Haïti et ses multiples tragédies : Il faut faire beaucoup plus

HAITI AND ITS MULTIPLE TRAGEDIES: MUCH MORE NEEDS TO BE DONE Eugenio Díaz-Bonilla 1 1 The author has had the honor of representing Haiti (as part of the Chair of Argentina and that country) at the Board of Executive Directors of the Inter-American Development Bank from September 2003 to March 2012. LAC WORKING PAPER 26 FEBRUARY 2022 CONTENTS INTRODUCTION ................................................................................................................................ ... 1 HAITI’S SPECIAL CHARACTERISTICS ................................................................ ............................... 2 Natural disasters ................................................................................................ .............................. 3 Health crises ................................................................................................................................ .... 4 Demography and the environment ................................................................................................ ... 5 A “good neighborhood,” but with drawbacks ................................................................ .................... 7 A very small government ................................................................................................................ 10 And corruption? .............................................................................................................................. 14 A LONGER VIEW OF GROWTH ......................................................................................................... 16 THE NEED FOR A STRONG RESPONSE NOW ................................................................................ 20 SAFETY NETS IN HAITI ..................................................................................................................... 22 Some definitions ............................................................................................................................ 22 Comparative data ........................................................................................................................... 23 Recent programs ........................................................................................................................... 27 Some considerations about the design of social assistance programs ........................................... 33 AN EXPANDED SAFETY NET FOR HAITI ......................................................................................... 39 CONSIDERATIONS FOR A BROADER DEVELOPMENT PROGRAM .............................................. 44 Some macroeconomic considerations ............................................................................................ 44 Some further comments about development and financing ............................................................ 46 CONCLUSIONS .................................................................................................................................. 48 Acknowledgments ............................................................................................................................. 49 References ......................................................................................................................................... 49 TABLES Table 1. Impact of natural disasters ................................................................................................ ... 3 Table 2. Area of agricultural land per person ................................................................ .................... 5 Table 3. Energy and forest indicators ................................................................................................ 5 Table 4. Economic growth by governments ................................................................ ...................... 9 Table 5. ASPIRE Program Classification .......................................................................................... 22 Table 6. Indicators of social programs ............................................................................................. 24 Table 7. Expenditures of EDE PEP (1000 gourdes) ......................................................................... 28 Table 8. Summary estimates for the social protection floor for the PNPPS strategy ................... 37 Table 9. Program proposal ................................................................................................................ 41 Table 10. Current international development financing .................................................................. 42 Table 11. Possible adjustments in expenditures and revenues ..................................................... 43 Table 12. Tariffs and imports: Summary and duty ranges .............................................................. 45 FIGURES Figure 1. GINI by countries and regions ................................................................ ............................ 6 Figure 2. Government expenditures as percentage of GDP ........................................................... 11 Figure 3. Haiti GDP per capita (constant 2010 dollars) ................................................................... 16 Figure 4. Real exchange rate: Haitian gourde against Dominican Republic peso ........................ 17 Figure 5. RER of Haiti and the Dominican Republic against the US dollar .................................... 17 Figure 6. Index of food production per capita (2014-2016=100) ..................................................... 18 Figure 7. GDP per capita: Haiti and Dominican Republic ............................................................... 19 Figure 8. Map of food security and agricultural programs ............................................................. 25 Figure 9. A continuum of delivery approaches ................................................................................ 