Neoliberalism in Haiti: The case of rice continues

Haiti Progres, This Week in Haiti,
Vol. 13, no. 33, 8-14 November 1995

American Rice, Inc.
P.O. Box 17253
Washington, D.C. 20041
Tel: 703-478-0822 Fax: 703-478-0335

October 30, 1995

Editor
Haiti Progres
Brooklyn, New York

Dear Editor,

In Neoliberalism in Haiti: The Case of Rice in the October 2 issue, Haiti Progress reprinted an article from the Haitian Information Bureau which contained many errors both of facts and opinion. Because rice is so important to the future of their country, all Haitians deserve complete and accurate reporting on the issues involved; an accuracy which I am sure the editors of Haiti Progress always intend to provide. On rice, your readers may be interested in the following facts:

• Haiti rice production, especially in the Artibonite Valley indeed has declined since the late 1980's as the quality of infrastructure and rice seeds deteriorated. The decline accelerated after 1991 because the coup and the international embargo raised the cost of imported inputs (seed, fertilizer, fuel, etc). Many farmers have gone out of business.
• Since the 1980s, the declining availability of La Crete and Madam Gogose rice caused prices to rise sharply allowing cheaper, higher quality imported foreign rice to become the main source of this most basic food for Haitians. In 1986, American Rice Inc. [ARI] began exporting rice in sacks to Haiti from its rice mills in the U.S.
• American Rice Inc. is the largest U.S. rice milling and marketing company with U.S. facilities in Texas, Arkansas, California and offshore including in Haiti, Jamaica, Bonaire, and Puerto Rico in the Caribbean.
• In order to improve the economics and guarantee the availability of quality rice in Haiti at the most competitive price, in 1992, American Rice Inc. established the Rice Corporation of Haiti, S.A.. RCH imports rice in bulk at the lowest possible cost and maintains large stocks inside the country so as to prevent periodic shortages which historically have been exploited by traders for high profits. At the same time, RCH was to provide technical assistance to improve the quantity and increase the amount of rice grown in Haiti for blending with imported rice at the RCH mill.
• RCH leased the unused assets of the closed ENAOL oil plant at Laffiteau [just north of Port-au-Prince - HP] and invested almost US$2 million to convert the facility into a rice milling and packing plant. The rice mill currently is fully staffed by 200 Haitian managers and workers and contributes value added production to the Haitian economy by purchasing empty rice sacks and other inputs and services from local companies. RCH contributes hundreds of indirect jobs in unloading, loading, transporting, and selling its Blue Ribbon, White Sail and COMET brands in markets throughout Haiti. Other brands of rice imported by traders does not contribute substantial jobs or value added inside the country.
• As a subsidiary of American Rice Inc., one of the largest rice companies in the world, RCH always has direct access to the lowest cost, highest quality rice from sources world wide. ARI even has it's own cargo vessels which deliver rice to Haiti at the lowest possible transportation cost.
• Because Haiti today must import much of the rice it consumes, it is directly affected by the supply and price of rice in the world market. Until recently, price rises forced by a world-wide rice shortage, RCH had been able to stabilize the US dollar cost of rice in Haiti at about $20 per 50 kg. sack by consistently maintained large inventories of rice inside the country. These existing large stocks of rice have made it impossible for traders to create shortages and charge high prices to consumers.
• Unfortunately, notwithstanding the stable prices offered by RCH over the last year, the price of rice to consumers paid in Gourdes has risen due to inflation and declining Gourde-dollar exchange rate.
• The RCH project and contract with the Haitian state was permitted under terms of the international embargo which allowed rice imports to continue as essential to feeding the Haitian people. Notwithstanding extreme difficulties and the high cost of operating during the embargo, RCH never closed and continued to provide quality rice to all Haitians.
• Since start-up in December 1992, RCH has paid import duties, taxes, port charges and lease charges totaling Gourdes 75,000,000. This can be verified with the Minister of Finance.
• RCH has never considered or proposed buying any land in Haiti. In 1992, in cooperation with the ODVA [the State-run Organization for the Development of the Artibonite Valley], RCH did begin to implement a program of technical assistance in the Artibonite Valley providing high yield U.S. rice seeds and advice from Texas agronomists. Experimental plantings of U.S. hybrid seeds achieved large improvements in field and milling yields in the Artibonite.
• Unfortunately, the technical assistance program was stopped by the U.S. embargo authorities in 1992 when they received complaints from Haitians in the United States claiming that RCH was aiding the de facto government by improving rice growing in the Artibonite Valley. Since the return of the Constitutional Government last October, RCH has consistently proposed to the Government that we restart technical cooperation, including building a new rice mill in the Artibonite Valley. Unfortunately we have not received a response.
• At present, the total of customs duties, counselor fees, and withholding taxes paid by RCH to the Haitian state amounts to 8% of the cost of a sack of rice, not 3% as you report. As a result, the current RCH offered price of Gourdes 340 per 50 kg. sack includes Gourdes 23 of taxes and charges paid to the Haitian State. Many contraband traders and others who receive special franchise do not pay these charges and consequently their rice can be lower priced than RCH.
• Because the cost of rice is rising worldwide, Haitian consumers will be paying an ever increasing amount of import taxes for the rice they buy. In order to lower the burden on consumers, RCH has proposed that the Haitian State temporarily exempt all rice imports from customs duty, taxes, and port charges. We understand that the new Haitian Parliament may soon consider exempting rice from taxes, and we recommend it do so immediately.

