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Africa: Haiti's Debt in Context
AfricaFocus Bulletin
Feb 2, 2010 (100202)
(Reposted from sources cited below)
Editor's Note
"Haiti was the only country in which the ex-slaves themselves were
expected to pay a foreign government [France] for their liberty [in
1804]. By 1900, it was spending 80% of its national budget on
repayments. ... In 1947, Haiti finally paid off the original
reparations, plus interest. Doing so left it destitute, corrupt,
disastrously lacking in investment and politically volatile." -
historian Alex von Tunzelmann, in London Sunday Times, May 17, 2009
In June 2009 $1.2 billion of Haiti's modern external debt, dating
to the Duvalier dictatorship and subsequent international
structural adjustment programs, was cancelled. But even after this,
Haiti remained saddled with a debt of more than $1 billion. Now
France has pledged to cancel its bilateral debt to Haiti, and the
IMF has said it will cancel its own debt, including a new loan for
$100 million being made available after the earthquake.
Cancellation of all the country's external debt, analysts say, is
one of the minimal conditions necessary for that country's
reconstruction.
This AfricaFocus Bulletin contains a letter from 80 U.S.
organizations to U.S. Treasury Secretary Geithner calling for
cancellation of Haiti's debt, a background paper on Haiti's debt by
Jubilee USA, and a brief description by historian Alex von
Tunzelmann on the historical origin of Haiti's debt.
Another AfricaFocus Bulletin sent out today contains commentary on
the need for African and international support for Haiti's
reconstruction.
For more on Haiti's debt, see particularly
http://www.jubileeusa.org / direct URL: http://tinyurl.com/yjwhb9t
Also see Sophie Perchellet, �ric Toussaint, "Grants to Repay an
Odious Debt?" January 18, 2010
http://www.cadtm.org/Haiti-Grants-to-repay-an-odious
For previous AfricaFocus Bulletin's on the issue of African and
other developing country debt, see
http://www.africafocus.org/debtexp.php
++++++++++++++++++++++end editor's note+++++++++++++++++++++++
Organizations Unite to Tell Treasury Secretary Geithner: Cancel
Haiti's Debt Now and No More Debt for Disaster
January 26, 2010
Today 80 US religious denominations, human rights groups, and
development agencies including the Jubilee USA Network, the
AFL-CIO, the ONE Campaign and TransAfrica Forum sent a letter to US
Treasury Secretary Timothy Geithner, urging him to negotiate
immediate debt cancellation for Haiti by the international
financial institutions.
As the International Monetary Fund prepares to meet on Wednesday to
vote to approve a $100 million emergency loan for Haiti and discuss
possible debt cancellation, the groups urge the United States use
its leadership to ensure that Haiti's existing debt be cancelled
definitively and that any new money comes in the form of grants,
not loans.
January 26, 2010
The Honorable Timothy Geithner Secretary of the Treasury
Dear Mr. Secretary:
We are grateful for the US government's efforts to date to mobilize
emergency assistance for disaster relief in Haiti.
We are writing today to bring to your attention two specific steps
that we believe should be a part of our government's response to
the Haiti crisis: (1) support for the cancellation of Haiti's
remaining debts; and (2) ensuring that any disaster relief
assistance be provided as grants rather than loans.
First, as you know, in June 2009 Haiti secured $1.2 billion in debt
cancellation from its major creditors when it reached completion
point in the Heavily Indebted Poor Countries (HIPC) Initiative.
This was a critical step forward. But even after this relief, Haiti
remains saddled with a debt of more than $1 billion.
More than half of Haiti's outstanding debt is owed to the Inter
American Development Bank (IDB) ($442 million), the International
Monetary Fund (IMF) ($165 million), and the World Bank's
International Development Association (IDA) ($39 million) --
institutions where our government has a significant voice on the
Executive Board. Haiti is projected to pay at least $100 million in
debt payments to these institutions over the next five years unless
these debts are cancelled -- and the earthquake now has devastated
Haiti's capacity to generate sufficient export revenue to be able
to afford these payments.
We have welcomed statements from IMF and IDB officials of their
intentions to consider cancellation of Haiti's remaining debt. We
urge you to use your voice and vote on the Executive Boards of the
IDB, IMF, and World Bank to secure cancellation of Haiti's
remaining debts to these institutions. While arrangements are
worked out for cancellation, we urge you to call for a moratorium
for debt service payments from Haiti to these institutions, without
interest accruing.
