(1954) L'économie d'Haïti

W.H. 26-b RESTRICTED FiLE Copy This report is restricted to use within the Bank.I INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT THE ECONOMY OF HAITI August 5, 1954 Department of Operations Western Hemisphere Public Disclosure Authorized Public Disclosure Authorized Public Disclosure Authorized Public Disclosure Authorized Public Disclosure Authorized Public Disclosure Authorized Public Disclosure Authorized Public Disclosure Authorized CURRENCY UNIT -GOURDE U.S. $1 Gs. 5 Gs. .1 * U. S. $0.20 Gs. limillion .U. S. $200,000 ThBLE O' COVTHPIS Page BASIC DATA SUlNDRY .i. I. THE COUmTRY AND TilE P-5XPLE 1 TI. ECONOMIC DEVELOFQPikET 2 III. AGRIITJL 7 PJRE 5 General 5 Subsistence Crop and Livestock 6 Coffee 7 Sisal 8 Sugar 9 Bananas and Other Crops 9 Prospects 10 IV. IiNTuS2RY 12 ,ining 12 Tourism 13 V. TEA,S?ORTATION 13 Ports 13 Railways 14 Roads 14 VI. .ONY AND B 'ANKING 15 General 15 Banking System 16 Proposed Mionetary Reform 17 Savings and Internal Capital Market 18 VII. PUBLIC 'KINAEJCE 19 Government Spending Programs and Policy 21 Debt Position 22 VIII. BALANCE OP PP1rcNrsM 24 TABLIZ OF C07§2:'p,!JTS (cont'd) STAT:STTCL ¢JJ_APP)-IX Table 1 -Summary of External Public Debt Table 2 -Estimnated Contractual Service on the External Public Debt Table 3 -Exports by Main Commodities and Preas Table 4 -Volume of Exports Table 5 -Imports by 1'ain Commodities and Areas Table 6 -Number of Tourists in Haiti Table 7 -Recorcd3Budget Expenditures and Revenue Table S -Budget Revenue Table 9 -Public Investment Table 10 -National Bankc Table 11 -Domestic Mgoney Supply Table 12 -Loans and Advances 1952-53 of Institut Haitien de Credit Agricole et Inaustriel (IIECAI) 21.IC DATA Area 10,700 squiare miles Population (1950 census) 3,112,000 Approximate yearly increase 1.5 % Trade 1951-52 1952-53 (in U.S.$miTllion) Exports 52.9 37.8 Imports 50.7 _5-1 Balance + 2.2 -7.3 Foreign Exchange Reserves Central Bank In U.S.Ž. million (30th September) 12.6 6.5 In % of imports 27.9% 1b.L% Principal exports Coffee (% of total exports) 62% 65% Sisal t 19% 12% Sugar t 6% 6% Budget Revenues (in TJ.SA * million) 29.3 27.3 'External Public Debt A.s of Dec. 31,1953 Total (in U.S.S million) 28-75 Eximbank loans (disbursed and undisbursed) 17.75 Internal loan 3,99 Hell by National Bank 3. f9 Held abroad O. ho Other 7.01 1. Haiti is to be singled out among the Latin American Republics for a number of characteristics: it has an almost completely negro population; formerly one of the richest colonial territories, it has probably now the lowest standard of living, income per capita, as well as the lowest per capita trade and proportion of urban Dopulation; it has few big estates but innumerable small peasants' holdings spread over a mountainous countryside; and it is the only country of which French is the official language. 2. The density of population is the highest in all the American Republics; but while population is growing, land resources are shrinking ovwngr to soil erosion and exhaustion. Income per capita has been more or less stationary for many years. The apparent postwar improvement of Haiti's economic position is almost entirely due to a considerable improvement in the terms of trande as a result of high coffee prices, and not to any real increase of output. 3. Coffee, which grows more or less wild on the highland slopes, is the principal export crop, follovwed by sisal and sugar. Domestic food production is insufficient to support the 3.5 million inhabitants, and food represents no less than 20% of the country t s imports. Some progress is being made, however, through the extension of irrigation and the growring of rice made possible by Point Four technical and financial help, and by the Artibonite Valley irrigation and reclamation project financed largely by a ;ilh million Export-Import Bank loan. Nevertheless, it is apparent that, if substantial progress is to be made, better techniques and more abundant credit -are not enough and that funda- mental changes will have to be made in the structure of Haitian agriculture. 4. The monetary system, as it has functioned since the American occupation (1915-1934), has assured internal and external stability, but to some extent at the expense of economic development. The gourde note issue is usually more than one hundred percent covered by gold or dollars, and the total money supply varie closely with the movement of exchange reserves. vith very little scope for internal borrowing, the Government has to balance its budget on average. Thlis absence of budgetary and monetary elasticity hlas prevented inflation and serious balance of payments crises. 5. However, since 1951 when the Government began to play a more active role in economic development by launching an investment program, things have begur to change. Heavy Governmnent spending led to a budget deficit in 19q1-52, and in 1952-53, bad crops and a fall of prices led to a balance of payments deficit and a further large budget deficit. These deficits wiere covered oy short-term borrowving from the National Bank, and from foreign contractors and foreign banks. 6. The big increase in coffee prices in 1953-54 will considerably help a return to balanced accounts. However, the 1951-53 crisis has shown that even a slight departure from conservative policies can lead to serious imbalance. Proposals for currency and central banking reform which would introduce greater monetary flexibility are now under discussion. These proposals could lead to financial instability, but much would depend on the way in wghich the Government managed the new system. If these proposals were adopted, their workcing should be closely -watched. -ii - 7. If, as is generally expected, the price of coffee remains htgh for the next twvo or three years, the present moment offers HIaiti an exceptional opportunity to stimulate much-needed economic development. Both Government and private investment resources should increase significantly and if these resources can be effectively channelled into productive use, lasting benefit to the economy would result. The prudent absorption rate for foreign loans will depend greatly on Government policies and investment programs in this new situation. Thle coffee price rise is quite recent, and indications that efforts to date do not Dromise large results are not necessarily discouraging. 8. Haiti's debt record has been good. At present, the total external commitments of the country are not unduly high. The current and next few years are burdened with repayment of short term commitments incurred in 1951-53, but the high exchange and fiscal receipts to be expected from no"; on vill make it possible to meet them and also to make fairly large investment expenditures. By 1957, the only external commitments outstanding should be two Export-Import Bank loans, on which amortization will then begin in full; internal indebtedness if any, will probably be small. T. THE COCRNTRY A ITD TE PEOPLE 1. The Republic of Haiti occupies the western third of the island known as Rispaniola, Santo Domingo or Haiti, second largest of the Caribbean islands. The country is very mouintainous, .:ith ranges of nearly -,00O feet, and the low- lands comprise less thatu one-fifth of' the whole country. The principal plains, all near the sea, are the Northern Plain, facing the Atlantic, the Artibonite and Cul-de-Sac Plains, facing the sheltered (konave Gulf, and. the Ca-,es Plain, in the south; to these should be added the undulating expanse of the Central Plateau. 2. iVt/holly within the tropics, Haiti has two wet seasons, from Mlay to June and from September to iNovemlber, and a major dry season from December to April. Except for the Worth and South Coasts, the country faces west. It is thus out of the path of the m.ore dangerous hurricanes, and also sheltered from the pre- vailing trade winds. Althouah the country receives on the whole a fair amount of rain, distribution varies greatly from one place to another; several parts of the country receive less than 50 inches a year, which with the prevailing temperatures means semi-aridity in the absence of irrigation; this is notably the case of lower Artibonite and, to a lesser extent, the Cul-de-Sac Plain. 3. The Haitian people are descended from the slave population oF this one time French colony, which achieved independence in 180L. Possibly 90% are of pure African origin. Pest estimates put the present population at 3.3 to 3,5 million neople, which in this country of 10.7thouseno square miles, the size of Belgium or TMlaryland, gives a density of over 300 per square mile, the nigh- est in all the Latin rAmerican republics -although somewhat low.er than in Puer- to Rico and some other small islands. L. Both birth and death rates are high. Estimates of the rate of popula- tion increase very widely; the fip-ure of 1.5% per annum, which appears a fair one, is definitely lowrer than in most other countries of' the area. However, this is big enough for so densely populated a countrr with virtually no outlet for emisration. The improvement of sanitary standards, clearly noticeable in recent years,means that the rate is more likely to increase than to decrease. The great bulk of the Tiaitians are country dwellers. A distinctive feature of Haiti is the nearly complete absence of large estates and the un- usual degree of occupancy oP the nighilands. This makes Haiti unique in the Caribbean. There are few villages in the usu.al sens; of the word, but scatter- ed settlements are -round everywhere. The contrast i: most marked with the nei½hboring Dominican Republic, vhere the density of population is onlyr one- third of that of' Haiti and the great bulk of the people is concentrated on the lowlands. 6. Illiteracy is estimated at 855. The problem of illiteracy is compli- cated by the fact that, whereas French is the official language, 80 or 9&% of the population speaks only Creole, a corruption of French based on the Norman French of seventeenth century sailors whi-ch has also borrowered from Spanish, En- glish and sometimes African sources. Taking this fact into account, and on the grounds that there can be no real progress if education is not spread throughout the country, various efforts have been made in recent years, sponsored notably by UNEtSCO, to raise Creole to the status of a wvritten language and so to by-pass French. Although a final conclusion is pre- mature, the experiment does not appear to have met with much success so far. Mieanwhile the Government and Government-sponsored Catholic institutions are pursuing their efforts to spread education through the medium of French. Progress, however, is still slow, at least as far as primary education is concerned. 7. Haiti is a centralized republic. It has never shown great political stability. The present constitution, the thirteenth, dates from 1950. Executive power is vested in a President elected by popular vote for a term of six years and not eligible for immediate re-election. The term of office of the present President is due to expire in 1956. The legislature, composed of two houses, is usually in session from A.pril to June or July. In practice, the C.ongress neither proposes nor votes any changes in the budget submitted to it; nevertheless the importance of members individually and collectively is far from negligible. The President is assisted by the Council of the Secre- taries of State, who as heads of the individual de;Cartments reoort exclusively to him; the Secretaries have only a limited power of decision and are usually changed more frequently than the President. In the last ten years, the Army has regained most of the political influence which it enjoyed prior to the Prmerican occupation of 1915-1934. II. ECONOTIC DEVELOPMENT 8. Haiti is economically backvard. Available statistics show an income per capita of around !64 for 1952, the lowest in Latin Xmierican countries; the trade per capita comparison puts Haiti in the same rank--all the more striking as the smallness of the country and its location in one of the active commercial areas of the world should tend to put it higher, all other things being equal. Laborer's wages are the lowest of the wrest Indies; legal daily minimum wages, which are probably not far from the actual averages: are set at $0.70 in agriculture, and tl for Government employed workers. Food consumption per day has been reported very low in terms of calories -although it has sometimes been said that the variety of the Haitian peasant t s diet compensates in part for its overall deficiency. All measurements and observations confirm the existence of a lowr standard of living and of a very limited degree of development. 