had a big influence on making sure that the current president, Martelly, was actually able to survive to the second round of the election. And he ultimately ended up winning. And since then, right up until the last few months, the U.S. ambassador here has been a staunch Martelly supporter in his decisions to defer elections and to rule by decree. So, in all these areas I think there’s the–you know, certainly the U.S. government, the Obama administration and Hillary, when she was secretary of state, seemed to have aligned themselves very closely with this current government.

DESVARIEUX: Let’s talk more about the Clintons and their role in Haiti. I mean, a lot of press has now focused on the Clinton Foundation’s work in Haiti. The Washington Post actually had an article that came out specifically looking at their development projects–Caracol Industrial Park, which you mentioned, and they have several others. Can you just speak to their track record in Haiti? And do the Clintons, in your opinion, based on the work that you’ve seen being done in Haiti, have they sort of lived up to this promise about trying to build Haiti back better and to have nonprofits like their own go out of business?

HENRY: You know, Haiti is a tough place to make progress, and you have to give them credit for trying. I think that’s one important thing. Many U.S. politicians will say, what’s in it for me to be the concerned about Haiti? It’s not going to win me any votes in the U.S. election.

But that aside, I think they have basically made a bet on kind of the–some of the wrong people here, in terms of the folks that they have been backing. And there are also a number of deals that have come to the surface recently, involving Hillary Clinton’s brother, Tony Rodham, getting a board seat on a mining company. That just doesn’t smell right.

DESVARIEUX: Goldmines, right?

HENRY: We have to [incompr.] closely. There’s a Goldmine. It’s supposed to have somewhere as much as $20 billion of ore. And there’s another prime minister, a former prime minster of Haiti that’s on the board. So we need to look more carefully at that deal.

But basically the Caracol strategy of betting on finding a South–in that case, a South Korean manufacturing partner who’s going to basically operate a kind of sweatshop exporting more more textiles–Haiti’s largest export now is textiles to the United States–is, I think, a kind of a limited focus. And 27 percent of the economy is agriculture, yet the investment in the agricultural sector is minimal compared to these new industrial or tourism strategies. And so you really have to wonder whether that strategy is not being dictated by the local elite.

You find, for example, in the case of the Haitian banking system that the top three banks are dominating the remittance transfers. They’re creaming about 10 percent off the $1.2 billion of formal remittances in the form of charges to Western Union and to their partners here. You know, that’s just, like, a tax that’s being implemented on some of the poorest people in the world, who are basically the only providers of very effective aid to even poorer Haitians.

You also find that the banking system has about a million depositors, most of whom are poor, and there’s only, on the other hand, about 30,000 borrowers, maybe 1,000 of whom dominate the borrowing. So you’re basically having financial exclusion, where much of the banking system is used to channel money up the class structure to the borrowers, who are much more wealthy.

So there are a lot of opportunities for reforming these sectors, but as you dig down into it, you find–. For example, in the tax situation, Haiti has one of the most regressive taxes, tax systems, in the Western Hemisphere. Most of the taxes are collected from import duties, not from income taxes. Almost nobody in the elite pays income taxes. And so their total tax take as a share of GDP is only about 12 percent.

Well, we know from studying other examples of developed economies that you really have an unavoidable tax burden of about 25 to 30 percent in order to make the vital investments in public education and health and security and the rule of law that Haiti is just not able to make ’cause it has no functional tax system.

So these kinds of fundamental structural reforms in education and health and tax system and the rule of law, these are things that have been completely neglected as priorities by the international community–and, I think, by the Clinton administration in the ’90s, and then the Obama administration more recently. And we’re kind of governing from one pseudo-ally to another and hoping to find the political leader who can pull it all together. But while we’re waiting, Haiti is still remaining kind of stuck in low-level development, with a per capita income of $383 per person.

DESVARIEUX: Yeah. And one of the development projects that they have put money in, the international community, is actually a new Marriott in Port-au-Prince now. So there’s another example for you.

Thank you so much for joining us, James.

HENRY: You’re very welcome. Good to be with you.

DESVARIEUX: And thank you for joining us on The Real News Network.

End

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