Haiti Can Rebuild Its Economy. Here's How.
(Bloomberg Opinion) -- After the assassination of its president, Haiti is once again in danger of spiraling into political chaos. The country’s chronic dysfunction is both a result and a cause of its chronic poverty. What it needs is to focus on economic growth — and to do that, Haiti should copy its more successful neighbors like Jamaica and the Dominican Republic.
Right now, Haiti is the poorest country in the Western Hemisphere. Even worse, by some measures Haiti’s living standards haven’t grown at all since 1950:
In 1950, Haiti was on a par with Jamaica and the Dominican Republic. As of 2018, it was less than one-third as rich as the former, and less than one-sixth as rich as the latter. This is one of the most spectacularly dismal economic failures in the modern world, and turning the situation around should be a galvanizing mission for Haitians, as well as for the U.S. and other neighbors in the region.
The question , “Why is Haiti so poor?” is an interesting and complex one, rooted in history and politics. But instead of focusing on the past, Haitians should ask, “What will make Haiti less poor?” The likely answers are tourism and better agriculture.
Most Caribbean island countries thrive on tourism. For Jamaica, the industry’s total contribution is estimated at 31% of GDP. Even for the Dominican Republic, with a well-diversified industrial mix of manufacturing and services, tourism sustains an estimated 16.3% of the economy. Caribbean islands are sunny places surrounded by beautiful, warm waters — a perfect spot for a vacation.
But so far, Haiti has only managed to cash in on this advantage a little bit. The only real tourist attraction is the port of Labadee, which is leased by a cruise company and fenced off from the rest of the nation. The biggest reason tourists don’t visit Haiti’s beautiful beaches is fear. Though the country’s murder rate is not usually that high, it tends to spike hugely during the frequent periods of political instability. Haiti has also become an epicenter of kidnapping.
The safety problem in Haiti probably can’t begin to be solved until citizens are able to gain a bit of upward mobility. For now, the country should focus on creating small oases of security where tourists can rest assured that they won’t be kidnapped or robbed. This approach has been used by a number of other countries like Mexico to maintain tourism even during country-wide spasms of violence. And it’s also how the Dominican Republic and Jamaica have successful tourism industries despite their own high crime rates. Haiti should concentrate security forces near these beach enclaves, and build infrastructure to restrict access, as in Labadee.
Haiti can also build one or two airports near the tourist resorts. Because infrastructure is expensive, this, and the hotels and other buildings at the actual resorts, will require foreign financing. So Haiti has to make sure to provide promises of stable property rights to foreign investors. Those property rights will also be a good influence on the country’s governance, because they will eventually allow a culture of entrepreneurship.
The social relationships generated by carving out sections of the country’s coast for tourism will be ugly in some ways — rich foreigners coming to visit Haiti’s most beautiful beaches while ignoring almost all of the locals except for the people who work at their hotels. But right now economic growth takes precedence.
Haiti also needs to improve its agricultural productivity. Farming still represents about half of the country’s economy. Programs like Jamaica’s Rural Economic Development Initiative have been successful at improving crop yields and rural incomes. Increasing yields can also prevent the need to increase cultivated acreage (which causes soil loss), and modernizing small farms can help make them more robust against the island’s frequent natural disasters.
Finally, Haiti could consider becoming a tax haven. Many small Caribbean islands such as Bermuda and the Caymans have succeeded in getting foreign companies to put offices there, or buy local real estate, by offering extremely low corporate tax rates. That's a cheap trick, of course, and it helps rich-world companies skirt their tax bills. But it would bring in some much-needed money and could help develop a national habit of protecting property rights. This strategy would also require creating enclaves of security for foreigners.
Tourism, agricultural productivity, and tax haven status are modest initiatives. They won’t transform Haiti into a success story like the Dominican Republic overnight. But they’re doable initiatives, because they don’t require fixing the whole country at once -- just creating pockets of security to generate some prosperity that can start to help raise normal Haitians out of abject poverty, igniting a virtuous cycle of political stability and growth.
The Haitian diaspora, and international aid agencies, should concentrate their spending on creating growth pockets. The U.S. could provide a further boost by establishing an expanded trade agreement with Haiti similar to the one it has with the Dominican Republic. In fact, many nations should do the same, since an unstable Haiti is in no one’s interests.
Haiti isn’t going to be fixed tomorrow, or the day after tomorrow. But when you’re at rock bottom, the only way to go is up. Growth has to start somewhere.
This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.
Noah Smith is a Bloomberg Opinion columnist. He was an assistant professor of finance at Stony Brook University, and he blogs at Noahpinion.
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