Haiti - Overview of economy

Haiti has long been the poorest country in the Western Hemisphere, a consequence of its unique historical development, generations of misrule, and declining natural resources. Since its slave revolution and war of independence, which culminated in the founding of the nation in 1804, the country's economy has been dominated by small-scale agricultural production. Rural over-population, the increasing division of small farms, and disastrous ecological degradation caused by tree felling and soil erosion have destroyed the traditional economy in some parts of the country and threaten it in others. Traditionally, most small farmers and peasant laborers have had little to do with the state, other than to pay taxes on export commodities such as coffee. The machinery of government, the political parties, and the country's business and cultural life are almost exclusively concentrated

in Port-au-Prince, a small city until the 1950s but now a rapidly growing area of shantytown development (shantytowns are dwellings constructed primarily of found materials, including cardboard and pieces of metal). A huge gulf has existed between a poor, black, peasantry, who are mainly illiterate and Creole-speaking, and a small, lighter-skinned, urban elite who speak French and, increasingly, English.

In the 1970s the dictatorship of Jean-Claude Duvalier tried to capitalize on Haiti's huge unemployment and low wage rates by inviting foreign companies, principally from the United States, to establish manufacturing bases near Port-au-Prince. In the 1980s this sector grew substantially, producing clothing, sports goods, and electronic parts for the North American market. However, intense political turmoil in the late 1980s and 1990s, coupled with the deterioration of the country's infrastructure , has since reduced the number of foreign companies operating in Haiti.

Haiti is, therefore, a country of largely impoverished peasant farmers and urban slum dwellers, with a small minority of lighter-skinned, wealthier people who tend to control import-export businesses, the financial sector, and a small tourist industry. There are few national companies, but family-run enterprises, often working as agents for U.S. businesses, dominate commerce. Since the 1950s Haiti has also been dependent on foreign aid, although its political violence and occasional periods of international isolation have often prevented that aid from reaching its intended beneficiaries. Government expenditures far exceed government revenues through taxation, and this shortfall is usually met by grants and loans from multinational agencies, totaling US$353 million in 1998 alone. Haiti's foreign debt stood at approximately US$1 billion in 1997.

In recent years Haitian governments have come under pressure from international aid agencies to liberalize the economy in return for continuing aid. Successive governments had retained control over important sectors of the economy, leading to huge inefficiency and persistent corruption. Several state monopolies , such as cement and the national flour mill, have been privatized , and others are expected to be sold off. These moves have increased unemployment as private owners cut payrolls.

Haiti's economy is essentially a survival one, where unemployment was officially estimated at 70 percent in 1999 and the informal sector provides the only work opportunities for most urban Haitians. In the countryside, many peasants operate almost outside the official cash economy, aiming for self-sufficiency and small surpluses for sale or barter at the many rural markets across the country. Not surprisingly, with approximately 80 percent of Haitians living in absolute poverty, pressures to emigrate, usually illegally, are strong. Other Haitians choose to cross the border into the Dominican Republic to work on sugar plantations or as manual laborers, for low wages. Remittances , estimated at US$150 million annually sent home from family members living abroad, are a vital means of support for many communities. Another unregulated source of income, earned by a small clique of influential individuals, derives from Haiti's importance as a trans-shipment point for cocaine and other narcotics en route from South America to the United States.