The Tortuga Freeport Project

During the past few years, news releases have been periodically appearing which have interested a growing number of international businessmen. American entrepreneur Don Pierson has been engaged in developing the Haitian island of Tortuga into a modern freeport with a complete absence of all taxes and traditional economic controls. Intrigued, like many others, I investigated the project and spent a week in Haiti visiting with Mr. Pierson and his staff to find out about their progress. I also took a trip to the island itself where heavy construction is now being undertaken. For the reader who finds the Tortuga freeport project sufficiently interesting to warrant further investigation I have provided addresses at the end of the article to facilitate inquiries.[1], [2] I should like to thank Mr. Pierson and his associates for the cooperation and numerous courtesies shown me.

Robert H. Meier
Port-au-Prince
1 September 1972

Tortuga lies six miles off the northern coast of Haiti in the Windward Passage. It is only 30 minutes by light plane to the Haitian capital, Port-au-Prince. It is three hours by air from New York, only one from Miami.

The island is 23 miles long and 4½ miles at its widest point giving it an area of approximately 60 square miles. There is a large ridge running the length of the island creating a turtle-like profile for which it was named (after the Spanish word for "turtle") by Columbus. The island is divided into two distinct areas, one half being quite arid, the remainder tending to be lush and tropical. The arid portion is being developed first, as the flatter terrain expedites initial construction efforts, including a new jetport to replace the current runway which handles planes up to the size of a DC-3.

The waters surrounding the island are crystal clear, so that from the air the terrain, beaches, and coral reefs present an impressive sight. The island's environment remains largely undisturbed by the construction and Pierson stressed that a great deal of effort was going into preserving the ecological balance.

There are an estimated 10,000 natives living on the island mainly in small huts on the southern shore. Farming and fishing are the primary livelihoods, but the freeport project offers immense potential for future employment. This labor force has already been used in building the current runway and Pierson intends to employ these people in the future whenever possible.

Aside from the freeport development, the natives have had little contact with the outside world. Pierson is now building a 150-seat elementary school which is due for completion by the end of the year and which will be donated to the island community. Tortuga has a colorful history. It was an early base for pirate activities in the Caribbean. The term "buccaneer" is said to have originated on the island to refer to the pirates who hid in the island's caves between raids on Spanish ships. More recently it has served as a jumping off point for Haitians trying to smuggle themselves into the Bahamas to find employment.

BACKGROUND

The story of the present freeport development began in England in 1963 when Don Pierson started two offshore radio stations, Radio England and Britain Radio, that broadcast an all-day programming of news, weather and music to the mainland. The stations were well received: the larger advertising accounts included General Motors, Ford, Kent Cigarets and Lever Brothers. In spite of their popularity in England the stations' activities were terminated in 1968 with the passing of the Marine Offences Act which made it illegal to supply, work with, or otherwise aid an offshore radio station—with the threat of criminal penalties for violators.

Anticipating the Marine Offences Act, Pierson mailed inquiries to all the foreign embassies in Washington offering the services of his floating radio stations. Haiti was among the eleven countries replying, although they later turned down the offer.

Shortly after the meetings on the radio stations, the Haitian government began to put out inquiries for a foreign organization that would be interested in developing the island of Tortuga along the freeport concept of the Bahamas. Remembering Pierson's energetic, if unorthdox, approach to business problems, the Haitian ambassador in Washington called on him for advice. From this encounter came the first negotiations between Haiti and Pierson in December of 1967.

Dupont Caribbean Inc. was founded by Pierson to develop the island and in December of 1970 a unique convention between Haiti and the corporation was signed creating a freeport economy on the island of Tortuga for a 99 year period. The government of Haiti received an interest in the corporation for their concessions.

Specifically, the convention creates a freeport authority to be controlled by Dupont Caribbean. The authority in turn will completely control the economic life of the island and have the sole power to grant licenses for operations on Tortuga, start corporations, or issue permits of various types. According to the convention, however, the island itself will be completely tax-free. Absent will be such common economic burdens as corporate, personal income, capital gains, sales, excise, ad valorem, social security, property, import, export, and special levy taxes.