9. But the economic picture in Haiti not only shows a low level of development; it also shows very limited progress over the years. As a matter of fact, it is not certain that output has matched population increase. The 1948 U.N. mission estimated that there had been no increase in the per capita income from 1927-28 to 1947-48, if not an actual decrease. The increase in the volume of exports in the past twenty or thirty years, if any, has been very small. Comparative surveys of the Caribbean area, although not fully reliable, generally tend to show that only Haiti is in such a position, 10. Not only has progress been slight, but there has been nothing uniform or steady about it. For instance, exports of practically every Hlaitian commodity, including coffee -the major export crop -have been at one time or anotner in the present century much higher than they are now. mTe p)ostwar period alone has seen a marked decline in the export of sisal, bananas, sugar, essential oils and handicraft articles. MTis, of course, is partly due to the very versatile nature of the Haitian agricultural system of small hold- ings and has its advantages; following price movements, crop diseases, or any, other causes, there is a quick switch from one crop or trade to another. Foo> growing is usually the main substitute; in numerous cases, how,!ever, once prosperous crops have fallen into decay without ever being really replaced. 11. The country's present economic condition and progress are in great contrast with what has been recorded in the past. As a colony Haiti, then called Saint-Domingue, was very prosperous, some contemporary writers even went so far as to say "astonishingly" so; this vwas within boundaries whichs from 1697 when Spain recognized France's right to the western third of the island, up to now, have changed only little. At the end of the 18th century Saint-Doningue was France's richest colony, the "pearl of the Antilles". Cultivated under a plantation economy, the island was devoted to the producti, of several then very valuable tropical products0The export of sugar, of which it was the world's foremost producer, with probably over one-third of the estimated world total, was nearly double what it is now; that of coffee about the same; that of cotton slightly superior; indigo, which has nowr disappeared, was another important oroduct, balancing more or less, together with smaller amounts of cacao, mahogany and logwood, the new export products which have appeared since. '!fith one-seventh of the present population, the country then produced a volume of exports much above the present level, and received for them, especially for sugar, a relatively higher price than now. This was the result of very efficient cultivation. Extensive irrigation works had been carried out, notably in the Cul-de-Sac plain, once described as the most valuable piece of land on earth, and to a lesser degree in the krtibonite plain and other parts of the island. The northern plain, which was colonized first, was less in need of water. Today, one of the most distinctive features of the Haitian countryside is to be found in the massive stonework of sugar-mills, aqueducts (sometimes still in use) and, more rarely planterst stately mansions, all more or less well preserved relics of the colony. 12. The real economic impact of independence, won in 1804, came from tlhe splitting up of estates into a great number of small holdings. This was not deliberate policy, for the maintenance of large estates wTas even attempted for a while in the North. The State, which had acquired for itself a conside able part of the land, was gradually compelled not to interfere with the de facto seizure of the land by the former slaves. As a result, even today, the ownership of land is far from secure and few landowners can produce unassail- able title deeds. 13. This insecurity of land tenure is one of the main obstacles to progress in agriculture. Other obstacles to development are limited educatioi the low level of savings and investment; coupled with inadequate programming and ,maintenance of the investm-ents actually made, wihich result usually in a very low return to the country. The smallness of the country, its small natural resources, and the extreme narrowness of the internal market give it very little attraction for industry or indeed for foreign ventures of any kidr -4 - 14. In 1915, following a period of intense troubles, Armerican troops occupied the country. The decision to withdraw them in 1934 was largely due to President Roosevelt's deep personal interest in Haiti. The American occupation changed the picture very little. The country acquired a well-managed financial system, but this was used mainly for the purpose of paying back the external debt, and only little economic progress was made. One of the lasting results ol the occupation, however, was the abolition of the law preventing foreigners from owning the land. This permitted the establishment of a few big estates, notably of a 28,000 acre sisal plantation in a dry and hitherto uncultivated part of the northern plain. 15. A new attempt to reintroduce big estates and plantation crops was made in 1941 wvhen Haiti entered the war on the side of the U..S.; the govern.nent declared various parts of the country as strategic areas, thus enabling a specially created Atmerican-Haitian company (SHADA) to amalgamate large tracts oX land by means of pre-emption. Rubber and si.sal were the principal crops raised. The experiment had given disappointing results and only losses had been incurred when, in 1952, the Company's assets were turned over to the Haitian Government in return for assumption by the latter of the `$ million P1xport-Impnr Bank loan which had been made to SHADA. 16. As elsewhere, the postwar period has seen the birth of new efforts. C-reat emphasis has been put on the technical and educational side, to which the United Nations and the U.S. "Point Fourlt program have contributed. Both maintain large permanent missions in Haiti. 17. The International organizations have devoted substantial attention to Haiti. There were first the UNTSC0O experiment in fundamental education, wvhich has been going on for several years. There was then the U.N. General Ilission Survey, the first of its kind attempted by the U..,7 which resulted in a report published in 19L9. Since then, U.N. experts, some of them resident and some of them visitors, have lent their services to a great number of activities in Haiti They have been assisting to establishl technical schools for engineers, hotel trade, tanning, etc., and have advised on various problems of agriculture, on the establishment of cooperatives, on statistics, on Government finance, etc. The American experts of the U.S. Foreign Operations >.dministration, some of the? who have been in the field somewhat longer, have been iiorking on very similar lines. 18. Since 1950, investments have risen to a sizeable level. The bulk of private investment, which roughly forms about half of the annual total, is directed into building, practically all in the Port-au-Prince area; most of the remaining private investment consists of reinvested business profits, while very little caoital goes into new enterprises. Public investment is on the whole more directly connected with developm-ent. In the past two years, much of it has been financed by funds borrowed abroad. 19. The projects now under way are very large in relation to the wealth of the country. For instance, the cost of the nximbank-financed Pntibonite river project, by far the most important under way, was estimated in 1950 at `320 mil- lion which was equal to the wyhole of the Government budget for that year (and the final cost will probably be very much higher). Ilowever, the structure of -5 - the Haitian economy is such that these investments are not likely to yield returns as high as rnight be expected. in the case of the Artibonite Valley, ahicch is already 2. peopled area, the difficulties arise from the necessity Df consolidatin, the peasants t holdings in more orderly, lots and of iLmproving techniques and education. If all the present efforts are to bear frmuit, i+ bill be through their indirect educatLonal and. other effects rather than throwu,h their direct contribution to outpuvt. 20. A s compared with prewar, economqic conditions in iTaiti showr progress mainly insofar as price relations are novr extremely favorable to the country. In 1951-52, t err.s of trade (computed on a post-war basis) vwere nearly two and a half tinLes more favorable than in 1937-38, and abaout 60K` more favorable than in 19h7-L8. This results mainly frorm the high price of coffee, which has been constantly appreciating in the postw.ar period. In 1952-53 the termLs of trade fell somewhat with the decline in the price of sisal an: sugar, but in i953-4, with the rise of coffee prices to uinprecedented levels, theyr are to become more favorable than ever before. In ,Tay, 1954 the price of Haitian coffee in -New Y'ork stood at 0o.86 per lb., compared writh 0.56 the year before. Coffee w,aill form nearly 8Q} of Haiti's exports this year. 21. The present coffee boon is a challenge to Haicti. Bringing high export earnings anid highi budget receipts, it offers an exceO'tiornl opportunitV to stimulate much needed developmien't. This should be done throuh -adoption of a coherent clevelopyrient policy in Thich structural changes in agriculture should have hi|hl priority. This opjportunity has to be seized nov; in two or three years time coffee prines may fall, and it will be too late. IIIT, AGRTc wU-LTRE CGeneral 22. Lgriculture is by far BaitiTs most important activity. In conrtrast with colonial timles, sabsistence is its first goal, although the oroduction of export amps for moneyr plays by no means an inconsiderable role in the peasant economy. Cultivated land forms only a small fraction of the total area; this) of course, mainly reflects the fact that maniy parts of the country are barren or consist of mountainsides regularly burnt over by the peasants to make temporary pasture. However, in spite of the great pressure and dispersion of population, not all of the arable land i s actually tilled; even in the richest plains, there appear to be large tracts which remaLn uncultivated for many years in successioxi. The adnis try of A.griculture and the kAgricultural rnca are making some ef -forts to restore them to cultivation. 23. Agricultural equipment is vrery primitive. The use of the plough and the ox-drawn cart is nearly unk-;rno,n; transport ny mule is still a semi-luxary. Fertilizers are not used. In contrast, where American -6 - sponsored projects are under vfay, the most modern machinery is to be found. The gap between modern and Haitian techniques is too great to be easily bridged. For instance, in places where SCIPA (Service Cooperatif Interamerica.in de Production lgricole), an organization which is jointly financed by Haiti and the United States, has introduced rice cultivation with the help of improved irrigation and mechanized methods, the peasants, who are not organized in machinery pools, soon relapse into crude methods of production and the increase in production is not as large and as durable as it could be. 24h. Mlost of the colonial irrigation works wiere allowred to fall into decay in the nineteenth century, but great efforts are being made today to improve irrigation facilities. Out of a total plain surface of 500,000 hectares (I hectare -2.4 acres), it was estimated in 1927, probably conservatively, that 125,000 could be put under irrigation. The aggregate surface irrigated by the various networks in 1952 amounted to 41,000 ha.; work has been done on about 5,000 ha. in the last five years, mainly by SCIPA. However, most of the existing works are in poor condition. The Artibonite river project, which will not be completed before l156, by far the biggest single project in Haiti, aims at reclamation, irrigation, drainage and redistribution of tenure of over 30,000 hectares. Atn important part of this was already under irrigation, although only as a result of irregular floods. In 1951, Eximbank's loan for this project, initially 04 million, was increased to t1h million when it was realized that a big dam much higher up on the valley was necessary for flood control. 25. There is probably little risk that such an important project will not be kept in good condition, but this does not hold good of the smaller water works. The case of a small canal completed two years ago is typical. ReDairs to a small cement structure would cost less than 1,500, but they have not yet been done, and this has resulted in the loss of several crops of rice on over 100 acres. The poor maintenance of existing hydraulic works and the extent of land, little if at all, cultivated, indicate that, in spite of the great pressure of population, there is considerable waste of resources. 