Privatization: What the Haitian People Can Expect

From Haiti Info,
Vol. 3, no. 10, 25 February 1995

PORT-AU-PRINCE, Feb. 22 - Last week the Haitian government admitted that nine state enterprises will be privatized as part of the Structural Adjustment Program (SAP) being implemented under the strict control of the International Monetary Fund (IMF) and the World Bank. [See also last issue.] President Jean-Bertrand Aristide, who only a few years ago headed a massive mobilization to fight against privatization and neoliberalism in general, has defended and promoted the measure.

The government, knowing well the population's sensitivity on the matter, is taking careful steps to avoid a public debate in order not to create conditions for another mobilization, and did not announce the plans itself. Rather, the Haitian people learned of the move in an Agence France Presse (AFP) story from Washington, D.C., quoting Philippe Lietard, the Haiti point man for the World Bank's International Finance Corporation (IFC). He said the state will sell foreigners 50 to 60 percent of: Autorité Aeroportuaire Nationale (which runs seven airports), Autorité Portuaire Nationale (which runs 12 ports), Banque Populaire, Banque Nationale de Credit, Ciment d'Haiti, Electricité d'Haiti (EDH), Entreprise Nationale des Oleagineux (vegetable oils), Minoterie d'Haiti (the flour mill) and TELECO (the telephone company).

Lietard told AFP that investors from the U.S., France, Switzerland and Canada are interested, and that the Haitian government will keep some of the shares, except for ten percent, which will go to victims of repression. Profits from the sales will go for health and education (30 percent), for pension funds (20 percent) and rural roads (50 percent), he said.

The IFC, the most secretive of the three financial institutions that make up the World Bank, lends money to the private sector and develops capital markets in poor countries. It is being paid US$2 million by the U.S. Agency for International Development (AID), for essentially preparing the terrain and assessing the risks for U.S. and other multinationals. Lietard said it will make recommendations in two to three months and that only three enterprises will be sold in 1995.

A Shock But Not A Surprise

The news of the privatizations came as no surprise; it is the logical conclusion of a process and a pressure underway since the Duvalier era. What was shocking were the institutions chosen, like the flour mill, which the Inter-American Development Bank (IDB) said made over US$3 million in 1990 and would have made US$7 million 1991. It was closed by the de facto regime and thereafter the flour business was reportedly controlled by Police Chief Col. Michel Francois (The site is now being used by Haitian-American Rice Corp., set up illegally under the de facto Marc L. Bazin regime, which imports and sells U.S. rice for 20 percent less than local rice). Another closure was the cement factory. Cement is crucial for construction here, and all materials necessary for cement are indigenous to Haiti. Before Aristide took office it lost millions of gourdes per month, but by May was turning a profit. Several monopolist families, who supported the coup d'état, fought viciously over the market. TELECO's overseas earnings kept the government-in-exile in business for three years and today, according to one source, has an US$18 million surplus in a U.S. account.

Also shocking is the decision to sell off the airport and port authorities, two agencies of strategic and economic importance. Each year during the eighties, Haiti exported over US$200 million worth and imported over US$300 million worth of goods. In the first three months of the Aristide administration, APN went from losing 1.5 million to earning almost half a million gourdes per month.

EDH, like other electricity companies, a potential profit-maker, was also projected to make a profit in 1991: US$1.5 million, not even counting even the tens of thousands of dollars' worth of electricity being stolen by the elite with sophisticated devices purchased in the U.S. (like a magnet that blocks meters), or the thousands of slum-dwellers with illegal connections. Shocking is the inclusion in the deal of one of the recently lavalas- converted, former coup-supporting families, the Mevs clan. Last fall, Fritz Mevs revealed to the Village Voice that he and Florida Power & Light were planning to buy EDH, build a plant in the Port-au-Prince harbor and power the country with World Bank-financed power lines (Mevs has already signed a contract to rent an electricity-generating barge from the same company to the state for US$13 million a year for eight years.)

Reactions from Workers

The steps toward privatization are being taken in a context of confusion, characterized by a propaganda where people are being fed false information about its benefits. Many have called for a public debate.

Jean-Robert Bosse, a member of the TELECO union who quit the company during the coup and is now back at work, said TELECO should not be sold.

By and large, TELECO is one of the biggest profit-making industries in the country, he said. The state should conserve certain domains of interest... to regularize prices and protect consumers... If the coup did not occur, the IMF would never have found the terrain open like this.

An EDH union leader said his company also could be profit-making and said he and all consequent unionists are against the privatization plans.

A member of the state flour mill union said he thinks the move will hurt everyone.

All political power comes from economic power, he said. We think that this will be catastrophic for Aristide himself, but that the biggest consequence will be felt by the people... Aristide has to explain himself.

The New Aristide Defends Move

Journalists also reacted. When President Aristide appeared with U.S. and U.N. officials the next day, he was immediately queried and defended the move with demagogy.

