Haiti Liberte: Martelly Promotes Sweatshops for Haiti

by Haiti Grassroots Watch

The second of three articles

Why is Haiti “attractive”?

Last September, President Michel “Sweet Micky” Martelly told foreign
investors that Haiti is ready for “new ideas and new businesses.” The
country, he said, is “creating the conditions necessary for Haiti to
become a natural and attractive destination for foreign investment.”

But the ideas are not that new. Over 30 years ago, the Haitian and
U.S. advisors of dictator Jean-Claude Duvalier had almost the same
plan for Haiti’s economy. The impoverished country would become the
“Taiwan of the Caribbean” – a vast factory complex offering low
sweatshop wages where U.S. industries could assemble textiles,
electronics and baseballs.

How has it worked out? Three decades and billions of dollars in
investments later, workers in Haiti earn less than they did under
“Baby Doc,” as outlined in the first installment  of this article. And
studies like Yasmine Shamsie’s Time for a “High-Road” Approach to EPZ
Development in Haiti note that “[w]hile the [Free Trade Zone] model
did create jobs, it also had important negative effects on Haiti’s

Among the “negative effects” the Canadian researcher noted:

– Increase in income concentration and regional inequality
– A rise in food and housing prices
– Slums in marginal areas sprang up, in part because of the rural
exodus spurred by the factories, but also because “wages were too low
to provide workers with decent or safe accommodations.”

Those results haven’t stopped Haitian politicians  and “development
experts” from doing “dejà vu all over again” planning. This time,
however, plans call for “decentralizing” the factories.

In 2002, President Jean-Bertrand Aristide kicked off the new round
when he and Parliament passed sweeping “Investment Code” and “Free
Trade Zone” legislation. The new laws offer 15-year tax holidays,
duty-free import and export, and tax-free repatriation of profits.
Only one Free Trade Zone (FTZ) opened last decade – CODEVI on the
Haitian-Dominican border – but others were in the works prior to the
Jan. 12, 2010 earthquake, thanks to the incentives offered by
duty-free textile trade agreements with the U.S..

In fact, the changes in the international garment industry during the
last decade – due to the 2005 expiration of the Multi-Fibre
Arrangement (MFA) and the Agreement on Textiles and Clothing which
gave developing countries low-duty or duty-free export quotas for the
U.S., Europe and other “developed” countries – have created havoc.

When those agreements ended, thousands of factories in low-wage
countries around the world shut their doors or laid off workers as
international contractors sought out more advantageous locations to
have their clothes stitched. Perhaps not coincidentally, the very next
year, in 2006, the U.S. Congress passed the Haitian Hemispheric
Opportunity through Partnership Encouragement (HOPE) Act that gave
preferential access to Haitian-sewn clothing. Two years later, HOPE II
expanded the preferences and locked them in place for ten years.

Then, in the wake of the earthquake, Congress approved the Haiti
Economic Lift Program (HELP) Act, which nearly triples duty-free
quotas for clothing exports from Haiti to the U.S. and stretches the
access up through 2020.

But the names “HOPE” and “HELP” shouldn’t mislead readers into
thinking the legislation is meant to be “hopeful” or “helpful” to
Haitian factory owners or workers only.

Writing for the United Nations in 2009, economist Paul Collier noted
that “[u]niquely in the world, Haiti has duty-free, quota-free access
to the American market guaranteed.”

“Haiti has a massive economic opportunity in the form of HOPE II,”
Collier wrote in his Haiti: From Natural Catastrophe to Economic
Security report for UN General Secretary Ban Ki-moon. “The global
recession and the failure of the [World Trade Organization] Doha Round
accentuate this remarkable advantage because manufacturers based in
other locations will undoubtedly be fearful that rising protectionist
pressures may threaten whatever market access they enjoy currently.
*From the important perspective of market access, Haiti is now the
world’s safest production location for garments.*” [author’s emphasis]

Collier and the other cheerleaders say Haiti won’t be able to sell its
“unique” advantage unless it carefully assures a few sine qua nons.

Low wages
Wages must be kept low. A World Bank/Inter-American Development Bank
report prepared for the 2011 Davos World Economic Forum noted that, at
the moment, Haiti’s labor costs were “fully competitive with China’s,”
while wages in the Dominican Republic are “high,” which has led to a
“decline” in the assembly industry there.