26 1 INTRODUCTION Haiti has been suffering for many decades a damaging combination of climate and natural disasters and political, economic, social, and health crises. Just in the last months there was the terrible assassi- nation of a sitting president on July 2021; an extremely damaging earthquake of 7.2 magnitude on Au- gust 2021; the heart-wrenching images of Haitians at the US-Mexican border in September 2021; the expansion of gang activity with the kidnapping of US missionaries in October 2021; and another earth- quake of 5.3 magnitude in late January, to name only the more recent sequence of very bad events af- fecting the country. And yet there are also very encouraging signs about the advance of a broad political dialogue, involving expanding segments of the Haitian society, which is the only way the country will be able to emerge from the current tragic situation. This paper is an attempt to contribute an outside perspective to that dialogue, focusing basically on the international community and what can be done in support of a pro- cess that only the people of Haiti can design and implement. In particular, the paper advances some ideas about the social safety net the country needs now. A well designed and funded social safety net sustainable over time will not only help to alleviate the terrible human suffering in Haiti, but it also can contribute significantly to a) restarting the economy (by provid- ing cash transfers to groups that will reactivate demand and supply aspects); b) shoring up security (by offering alternative incomes to the youth and vulnerable groups that can be mobilized by criminal gangs and violent political actors); and c) diminish migration pressures (by offering survival options in Haiti). The social safety net should focus on the basics of building human capital, such as food and health, which are prerequisites for other aspects of human capital. Allowing a significant part of the children and young population to be malnourished is compromising the economic, social, and political viability of Haiti. This social safety net should overtime absorb the supposedly one-time, but in fact recurrent, hu- manitarian programs that are being operated in Haiti. If the international community ignores the Haitian suffering, there will continue to be very negative con- sequences not only for Haiti, but also for the United States and many other countries in the Americas and elsewhere, which will have to deal with the harmful externalities of humanitarian, crime, and migra- tion crises. This document also tries to place the discussion in the context of the broader and extremely pressing challenges faced by Haiti and its people, including the current extremely damaging security conditions. Before going into those topics, the paper also discusses some of Haiti’s special characteristics that need to be considered for the international community to be able to support, and not hinder, the efforts 2 of the Haitian people to overcome the many economic, social, and political challenges they face. The paper argues that there are erroneous pre-conceptions that need to be cast aside, some with ugly rac- ist overtones. A case is the emphasis on the country being “one of the most corrupt in the world,” when, as it is argued later, a main current problem (as different from the kleptocratic times of the Duvalier and military dictatorships) is the weak and fragmented public sector, which, although not approaching a Hobbesian “state of nature,” lacks, in many cases, the resources to provide basic services to the popu- lation, starting with security. This document is organized as follows. The next section discusses Haiti’s special characteristics. Then there is an analysis of economic growth since the 1960s. After that there are sections arguing for the need of a strong response now, reviewing briefly some of the recent programs linked to social safety nets and humanitarian responses, and assessing some of the dimensions and parameters that need to be considered in a future program. The following section develops the proposal, with costs and sugges- tions for its financing. Subsequently, there are some reflections about macroeconomic and develop- ment policies, and a specific focus on agriculture, energy, and the environment (particularly reforesta- tion). A final section concludes. HAITI’S SPECIAL CHARACTERISTICS It is well known that Haiti represented the first successful slave rebellion against a colonial power when it declared its independence in 1804, thus posing a dramatic double challenge to the prevalent eco- nomic and political order (national and international) in the XIX century. The rebellion and independ- ence are a foundational aspect of the pride of Haitian people in the history of their country but, also, the source of the international economic and political boycotts that the country suffered for many decades. Yet, and not denying the negative historical legacy of that international hostility, in the 1950s and early 1960s, as shown later, Haiti had about the same income per capita than the Dominican Republic (in constant USD). 2 The Haitian substantial decline and big divergence in economic performance with its neighbor, and most of the developing world, took place in the last half a century, and that is the period this paper analyzes. It is known that Haiti is the only Least Developed Country (LDC) in Latin America and the Caribbean (LAC), and its poverty rate of 50.3% (measured in 3.2/day/per capita of PPP dollars) is well above the average for developing countries (35%) and for LAC (less than 11%). Also, it is impossible to deny the 2 In 1960 Haiti’s GDP per capita was also above Paraguay, Bolivia, Honduras and Belize in LAC, and several other countries in Africa and Asia (Data from WDI/WB). 