Haiti: Lifting an Economy from the Rubble

Building an open society in Haiti requires foreign investment that will spur sufficient economic growth to help the country’s ten million people to lift themselves out of a struggle to survive. This was the grim reality before the 2010 earthquake exacted its toll in deaths and injuries and left a tenth of the country’s population homeless.

Beyond his work with the Open Society Foundations, George Soros has provided loans and loan guarantees to foster economic development in Haiti. Before the earthquake, the Soros Economic Development Fund had guaranteed up to $1 million on $2.3 million in commercial bank loans in Haiti. After the disaster, the fund provided a $3 million loan to CODEVI, Haiti’s only fully operational free trade zone, which is owned by Grupo M, a privately held manufacturer producing knits and woven products for the U.S. market.

“The apparel manufacturing lines located at CODEVI are best positioned to take advantage of the HOPE II Act, which expands trade preferences to Haiti’s textile industry while creating jobs in a city outside of the capital,” said Neal DeLaurentis, vice president of the Soros Economic Development Fund. This investment was expected to create 1,400 new jobs for low-income Haitians in 2011.

JMB is one of Haiti’s largest exporters of the Madame Francis variety of mango, the country’s second largest crop.  The fund’s combined debt and equity investment of $2.3 million is enabling JMB to export frozen mango chunks. This should increase the incomes of small-scale farmers, because mangoes that would normally have been rejected as fresh produce can now be frozen and exported.

The Soros Economic Development Fund has also provided capital to tiny Haitian enterprises through its work with the Association pour la Coopération avec la Micro Entreprise (ACME), a microcredit lender that, since its founding in 1997, established 24 branches countrywide, developed 26,000 active clients, and extended more than $10 million in outstanding loans, 80 percent of them in Port-au-Prince. The fund began working with ACME in 2002, when it provided ACME with a loan guarantee of $300,000. Today, ACME has a guarantee for $1 million and a loan of $1 million.

The earthquake ravaged Port-au-Prince, killing five of ACME’s skilled employees, including loan officers, and destroying two of its 14 branches in the city, including its cinder-block and wood headquarters, said Sinior Raymond, the firm’s executive director. “I was there with the other employees at the time the roof came down. After the earthquake we were working under a tent.”

ACME lost about 4,000 clients in the earthquake, about 1,000 of them killed. Others were driven out of business and could not repay their loans. Still others simply disappeared from the city. “We had about $4 million in write offs, and a $2 million loss for 2010 as a whole,” Raymond said. “We continued to make loans to clients who had lost only part of their activities in the earthquake, but they continued to lose money because their customers could not pay for goods and services. Before the earthquake, our clients had a repayment rate of about 96 percent. In just one month, only half of the loans were being repaid.

“After the earthquake we asked the Soros Economic Development Fund to stop payments for six months, and they gave us time off. Now we’re back to a 91 percent repayment rate, but with a smaller client base. People are beginning again with their business activity. It is our philosophy to continue with them. The banks wouldn’t do it because they thought it was too high a risk. Now we have the risk problems connected with the elections and cholera.”

Almost 90 percent of ACME’s clients are engaged in commerce and use their loans to purchase goods to resell, and only 3 percent for enterprises engaged in production, and the remainder provides services. It has made investments in poultry production, since Haitians consume about five million chickens per month and import 4.9 million of them. ACME also loans to farmers who produce livestock.

Rosilia Pierre-Louis, 46, had been selling fruit for more than two decades on the day the earthquake toppled buildings all around her store. She had taken three loans to purchase fruit and other goods for resale, much of it wholesaled to vendors at a local market. “This was the first time I had ever signed a contract for a loan,” she said. “I knew I had agreed to repay it every month. I tried to save with discipline, so I could return to ACME what I owed along with the interest. I sold my goods to people who agreed to pay cash and I have good customers, including a restaurant.

“The day of the earthquake I was just right here. I could see the earth moving. I ran away from the building and got into the street. I could see the house across the street falling down, collapsing. There was so much dust. It was totally dark. People went crazy and couldn’t see each other. All my children were out. But thanks to God none were injured. I spent a lot of nights outside in the street. We were afraid.

“After the earthquake, things got worse. It was very difficult for people like me to pay our loans to ACME for different reasons. First people who purchased our goods on credit had died or had disappeared, and we could never track them. Customers who had survived and stayed in Port-au-Prince couldn’t afford to buy our goods, because their jobs were gone. I can pay my interest, only because I was lucky enough to find a new customer, a restaurant.”

One enterprise producing construction materials is Faniel Louis-Jean’s cinder-block yard. “I started making the blocks by hand,” he said, “but people told me I could make better blocks with a machine.” Louis-Jean went to ACME for a loan, bought a block-making machine, and repaid it in 18 months. Using shovels, molds, and buckets, cement, and water, Louis-Jean’s workers were able to produce 1,000 cinder blocks in a five-day week. With the machine, production increased tenfold. ACME stuck with Louis-Jean after the earthquake when he had trouble paying his loans on time.

The disaster had adversely affected the builders who bought his blocks. But it was obvious that, after the destruction of so many buildings in the capital city, the construction industry was going to rebound and that, in a land with no forests, construction with cinder blocks and reinforced concrete was the only option. Louis-Jean has strengthened his blocks. “Now we put more cement in the block,” he said. “I have a very good business going because of this. I have engineers who come here to get my blocks and go to construction sites miles away.”