The Caracol Industrial Park: A Misguided Approach To Economic Development

December 8, 2011

The big Haiti news last week was all about the Invest in Haiti forum. Predictably, chatter about the event has segmented into two camps. On one side are business enthusiasts who see the forum – and the headline-grabbing business park being built in Caracol – as a sure source of jobs and growth. On the other are those concerned with social justice, who point out that textile manufacturing in Haiti has historically been plagued by wage and union suppression.

Construction begins on a new industrial park in Caracol, Haiti.

For the most part, these groups aren’t in dialogue with one another because they focus on different factors. The pro-investment group – Bill Clinton, President Martelly, and Foreign Minister Laurent Lamothe – don’t discuss worker’s rights and distributive justice issues.

Rather, they assume that “growing the economic pie” is sufficient for now: if problems exist with how the pie is divided, those can be addressed later. Meanwhile, those who do focus on justice issues continue to point out (rightly) the historical pattern of industry and investment only benefiting a few is clear.

In this piece, we take a different approach to critiquing the industrial development vision represented by the Invest in Haiti forum. The stated goal of those supporting the industrial park in Caracol, as reflected by Bill Clinton’s quote (see below), is to create jobs that will lead to economic growth and development.

“We are here to build a modern economy… and in the process, give Haitians the means to build a modern state.” – Bill Clinton, Nov 30, 2011

The question behind this post is: even if the distributional and justice-related concerns are ignored for the time being, does the vision they’ve outlined stand up to macro-economic scrutiny? The answer is, unfortunately, a resounding “no.” The remainder of this post explores the macro-economic reasons why this is the case.

 

Building a Modern Economy?

Backward and Forward Linkages

This unwieldy macro-economic term actually describes a simple concept, best illustrated by example. The ultimate case study of successful backward and forward linkages is the tire industry in Brazil (PDF). The production of tires in Brazil was a huge boon to rubber plantations (backward linkage). Eventually, Brazil’s status as a tire manufacturer attracted auto manufacturers (forward linkage), and the three industries grew together – resulting in huge growth rates in Brazil.

So what are the prospects for linkages in Haiti?  Again, Bill Clinton’s speech is instructive on this point:

 

I want to say a special word of thanks to Sae-A and to Chairman Kim for… not only bringing 20,000 jobs to Haiti. But… there were once 100,000 people assembling clothes in Haiti, but they never even had their own textile mill. They’ll have their own textile mill for the first time now. – Bill Clinton, Nov 30, 2011

 

The fact that Haiti will now have a textile mill differentiates this round of investment from past textile manufacturing efforts. That’s because previously, Haiti had to rely on imported textile materials for assembly and immediate re-export. In other words, the mill opens up the possibility for a backward linkage with cotton growers. However, this would first require revitalizing Haiti’s cotton production, which peaked before the reign of the Duvaliers and has fallen steadily since.

As for forward linkages, there’s not much on the horizon. A 2008 Overseas Development Institute paper entitled, “The Role of Textile and Clothing Industries in Growth and Development Strategies” (PDF) only discusses backward linkages, with one exception. They vaguely suggest that “business support systems” that develop around the garment industry “may facilitate the transition into higher value added activities.” In other words, unlike with tires, clothing doesn’t lead to anything of higher value – which is traditionally how emerging industries spark growth – except for by fostering business culture.

Integration into Global Value Chains

The global value chain is, quite simply, the chain of economic relationships that constitute a production process. On one end of the value chain is a cotton grower; on the other, a person wearing a finished clothing product.

It’s important to consider “integration” into these chains because there’s lots of research suggesting global value chains are “sticky.” That is, once buyers and sellers at different links in the chain develop relationships, they’re not prone to go shopping around for new relationships to replace them. This phenomenon is described by a recent World Bank paper entitled, “Clothing and Export Diversification: Still a Route to Growth for Low Income Countries?” (PDF):

These chains initially emerged in the clothing sector in the 1950s and 1960s as buyers in developed countries contracted out production to low-wage developing countries. Over the past 4 decades these chains have matured and the sourcing networks have spread over a large number of countries… The mature global chains of today restrict the opportunities that the clothing sector offers developing countries for diversification and growth.

In other words, prospects are at best uncertain that Haiti can capture a larger share of textile value chains than it currently commands. While favorable trade preference arrangements may assist Haiti in the short-term gain access to US markets, even that isn’t a sure bet. In the past, duty-free and other tax-exempt statuses haven’t been adequate to lure many manufacturers to Haiti.