3 fractured and confrontational nature of the political process in Haiti for many decades. But it is also im- portant to acknowledge a combination of factors that contributed to that fractiousness and have made socio-economic and political conditions very fragile and, in many respects, unique. Acknowledging these special characteristics, discussed immediately, is a necessary precondition for designing and im- plementing effective programs to overcome the many problems affecting the country. Natural disasters First, Haiti has suffered in its history a very lethal combination of natural disasters. Only counting the last two decades the country was affected by the deadly earthquake of 2010 (from which Haiti has never fully recovered), compounded by the recent ones in August 2021 and January 2022. Measured in deaths per population and losses as percentage of the GDP the 2010 earthquake had been more dam- aging than other global natural disasters that received special attention from the international commu- nity (such as, for instance, the fatal tsunami of 2004 in Indonesia) (Table 1). Table 1. Impact of natural disasters Source: Cavallo, Eduardo A, Andrew Powell, and Oscar Becerra 2010. 3 That earthquake also forced many Haitians to leave their country, with a percentage migrating towards several South American countries. With the 2020 pandemic hitting that region particularly hard, many of those have been moving north towards the United States, leading to the recent sad images at the US- Mexican border. In addition to the earthquakes, the country also suffered a series of tropical storms and hurricanes. Only in the last two decades, Haiti suffered tropical storm Jeanne in 2004; hurricane Dennis in 2005; 3 Other estimates suggest that there may have been less casualties, perhaps around 60,000 deaths. Still, that number as a ratio of the Haitian population would be 6,000 deaths per million people, which would place Haiti at the top of the tragic list of casualties. 4 four tropical storms/hurricanes in 2008 (which caused losses estimated at 15% of GDP; World Bank 2015).; hurricane Sandy in 2012; and hurricane Matthew in 2016, the strongest in decades, with large- scale devastation, affecting more than 1 million people. Recently, Haiti also experienced drought condi- tions that negatively impacted agricultural production. In fact, the World Bank (2015) showed that Haiti has had a higher number of disasters per km2 than the average of the Caribbean countries. Therefore, Haiti is the only country in the Americas that is ranked in the very high vulnerability category for natural disasters by the World Risk Report (2021) (and it is the 15 th most vulnerable in the world out of 181 countries). Health crises The negative impact of natural disasters has been compounded by several health crises. The global HIV pandemic started in the 1980s and peaked in the mid-1990s, but the incidence in Haiti, although half the rate of SSA, is still about twice as large as in the Dominican Republic and about 3 times the rate in LAC countries. The pandemic affected the tourism industry, because in the early 1980s Haiti was singled out as a high-risk country, even though it was the victim of an infection that came from abroad. The New York Times (“FOR HAITI'S TOURISM, THE STIGMA OF AIDS IS FATAL By Marlise Simons, Nov. 29, 1983) reported that tourism dropped from 70000 persons in 1981-1982 to just 10000 in 1983. 4 In the early 1980s Haiti was also hit by the contagion of African Swine Fever (also imported from abroad), which led to the forced slaughter of basically all the porcine stock. In general, the 1980s was a decade of low growth in LAC, related to the early 1980s deep economic recession in the US, the de- cline of commodity prices, and the debt crises; but in Haiti the impacts of HIV on tourism and other ac- tivities, the decimation of the porcine population, plus other political and economic problems (discussed later) led, in the second half of the 1980s, to an even stronger decline in GDP per capita than most other LAC countries (more on this below). Several years later, the cholera outbreak reported at the end of 2010, and whose source is considered to have been a camp of UN peace-keeping soldiers, ended up killing thousands of people. In that con- text, the impact of COVID-19 has been just another damaging event in a sequence of a variety of nega- tive health and other shocks (Díaz-Bonilla, Piñeiro, de Salvo, Laborde, 2021). 4 The NYT article also mentions that singling out of Haiti by US health officials, which the Haitian government labelled as “racist,” had so af- fected anything related to the country that a shipment of textiles was returned from the United States because it was labeled “Made in Haiti.” 5 Demography and the environment Another factor to consider is that the country experiences a very high population density: Haiti has about 414 persons per square kilometer (sqkm) of land area (World Bank data for 2020), above South Asia (389 persons/sqkm), and far more than in other LDCs (52 persons/sqkm), or low-income coun- tries, the lower bracket of developing countries (44 persons/sqkm). Related with this fact, Haiti has a low availability of hectares of agricultural land per person (Table 2). Table 2. Area of agricultural land per person Agricultural land (ha/person) Haiti 0.172 Dominican Republic 0.233 Fragile and conflict affected situations 0.785 Least developed countries: UN classification 0.808 Low income 0.968 Sub - Saharan Africa (excluding high income) 0.997 Caribbean small states 0.284 Source: WDI/WB The population density is one of the main reasons for the damaging impacts of natural disasters. Along with poverty, it is also an important factor in explaining the deforestation of the Haitian side of the His- paniola Island (the forest area in Haiti is just about 1/7 of the equivalent area in the Dominican Repub- lic; Table 3). And in part related to the fact that forest-based products continue to be a significant part of energy consumption, the levels of use of energy per capita are also very small (Table 3) contributing to a very weak economic performance (discussed later). Table 3. Energy and forest indicators Energy use (kg of oil equivalent per capita) Forest area (% of land area) Forest land (ha/population) Haiti 391 13.2 0.03 Dominican Republic 777 43.6 0.20 Low Income N a 21.1 0.53 SSA 689 27.1 0.64 LDCs 360 27.2 0.58 Fragile and conflict affected situations 680 23.8 0.56 Source: WDI/WB 6 Population pressure over limited natural resources is usually associated with volatile societies and frac- tured politics, and in Haiti it has also interacted with two other characteristics of countries with high so- cial unrest, such as large income inequalities and an important percentage of young population. Next Figure 1 shows Gini values for the most unequal countries in the world as well as averages and median for LAC and the world: Haiti shows the second largest income inequality globally, 5 only after South Africa, clearly above the rest of LAC and other countries in SSA (the two more unequal regions of the world). Figure 1. GINI by countries and regions SOURCE: WDI and PovCalNet, World Bank Haiti is also young: 52% of the population is below 25 years of age, when the percentage for LAC is 40.3% and Central America is 44.7%. 