What are the wages across the border in the DR?  In 2009, the minimum
wage for Free Trade Zone workers was US$35 a week, which, according to
the US State Department – cited in a study by Georgetown Professor
John M. Kline –  “did not provide a decent standard of living in any
industry for a worker and family.”

The implication? Haitian sweatshop wages won’t be going up any time
soon. They currently stand at about $35 a week.

24/7 production
The clothing industry “operates multi-shift production,” Collier noted
in his report, where he called for Haitian factories to include night
shifts. The Haitian private sector agrees. In its post-earthquake
Vision and Roadmap for Haiti report, Haiti’s industrialists and
business owners called for “flexible labor laws, including immediately
legalizing the 3×8 work shift to allow increased competitiveness in
the garment industry.”

Public investment
Not surprisingly, Haiti’s would-be sweatshop investors are also
looking for subsidies and handouts. “Given the risk and timing
associated with garment tenants, public funding is necessary to
catalyze investment in the new economic development zones,” the Vision
and Roadmap noted.

The factory owners got their wish – the U.S. and other donors are
donating almost $200 million to the new Regional Industrial Park of
the North (Parc Industriel du Region Nord – PIRN) project in Caracol
(see below).

Land for FTZs
“Ensure that land is rapidly available for acquisition in Export
Zones,” Collier recommended.

All of these elements will make sure that Haiti is, as Martelly called
it, “a natural and attractive destination.”

What’s planned for Haiti?

“Free Trade Zones should be one of the spearhead’s to launch
reconstruction,” recently said Jean-Alix Hecdivert, director of the
Haitian government’s Free Trade Zone Office (FTZO).

Beginning 40 years ago, Haitian authorities and their backers pinned
their hopes – in part – on Free Trade Zones (FTZs) and assembly jobs.

More recently, the Haitian government and its backers have nuanced
their approach. The 2010 Presidential Commission on Competitiveness:
Shared Vision for an Inclusive and Prosperous Haiti report named
textiles as one of five “priority” sectors. (The other four are:
animal husbandry, tourism, fruits and tubers, and construction.)

But in the wake of the earthquake, and with the advent of the HELP law
which extends the HOPE II benefits, the main focus appears to be on
FTZs and the assembly industry sector. The FTZO has received many
requests for new authorizations, Hecdivert told Haiti Grassroots Watch

“We are working on all of these projects because the focus is: create
the most jobs possible in the shortest amount of time,” he added.

Echoing Hecdiovert, a key figure in the Martelly administration said
the government is basically banking on “a massive influx of foreign
capital.” In a Sep. 12 article in Le Nouvelliste, Laurent Lamothe,
head of Martelly’s new Council on Economic Development and
Investments, said “the biggest need for the Haitian population is job

According to HGW’s interviews with the FTZO, and the evidence culled
from dozens of documents and reports, there are over a half-dozen new
FTZs and other assembly industry-related projects in the works. These
include FTZs, Free Trade Industries (essentially an FTZ that the size
of the building) and “Special Economic Zones” which are like expanded
FTZs but with some non-FTZ businesses allowed in the region. One of
the biggest projects is the PIRN. Another large project – although not
much is known about it – is a giant combination of FTZs and other
initiatives some journalists are calling the “North Pole Initiative.”

Despite numerous requests to FTZO officials, HGW was not able to
obtain definitive paperwork on all of the projects, nor a map of
approved FTZs. Below is an incomplete list of existing or potential
FTZs and related projects.

Name                        Where          Who          Who is
investing                 Number of new jobs
what kind of investment  project aims to create
SONAPI industrial park    Port-au-Prince     (government    Government
- $3.5M loan   1,200 – 2,000
(expansion)                                        industrial park)
Government – $400K grant

CODEVI (expansion)     Ouanaminthe         Grupo M         World Bank
& Soros Economic 1,400

             Development Fund (SEDF)

             – $6M loan

             Citi – $250K grant

West Indies Free     north of Port-au-Prince  WIN Group     Soros
Economic Development  25,000
Trade Zone      (part of “North Pole”)      (Mevs family)  Fund (SEDF)
- $45M loan

Industrial Revolution II Croix des Bouquets Richard Coles    $7.5M
total, with                      ?
Multiwear S.A. a $3M loan possibly

                 coming from IDB

RHEA                       Croix des Bouquets    Signa S.A.
   ?                                    ?

