Thursday, February 25, 2010

Now That the Cameras Are Gone: Foreign Direct Investment in Haiti


Just weeks after the 2010 earthquake in Haiti, former President Bill Clinton led a special session on Haiti at the World Economic Forum Annual Meeting in Davos, Switzerland. Representatives from the World Economic Forum and the United Nations joined with the Clinton Global Initiative to encourage business leaders from around the world to do business in Haiti. The goal of the meeting was to increase private sector investment in agriculture, tourism and other business opportunities in the island nation.


Denis O'Brien, the executive chairman of a cellular company that employs Haitians who sell his company's telephone cards made the case at the meeting for foreign direct investment in Haiti, explaining that the island nation is a good location for manufacturers. Urging attendees to invest in Haiti, O'Brien told them to invest "for the right reasons." He explained that they should invest "not just for altruistic reasons, but for economic reasons...." Brazil's Foreign Minister also spoke at the meeting explaining that business investments in Haiti "can be done not just to help Haiti but to make money."


These statement alarmed me. I'm not sure the kind of capitalism the Davos participants advocated is the best thing for Haiti right now. In the U.S., this kind of capitalism enabled a very small portion of the population to become very rich, burdened the middle class reducing its numbers dramatically, while increasing the numbers of poor Americans. The Davos participants envisioned that companies, primarily from developed nations, establish businesses that would employ a few Haitians at what I'm sure will be pathetically low wages. Only one of the speakers, the Managing Director of the World Economic Forum, briefly mentioned the possibility of foreign investment in Haitian businesses. (Brazil's Foreign Minister noted that Haiti's street markets were in business again but said nothing about investing in those businesses.) The session participants encouraged foreign direct investment that would employ a few Haitians without exploring the possibility of partnering with Haitian entrepreneurs. Employing Haitians at low wages while ignoring the potential promise of Haitian entrepreneurship sounds like exploitaiton. Haiti has been through this before.


Clinton ended the meeting by saying the following: "Haiti is the only successful country ever established as the result of a slave revolt. For that, they were punished by either being ignored or abused. The United States did not recognize them for nearly 60 years and when finally we did we were in with the rest of the crowd of European powers saying that they had to pay enormous reparations for winning their freedom."


Haiti does not need the kind of capitalism advocated by the World Economic Forum participants. The investment they envision will likely enrich private companies in developed natons while exploiting Haitian workers. Haiti doesn't need charity either. Haiti deserves reparations.

20 comments:

  1. GERMAINE ANTHONY AUSTINMarch 1, 2010 at 12:05 PM

    I agree with the conclusion of this article, "Haiti deserves reparations." Whether we like it or not it's obvious that Haiti was punished for "winning their freedom which should be a crime against the "cause and affect" chain of events. However, we cannot deny that Haiti is also in desperate need of investment. I don't believe in waiting to invest in a country simply because they may not be ready for investments. Haiti needs help now. I disagree with paying anyone low wages, it’s happening all over the world in developing countries. I’m not condoning it; I’m just simply stating a fact. Consequently, I don't think Haiti should wait for the United States to try to enforce Human Rights laws all over the world just so they can obtain meaningful living wages. Wages count for someone who never had it, whether it's a little or a lot; just like investment counts for a country that lacks it, whether it's a little or a lot. It's obvious that only a small portion of the population will get rich, that's the result of investing. We can't expect business to go bankrupt by providing Humanitarian efforts while they continue struggling to make ends meet elsewhere. I would like to propose a new conclusion for this article, Haiti needs and deserves reparations but they also need and deserve investment.

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  2. Haiti is a proud nation and rightfully so given their past struggles. The proposal of the World Economic Forum participants appears on its face to be seeking a way to help the nation without negating its “stand on our own” mentality. A closer look however causes me to question whether they are merely looking to profit from this tragedy by promoting cheap labor. I understand that in the business world it is all about profit but do not come with a proposition under the guise of humanitarian efforts! If this proposal of “investments” in the Haitian businesses is to “increase private sector investment in agriculture, tourism and other business opportunities in the island nation” then perhaps there should be rules laid out to protect the Haitians from be exploited during this time of desperation. If we are to go in there to help each other and there is a mutual benefit then I am in agreement with the proposal however I do not believe this can be accomplished with just a nudge from these group leaders. There must be rules to govern and protect this effort.