6 In fact, Haiti is more comparable to Sub-Saharan Africa (62% below 25 years of age) the youngest region in the world and, also, politically very volatile (UN Popula- tion data). But while in SSA the youth may be enticed to join fundamentalist terrorism, in the case of Haiti, the closeness to both the main demand market for drugs and some LAC countries important on the supply side, facilitates the integration of the youth in drug-related criminal groups and gangs. Young (an unemployed) 7 population can also be easily mobilized for political violence by unscrupulous actors. 5 The World Development Indicators of the World Bank reports a GINI based on consumption, which does not appear to be comparatively that high. PovCalNet has also the GINI based on incomes for Haiti, which is the right comparison with the countries shown in the Figure. 6 Not surprisingly, the other two countries with more than 50% of the population below 25 years are Honduras and Guatemala, which also suffer turmoil and migration problems. El Salvador, another high-migration country, is somewhat less young (45% of the population under 25 years) but it has the largest population density in Central America (313 persons/sqkm, when the simple average of the countries in that region is 122), being land- and water-constrained. 7 There is no recent data for Haiti about the percentage of youth that do not work nor study. The last data of 2012 was comparable to the Do- minican Republic for the same year (around 18% and 20% respectively). It is defined as “Share of youth not in education, employment or train- ing (NEET) is the proportion of young people who are not in education, employment, or training to the population of the corresponding age group: youth (ages 15 to 24); persons ages 15 to 29; or both age groups.” 51.3 51.9 53.0 53.3 54.0 54.6 56.4 59.1 60.8 63.2 38.0 37.3 47.7 47.3 0.0 10.0 20.0 30.0 40.0 50.0 60.0 70.0 GINI 7 The age structure, along with poverty, population density, and vulnerability to natural disasters is a rec- ipe for contentious politics, social violence, and rampant crime. A “good neighborhood,” but with drawbacks As noted by Collier (2009), and different from fragile states in Africa and Central Asia, Haiti is in a pros- perous and peaceful neighborhood, and very close to the United States, the main market for much of its exports of goods and services. This offers locational advantages for agricultural and manufacturing ex- ports, and tourism. However, it has also drawbacks related to the peculiar security, economic, social, and political links that such proximity generates. Regarding security , because of its institutional fragility and its geographical position, Haiti, as men- tioned, is a desirable transit point for drug traffickers towards North America and, also, a conduit for other international criminal trade. The significantly negative implications of those activities for the Hai- tian society and government are obvious. In economic and social terms, income inequality in Haiti, in addition to structural and historical reasons, seems to also be related to the way in which part of the Haitian population gets inserted in the US economy while other sections of Haiti cannot do it. For instance, there is a circuit of legitimate private business integrated with the US. There is another circuit linked to remittances of Haitian people living in the US. That money, however, is received by a fraction of the households, and relatively more by those that are urban and non-poor. World Bank 2015 notes that, while on aggregate about a third of all households receive remittances, the share increases to more than 35% for urban households and drops to 20% for households in rural areas. Further, the report shows that, nationally, 38% of non-poor households receive remittances, but only 18% of the poor, and somewhat less than 14% of the extreme poor (the percentages are, respectively, 41%, 26% and 15% for urban households, and 32%, 15% and less than 14% for rural families) (World Bank, 2015, Table 2.2). This would be because migrants tend to be from urban households with higher incomes, and therefore themselves more educated (see the analysis in World Bank, 2015). The relatively higher level of education of the migrants also causes a brain drain that hurts Haiti (see Evans Jadotte, 2012; and World Bank 2015). These assertions, however, need to be validated with more recent data. There is a third circuit related to international organizations, bilateral agencies, NGOs, church groups, and similar activities of cooperation and development that usually pay higher salaries than local ones. Also, being just a few miles away from the United States makes easier for persons of good will that, for 8 religious or humanitarian reasons, want to help the poor, to set up missions and engage in social pro- jects. Those initiatives, while certainly contributing in many cases to alleviate serious social and human- itarian sufferings, lead as well to a proliferation of activities without an overarching country strategy and with different quality of the social services provided. Finally, there is another circuit, mentioned before, of illicit activities which may include drug trafficking, smuggling of goods and persons, and other criminal networks, which