Second, we welcome the pledges of additional financial assistance
from international governments and international financial
institutions, as we acknowledge that all available resources must
be delivered to Haiti in as timely a manner as possible. However,
we urge that all support be in the form of grants instead of loans.
While we were initially concerned when the International Monetary
Fund announced its intention to provide $100 million in loan
assistance as part of an existing loan agreement that includes some
onerous conditions, we welcomed IMF Managing Director Dominique
Strauss-Kahn's recent promise that the IMF intends to work to
cancel all of Haiti's debt including this new loan. We urge you to
work with the IMF to ensure that all assistance, including the new
IMF loan, is provided on grant terms and without requirements of
existing loans.
We thank you for your consideration of our views on this critical
issue.1
Sincerely,
[for list of signatory organizations see
http://tinyurl.com/ybufgog]
Policy Update Debt Cancellation for Haiti: An Important Victory but
an Unfinished Agenda
August 2009
[For this background paper plus a wealth of other background
resources on Haiti's debt, see
http://www.jubileeusa.org / direct URL: http://tinyurl.com/yjwhb9t
Haiti achieved $1.2 billion in debt cancellation under the Heavily
Indebted Poor Countries (HIPC) program in late June 2009. It's an
important step - but by no means the end of the story - for a
country with a violent past, extreme poverty and faced by recent
humanitarian emergencies.
By Mimi Lytje
It has been a very bumpy ride for Haiti towards debt cancellation
right from the start, trying to wind its way through the HIPC
process. The international debt relief program was set up under the
International Monetary Fund and World Bank to reduce impoverished
countries debt burden. But the program's strict requirements have
often been equaled to an obstacle course for struggling nations.
Despite its substantial debt burden and its status as the
hemisphere's poorest country, Haiti was not initially accepted into
the HIPC program because it did not meet the technical debt burden
indicators. Haiti was officially included in HIPC in 2006 only
after these requirements were revised.
After being accepted into HIPC, Haiti was projected to finish the
program and receive full cancellation of its debt by September
2008. However the World Bank and IMF repeatedly pushed back the
completion point. In the US this led a bi-partisan coalition of 72
Members of Congress to sign a letter to World Bank President Robert
Zoellick in February 2009 urging immediate debt cancellation for
Haiti. Under pressure from campaigners, in April 2009, the Obama
Administration announced it would cover up to $20 million in debt
service payments from Haiti until Haiti reached completion point -
an important step recognizing Haiti's tremendous need
Haiti achieved its much needed and much anticipated victory at the
end of June 2009 when the board of the World Bank finally approved
Haiti's progression to completion point under HIPC. Haiti will now
have $ 1.2 billion in external debt owed to both bilateral and
multilateral creditors such as IMF, World Bank and the US
government cancelled.
In a country where more than 76% of the population lives in poverty
and only half of the population are able to read, money freed up by
debt cancellation can now be spent on poverty reduction.
A history of illegitimate debt
Haiti's legacy of debt began shortly after the country won
independence from France and abolished slavery. France threatened
to reinvade unless Haiti compensated it for the loss of its
"property", including slaves. With French warships positioned off
the coast, Haiti gave in to French demands in 1825, and agreed to
pay 150 million francs, financed by a loan to a designated French
bank in return for recognition of Haiti's sovereignty.
This enormous debt - equal to fourteen times Haiti's export
revenues - placed a heavy burden on the new country. Haiti was
forced to send any available cash to France, diverting revenues
from investments in infrastructure, education and government
services. The world's first black republic descended into a spiral
of debt and underdevelopment from which it has never recovered.
From 1957 to 1986, Haiti was controlled by the father/son
dictatorship of Francois "Papa Doc" and Jean-Claude "Baby Doc"
Duvalier. For nearly thirty years they spent huge amounts of
foreign assistance to enrich themselves and suppress the Haitian
people. This misuse of resources was widely reported, yet donor
countries and international financial institutions continued to
lend money to the regime.
Surviving a global financial crisis
The fact that Haiti has now received $1.2 billion in external debt
cancellation is a step towards justice for the historical injustice
Haiti has suffered.
But even with this progress, the story does not end here. This
amount only accounts for 2/3 of Haiti's total debt burden. The debt
relief will give Haiti some much needed breathing space in their
budgets but the 1/3 of the debt burden that hasn't been cancelled
has been incurred after 2004. When world leaders agreed to the
Multilateral Debt Relief Initiative (MDRI) in 2005 in Gleneagles,
it was agreed that only debts accrued through 2004 would be
cancelled. The remainder of Haiti's debt has been accrued since
then.