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  3. I agree that this would be taking advantage of Haiti at its time of despair but I wonder what the Haitian people will say if they have a vote. They really need help right now and most of them are starting from scratch. I am not advocating for taking advantage of anyone but I wonder if they are so desperate that they would take whatever help they can get at the moment. The problem then becomes when it will end. They will continue to be used even after the country has rebuilt itself.

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  4. It is undeniable that Haiti has experienced beyond its fair share of pain, despair, and hardships. Clearly the 2010 earthquake did not help the situation. Considering all of this it is fairly concluded that the capitalism resolution recommended by the World Economic Forum may be more of an exploitation tactic than an act of assistance. But do they have much of an option at this point? Companies aren’t exactly traveling in masses to Haiti in an attempt to uplift the economy. I am not sure if the Haitian people are in a position to reject any form of assistance. Their first motive at this point is to help their people in whatever way they can. If these private companies have anything to offer, I am sure that the government will willingly accept it. The question comes in, will the Haitian government be able to accept these private companies offers and meanwhile capitalize on this opportunity to benefit themselves just as much as the companies will receive a benefit. It could be assumed that these corporations are offering this opportunity as a charity case, but at this point they are in need of charity. Considering the past of Haiti and the international resistance to assisting them, any offered assistance should be accepted as a welcomed change. In a perfect world reparations would be a great outcome to this dilemma, but in today’s world our best option is to make the best out of a bad situation.

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  5. The first country built by free slaves was Israel.

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  6. I am all for other countries investing in Haiti to help the country flourish into a lucrative and economically stable country that I know it can be. However, the type of investment that President Bill Clinton posed to attract investors is not what the country needs. I believe their can be a marriage between the investment that Pres.Clinton posed at the at the World Economic Forum, and the type of investment that would allow, Haitian owned businesses to flourish and essentially allow the extra money coming in from other countries to actually assist the people in need. The Haitian people in power need the world to recognize how profitable Haiti can be, however, at the same time they need to ensure that the exploitation of Haiti's valued resources and people never happens again.


    - Jeffrey Pierre-Louis

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  7. This post provides an insightful and unique approach to the World Economic Forum suggestions. At first glance, it seems that establishing businesses in Haiti would provide excellent economic opportunities. However, further examination reveals that establishing new businesses in Haiti creates the risk of various adverse consequences. In my opinion, the potential consequences of locating new businesses in Haiti may be worth the risk. Haiti is in a fragile economic state and the opportunity for generating income could help Haiti recover from their financial problems.

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  8. Several remarks on the article and posted comments:

    1. To Anonymous: Haiti is the first successful country born of a slave rebellion, where blood was shed for freedom on the very land the slaves had worked. Moses led freed slaves into ancient Israel; freed slaves were also allowed to settle in Israel. I believe that is what President Clinton meant in his speech.

    2. I agree with Professor Wade, Mr. Pierre-Louis and Ms. Bragg.

    Haiti does not need pity, or mere "charity." Haiti needs economic assistance to rebuild and improve its infrastructure. Just compare Haiti's death toll at 230,000 with Chile's at 700+.

    Long-term construction projects, financed by foreign investors, yield many benefits: i) Haitian workers can be hired; ii) Haitian local government and professionals, such as architects, can develop improved urban plans; iii) in the unfortunate event of another earthquake, new, more stable buildings will not buckle onto unsuspecting citizens; and iv) investing in Haiti's roads, highways and bridges is a meaningful contribution, not just a pitiful charitable act.

    And Haiti does need foreign direct investment ("FDI"). However, Haiti does not need FDI where foreign countries establish offices with foreign managers and Haitian workers, and where the Haitian workers are the lucky few.

    The path to a stable, wealthy future means that many Haitians must be involved in rebuilding its economy. And the proper way for FDI to foster such growth is FDI to existing Haitian businesses and to encourage Haitian development of new businesses. Existing Haitian businesses need capital, fast, or may not recover from the impact of the earthquake.

    President Clinton's summit is an important public overture and recognition of Haiti's need as well as Haiti's potential. But more ideas need to be generated on a larger scale, such as developing microfinancing platforms, in order to ensure FDI in Haiti is FDI that Haitians can build upon.

