In the News: A glittering industrial park in Haiti falls short

by Jonathan M. Katz. Originally posted at Al Jazeera America

A cornerstone of post-earthquake ‘reconstruction€™’, the Caracol park is not living up to its backers’ lofty promises

caracolCARACOL, Haiti — The young men playing dominoes in this tin-roofed fishing village used to have high hopes for the industrial park being built up the road. They had heard of the U.S. government’s plans to invest hundreds of millions of dollars in a part of Haiti where most people are barely scraping by, and promises from a South Korean garment manufacturer to create tens of thousands of jobs.

But less than a year after Caracol Industrial Park’s gala opening — with Bill and Hillary Clinton, Sean Penn, designer Donna Karan and Haiti’s current and former presidents among the guests — the feeling these days is disappointment. Hundreds of smallholder farmers were coaxed into giving up more than 600 acres of land for the complex, yet nearly 95 percent of that land remains unused. A much-needed power plant was completed on the site, supplying the town with more electricity than ever, but locals say surges of wastewater have caused floods and spoiled crops.

Most critically, fewer than 1,500 jobs have been created — paying too little, the locals say, and offering no job security. “We thought there was going to be some benefit for us,” says Ludwidge Fountain, 34, laying his domino with a satisfying smack. He worked for two months at the park as a guard, taking home about $3.40 a day, until his contract ran out. “Maybe it’s good for some of the people inside the park. Everyone else got nothing.”

The industrial park near Caracol is the centerpiece of U.S.-led reconstruction of Haiti after its January 2010 earthquake — even though the northern village was undamaged, sitting more than 100 miles northeast of the epicenter. The State Department has promised the park will create 65,000 jobs, powering an economic revitalization of northern Haiti while reducing overcrowding in the quake-stricken capital (though northern Haiti is at least as seismically active as the south). At the opening, then-Secretary of State Hillary Rodham Clinton called it “a new day for Haiti and a new model for how the international community practices development.”

Yet in a larger sense, the project is the result of an economic philosophy promoted by Washington for poor and ravaged countries around the world: that setting up a low-paying textile sector to cheaply stock U.S. stores and closets is a first step on the path out of poverty. In fact, it has been the core U.S. economic plan for Haiti since the late 1970s and early 1980s, when the country’s economy was under the control of the dictator Jean-Claude “Baby Doc” Duvalier. And still today, it’s a plan that — unlike other forms of development aid — the U.S. is generally eager to finance: More than $270 million has been set aside for Caracol by the U.S. Agency for International Development and Inter-American Development Bank.

But despite those high expectations — or maybe because of them — some officials in Washington are as frustrated as the factory’s neighbors. Nearly three years after the project was announced, the park still has just one major tenant: Sae-A Trading Co. Ltd., a Seoul-based textile giant that supplies Wal-mart, Gap, Target and others. (The sole other occupant, a Haitian franchisee of Sherwin-Williams Paints, has only a few dozen employees.) Even with another apparel maker expected in the park soon and Sae-A planning to create another 1,400 jobs by year’s end, the park is nowhere close to producing the 20,000 jobs its backers have promised over the next few years, much less the 65,000 predicted by the State Department.

USAID’s role criticized

On a clear August day, the park’s completed section is an impressive sight: a grid of paved streets in a country that has few, a shiny power plant in a region that sorely needs more, and a gleaming corporate headquarters fronted by U.S., South Korean and Haitian flags. Construction crews from the neighboring Dominican Republic climb the steel frame of a factory building still under construction. Most of the park’s current workers lean over sewing machines in Sae-A’s cavernous structure, racing to meet their quotas for the day.

But surrounding that knot of activity is a lot of empty land, and with it questions about the park’s future — and that of Haiti’s north. In the eyes of its backers, Caracol’s growth was part of a plan to turn the country’s entire northern corridor into an engine for growth, featuring new ports, mining in the hills, an international airport, tourist attractions and a new, Dominican-financed university filled with students. Little of that has come to fruition. For now, Sae-A’s Korean managers have to make do with on-site dorms in an isolated region, contenting themselves with the tropical weather and a steady supply of sea cucumbers — an East Asian delicacy the nearby villagers have recently learned to catch and sell.

Officials have competing theories as to why more investment hasn’t come. Generous terms including fully financed buildings, infrastructure and a 15-year tax holiday have not overcome many major companies’ fears of Haiti’s crumbling infrastructure and political instability. (The only slated addition to the park, Atlanta-based uniform manufacturer Safi Apparel Corp., also operates two factories in Afghanistan.)

Another problem, ironically, may be the backers’ lofty goals. With so much money on the line, prospective tenants face a high bar in convincing officials that they will create enough jobs and revenue to justify a spot in the park. “We have people who come, interested, but they only employ 20 or 25 people,” says Max Edouard Vieux, who represents Haiti’s industry-governing Société Nationale des Parcs Industriels in the country’s north.

Even Sae-A hasn’t expanded as quickly as boosters hoped. Plans to build an on-site knitting-and-dyeing mill, which would likely provide better-paying and more durable jobs than the sewing lines, are on hold until sewing production ramps up, according to company spokeswoman Nicolle Kuritsky.

A report released in June by the U.S. Government Accountability Office placed blame on USAID itself, saying that poor planning and the projection of spiraling housing and construction costs have put the project’s future in jeopardy. USAID did complete a first, 10-megawatt phase of the power plant under budget, but the bulk of the money — 82 percent — has yet to be obligated at all, with officials still waiting to break ground on at least two more phases of the project.