ensnare the young and unem- ployed into better remunerated activities. On the other hand, there is a substantial percentage of the population without the language, skills, and contacts to be able to migrate or to get integrated in those other circuits. The combination of all those activities, licit and illicit, generates a large dispersion in incomes, depending on which circuit the differ- ent groups of the Haitian population are integrated. At the same time, as noted, migration of the more educated population denies the country the human capital needed for its development (Jadotte, 2012; World Bank, 2015). An additional effect of some of those activities is the impact on the appreciation of the real exchange rate, thus hurting tradable sectors, such as agriculture (where many of the poor work), manufacturing and tourism, with negative impacts on employment, poverty, and income distribution (see the discus- sion of exchange rate (ER) in Díaz-Bonilla, Paz, and Piñeiro, 2021). The potential impact of interna- tional financial flows both developmental and remittances) on the appreciation of the real exchange rate (RER) has been noted by different studies in developing countries (Díaz-Bonilla, Paz, and Piñeiro (2021). Remittances are crucial for some groups in Haitian society, but, they are not the majority and certainly not the poorest: a better understanding is needed to transform them in instruments of human and productive capital accumulation, while managing the macroeconomic effects of the Dutch-disease effect. From the political perspective, it is impossible to deny the fractured and confrontational nature of the political process in Haiti for many decades. But along with internal conditions, an external factor has also contributed to a fractured polity: due to its proximity to the US, Haiti has been caught many times in the racial, partisan, and Cold War politics of its powerful neighbor. Several bruising battles have been fought between different actors in Washington DC involving Haiti as a proxy since the times of the Duvalier family, going through the military coups and uprisings against Aristide in 1991 and 2004, and, lately, in relation to the influence of Venezuela’s Chavism mainly through PetroCaribe (the agreement started in 2005 with many Caribbean countries through which Venezuela offered oil supplies on very concessionary terms and in ways that helped the country monetize part of it for public expenditures; Haiti joined in 2006). The undeniable problems to generate consensuses that exist in the Haitian politi- cal process have been historically exacerbated by the feeling on the different sides, well-founded or 9 not, of having important allies in Washington who were going to allow them to triumph in their battles within Haiti. The history of intermittent and contradictory external irruptions strengthened the tenden- cies towards intransigence between opposing factions within the country. The episodes in 1991-1995, which included the boycott by a US Administration to the military govern- ment that had ousted Aristide, and the period from 2001-2004, marked by antagonism to the second Aristide presidency by a different US Administration, led to largest drops in income per capita in Haiti (see Table 4). The debates about the legitimacy or not of the elections of the last two Presidents, and the role of the international community in those processes, also have contributed to a fractured political dialogue. Therefore, it is necessary to ensure that Haiti does no longer become a prisoner of external ideological battles that reinforce the tendencies towards internal divisions and lack of dialogue. Table 4. Economic growth by governments GDP per capita (USD constant 2010) Total aggre- gate change from previous period (USD constant 2010) Total aggre- gate change from previous period (%) Total aggregate change from the year 1960 (%) 1960 1512 1986 End of Duvaliers 1542 30 2.0 2.0 1994 End of Military government 1029 - 513 - 33.2 - 31.9 2000 End of Preval first govern- ment 1150 121 11.8 -23.9 2003 End of second Aristide gov- ernment 1137 -13 -1.1 -24.8 2006 End of transitional govern- ment 1128 -9 -0.8 -25.4 2011 End of Second Preval Gov- ernment 1226 98 8.7 -18.9 2015 End of Martelly government 1261 35 2.9 -16.6 2020 Currently 1188 -72 -5.7 -21.4 Source: WDI/WB. Note: when the change of government took place early in a year (such as in 1995, 2001, and 2005), the year considered in the Table is the previous one. It is not surprising that the two terms of President Preval, who was elected and ended his non-consecu- tive mandates democratically (the first in Haitian history until that point), are the two periods of higher growth of income per capita, even though the country suffered several natural disasters. And the third 10 period of growth was during the Martelly Presidency, when for the first time in Haitian history a Presi- dent from one party received the government from a President from another party. 8 More recently, the collapse of Venezuela, which in 2018 led to the termination of PetroCaribe’s conces- sional oil shipments, ended a source of finance for different public sector programs (which have not been replaced) and forced the Haitian government to eliminate the internal energy subsidies that year. The latter, in turn, led to violent protests against President Jovenel Moïse (related to the deterioration of living conditions, the curtailment of energy subsidies, and suspicions of corruption linked to Petro Car- ibe and other programs), and a crippling shutdown of economic activities in the whole country (in what was called “Peyi Lok”). The turmoil has continued and recently was compounded by the tragic assassi- nation of President Moïse. The pandemic has delayed the needed steps that international organizations were supporting to normalize political conditions and to contain criminal activities by gangs. The situa- tion of Haitian at the Mexican/US border has added to the complex political dynamics between Haiti and the US. In summary, Haiti has a configuration of continuous impacts of very negative