    Cathy

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  9. I agree with Professor Wade. The participants at Davos are the exact parties that have presided over Haiti's economic devastation. Any proposals by such leaders should be met with a great deal of skepticism, if not outright rejection. I'm glad that President Clinton has admitted the negative role America has played in Haitian history. However, he must also recognize some of the more recent trade liberalization policies (via the IMF) that have devastated Haiti's economy as well as the continued U.S. support for dictatorships in Haiti. After the IMF lowered tariffs on rice imports in 1995, Haiti effectively became a rice dumping ground by U.S. farmers. Hatians could not compete with the heavily subsidized rice from the U.S. and led many rice farmers to go out of business. This is just one of many examples policies that neo-liberal Western economies have imposed upon Haiti. The speeches at Davos smell of the same "disaster capitalism" model: Exploit a natural disaster by privatizing the entire economy and profit off Haitian misery.

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  10. I agree with Ms. Austin and Ms. Johnson that if Haitians had a choice on foreign direct investment, they would want companies to invest in Haiti. I think that most people who are unemployed, homeless, and close to starvation would prefer to have a low paying job than not have a job at all. In the long run, this may have adverse consequences because employees may not get the compensation they deserve. Also, if employees’ wages are low the economy will not become stable. This plan also comes with high risk for the companies willing to invest in building businesses in Haiti. Haiti is vulnerable to natural disasters such as flooding and earthquakes. Therefore, both Haitians and foreign business owners could potentially take a loss with the capitalism advocated by the World Economic Forum participants. While this plan may not be the ideal solution for Haitians, it is a start. As Professor Wade suggested, foreign investments in Haitian businesses should also be advocated for as well.

    Jennifer B.

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  11. I respect the fact that Clinton brought light to the situation that it was the US and other European countries such as Britain and France who placed Haiti in such an unstable economic state that has caused its infrstructure to comllapse when the earthquake hit. People are quick to point fingers when something goes wrong but they fail to recognize how they helped facilitate that wrong in the the early stages.

    Haiti does not need charity at this point because all that will do is put money in an economy that is non-existent. Nor does Haiti need foreign businesses to come in because this will only further cripple the people through cheap labor. And, Haiti definately does not need the media telling it how horrible its infrastructure was and all the reasons why the earthquale has devistated its country.

    What Haiti really needs is REAL support. It needs foreign investors to work with local Haitian entrepreneurs to build the economy and provide Haitians with the oppurtunity to develop its own country. It needs INGO's to come in and work with local NGO's and guide them in this time of need. It needs foreigners to invest in the country to provide long term stability; help the people develop so that once all this aid leaves, the country may stand and grow on its own and not be dependent on others.


    -Veronica Sewnarine

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  12. I agree with Professor Wade this is not what Haiti needs right now. I believe to ask big businesses to hire Haitian workers can seem like a blessing, but in the long run Haiti will be hurting because they will not have their own native born businesses. I think if big business is going to show their “generosity” to Haiti they should instead take those funds and strengthen the school systems in Haiti, so they can develop future leaders in Haiti who can one day compete in the businesses world.

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  13. "explaining that the island nation is a good location for manufacturers." In other words, let's have ourselves another Cambodia or Vietnam where we pay desperate children 11 cents a day to make Nike shoes for us, except that this time around we can drastically reduce our shipping costs as well, since Haiti is practically next door. I do not want to be cynical, but I highly doubt that any corporation out there has at heart what's best for Haitians as a people. The goal of maximizing profit, externalities be damned, is way too attractive for most private outfits these days. The organizations who truly try to do something for the people there were the NGO's and the rescuers who rushed to help from all over the world. Don't expect big business to follow. That would be too good to be true. Corporations have absolutely no problem exploiting us here at home whenever and however it suits them, so we can't expect them (though we can still pierce their shields occasionally - whereas the average Haitian can't) to behave any differently abroad.

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  14. In the first paragraph when they mention increasing private sector investment in agriculture I wondered how that would work. The majority of the people in Haiti earn their living from agriculture. If somebody owns a small plot of land that they work, is the forum advocating that these plots be taken over by big business and become a huge agribusiness? Anyway, Haiti needed help before the earthquake and definitely needs help now. I know that countries and corporations are being asked to invest for monetary reasons because they want to frame investing in Haiti as a sound business decision. But, I would also encourage altruism. People need shelter and places to work now. So, I would like to see help in that area, although I'm so afraid of corporations taking advantage of Haiti's resources, including their workforce.

