Diaspora has potential to facilitate Haiti’s economic development
By Sam Bojarski
Although his children now live in the United States, Nondieux Mathurin of Rockland County, New York, regularly sends money to their mother in Haiti. Mathurin has a niece and nephew there as well, who need support from time to time.
“Sometimes they call me and say, ‘uncle I’m dead broke,’ and I have to send something to them. They’re not employed, to be honest with you there are no (places) over there now where people can go to work,” said Mathurin, a Haitian native who has been living in the U.S. since 1974.
Remittances give recipients a push, providing them with something to live on, while helping pay for basic necessities. The money makes a big difference in their lives, according to Mathurin.
“I know a lot of Haitian families here in the United States support their loved ones in Haiti,” he also said, acknowledging the sheer amount of money the diaspora contributes in remittances each year.
Last year alone, Haitians living abroad sent nearly $2.5 billion back to their home country, an amount that accounted for 26.5 percent of Haiti’s GDP, the World Bank has reported. But while remittances help recipients pay for essentials, Haiti’s economy has few productive investment opportunities for this money, and government authorities have demonstrated an inability to channel it effectively.
According to Manuel Orozco, a director at the U.S.-based international affairs think tank Inter-American Dialogue, remittances have an important developing impact, albeit one that is not fully utilized due to state fragility. The fragility of the Haitian state has underlied the consistent increase in remittances over the last two decades.
Since the end of the Duvalier era in 1986, Haiti has gone through frequent cycles of political instability, usually occurring before and after elections. This restrains the state’s ability to function effectively and leads to increased migration. Those who leave end up remitting money to help loved ones still in the country, according to Orozco. State fragility exacerbated conditions after the 2010 earthquake, he also said.
A report Inter-American Dialogue published in 2018 called “Latin American and Caribbean Migration from Weak and Failing States,” showed that the total number of people who had emigrated from Haiti reached nearly 804,000 by 2000 and 1.24 million by 2015. Remittances grew by nearly $2 billion during this time period, according to World Bank figures.
Due to their educational status, many migrants could have otherwise helped Haiti grow.
“You’re talking about people who went to school or people who belong to the middle class which is very small … Haitian migration goes basically between the lower-middle class to the middle class, and they could be an engine of growth (in Haiti),” Orozco said.
Remittances and the economy
Inter-American Dialogue has reported that the average monthly remittance amount sent by Haitians in the U.S. and Canada is $120. About 2 million households in Haiti benefit from remittances, which increase recipients’ disposable income and savings, Orozco said.
Haitian economist Enomy Germain, who works as a professor for the Center for Planning and Applied Economics in Port-au-Prince, said it would be difficult to say how the Haitian economy would look without remittances. But he also said that life would clearly be more difficult for a large portion of households.
Remittances “help compatriots to deal with the problem of unemployment and poverty. They also help parents pay for their children’s schooling,” Germain said. “However, it should be noted that this money, for the most part, is not invested by the beneficiaries. They simply spend it.”
Remittance recipients spend the money on living expenses like food, housing and clothing, said Georges Metellus, a Haitian-American medical doctor who works as an administrator at the Center for Haitian Studies, in Miami.
“Most of the time people send money to Haiti to help the rest of their family, maybe to pay for children’s school,” Metellus also said. Remittances typically increase in volume during the back-to-school months of August and September, he added.
Diaspora members would otherwise use the money to buy consumer goods and pay for necessities of their own.
“We send part of what we have (to Haiti), and whatever balance we’ve got left up here we use it … to pay our rent, go shopping, send our kids to school, buy our kids clothes, you know, pay our gas and electricity,” Mathurin said.
Daniel Eugene, a Haitian American, is trying to build political and financial support for a Diaspora of Haiti Equity Capital Access Fund (DHECAF). The equity fund would facilitate a “poverty exit strategy” for Haiti by funnelling diaspora money into production activities. It could also help alleviate some of the financial burden on diaspora communities.
The constant sending of remittance money “does not affect only the Haitian American business(es) but (also) the American economy at large. We have to forfeit a better car, housing, life insurance policy, movies, clothing, less frequent appointment to a hairdresser and you can go on and on,” said Eugene.
DHECAF would support basic manufacturing and agro-industrial food processing in Haiti to stimulate the country’s economy, Eugene added.
The main issue limiting the developing impact of remittances “is that the productive base of the Haitian economy is practically zero, there is very little input in Haiti that creates and generates wealth, and so there is no fertile ground for any kinds of investments,” said Orozco.
Vital economic sectors like health care, education, manufacturing and local food production remain underdeveloped, he also said.