?                         Corail-Cesselesse
                                (part of “North Pole”) NABATEC
Unnamed Korean firm?              ?
                                                                – Gerald-Emile
                                                                Brun, director

HINSA                  Drouillard                      Hispaniola
Investment                                        ?
                            (Port-au-Prince)         S.A. (D’Adesky)

PIRN                  Caracol                          US government,
     US – $120M grant         20,000
government,   Inter-american           (more promised)
            Development Bank

                       (IDB) – $55M grant

                      Sae-A – $78M

Quisqueya           Sartre                                    ?
?                       Les Cayes                               ?

Nouveau             Port à l'Ecu                      Societe Generale
       (tourism installation as
Quisqueya                                      de Developpement
 well as FTZ planned,
(SOGEDEV)           according to FZO)
?                      Fort Liberte                                ?

?                     Ganthier                                     ?
                       (part of “North Pole”?)

Charity or profit?

The language in the press releases and on the websites announcing the
millions in loans and grants for the expansion of the textile assembly
industry constantly reinforces the idea that relocation of factories
to Haiti is practically a charitable enterprise.

The Interim Haiti Recovery Commission says the project is in the “job
creation” sector, making it sound almost like a social service.
Billionaire George Soros’ investment group hyped that their
participating in the West Indies Free Trade Zone would “improve the
standard of living for 300,000 residents.” A Citi news release on its
$250,000 grant to CODEVI congratulated itself for helping “create
1,400 new full time jobs for Haitians over the next 12 months.”

But a look at what the buying power of a Haitian textile worker’s
salary dispels the myth that assembly jobs contribute to a
significantly improved “standard of living.” And in any case, an
investment is an investment – the objective is to make a profit. That
is why financiers like Soros and Korean textile giants like Sae-A
Trading are in Haiti, not in Alabama or France.

The jobs “created” in Haiti most likely already existed as jobs in
another country before moving to the home of the hemisphere’s lowest
wage. Haitian laborers are likely replacing more expensive laborers,
and are basically making it possible for clothing labels like GAP,
Banana Republic, Gildan, Levis and others to make even more profits by
shutting down factories based in countries with better salaries and
better worker protections.

A look across the border is instructive. Between 2004 and 2008, as
wages rose a tiny bit, and a preferential trade agreement came to an
end, the Dominican Republic lost 82,000 assembly jobs.

In the US, during about the same period (between 2004 and 2009), over
260,000 textile workers lost their jobs, according to the US Bureau of
Labor Statistics. U.S. sewing machine operators – the least trained
textile workers – earned about $9.50 an hour in 2008 (the most recent
figures available). In Haiti they earn about $5.90 a day.

Manufacturers do not take their jobs offshore in order to “jumpstart”
industry or “improve the standard of living.” They do it to make a
profit. As Canadian company Gildan Activewear said in a recent
newspaper article, the savings offered are “too good to pass up.”

According to a 2009 study commissioned by the Haitian government and
paid for by the World Bank, Haitian assembly plants seem to be making
a good profit, also. At that time were netting between 8 and 67 cents
profit per piece, with factories stitching up to 1.7 million items per

Not all bad

Industrialization brings some benefits. Haitian workers get training,
industrial parks are built, and there is likely some transfer of
technology. Electricity, water and other infrastructure is usually
improved in the FTZ areas. But the industry is volatile, and at any
moment a textile company can pick up and leave.

For these and other reasons, Haitian economist Camille Charmers thinks
the current approach – marketing Haiti’s sweatshop-wage salaries – is
“a big error.”

“Basing the country’s development on assembly industries is a big
error, it will lead us into a hole, into dependency,” he told HGW.
“We’ve already experienced it, we know what it does.”

While Chalmers admitted that the areas with FTZs have slightly better
infrastructure than the rest of the country, and that workers use
their meager wages to buy food, the overall effects are minimal and do
not help the economy’s productive forces grow.

“The sector is practically cut off from the rest of the country,” he
said. “You get some factories and some salaries, and everything else
is imported.”