 

Realistic Expectations for the Industrial Park

This is not going to modernize Haiti’s economy. Without forward linkages, there’s no real prospect for diversifying into higher-value sectors. But even if it’s unlikely for Haiti to break into established global value chains, it already has a place in several in the textile industry. Therefore, enhancing the sector could have a positive welfare effect – if the benefits are distributed in an equitable fashion. And this, of course, brings us back to the political factors discussed earlier.

 

A Better Economic Model?

There are, however, other models. Costa Rica, for instance, is one case of a small island nation that achieved a foothold in a higher-value industry despite its low-income status. That transition is described in the paper, “Costa Rica’s Development Strategy Based on Human Capital and Technology: How It Got There, the Impact of Intel, and Lessons for Other Countries” (PDF).

The point isn’t to suggest that this is the right model for Haiti. Rather, the point is that there are models besides from the low-wage, textile-driven development envisioned by Martelly and Clinton, which has a proven track record of failure.

Photo Credit: Flickr/USAID_Images


Weekly Links Round-Up: Haiti’s Economic Future, MINUSTAH Poll, and More!

December 2, 2011

Invest In Haiti: The Future of the Haitian Economy

President Martelly plans to create 500,000 jobs in three years. Some of these will come from a new Marriott hotel being planned in downtown Port-au-Prince, but he intends even more to come from a new industrial park in Caracol, Haiti.

Pairs Well With: This investigation finding that the garment industry – which will take center stage in the new industrial park – has been fraught with union suppression.

Also Pairs Well With: This Haiti Grassroots Watch investigation highlighting the wage suppression, poor working conditions, and bad track record of “sweatshop-led development” in Haiti.

 

USAID begins construction at the industrial park in Caracol, Haiti.

 

MINUSTAH Poll & Doublespeak

A new poll finds that two-thirds of Haitians want the immediate withdrawal of UN forces.

Pairs Well With: The headline-making line about the UN, however, came from Nigel Fisher, deputy Special Rep of the Secretary General for Haiti. In a press conference this week, he claimed that “only media and elites” want the UN out of the country – just days after the poll’s release.

 

Quick Hits

The US government decided to lift an 18-year arms embargo, which was only intermittently observed while in place.

The World Bank approved a $255 million plan to provide housing and education in Port-au-Prince in response to the disbanding of the Interim Haiti Recovery Commission.

 


3 Principles to Ensure You Do (or Support) Effective, Appropriate Work in Haiti

November 30, 2011

In the first post following Lavarice Gaudin’s visit to Minnesota, we argued that development is political. Any NGO that ignores the political factors perpetuating Haiti’s poverty can’t contribute to meaningful, structural changes.

This time, we outline the steps you can take to get involved in a better way. These steps apply whether you’re an NGO looking to do work in Haiti, or a donor looking to give money. The Haiti Justice Alliance was established with the belief that these steps are critical to successfully working for real change in Haiti:

  1. Research the history of the problem you want to work on as well as the method you want to use to get involved;
  2. Empower people in Haiti through partnership rather than unilateral action;
  3. Complement existing efforts rather than duplicating them.

 

Why Don’t More People Do This Already?

There are, of course, many who work in Haiti effectively, but several obstacles make this regrettably uncommon.

For starters, US government involvement reads like a laundry list of pitfalls to avoid in Haiti. People who take their cues from US aid programs are almost certain to get it wrong.

Read the rest of this entry »


Links Round-Up: Minister Forced to Resign, Army Put on Hold, And More

November 23, 2011

Breaking News Alert

The Minister of Justice, Josué Pierre-Louis, resigned yesterday under pressure from Haitian parliament. He was charged with participating in the illegal arrest of an opposition party parliamentarian, Arnel Belizaire. Most believe the arrest was retribution for a public spat between Belizaire and the President.

 

Security

President Michel Martelly delayed the re-establishment of the Haitian army pending a ‘civilian commission’ recommendation, due on Jan. 1. Most likely this change occurred because of insufficient funds, or pressure from international actors.

Pairs Well With: The homicide rate in Haiti is not only lower than implied by the media, but is actually well below the average for Latin America and the Caribbean, according to a new study.

Also Pairs Well With: Our post urging everyone to move past the debate over lawlessness in Haiti, which is one of the main justifications for bringing back the army.

 

Economy and Trade

The Ministry of Trade seeks to attract investors, declaring: Haiti is open for business (h/t @moiracathleen).