26. In the highlands, the main problem is soil erosion, resulting from deforestation and intensive grazing, and which is already very far advanced. Prevention of this by means of contour ditch ploughing, reafforestation, and fencing in of animals is spoken of, but little practiced yet except in a very few places. Subsistence Crops and Livestock 27. Main subsistence crops are millet, sorghum, corn, peas, beans, plantains, sweet potatoes, mangoes and avocados. The cultivation of rice, with a high output per acre, is very desirable in Haiti. Production has increased considerably recently throuth the extension of irrigation, dis- placing nearly all imports; although consumption is increasing it is hoped that the country may becomne a net exporter. In the flat parts of the highlands, temperate crops and vegetables, for which the demand is increasing with the development of tourism, can be introduced successfully. One of the main problems of Haitian agriculture is the storage of crops,whlnh pay every year a heavy toll to rats, insects, rain and thieves. Although production on a typical small holding is very diversified, trade between peasants is highly developed and the IHaitian economy, wvith its picturesque market places all over the country, is much more of a money economy than might at first be supposed. 28. Animals are reared haphazardly, and although numerous, do not contribute much to the wealth of the country. However, somne parts of the country are potential cattle-raising districts, notably the so-called Central Plateau, in the interior. There is a lack of protein in the people's diet, and efforts are now being made to develop fresh and salt- water fisheries, following one of the conclusions of a 19b9 UN survey. Home production of food is supplemented by imports of wheat flour, fish, lard, oils, nilk, meat and many otlher items representing altogether 20 of Haiti's imports; all of these, except wheat flour, could -vuell be produced within the country. Coffee 29. Since Haiti became independent, coffee has constantly been the chief export. The carefully maintained plantations of the Cibnilperid have given place to coffee trees grown wrild, intermingled with other sDecies. They reproduce haphazardly, and vezy little planting is ever done. It is said that plantations in regular rows mingled with no species other than the usual shade-giving trees do not amqount to 10 acres in the whole country. Coffee, essentially a peasant product, is scattered throughout the country, and is exported from nine different ports. 30. The yields are probably mruch under 1 lb. per tree per year, which is definitely lower than in most other coffee-grovwing countries. The area covered remains fairly constant. Immediately before the mar, when prices were particularly low, some trees were replaced by subsistence crops; this happened again during the SH.ADA program of planting ruboer and sisal during the war. In recent years, some replanting has been going on. On the ,hole, export statistics -the only accurate ones -show a declininig trend. A maximum was reached with exports of 4S,0J0 metric tons in 1918-19 and 42,000 in 1932-33; maximum postwar exports were 31,000 tons only in 1951-S2 (390,000 bags of 80 kzs., as used in Haiti, or S20,000 bags of 60 kgs.) -a level which it is expected to maintain this year. However, the reduction in exports partly reflects a big increase in internal consumption, which is at present estimated at over 1h,000 tons; this puts total production at 46,000 tons, probably one of the highest levels ever recorded. 31. The M,linistry of Agriculture forecasts that, wlth the continuation of g,ood prices, production within the next Live years could increase by over 20S (from 570,000 to 700,000 bags of 80 kgs.); if consumption remains stable, exports could increase in a somewhat higher ratio. However, this simply means that the export average of the early thirties would be regained. The increase in production is to come in small part only from expansion on new land, or at the expense of other crops; the administra- tion's minimum prograim for planting in the next five years is only 5,000 hectares (which compares with a total area under coffee of so-enthing around 100,000 hectares); direct planting by the peasants may be somtewhat more important. But most of the increase would have to come from higher yields throlugh the improvement of existing plantations. The administration's improvement program is to cover about 15,000 hectares. 32. However, present efforts do not appear too promisin,;. The rate at which plants from government nurseries reach the peasant,s at present allows for the planting of only 500 hectares a year, and e-en when speeded up with the help of the proceeds of the new supplementary tax on the export of coffee, part of which is earmarked for that purpose, the replanting m.ay fall short of expectations; moreover doubts may well be entertained of the quality of some of the plants privately distributed, or of the efficiency with which replanting is carried out on the peasants' holdings. A simpler way of improving output w^rould be by better drying of the beans. it has been estimated that 1/3 of the crop is lost through poor drying. Numerous conacrete drying surfaces have been built in recent years, but have not given completely satisfactory results. Piechanical drying htas nov been experimentally introduced. The remoteness of most of the coffee growing districts is one of the main obstacles to imorove-rent. Thle regulations governing the activity of the various traders, processors and exporters also apppear to be an important element in the ni cture. 33. The aroma of Haitian coffee is much appreciated in foreign markets, particularly in Europe. Up to 1935, when the Franco-Haitian trade agree- ment vas terminated, half or more of the production was sold on the rench rnarket. After that date, the Urnted States became the principal outlet, and virtually the only one during and after the war. Nio difficulty was experienced in marketing in the U.S. except thFt better gradirng was required; some improveement in this direction is still neededf. After the war the European market gradually increased its buying again, and Belgium became the chief buyer. For the year 1953, Belgium, France, Italy and the Netherlands took 6Th 6f the coffee exports, the U.S. taking most of the rest. All Haitian coffee is paid for in dollars. Sisal 34. Sisal was introduced to Haiti in the late twenties. In contrast with coffee, sisal is grown mainly on large estates. Decortication is best done with machinery capable of large scale operation; however, especially when the price was high, peasants started sisal growing in various parts of the country. Sisal is an advantageous crop for Haiti, as it grow;s on the drier lands unsuited for other crops; it is also one of the few crops for which consideralble expansion on new lands is still possible (on the other hand, it is a crop that depletes the soil, notably of potash, when no fertilizer is lAsed). Lnfortunately for Haiti, the price has fallen from a maximum of 31 cents per lb. in 1951 to a current price of 11 cents, and is more likely to decrease than to increase, owing to the renewed competition of Far East abaca, and increased production from ?ast Africa. The present price is said to be below the cost of production of some of the producers (not, however, of that of the biggest, the 28,000 acre Dauphin plantation). After reaching a maximum of 33,000 metric tons in 1949-50, exports fell to 20,000 tons in 1952-53; no more than 18,000 tons are expected to be exported for 1?53-54. Most of the crop is sent to the U.S. Sugar 35. Sugar, the mainstay of colonial Haiti, was virtually abandoned as an export during the l9th century. However, the cultivation of sugar cane was never abandoned and it continued to be used, either as a direct food, as a source of primitively processed alcohol, or as syrup. Even now, only a small part of the cane prod-uced goes to the sugar mills. Haiti re-entered the export market with the establishment at the begirning of this century of the large sugar mill of the Haitian-American Sugar Company, near Port-au-PIrince. In recent rears, exports have been running around 30,000 tons, somewhat below the immediate prewar level; in the past ten years in;ternal consumption has doubled to 29,000 tons. 'The present price level on the world market (Haiti has practically no position on the t.A1ericnn market) although lox:, is still considered profitable. Thlree new sugar mills were contemplated, which would have enabled Haiti to fulfi.ll the export quota of 45,000 metric tons it was avwarded in the 1953 Inter- national Sugar Agreement (for the year 1954 quotas have been reduced by 20's, the Haitian quota having been reduced by cnly 101;). The first mill, serving the Cayes plain, was completed a veazr ago, but :,rork on the others has been interrupted recently, in one case because it was found that the supply of cane would be insufficient, in the other -which leaves the potentially highly productive N4orth plain w-lithout a proper sugar mill - because of lack of funds. V-e United Kingdomn was the first customer for some years, then the Netherlands; for the first timie in years a slmall ouota has been granted on the U.S. market for 195h. Bananas and other Crops 36. Exports of bananas rose to a sizeable level betseen 1930 and 1946-h7, vwhen they represented 20% of the total value of exports. The trade was a monopoly of the Standard Fruit C'ompany, wrhich had begun its operation around 1930 and got its supply less Lron its 1,500 hectares plantation in the Artibonite Valley than from peasants producing all over the country. However, after the Government, instead of renewing the Company contract, divided it among Haitian businessmen and politicians Twho had made arrangements with a number of small U.S. imoorters and traders, exports declined drastically (from 7 to 0.L million stems from 1946-47 to 1952-53). Ships and bananas never met at the right time and the peasants, vwho furnished most of the supply, gave up produc tion. The confidence of the peasants in banana growing hias been much shaken and it is said that -10 - it will be difficult to restore it. A new government-owned monopoly has been set up in 1952 with, hiowever, small ambitions only. Neverless, this is a line where market prospects are good ancl where development should be pressed. 37. lKore cacRo was produced forty years ago than now. in spite of the current high prices, little replanting is being done, and rats are said to destroy a considerable part of the crop. Exports of cotton have declined as the local spinning mills have absorbed more; soon there will be none left f,r export. Exports of essential oils (vetiver, lemongrass) reached somne importance in the years just after the war; the reappearance of lowter cost Far East competitors has caused a setback. roconut trees are numeroas in the south, although production is still insufficient to maintain a re.gular copra trade. There is a small export of castor oil. kl large experiment in castor oil production wras conductedothTe ='lateau Central during the first W1orld WIar, withoat favorable results. Rubber was a similarly unsuccessful ventrure of "orld )-rar II; some small production has been recorded, however, from 1952 on. Prospec ts 38. -Great changes in agriculture are necessary, not only for progress, but even for survival, in view of the pressure of population and the shrink- age of lanid resources through depletion and erosion. These changes have to be structural; the injection of credit would not by itself be a solution. For instance, although little equiprent is used, the size of holdings and the nature of the terrain afford little scope for rmechanization. P11though rural credit is very scarce (current interest rates in the countrysgide are 2 or 3% per month), the extension of rural credit would be ineffective unless coupled with supervision, advice and organization from within or without. 