    I believe that Haiti's citizens should not have to place their faith and fate totally in the hands of big countries and corporations coming in and "saving Haiti". There should be a simultaneous sustained effort to encourage microfinancing. Of course, corporations won't earn big profits and maybe that's why there was no mention of that. There is not a lot of money to be made from lending small amounts of money to people to use in their own existing small business or to create a new small business. There is such a disparity between the rich in Haiti and everyone else and microfinancing won't close the gap all that much, but it would be a start to restoring self-sufficiency and would allow a broadening of opportunities beyond low wage jobs provided by foreign investors.

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  15. I feel that allowing businesses to invest in Haiti is great way to help jump start the economy. However, I feel that over saturating Haiti with foreign owned businesses could potentially keep Haiti in its vicious cycle of poverty. Having more jobs available will open a window of opportunity for those who were jobless and homeless. Creating jobs can lead to better roads, schools, hospitals and can even open a window for tourism. If done correctly with the well being of the Haitian Population as a major factor in these businesses investment plan, investment in Haiti can be a great thing.

    Andrew S

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  17. Haiti may deserve reparations, however the question at that point becomes from whom? How much is enough, and in what form should these reparations be in. To solely give money to a country that doesn't have the corporate or economic infrastructure to handle it will turn into what Haiti is dealing with right now. As countries are giving aid to Haiti, both monetarily and in goods, Haiti is struggling with distribution.

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  18. I agree that at this point in time Haitians certainly do not need Multinational enterprises to come in to engage in foreign direct investment. Although, it is true that Haiti can benefit from corporate acts of altruism, I believe that the gravity of the possible risks of overreaching and the exploitation of the Haitian people by allowing FDI to invest in Haiti far outweigh the benefits. It has been noted in academic economic and legal publications that FDI does not benefit the citizens of the host country unless its domestic market/infrastructure has already reached a threshhold of advancement that would allow it to absorb valuable technology inflow from foreign investors. Furthermore, the primary purpose MNEs is to reduce the costs of investing and increase profits. It may seem cynical to believe that corporations would take the opportunity to exploit a host country's resources and to take advantage of the lack of business regulation to maximize profits but I don't believe it is too far from the truth.

    The current state of Haiti's infrastructure would prevent it from ultimately benefitting from FDI. While, I believe Haitians will welcome any form of aid -- the Haitian government officials and representatives should be wise and strategic in choosing the vehicles that such aid comes in. I agree that Haiti does not need investors it needs deserved reparations.

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  19. I'm working on a law review comment about the Foreign Corrupt Practices Act. Transparency International recently issued a handbook for combating corruption in humanitarian emergencies specifically aimed at Haiti. Even prior to the earthquake, Transparency International ranked Haiti 168th out of 180 countries on its annual Corruption Perception Index (showing a high level of perceived corruption). This is a great opportunity for Haiti to "turn the corner" on corruption and rebuild an infrastructure without bribery and corruption. Transparency International calls this the "perfect storm" where there is dire need and institutional chaos, plus a country with a history of corruption. I think and foreign direct investment without strict oversight is going to further the economic divide of Haiti making the rich richer and the poor poorer.

    But bribery comes from corporations offering the bribes and individuals demanding and/or accepting them. Since the Haitians are in an emergency situation, I hope public officials will look out for the best interests of the citizens in rebuilding as quickly as possible.

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  20. One of the best reports that I saw during the earthquake coverage (in the aftermath) was this link of Christianne Amanpour on the garment sector in Haiti: http://www.youtube.com/watch?v=o85HSXyP0fc
    Currently, they have 28,000 jobs in the sector, hoping to push it as high as 130,000 jobs, though they need investment. The head of the chamber of commerce for the garment industry mentions they were trying to get a $25M loan, and to keep quota-free, duty free imports with the U.S., who are the principal markets for the products. It's the kind of investment that would be paid off fairly well, and each of the jobs created supports eight people. Factory work is... well, factory work, but it's work. As for us would-be consumers here in the U.S., note: they work on well-known labels: Gap, Old Navy, New Balance. Look for the made in Haiti label...

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