Behind the sale of the flour mill

Haiti Progres, This Week in Haiti,
Vol. 15, no. 34, 12-18 November 1997

(HIB) In a process that appears to be on the edge of legality at best, the resigned Prime Minister this month signed a contract privatizing the first of the 33 state enterprises slated for the auction block in what was clearly a liquidation sale in the favor of foreign capital.

Although resigned for over four months, and despite the fact that the council which oversaw the deal is operating without some members or any law regulating it, on Oct. 14, Smarth, as practically his last act in office, signed away 70 percent of the state flour mill, the Minoterie d'Haiti, to two multi-billion- dollar transnational corporations.

According to the few details of the deal made public, the Haitian-American consortium - a novice Haitian finance group, Unifinance, and two mega-agribusinesses: Continental Grains, which did US$15 billion in sales last year and is into wheat, rice, chickens, finances and a host of other activities in over 50 countries, and Seabord Corporation, which has boats, flour, pork, chicken, etc, and did almost US$1.5 billion in business last year -got a great deal. There is no question who is running the consortium which gets the 70 percent in exchange for promising to invest US$9 million in the mill. (The state retains 30 percent.) Each of the three partners has US$3 million worth of shares, but already Unifinance has announced it plans to sell off $2 million worth. The consortium has promised to open the mill in nine months.

Coincidentally or not, this first privatization of Haiti's state companies went through only three days before US Secretary of State Madeleine Albright's visit. The contract signing, replete with champagne, was festive, and, not surprisingly, although Albright was not there, the other patrons were, beaming. US Ambassador William Swing was in ecstasy, saying this was a good sign for American investors... it is very important for us that they come and install themselves in Haiti, while World Bank representative Carol Carr said it was an historic step.

We are delighted to see that everyone accepts this success and we hope that at the end of the month when the bids for the Cimenterie are opened, we can move forward! Carr extolled, adding that the process, overseen by the Conseil de modernisation des entreprises publiques (CMEP) was done in a very professional and transparent manner.

Smarth, even though he was chalking up points with his tutor for having rammed the sale through in the midst of contestation, was more muted.

For five years [the mill] was closed, there were no jobs, he said defensively. This government accepted its responsibilities, and we said we would not leave it like that. We don't have the capital, so we called capital to come and join with the state to make the enterprise work. To criticism, he said, bluntly: This economic program for the country cannot be avoided ... To stop would be suicidal.

Five days later, a job well done, he resigned and went home.

No transparency at all

The CMEP was created following parliamentary approval of the Law on the modernization of public enterprises (one of the two neoliberal laws) in the fall of 1996. It is supposed to be made up of the Prime Minister or his designate and two others appointed by the executive, and two more, one from the business sector and another the labor sector, both to be approved by the executive. Currently however, it has only the three executive members. It is headed by Minister of Planning Jean Erick Deryce. A second law which is supposed to regulate CMEP's actions has never been considered or approved by parliament. Currently, CMEP has a great deal of latitude to choose the form of privatization to do, on many of its actions, such as capitalization deals like the Minoterie contract, are not subject to any oversight or approval by parliament or any other government body.

Given that latitude, it is not surprising that, quite contrary to Carr's claim, there has been no transparency at all in the privatization process. In 1995, for example, it was announced that the International Finance Corporation (IFC), the most secretive of the three institutions that make up the World Bank, was doing a study of the first nine enterprises to be privatized. The study was paid for with a US$2 million grant from USAID. Since then, the US government has also openly funded, and probably more quietly been heavily involved in, other activities to move the process forward. However, neither the IFC study nor any other information on the estimated values of state assets has ever been published. Asked about the value of Minoterie this week, a CMEP employee said there were estimates made but refused to share them.

There is certain information that was deliberately not diffused so the offers would be more interesting, he said.

Despite the obscurity surrounding the deal, it is still possible to get a vague idea of the value of Minoterie. What literature and opinions that can be found indicate that the Haitian- American consortium was handed the mill on a platter. The Ft. Lauderdale Sun Sentinel said it appeared the companies got a good deal and a blessing bestowed by the Washington-based business lobbying group Caribbean-Latin American Action is another sign that foreign capital made out well.

More concretely, in the past Minoterie, the nation's only flour mill, has been a big money-maker. It also made a great deal of money by selling by-products for animal feed. The de facto government closed the plant soon after taking power, but certainly not because the plant was losing money. Col. Michel Francois was said to control the flour import business during the three-year coup d'Etat and supposedly regularly collected payments from merchants. (The regime also closed the cement factory and friends of the regime immediately cornered the market.)

According to a December, 1996 study by the Concertation pour Haiti of Quebec (a group of Canadian organizations), the mill can be up and running with only US $1.1 million of investment and US $2.3 million for modernization. Then, it is indisputable that the enterprise can be profitable, like it was in the year 1986- 1987 when it made profits of US $5.8 million, the study says. According to a 1992 Inter-American Development Bank report, it made almost US $4 million in 1990.

When the Jean-Bertrand Aristide administration took office in February 1991, Minoterie had been operating in the red due to poor management, corruption and overstaffing, but it, as well as other state enterprises, were soon making money from the state.

