Thursday, June 10, 2010

Good neighbours?

Good neighbours?

Published: June 08, 2010

Foreign Direct Investment

Haiti and the Dominican Republic have endured a fraught relationship over the past 200 years, but could the latter’s response to the former’s recent earthquake lead to a more mutually beneficial partnership in the future? Michael Deibert investigates.

(Read the original article here)

When an earthquake devastated a large section of Haiti in January, no country responded more empathically than the Dominican Republic, which shares the Caribbean island of Hispaniola with Haiti.

Despite what has been an often stormy and distrustful relationship between the two countries – due in large part to the many Haitian occupations of the Dominican Republic, as well as the long history of abuses committed against the almost 1 million Haitians living in the Dominican Republic – Dominicans almost immediately began fundraising drives and gathered supplies. These were then ferried across the border to Haiti by a combination of local relief organisations and ordinary citizens.

“I had been visiting Haiti for such a long time, and have such good friends over there, that I knew I had to do my best to help,” says Juan Pablo Fernandez, president of Químicos & Plásticos, a Dominican company that supplies raw materials to the industries of both nations. After the earthquake, Mr Fernandez and his employees joined other Dominican businesses in transporting privately donated relief supplies to Haiti’s stricken capital, Port-au-Prince.

The Dominican response to the earthquake just might have eased some of the mutual recrimination brought on by an oft-tragic shared history stretching back two centuries.

In 1822, then Haitian president Jean-Pierre Boyer invaded the eastern part of the Dominican Republic. Despite this, country succeeded in declaring its independence in 1844. Another Haitian leader, Faustin Soulouque, who would go on to declare himself emperor of Haiti, then invaded the Dominican Republic twice.

In 1937, following the expulsion of Haitian cane cutters by Cuban dictator Fulgencio Batista, even more Haitian labourers flooded the Dominican Republic, then led by dictator Rafael Trujillo, who would rule the country from 1930 until his murder in 1961. That October, under Mr Trujillo’s orders and for reasons that still remain unclear, Dominican soldiers and police massacred an estimated 20,000 Haitians.

Haitians continue to stream into the Dominican Republic looking for work today, even though they continue to face “severe discrimination”, according to the 2009 Human Rights Report issued by the US State Department’s Bureau of Democracy, Human Rights, and Labor. But though both countries have experienced authoritarian regimes and high levels of corruption, their economic and investment portfolios paint a markedly different picture, analysts say, especially over the past two decades.

Revealing data

Before the earthquake, according to the CIA’s World Factbook, the GDP real growth rate for the Dominican Republic was 1.8% during 2009, and the GDP per capita was $8300. In Haiti, these figures were 2% and $1300, respectively. While average life expectancy for the Dominican Republic is 73 years, the figure in Haiti is just 57 years. To add to Haiti’s woes, according to its government’s Preliminary Damage and Needs Assessment, the damage bill from January’s earthquake was in the region of $7.9bn.

While two-thirds of Dominican exports remain bound for the US, foreign remittances, mostly from the US, continue to account for nearly one-tenth of the country’s GDP, and there remains a robust tourism industry. Boasting the largest economy in the Caribbean, the Dominican Republic currently has approximately 50 free trade zone parks, producing everything from textiles to electronic devices and pharmaceuticals. The country’s financial sector has also largely stabilised since the collapse of its second-largest bank, Banco Intercontinental, in 2003, which had to be bailed out by the Dominican treasury at a cost of some $2.2bn.

“Business is increasing on a daily basis [in the Dominican Republic] and there is much optimism,” says Aryam Vázquez, an economist who covers country risk for Wells Fargo’s emerging markets unit in New York. “The banking sector is much better regulated than in the past, and we have seen concerted efforts by successive governments to stabilise the domestic demand market.”

Across the border

Before the earthquake, Haiti seemed to be regaining some of its financial footing following the chaotic presidency of Jean-Bertrand Aristide between 2001 and 2004 and the often erratic rule of the interim government that replaced him. Relations between Dominican president Leonel Fernández, in office since August 2004, and Haitian president René Préval, who has governed since May 2006, are said to be warm. During their mutual first term in office in the 1990s, Mr Fernández made the first official state visit by a Dominican leader to Haiti since the 1937 massacres.

Political instability in Haiti has led to environmental degradation and economic atrophy. While Haiti was ruled by a series of ravenous civilian and military dictatorships for much of the past 50 years, Joaquín Balaguer, a long-time Trujillo consigliere who led a series of authoritarian governments in the Dominican Republic over the past half-century, was taking steps to prevent the country from sliding into the environmental disaster that was befalling Haiti, including using the Dominican army to prevent extensive deforestation. Haiti, on the other hand, has lost 90% of its tree cover over the past 60 years (and about one-tenth between 1990 and 2000), with the resulting erosion destroying two-thirds of the country’s arable farmland.

Hope beyond the despair

Despite such statistics, there is hope that out of the tragedy of January’s earthquake there lies an opportunity to help Haiti advance beyond the modest improvements in economic stability and security of recent years.

Haiti’s garment industry, once a pillar of its economy, has benefitted in recent years from measures that provided certain Haitian textiles with duty-free status when entering the US. Last year, Haitian firm the WIN Group, along with the Soros Economic Development Fund, announced their intention to construct a $45m industrial park in Port-au-Prince’s Cité Soleil slum region, a project that has been put on hold in the aftermath of the earthquake.

The OTF Group, a competitiveness consulting firm, has continued to advocate for the creation of “growth clusters” around Haiti, a proposal that fits closely with the Haitian government’s desire for decentralisation, economic diversification and the “decongestion” of the Port-au-Prince metropolitan area, rather than rebuilding as before.

Such measures might well provide a possible future at home for the Haitians currently living in the Dominican Republic and spell a less fractious new era for two nations whose economic destinies, despite frequent tensions, remain inextricably linked.

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