HAITI: RECENT ECONOMIC TRENDS

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP85T00875R001600030153-9
• Release Decision: RIPPUB
• Original Classification: C
• Document Page Count: 10
• Document Creation Date: December 22, 2016
• Document Release Date: October 28, 2011
• Sequence Number: 153
• Publication Date: October 1, 1970
• Content Type: IM

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Confidential
DIRECTORATE. OF
INTELLIGENCE
Intelligence Memorandum
Haiti: Recent Economic Trends
-Eo1fi
ER IM 70-152
October 1970
Copy No.- 0
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WARNING
This document contains information affecting the national
defense of the United States, within the meaning of Title
18, sections 793 and 794, of the US Code, as amended.
Its transmission or revelation of its contents to or re-
ceipt by an unauthorized person is prohibited by law.
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CENTRAL INTELLIGENCE AGENCY
Directorate of Intelligence
October 1970
INTELLIGENCE MEMORANDUM
Haiti:' Recent Economic Trends
Introduction
Although Haiti's backward economy lost ground
during the mid-1960x, it recently has shown some
improvement in certain sectors despite the Duvalier
regime's continuing repression and corruption. In-
vestment, employment, and foreign exchange earnings
are at their highest levels in several years, but
reports of a "boomlet" are exaggerated. Although
total output has begun to grow again, many basic
obstacles to economic progress remain. This memo-
randum examines the recent improvements and pros-
pects for their continuing.'
Background
1. Haiti, Latin America's poorest and most
densely populated country, has a per capita income
less than_one-fifth the regional average. Economic
development has been handicapped both by decades
of violence, instability, and misgovernment and by
adverse natural conditions. Only about one-third
of the-area is agriculturally usable, soil fer-
tility has-been largely exhausted, erosion is a
widespread problem, and crops are frequently
Note: This memorandum was produced solely by CIA.
It was prepared by the Office of Economic Research
and was coordinated with the Office of Current In-.
te Z Zigence .
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damaged by hurricanes or drought. There are no
energy resources except for come hydroelectric
potential. Minerals consist mainly of small bauxite
and copper deposits.
2. Although Haiti now has 3/ to 5 million
people, the modern economy remains very small.
Subsistence farming embraces more than 90% of the
agricultural land and perhaps 80%-85% of tl::a popu-
lation. Three-fifths of exports are agricultural
products, mostly sugar and low-grade coffee from
subsistence farms. Until recently, manufacturing
had scarcely progressed beyond agricultural proc-
essing -- mainly sugar refining. Apparently, con-
tinued high death rates have helped to give Haiti
one of Latin America's lowest population growth
rates (an estimated 2%-2/%), but the economy still
cannot absorb many people seeking work.
Economic Decline in 1963-68
3. The economy moved ahead slowly for several
years after Duvalier took power in 1957 and was
buoyed in the early 1960s by increased foreign aid
and record tourist receipts. Publicity about the
regime's character, however, soon discouraged
tourism and foreign investment. Gross receipts
from travel fell from $8 million in 1961* to $1 mil-
lion in 1964, and direct private investment averaged
only about $1 million annually in 1962-68. The
United States sharply reduced its aid in-1962 and
suspended most of its aid programs in 1963.
4. These setbacks were compounded by. an un-
usual run of bad weather. Hurricanes struck in
1963, 1964, and 1966 and drought in 1968. Agri-
cultural output dropped substantially during
1963-68, and export earnings trended downward.
Seldom very robust, net foreign exchange reserves.
dwindled to minus $7 million by September 1968.
In contrast to the 12% gain of 1960-62, gross
domestic product fell by an estimated 15% (or some
27% per capita) during 1963-68. Declining economic
activity and reduced foreign aid cut government
revenues and brought public investment -- half of
the total by 1962 -- almost to an end.
*'_Statistics in this memorandum refer to fiscal
years ending 30 September of the year specified.
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Moderate Revival in 1969-70
5. With all its deficiencies, Haiti also has
a few assets: cheap labor, proximity to the United
States, and (as additional tourist attractions)
pleasant winter climate and an exotic atmosphere.
These advantages -- together with continuing in-
ducements for industrial investment, reduced un-
favorable publicity about the Duvalier government,
and good weather since mid-1969 -- account for the
economy's recent small improvements.
6. Under the 1963 law that offers duty-free
entry for new manufacturing firms' imported in-
puts, foreign and Haitian businessmen obtained
46 licenses in 1969 to open establishments, com-
pared with 22 licenses in 1968 and only a few
previously. Some of the 46 facilities are already
operating, and others apparently are under way.
New establishments opened during 1962-68 reportedly
created 5,500 jobs (],0%-15% of manufacturing em-
ployment.in 1968), and the licenses issued in 1969
promise appreciable further gains. Many of the
new and planned facilities involve US capital,
.but no large, well-known corporations are repre-
sented. US investors generally limit their risks
by forming joint ventures with Haitians, who lend
their names and sometimes partly finance local
investment costs.
7. The manufacturing operatioz_s being de-
veloped are nearly all labor intensive; some con-
sisting of assembling US-made components for re-
export and others of organizing handicraft pro-
duction. Prominent goods in the first category
(which enter the United States under reduced
tariffs) include rubber shoes, baseballs, and
simple electrical equipmeit. The handicraft op-
erations for the most part produce inexpensive
clothing plus such items as wood carvings, sisal
rugs, and handbags for export and the tourist
trade.
8.. Recovery of,tourist trade since 1964 also
contributed to the recent economic improvement,
although earnings rose only slightly last year.