39. There are two schools of thought on the solution to the Haitian problem. nhe first believes in the develooment of cooperative practices on the part of the Haitians theraselvaes. The lHaitian peasants have long had the custom of cooperat-on in the form of "$coumbite', whereby neighbors freely and voluntarily help a neighbor in time of emergency or on special occasions, like building a house. Recent developments include the introduction of rural credit unions (Calsses populaires), now numabering 6, by French-Canadian priest in 1946. They are now supported by SCIPA (Point IV). However, since they make only small short-term loans at l1 per month, they cannot by themselves greatly change the structure of agriculture. Potentially more important are production and sales cooperatives, of which a few havelbeen formed in the Port-au-Prince area. Properly organized, they could be a very effective mediu for introducing better equinmentu, storage facilities, and techmical advice. However, it is apparent that, if strong political support is not given to them, cooperatives will not make much headray. -1l - 4o. The other school -not necessarily opposed to the first - relies also on the vfidening of rural credit. It believres, howiever, that progress can only be attained on holdinas above the present average size and, by concentrating technical and financial assistance on such holdings, vwould tend to promote their creation. Practically all the agricult'.ral loans of the recently established credit institute (TIHAI) have gone to such holdings. The high price of coffee favors the trend towards slightly larger holdings and in some places there is a noticeable tendency for coffee growing to be concentrated in fewer hands, thus permitting nore efficient cultivation. 41. These two roads to progress are not necessarily opposed. It remains true that the Government has not yet made a clear-cut choice of agricultural policy. But it mrust do so if Haiti is to make real prugress; the peasants cannot improve agriculture without government assistance and instruction. -12- IV. INDUSTRY h.2. Up to the end of the last w.!ar, industry in Haiti vwas mainly confined to the processing of agricultural products (sugar cane, sisal, esse;utial oils, etc.). In the last 'ew years various small-scale industries have been started; on the whole, however, industry is still very limited. O3. Ilost of the industries are to be found in or near Port-au-Prince. They include a vegetable oil plant for processing cotton seed, a spinning ancd weaving cotton mill -a second is in construction which will mean that thie country wvill absorb practically all its cotton production, without howprever being self-slffi- cient in textiles, -and a fevw weaving and apparel work shops. A sisal bag facto- ry and a cement mill, the capacity of this last to be nearly double the countryK, present consumption, are to be completed this year. A soap factory will he the next to be built -soap being a major import. Ui. It should be noted tUhat, although trade and industry are in principle free, it is normally the case that, before setting up a newv industry the would:1-bE entrepreneur makes an agreement mwith the State w1hereby th,e latter concedes such advantages as tax concessions, red.uction of customs duties on machinery and raw material and, if not an actual monopoly, sometimes the guarantee that the same concession will not be civren to a competitor for a certain length of ti½re. This practice, which is not limited to manufacturin7, leads businessmen, both Haitian and foreign, to nesotiate such concessicns long before raising the necessary capi- tal or making any practical stucdy of the venture. Hence there are a great num.- ber of projects of every kind w7hich are talked of but never materialize, and in this way these concessions, intended to encourage investors, may have detrimen- tal effects. L5. Production anH consumption of electricity is extremely low. Installed capacity is about 20,000 kw for the -whole country, of wqhich about half belongs to public utilities companies and the rest to private industry. Sales to the public amounted in 1952-53 to 25 million khvh. Consumption projections (arrived at by the engineering consultant firm) show that lunder present trendIs the total Possibility of productiLon of the Arti'bonite d'qun nowv ilnder construction (11l million kw:ih. norrmel qnd 190 million kwvhh. includling overflo.. prociuction) cotuld not be fully used before 1971. 46- Special mention should be made of handicrafts and smLall indrustry-, which work principally for export and reached a fair level of activity in the imme- diate post-war years (mahogany, sisal goods). An appreciable setback has been experienced since then, but the tourist trade is now bringing sor..e rev-val. Ef- forts are beina made to develop new lines such as furniture making, tanning and shoe making (the import of shoes has multiplied fivefold betwveen 19L9 to 1053). Mining b7. PlTo thorough survev of the country-'s mineral resources has yet been made but it is knowm that lignite (studies have been made of its possible use for the production Of electricity), bauxite, copper and manganese are present. Traces -13- of rarer metals an= phosphntes have been reported; an oil exploration permit has been granted to a small cormpany. So far, the only development actually un- dertaken is of a bauxite mine near yriragoane, operated by the Reynolds M.,ining Corporation. Exports are to begin in the second half of 1955 and are to reach a yearly level of 300,000 tons (w-ith an approximate value of S 5 per ton). This is low compared with the Guianas or Jamnica (in Pritish Gutiana, 1952 production was 2.3 m.illion tons); it is said that although bauxite deposits are nurmierous, output in Haiti could not develop very much. However, this mine represents an investment of Nd million and it wrill make an appreciable contribution to the Haitian budget in the form of royalties and income tax. Tourism b8. Tourism is about to become T.aiti' s second export industry, following coffee and topping' s-sal. The country's main assets are the beaut,r of its scen- ery and the picturesque way of living of its people, both as yet little "spoiled" by technolonical and general prorress. In four years, from 1958-4? to 1952-53, tourists coming annually to Hiaiti increased from 8,00 to 34,000; further progress was registered in the w:inter of 1953-5b. This increase, how- ever, applied to tourists on sea cruises touchinL' at Haiti (usually staying one day or less) rather than to tourists corming by plane, staying on an average be- tween 5 and 6 days. Under the heading' of tourism are to be included the UI.S. Nary sailors, totalling. 35,000 in 1952-53, from ruantanomo base in Eastern Cuba, who are also visiting Haiti in increasing' numbers on weekends. Lourism receipts (including seamen's exnenditure) are estimated conservatively b-r Government of- ficials at t3.5 million for 1l52-53 an- probably about tl millIon more for the present year (other estimates would put these receipts c;1million higher). r,'ost of the tourist traffic is centered in Port-au-Prince and its sub- urb Petionvrille, 1,000-1,500 feet hicher up. The present influx is an outcom.e of t'he construction in recent years of a series Or first-rlass hotels financed throuqh the Covernment-owned Anriculturpl and Industrial -ank. Can Haitien in the Jorth boasts of a fine coast view and is near the spectacular ruin of "La Citadelle"l,X a historical fortress unparalleled in the whole of America. zt hopes to become an important tourist center when work on the airnort iLs finished Another project in the North is the construction, with American Capital, of a resort hotel and beach in an area at present undeveloped. This project would cost about ¢- 0.5 million. V. TRANSPORTATION 50. Transportation facilities in Haiti are still very inadequate. On the other hand, since no part of the country is far from the sea, and since a net- ,ork of' main roads, although i n places in poor condition, has survived from co- lonial times, no region is seriously isolated from the rest of the country or from the outside world. Forts 51. The principal port is Port-au-Prince, which handles 72% of the countryts imports and 47% of its exports (1952-53). Medium sized ships can dock on the pier, but handlinc equipment is inadecuate. A port improvement project has been prepared. Apart from Port-au-Prince, Cap Ha-itien -is the only port where ships can dock at a pier, completed in 1953. All other ports are equipped with small wharves only, so that loading and unloading must be done by lighters. All shipping is foreign, except for a fevw small Haitian ships. Railways 52. The railwvay 'Lines consist of some 50 miles of 30 inch gauge railway be- longing to the Port-au-Prince sugar company, 1 miiles near Cap Haitien belong- ing to SHADA, and a 90 mile line of' '2 inch gauge from Port-au-Prince to Saint- M>'arc and Verrettes in the Artibonite, formerly oa:ned by Americat interests, which is now State owned. Traffic on the latter has declined in recent years, due partly to the reduction in shipment of bananas. The completion of the ce- ment mill at Cabaret betwreen Port-au-Prince and Saint-Larc should somewhat in- crease its tralffic. Roads 53. _Haiti possesses 2,700 kilometers of roads; 1,100 of these are gravel roads, of which 260 are asphalted (30 in 19L3). The improvement of roads was one of the main items of the 5-year development progran lau,nched in 1951; one- fourth of the total planned investment of 0-s. 200 million was earmarked for that purpose. The program included (1) the asphalting of 500 klns of roads lin- king the main cities at a cost of Gs. 32.5 million; (2) the asphalting of 50 kms of a number of short legs of road of special importance \'-s 3.75 million); (3) the construction of 350 kms of penetration roads, mostly in mountainous areas ks,s 15 million). Attention has been mnainly concentreted on (1). Howrever, as a deficit appeared in the public budget from 1951-52 on, the Government be- gan to rely on the financial as well as the technical assistance of foreign con- tractors, and it has become difficult to ascertain how valid the so-called 5-year prograrm still is. In 1952, a contract wras si-ned v,^ith the French ".Socie- te des Grands Travaux de Marseille", which was to carry out most of thie works under (1) above in a 3-year period; this did not become effective as the plans to be arranged by the Societe for an external loan fell through. FinallY, the work on the country's main road, Port-au-Prince to Cap 1-aitien, was diviided be- tween the TMarseille company and thle "Coinpania de Industrias 'HfarLtimasl' incorpo- rated in Cuba but American-ovned, which had also contracted for the port and town improvements of Cap Haitien. At present, about two-thirds of this road has been completed. The asphalting of the 6'0 lms road from Cap Lfaitien to the Dominican Republic border, serhin7 the rich North plain, now virtually com.ple- ted, was done by the Bohama Curacao Constrction Company, a Dutch company; the work was financed by the American-owned Dauphin plantation, one of t'he users of the road, according to the terms of a contract signed in 1952 between the Dau- phin plantation and the Haitian GovernmentD 5. The next roads to be constructed or improved are, according to present intentions, the road Port-au-Prince to !,es Cayes, running for the greater part along the coast, and the road from Port-au-Prince to Hinche and eventually to Cap Haitien, which would oper up the "Plateau Central", a potenUially important cattle-raising district. Very little work has been done on the penetration roads described under (3) above~ but these should prcbably receive more cons-d- eration. 55. There are only 7,000 cars in the country, most of them seen only in the Port-au-Prince area. The weak point of the Haitian road system is and has always been repairs and maintenance. In thle past, the results of several road improvement programs after a fer years have been completely washed away by the tropical rains because of poor construction and insufficient maintenance. This -15 - was notably the case with a program launched in 1938. There is no evidence that things have changed very much since. An official report submitted to the mission states: "The sums allotted for maintenance of the road netvwork (including the expenditure of the maintenance department) thus amount monthly to Gs.34 per kilometer (about ;1 per mile) .... which is insignificant for the work to be done." VI. LIONEY AYiJD PNKTII General 56. The monetary and financial system of Haiti still bears the mark of the American occupation. The gourde, the legal currency, has since 1919 been tied to the dollar at the fixed exchange rate of 5 to 1. Both gourdes and dollars are legal tender and circulate freely in the country, e.g. if gonrdes are tendered in payment, change may be given in dollars. all reserves of the Nationa Bank, which has the privilege of the gourde note issue, are kept in gold or dollars, mostly in New.,! York. All external transactions are conducted in U.S. dollars. 57. The banking system's primary function is the financing of foreign trade. Traditionally, the system vworked as follows. The volume of purchasing power (currency and bank deposits) adjusted itself more or less automatically to changes in the external position of the country. Conversely, the external positd adjusted itself quickly to any change, and if put out of balance, equilibrium was soon restored. A payments crisis was iapossible, since in the absence of elasticity in the monetary and financial system, any reduction of foreign exchangr earnings ipso facto correspondingly reduced internal purchasing power and hence the demand for imports. Thus trade deficits could not last very long, except perhaps in time of a recession, wvhen the continual downward movement might defer the return to equilibrium, as was the case in the thirties. The Government was under the necessity of balancing its budget, as it could not create money nor borrowe, except externally, but as long as external investors did not overestimate Haiti's creditvforthiness, this loophole was not serious. 