#4940: Durban Comments on Pina's Inflation Analysis (fwd)

[Bob Corbett <corbetre@webster.edu>]

From: Lance Durban <lpdurban@yahoo.com>

No question that the devaluation of the gourde hits poor people who have
no access to hard currency the hardest, but it is somewhat less clear to
me that the wealthy elites of Haiti are automatically the winners.  Don't
forget, rich folks importing goods and selling on the local market are
continuously obliged to buy new dollars at an ever more expensive rate.  
They have to raise gourdes prices just to recover the money needed to buy
dollars and import the same items again.  Except that when the local
prices go up, the poor Haitian consumer will be able to buy less... meaing
the rich guy's market is inevitably shrinking. 

I would like to ask Kevin to provide some of the "growing evidence" he
refers to in this sentence:

   "..there is growing evidence that the diminishing supply of
    US currency is compounded by large overseas transfers of
    capital by Haiti's entrenched business elite."

and then to let me in on the "no secret" to which he refers a couple of
paragraphs later:

    "It is no secret that a great many within this business oligar-
     chy have close ties and contacts with allies in Washington."

Sorry to say the latter is a secret to me, although I am always interested
in learning new secrets, Kevin.

As for Kevin's observation that most people with money in Haiti seem to be
more interested in importing foreign products for resale than actually
making something locally, he is absolutely correct.  Why is that so? 
Seems like if you were manufacturing something for sale in U.S. dollars
overseas you could actually profit as the gourde devalued... at least in
the short run.  Could there be other reasons why investment in productive
enterprise in Haiti is looked on with such disfavor?  Could political
instability, lack of basic infrastructure, poor marketing of the country,
etc. play a role? 

Finally, as for the condemnation of wealthy people for exchanging their
piles of gourdes into another vehicle that will hold its value better (the
exporting dollars to Zurich phenomena), well, that's normal human behavior
regardless of how high your pile of gourdes is.  No one wants to see his
assets be devalued!  HOWEVER, by plunking your gourdes into plant and
equipment in Haiti you are not automatically throwing your money away. 
Plant and equipment in Haiti is mostly evaluated in US dollars, but even
if you did buy it in gourdes, its price (in gourdes) will most likely
climb almost as fast as the gourde declines.  That's called inflation.

Regards,
Lance Durban

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