Over this summer, as I watched donations flow to Haiti after President Jovenel Moïse’s assassination and then the 7.2 magnitude earthquake, I couldn’t help but revisit how these funds usually end up back in the donor countries. There is an abundance of literature on the pros and cons of international aid in Haiti and elsewhere, with the cons generally outweighing the pros.
Where has all the money gone, after the 2010 earthquake, is a question that has been answered in the Journal of Haitian Studies and in Frederic Boisrond blog for the US and Canada, among other sources. Essentially, the vast majority of the money disbursed for aid returns to the donor country.
For example, more 75% of US Aid for International Development (USAID) 2010 earthquake funds went to private contractors inside the Beltway. Similarly in Canada, the 2010 earthquake donations to the Canadian Red Cross were used essentially to save a struggling business in Montmagny, Quebec.
The unstated goal of these donor countries is to sell the products and services of their own nationals and organizations, thus reducing unemployment at home. There is nothing wrong with this and you cannot blame them because at the end of the day, that’s their money. Such practices cannot be qualified as corruption either, as some people have suggested.
Breaking it down: How the money returns to the donor country
The fact is that expatriates from donor countries are paid at the rate of their countries, plus a risk premium, housing, transportation and even food provided. For a professional being paid around $8,000 to $10,000 a month in North America, for labour-intensive initiatives, this can constitute a substantial amount. On average, expatriates cost two to three times what they would in an equivalent position back home. These wage bills, companion benefits and administration expenses could take 70% or more of the donated money without any tangible local and long-term impact yet.
Now, keep in mind that these expats are deemed residents of their original countries. Their marginal tax rate could be up to 40% in Canada for example. Moreover, HST (Harmonized Sales Tax) on products and services are in the range of 12 to 15%. This means a sizable portion of the donation went back to public coffers of the donors.
The toll of local systemic corruption
Assuming that 70% of the original envelope does not leave the donor country, the remaining 30% goes to the beneficiary country, like Haiti. In a country rife with systemic and structural corruption, about 20% of the original envelope would disappear through embezzlement, kickbacks other practices.
Take the PetroCaribe debacle, for example. In its 1,000-page report, Haiti’s High Court of Auditors slammed the fraudulent and illegal management by various ministers and administrations of nearly $2 billion from the Petro Caribe Venezuelan aid between 2008 and 2016. In one instance, more than $46 million was paid to a single Dominican company, Constructora ROFI SA, to build an industrial park and 1,500 houses outside Port-au-Prince. Yet, the judges were unable to trace a single contract for the unfinished project.
Once corruption siphons a portion, barely 10% of the original envelope if left to realize actual work with tangible impact on the intended beneficiaries.
Staffing friction, lack of dialogue cripple plans
Coming back to the expats, they do not always have the proper expertise, credentials, or cultural literacy to actually deliver the results needed. Networking and favoritism sometimes prevail in choosing the organizations or personnel for these assignments, instead of sound procurement/hiring practices and HR management. This reality can be a source of friction with the local counterparts, which does not help to efficiently carry out the work on site.
Besides, there is generally a lack of dialogue between the parties before setting up any aid program. The objectives of the donor country are usually not in line with those of the receiving country. This fact alone can explain the lack of dialogue.
For example, after the 2010 earthquake, the Canadian Red Cross and the Canadian International Development Agency chose to built temporary, low quality prefabricated shelters proposed by SNC-Lavalin and Groupe Laprise. CIDA, now Global Affairs Canada, made that choice over permanent, better quality prefabricated houses proposed by Architectes de l’urgence du Canada. Surely, had Haitians been consulted, they would have chosen the latter.
What Haitians and the diaspora can do
Systemic local corruption seriously complicates matters. That’s why we require the support of the international judiciary system, which needs to reform its policies to be able to directly investigate financial crimes from foreign or national corruption. This will happen only with the mobilization of the civil society to force changes in both national and international institutions.
For example, at the national level, institutions should be reformed so the runner-up political party can have the official opposition status, with an allocated share of the national budget. This official opposition party could work with regenerated international legal institutions in the investigation of financial crimes.
Haiti’s development will start only when Haitians stop relying on traditional international aid, take matters into their own hands, reform their institutions to end structural corruption and accept being accountable for managing public funds and resources. In the meantime, Haitian diaspora in the US, Canada and elsewhere should be mindful of the management style of any foreign aid organization they might support with donations after a natural disaster or any other crisis.