INDIVIDUAL LICENSES

Considering the immense potential advantages of conducting business on the island, I asked Pierson and George R. Todd, a management consultant working on the project, about the costs involved in actually setting up a small business there. They were reluctant to state specific figures since each licensing request is subject to individual negotiation but they did offer the following figures as a rough sort of guideline, stressing that they could significantly change at any time. For an individual architect or engineer the initial licensing fee would probably be "in the neighborhood of" $1000 for a license of "average" duration. Most licenses of this type will tentatively run from three to ten years. Beyond this fee the licensee would pay the freeport authority a flat 5% of their gross income per year. Such a fee would provide additional operating revenue for Dupont Caribbean. Beyond these two figures a company or individual would only encounter his normal business expenses such as raw materials, wages, and the like.

There is a large range in the types of licenses available including the free-market provision of various "municipal" services, although it would seem that the number of organizations that could be incorporated for tax purposes would be essentially unlimited. There are about 200 licenses now available and Pierson reports that the response has been great. Every effort is being made to insure the integrity of those allowed into the economic environment of the island.

LEASEHOLD LAND

In addition to the freeport authority, Dupont Caribbean received 99-year leasehold rights to approximately 75% of the island with the right of reassignment. The remaining 25% is reserved as the property of the native inhabitants. Free access to all the beach areas is being preserved for everyone on the island. The extensive block of leasehold land, about 45 square miles, was released to the company in November 1971. It is from this land that assignments will take place for construction of offices, factories, banks, resorts and other projects.

FINANCIAL NEWS

As examples of the interest being generated in the project Pierson cited several recent developments. He said that he had received a "staggering sum" from one corporation for a letter of intent that will allow the company to use about 1,200 acres of land to build a 50-100 million dollar petrochemical plant on Tortuga. In addition, an offer has been received from Merrill Lynch, Pierce, Fenner & Smith, Inc., to place some 3 million dollars in debt securities for additional financing contingent upon Dupont Caribbean's consenting to have a public stock offering within 15 months. Pierson indicated no final decision on the matter but he did mention an increasing demand for a public stock offering. The convention with Haiti requires that stock be offered on the international markets at an indeterminate future date, but no decision has yet been reached on when that will be.

CURRENT DEVELOPMENTS

The first major assignment of leasehold land was made in April 1971, allocating a portion of the western tip of the island to Translinear Inc., a Texas development firm. After mapping and other preparatory work was done, this section of the island entered the operational stage in August. The construction work for the Translinear project is being carried out by Indian River Construction Company of Jacksonville, Florida, and every effort is being made to employ local native labor.

On 4 August 1972 the first shipment of heavy equipment was unloaded on the island—house trailers, tractors, graders, well-digging rigs, and similar equipment are in use. Among the priority projects are a hotel/restaurant to house investors and company officials visiting the island. This will later be enlarged to serve tourists. A primary road system and improvements on the 4,000 foot landing strip also have high priority.

Even though the island is still in the early stages of development an airline has already been established. Called Tortuga Air, it is owned and operated by Al Celcer. The airline is currently flying heavy-duty twin engine planes and a helicopter which was shipped in with the first load of heavy equipment and assembled on the island. Tortuga Air is currently awaiting the arrival of a new jet helicopter. Access by airline has greatly facilitated communication between the island and Port-au-Prince where Dupont Caribbean has its temporary headquarters. While the plane trip is a pleasant 30-minute flight, the alternative is a six-hour ride over rough Haitian roads followed by a boat trip across the channel. With expected improvements in the road system, the deepwater port potential of the island, and the current policy of off-loading heavy equipment directly from landing barges, any transportation problems seem close to being permanently solved.

