Dominican Republic and Haiti: Country Studies
by Helen Chapin Metz et al by Helen Chapin Metz et al
Dominican Republic and Haiti: Country Studies reducing inflation, corruption, and smuggling. When he was overthrown by dissatisfied elements of the military only seven months later, on September 30, 1991, he left his homeland first for Venezuela, then for the United States. Almost immediately upon his departure, Haiti's foreign assets were frozen and an international trade embargo was imposed on all items, with the exception of basic food and medical supplies. The impact of the trade embargo on the country's economy was very severe. More than 100,000 jobs were lost. Starvation spread through most rural areas and into provincial towns. The flight of approximately 300,000 people from Port-au-Prince to the countryside worsened poverty and health conditions. Thousands of boat people managed to flee the country. Smuggling and evasion of sanctions continued to increase to an alarming degree. From October 1991 to October 1994, Haiti was ruled by a succession of military-backed regimes of which Raoul Cedras was the principal figure (see Military Coup Overthrows Aristide, October 1991-October 1994, ch. 6). They perpetuated repression and terror, tolerated human rights violations, and sanctioned widespread assassinations in open defiance of the international community's condemnation. The international embargo and suspension of most external aid caused inflation to rise from 15 percent to 50 percent. A dramatic drop in exports and investment also took a toll on the country's industrial productivity and further damaged its already weak infrastructure. Economic Policies At the time of the military coup in 1991, Haiti's per capita GDP had fallen steadily by 2 percent a year since 1980. The country's economic stagnation was caused by permissive policies that tolerated massive corruption and inefficiency in the public sector, and by social polarization, mismanagement, and total neglect of human resources. From 1991 to 1994, real GDP fell 30 percent and per capita GDP dropped from US$320 to US$260. Aristide's return to power on October 15, 1994, after a complex process that included threats of military intervention by the United States and a coalition of multinational forces, raised the hope of economic revival. With the situation gradually stabilizing, a conference of international donors held in Paris in August 1994 produced approximately US$2 billion—including 370
Haiti: The Economy US$425 million from the United States—in pledges of assistance by 1999 in exchange for a commitment from the Haitian government to adhere to a program of economic reform, trade/ tariff liberalization, privatization, macroeconomic stabilization, and decentralization. But implementation of these programs was slowed down by parliamentary bickering, opposition to structural reform, and public dissatisfaction with the lack of progress in the stagnating economy. Negotiating an International Monetary Fund (IMF—see Glossary) offer of US$1 billion in aid, with stringent conditions relating to structural adjustment and privatization of nine major state enterprises, proved to be tortuous. Other attempts at economic and social reform, such as implementing an increase in the minimum wage, also proved to be futile. Faced with popular demonstrations against the controversial concept of privatization while he was trying to tackle the daunting challenge of rebuilding his country's crumbling physical infrastructure, Aristide decided in October 1995 not to proceed with the privatization of a state-owned cement plant and a flour mill. As a result, no further progress on privatization was possible during his term. Moreover, lack of commitment to civil service reform and other structural reforms tied to loans from the World Bank and IMF derailed the signing of two credit agreements with those international organizations and prompted Aristide's prime minister to resign in October 1995. Structural Policy When President Rene Garcia Preval took office in February 1996, he vowed to implement the structural adjustment program that had been suggested to Aristide. His government initiated a program to reduce expenditures and eliminate thousands of civil service jobs occupied by "ghost employees." Another acute problem was the huge budget deficit caused by central government support for inefficient state-owned enterprises and a bloated public sector in general. Parliament eventually enacted economic reform legislation authorizing the executive branch to proceed with privatization. The new legislation allowed the granting of management contracts for forming joint ventures with private investors through partial divestiture of state-owned enterprises. The government also put in motion an Emergency Economic Recovery Plan (EERP) whose main objective was to achieve rapid macroeconomic stabilization and to attend to the 371
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<strong>Haiti</strong>: The Economy<br />
US$425 million from the United States—in pledges of assistance<br />
by 1999 in exchange for a commitment from the <strong>Haiti</strong>an<br />
government to adhere to a program of economic reform,<br />
trade/ tariff liberalization, privatization, macroeconomic stabilization,<br />
<strong>and</strong> decentralization. But implementation of these<br />
programs was slowed down by parliamentary bickering, opposition<br />
to structural reform, <strong>and</strong> public dissatisfaction with the<br />
lack of progress in the stagnating economy. Negotiating an<br />
International Monetary Fund (IMF—see Glossary) offer of<br />
US$1 billion in aid, with stringent conditions relating to structural<br />
adjustment <strong>and</strong> privatization of nine major state enterprises,<br />
proved to be tortuous. Other attempts at economic <strong>and</strong><br />
social reform, such as implementing an increase in the minimum<br />
wage, also proved to be futile.<br />
Faced with popular demonstrations against the controversial<br />
concept of privatization while he was trying to tackle the daunting<br />
challenge of rebuilding his country's crumbling physical<br />
infrastructure, Aristide decided in October 1995 not to proceed<br />
with the privatization of a state-owned cement plant <strong>and</strong> a<br />
flour mill. As a result, no further progress on privatization was<br />
possible during his term. Moreover, lack of commitment to<br />
civil service reform <strong>and</strong> other structural reforms tied to loans<br />
from the World Bank <strong>and</strong> IMF derailed the signing of two<br />
credit agreements with those international organizations <strong>and</strong><br />
prompted Aristide's prime minister to resign in October 1995.<br />
Structural Policy<br />
When President Rene Garcia Preval took office in February<br />
1996, he vowed to implement the structural adjustment program<br />
that had been suggested to Aristide. His government initiated<br />
a program to reduce expenditures <strong>and</strong> eliminate<br />
thous<strong>and</strong>s of civil service jobs occupied by "ghost employees."<br />
Another acute problem was the huge budget deficit caused by<br />
central government support for inefficient state-owned enterprises<br />
<strong>and</strong> a bloated public sector in general. Parliament eventually<br />
enacted economic reform legislation authorizing the<br />
executive branch to proceed with privatization. The new legislation<br />
allowed the granting of management contracts for forming<br />
joint ventures with private investors through partial<br />
divestiture of state-owned enterprises.<br />
The government also put in motion an Emergency Economic<br />
Recovery Plan (EERP) whose main objective was to<br />
achieve rapid macroeconomic stabilization <strong>and</strong> to attend to the<br />
371