12575: Haiti-Bust Banks (fwd)

[Bob Corbett <corbetre@webster.edu>]

From: Greg Chamberlain <GregChamberlain@compuserve.com>

   By MICHAEL NORTON

   JACMEL, July 27 (AP) -- Nicolas Greffin lost his life savings and
property to a cooperative banking scheme that has left him and untold
thousands across Haiti in despair.
   Without notice, government-endorsed cooperative banks are folding,
raising questions about the high interest they paid and allegations they
were used to launder drug money.
   Their demise has brought new desperation and provoked violent protests
in a country mired in poverty and a 2-year-old political impasse that has
blocked international aid.
   Like other Haitians, Greffin says he was swept up in a wave of banking
enthusiasm that began last year.
   The 54-year old veterinarian's assistant sold two small houses and a
plot of land, withdrew his savings from a commercial bank and deposited the
lot -- the equivalent of $8,900 -- in two of the 10 cooperatives in Jacmel,
a seaside tourist town in southern Haiti.
   That was May 25. On June 1, many co-ops shut down and the owners
vanished with the depositors' savings.
   "I lost everything, for six days of illusion," Greffin said, with tears
in his eyes.
   Greffin blames President Jean-Bertrand Aristide because, "He encouraged
us to join the cooperative movement and never warned us these banks were
not part of it."
   Members of legitimate cooperatives, which have existed in Haiti since
1937, pool their resources and invest in farming, fishing and housing.
   As the cooperative banks began operating last year, government
advertisements began appearing endorsing the cooperative movement, and
officials including Aristide did the same. Though they never tied the
movement to the banks, the timing led people to believe their government
was endorsing the banks.
   Aristide, who some Haitians consider the savior who delivered them from
the dictatorship of the Duvalier family, appeared to be endorsing another
form of salvation.
   "Haiti can only succeed through the cooperative movement," Henriot
Petiotte, director of the state National Cooperative Council, said in an
interview July 2 on Radio Metropole.
   But he also said that "if it's true the president encouraged people to
join the cooperative movement," Aristide "referred to traditional
cooperatives -- not 'new wave' ones."
   The co-op banks offered up to 15 percent monthly interest on term
accounts, compared to commercial banks' 2 to 7 percent annual interest. The
commercial banks held deposits totaling about $1 billion, while the
cooperative banks, economists estimate, gathered $80-150 million.
   In December, commercial bank customers began moving savings to
cooperatives in alarming numbers.
   In January, Sogebank, Haiti's largest bank, returned deposits to a dozen
or so cooperatives. An economist who spoke on condition of anonymity said
correspondent U.S. banks expressed fears the cooperatives were depositing
drug money in Sogebank.
   Depositing money with legitimate banks could have "washed" the money for
drug dealers.
   It is no coincidence, economists and analysts say, that the cooperatives
shifted into high gear in mid-2001, shortly after passage of a law
requiring banks to notify authorities of deposits exceeding $10,000. The
law didn't apply to the co-ops.
   Haitians became fearful. Confidence waned; the number of new investors
shrank. Old investors tried to withdraw money too late.
   Dozens of co-ops have closed since April, provoking sometimes violent
demonstrations.
   In Jacmel, more than 5,000 of the 150,000 people had invested in the
co-ops. But since one wage earner supports about 10 people in Haiti, some
50,000 people -- a third of the population -- are directly affected.
   Jackson Alexandre, a 29-year old accountant, transferred his savings of
$7,500 to three co-ops. Now he is penniless and out of work. His boss was
forced into bankruptcy because of his own co-op investment.
   "What happened to Jacmel was worse than a hurricane," Alexandre said.
   Mystery still shrouds the co-ops' ability to pay such high interest
rates.
   "Do new deposits pay interest on old deposits?" former Planning Minister
Marc Bazin asked, alluding to pyramid schemes that, in countries like
Albania, led to disaster as money owed to initial investors exceeded funds
deposited by those who followed.
   In February, Haiti had about 300 co-op banks, with about 185,000
members. It's unclear how many remain.
   In Jacmel, only two are left. One, called Coeurs Unis, or United Hearts,
has purchased fleets of taxis and buses, gas stations, schools, and real
estate since it opened in October.
   In May it bought a 28-room beach hotel outside Jacmel for a reported
$3.4 million. With its 40 employees and low occupancy rate, it's doubtful
the Mirage Hotel is making money.
   But it is located on a newly tarred 18-mile road nicknamed Cocaine
Alley. It lies along beaches where boats from Colombia often drop bundles
of drugs.
   This month, Coeurs Unis lowered its monthly interest rate from 12 to 5
percent.
   Days earlier, Aristide announced that "There is no crisis of the
cooperative movement" and pledged "the state will abandon nobody who
deposited money in a cooperative and was victimized."
   But it's doubtful the cash-strapped government can reimburse victims by
October, as it has promised.