58. In this system, the National Bank's role was nearer to that of a Currenc- Board with a 100% external backing of the currency, than to that of a real Central Bank. Such a system assures stability. It gives confidence to private foreign lenders wvho look for regular service of their loans. In fact, for a long time, the main objective of the Haitian budget was the collection of monies from customs in order to meet the service of the foreign debt. 59. On the whole, domestic prices have closely followed U.S. price movements. On the basis 19L8 = 100, retail prices were at 93 in the third quarter of 1953. 60. There have been in recent years indications of a tendency to depart from this traditional mechanism, primarily as a result of the Governiaent's heaNT spending and borrowing. In 1951-52, excessive spending led to a large budget deficit. In 1952-53, a reduction in the volume of the coffee crop and in the prices of sisal and sugar caused a drop of J15 million in exports; imports ad- justed only partially to this movement and declined by `;5 million, leaving the highest deficit in trade and payments on record. The reduction in trade brought about a reduction in government revenues and, for the second year in succession, there was a large budget deficit, which was partly covered by borroling- inter- nally from the National Bank, and partly by borrowing from foreign contractors and foreign banks. This helped to maintain internal buyini power and thus ex- plains in part the balance of payments deficit. The question that arises is whether this internal monetary expansion was only a temporary adjustment due to be corrected within a short time anyhow, or rather a sign of a permanent depar- ture from previous practices. In the current year, a recovery is expected, as an improvement in both the balance of payments and th-e government b-dget vill allow for reimbursement of part of the previous year's indebtedness; but so much of this improvement will be due to the increase in the price of coffee, clearly an event completely outside Haiti's control, thrt it is difficult to tell whether a real change has taken place. A de jure endorsement of practices which have already a de facto existence is contained in a draft lawr of monetary reform, which has been under discussion for two years, although a decision has yet to be taken. Banking System 61. The privilege of the courde note issue rests with the "Banque Hationale de la Republique d'Haiti", acquired by the Government of Haiti in 193 from the National City 3ank of New York, which had purchased it in 1922 from the Banque de l'Pnion Parisienne. kn American comptroller was stationed in the Bank up to 19L4 when the 1922-23 U1.5. loan was refunded. As a legacy of this period, the administration and collection of customs duties, the chief source of govern- ment revenue, is still the responsibility of the "Fiscal Department" of the TNa- tional Bank, and not of the Mtiinistr-y of Finance. 6?. Resides being the bDank of issue, the National Pank performs tne usual functions of fiscal agent for the G,overnment, and carr-ies on a normal comrer- cial banking business; all these functions are discharged by the commercial (banking) department. Apart from the iJlational Bank, wrhich has branches in the principal tovwns, there is in Haiti only one other bank, a branch of the Royal nank of Canada. Deposits in the Royal Bank branch amount to about one-fourth of those in the National Bank. On Febniary 26, 195i, they amounted to Gs.17 million; the Rooyal Bank branch maintains only a small working balance at the Panque Nationale, and keeps the bulk of its assets in New York. 63. According to the law, the note issue hias to be covered as follors: at least 33 1/3 per cent by gold or dollars; 66 2/3 per cent by bills bearing two signatures and at less than 120 days, or Haitian Government bonds (within a limit of ',3 million), or gold, dollars or short terin dollars bonds. The lavw authorizing Haiti's me-iership of the I.B.R.D. and 1XF in 1953 also made IBRD bonds and Haiti's drawring rights on the I.MT.F. eligible as cover for the note issue. In fact, as there has alwvays been a scarcity of bills bearing tvwo sig- natures, the ratio of the National Bank's gold and dollar holdings to the total gourde issue has always been much higher than the legal one-third provision. For instance, on September 30, 1950, gold and dollar holdings constituted 54% of the total of the issue; on September 30, 1953, at a time when foreign ex.- change reserves had dwindled considerab' y, it constituted 62% .Variations in this ratio refleottheinability of the Haitien market to furnish domestic paper to cover the currency issue rmore than cnanges in foreign exchange holdings. Tn addition to the gold and dollars used as legal backing to the currency, the -17 - National Bank had additional dollar reserves at its disposal at all times. The real ratio of the exchange reserves to note issue was thus much more than a hundred per cent during most of the postwar period; on September 30, 1953, it had not fallen lower than 689, and has risen again since then. 64. The cash liquidity of the National Bank assets, very high at the end of the war, has gradually declined with the widening of the Bank's lending opera- tions; from September 1947 to September 1953, while total assets increased by 75%, total Bank advances increased fourfold. Nearly two-thirds of the new advances were made to the Government or with the Government's glarantee. The Bank's lending to the Government has taken various forms: subscription to Government bonds or to new Treasury bills (the Bank's holdings of these have bee actually declining with the gradual amortization of the 1947-57 loan); over- drafts on the Government current account (which up to 1951 showed a large positive balance); discounting by the Bank of the Government bonds given in payment to public works contractors; subscription to the capital of the Institf Haitien de Credit Agricole et Industriel (IHCAI); lending with the Government'E guarantee to private or public corporations. 65. The National Bank has tried to maintain its traditional course despite the pressure put on it by the Government. UJntil this year, the Governmnent's overdraft on current account at the Bank could not by law exceed Gs.5 million, this limit being binding on the Government, but not on the Bank. lTrhen, as happened in 1953, the Government overdraft rose above this limit, the Bank was placed in an embarrassing position. It was largely because of the Bank's attitude that, in October 1953, the Government obtained an advance of the expected proceeds of the newr supplementary tax on coffee from a Boston bank, instead of the National Bank (see below). In Npril 1954, however, the legal limit to the Government's overdrafts wras raised to Gs.15 million, which is roughly the actual present amount of the overdraft. Proposed monetary reform 66. Haiti's monetary and central banking system has been accused of not contributing to the development of the country. For this reason, important monetary and banking reforms have been suggested by the U.N. Economric and Financial Adviser and are now under discussion. 67. The essence of the reform would be to give more elasticity to the financial system; to regularize the Governmentts borrowring capacity, and to reinforce the National Bank's reserve position. This would be done (1) by taking dollars out of circulation, thus ending the dual currency system, (2) by dividing the Commercial Department of the National Bank into an issue Department and a Banking Department. The Issue Department could then accept the Banking Department's endorsement of commercial paper, so that the supply of two-name paper eligible as cover for the currency could be greatly increased, (3) by extending the margin of legal Government borrowing. At the same time, the project would maintain complete external convertibility of the gourde and the dollar and partly limit the effect of the increased supply of two-name paper by requiring that the gold and dollar reserves of the National Bank should be, on an annual average, equal to a minimum of 40-h of all its sight commitments. However, the reform has met with opposition in business circles and on the part of the conservative management of the National Bank, on the grounds that it -18- might shake public confidence in the gourde. 68. The exchange reserves of the National Banki are composed of a little over t2,0 million of ggold kept in New York, and for the reuainder of dollar balances in Vlewm York or dollars in cash in Port-au-Prince. Their total has varied from .7 to $13 million in recent years, the average at the end of the fiscal year (September 30) being around $R10 million; this is a little over the value of three months of imports, a level which is not excessive hut has appeared ade- quate to meet changes in the country's level of exchange earnings. In addition. the dollars circulating in the country constitute a potertial foreign exchange reserve. Their value, difficult to assess, has been estimated at up to half of that of the gourde note circulation. Cne ai-m of the proposed reform is to mo;i- lize these dollars. 69. Although the National Bank mainly finances sh-ort-term co,.mmercial tran- sactions, it has at times lent money for industrial or other ventures of nation- al interest. Since 1951 this task has been assigned to the "Institut Haitien de Credit Agricole et Industriel" (Haitian Agricultural and Industrial Credit Institute or XEIO) .IHCAI, which appears to be well and cautiously managed, derives its resources from compulsory loans levied .on the export of certain products (in the form of a small percentage of proceeds5) on the insurance com- panies and on its own borrowers, as well as from its capital, subscribed by the Government and the N,7ational Bfank. Total assets in >Narch 19T.h amounted 'o about d 1 million, of which loans and advances formed 1.5 million only. frost of' the loans, usually small, have been nedium term. So far hotel building has re- ceived the bulk of the credits, medium scale industrr, cane sugar growing and processinc, other industry and agriculture coming next. Although lending is still the only authorized business of IHOAI, thle Puerto Rican "Compania de Fo- mentol" which participates directly in industrial ventures is kept in mind as a future model. Savings and internal capital market 7q. There are few outlets for sav-ngs in Haiti. Tradesmen and businessmen usually keep the greater part of their balances abroad; threir savings, dif- ficult to trace, enter the Hiaitian economy only in the form of reinvested pro- fits, or construction. People in the countryside hoard Fourde or dollar bills, preferably the former, because, it is reported, the uniformly green color of the dollar bills makes it difficult for an illiterate peasm try to distinguish denominations. The amount of these hoards is prohably not very high. '1. Apart from the National Bank, vwhose savings accounts on September 30, 1953, totalled Gs.12.9 million, or 2h% of its total deposits, the only other savings institutions are the rural "Gaisses Powulaires", where deposits at pre- sent reach only Gs.1 million. The 1Hational Bank hopes to attract increased sa- vinLs from the peasants -a potentially important source in times of high pri- ces of coffee -by introducing a new type of account open to illiterate people. 72. Tne Government has hopes of developing a market ror publ-ic and private securities in thne country. In spite of the stability of the currenc,r and, as far as the Government is concerned1, its good debt record, business circles ap- pear up to now to shoT very little resnonse to the idea. -19 - 73. Thanks to the special tax now levied, the Governmaent is able to drain off a large part of the increase in the value of the coffee crop over last year's, which it will use acinly for debt repayment and invest- ment purposes. It is estimated that the peasants' share, which will increase less than in proportion to the total value of the crop, will be used primarily to restore hoards to their normal level, and consumpt.ion will increase little, at least in the present year. The exporter's share wuhich may be considerable, will go for expenditures abroad, for construction in the country or, in a few cases, for investment in industry, or will remain unspent. At any rate, what is apparent is that the coffee boomn vrill probably not induce a major private spending spree. The country should thus be in reasonably good condition to profit from present high coffee earnings. VII. PUBLIC FINAN11CE 7b. Since 1947 when, with the refunding of the 1922-23 loan, debt service ceased to be the principal aim of fiscal administration, efforts have been made to increase Government revenues and the share devoted to development purposes. In the past six years, Government revenues have increased more quickly than trade. Out of a national income estimated for 1952 at around d"200 million, the budget revenue abisorbed nearly 15i,, w7hich is not unduly low for a country such as Haiti. 