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Corporate Welfare in Haiti

Haiti, having the lowest wages in the entire Western Hemisphere, offers a very enticing environment to U.S. corporations intending to set up plants overseas. Such companies as JCPenney, Disney, and Sears actually search for Third World countries characterized by high unemployment and poverty. In addition, they seek out those governments which have weak labor ministries, offer financial incentives, and are willing to meet infrastructural demands of corporations. Such concessions granted by the host government are called corporate welfare. Whereas corporations receive vast incentives to set up plants in Haiti, and, in the case of Disney, can even afford to pay their top CEO $97,000 an hour, returns to the Haitian economy are minimal, and working and living standards of Haitian people, whose wages are generally below the minimum of thirty cents an hour, steadily decline.

How is it that exploitation of workers and preferential treatment of investors became the norm in Haiti? In order to discuss the complex answers to this questions, it is necessary to first emphasize that the realities of (usually Third World) worker exploitation for the benefit of the few is not a naturally-occurring phenomenon; rather, it has been created through a complex and historically-grounded process of supplanting local production of the host country with imports, maintaining low wages, and operating under a lack of regulation. In Haiti, this process involves the United States and Haitian governments, multinational corporations, Haitian elites, and international financial institutions (IFIs), such as the World Bank and the International Monetary Fund (IMF).

IFI Strategy: Low-wage, Export-oriented

For over a decade, the World Bank and IMF have insisted on a low-wage strategy as a means of attracting foreign investment and have both designed and supported policies that restrict wages. In the early 1980s, the World Bank proposed a strategy to develop the export potential of both agro-industry and the country's assembly industry, which involved marginal hillside lands being planted with coffee or cacao, and large tracts of flat and potentially more productive land being re-oriented toward the production of other export crops. Displaced peasants would flock to Port-au-Prince, forming a large labor pool for assembly industries. At the same time, new trade regulations, tax holidays, credit funds, technical assistance projects, and infrastructure services were established to support the assembly sector, already aided by the continued suppression of worker rights and wages.

Successes: Benefits to U.S. Investors and Haitian Elites

The narrow strategy to increase Haiti's exports and tie its economy to the U.S. market was quite successful. By 1985, for instance, the assembly sub-sector generated more than half of the country's industrial exports and earned one-quarter of its foreign exchange.

The World Bank and IMF's broader strategy of using foreign investment and exports as an engine for development, however, was an unmitigated failure. Throughout the 1980s, food production continued to fall, private investment consisted almost exclusively of residential construction, the assembly sector remained stagnant, and the value of agricultural exports dropped due to declines in the international price of coffee. The purchasing power of wages in 1985 was less than in 1970. Moreover, the value added from assembly-industry exports is very small; for instance, in 1989 apparel exports were worth a real value of only U.S. $23.1 million, according to the U.S. Commerce Department. This is due to the fact that goods to be assembled were shipped from the United States, pieced together, and shipped out again, and few, if any, Haitian goods were used in the process. In addition, much of the tax-free profits made from the assembly sector are repatriated by U.S. investors, not reinvested in Haiti.

Real wages in Haiti have been more than cut in half during the decade of the 1980s, reaching U.S. 25 cents an hour without benefits in 1989. A full-time minimum wage salary provided less than sixty percent of a family's basic needs (food, shelter, education) in Port-au-Prince.

The 1990s: A New Era?

The election of a populist government in 1990 brought with it opportunities for addressing the root causes of poverty never before seen in Haiti. Soon after taking office, Jean-Bertrand Aristide's administration made three proposals for economic reform designed to benefit the poor: the imposition of price controls on basic foodstuffs; the raising of the hourly minimum wage to a combined cash and benefit total of U.S. $.75 per hour; and the enforced payment of legally required social security taxes. Aristide also made major strides in improving government efficiency and structures, which drew pledges of U.S. $511 million in grants and concessionary loans from the IFIs, USAID, and other bilateral and multilateral donors. However, despite new realities and opportunities, donors conditioned development assistance on the adoption of the same old structural adjustment policies, which included maintaining poverty-level wages, further opening the Haitian economy, and stepped-up incentives to the export sector.

Submitting to structural adjustment conditionality was again the quid pro quo for U.S. support for Aristide's return to Haiti after three years of bloody and destructive rule by a military junta between 1991 and 1994. And once again, wage restraint was a condition for receiving IFI support. In 1995, the IMF happily noted that the legal minimum wage established in June 1995 of 36 gourdes in reality "falls well short of the real and U.S. dollar equivalent minimum wage of ten years ago, and should not affect the good prospects for the export sector." But, because the Haiti Labor Code mandates wage increases to keep up with inflation, the IMF wants to take no chances; it is providing part of the technical assistance to the Haitian government to revise the Labor Code to support the low-wage strategy of the IFIs. The IMF has also mandated a three-year government wage bill freeze. This means that in order to increase the wages of its teachers, nurses, and other state employees, large numbers of people will first have to be fired, so that the total wage bill does not increase. This pits worker against worker and severely and deliberately undermines workers' rights of association and collective bargaining.

In contrast to the labor-busting IFI policies, investors benefit greatly from a whole range of subsidies promoted and supported by the IFIs. Under the current IMF program, tax holidays would be maintained for a period of 5-10 years. Under the agreement, the government is committed to "assist the assembly industry to stay competitive by ensuring adequate electrical supply." Toward this end, the Government of Haiti (GOH) will invest U.S. $73 million from the Inter-American Development Bank (IDB) and the European Investment Bank in electrical plant, hardware, and repairs. In addition, as part of its loan agreements with the Bank and Fund, the GOH has reduced the telephone, electricity and customs fees, and tax incentives for foreign investors. At the same time, the government has removed food and fuel subsidies for the Haitian poor and increased their utility fees.

A Call to Action

Decades of public investments and policy manipulation by the World Bank, the IMF, and the U.S. government have deliberately created an environment where the exploitation of workers is hailed as an incentive to invest in Haiti. U.S. multinational corporations, such as Disney, have apparently found that incentive compelling.

Fifty Years is Enough is calling upon U.S. investors in Haiti to reject exploitation as a means of increasing profit. The World Bank, IMF, U.S. government, and responsible U.S. investors should ensure that, at a minimum, companies operating directly in Haiti or through sub-contractors respect Haitian laws regarding minimum wages, working conditions, benefits, and the right of Haitian workers to organize, to negotiate a collective contract, and to work for better wages and working conditions over time. Within such a context of respect for the rights of Haitian workers, foreign investment could be an important source of employment for Haitian workers.

Information in this briefing is drawn from a Development GAP report entitled "Democracy Undermined, Economic Justice Denied: Structural Adjustment and the Aid Juggernaut in Haiti" by Lisa McGowan, January, 1997 and from "The U.S. in Haiti: How to Get Rich on 11 Cents an Hour", by the National Labor Committee, January, 1996

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