Port-au-Prince's Aid Economy

How foreign aid to Haiti can pressure the local economy, compound inflation problems, and maybe do more harm than good in the end

Port-au-Prince, Haiti—Jocelyn Louis and her extended family of 10 have lived in the same three-bedroom house in the Port-au-Prince working-class borough of Delmas since 2000. Just after the earthquake of January 12, 2010, Louis' New York-based landlord told her that he wanted to increase rent, and the family could either pay up or move out. Demand for housing spiked after about half of the city's housing stock was destroyed or significantly damaged in the disaster, and rental prices rose accordingly. The Louis family paid about $2,250 per year in rent just before the quake; in the wake of the disaster, it shot up by $1,000, nearly a 50 percent increase. The family's rent has since risen to almost double what they paid before the earthquake.

What's causing the inflation?

The widespread destruction from the disaster jolted real estate prices, but the presence of foreign NGOs and government organizations, who pay premiums for office and housing space in the capital, pressures local rental markets as well.

"Many foreigners come to rent houses and pay a lot of money," says Louis, "and they pay in U.S. dollars. We get paid in Haitian goud, but owners want U.S. dollars and want foreigners to rent from them."

Property owners prefer dollars, which are more scarce and hence more valuable than Haitian goud—and more difficult for ordinary Haitians to come by, often at an unfavorable exchange rate. The preference for foreign currency predates the earthquake, but it's since become much more common for owners to demand bills marked with dead white presidents instead of those featuring Haitian revolutionary heroes.

Foreign organizations didn't line up to rent the Louis' house specifically. Most foreign NGOs, contractors, and governmental organizations prefer offices and houses in Pétion-Ville, a hillside neighborhood that is one of the most affluent areas of the capital. But even though the aid economy is centered high above downtown Port-au-Prince, its effects on the local economy reverberate throughout the city.

Inflation had plagued Haiti before the earthquake, especially in 2008, when four hurricanes thrashed the island nation and, combined with the global financial crisis, caused drastic increases in food prices. The enormous foreign aid inflows that followed the 2010 earthquake provided relief for countless suffering Haitians, but they've had certain deleterious effects as well.

In its March 2010 assessment of earthquake damage, the World Bank predicted Haiti would be saddled with 11 percent inflation due to, "among other things, the reduction in goods available, the increase in the cost of transport, and the influx of external aid." Last fall, the International Monetary Fund (IMF) reported a 12-month inflation rate of 10.4 percent, largely attributed to increased food prices.

Louis is unemployed; her husband earns the family's living as an electrician. Besides inflation in housing, increases in food prices are the most arduous strain on her household. She used to budget $100 a week for staples like rice, beans, sugar, milk and some meat, and she'd usually have $15-$25 to spare. Now, she says that $100 isn't enough to eat properly for a week, and spends her entire weekly budget even while buying less food.

Nelda Simon, who also lives in Delmas, says that feeding her family costs more than double what it did before the earthquake. She works as a street vendor selling women's sandals and shoes. Her husband, who used to support the family, died in the earthquake, so it's up to her to come up with rent payment for her two-room house and school fees for her two young daughters.

Before the disaster, the family lived in a three-room house on a nearby street. Her landlord, who lives somewhere lòt bò dlo—"on the other side of the water," or abroad, in Haitian Creole—raised rent by 50 percent after the earthquake. He eventually told her to vacate so that he could have the house repaired. Simon thinks the real reason she had to move was that he wanted to try to rent the house to an NGO or aid workers, although she admits that she doesn't know whether he did.

In certain respects, the situation in Haiti resembles that in Afghanistan, where locals fret the scheduled withdrawal of foreign aid and military spending. The effect is much more significant in Afghanistan because the occupation is a decade old and aid flows are monumental. The World Bank estimated that in 2010, 97 percent of the country's GDP was derived from economic and military aid from foreigners, according to a June 2011 report by the U.S. Senate Foreign Relations Committee. "Afghanistan could suffer a severe economic depression when foreign troops leave in 2014," warned the Bank, "unless the proper planning begins now." Some onlookers have similar worries about the Haitian economy.

In a June 2010 report, The Brookings Institution warned that the $5.3 billion in aid pledged at the time for the first two years of recovery "is some 50% of Haiti's annual GDP, raising the possibility that the massive inflow of aid and the reconstruction process could lead to major macroeconomic distortions."

Harley Etienne, a native of Haiti and assistant professor of city and regional planning at Georgia Tech, says that the so-called "disaster economy" has drastically inflated the capital city's real estate market.

"The prices are way out of scale," Etienne told The Christian Science Monitor in March 2011, "to the point that I don't know how you can justify some of it. Part of it is tied to how devalued the Haitian currency is, but Haitian property owners are certainly trying to get some money while the getting is good."

"After the earthquake, the price of housing practically doubled," says Medjine Jasmin, an assistant at real estate agency Groupe Immobilier D'Haïti in Pétion-Ville. Many of the company's clients are organizations from abroad. Because the majority of relief assistance contracts received by NGOs and foreign contractors lasted only six to 18 months, Jasmin says that many foreign organizations packed up and headed home or at least drew back operations once contracts terminated. A lot of them left the country, and a gap in the economy.

"NGOs pay very well," says Jasmin. "There were many ways to make money. Now, it's more difficult."

The aid economy clearly is a boon for property owners and locals fortunate enough to be employed by foreign organizations. But it puts upward pressure on real estate prices, and even for locals who get jobs, it may not be a long-term path to the working-class, particularly for low-skilled workers like drivers and security guards.

It may be impossible to tell just how much the aid economy affects the local economy until aid flows diminish over the next five to 10 years, but the aid economy in Haiti may be less temporary than the international community lets on, or than in war zones like Afghanistan. Here, like the 520,000 Haitians still living in ostensibly temporary tent camps around Port-au-Prince, it's not apparent that the international NGOs, branches of foreign governments, and aid contractors will ever leave.

Tate Watkins is a freelance writer based in Port-au-Prince and a one-time Reason intern.