Pairs Well With: Two articles showing how wage and union suppression have been used to deny the benefits of foreign investment to Haiti’s poor. In other words, investment is great – but only if the right regulations are in place.

The emergence of a vibrant entrepreneurial class in Haiti is one of the best defenses against predatory foreign investment. That’s why it’s exciting to hear that one of our partner groups, the What If? Foundation, is starting a club focused on developing students’ entrepreneurial skills.

Pairs Well With: Haiti’s first annual Global Entrepreneurship Day just concluded, which serves as another positive model of promoting Haitian-driven business ideas, as imposed to foreign-imposed ones.

 

Aid to Haiti

The Center for Economic and Policy Research again picks up on a story that HJA previously covered: the fact that USAID’s reliance on enormous contracts decreases the quality of its aid to Haiti.

Pairs Well With: HJA’s two pieces that focus on the effect of tied aid contracts and “indefinite quantity contracts” (IQCs), which are used because they’re administratively cheap, even though they produce terrible results.


Development Is Political

November 14, 2011

We had a wonderful series of events last week with Lavarice Gaudin, director of operations for the What If? Foundation. Lavarice braved 13 talks over 3 days, which included a panel, public speeches, and class appearances.

Although he offered unique insights each time, several common themes emerged. This post picks up one of those themes for further discussion.

Power and Politics in the US-Haiti Relationship

“The US relationship with Haiti is like somebody who breaks your legs, and then asks: why are you crippled?” – Lavarice Gaudin

Lavarice Gaudin at the University of Minnesota. Photo Credit: Paul Miller.

Read the rest of this entry »


The Right Kind of Food Activism For Haiti: An Event Announcement

October 26, 2011

“It may have been good for some of my farmers in Arkansas, but… it was a mistake. I have to live everyday with the consequences of the loss of capacity to produce a rice crop in Haiti to feed those people because of what I did; nobody else.” – Former Pres. Bill Clinton

The above quote speaks to a profoundly important shift in Haiti since the 1980s: the replacement of most locally grown rice with US imports. Although Haiti produced enough rice to feed itself just 35 years ago, that era has long since passed. Today, the USA Rice Federation brags that Haiti is one of the 5 largest export markets (PDF) for American rice.

In this quote, Bill Clinton admitted something that Haitians have long known. By destroying its rice production system, the US “imposed” upon Haiti decades of devastating hunger. One of the Haitians fighting to reverse this trend is a visionary agricultural activist named Lavarice Gaudin. The Haiti Justice Alliance is thrilled to announce that Lavarice will be joining us in Minnesota from Nov. 6-10.

Read the rest of this entry »


Weekly Links Round-Up

October 13, 2011

Breaking news: President Martelly met with former President Jean-Bertrand Aristide yesterday, as part of a tour of former leaders in which he also visited with former dictator Baby Doc Duvalier and coup leader Prosper Anvil.

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President Martelly’s third nominee for Prime Minister, Garry Conille, is formally ratified by both houses, ending a political impasse.

Pairs Well With: Account of how Jeff Sachs’ doctrine of “economic shock therapy” – a hallmark of neoliberal economic policy in poor countries – shapes Conille’s economic view.

Also Pairs Well With: Discussion of Conille’s background and professional history. Conille says, “I am not the candidate that the blan [international community] is sending back to Haiti. I am the candidate that Haiti strategically put inside the blan to better understand the blan and to come back and help Haiti.”

Newly ratified Prime Minister Garry Conille. Photo credit: Miami Herald.

A major project of one of our partner groups, the Aristide Foundation University (UniFA) Medical School, re-opened last week. The Medical School has been closed since the US-backed coup that removed President Aristide in 2004, when US marines began using it as a base.

Pairs Well With: A review of President Martelly’s primary education plan. As one of the few social policy programs he has outlined in any detail, the focus on schooling is significant. Nonetheless, the review points out that with a projected funding gap of $80 million per year, the “sustainability of the program is unclear.”

The Harvard Group published an well-documented review of the recent human rights abuses perpetrated by MINUSTAH, the UN Mission in Haiti.

Pairs Well With: Nobel Peace Prize Laureate Adolfo Perez Esquivel penned a powerful sign-on letter demanding that contributing nations of Latin America withdraw their UN troops in Haiti:

It is unconscionable that our countries, which have all experienced foreign aggression, should be among those to trample the sovereignty of a country that has experienced countless brutal interventions since courageously breaking the chains of slavery and colonialism.