“It’s completely wrong-headed and it won’t help the country get out
from under its economic crisis,” the economist concluded. “People need
to know what FTZs are, what has happened in Mexico, or Honduras, so
they don’t think these things will ‘save’ us.”

So how have other countries fared?

Stepping Stone or Dead End?

Haitian factory owner Charles H. Baker admits that by trying to
attract manufacturers to Haiti with the lowest salary in the Americas,
the country is engaged in a “race to the bottom,” but he insists that
low-wage, low-skilled assembly industries are a “stepping stone” to
more complex industrial development.

“It will last ten to 15 years,” Baker told HGW. “I count on it only as
a stepping stone… It’s a step. We’re going up the stairs, and it’s
one of the steps.”

Dozens of countries – and indeed, Haiti, on and off for the past 30
years – have already walked the walk, climbing onto the bottom of the
“race to the bottom” steps.

HGW reviewed reports on the Dominican Republic, Mexico and Central
America to see how those countries, economies and workers have done.

Resoundingly, the evidence on Free Trade Zone (FTZ) and low-wage
assembly industries shows: Economy – Little evidence of “linkages”
with the rest of the economy; Environment and Health – Assembly
industry-led industrialization can have direct and indirect negative
effects on the environment, and lax regulations or lax enforcement can
mean that workers are exposed to hazardous materials; Society – While
the employment of women does yield some positive effects (economic
autonomy, etc.), assembly industries can also have negative effects on
families and society.

“The literature on [Export Processing Zones] is voluminous but there
are a few findings that stand out when considering Haiti,” notes
Canadian researcher Yasmine Shamsie. “First, countries that applied
the EPZ model relatively successfully (such as Mauritius and Costa
Rica for instance) employed it as one pillar of a broader plan to
diversify their economies. This means that the model on its own will
yield hardly any beneficial results.”

What does the data say?

HGW cannot claim to have perused all of the literature, but a glance
at some studies of countries similar to Haiti might shed some light…

In 2003, Jose G. Vargas Hernández of the University of Guadelajara
looked at literature related to Central America where, during the
1990s at least, “most of the maquiladoras are owned by Asian capital,
mainly Korean capital investors.”

The researcher concluded that “[t]here is no evidence that maquiladora
industry’s technological complexity has a direct impact both in
economic development and generation of well remunerated employment.”

Vargas Hernández went on to discuss universal “non-observances of
labor rights,” the fact that foreign investors can leave a host
country on a moment’s notice, and the frequent failure of the sector
to develop beyond simple low-skilled, and low-wage jobs.

“There is not a clear understanding about the role that this type of
industry is playing in economic growth and national development,” the
researcher wrote.

In an exhaustive 2008 literature review, two US-based professors
concluded that even Foreign Direct Investment (FDI) and the creation
of high-tech assembly industry don’t necessarily produce “spillover”
into the local economy. In Comparative Studies in Comparative
International Development, Eva A. Paus and Kevin P. Gallagher looked
FDI in Mexico and Costa Rica. For the latter, they found “some
positive spillovers from FDI through the training, education… [but]
spillovers via backward linkages [to the rest of  the economy] have
been small.”

Hopes were very high for Mexico, which had an indigenous electronics
and computer industries prior to the FDI boom. Rather than source
parts in Mexico, however, the foreign companies got inputs wherever
they were cheaper – usually from Asia.

“Under the Washington Consensus, governments in both countries had
great faith in the power of liberalized markets to render economic
stability and growth, and for FDI to generate technological and
managerial spillovers,” the authors wrote. “Our article contributes to
the growing body of evidence that the Washington Consensus does not
constitute a viable development strategy.”

Along the Mexican-U.S. border, home to the maquiladora boom,
especially following the implementation of the North American Free
Trade Agreement (NAFTA), income disparity is higher than at any other
commercial border in the world, a 2007 article in the Golden Gate
University Environmental Law Journal reports. Minimum wage in Tijuana
buys one-fifth what it did in the early 1980s, and “67% of homes have
dirt floors, and 52% of streets are unpaved,” researcher Amelia
Simpson wrote.

Environment and Health
There are generally two types of environmental concerns associated
with assembly industry plants – direct environmental damage due to
waste, and indirect damage or effects, due to increased pressure on
the water supply from both the industry and the typical population
influx inspired by the hope of jobs.

