Haiti-Dominican Republic Trade: Exports or Exploits?
December 21, 2012,Milo Milfort/Haiti Grassroots Watch
“I get everything at the Haiti-Dominican Republic: carrots, squash, eggplant, cabbage, peppers, eggs, salami… everything. The border is what feeds us,” explained a merchant as she stood by her groaning stand.
The food seller – who refused to give her name because she feared reprisals from Haitian tax collectors – sells vegetables and other food products at the Croix des Bossales marketplace, the biggest open market in the capital. Every day, hundreds of buyers and sellers clog the noisy, grimy patch of land near the country’s main port.
Mountains of Dominican pasta, towers of Dominican eggs, mounds of Dominican plantains and piles upon piles of tomato paste, ketchup, mayonnaise and other prepared foods are everywhere to be seen. The view is similar in Haitian supermarkets.
And like the vegetable dealer, other merchants are all surrounded by mostly Dominican wares. There are clearly products to be had. But almost none of them are produced in the country… most come from the Dominican Republic.
The situation is similar in Tabarre, Croix-des-bouquets and Salomon marketplaces, the Haiti Grassroots Watch (HGW) investigative journalism partnership discovered.
In these four key open-air markets serving the capital region, Haitian products are not easy to find. Not even for the merchants.
“We can’t find them. They hardly even exist,” an egg seller said. She sat next to a tower of eggs stacked in grey Dominican egg crates.
In the hardware stores, a similar tale. Sacks of Dominican cement reaching up to the ceilings. In most of the eight stores visited by HGW teams, salespeople said cement from the neighboring nation sold at a lower price than the “Haitian” product. (Actually, “Haitian” cement is imported by the boatload and bagged in country.)
“Haitian cement is more expensive, but it’s better. In contrast, Dominican cement is cheaper, but it’s also lower in quality,” a worker at GB Hardware said. Over at Alliance Distribution S.A., a salesman reported that it was “easier and quicker” to get Dominican cement delivered.
Is the flow of Dominican products a simple case of exports, or is Haiti’s neighbor exploiting an economy weakened by a devastating earthquake?
Did the earthquake shake up economic relations?
The January 12 2010 earthquake killed some 200,000 and made over one million people homeless. It also destroyed eight percent of capital goods, according to the World Bank. The agricultural sector alone suffered US$8 million in losses, according to the Haitian government. In addition to lost crops and damage to key transportation infrastructure, irrigation systems in the earthquake zone were severely damaged.
The crying need for food and other goods – for earthquake victims as well as the thousands of international humanitarian workers – served the Dominican agricultural and industrial sectors well, according to business association representative.
The earthquake had “positive effects for industry, especially for those producing construction materials,” admitted Circé Almanzar Melgen, vice president of the Association of Dominican Republic Industries (AIRD in Spanish).
As Haiti’s closest neighbor, the Dominican Republic, its businesses and its farmers were “in the right place at the right time,” as the saying goes. But even before the catastrophe, the Dominican Republic was doing well.
In 2000, only three percent of Dominican exports went to Haiti. Nine years later, that number had grown to 15 percent, according to 2012 World Bank report Haití, República Dominicana: Más que la Suma de las Partes (Haiti, Dominican Republic: More than the Sum of its Parts).
Since the earthquake, “Dominican exports to Haitian have grown considerably, rising from US$647.3 million in 2009 to US$869.23 million in 2010 and US$1.018 million in 2011,” according to Magdalena Lizardo of the Dominican Republic’s Ministry of Economy, Planning and Development in written comments made public on June 5 2012.
“If we exclude the exports from the Free Trade Zones, Haiti has been – since 2010 – the top recipient of Haitian national exports, which were valued at US$575.6 million in 2011, slightly higher than the US$570.8 million exported to the United States,” Lizardo added.
“Haiti is the Dominican Republic’s most important market, due to its proximity and because of how easy it has been to penetrate the market,” Almanzar concurred.
The president of the Santo Domingo Chamber of Commerce and Production is clear on the reasons for the increase.
“The increase has happened because, first of all, you need the products. There is a market that is buying, but there are not suppliers selling. You need certain products. If you had factories and industries that suffered [because of the earthquake], then there is even more need,” Maria Isabel Gasso, president of the Chamber, said.
Rising Commercial Deficit
Without question, Haiti needs the products.
The country has suffered an increasingly negative trade balance since the 1970s. Prior, Haiti was largely self-sufficient in food, cement and other products. However, the island nation has had a mostly extraverted economy since before her 1804 independence. The governments that succeeded the revolution rarely developed economic policies that would permit and encourage national industries and modernized agricultural production that would be able to keep up with population growth.
Local elites mostly exported raw materials (coffee, cacao, indigo, sugar, etc.) and imported foodstuffs and other finished products.
Haiti not follow the “import substitution” trend that swept most ex-colonies in Latin America, Africa and Asia in the 1950s and 1960s. Import substitution policies allowed local industries to develop under the protection of high tariffs and other government-sponsored advantages.
“We are following a growth model that weakens productive sectors in the face of imports and importers,” explained economist Camille Chalmers, professor at the State University of Haiti and director of a platform of organizations who promote “alternative development.”
On the other side of the border, however, Haiti’s neighbor followed a different path by promoting national industries.
“The Dominican model dates back fifty of sixty years,” according to Gasso. “For a while, there were laws that promoted industries and production, and also laws promoting exports and the Free Trade Zones. These industries have been there for years… and they have benefited from various policies promoting exports and production.”