As other Caribbean facilities became overpriced
and overcrowded or became less attractive because
of local antagonism toward tourists, 'Iaiti gained
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popularity with vacationers in spite of the repres-
sive atmosphere. No new hotels have been built
recently, but several that closed during the po-
litical upheavals of 1963-64 have reopened. Rates
typically are 50%-75% less than for comparable
hotels in Jamaica. The casino in Port-au-Prince
reopened in 1969, and three airlines opened new
routes from the United States. Tourists rose from
17,000 in 1964 to 62,000 in 1969 -- still well
below the 1962 level and only one-fifth of the num-
ber visiting Jamaica. Tourist earnings neverthe-
less reached $5 million in 1969 (one-seventh as
much as export revenues) and more than offset the
comparatively large foreign expenditures of Hait',an
students and travelers. The US economic slowdown
probably has dampened the influx of the tourists
in 1970-, but not as much as in other Caribbean
countries.
9. The economy's performance in 1969 was me-
diocre, at best. The moderate gain in manufac-
turing -- reflecting both new manufacturing opera-
tions and some recovery in traditional industries,
especially cement -- left output well below earlier
levels. Agriculture still sufrered from the 1968
drought and output continued to decline. Mining
output soared, however, as bauxite exports rose by
60%, to 764,000 metric tons. With an estimated 2%
rise in 1969, gross domestic product merely approx-
imated population growth (as shown in Figure 1).
Public investment rose substantially, expenditures
being concentrated on the Peligre hydroelectric
plant, road construction, and improvement of the
Port-au-Prince harbor facilities. The increased
spending was made possible by diversion of funds
from current operations, use of accumulated funds,
and borrowing from the National Bank and private
individuals. By early 1970 the government's
financial position had improved enough to induce
the International Monetary Fund to reinstate a
$2.2 million r:andby credit, none of which has
been used. Despite an 11% decline in coffee and
sugar sales, export earnings remained at the 1968
level (see Figure 2) because of larger shipments
of bauxite and light manufactures. Exports of
the new industries to the United States rose
from $4 million in 1968 to $6 million in 1969,
reaching 16% of the total.
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ECONOMIC INDICATORS
Figure 1. Production
oL
*CIA estimates for CDP In 1963.64 and 1967-69; pe, capita data asst.rie
population growth of 2'I annually.
1959 1961 1963 1965
Fiscal years
Figure 2. Balance of Payments
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Continuing Problems and General outlook
10. Haiti's basic problems make it very diffi-
cult to attain even a moderate, sustained economic
advance. The modest improvements achieved in 1969,
and apparently continuing this year, can perhaps
be extended for another year )r two. Earnings
from tourism should expand further, barring a po-
litical crisis, and growing exports of simple manu-
factures seem likely. Moreover, reopening of a
long-idle sugar mill in 1970 will probably permit
Haiti to boost sugar exports enough to fulfill its
quota in the US market. These gains probably will
more than compensate for continued weakness in
other agricultural exports and may restore total
earnings to about the 1963 level.
11. Over the next several years, it is ques-
tionable whether the economy will progress rapidly
enough to maintain per capita output. The handi-
caps of too many people, scanty natural resources,
and rudimentary economic structur6 will continue
to hobble such development efforts as are made.
The investment rate remains extremely low. Most
transport and storage facilities are in bad shape.
Without appreciable n3w investments, sales by
labor-intensive export industries do not promise
sufficient growth to outweigh reduced sales of
traditional products. Foreign aid prospects are
not especially bright, because total US allocations
are declining, proper use of the money under
Duvalier is doubtful, and Haiti has defaulted period-
ically on some obligations arising from its $47 mil-
lion foreign debt. Reclamation is needed simply to
offset the loss of agricultural land area through
erosion, and land is being shifted from commercial
to subsistence farming because of population pres-
sure and difficulty in competing in world markets
for tropical crops. Poor sanitation, nutrition,
medical care, and education -- plus the emigration
of many Haitians of superior education and train-
ing -- combine to keep the quality of the work
force low.
12. Equally discouraging are the Duvalier
regime's unwillingness and inability to make the
efforts called for and doubts that a successor
government would necessarily be better. Under
Duvalier, various development plans nave been
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drawn up, but they have never been implemented.
He. attaches far more importance to his clique's
welfare and to support of relatively large security
forces than to spending on social welfare and de-
velopment projects. Anti-government plotting and
Duvalier's success in keeping an apparent successor
from emerging have contributed to political uncer-
tainties that can hardly fail to hold down.invest-
ment.
Conclusions
13. Haitian output probably rose about as much
as population in 1969 and early 1970, halting the
deterioration of the mid-1960s in some respects
but leaving economic activity well below earlier
levels. Recent small improvements reflect the
continuing establishment of small manufacturing
operations (mostly'with US capital), the partial
recovery of tourist earnings, and a large rise
in bauxite production. Haiti's cheap labor and
location have been assets in developing both
tourism and light, labor-intensive manufacturing.
The latter involves assembling US-made components
for re-export as well as promotion and organiza-
tion of handicraft operations serving domestic
and foreign markets.
14. Haiti's economy probably will show further
small improvements during the next year or two.
Prospects seem favorable for moderate gains in
manufacturing and in agriculture, if hurricanes
and drought do not interfere. Exports and tourist
earnings should be able to recover more of the
ground lost since the early 1960s. Even moderate
economic progress will be difficult to attain
over the long term, however, because of funda-
mental problems. Scarce resources are strained
by overpopulation, effective institutions are
largely lacking, and Duvalier's policies are
self-serving. Most workers lack education,
training, and elementary health care, and busi-
nsssmen confront widespread government corruption
and discouraging tax policies. As the poorest
and most crowded Latin American country, Haiti
faces difficulties that strongly inhibit domestic
savings and foreign aid and encourage some of the
most talented people to emigrate.
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