natural and health shocks, high population pressure over natural resources, high poverty and income inequality, young (and unem- ployed) population and an appreciated RER (more on this below) in a combination that other countries (in LAC and in other developing regions) do not have to confront, and that makes for a complicated management of the political process. The later has been also affected by Haiti becoming part of racial and political disputes in the US. Those tremendous challenges are even more difficult to address be- cause of another characteristic of Haiti: the country has a very small government (discussed next). A very small government Constraining the possibilities of confronting the problems mentioned, the Haitian government, meas- ured in expenditures as percentage of the GDP, is one of the smallest in the world (Figure 2): according to the IMF Fiscal Monitor Haiti’s government expenditures (average 2012-2020) is 12.3% of the GDP, 9 when the average for low-income countries (which the IMF distinguishes from emerging-developing countries) is 18.8%; the same category of countries in LAC shows expenditures of 22.4% of the GDP, and of 17.3% in SSA. In the case of emerging-developing countries (the next higher level of income in 8 There have been allegations of significant meddling by external actors in the election of President Martelly, which the author is not in a posi- tion to judge. 9 The last IMF Article IV has a larger percentage of expenditures on the GDP. But this seems related to the fact that the GDP in nominal do- mestic currency utilized in the report is smaller than the one considered in other IMF reports and in the World Bank’s World Development Indi- cators. 11 the IMF categories) public expenditures are above 31.5% of the GDP; they reach about 32.9% in LAC and 17.8% in the Dominican Republic. Figure 2. Government expenditures as percentage of GDP Source: IMF Fiscal Monitor. Average 2012-2020. The earthquakes, the sequence of other natural and health disasters, and more recently the COVID19 pandemic, have further weakened the human and operational capabilities of an already small public sector (these shocks also damaged the operational capabilities of the international agencies and NGOs functioning in the country). Therefore, the country suffers from a combination of shocks and structural problems, but it does not have a government with the institutional, financial, and human resources to solve them and serve the population. That small size along with the multiple problems affecting the country have led to several developments that complicate even more a sustained, coordinated, and prioritized answer to the ongoing suffering. Some of those include the following: *The public sector is fragmented with relatively small programs, with high administrative costs per unit of person served. For instance, in the case of the social sector, in 2020 there were over 20 social pro- tection programs implemented in Haiti by over 11 public institutions and ministries (UN, 2020). Trying to reduce that dispersion, the government approved in June of 2020, 11 social protection mechanisms un- der the National Policy on Social Protection and Promotion (PNPPS). This effort is commendable. A 31.5 32.9 17.8 18.8 22.4 17.3 12.3 0.0 5.0 10.0 15.0 20.0 25.0 30.0 35.0 Emerging Market and Middle-Income Economies Emerging and Middle-Income Latin America Dominican Republic Low-Income Developing Countries Low-Income Developing Latin America Low-Income Developing Sub-Saharan Africa Haiti Government Expenditures (% GDP) 12 main question is whether the government has the human or financial resources to implement that policy to scale, given that the PNPPS is still conceptually and institutionally complex. 10 *Because of a weak and fragmented public sector, the country receives a variety of support from inter- national organizations, NGOs, churches, and the like, with projects that, also in many cases, are small and uncoordinated. All this leads to the perception among the Haitian population that a not insignificant part of what is announced as external aid (public or private) is in fact spent in international consultants and operational costs of the international agencies and NGOs, including vehicles, rents for houses and offices, and similar expenditures that, in addition to making the funding that goes directly to the benefi- ciaries smaller than it seems at first sight, puts additional pressure on prices of a variety of tradable and non-tradable goods and services in Haiti (with, as mentioned, a negative impact on the real exchange rate 11 and income distribution). At the same time, the donor community takes a lot of time from the na- tional staff, related to participation in meetings, preparation of documents, and similar not directly oper- ational activities. 12 *A government small and weak also poses a dilemma to the international community that tries to sup- port Haiti (as noted in Collier, 2009 as well). Respect for Haitian sovereignty and the need for country ownership requires that international agencies work in partnership with the government of Haiti. Related to this, the international community may be reluctant to organize and use the needed coordinating mechanisms among themselves if the government does not call and push for that coordination. But in- stitutional weaknesses and scarce time of the officials may prevent them from taking that strong coordi- nating role, which is absolutely necessary, given the proliferation of international development partners. At the same time, when confronted with the government’s institutional weakness, the international com- munity has resorted to several approaches, some of which may not necessarily be in line with the needed respect for the country’s sovereignty and ownership. One of those is simply to work separately from the government, through NGOs, the private sector, and other social actors. This approach may help to deliver some quick results, but may be limited in scale, lack a national strategy, and, in some cases, weaken further the legitimacy of the government. 