OBSERVATIONS

With the operational stage of the freeport project now seriously underway, the ultimate potential of the island becomes even easier to envision. Its natural advantages include a strategic location in the Caribbean, ample space for virtually any endeavor, a host country eagerly looking for economic growth, and—most important—a 99-year tax-free environment. Possibility for success is increased even further by the fact that other traditional freeport/tourism areas are being progressively crippled by growth in taxes to one degree or another; nearly everywhere else the myopia of economic nationalism is breeding an increasingly hostile environment for business or tourism, let alone any vestiges of a freeport system. An excellent example of this degeneration can be found in the so-called Freeport of the Grand Bahamas where the import duty on watches and jewelry has grown to a range of 27-30%. Tortuga, on the contrary, can never have any at all, making the relative advantages obvious. Add to this the surliness of the natives in many traditional Caribbean tourist areas, along with the growing number of racial incidents directed against whites in these other areas and you have the formula for the unique success of Tortuga.

Pierson views the logical end of the freeport development as a vast complex of commercial activity. Beyond the obvious attraction of tourism, gambling, and truly tax-free shopping and consumption, there are essentially unlimited possibilities: retirement living, condominiums, companies incorporating for tax benefits, all types of manufacturing, international banking services; service as a flag of convenience for shipping companies such as those that now register in Liberia or Panama. In addition there are a host of business operations already located in the islands that could profitably move to Tortuga especially when you consider the nearly untapped labor supply of Tortuga and Haiti.

Although this type of growth does require time, Pierson estimates that in two years the island will have 5,000 new non-Haitian residents engaged in all types of commercial activity. The list of cruise ships interested in making port calls is growing steadily and it is estimated that after the same two years an average of nearly 20,000 tourists a month will visit the island.

THE GOVERNMENT

The obvious question generated by this information is whether the Haitian government at some future date would attempt to tamper with the freeport of Tortuga, by either repudiating or forcibly altering their convention with Dupont Caribbean in the hopes of generating tax income in addition to their current financial interest, or by nationalizing all or part of the activities on the island. The whole project quite obviously is possible only because of the contractual forebearance of the Haitian government, yet the flowering of a vital multi-faceted economy on their formerly undeveloped island would be a tempting plum indeed. I questioned Pierson about these possibilities and he replied by emphasizing that the Haitian government realized full well that the ultimate success of Tortuga rested upon keeping the confidence of the world business community by maintaining the laissez-faire environment of the island. Tampering with the agreement could only result in a serious disservice to everyone concerned and Haiti would have by far the most to lose. It should be noted that Pierson has been dealing with the Haitian government and people on an intimate basis for over four years now and seems fully satisified with the credibility of the government.

In concluding a discussion of this matter it should also be stated that the success of Tortuga will have tremendous implications for the whole country. As more and more people are drawn to the freeport, the spotlight will also fall on the mainland. The freeport's success could be a significant factor in the mainland's growth as well and the government is obviously aware of this fact.

Seemingly, the freeport project could not have come at a better time. Since the death of Dr. Francois (Papa Doc) Duvalier in 1971, his son, Jean-Claude, has been installed as "president for life." With the change has come a more nearly open society; although still depressed, the Haitian economy is also starting to show signs of growth. In the last two years an estimated 200 new businesses have set up operations there, creating approximately 10,000 new jobs. The recently-created quickie divorce industry exposes many new people to the country every week, some of whom stay on for extended visits and even to set up businesses there.

Haiti may be ripe for many types of progress, particularly after the isolation that began with Papa Doc's regime. One hopes that the government's new pledge to increase economic growth is based on an understanding of the dynamism of the free market, and will remain firm as time passes.

Robert H. Meier is currently completing his bachelor's degree program in finance at Northern Illinois University in De Kalb. He is active in the Illinois Libertarian Party and is a member of the Libertarian Party National Executive Committee.

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NOTES AND REFERENCES

[1] For further information on the Tortuga project:
Dupont Caribbean, Inc.
Eastland, Texas.
[2] For general information on the Haitian economy:
U.S. Embassy
Commercial Secretary
Port-au-Prince
Haiti
(Request their publication titled "Economic Trends" dated August, 1972.)