75. About half of the budget receipts come from taxes on imports and another 201 from export taxes. How-;ever, revenue from internal sources is increasing slightly; first in importance i-s the tax levied on business profits; personal income tax affects only about L,000 people. 76. Both the Revenue Departments (the Internal Revenue and the Fiscal Department of the National Dank) are allowred a stated percentage of their receipts to cover their expenses; in recent years, the legislature has taken advantage of this fact to impose on them the responsibility of managing and sometime providing funds for a certain number of goverLnment enterprises; the Internal Revenue Departmient has thus to manage a railway line and a theater. Such a system, which is somewhat similar to the farming out of taxes which existed in European countries up to the 18th century, makes it difficult, of course, to assess the exact administrative cost of the collection of taxes. Some- time the necessity of putting all these monies either back into the General Budget or at the disposal of really autonomous entities wRrill arise. 77. Normally Haiti's budget (the actual, not the projected budget) has been kept inequilibrium from one year to the next, largely because the conservative monetary and central banking policy has given little scope for internal borrowing. For the period 1216 to 1951 the cumalative receipts and expenditure balanced exactly. For the 10 yenrs ending September 30, 1952 there wnas even a small surplus. 78. The temptation to overspend is of course much stronger nowf that -20 - a relatively greater degree of monetary and financial autonomw has been attained. Since 1951, large deficits have appeared (see Tables ? and L ). rne deficit of Gs.13.1 million in the fiscal year 1951-52 (October 1- September 30) reflected, not a drop in revenue, but the extraordinary increase in expenditure entailed by the five-year economic development program launched in 1951. A further large deficit of Gs.15.7 million was recorded in the fiscal year 1952-53, this time owing to a marked drop in revenue, the result of a poor coffee crop and a fall in the price of sisal. 79. The deficit for the year 1951-52 was covered mainly by drawing down a large balance which the State had accumulated in its account at the National Bank. h.e 1952-53 defi cit was covered by further resort to the National Bank and by external borrowing. Some of the borrowing from the National Bank will be repaid in 1953-5L. In addition to this borrowing, various Government departments ran into debt not recorded in the General accounts. According to the Secretary for Finance, such debt at the beginning of LMarch 1954 amounted to 4 or 5 million gourdes; most of this sum was to be imputed to the fiscal year 1952-53 and it was hoped to repay it within the current fiscal year. Accouant should also be taken of borrowiing from public works contractors. IThen a deficit began to appear, expenditure was not sizably reduced, but the financing of part of the public worlks program was shifted from the budget to the contractors. Most of the financing secured was short-term (part of it was at 10 years, however) and some repayment is scheduled for the current year. The justification claimed for this short-term borrovwing is that it compensates for the large ups and downs of the Haitian budget receipts. 80. The real expenditure and deficit in the two years 1951-52 and 1952-53 was thus much higher than actually recorded. Adding all formns of extrabudgetary financing, the real government spending appears as follows: (Fiscal years October 1 -September 30) 1951-52 ir952-53 1?53-54 Test'd7 (million of gourde&J' Budget Revenue (1) 146.3 136.4 163.9 2xtra-su,getary revenue (2) - 12.5/ Total revenue (3) 146.3 136.4. 176.4 Borrowing National Bank (1) 13.5 12.42/ -5.0 " Public T.h.orks cont. (5) 3.7 17.0 -6.3 Floating debt (6) - 4.5 -4.5 Total spending (7) 163.5 170.3 160o.6 1/This corresponds to the part of the proceeds of the supplementary tax on export of coffee earmarked for special purposes. 2/The bills of "Compania de Industrias Ilaritimas' t amounting to Gs.l5 million ('3 million) and rediscounted with the Chemical Bank, New York are included in line (5). There may still be some slight overlapping betveen lines (4) and (5). The borrowing from National Bank shown, refers only to the 3ankts direct lending to the government and excludes lending with the government's guarantee. -21 - 81. The fiscal year 1953-Sb4 will show a mi7arked recovery due both to an increase in taxation and an increase in taxable incorme. ThanIs to an extraordinary tax on coffee introduced as early as August 1953, the governrent is able to take full advantage of the current good crop and extrem.ely high price of coffee. Government estimates as of mid-April 1954, perhaps cautious as regards the yield of coffee taxes, but over-optimistic on the other sources of income, put total receipts for the year at the record level of Cs.176.4 million, just Gs.L0 million over last year. T'!ost of the increase Would come from the export taxes on coffee, the extraordinary tax alone yielding over Gs.20 million, although a great part of the crop was sold at the old prices. The total taxes levied on the export of coffee in Hiaiti are now a little over 25% of the current price. Latest estimates put budget and extra budget expenditure (including repayment of Gs.5 million to the U'!titonal Bank) at G1s.17h.9 million which compares with only Gs.152.1 million last year. Actual spending in the first five months of the current fiscal year (not including extra-budgetary approprintions) was 55 lowrer than in the corresp3and- ing perio- of the previous year. Gover nment spending programs and policy 82. The marked increase in expenditure that took place in 19-1-52 wVas mairny due to the increase of expenuiture for investment and development purposes, shovwn in Tables 7 and 9; debt service, on the other hand, decreases regularly with the prog,ressive retirement of the 194?-57 internal loan and other expenditure increases more slowly than investment. In 1951, still inl the sw.ing of thle Korean boom, a five-year development program was adopted, which budgeted a total expenditure of Gs.200 Tmillion in five years. Roughly two-fifths was earmnarked fcr public works (mainly for roads), one-fifth for agriculture, and most of the remainder for education and health. The first year, no less than Gs.49 million, i.e. 315 of the total 'udget expenditure, was spent under the hieading of development. The following year, as a deficit anpeared, most of the road building program financing was shifted from buldget to shcrt-term borrowving from foreign contrators. 33. detailed breakdolan of oublic investment figures since 19 1 49 shows that investment for non-directly productive purposes, especially in the first years has been high; this included the celebration of the 200th anniversary of the foundation of Port-au-Prince (1949) whi-ch absorbed half of the investmnent figure for that year, and the 1Oth anniversary of the country's independenace (1954). Howuever, the improvements thus made could have some influence on touirism. From 1951 to 1953 road building was the maJor item of expenditure; this year it is to be the Artibonite u:roject. 84. It should be possible for the Haitian Government to expand its investment expenditures. There is a good prospect that total revenues in 1954-55 will be considerably higher than in 1953-5b, thanks mainly to the benefit of a full year's yield of the taxes on coffee. Coffee prices rose about half way through the fiscal year 1953-54. ..,oreover, high coffee prices and incomes will diffuse prosperity throughout the economy and revenues from other taxes should incre-ase correspondingly. So long as -22 - coffee prices remain high, which may be from 2 to 3 years, government revenues should also be unusually high. It is true that the extraordinary coffee tax has been imposed for a period of only two years, but it seems reasonable to expect that it would be renewed if coffee prices continue high. The increase of revenue over a 3-year period would make it possible, all out of current budget receipts, (a) to reimburse existing short-term debt and to retire the debt to the National Bank as scheduled, (b) to cover the local expenditure cost of the Artibonite River Project, and (c) to undertake additional investment. If ordinary expenditures were kept at the same level as now, this additional investment could be of the order of 50 million gourdes over a 3-yea7r period and correspondingly smaller if current expenditures are permitted to increase. On the other hand, official investment could be further increased to the extent that it is possible to tap private savings through savings accounts or the sale of public securities (paragraphs 71 and 72 above). The present period is thus favorable to undertake public investment. Debt Position 85. The total external debt outstanding is not high. T#--hen the 9 6.6 million of debt to foreign contractors which, although expressed in gourdes, is really a foreign commitment, is included, the amount ouitstanding on December 31, 1953, was 413.7 million or, if the undisbursed amount of the Eximbank Artibonite loar. is added, &25.2 million, This compares with foreign exchange earnings of around 0S0 million a year. 86. HaiW itis debt record is good. Haiti's public debt originated in the 150 million francs indemnity (t50 million of the present day) which Haiti assumed in 1825 in return for France's recognition of its former colony's independence. This indemnity proved excessively heavy; loans were floated on the French market to pay some of the installments and even interest; eventually France had to accept some reduction. Other Haitian Government loans of 26, 60 and 65 million francs were floated in 1875, 1896 and 1910. In 1922 the ITlaitiar. Government consolidated all its outstanding indebtedness by issuing a '23.7 million 30 year 6% dollar loan in the American market. However, some of the French holders did not accept the repayment in depreciated francs that was made at the time. The deadlock was finally settled in 1952, when Haiti agreed to pay 650,000 annually over a six-year period out of the proceeds of the exports of Haitian coffee to France. This settlement amounted in effect to a fee for re-entering the French coffee market, which had been virtually closed to Haiti since 1935. 87. The U.S. 1922-23 loan was made a first charge against all revenues of the lIaitian Government; for a number of years it was amortized at a more rapid rate than was called for by the terms of the contract, except for some reduc- tion from 1937 to 1941 following a sharp decline in the price of coffee. In 1947, the balance of the 1922 loan was repaid in full out of a 5q 10 million internal loan. Thus, from September 30, 1917 to September 30, 1952, the Haitian public debt was reduced from :w>35.4 million to .56 million. The percentage of Government revenues absorbed by the debt service declined from 28.4% in 1922-23 to 5% in 1951-52. -23- 38. -[ait_ thus began tihe postwar reriod -it'. a clem slate. Apart from about 'QCO,000 of thie 19P71oan rw-,hich is held e.ternally, the lonr-term debt at present consists mainly of twro Export-Import Bank l-oans .The first (l9il-19W66) was made to SHADA, now a Government-owmed corporation, for sisal and rubber cul- tivation; K3.7, million is outstanding. The second (l9B8-197l) is of `1c1 milllion for the Artibonite river project; so far only ';2.5 million hlas been disbursed, but the rate is now increasing as work is in full swing. An earlier F,ximbank loan for the public works nrogram of 1935 wvas naid back in full in 1950. 39. In the past twqo vears, however, the debt has also been increased throut the Grovernment's conmitmtent to foreign public works contractors. These includce three road, port or airport contracts, already mentioned above, and another for public housing. TMrost of tllese are short term ahd consequentlv impose a heavy burden durine the period i95.)