THE EMBARGO ON INTERNATIONAL LOANS AND ASSISTANCE TO HAITI

February 7, 2003

HISTORICAL CONTEXT

-        Haiti’s chronic indebtedness to foreign banks began in 1825 when it was forced to borrow 24 million francs from private French banks to pay a crippling indemnity debt of 150 million francs to France.

-        The burdensome repayment schedules (Haiti maintained a remarkable record of payment of its debt, never defaulting until after the American intervention) denied Haiti the opportunity for any real economic development in the early years of the Republic. Haiti was set on a devastating course of borrowing funds to re-pay an ever-growing debt.

-        Haiti became steadily poorer during the years 1957-1986 when the Duvaliers were in power. Federal Court decisions in the U.S. indicate that Duvalier and his coterie sole in excess of half a billion dollars. Yet, Haiti was a major recipient of foreign aid throughout the Duvalier era  with the US, Canada, West Germany and France prominent amongst the bilateral donors and with the World Bank, IMF, FAO, WHO, the most notable of the multilaterals.

-        In 1981, the IMF paid in $22 million to the Haitian treasury as part of a standing credit; two days later a visiting team of fund experts discovered that Duvalier had withdrawn $20 million of this money for personal use. One documented incident of theft spanning over 30 years. Today the arrears that Haiti is obligated to repay date back to these Duvalier era loans stolen from the treasury.

BREAKDOWN OF MONEY WITHHELD BY THE INTER-AMERICAN DEVELOPMENT BANK (IDB)

A.       Loans fully approved by the IDB, conditions met by the GOH, agreements ratified by the Haitian Parliament

§          Rural road and rehabilitation program   $ 50     million

§          Reorganization of health sector             $ 22.5  million

§          Potable water and sanitation                 $ 54     million

§          Basic education program                      $ 19.4  million

§          Sub-total                                            $145.9  million

      B.        Investment sector loan (under discussion)

      §          Budget support and partially to fund arrears  $50 million

     C.         New money earmarked for Haiti for 2002-2004 that must be disbursed of else will be lost

§          Vocational training - education

§          Basic infrastructure - roads

§          Economic and Social Assistance Fund (FAES)

§          Health

§          Agriculture $317 million

§          Total IDB                                              $512.9 million

THE EMBARGO ON LOANS

In a letter dated June 4, 2001, to the Government of Haiti, the IDB acknowledged that, “the position of certain members of the IDB Administrative Council regarding the situation in Haiti is temporarily preventing the institution from strictly conforming to the norms and procedures agreed to with respect to the management of the project [with Haiti].” And that in this “unprecedented situation”, it was awaiting the green light from either the OAS or “major partners” of the IDB’s Administrative Council, to go forward with the loans. In essence, despite Haiti having paid $5 million in arrears then owed, the IDB refused to and continues to refuse to release the loans until there is a resolution of the “political crisis”, as subsequently confirmed by letters from the U.S. representative to the bank and statements by Secretary of State Colin Powell at a CARICOM meeting last February 2002. In a recent briefing, the State Department recognized that because: “Haiti is the hemisphere’s poorest country, there is a continued need for assistance to programs that increase access to education, combat environmental degradation, fight the spread of HIV/AIDS, and foster the creation of legitimate business and employment opportunities. These programs can create an atmosphere conducive to building democracy and reducing illegal migration. They will also address root causes of poverty and hopelessness in Haiti, contributing factors behind Haitian involvement in the international drug trade.”

OAS RESOLUTION 822 CALLS FOR THE NORMALIZATION OF HAITI’S RELATION WITH THE INTERNATIONAL FINANCIAL INSTITUTIONS

 -        On September 4, 2002 the OAS unanimously adopted Resolution 822, which among other things, resolves to “support normalization of economic cooperation between the Government of Haiti and the international financial institutions and urge those parties to resolve technical and financial obstacles that preclude such normalization.” In theory de-linking the loans to the “political crisis.”

 -      Haiti’s arrears, approximately $50 million to various financial institutions, and approximately $20 million to the IDB, was posited as one of the main obstacles  to the release of the loans.

 -       In addition to the payment of arrears, the Government of Haiti has been asked to stop subsidizing the cost of gasoline as an immediate good-faith sign of its willingness to curb the deficit. Further macro-economic governance measures asked of the government to slow inflation, decrease deficit financing, and promote transparency, are being implemented.

  -     At the end of December, the Government of Haiti withdrew its subsidy on gasoline, sending the price at the pump up by nearly 80%. Haiti’s Minister of Finance is working closely with the IDB to secure a necessary bridge loan for the payment of arrears, but there has not yet been a release of the pre-approved loans by the IDB.

  -     At a recent OAS meeting, Guyana’s Ambassador stated, Haiti owes money because if has no money and Haiti is being asked to pay a debt with money it doesn’t have.  Haiti is a country where the debt should be eliminated.  And conditions are ideal for such a decision.

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