Haiti

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

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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.

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  1. Deja vu?

    1. In Haitian creole that’d be something like “davu”. Like the way “l’autre bord de l’eau” becomes “lot bo dlo”.

  2. This problem is the reason why I support Ron Paul idea to stop foreign aid. As a Haitian born, I know first hand that all that good intention has done nothing but wreak Haiti. Foreign aid in the form of food just destroy the livelihood of farmers. I will go as far as saying that most foreign aid are evil. Most of it is just stimulus for American farmers at the expense of these countries agricultural sector.

    1. The problem with foreign aid dollars is that proponents conflate all types of foreign aid, and in doing so can cherry pick examples that appear to protect it. These types are:

      1. Foreign investment
      2. Medical/Scientific research
      3. “Stimulus” spending

      The last category, including such treasures as the War on Drugs and food and medicine give-aways, is easily the largest, and smacks of Keynesianism at its finest (worst?). No one seems to realize that such spending will not guarantee an increase in supply, but will guarantee an (artificial) increase in demand, leading to inflationary bubbles.

      The second one, though usually lumped into the category of “foreign aid”, is actually a form of domestic spending for politicians to return the “favors” of the pharma-industry.

      The first one is the only legitimate form of foreign aid, but unfortunately it’s not nearly as widespread as it should be.

  3. United States Virgin Islands Republican caucuses, 2012
    Candidate Votes Percentage Unbound Delegates Delegates
    Ron Paul 112[3] 29.2% 1 1
    Mitt Romney 101 26.3% 6 7
    Rick Santorum 23 6.0% 0 0
    Newt Gingrich 18 4.7% 0 0
    Uncommitted 130 33.9% 2 1
    Unprojected delegates:[4] 0 0
    Total: 384 100% 9 9

    1. And how does this relate to the topic being discussed?

  4. What would be the effects if Haiti adopted a gold standard? Would they be more prosperous, less prosperous?

    Can anyone help me understand?

    1. A gold standard can be effective only when a society and its government are honest.

      Even the most vociferous Haitian Nationalist will tell you – in private – that the American is preferred over a Haitian to administer some program or business.

      Meanwhile, Haiti’s gold has been in Fort Knox since the American Occupation of the early 1910’s. And it is best it stays there.

      1. A gold standard forces government to be honest (why do you think they don’t want it ?). People always say how Greece is suffering because it can’t control its own currency, I see it from the opposite angle, Greece is now forced to cut its government fat which I see as a good thing, the alternative is to inflate away the debt and keep its over bloated government and hope that somehow the problem will go away.

  5. Foreign aid to Haiti is a waste.

  6. Foreign aid is more than a waste, it’s having the same effect that welfare did on the black family, creating a class of people content with dependency. Why would I work a lousy job for pitiful money when I can sit at home for the same money? Of course, there’s no advancement when you’re dependent.

    1. Having children is effectively advancement if benefits increase with family size.

  7. The aid that Haiti gets stinks like colonialism, the country can never get out of its hole as long as foreign nations utterly control every aspect of the nation.

  8. ???First of all, stop Beats By Dr.Dre Headphone cursing. Secondly, what I’m pointing

  9. One of the most poorly argued articles on the effects of foreign aid on Haiti — which, I agree, are deleterious — I’ve read. You’re talking about an event that destroyed an estimated 250,000 residences. Of course there will be a spike in rents. It’s supply and demand. Do you really think the landlords of P?tion-Ville apartments in which NGO workers are currently living would otherwise rent them for $187/month?
    You fail to mention the antiquated land tenure system that left many without proper documentation to their home. Or population density, etc.
    What’s more, you don’t discuss that major disasters always have an inflationary effect on their economies (see Hurricane Katrina, which doesn’t come close to the earthquake effect on GDP).
    A lot of faults can be found in the aid system, but you really owe it to your readers to be more careful and exhaustive with your reporting.

    1. Did you read carefully the third sentence of the piece?

      I didn’t feel this piece was the place to delve into the intractable issue of Haiti’s antiquated land tenure system.

      You’re right that the issue of population density in PAP probably merited a mention.

      1. You mean the sentence starting, “Demand for housing spiked after …”
        Yes, I read it. It’s also incorrect.
        Demand didn’t spike. If anything, it declined, sadly, due to the number of deaths. Or at least it was constant.
        Supply decreased, which caused the housing prices to rise.
        An economist could have told you that and clarified some of your other ideas … if you’d bothered to call one.

        1. You’re right, it was badly worded on my part, but the end result I reported holds: prices have increased drastically as there’s a huge number of people looking for housing relative to the stock.

          One takeaway from the reporting for this piece was how difficult it is to suss out just how much the presence of foreign orgs affects the local economy, given that the earthquake caused such massive damage and shocked the entire country and economy. I thought that that nuance came through in the piece. (“It may be impossible to tell just how much the aid economy affects the local economy . . .”)

  10. the negative effects of foreign aid on Africa have been well documented. It is not only that the alot of it is stolen and ends up in foreign bank accounts, the aid that actually reaches say, a farmer, is likely to ruin his occupation, as this article points out.

    the NYT had a piece on how foreigners are helping african women. felt strongly that it is not the business of westerners to change people’s sexual politics. In the west, women’s education followed men’s and a huge accumulation of wealth from free enterprise. In poor countries, already hundreds of thousands of men with degrees in law or political science who can’t find work. And there are millions of men who can’t get educated. Better to fund a woman’s or children’s healthcare center than to favor women over men and to create all kinds of resentments. Let people handle their own social affairs.

  11. I noticed that the property owners of the dwellings lived in by Madames Louis and Simon live outside of the country. Could absentee landlordism contribute to the problems? God bless.

  12. But they can gambol in Haiti! That means it’s paradise! Right?

  13. Crime rates and insurgence are among the many problems of rebuilding Haiti. The crime wave after the earthquake surged and the job market shut down completely. With no jobs, no incomes, no stability, people have a greater tendency to commit crimes in order to survive. Haiti is a very dependent state and NGOs have helped to create this matter, however without the NGOs Haiti may be just as bad, if not worse.

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