With these facts in hand, readers of Haiti Progress will be better able to understand the current challenges facing the rice industry in Haiti. Rice Corporation of Haiti S.A., backed by the unique capabilities of American Rice Inc., will continue to guarantee that Haitian consumers always will have the rice they want at the most competitive prices. We also hope soon to be able to include quality rice grown in Haiti.

Sincerely,

Lawrence H. Theriot

HAITI PROGRES RESPONDS:

Lawrence Theriot proposes to correct errors both of facts and opinion in Neoliberalism in Haiti: The Case of Rice, but then makes few specific refutations.

Mr. Theriot disputes the article's assertion that rice imports are subject to a trifling 3% tariff by writing that the total of customs duties, counselor fees, and withholding taxes paid by RCH to the Haitian state amounts to 8% of the cost of a sack of rice. To arrive at 8%, it appears that he simply pads customs duties with counselor fees and withholding taxes, which cannot fairly be considered part of the tariff. Furthermore, even 8% would be less than half the 16.4% tariff which the U.S., the champion of free trade, places on long-grain semi-milled rice imports, a tariff which protects American Rice Inc. above all others. (U.S. rice imports from the Caribbean are duty-free under the Reagan-launched Caribbean Basin Initiative, or CBI, because Caribbean rice production is either owned by U.S. multinationals or no threat to U.S. rice producers.)

Beyond this, Mr. Theriot and RCH propose that the Haitian State temporarily exempt all rice imports from customs duty, taxes, and port charges. Meanwhile, Mr. Theriot is also calling on the Haitian State to improve the infrastructure -- irrigation, roads, etc. -- that will facilitate RCH's rice operations. Who is going to pay for those improvements, Mr. Theriot, if the State collects no import duties or taxes? Haitian peasants?

Mr. Theriot also contends that RCH's deal-sealing in Sept. 1992 with an illegal government of Haitian putchists did not technically violate the international embargo because rice imports... [were] essential to feeding the Haitian people. He further points to the extreme difficulties and the high cost of operating during the embargo. Does Mr. Theriot really want us to believe that RCH was motivated by compassion and a sense of sacrifice in striking its deal with killers? Even the blindest pursuer of business opportunities could not have missed the media extravaganza mounted by the putchists around the signing of the contract. It was a propaganda boon to a shaky and isolated coup regime responsible for killing over 5000 Haitians. No, the deal was not about humanitarian concern. It was about profit.

Mr. Theriot declares that his rice mill currently is fully staffed by 200 Haitian managers and workers and that it creates hundreds of indirect jobs. However, when Haiti Progres interviewed residents of Laffiteau last May, they said that they had been promised that the rice mill would create 700 jobs, but that, by their estimates, about 70 people worked there. They also were irate that workers at that time were being paid only 25 gourdes a day (equivalent then to about US$1.67), according to them. (The residents were vehemently opposed to the privatization of the other state industries in the area, the flour mill and cement plant.)

The Haitian Information Bureau (HIB) noted in the article that the RCH-provided U.S. agronomists who were to help improve rice production in the Artibonite were not evident and conjectured that RCH will position itself to buy up land as little and big landowners go broke. Mr. Theriot protests that RCH's technical assistance to aid Haitian farmers is only being held up by the Aristide government and that RCH has never considered or proposed buying any land in Haiti.

History belies these assertions. We presently can only speculate about the intentions of Erly Industries, which is the parent company of American Rice Inc., in turn the parent of Comet Rice, Inc., in turn the parent of RCH. But an Oct. 27 special report just released by the Washington Office on Haiti (WOH) offers invaluable insights into this multinational's background and practices.