Haiti imports over half of the food it consumes and even larger portions of staple items like rice. The country consistently spends less on health care than other nations in the western hemisphere.
In the education sector, “you won’t find good schools to invest your money (in) or good teachers to expand academic development through tutoring, so there are basically no incentives, there is no enabling environment in the country,” said Orozco.
Many remittance recipients do not invest their savings in bank accounts, which could potentially foster economic growth.
“Those savings are either not put into the formal financial system or are not invested in the local economy because there is substantive instability,” Orozco said.
In a 2010 paper, Orozco noted the importance of developing the country’s financial sector. Funnelling savings through banks, he said, could increase the credit portfolio available for small businesses.
On a macro level, remittances help Haiti cope with the “scarcity of the dollar,” thus increasing the value of the gourde, according to Germain. Dollar shortages are relatively common in countries that rely heavily on imports.
“But these funds are not well channelled by the public authorities. This is why they do not necessarily contribute to growth and development,” Germain added.
Recent plans by the government to channel remittance money into education have led to a lawsuit and have called the activities of wire transfer companies into question.
In 2010, then-President Michel Martelly announced a subsidy program called PSUGO, designed to provide free education for children. His administration introduced a $1.50 tax on wire transfers from the U.S., Canada, the Bahamas and Turks and Caicos and a five-cent charge on international phone calls.
Last year, attorney Rodney Austin and Haitian-American attorney Marcel Dennis filed a $1.5 billion lawsuit related to the scheme in Brooklyn Federal Court. The suit alleged that the Haitian government conspired with wire transfer and telecommunications companies to defraud diaspora members. Companies like Western Union, Unitransfer, CAM, Digicel and Natcom, along with current and former government officials, are named in the lawsuit.
The education subsidy “we know is not happening,” said Austin.He also said the Haitian-American plaintiffs who were sending money to Haiti did not know why they were being charged the fee, and some wire transfer companies did not itemize it. Charging a fee to U.S. residents for services in Haiti is illegal, and Austin also said he and Dennis are trying to figure out where the money has gone.
“I think it’s an important case in the fact that these money transfer companies are just so easily and so willing to charge their customers these additional fees in excess of what they already charge them and with no real basis for it,” Austin said.
In 2004, when remittances were less than half of their 2018 levels, the amount of transfers to Haiti handled by the major money transfer companies amounted to nearly $540 million, according to a 2006 paper on the Haitian remittance economy Orozco authored. Money transfer services, due to their convenience, are still the predominant way of sending money to Haiti, Austin said.
Court documents estimate that the money transfer and phone call charges initiated by the Haitian government generated around $300 million from 2011 until the end of last year.
Prospects for Diaspora influence
The government’s fee scheme “has a sour taste because they’ve collected a lot of money. Still right now we don’t know how much money they collected and what they did with the money,” said Jacques Bingue, an engineer who serves on the management team for Group Citadelle, an organization dedicated to implementing feasible energy policies for Haiti.
According to Orozco, the Haitian diaspora does have a strong political influence in Haiti, with connections to officials of current and former administrations. But Diaspora members are politically “as divided as the country is” and cannot vote in Haiti’s elections, he said. Bingue agreed, noting that there is no political platform that unites Diaspora members.
The Diaspora’s efforts to improve Haiti’s economic circumstances, he said, are also disjointed.
“Everybody’s helping, the problem is that you have a lot of small groups, therefore you cannot have economies of scale,” Bingue said.
Bingue is currently assisting Eugene in the effort to build support for DHECAF among Diaspora members and with the U.S. Congress. He mentioned that the group plans to invest in the production of goods like sugar and cement, specifically.
In addition to meeting local demand, investments in these areas could also serve as exports and help stabilize Haiti’s currency, according to Eugene.
“If only a fraction of (remittance money) were used to directly inject into the economy as jobs creation, Haiti will be better off in terms of economic growth and development,” Eugene also said.
According to United Nations figures, imports of sugar and cement to Haiti totaled over $157 million in 2017.
“If (the Diaspora) could invest in a sugar mill, Haiti would not have to import $63 million worth of sugar, Haiti would produce the sugar, produce jobs in those sugar industries,” said Bingue.
Eugene said the diaspora must use its financial power for more than remittances and “shift its focus from charity to economic empowerment” at all costs. When it comes to development Haiti’s needs are many, but Bingue added that improving the country’s productive base is a good place to start.
“There is a lot that the Diaspora could do, but you have to start with baby steps, and the basic (strategy) is this stuff that Haiti imports, have Haiti produce it, that’s the first step,” he said.