10 This is part of a pattern, not only in Haiti but also in many developing countries, of drafting very ambitious strategies and programs (usually requested by the international community) but for which the governments may not have the financial and institutional capabilities to implement as envisaged. Also, the process of preparing those strategies takes a large amount of valuable time from Haitian officials and resources from the international agencies. 11 Some aspects of exchange rates in Haiti are mentioned later in the paper. A more detailed discussion can be found in Díaz-Bonilla, Paz, and Piñeiro (2021). 12 The author remembers that the first meeting after the 2006 inauguration with the late President René Préval (may his soul rest in peace), he said, half-jokingly, that with all the activities of the international organizations and bilateral aid (whose representatives always want to talk with the President, or the Prime Minister at least) he was going to need several public sectors to work with all of them. Less jokingly, and, rather, sadly resigned, he also said that he expected, if things did not work in the future, that his government was going to be blamed for their sup- posed inefficiency and inability to get things done. He insisted on the need to have fewer, but bigger, projects, and with greater impact. This is still a pending debt of the development community. 13 A separate approach is to focus on “institutional strengthening” and general governance issues (includ- ing “corruption”), which are supposed to help improve the operations of the public sector in the (hope- fully near) future. But focusing on institutional building in general terms may be perceived by the popu- lation as the authorities working for the donors, strengthening the public sector but without immediate benefits for the Haitian people. A third approach is to set up parallel structures (from individual executing units that last only while there are project resources, to the suggestions after the 2010 earthquake about the creation of an Interna- tional Development Agency to take over the reconstruction of Haiti). There are variations to this ap- proach. One has been to privatize or enter into management contracts for certain operations such as was suggested for the port at Port-au-Prince, which has the highest cost of other ports in the Carib- bean, and for customs procedures and service, at least in some areas such as in special export zones (Collier, 2009). Privatization was also suggested for the main public electricity company and the possi- bility of allowing private operators in the energy sector. Certainly, this is a relevant option to improve the operation of those public services. A question is why the several past efforts in this regard have had limited results. Another model of parallel operations suggested has been the Independent Service Authority (ISA) (see Collier, 2009), which would be a quasi-independent public agency (with a Board with majority from the government) that coordinates and co-funds NGO and private sector provision of certain public services, mainly social ones such as education and health. The ISA would implement but not define policies, which would still be the task of the relevant ministries. It would have three functions (Collier, 2009): first to receive international development aid, and money from the government and other potential sources (but as part of the national budget process); second, channel the money to different NGO and private service providers by entering into contracts with them, with specific requirements (set by the ministries) of quality, geographic coverage, and other standards; third, to monitor the performance of service pro- viders against the standards set. This is another option that can be considered for some of the activities in education and health. A fourth and perhaps better approach for some operations would be to agree with the government to embed international technical staff in Haitian institutions working side by side with national staff, and focusing on programs that have a direct and immediate impact on the population. In the process of im- plementing those programs, the national and international staff establish the operational mechanisms to strengthen government institutions, technical capabilities, and the budget process and financial con- trols. Something similar has been suggested by Brigety and Ondiak, 2009 (a report prepared for the Center for American Progress), when they advised the creation of what was called the Governance Capacity 14 Partnership, or GCP, to provide direct bureaucratic support to essential Haitian ministries. The GCP would consist of teams of technical experts from donor countries that would be assigned to work for a period in those ministries both performing specific functions (as negotiated with the Haitian govern- ment) and training their counterparts. In this approach the international community and the Haitian gov- ernment would conduct assessments to determine which crucial ministries require assistance, what are the most vital tasks, and the minimum number of external consultants required to fulfill those functions in the near term (Brigety and Ondiak, 2009). This approach may be particularly useful for setting and operating the financial, accounting, and audit controls to integrate all governmental operations within the Treasury Single Account (TSA) that the IMF is recommending. Another option pursued was that international organizations pay separate bonuses to national staff ac- cording to objectives achieved in a program. That was the case of an IADB project with DINEPA (water and sanitation), and there was an attempt to design a transversal intervention with that logic, which was supported by the Haitian authorities. Obviously, the most dramatic manifestation of the fragmentation and weakness of the public sector is the current state of lawlessness, with armed gangs and criminal groups now controlling parts of Haiti. Although some commentators may still favor an external intervention, such as it was the case of the MINUSTAH, below it