The application of neoliberal economic policies – reduction of protective tariffs, privatization of state industries, cuts to social services and other programs – at the end of the last century took a heavy toll on an ailing economy. Tariffs on food and other agricultural products were first cut in 1982. They plummeted further – most to zero percent – in 1995.
Haiti currently has the lowest tariffs in the Caribbean.
The drastic reductions were part of a 1994 agreement referred to as the “Paris Plan.” The accord was between the exiled government of Jean Bertrand Aristide government and the international financial institutions (World Bank, International Monetary Fund (IMF), and the countries commonly known as the “friends of Haiti”: the United States, France and Canada.
The agreement is seen as a quid pro quo. The Aristide government would enact a series of radical neoliberal policies in exchange for international support for its return to power in 1994. (Aristide was overthrown in a bloody coup d’état, supported by local elites as well as the US Central Intelligence Agency, in 1991.)
Since 1995, as Haiti’s trade balance has skyrocketed, as have food imports. The deficit stood at about US$500 million in 1995. In 2000, it was US$813 million and, according to a 2012 IMF report, it will reach about US$2.2 billion for the 2011-2012 fiscal year.
The food “deficit,” in US dollars, stood at US$242 million in 2000. Seven years later, Haiti imported US$342 million worth of food. According to the Haitian Ministry of Agriculture, in 2005, Haiti was importing 57 percent of its food. That figure is undoubtedly higher today.
Ministry of Commerce director general Luc Espéca is conscious of the damages wrought by neoliberal policies.
“Imports have huge impacts on local producers… They work, but the market is invaded [by cheaper products]. Producers can’t sell what they’ve grown. When you work had to produce something, but then you don’t make a profit, you get discouraged,” he explained.
Imports and the lowered tariffs are not the only reasons Haiti’s agricultural production hasn’t kept pace with population growth. The lack of public and private sector investment in agricultural production, Haiti’s antiquated land tenure system and other factors have all contributed.
But the drop in tariffs dealt a harsh blow.
“When you open your markets without building up productive capacity, you are in effect destroying your own production. Dominican products sell for less. You have to produce in quantity in order to sell at a good price,” Chalmers noted.
The Ministry of Commerce’s Espéca agreed.
“We aren’t applying policies that favor national production,” he said. “What they didn’t understand is that wealth is created by national production, happening inside the country. You can’t open your borders and let all kinds of products in, and think that will create wealth… I believe a serious error has been made.”
The application of neoliberal policies had other effects on the economy.
Once he returned to Haiti in 1994, the Aristide government had to sell off the state enterprises, among them the state cement company. The business operated at a loss during the turbulent years that followed the fall of the Duvalier dictatorship (1987-1991) since the regime had milked it dry and never invested in maintenance and modernization.
However, the Aristide government had a plan to make it profitable. All of the raw materials necessary for cement are present in Haiti, whose geology is largely limestone. But the “Paris Plan” obliged the state to sell it off. The new owners never invested in the factory, and instead use the wharf and buildings to import and bag foreign cement.
“I remember, when I came back to Haiti in 1976, we made everything: pipes, cement, etc.” remembered Gérald Emile “Aby” Brun, a vice president of the 30-year-old Haitian construction and architecture firm TECINA S.A.
Brun regrets that his country no longer produces cement.
The sale of the Cement company “is just one on the list… TELECO [the state telephone company], the flour mill, the same thing happened to all of them… eggs chickens, bananas, and plantains.”
Brun lays the blame partly at the feet of Haitian “capitalists.”
“The Haitian capitalist is afraid of the country’s instability and of the corruption of a series of governments,” Burn continued. “He doesn’t want to take any chances and wait 10 or 15 years to make his profit. In fact, Haitian ‘industrialists’ are not industrialists at all. Three-quarters of them are just vendors, merchants.”
Haiti Grassroots Watch could not find data on the exact amount of Dominican cement exported to Haiti, but recent data from the Dominican Association of Portland Cement Producers is telling. Six major companies employ 15,000 people and cement makes up 21 percent of the country’s export. In August 2012, the association announced, “Exports of cement to other markets have risen 34.2 percent in comparison wit the same period last year.”
Where is Haitian production headed?
Both sides of the border agree. Haitian production cannot satisfy the nation’s demand, and Dominican producers are increasingly capitalizing on this weakness, especially since the January 2012 earthquake.
Many are calling for the Haitian government to rescue Haitian national production.
“The Haitian state is not defending Haitian economic actors,” according to Chalmers.
On the other side of the island, the president of the Chamber of Commerce of Santo Domingo practically agrees.
“I personally would like to see Haitian products here, but the Haitian government is the one who needs to promote what it needs to promote in Haiti in order for there to be exports,” Grasso said. “They need a plan. When a boat leaves port without a destination, it doesn’t get anywhere.”
Surrounded by her mountains of Dominican vegetables, seated next to her colleagues hawking Dominican pastas and eggs, the Croix de Bossales merchant agrees with Gasso. She wants to see change, but she remains a pessimist.
“We need a change but where will it come from? I don’t know. All we hear are beautiful words,” she said. “We need people to become aware so that we can rescue the country from this terrible situation.”
Milo Milfort/Haiti Grassroots Watch
This report is part of the “New Visions for Haitian-Dominican Reality – More and better journalism” program, financed by the European Union and coordinated by the UNESCO Chair in Communication, Democracy and Governance at the Pontificia Universidad Católica Madre y Maestra in Santo Domingo, Dominican Republic.
Haiti Grassroots Watch is a partnership of AlterPresse, the Society of the Animation of Social Communication (SAKS), the Network of Women Community Radio Broadcasters (REFRAKA), community radio stations from the Association of Haitian Community Media and students from the Journalism Laboratory at the State University of Haiti.