-56. In itlovember 1952, the bonds of the biggest contract, that of t3 m.iillion with Cia. de Industrias 1iaritimas, already discow:- ed by the Niational Bank, were accenQed for rediscount bcy the Chemical Bank, Fe York. in October 1953, the Gove rnment discounted the proceeds of thie newTly established supplem-entary tax on coffee through the issue of twxo series of treasury bills at six and nine months totalling "2.6 million, which w!ere bought by Estabrook and. Co. and by the rirst i1ational Banl] of Boston. The pro- ceeds were to reduce the Glovernment' s already heavy overdraft at the [Tational Bank. The bonds w-ere paid back in ardvance between January and MJarch 19_ . The nomianal interest rate was 3., but as the bonds were issued at only 95 this combined with their accelerated maturity, means that the real cost to the To- vernment was someth'ing just a little over lbSo per annumf. 90C. Annual service paymrents on 3 aitil s external debtL (includinE the un- disbursed portion of Eximbank loans and total service on bonds payable in goL'rdes or Collars at the option of the holder) is estimated to reach 32.5 millir in 195L and a little over £3 million in eacth of the years 1955, 1956 and 1957. In fact, 90 percent of the t!4 million 5W "internal" loan 19b7-1957carrying the payment option cleuse are helde within Haiti. Provided these bonds now do- mestically held are retained within Haiti, total service payments act.u2ly maade to foreiFn holders would amount to only -;L mrillion in 19Q5 and a little over `2 million in 1Q55 through 1957. -2L - VIII. BALANCE cv P¼ -2T5 91. All external transactions are conducted in U.S. dollars. There are no exchange controls, no quantitative import restrictions (except on tobacco products); nor is there any preferential tariff treatment since 1?51, when Haiti became an acceding government to the General Agreement on Tariffs and Trade (GATT), conceding t:he most favored nation tariff to all the signatories of the agreement, and terminating the Haitian-U.S. reciprocal Trade Agreement of 1935. The only exception could be considered the 1952 French-Haitian agree- ment, which while primarily taking the form of the settlement of an old debt problem, included concessions on certain luxury imports from France. 92. After the war, thile value of trade expandled regularly up to 1951-52. On the side of exports, this reflected an increase mostlv in prices. From 88 in 1938-39 (19h6-L9 = 100), the volume cf exports rose to 101 in 19L6-L7, 1O in 1951-52, but fell to 8 in 1952-53, to settle probably around 100 cr a little below in the present vear (weights based on a 5 year postwar perto-l average). The increase in 25 years does not exceed 1 or 20'. Expcrt prices are favorable primarily owina to the high- price of coffee. On the 'casis 1QL16- 1949 = 100, they rose from 28 in 1937-38 to 160 in 1951-52 or nearly Six times. In 1952-53 the fall of sugar and sisal prices brougtht therm dowIn by about 10%, but the renewed increase in thle price of coffee has since plushed thlem to un- precedented levels in the present year. Coffee, whrhich formed less than LO% of the value of exports at the end of the war, has once auain risen to a dominat- ing position; in 1953-54, coffee will provide nearly 5O?' of ex.ports, as in the late twenties. 93. In contrast, import rprices lhave remained lovw. This appears not only in comparison w,iith the prew.ar, bout also wit.hin the pontw.,ar period. From 1937-3( to 1951-52, they multiolied less thian 2# times. They remained stabDle or de- clined durinc- most of the postrar period. Consequently, on the basis 19i:6/b7- 1948/E = 100, the terms of trade (tentative computation) rose from 67 in 1937-38 to 164 in 1951-52. M,Iuch more thnan the increase of the vollme of ex- ports, it is the improvement of the terms of trade wihich has made possible for the country to secure a much larger volume of imports than before the war. On the same basis, import volume has risen from approximately 72 in 1937-38 (106 in 1929-30) to 218 in 1951-52, to fall back to 186 in 1952-53. 91i. Food on the one hand (of which half is wheat flouAr and the renmainder is oils, lard, fish, milk, meat and vecetables), and textiles and apparel on the other, each form about 25% of imports. Other main imports include petro- leum products, vehicles, soap and cement. The composition of imports remains more or less constant; hiowever, the stability of textile irports despite a substantial increase of production, the large increase in imnorts of shoes, soap and also of items still low on the list such as corrugated iron ( to re- place thatch roofs) bicycles and flashlights, is a sign of some improvement in the standard of living in the countnr in recent years. -25- 95. The balance of navments of Haiti is as follows: Fiscal years October 1 -September 30 } 949-50 1950-51 lg5i-52 1952-53 1953-5t1 ( nrovisional) Y forecas (Mijillions of dollars) I. Current Account Exports 39.9 50.L 53.2 36.2 52.0 Imports 36.2 13.9 50.3 h5.2 1±5.0 Trade balance 3.7 6.5 2.9 -7.0 7.0 Tourism (gross receipts) 1/ 2.0 2.b 2.14 3.6 4 e Other servirces (net) -6.L -91 -a.0 -3.1 -7.8 Net goods and services 0.7 -0.2 -2.7 -11.5 3.6 Net goods and services including donations -0.2 0.3 -2.? -10.8 h.8 TI .Capital Private (net) 3.9 4.S 2.6 2.8 Official and Banking (net) -3.2 -2.3 -3.6 11.1 Nqet errors Rr omissions -.5 -3.3 -3.1 Chan7res in reserves (NIational Bank) 2 2.6 -3.7 + 5.3 -6.1 (4 5.0) Source: International MVonetar.7 Fund>; 1952-53 and 1953-5b, Bank M-ission es- timate. 1/ including seamen expenditures; partly estimated. The main credit iten in the invisibles is tourism -for rrhich the official es- timate is probably on the conservative si de; on the debit side, the Fain item is investment income; the expenditure of Haitians abroad is also important. 96. The balance on current Account, including donations, is almost in equilibrium. However, the 1952-53 picture was ver, different, the deficit beine about 311 million (provisional estimate). The present year is expected to show a marked recover7ly and perhaps a surpluis, although probably not as large as last year's deficit. 97. Capital transactions are difficult to connile accurately, one of the reasons being the absence of exchange control. The principal credit item un- der movement of private capital, reinvestment of foreign companies' profits, may bie overestimated. Naew private cepital from abroad is small (around 31 million per year; total U.S. ciirect investment in Haiti was estimated in 1950 as :$12.7million only). Information on Haitian assets abroad is sketchy, al though they might not be unimportant. Half of the large influx shown under of- ficial and banking transactions in 1952-53 cam.e from the liquidation of assets -26 - abroad ($5.6 million), and half from new borrowing (from the Eximbank for the Artibonite project and from foreign contractors). Previously, monetary reservef were slightly increasing and amortization had been larger than nrew borrowing. 98. The U.S. is Haiti's principal commercial partner. Howrever, Haiti took 68' of its imports from the U.S. last year and sent it only 41k of its exports, whereas it sells to Europe more than it buys from it. As all Haiti's trans actions are conducted in dollars, this creates no problem, and as long as coffee sells well, there is no great inducement for shifts in the trade or payments pattern. The proposals made by some European countries for trade or payments agreements have been turned dow,7n, the main reason being that non-dolla- or deferred payments for Haitian exports through the opening of bilateral accounts would in the end amount to nothing less than an extension of credit which Haiti is in no position to provide. There has apparently been no attempt to assess whether new outlets could thus be found for commodities that are now difficult to market. 99. There seem to be no basic or structural reasons vwhy Haiti should encounter persistent balance of payments difficulties in the future, provided her development follows lines taking advantage of the opportunities that exist. Production and export of coffee, cacao and bananas could all be increased, and all enjoy good markets. Some expansion is possible for sugar also. Production of sisal could be expanded if markets improve; bauxite will soon be exported. Tourism receipts are bound to increase. It should also be possible for Haiti to produce domestically much of the fish, milk, meat, and vegetables now imported, and to expand the output of textiles, cement and other industrial products, similarly replacing imports. This means that it should be possible over the longer-run to maintain at the least an undiminished volume of imports, and that their composition can change as economic development proceeds. 100. It is true that an adverse movemnent of the terms of external trade, which are now very favorable to Haiti, must prudently be expected. This is principally because the present high price of coffee cannot be expected to last many years. But this of itself need cause only temporary difficulties. Haiti is not a "one-crop" economy, and wise policies, directed towards stimulating efficient low-cost output both of exports and of foods and manu- factures for domestic consumption, can ensure an acceptable future balance of payments position. 101. Haiti, however, is not and will not be immune from the oossibility of balance of payments difficulties originating from domestic inflation. The rigidity of the banking system has effectively safeguarded the position in the past. Tf in the future this rigidity is relaxed and monetary demand be permitted to expand more quickly than domestic output, exchange and import shortages vwill be inevitable. This is why budgetary deficits, even if resultin from an attempt to enlarge Government investment, would be highly dangerous. Table 1 HAITI -EXTERNAL PUBI C DEBT National and Goverrnment Guaranteed Debt Debt out"standing Dec. 31, 1953 IDENTIFICATION In UF.S. dollar ('thouY nl TOTAL 28, 749 U.S. 3DLLAR DEBT 28,749 Publicly issued bonds 4,244 tX000,000 settlement of 5%, 1910 French franc bonds, 1952-1958 Y/ 410,000,000 Emprunt Interieur 53, 1947-1957 -x2~4 Portion held externally 402 Portion held internally 3, 592, Privately placed debt / ,604 j1,000,000 Republic of Haiti to Societe des Grands Travaux de 'Marseille 1952 3/ 1,000 $3,000,000 Republic of Haiti to Cia d,e Industrias Maritinias 32P, due 155 4/ 2,800 41,861,340 Republic of Haiti to Cie Lankton, Ziegele, Marhoefer International 3.a. 1952-1957 / 1,061 1,500,000 Republic of Hiaiti to Plantation Dauphin 4%), 1952-1962 6/ 943 U. S. Government loans 17,901 Export-Import Bank 17,750 45S, 000,000 Societe lIaitiano-Anericaine de Development Agricole 3% (formerly 4%) 1941-1967 1/ 3,750 $14, 000,000 Republic of Haiti 3i%, i948-1974 1I, oooT'/ GSA loan 4151,000 loan to Republic of Haiti 3-%, 1947-1954 9/ .45,1 * TN' ttotal amrcunt of the intcr.aal loan is classified as dollar obligations as the bonds are payable either in dollars or gourdes at the option of the holderr; in fact, the portion held internally (nearly exclusively by the National D,ank) is cashed in domestic currency. The same may apply for part of the debt privately placed with foreign contractors. See footnotes on following pages. Table 1: Footnotes 1/ An annex to the commercial agreement of June 24, 1938, between France and Haiti provided for the liquidation of a dispute relating to the redemptior of the 5% bond issue of 1910. Tids issue was called for redemption in 1923 at its Lace value in French francs; bondholders, however, claimed to be entitled to payment on a gold basis. Under the settlemuent o' 1938, bond- holders were to receive on each bond (a) an amount of 500 French francs ($l -fr38.0l as of Dec. 31, 1938), and (b) scrip with a face value of US$25. The scrip was to be paid off in 15 years by annual installments based on a levy on Haitian coffee imported into France. When in 1940 the war interrupted this arrangement, thiree payments totalling US32.784 per scrip had been made. A twenty-year prescription period, to which the bonds were subject, expired in 19h3. The Franco-Haitian commercial agreement of July 12, 1952, provided for a resumption of the payrents envisaged in the 1938 agreement from a fund to be held with the Bank of France. US$300,000 is to be contributed to this fund by the Haitian Government in six annuities of 450,000 each. These annuities will, however, be reduced if during any one year less than 4,000 tons of Haitian coffee is imported into France. A further amiount equivalent to US$900,000 is to be obtained from a levy in French francs, equivalent to US$2 per kg. bag of Haitian coffee imported into France. The levy is to be reduced if coffee prices drop under :,25 per 50 kg. Since the Haitian Government does not appear to have obligations in con- nection with the levy on coffee, the amount of $900,000 has not been included among the external debts of the Government. Under the existing exchange system, ho'lders of these obligations are willing to accept payment in gourdes because of the complete convertibility of the gourde into dollars. 