is suggested to try another approach that would consider the understandable re- luctance of the Haitian people to see foreign troops in their territory. The idea would be to strengthen the Haitian police and support it by embedding international police personnel at the operational level (as briefly discussed later). The logic of international aid paying for salaries of local personnel can be applied here to the police. And corruption? Transparency International, in its rank of perceived corruption 13 , places Haiti systematically in the low- est positions (in 2020 it appears in the 170 th position along with other three countries, out of 183). It is also common in international development documents to find references to Haiti as “one of the most corrupt countries in the world.” However, currently, TI reports that it does not have a chapter operating in Haiti, which is usually a crucial source for the evaluation of corruption with hard data. Also, the Enter- prise Surveys of the World Bank that would provide solid evidence through systematic interviews with the private sector about different specific instances of corruption, does not include Haiti. Therefore, this 13 Corruption is defined by TI as “the abuse of entrusted power for private gain.” 15 paper prefers to take a different view, emphasizing the several institutional fragility and other con- straints that need to be solved, regardless of what the perception of corruption may be. The main problems are a) the significant institutional weakness of the public sector which leads to lack of adequate accounting and financial controls (making difficult to determine for sure whether there was appropriation of funds or not, or whether the problem is simply waste and inefficient use of resources); b) low salaries that, additionally, are being paid intermittently, which may lead some public employees to request side-payments and try to use public funds personally (the lack of regular payments is a par- ticular problem in the case of the police); and c) the overwhelming poverty and lack of economic oppor- tunities that generate a mentality of “everybody for him/herself,” in a daily struggle to survive. All that aggravated by the presence of international crime and drug trafficking, also related to the weak opera- tional capabilities of the Haitian state, which given the limited economic opportunities, can ensnare not only the youth, but also members of political parties and the business community. At the same time, it must be recognized that accusations of corruption are common instruments of the rhetorical battles in politics in many developing countries, and Haiti is no exception. Therefore, percep- tions may also be shaped by the reiterated use of those political allegations. Finally, as noted before, the population that hears about large amounts of foreign aid and sees a significant number of interna- tional personnel operating in the country but does not necessarily feel positive changes in their lives, would be very susceptible to allegations that someone, somewhere must be stealing that money. 14 This paper considers that a better approach is focus on strengthening the financial, accounting, pro- curement and operational capabilities, simplifying tax and regulations, and clarifying the related deci- sion-making processes; to ensure that salaries are adequate and are paid regularly; and to foster eco- nomic development and employment opportunities while controlling crime and money laundering. As mentioned, all that needs to be done regardless of what the perception of corruption may be. Predicat- ing those necessary actions on the argument that Haiti is “one of the most corrupt countries in the world” is unnecessary and, and most likely, counterproductive. 14 Governments in developing countries are in many cases the culprits of those perceptions by announcing repeatedly the same money they are receiving from international banks and bilateral aid agencies, which in the minds of the national audience tend to accumulate. Also, as mentioned elsewhere in this report, given the small scale and fragmentation of many international programs, a non-trivial part is allocated to running the programs (staff, vehicles, offices, etc.) and far less than needed ends up directly supporting the intended beneficiaries. 16 A LONGER VIEW OF GROWTH The characteristics mentioned suppressed growth in Haiti. GDP per capita (measured in local currency) between 1960 and 2020 has declined by about 21% (see Table 4 and Figure 3), 15 with the largest de- cline, as noted, during the boycott of the Cedras dictatorship and the second one during the recent Peyi Lok, also compounded by the impact of COVID 19. Figure 3. Haiti GDP per capita (constant 2010 dollars) Source: WDI/WB The increase in the seventies was related to the resumption of foreign aid to Haiti after Duvalier Jr. re- placed his late father, and it was also supported by global and regional growth particularly in the second half of the seventies. GDP per capita reached its highest level in the year 1980 and started to decline since then, affected by the double dip recession in the US in the early 1980s, the impact of the HIV pandemic, the African Swine Fever, and the domestic political turmoil generated by the erratic and klep- tocratic policies of Duvalier Jr. Also, in 1985 the Dominican Republic (which until then had kept the peso tied 1:1 to the US dollar) devalued its currency, changing significantly the relative competitiveness between both countries. Haiti, on the other hand, maintained its parity of 5 gourdes per dollar until 1991, which led to the relative overvaluation of the national currency. Since then, the Dominican Re- 15 Only other 4 countries have seen larger declines in their GDP per capita from 1960 t0 2020, all in Sub-Saharan Africa. As a reference, for the world as a whole, GDP per capita increased by 194% and LAC by 144%. 0 200 400 600 800 1000 1200 1400 1600 1800 2000 1960 1962 1964 1966 1968 1970 1972 1974 1976 1978 1980 1982 1984 1986 1988 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014 2016 2018 2020 GD