How Haiti's Future Depends on American Markets

A major industrial park has been touted as a solution to the troubled country's economic woes. Does it really deserve the hype?
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Former U.S. President Bill Clinton and U.S. Secretary of State Hillary Clinton pose with workers at the grand opening ceremony of the new Caracol Industrial Park in Caracol, Haiti, on October 22, 2012. (Larry Downing/Reuters)

CARACOL, HAITI--Along the highway that parallels Haiti's north coast, not far from the bay where Christopher Columbus's Santa Maria is believed to have shipwrecked on Christmas Day in 1492, giant billboards with smiling faces dot the landscape of alternating crop fields and scrub acacia. The billboards carry the country's new mantra: "Haiti is open for business."

The cliché gains at least a little credence in this case from a $300 million industrial park, backed by the U.S. government and other donors. The single biggest investment in Haiti since the devastating earthquake of January 2010, the park symbolizes the debate about foreign-led economic development in very poor nations. Its backers say it will bring tens of thousands of jobs to a country in desperate need of them, while critics see it as merely another way for foreign firms to exploit cheap labor.

The reality is that the park could be both a quick way to create jobs and a means to boost the nation toward industrialization--and many locals, at least, say it gives them hope. But its success depends on manufacturers there making the transition fairly fast from cheap clothes to higher-value products--or else on the U.S. continuing to give preferential trade terms to Haitian goods.

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The industrial park sits just south of the small coastal town of Caracol and employs 1,600 people today, in an area where there are three main alternatives: farming, fishing, and leaving.

The Haitian government estimates unemployment at 40.6%, but the official figure pales next to the reality that around three-quarters of Haitians struggle to scratch out a living each day in the informal sector. "We had learned that supporting long-term prosperity in Haiti meant more than providing aid," U.S. Secretary of State Hillary Clinton said at the October inauguration of the park, where visitors included her husband, ex-president Bill Clinton, and celebrity actors Ben Stiller and Sean Penn. "It required investments in infrastructure and the economy that would help the Haitian people achieve their own dreams."

Haiti is not the easiest place to run a business. It lacks reliable electricity, good roads and ports, and solid institutions. But it managed to attract Korean textile manufacturer Sae-A Trading Co., among the largest in the world, as the anchor tenant of Caracol Industrial Park.

The U.S. government put up $124 million for an on-site power plant and other infrastructure. The Inter-American Development Bank (IDB) promised $100 million to build the park. The government of Haiti gave Sae-A a 15-year tax holiday. Sae-A itself pledged $78 million to cover equipment and operations, with a reportedinitial investment of $39 million.

Sae-A public affairs officer Karen Seo says the "decision to invest in Haiti became clear" with the international aid package. But there was one other sweetener, which officials say was the linchpin of the whole deal: U.S. legislation that, with a few conditions, gives apparel imports from Haiti duty-free status.

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Backers claim that Caracol Park could eventually create 60,000 jobs, albeit mostly low-paying work assembling garments. The minimum daily wage for textile workers in Haiti is 200 Haitian gourdes, about $5. (In 2011, the UN reported that 75% of Haitians live on less than $2 per day.)

Experts caution that in the global textile industry, margins in low-value production can hardly pay Haiti's $5 per day minimum wage.

The project has been controversial. Building it meant displacing about 350 families from the fertile stretch of state-owned land that an American consulting firm identified as a suitable spot. The area contains an important watershed, which makes it prime farming land, and some worry that the park's water usage and disposal could upset the local ecology. Most residents either fish or grow crops such as black beans or plantains. Mangroves grow in the bay, home to one of Haiti's few intact coral reefs. Both guard against shoreline erosion and provide wildlife habitat; a 2009 study estimated the direct economic value of the mangroves and reef at $110 million. Local officials say they weren't consulted about the park's potential location.

Last month's collapse of a garment factory in Bangladesh has put the conditions of workers who make clothes for the rich world in the spotlight. In Haiti, U.S. trade preferences require the creation of a program called Better Work, run by the International Labor Organization, to bring labor laws up to international standards and inspect factories. Many factories don't yet meet the standards (pdf, p. 15), particularly on health and safety and minimum wages, but the Caracol facility is too new to have been included in the latest Better Work report.

Others worry about the social consequences. Amy Wilentz, one of the best known American writers on Haiti, called the park "a new kind of plantation" and compared low-wage factory work to slavery. Others have decried the idea of using low-paying factory jobs as a step in the country's development. Some say that Haiti has already tried this strategy, and failed, or that the investment would be better spent in agriculture.

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It's certainly true that Haiti's apparel sector has boomed before. A 2010 Congressional Research Service report estimates that it employed up to 100,000 people between the 1960s and the end of the Duvalier dictatorship in 1986. A military coup in 1991 led to a trade embargo that hamstrung the industry, at the same time that competition was growing from regional neighbors like Honduras and emerging markets in Asia.

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Tate Watkins is a freelance journalist in Port-au-Prince, Haiti.

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