A new shipping port, meanwhile, is barely in the planning stage, largely because USAID is running the project itself despite not having built a port anywhere in the world in more than three decades. The GAO argues that without the new port, the park won’t be sustainable in the future, as containers have to move instead through the aging port at Cap-Haitien, the Dominican Republic, or over 100 miles of shoddy roads to Port-au-Prince.

When Caracol was announced, many observers were concerned that without decent, affordable housing nearby, the park could lead to the creation of shantytowns, as the assembly factories of the early 1980s did in Port-au-Prince. Since the park has not created many jobs, that hasn’t happened so far. But there also isn’t enough housing being built in the meantime. USAID cut the number of houses it planned to build near the industrial park by 60 percent, due mostly to unanticipated costs and an inability to sort out land title — a problem identified three years ago as the principal roadblock to reconstruction. A brightly painted new development remains vacant down the highway from Caracol, awaiting final touches to the houses and a decision on how to make them available, and to whom.

Even with those delays, however, housing is one area where the emphasis on the industrial park is particularly evident. By comparison, USAID slashed the number of houses it planned to build in the actual quake zone by 93 percent — meaning that two-thirds of the houses the U.S. now plans to build in all of Haiti are within 13 miles of the industrial park.

Overall, less than a third of the $651 million USAID said it would spend in Haiti has been disbursed. The GAO report quickly attracted notice in Washington. A congressional fact-finding team left for Haiti in early September to further evaluate the situation, with hearings on progress in the reconstruction effort expected next month.

USAID defends its work. The agency “welcomed the report,” says Elizabeth Hogan, acting assistant administrator for USAID’s Latin America and Caribbean Bureau, while noting, “The report is a snapshot of progress to date, and that work in housing, energy, port construction and other areas is ongoing.”

Minimum wage laws

It’s hard to overstate the importance of this project to those funding Haiti’s reconstruction. Growing Haiti’s apparel sector has been a major goal of U.S. policymakers since the late 1970s, when similar projects with equally low-paying jobs helped draw thousands of rural migrants to the capital, Port-au-Prince. In the turmoil after the 1986 overthrow of Haiti’s dictator, and a crippling U.S. embargo under President Bill Clinton a few years later, the sector collapsed, leaving behind empty factories and teeming slums.

In hopes of reviving the sector, and the profits they helped generate for U.S. retailers, Congress passed a series of import tariff exemptions for Haitian-sewn textiles in the 1990s and 2000s. In 2009, citing destructive hurricanes the year before, U.N. Secretary-General Ban Ki-moon appointed Clinton as his special envoy to Haiti to push a garment-focused economic plan. When the earthquake struck a few months later, wiping out much of the capital and killing an estimated 230,000 to 316,000 people, that plan became the blueprint for rebuilding Haiti.

Sae-A — a company well-known to Ban since his days as South Korea’s minister of foreign affairs and trade — had already been looking to open factories in Haiti, whose low wages and largely union-free shops fit with its model in low- and middle-income countries such as China, Guatemala and Vietnam. After the tragedy, with donors more willing to provide funding than before, then-Secretary of State Hillary Rodham Clinton brokered an agreement between Sae-A and the Haitian government to move forward on a deal. It came down to a division of labor: The U.S. would build the power plant, port and housing. The Inter-American Development Bank would finance buildings and infrastructure. The Koreans supplied the managers and some investment of its own; Haiti would secure land and workers.

The 366 farmers who gave up their land were given settlements averaging about $3,200 each. The workers would come even cheaper. Factories in Haiti now pay a minimum of $4.56 a day — an amount that would require working 29 days a month just to buy enough food, and nothing else, for a typical Haitian household, according to a 2009 USAID study. (Local vendors sell lunch to the Caracol workers on credit because wages are paid only twice a month; it is a growing source of tension at the park that many workers never pay their bill.)

In fact, the question of minimum wage could be another drag on investors’ interest. Under a recently enacted law, the minimum wage should now be roughly $6.85 a day for garment work. But factory owners have simply refused to pay the higher wages. A recent survey by the International Labor Organization found not a single factory in Haiti currently complying with the new law. Sae-A declined to comment on particulars, stating only that its employees “are compensated in accordance with local laws and regulations.”

Growing a middle class

Supporters of the garment-factory push, including the Clintons, Ban and Oxford economist Paul Collier, have argued that even lower-wage jobs will grow the economy and lead to the creation of a middle class. Many cite Haiti’s official unemployment statistics — 46 percent, according to the ministry of finance; 70 percent, according to the GAO report — as evidence of the need for employment of any kind.

Others — noting that nearly all Haitians work in the informal sector, regardless of their formal employment status — argue that inadequate salaries in jobs from which workers can be easily fired and replaced, in Haiti or elsewhere, won’t make a difference. “It’s a question of dependence,” says Yannick Etienne, spokeswoman for the Batay Ouvriye workers’ union, which is trying to organize workers in Sae-A’s factory at Caracol. “If these foreign investors don’t come, there are no factories. This is not the way a national economy should function.”

Nonetheless, with poverty still rampant, demand for the small number of jobs created at the park remains high. Modeline Jean, 24, fought hard to be on the Caracol sewing lines in hopes that it would pay better, and more regularly, than selling food outside her home.

But the $4.56 she earns a day is barely enough to pay the rent on her seaside shack, she grumbles. As she talks, she clutches a bandaged left wrist, which she says she sprained after slipping on a rainy walk home from a late shift at the factory. She will have to return to work the next day, no matter how it feels in the morning: According to Jean, her supervisor would dock two days’ pay for each day of work she misses. “It’s a beautiful park, but how they treat you don’t match how it looks outside,” she says.