When we talk about democratization, we are talking about a form to manage the money, Aristide said. This form permits us to find... democracy.

Onetime head of the Initiative Committee Against the IMF, part of a mobilization in 1987, Aristide did not fully explain how selling the enterprises in 1995 would democratize them, arguing instead that since the sales profits will be used to help people living nearby, democratically it serves the community.

Astoundingly, Aristide added, For a long time the enterprises of the state... used to serve as a source of money for the government to use however it wanted and that with democratization, the government would no longer have that source. He was obviously referring to the way the state should function. Yet beyond this formal but real question, he failed to mention the fundamental difference between a corrupt government working for the few and one at the service of the people.

Who Benefits from Privatization?

The multilateral institutions have pushed privatization since the eighties, but over the last few years it has become more and more de rigueur for SAP countries. In 1986, 13 percent of all financing was tied to such sales. By 1992, the figure was 59 percent.

The 1990s have started with a bang, ex-IFC Vice President William Ryrie told a privatization conference at the Adam Smith Institute in London recently. Privatization will, I am sure, be a continuing theme of the remaining years of this century, and the potential benefits to the countries concerned will, I have no doubt, continue...

But Ryrie has his wording mixed up. Reams of studies show that the benefactors are not countries but investors - local elites, further consolidating their control, or stockholders of Transnational Corporations (TNCs). Despite the fact that the 1980s are called the lost decade of development in the South, the world's top 200 TNCs, 86 percent of which are from a mere five countries, doubled their revenues, going from US$3 trillion in 1982 to $US5.9 trillion in 1992. In 1991, half of the US$11 billion foreign direct investment in Latin America went to buy state-owned enterprises. As the U.N. Development Program admitted in 1993, privatization has been more of a 'garage sale' to favored individuals and groups than part of a coherent strategy to encourage private investment.

Same Recipe, Same Results

In addition to offering attractive bargains to individual investors, privatization serves a larger purpose - extending the neoliberal model while creating opportunities for international capital. In country after country, it produces the same results:

• lay-offs, meaning immediate hardship for the ex-workers plus increased unemployment, shrinking the domestic market;
• after the initial injection of capital, a worsening balance of payments as the new owners repatriate profits;
• a stagnation or reduction of services combined with rate hikes;
• a reduction of the state's ability to intervene to encourage growth or alleviate a problem (such as the lack of electricity), since foreign (or local) investors make decisions based only on the bottom line, and,
• a weakening of the economy by making it more dependent on the world market.

What follows are some concrete examples of what the Haitian people can expect:

• Peru - Massive privatization, 1991 to 1993 = 300,000 people lost their jobs.
• Poland - Transportation system sold = Bus fares rose 61 percent.
• Hungary - Nine of the ten largest enterprises privatized in 1991 went to TNCs.
• Mexico - Over 1,000 enterprises sold, 1982-1994. The telephone company went to a close ally of then-President Carlos Salinas. Result = Monopoly & rate hikes, services (which were notoriously bad) stay the same.
• Argentina - Utilities sold = Telephone bills up 400%, natural gas up 54%, no more subsidies to poor electricity users.
• Russia - (Parliament disapproved of privatization, but that problem was eliminated.) TNCs are snapping up government institutes = Scientists and technicians at places like Moscow Institute of Physics work for AT&T; @ US$50 per month.
• Chile - State forests privatized = 40,000 hectares cut so far and replanted with non-native trees, leading to ecological problems.

Conclusion

The reasons behind privatization are not economic, but mainly political and ideological: the state loses control of strategic sectors like the ports, power and communication, to the benefit of international capital, which leads to a further weakening of the state and an accentuation of Haiti's dependence. Since the process of world capitalist economic integration is happening on the basis of the dominant neoliberal model, Haiti, if it wants to be part of this system, has no other choice than to get in line and adjust itself.

But not even the economic justifications hold water when you specifically consider the case of certain Haitian enterprises. In addition, the economic reasoning fails to take into account the social and political costs. When the enterprises lose their character of public service, millions who do not have the capacity to pay will automatically be excluded even more than they are today, leading to further polarization and a wider gap between the rich and the poor.

What all of this shows clearly is that the Haitian people have an interest to mobilize to protect their immediate interests, the principle and notion of public service, and to fight against the imposition of the neoliberal model in Haiti.

SOURCES: Numerous issues of Le Monde Diplomatique from 1993-1995, but especially Nov., 1993: Jean-Marie Chauvier, Les choix assujettis du president Boris Eltsine, and Nov., 1994: Christian De Brie, Ainsi s'elargit le gouffre entre pouvoir capitaliste et realites sociales; Numerous issues of Third World Resurgence; Numerous issues of ALAI Servicio Informativo; Kevin Danaher, ed., 50 Years is Enough, Boston: 1994, especially Natalie Avery, Stealing from the State; and James Petras & Morris Morley, Foreign Investors Rediscover Latin America, Z Magazine, Feb., 1994.