October 8, 2009 / 2:47 PM / 10 years ago

ANALYSIS-Impoverished Haiti is stabilizing but still risky

* Haiti’s gang violence, kidnappings decline

* World Bank political risk insurer ready to underwrite

* Impoverished nation faces presidential vote next year

By Jim Loney

MIAMI, Oct 8 (Reuters) - How stable can a nation like Haiti be, where U.N. soldiers still keep the peace, where a prime minister was toppled by food riots 18 months ago and where a president was overthrown by armed rebels five years ago?

Former U.S. President Bill Clinton raised eyebrows at an investor conference in Port-au-Prince last week by saying that Haiti’s political risk was lower than it had ever been in his lifetime.

That period includes a popular uprising that ousted the 30-year Duvalier family dictatorship in 1986, a military coup that sent President Jean-Bertrand Aristide packing in 1991 and years of gang violence and political tumult.

"It’s a slight exaggeration. If he had said lower than at any time since 1986, the year Duvalier departed power, I might be inclined to agree with him more," said Jean-Germain Gros, a Haitian-born political analyst at the University of Missouri.

"But there is no question that things have stabilized somewhat in the last two years," he added.

President Rene Preval’s government and the 9,000-strong U.N. peacekeeping force have calmed gang violence in the slums. Kidnappings for ransom, rampant last year, have dropped sharply.

The legislature, once a forum of chaos and contention, passed a budget on time this year, a sign that Preval’s olive branch to warring political factions is working.

"This is the first time you see a relative willingness on the part of the executive and legislative branch, with the various parties represented there, to work together," said Mark Schneider, an analyst at International Crisis Group.


The charisma Clinton, appointed U.N. special envoy to Haiti in May, lured several hundred potential investors to the capital Port-au-Prince last week and many said they believed a window of opportunity had opened to put money into a country desperately in need of roads, power and foreign investment.

About 70 percent of Haiti’s 9 million people live on less than $2 a day.

Clinton brought representatives of the Multilateral Investment Guarantee Agency, the arm of the World Bank that insures political risk in emerging economies. The agency has never written a policy in Haiti but said its window is open.

"We would be very happy and ready to look at very good, sound projects to underwrite," said Noureddin Ennaboulssi, a senior MIGA underwriter who visited Haiti last week.

"My sense right now is that the country is moving in the right direction," he said. "The country is doing a lot to provide a climate conducive to foreign direct investment."

Ennaboulssi said MIGA had had recent inquiries from firms involved in agriculture, textiles, infrastructure and tourism.

He declined to reveal MIGA’s risk rating on Haiti, a proprietary formula used to determine insurance pricing. MIGA writes insurance on currency, war and civil disturbance, expropriation, breach of contract and other risk factors.

But Belgian risk insurance agency ONDD has Haiti’s medium-to-long term political risk for export transactions rated a seven, the highest measure on its 7-point risk scale.

The Belgian agency’s Haiti ratings across all measures of war, expropriation and political risk are higher than poor African nations like Guinea Bissau and Burkina Faso.


The Haitian National Police force, which replaced the dreaded army in the mid-1990s, is not nearly ready to provide enough security to allow peacekeepers to withdraw, analysts said. The force has grown to about 9,000 trained officers and the government’s goal is 14,000 by 2011.

And while the police force is stronger, potential investors could be deterred by a weak judicial system whose ability to enforce business contracts is in question, Gros said.

"That’s the big black hole in Haitian governance. If there is one area in which no one can claim progress it’s in the judiciary," he said. "Prisons are overcrowded. There is still a lack of judges and those that are on the bench are corrupt."

Investors will watch with interest a current debate on whether to reinstate the army, which terrorized the country before it was disbanded by Aristide in 1995. Many Haitians are believed to oppose such a move.

"Haitian history has been such that an independent military has not been easy for civilian governments to control and has been available for purchase by economic sectors, so that raises questions of political stability as well," Schneider said.

Presidential elections next year to replace Preval raise the prospect that this "window of opportunity" for investment could narrow quickly. But some investors appear undeterred.

"Haiti is a scalded cat," Wilhelm Lemke, an official with shipping logistics firm Enmarcolda SA, said of failed past efforts to stimulate the economy. "You can be skeptical, but if you approach it with the glass half full instead of half empty, it makes all the difference. We are seizing this opportunity." (Editing by Pascal Fletcher and Alan Elsner)

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