Erly and/or its subsidiaries have been investigated for possible involvement in money laundering and illegal arms deals, debarred from government contracts, delisted from the NASDAQ stock exchange due to precarious fiscal status, and named in an investigation of illegal lobbying on the part of a former Reagan official, WOH notes in the report's introduction. In a later section entitled A Troubling History, WOH writes that Erly companies have been involved in various questionable deals, state and federal government investigations, near foreclosures, loss of licenses, and a dizzying series of complex sales and acquisitions of some Erly companies by other Erly companies, Among the cases cited:

• Comet Rice contracted with California rice growers to buy their harvests in 1991 but ended up paying them about 85% less per pound than other growers. WOH notes: Not only did Comet not warn [the growers] about what was coming, Erly reported a net income of $3.2 million that year -- a sharp increase over the net earnings of $455,000 it reported the year before. One grower said, '[W]hen you realize that the value was obtained by Comet but not returned to the growers, that's why confidence is gone...'
• Erly, Comet, and another Erly-owned company named Chemonics (also detailed in HIB's article) were featured in an Oct. 1993 New York Times series entitled Tainted Trade. According to the Times investigation, Gerald D. Murphy, Erly's Chairman and CEO, set up an AID-funded rice project in Jordan [which] cornered the lucrative Iraqi market for the exclusive benefit of Comet using a Jordanian company headed by a wealthy international commodities dealer, WOH reports. According to the series, the project: Did not disclose to AID that the project's goal was to use an obscure U.S. government loan program to give Comet an edge over other U.S. rice companies; Did not disclose to AID that Comet, not the Jordanian front company, was running the project and that no other U.S. rice companies would benefit; Dodged AID's rules about competitive bids, buying plant equipment from a Comet subsidiary; Invested the low-cost project loan at higher interest rates in the U.S., thus increasing Comet's profits; Used 'international government connections, developed at taxpayer expense through a subsidiary's consulting work for AID, to foster its own commercial interests.' (The subsidiary was Chemonics.)
• Erly has sought to buy rice cheaply in poor countries like Vietnam and Thailand only to sell it for a profit to other poor countries like Haiti, Iran, and Brazil. This practice makes Mr. Theriot's criticism of unscrupulous traders ring hollow.
• Comet Rice brought in 60% of the contraband rice that led to the 'Miami rice wars,' according to the Haitian weekly Libete, WOH writes. Haitian farmers were ruined when they couldn't compete with the imported rice's price, given U.S. government subsidies and the modern production and marketing methods used by U.S. agribusiness corporations.

The WOH report also details how Lawrence Theriot was the first director of the Caribbean Basin Initiative (CBI), serving in that capacity from 1982 to 1988. In January 1985, the Washington Post reported that CBI had been promoted with 'almost missionary zeal'... The 1985 Post article also reveals that Mr. Theriot even saw opportunity when Duvalier ruled Haiti, just as when the putchists were in power: If there is a jewel in CBI's crown, ironically it is Haiti, the region's poorest country. 'No one was better prepared to take advantage of CBI,' Theriot said. 'The Haitian businessman is very sophisticated and professional. The country has virtually been a free zone since the late' 60s. The people are nice.'

The WOH report goes into many other aspects of Erly Industries' history and role in Haiti and the world, as well as offering useful analysis of and alternatives to the nefarious effects of so-called free-trade and structural adjustment policies on the world's poor. As the WOH notes, the RCH and other [s]uch projects -- wrapped in development rhetoric about creating jobs, ensuring an affordable food supply, and improving agricultural production -- raise key questions, not only for the Haitian poor but also for the U.S. citizen whose tax dollar usually funds free market enterprises which richly benefit powerful U.S. corporations while further disempowering the peasant majority. The report closes by formulating some of these questions:

Given the way Comet treated California growers it had done business with for decades, how can Haitian peasants expect to be treated?

RCH's contract specifies that the price it pays for rice will fluctuate to reflect changes in the exchange rate. Do the wages it pays also fluctuate to reflect such changes?

Are the fertilizers, pesticides and other chemicals RCH will use toxic to people and/or the environment? Are they purchased from another Erly company? Are they purchased with U.S. tax dollars?

Will genetically engineered plants be introduced? In 1994, the Union of Concerned Scientists reported that very little is known about the potential risks of transgenic crops. For example, scientists have found that genetically engineering plants to resist existing viruses may actually stimulate the evolution of new viruses.

Will a credit system be offered to -- or imposed on -- Haitian rice growers with very easy terms at first, later followed by stiff interest rates, contract penalties, or other changes which will put them out of business?

How much will RCH's activities benefit Erly versus how much they benefit Haiti? Will foreign-owned agribusiness replace the small farming family, the peasant cooperative?

Have other Erly programs proven of benefit to the poor in Third World countries? How does buying rice from one poor country and selling it to another benefit either one?

Were the legal and ethical irregularities associated with Erly company projects in the past -- e.g., the Jordan project and the 1991 sellout of California growers -- a series of unfortunate coincidences, or an established pattern which should raise serious concerns about operations in Haiti?

Will the effects of this project be harmful to the Haitian poor, like the floods of donated rice were harmful and the swine eradication program was harmful?

As Mr. Theriot says: Because rice is so important to the future of their country, all Haitians deserve complete and accurate reporting on the issues involved. We think the questions above provide an framework for future investigation, and we look forward to the results.