How Haiti's Future Depends on American Markets

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.

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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.

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.

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.)

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.

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.

Hans Garoute, a Haitian social entrepreneur, remembers that period. At the time, he says, U.S. manufacturers in Haiti that had initially produced only low-value goods like t-shirts and underwear were starting to make products that command higher prices and wages. But in the political chaos of the late '80s, he watched many of those companies move production to Asia. "Today," he says, "we're back to t-shirt."

Apparel manufacturers have slowly rebuilt since the end of the trade embargo, with the help of a U.S. law passed in 2006 that allowed Haitian apparel to enter America duty-free. The law, known as HOPE (the Haitian Hemispheric Opportunity through Partnership Encouragement Act) was amended and expanded in 2008, and after the 2010 the earthquake, expanded once again through HELP (the Haiti Economic Lift Program). Employment in Haiti's textile sector has rebounded to about 30,000.

In 2009, knit and woven apparel accounted for 92% of Haiti's exports to the United States. Haiti needs growth like that to counterbalance its large trade deficit--$3 billion in 2011 according to the World Bank, or 41% of GDP. Haiti exports crops such as mangoes, cacao, and coffee, but agricultural products comprise only about 6% of all exports. The country imports 80% of the rice it consumes, mostly from the United States. Decades of deforestation and soil erosion, the lack of a modern farming sector, and government subsidies doled out to American farmers make it difficult for Haitian farmers to compete globally.

"Working in a factory is not a gift," says Garoute, "but believe me, sitting in Trou-du-Nord and do nothing, and you are 24 years old, that is worse." In 1992, Garoute founded INDEPCO, a non-profit network of tailors across Haiti who sew school uniforms and other garments for the domestic market. It also does training sessions, like one it held last year in the northern town of Trou-du-Nord for a group destined to work at the Caracol park.

But in the global textile industry, margins in low-value production can hardly pay Haiti's $5 per day minimum wage, Garoute says. "They have China making t-shirt," he says. "They have India making t-shirt. You have Pakistan making t-shirt. And don't forget, those countries make the raw material as well." He says that Haiti's textile industry will only grow into higher-value-added production with proper investment in the workforce.

At the industrial park, female workers wearing chartreuse aprons and headscarves stream out of the blue factory buildings on their lunch break. Frandline Joseph sits outside. She sews for Sae-A and says she doesn't like the work: "I don't have time to sit."

But she also says that she had no job before her current one, and life has improved since finding employment. "Now I work for 200 gourdes," she says, and can pay her daughter's school fees in a country with a virtually non-existent public education system. "Before the park, I worked for nothing."

Her story is similar to other published accounts, and that of Rosedaline Jean, a 22-year-old who's worked for Sae-A for five months. "Before, I lived only by the grace of God," says Jean. "Although I don't have a husband or children, my life wasn't easy because I wasn't working. When I got here, a lot changed in my life.

"This isn't the ideal job," she continues, "but it's better than nothing. I don't intend to make a career in this job. I plan to start a business, and I'm already saving for it. But it's difficult, because my salary is practically nothing."

Haiti's northern coast faces the United States, and so it is from this part of the country that people leave on makeshift boats, bound, they hope, for a better life. "The park can be good if it can give you a job," Edouard Riche, a maintenance worker there, said, as we watched a couple of fishing boats skimming the surface of the water. "If you have work in Haiti," he said, "you don't need to take a boat abroad to look for work."

Sae-A shipped 76,000 t-shirts to Wal-Mart in October of last year, the first products from the factory. It now employs 1,400 people and says that number will double by the end of 2013. It hopes to create 20,000 jobs in total over the coming years. The park's only other tenant is Peintures Caraïbes, a Haitian company that makes paint for Sherwin-Williams and employs about 200 people. Last month, U.S. garment company Safi Apparel signed a contract to become the park's third occupant.

Georges Sassine, a Haitian textile manufacturer and and the former head of SONAPI, the Haitian industrial parks agency, says the industrial park's cheap-manufacturing strategy is "just a time-buying procedure." But he is adamant that the Caracol development is viable only thanks to the duty-free access to America. The extension granted by U.S. lawmakers after the earthquake continues that tariff exemption until 2020. Whether Haiti can develop a higher-value-added textile sector by then--or whether U.S. lawmakers extend the legislation again--remains to be seen.