14342: (Chamberlain) Haitian govt abandons fuel subsidies (fwd)

[Bob Corbett <corbetre@webster.edu>]

From: Greg Chamberlain <GregChamberlain@compuserve.com>

Haitian govt abandons fuel subsidies, prompting major rise in prices of
gasoline, kerosene

By Michael Norton

PORT-AU-PRINCE, 3 Jan 03 (AP) - Haiti's government has halted subsidies of
gasoline and other petroleum products, leading to sharp price hikes,
government and business officials said.
        The price increases since New Year's Day also have affected diesel
and kerosene. Responding to higher prices at the pump, bus drivers are
raising their fares.
        "I don't see how I can send my kids to school now. Prices are
spiraling up," street merchant Nadine Florentin said, selling candies on
the roadside Friday in a daily struggle to support three children.
        A national budget deficit of some 3 billion gourdes (US$80 million)
was one of the factors that made it impossible for the government to
continue subsidies, Commerce Minister Leslie Gauthier said earlier this
week.
        Higher world market prices - stemming in part from a Venezuelan
opposition strike paralyzing the country's oil industry - also made it more
difficult for the Haitian government to continue subsidizing fuel, Gauthier
said.
        As a common practice, Haiti's government was buying oil shipments
and passing them along to wholesalers below cost.
        The increase in prices in Haiti, the poorest country in the Western
Hemisphere, has little relation to the Venezuelan political crisis, Haitian
economist Claude Beauboeuf said.
"The government should have cut the subsidy a long time ago," he said.
"It's lack of foresight that led to this dramatically painful measure."
        Since October, the subsidies have cost the government an estimated
500 million gourdes (about US$13.5 million), and its cash reserves in U.S.
dollars have fallen below US$50 million, Beauboeuf said.
        Since Dec. 31, prices for low-octane gasoline rose from about 46
gourdes (US$1.24) to 80 gourdes (US$2.16) per gallon, a 74-percent
increase.
        "We have to raise our fares, but our passengers can't afford them,"
bus driver Edy Pierre said.
Diesel and kerosene prices, meanwhile, rose by about 55 percent. Many poor
Haitians use kerosene for lanterns in shantytowns with no electrical power.

        One factor forcing the government to end subsidies included the
suspension of millions of dollars in foreign aid after disputed legislative
elections in 2000, Gauthier said.
        The International Monetary Fund (news - web sites) had demanded the
subsidies be halted. One US$50 million loan still pending from the
Inter-American Development Bank, intended to help the country meet its
budget shortfall, is contingent on the government meeting the IMF demand.
        Haitians have lined up for gasoline and kerosene several times in
recent weeks amid rumors of a fuel shortage, but officials insisted there
were adequate supplies.
        Economists warned that the higher fuel prices could spill over into
other parts of the economy, affecting prices at supermarkets and other
businesses that use diesel-fueled generators due to frequent power outages.

        Since mid-November, tens of thousands of Haitians have marched in
anti-government demonstrations, demanding that President Jean-Bertrand
Aristide resign for failing to solve the impoverished country's problems.
        Aristide maintains he has brought the country relative peace and
progress, but has been hindered by blocked aid and a combative opposition.
He has refused to step down before his term ends in 2006.