During the month of February [1991], Minoterie d'Haiti lost 2,761,230 gourdes. Since the new direction took charge in March, 1991, this operating deficit was brought to 162,635 gourdes the following month. Thanks to measures taken by the new direction... the results have lead to a net profit in May of 1,161,315 gourdes [US $165,000 at the time], brags a June 1991 report from the office of Prime Minister Rene Preval, who is today Lavalas' staunchest supporter of privatization.

The government intends to continue the objective of making all the state enterprises profitable, the Preval report continues. The state of financial health of these enterprises and their contribution to the treasury effects the public finances.

Very Contested Sale

When the contract was signed this month, the black-clad rapid response police team, the Compagnie d'Intervention pour le Maintien de l'Ordre (CIMO) immediately took over the factory, and have prevented workers from getting into their union offices. One reason might be because they have openly condemned the contract.

Our position on the deal is that it is a liquidation in the sense that, in relation to what Minoterie is worth, it is a gift, explained union member Wilfred Metellus. From 1969 to 1989, it gave the Haitian treasury 5 million gourdes every month; it made 100 million gourdes net every year. It has a housing complex [72 homes]. They did not even evaluate the value of the mills. There are 16 mills. Each one cost US $60,000. We just repaired four generators that give 4.1 megawatts of electricity.... We have a capacity to stock 32 tons of wheat... We have a wharf... If today they gave them the global price of US $9 million, that's a gift they gave them.

According to the union, Minoterie also has over 40 carreaux (about 52 hectares) of land, a sisal plant in Montrouis, and a factory for producing Akasan (a cornmeal drink) in Les Cayes. Real estate experts put the value of the land alone, located north of the capital near the Arcadins coast which has many beach clubs and a Club Med, at between US $2 million and US $3 million.

Another major critic of the contract is the recently formed Parliamentary Consultation Against Neoliberalism. Earlier this month it had said that President Preval supported an anti- neoliberal document it helped edit. It reacted strongly to the sale, condemning Preval and rejecting it as illegal.

That transaction was made to the detriment of the Haitian people, to the detriment of the country said Dep. Joseph Jasmin (Cap-Haitien PPL). The transaction took place outside of law that has not yet been born and that is supposed to organize CMEP... That law does not exist, so CMEP is acting in illegality. Also, the moribund government cannot engage the state.

We have a resigned government that has no legal responsibility before parliament. To whom is responsible? added Dep. Alix Germain (Abricots-KOREGA) We say that the act is an illegal act.

The parliamentary group said it plans to propose a law that would eliminate the CMEP altogether.

Is Flour the only thing cooking?

In the meantime, it is worth pondering why two of the biggest agribusinesses in the US wanted to get into Haiti. There is certainly money to be made in this captive market. Flour is an essential part of the Haitian diet, and with control of the agribusinesses in the US, the shipping, and the milling, Haiti's flour supply has become more of a monopoly than it ever was, only this time in the hands of two transnationals.

But that might not be all. Having Minoterie gives the transnationals a foot in a potential market of 7 million consumers for all the other products they produce, ship and market. In addition to rice, chicken, soy beans, shrimp, cotton, beans and other commodities, both of them are growing producers and exporters of pork, the most-consumed meat in the world and a quickly expanding new US food export, according to a 1966 article in the Kansas City Star. In 1995, for the first time in 44 years, the US became a pork exporter. The top ten producers (Continental is 12th) raised 23 million hogs that year.

Rural America is rapidly becoming the center of a global pork production business, boasted The Star. A Kansas producer Premium Standard Farms, added: The export opportunity is tremendous, virtually untapped.

The National Pork Producers Lobby in Washington, DC, is clear on the connection between the neoliberal policies being embraced by governments like the two Lavalas regimes, and pigs: The US pork industry may have been the single largest beneficiary of the trade agreements [NAFTA, GATT]. (The Kansas City Star, Nov. 6, 1996)

(Incidentally, mega-pork-producers have recently come under harsh criticism because their factories with their pig waste lagoons often pollute nearby waters. Continental has already been fined over US $268,000 for pollution and for ignoring regulations, and is now facing a lawsuit by Missouri citizens.)

What does all that mean for Haiti, where pork is one of the main meats consumed? Currently, some pork is imported and the rest comes from medium-sized as well as individual producers. (The peasants' kochon kreyol were killed off in the late 1980s' in a USAID-sponsored eradication program after an African Swine Fever outbreak.) Under the new, neoliberal tariff regime, there is nothing to protect local pork from mass-produced competition, and with a wharf, the boats and the space for a distribution center on Rte. 1, the corporations are now in a very good position to break into at least the pork if not other markets as well.

The privatization of Minoterie d'Haiti offers clear examples of who benefits and who loses from privatization: In this case, the people were robbed of a valuable state asset; the supply of a major food item will be in the hands of vertically integrated transnationals whose only motive is profit and who will have an objective monopoly, and, they are also poised to threaten the country's production of other food products by exposing them directly to the competition engendered by voracious and brutal international capitalism.