Damage or benefits to the environment appear to be highly dependent on
the ability of the host country to enforce laws and standards. Some
studies claim that assembly industry factories are more careful about
the environment because they know foreign consumers might boycott a
polluting industry.

A 2002 UN report on Mexico found that “the maquiladora industry
performs better than the non- maquiladora industry with respect to
direct environmental externalities.”

The case of the blue jeans water run-off in the Mexican state of
Puebla is by now well-known. In order to “fade” jeans, they are
usually beaten or chemically treated. Tehuacán means “Valley of the
Gods,” but reporters call it “Valley of the Jeans.” A 2008 study from
Ciencia y el Hombre journal in Veracruz reported blue dye run-off
polluting rivers and irrigation ditches. Of equal or greater concern
is the increased demand on water supply, Blanca Estela García y Julio
A. Solís Fuentes wrote.

“Due to the intensive use of water, the water table is diminishing
between 1 and 1.5 meters every year, at the same time the population
is growing between 10,000 and 13,000 people per year,” they noted.

In some parts of Mexico, factories now buy “water rights” from local
farmers in order to cover their needs, harming agriculture and driving
up the cost of water. The 2002 study noted that: “The shortage of
water, both in quantitative and qualitative terms, has already forced
the industry to start to purchase water rights, temporarily or
permanently, from surrounding agricultural water shareholders. These
water rights are traded with high market prices. One example is
Nissan’s automotive plant in Aguascalientes that purchased water
rights required for its painting processes.”

The NAFTA has an environmental “side agreement” that calls for
companies to clean up after themselves, but the 2007 Golden Gate
article noted that the agreement is neither “enforceable” nor has it
“brought adequate protections for workers or the environment.”

Surveys of Haitian factories attest to the lack of protections for
workers from environmental hazards. Better Work Haiti found that
almost all factories violated national and international laws and
standards. “Average non-compliance rates are high also for Worker
Protection (93%), Chemicals and Hazardous Substances (89%) and
Emergency Preparedness (82%).”

According to the April, 2011, report, “factories initiated remediation
efforts to improve the situation,” but as noted earlier, Better Work
does not have enforcement powers.

As the record in Haiti shows, the installation of assembly industries
and FTZs can have dramatic effects on population movement. According
to Simpson, in Mexico, the maquiladora industry “triggered the largest
migration since the 1960s.”

“Tijuana’s population increased more than sevenfold from 1960 to
2000,” she wrote.

Society is also impacted in another way. More than any other industry
in poor countries, assembly plants employ women. In some countries,
the workforce is up to 80% female, often young. Women are preferred
because, according to Canadian researcher Yasmine Shamsie, quoting
another researcher, “they are cheaper to employ, less likely to
unionize and have greater patience for the tedious, monotonous work
employed in assembly operations.” (In Haiti, the balance between women
and men is more even.  Women make up about 65% of the workforce.)

The impact on women can be both negative and positive. On the negative
side, women are exposed to the toxic chemicals, develop injuries due
to movement repetition, and can contract respiratory illnesses. On the
other hand, having an independent income – albeit insufficient – can
be empowering.

Still, women are usually the primary care givers for children. “Family
life, the foundation of every community, has deteriorated under the
influence of the maquiladoras,” wrote Richard Vogel about Mexico’s
Ciudad Juarez in 2004 for the Houston Institute of Culture. “About
half of the families that reside in the two and three room adobe
houses in the working-class neighborhoods of Juárez are headed by
single mothers, many of whom toil long hours in the maquiladoras for
subsistence wages. The resulting stress on families has lead to
chronic problems of poor health, family violence, and child labor
exploitation. Children suffer the most. Because of the lack of
child-care programs, kids are often left home alone all day and fall
prey to the worst aspects of street culture, such as substance abuse
and gang violence. Ciudad Juárez, by any measure of social progress,
is moving backward rather than forward under the influence of the
maquiladora industry.”

(Next week: Industrial Park in Caracol: A “win-win” situation?)

Haiti Grassroots Watch is a partnership of AlterPresse, the Society of
the Animation of Social Communication (SAKS), the Network of Women
Community Radio Broadcasters (REFRAKA) and community radio stations
from the Association of Haitian Community Media. To see images, video
and to access links to primary sources -
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