3/ A 1952 contract provided for a 47,000,000 three-year construction period; however, this has not been carried out and a provisional agreement i s in force. Each year an estimate is made of the cost of the work for the year. As of January 31, 1954, the estimate was 41,010,000. The cost of projects already completed plus the estimate of those to be done in 1954 is not expected to exceed 41,900,000. As soon as the projects have been executed, the Societe des Grands Travaux de Marseille receives bonds (with various maturities) from the Government of Haiti. These bonds are discounted at the Banque Nationale de la Republique d'Haiti at the option of the Societe. The final payment will be made on October 31, 1954. If, however, the Societe undertakes new works financed in the same manner, the amount of the bonds so dis- counted by the national bank mnay be increased and the maturities extended. The notes of this loan were discounted by the Chemical hbank of New York. iJ This loan was issued to finance the building of a housing development, La Cite Miagloire. There is a two-year construction period during which necessary funds will be disbursed as the work progresses. Table 1: Footnotes (Continued) g This loan is to finance the construction of a roadway and an airport. The bonds are issued as the work progresses. The Haitian Government gives bonds to Plantation Dauphin as evidence of her obligation. The governrment agrees to accept 30 of these bonds in payment for taxes due to Haiti by Planta- tion Dauphin. 7/ Guaranteed by the Republic of Haiti. 3/ Of this amount k2,483,873 -as disbursed and still outstanding and 411,516,127 was undisbursed as of December 31, 1953. 2/ The agreement provides that the United States may elect to accept either real property and improvements to real property or local currency instead of US dollars for repayment of this obligation, to be used for U.S. Govern- ment purposes, including cultural and educational programs. This loan is not reported by the Republic of Haiti as a part of her debt. Source: IBRD -Foreiu,n Tnv.st:-ent Section Table 2 ESTI'iIATZD CONR.CXTUAI KERVICE ON THE EXTERNAL PUA1LIC DEBT (thousands of US dollars) Paym rnents Total Debt (lUS do15S held d-e Debt Outstandinr Payments during year foreirs Year January 1 Amortization Interest Total Total/ 1954 28,749 4,536 545 5,081 O ,1 3 1955 24,960 2,368 677 3,045 2,022 1956 22,592 2,897 619 3,516 2,538 1957 19,695 2,770 592 3,362 2440 1958 16 925 1, 316 568 1,884 1 , 8, 1959 15,609 1,265 524 1,789 1, 7;9 1960 14,0344 1,265 481 1,746 1, 7LI6 1961 13,079 1,265 437 1,702 1,702 1962 11,814 1,265 394 1,659 1,659 1963 10, 549 1,115 351 1, 466 1,;466 1964 9,434 1,i16 314 1,430 1,430 1965 8,318 1,115 276 1,391 1,391 1966 7,203 1,114 239 1,353 1,353 1967 6,%089 1,033 201 1,234 1,234 1968 5,o56 778 170 948 9L8 1969 4,278 778 143 921 921 1970 3,500 778 115 893 893 1971 2,722 777 89 866 866 1972 1,945 778 61 839 339 1973 1,l67 778 34 812 812 1974 389 389 7 396 396 Source: IBRD Foreign Inv0stncnt Section 1/ Excluding the service of the nortion of the t"O !rintern.cl' loan 1947-1957 carrying the payment option clause held -:,ithin Haiti. Table 3 EXPORTS BY !KAIN COMMODITIES A-MD AREAS Fiscal Years O0ctober 1 -September 30 Commoditis 1946-4 1947-48 19458----1949-50 1950-51 1951y-52 -195275Commnodities 1 ib- 7 1 947 -;R4: l-53 l 5 (millions of US dollas) Coffee 12.1 10.8 13.4 20.5 26.0 32.7 25.1 (in % of total (38) (35) (43) (53) (52) (62) (65) exports) Sisal 5.7 8.1 9.3 9.3 12.1 10.3 4.7 Sugar 2.8 2,2 1.6 2.9 4.0 3.3 2.3 Cotton 0.2 1.8 1.3 0.8 o.6 o.6 0.8 Cacao 0.8 1.3 0.9 0.8 1.3 1.1 1.1 Bananas 6.1 2.8 1.7 1.3 1.0 0.5 0.3 Essential Oils 0.5 0.2 0.3 0.6 1.0 1.1 0.6 Handicraft 1.0 1.8 1.3 0.9 1.0 1.2 1.4 Other 2.3 1.8 1.2 1.3 2.6 2.1 1.5 Total Exports 31.5 30.9 31.0 38.5 49.6 52.9 37.8 Total Imports 27.2 32.2 31.4 36.2 44.5 50.7 45.1 Trade Balance 1 4.3 -1.3 -0.4 $ 2.3 / 5.1 / 2.2 -7.3 Countries of Destination U.S. and Canada 60 60 60 57 59 59 41 Belgium 11 12 12 16 18 23 19 France 1 1 - - 2 - 12 Italy 4 6 9 12 6 8 10 Netherlands 2 3 4 9 6 5 7 United Kingdom 9 10 8 3 5 1 1 Source: Trade Statistics. Table 4 VOLUMs OF EXPORTS 1929- 1937- 1938- 1946- 1947- 1945- 1791 1930 1938 1939 1947 1948 1949 Coffee 1,000 metric tons 30.8 34.3 25.1 29.3 24.6 22.7 27.8 Sisal tt - 0.4 7.2 7.5 21.1 26.0 29.7 Raw Sugar It 74.0 14.9 33.5 37.1 26.1 20.1 17.5 Cotton t 2.8 5.1 4.7 4.7 0.2 3.3 2.0 Cacao it 0.1 2.3 1.6 1.6 1.9 1.8 1.5 Bananas million stems - - 1.4 2.u 7.3 3.5 2.1 General Index (1946/47 -1948/49 = 100) 78 88 101 98 101 1949- 1950- 1951- 1952- 1953- 1950 1951 1952 1953 1954 (est'd.) Coffee 26.2 25.4 31.3 23.1 (3g.ot) Sisal 33.4 31.2 25.9 20.0 (18.0) Sugar 30.8 34.4 32.4 28.5 (25.0) Cotton 1.3 0.5 1.1 1.3 C 0.5) C acao 1.8 2.0 1.9 2.1 ( 2.3) Bananas 1.8 1.3 0.6 0.4 ( 068) General index 104 101 104 84 (96) Source: Trade Statistics; 1953-54 Mission estimates; Volume index Institut haitien de statistiques; 1791 statistics: S. Leyburn, The Haitian ?eople (these statistics are controversial; for 1790 the Institut de Statistiques gives a coffee export of 47.6 thousand tons). Table 5 IMPORTS BY MAYN COYIODITIES AND AREAS 1948-49 1949-50 1950-51 1951-52 1952-53 (millions of US doll ars7 Wheat Flour 3.6 3.2 4.o 5.3 4.7 Other Foods 3.1 3.6 4.4 6.1 5.9 Cotton Cloth 4.3 7.8 7.3 7.9 5.4 Other Textiles 2.3 3.4 4.o 5.0 4.0 Shoes 0.3 0.5 0.7 1.2 1.3 Soap 1.2 1.3 1.7 1.6 1.8 Chemicals and Pharmaceuticals 0.7 1.0 1.3 1.2 1.0 Oil Products 1.7 1.4 1.9 2.3 2.3 Iron and Steel 2.1 1.9 3.0 2.9 2.6 Agricultural Machinery 1.1 1.0 1.4 1.7 1.2 Vehicles 1.1 1.3 2.1 2.3 2.4 Cement o.6 o.6 o.6 0.7 0.8 All Other 9.3 9.2 12.1 17.6 11.7 Total 31.4 36.2 44.5 50.7 45.1 Countries of 0rin (percentages) U.S.A. 77 76 72 69 68 Ccntinental QEEC Countries 5 7 10 10 12 Canada 4 5 5 6 5 U.K. 4 4 5 4 4 Curacao 4 3 3 3 4 Source: Trade Statistics. Table 6 NUMBER OF TOURISTS IN HAITI Tourists By Plane B3r Boat 1948-49 7,810 1949-50 12, 023 1950-51 lo,o68 6,783 1951-52 13,560 6,389 1952-53 17,016 17,423 1952-53 Oct.-Feb. 7,752 4,506 1953-54 Oct.-Feb. 8,029 15,574 Source: Fiscal Department. Table 7 REropo] BITJDGET E.?S2DsThV2s V PBV,JUE Fiscal years Oct 1 -Sept 30 L9h7 -48 1948-49f l1T9430 lTh-i'5U5'951-52 1952-53 (mallions of gourdes) Defense 13.7 15.1 17.2 19.2 21.7 26.5 Debt Service 10.7 10.3 10.4 9.5 8.5 6.3 Investment * ) ) ) 25.5 48. 37.1 ) 59.2 ) 67.9 79.3 KLdinistrative ) .-, ) _ ) 65.9 80.3 82.2 and other Total - Dcpenditure 83.6 93.3 106.9 120.1 159.4 152.1 Total Revenue 78.8 83.1 109.1 125.3 146.3 136.4 Surplus or Deficit -4.8 -10.2 f2.2 $5.1 -13.1 -15.7 (Percentages) Defense 16 16 16 16 14 17 Debt Service 13 11 10 8 5 4 Investment * ) ) ) 21 31 25 )71 )73 )74 **.iin±str.ntive ) _ ) _) __ 55 o - and other Total 100 100 100 100 100 100 * Prior to 1950-51 breakdown not available. This it,em is some-what samaller than the total of investment supported out cf governmnent revenues shown on Table below, Source: Fiscal Department Table 8 BUDGET REV2TUE -199,-1553 (iillions of gourdes) 1947-48 1948-49 1949-50 19<0-51 1951-52 1952-53 Customs revenule 58.2 59.2 80.2 93.2 106.8 9/4.1 of' which inmport taxes 42.6 43.6 58.6 66.2 75.7 70.3 of which export taxes 14.8 114.8 20.6 25.9 29.8 22.5 Internal revenue 18.1 20.4 22.7 24.6 33.5 33.3 Other 2.5 3.5 6.3 7.5 5.9 8.9 Total 78.8 83.1 109.1 125.3 146.3 136.4 (percentages) Customs revenue 74 71 73 74, 73 69 of w,,hich import taxes 54 52 54 52 52 52 cf wahich export taxes 19 18 19 21 20 16 Internal reventue 23 25 21 20 23 24 Other 3 x4 6 6 4 7 Total 100 100 100 100 100 100 Source: Fiscal Departmenlt Table 9 PU1T IC ILH3TET? lc9 48-1953 (thou.sands of gourdes) est'd) 1949-50 1950-51 1951-52 1952-53 1953-54 I. Agriculture 5,765 5,659 9 16,880 36,830 1. Irrigation and agrictulture (except Artibonite) 842 409 4,257 550 3,000 2. Artibonite Valley 3,750 3,750 3,750 7,500 12,500 2a. it (bcrrowed funds) - - - 7,5O0 20,000 3. SCIPA 1,173 1,500 1,835 1,330 1,330 II. Transportation 4,457 8,529 19,302 31,380 IL,50o. 4. Roads, airports 420 5,574 16,917 9,777 1,211 ha. it (borrowed funds) - - - 19,352 8,24!0 5. Bridges and land 448 363 223 176 50 6. Material and equipment 3,589 2,593 2,172 2,075 1,500 Unallocated 3,500 III. Public buildings and works 18,395 14,669 22,729 14,545 8,911 7. municipal and port works - 8,250 9,653 8,347 _ 7a. It '"(borrow,ced funds) - 2,000 3,714 - 8. Housing and other buildings 3,876 3,979 9,362 4,709 3,750 9. Interrial Dcposition, etc. 14,519 10 - 1,489 5 ,161 IV. Miscellaneous 2,388 3,843 9.751 8,224 4,030 10. International organiza- tions (except SCIPA) 1,914 2,033 2,472 3,152 2,530 11. Miscellaneous (mainly industry) 474 1,810 3,529 5,172 - 12. Contribution to Agricul- tural &: Industrial Bank - - 3,750 - 1,500 Total 31,005 32,701 61,299 ?1534 64,272 Of which: out of gov't revenue 31,005 30,701 57,585 44,682 36,032 out of borrowed funds - 2,000 3,714 26,852 28,240 Notes: 3 ard 10. The amounts sho'm relate only to the Haitian Government share of the costs of projects jointly sunported by U.N. agencies or Point Four Program. These include SCIPA (Service Cooperatif Table 9 cont 'd Interamericain de Production Agricole, shown in item 3), SCISP, parallel organization for health; on both of these the share of the lHaitian Government has lately been reduced frorm 50 to 4h% of the total cost; the one other major item is the contribution to the `7Vorld Health OrganizatJion project. 9. These relate to the Shiboition for the 200th anniversary of Fort au Prince (1149), and to the celebration of the 1150th anniversary of the independence (1954); durable pirota.ments resulted in the cityr of Port-au-Prince in the first case, and in the city of Goneives in the second. Source: U. M. financial adviser and mission. Table 10 NATIONAL BANK (millions of gourdes) (as of September 30) 1947 1948 1949 1950 1951 1952 1953 1. Exchange reserves 56.9 k6.1 26.7 39.5 57.8 63.1 32.5 holdingL/ 2. Loans and investments 21.4 22.9 24.6 33.2 35.8 4 6 .5 85.2 3. Of which to governmentj/ n.a. n.a. n.a. n.a. 5.9 19.4 46.8* 4. Other assets 3.6 11.1 1.9 6.1 6.9 5.8 36.3*s 5. Total assets 81.9 80.1 66.2 78.8 100.5 11.4h 144.o 6. Bank notes in circulation 28.1 22.7 25.9 32.3 37.4 48.5 47.9 7. Bank deposits 41.5 46.6 28.0 32.2 h6.7 50.3 53.2* 8. Other liabilities 12.3 10.8 12.3 14.3 16.4 16.6 42.9** 9. Total liabilities 81.9 80.1 66.2 78.8 100.5 115.4 i44.o 10. Exchange reserves entering the legal note issue cover (50 71 67 72 54 66 71 62 11, Ratio of total exchange reserves to note issue (%) 202 202 104 122 154 130 68 12. Ratio of loans and investments to total 26 29 37 42 36 4o 59 13. Ratio of reserves to domestic money supply 61 52 37 47 55 53 28 1/Gold, foreign exchange and due from banks abroad, virtually all in U.S. funds. 2/Including holdings of the 1947-1957 internal loan, not including advances guaranteed by government. The Total of the advances to government might be net of part of the goverrmlent deposits already accounted for in item 2. * From November 1952, the bills amounting to Gs.l5,O0O,OOO discounted by the National Bank and rediscounted v4ith the Chemical Bank, Nev. York, are taken into account under l"governnent" on both sides. ** From August 1953, includes total capital subscription to the IPW and ORD (Gs.20 million). Table 11 DOMESTIC TMONEY SUPPLY (millions of gourdes) (as of September 30) 1947 1948 1949 1950 1951 1952 1953 Notes and Coinl/ 3b.1 29.2 32.4 38.8 44.2 55.3 5h.5 Bank deposits 59 60.3 ho.4 h4.7 60.2 64.4 63.6 Total domestic 93 89.5 72.8 83.6 2o4.4 119.8 118.1 money supply I/ Gourdes notes only. Source: Fiscal Department Table 12 LOANS AND ADVANCES 1952-1953 OF INSTITUT HAITIEN DE CRIMIT AGRICOL:2 ET INDUSTRIEL (IHCAI) (millions of gourdes) I. Breakdown by groups of industries Hotels 2.25 Industry 1.27 Agriculture in general 0.31 Sugar cam industry 0.30 Total 4.13 II. Breakdown by end-use Agriculture 0.35 Equipment 0.13 Land buying .02 Land improvement .o6 Working capital .14 Other than Agriculture 3.78 Equipment and buildings 3.29 Raw material .10 W, orking capital .39 Total 4.13 Source: IHCAI and Ilission Por I-de-Poir ATLANTIC OCEAN male St. Nc-t _r/ r 5/5.JL , __. 0t H A I T I ( s; ; / , < i i F r ~~~~~~~~~~~~~~~~~~~~~~I H >4S H A IT I j_ -- ( Road, all weather asphalt - - r Rood,all weather gravel 1%; Rood,dry weather dirt ------ Railway --''-- ART/RONI ' Mountains IRRIGAT/OM. AI.: R/-CLAMAT/:, I O a 0 20 30 40 50 $ O 10 20 30 40 50 GULF OF GONAVE - , ErITEAL KILOMETERS F FLLTELUX I LE DE LA GONAVE' ) ._ _ |: .e' >n I~~~~~~~~~~~~~~~~~~L /, --- - -A-U .r 9-s~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~PIC Cro UL Ot _5 j 'A- 9< I - Aquln_ -A:I'E A N_S E ~~~~~CARIBBEAN SEA )