The remaining debt is owed mainly to the Inter-American Development
Bank and IMF. The World Bank aid Haiti has received after 2004 has
come primarily in the form of grants. Haiti also has taken out
substantial loans from Venezuela under the "PetroCaribe" agreement.
Repayments of the Venezuela loans - despite being given on
concessional terms - is expected to reach as much as 1% of GDP in
2013.
Haiti suffered through a series of humanitarian crises in 2008
caused by the devastating effects of four hurricanes. Sharp
increases in food and energy prices have also led to an escalation
of hunger among the poorest sectors of the population. Now, more
than ever, Haiti faces the severe and negative effects the recent
downtown in the global economy.
Haiti is not alone: the overall picture for developing countries is
bleak and the United Nations Conference on Trade and Development
(UNCTAD) predicts a $ 2 trillion financial shortfall for developing
countries, along with a 30% drop in exports income. A decline in
food production is also likely, as is recurrence of food crises in
some parts of the developing countries.
The urgency of the situation has led UNCTAD to call for a temporary
moratorium for developing countries on their debt service
obligations. The UNCTAD General Secretary Supachai Panitchpakdi has
stated that: "In the current global crisis situation both debtor
and creditor countries would probably be better served if scarcer
foreign exchange earnings in the debtor economies were used for the
purchase of imports rather than for debt servicing". Haiti is a
prime example of a country that could benefit from such a
moratorium.
Since debt cancellation under HIPC can not stand alone and since
measures such as responsible lending mechanisms have been widely
neglected, Haiti like many other countries in the same situation
could very well be headed for another debt crisis.
Building on Haiti's debt cancellation, a moratorium on Haiti's
remaining debt is a critical next step in ensuring continued
progress and a way out of poverty for this small island state. For
more information, and to take action, see http://www.jubileeusa.org
or http://www.haitijustice.org.
Excerpt from article in London Sunday Times by historian Alex von
Tunzelmann. May 17, 2009
http://www.timesonline.co.uk /
direct URL: http://tinyurl.com/ogxxu2
Just why is Haiti in such a dire situation, so much worse than any
other country in the Americas, and as bad as anywhere on Earth?
Some blame the United Nations. Some blame the Americans. Some have
theories about the collision of global warming with global
capitalism. All are careful to point out that the Haitian elite
deserves its reputation for being greedy, negligent and
kleptocratic. "I think the Haitian people have been made to suffer
by God," Wilbert, a teacher, tells me, "but the time will come soon
when we will be rewarded with Heaven."
History tells a different story. The appalling state of the country
is a direct result of having offended a quite different celestial
authority - the French. France gained the western third of the
island of Hispaniola - the territory that is now Haiti - in 1697.
It planted sugar and coffee, supported by an unprecedented increase
in the importation of African slaves.
Economically, the result was a success, but life as a slave was
intolerable. Living conditions were squalid, disease was rife, and
beatings and abuses were universal. The slaves' life expectancy was
21 years. After a dramatic slave uprising that shook the western
world, and 12 years of war, Haiti finally defeated Napoleon's
forces in 1804 and declared independence. But France demanded
reparations: 150m francs, in gold.
For Haiti, this debt did not signify the beginning of freedom, but
the end of hope. Even after it was reduced to 60m francs in the
1830s, it was still far more than the war-ravaged country could
afford. Haiti was the only country in which the ex-slaves
themselves were expected to pay a foreign government for their
liberty. By 1900, it was spending 80% of its national budget on
repayments. In order to manage the original reparations, further
loans were taken out - mostly from the United States, Germany and
France. Instead of developing its potential, this deformed state
produced a parade of nefarious leaders, most of whom gave up the
insurmountable task of trying to fix the country and looted it
instead. In 1947, Haiti finally paid off the original reparations,
plus interest. Doing so left it destitute, corrupt, disastrously
lacking in investment and politically volatile. Haiti was trapped
in a downward spiral, from which it is still impossible to escape.
It remains hopelessly in debt to this day.
AfricaFocus Bulletin is an independent electronic publication
providing reposted commentary and analysis on African issues, with
a particular focus on U.S. and international policies. AfricaFocus
Bulletin is edited by William Minter.
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