15978: This Week in Haiti 21:14 6/18/2003 (fwd)

[Bob Corbett <corbetre@webster.edu>]

"This Week in Haiti" is the English section of HAITI PROGRES
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                           HAITI PROGRES
              "Le journal qui offre une alternative"

                      * THIS WEEK IN HAITI *

                      June 18 - 24, 2003
                         Vol. 21, No. 14

HAITI HEADS DOWN DEBT BLACK HOLE

Last month, the Haitian government agreed to undertake strict austerity
measures proposed by the International Monetary Fund (IMF) in the hopes of
unblocking millions of dollars in frozen international aid and loans.

Under the terms of the agreement, called a Staff Monitored Program, Haiti
must scrupulously follow IMF directives to cut deficit spending, privatize
state industries, downsize government agencies, and lower tariffs over a 12
month period. If it fails to do so, as it has twice in the past five years,
it will not receive the IMF's seal of approval and loans.

It is a gamble. And now the Haitian government is leveraging that bet with
two more gambles.

The Haitian government wants to free up some $146 million in approved loans
from the Inter-American Development Bank (IDB). After reneging on releasing
the loans in 2001 under pressure from Washington, IDB officials said that
they would disburse the funds if Haiti cut a deal with the IMF and also paid
its IDB debt arrears of some $30 million (see Haïti Progrès, Vol. 21, No. 6,
4/23/2003).

But where to find the $30 million? Haiti's foreign reserves are already
precariously low, lurking in recent months at about $50 million.

On Jun. 10, Finance Minister Gustave Faubert announced that the government
would seek to borrow the money from Haiti's private banks, which would
charge commercial interest rates of about 9%, and also get a 2% fee of some
$600,000.

So the government is gambling that, if it pays its IDB arrears: 1) the IDB
will not renege again; 2) that it will be able to pay back the private banks
and 3) that IMF monitors will give them a passing grade.

But already complications loom. On Jun. 12, the Professional Association of
Banks (APB) issued a press release confirming that the government had asked
for a short-term loan in May to pay its IDB arrears. "Following this
request, several commercial banks have shown interest in providing this
financing, given certain conditions and guarantees," the release said. "One
of the conditions is the definite and irrevocable authorization of the
Haitian government to the IDB to reimburse directly to the commercial banks
the sum of the loan from the first disbursement of the sector investment
loan."

This puts the government in a jam. The IDB loans for roads, education,
potable water and sanitation, and health are not released in a lump sum but
small installments, which will not at first even cover the total loan of $30
million. Furthermore, the IDB loans would then be going to pay off the
banks, not carry out the projects for which they were intended.

Even long-time Washington ally Marc Bazin, a former World Bank economist,
outlined the risks he saw in the situation on Radio Métropole on Jun. 12.
"First, why would the public treasury borrow money at commercial interest
rates while the interest rates on the arrears are only 1% for ten years and
of 2% for forty years?" he asked. "Secondly, the $30 million [that the banks
will lend to the government] are payable in one payment while the IDB
carries out its disbursements in installments. Thirdly, certain IDB
operations, pending reimbursements from Haïti, are subject to previous
technical obligations. The sector investment loan has about ten conditions.
What will happen if, as usual, we drag our feet? Does one really believe
that the IDB will pay out if obligations are not fulfilled? The fourth risk
is the biggest one. That we will get into debt at commercial rates to pay
the arrears without ever being able to satisfy the [IDB]," i.e. get release
of the IDB loans.

In short, the Haitian government is making a $30 million crapshoot with a
Washington-controlled bank which has already double-crossed it.

Meanwhile, leaders of the Washington-supported Democratic Convergence
opposition front, like Gérard Pierre-Charles, have sought to kindle panic
among depositors of the commercial banks by suggesting that the government
will not pay back the loan. Late last year, a panic briefly threatened Haiti
's banking system when opposition-fanned rumors circulated that the
government was planning to convert all dollar accounts into gourdes.
Depositors transferred millions of dollars out of the country.

Why are Haitian government officials now naively accepting the premise that
$500 million in international aid and loans is "embargoed" for technical
reasons, not political ones? After bitterly denouncing them in recent
months, the Haitian government now seems blind to the strings with which
Washington controls the IDB and other international lending institutions.

"The International Monetary Fund and the World Bank are dominated by the
United States, and the dominant stakeholders in those institutions are
American finance capitalists," wrote analyst Stan Goff (see Haïti Progrès,
Vol. 18, No. 7, 5/3/2000). "In simple terms, the IMF and the World Bank have
much in common with loan sharks. They do not come to countries' rescue. They
hold out loans to desperate countries to restructure their debts, and take
on more debt - which they can ill afford - in exchange for acceptance of
draconian adjustments to economic structures that are beneficial only to a
small local elite who are working with transnational corporations (TNCs).
These are called structural adjustment programs (SAPs). Their purpose is to
pry developing economies open for domination by the TNCs and international
speculators."

Groups like the National Popular Party (PPN) and the Platform for an
Alternative Development (PAPDA) have called on the Haitian government to
declare a moratorium on paying off its debt to break the infernal cycle into
which Haiti is increasingly locked. They propose investing the money that
would go to pay interest into autonomously-designed projects to improve the
lives of the Haitian people. The PPN has also called for building closer
ties and cooperation with countries not subservient to Washington, like
Cuba, China, and Venezuela.

Haiti has a total foreign debt of only $1.248 billion, still modest in
comparison to other Latin American nations which plunged headlong into
Washington-encouraged borrowing over the past two decades and are now
saddled with giant debts which they can never hope to pay.

All articles copyrighted Haïti Progrès, Inc. REPRINTS ENCOURAGED.
Please credit Haïti Progrès.

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