Grupo M Update: Source of the Problem

UNCLAS PORT AU PRINCE 001666

SIPDIS

WHA/CAR
EB/IFD/OIA
WHA/EPSC
INR/IAA (BEN-YEHUDA)
INR/EC
DRL/IL
STATE PASS AID FOR LAC/CAR
TREASURY FOR ALLEN RODRIGUEZ, GREGORY BERGER, WILLIAM
BALDRIDGE, LARRY MCDONALD
USDOC FOR 4322/ITA/MAN/WH/OLAC (SMITH, S.)

E.O. 12958: N/A
TAGS: ELAB PHUM ECON EINV HA
SUBJECT: Grupo M Update: Source of the Problem

REFA: Port au Prince 1366
REFB: Port au Prince 0234


1. Summary: As described in reftels, a long-standing labor
dispute between Dominican manufacturer Grupo M and workers
in Ouanaminthe was recently settled. According to Yannick
Etienne, a labor representative, the fight has its origins
in the closed-door negotiations that established the Free
Trade Zone (FTZ). The farmers were left out of the
negotiating process until the day of the FTZ ground breaking
ceremony in 2002, when they were told their land was being
expropriated. Grupo M eventually published a social
compensation plan in 2003, however, it came too late for the
farmers whose land was already gone, and whose suspicions of
the Dominicans were already aroused. Grupo M's experience
is instructive for foreign investors in Haiti. Government
contracts are often made informally and are rife with
opportunities for corruption. End Summary


2. According to Yannick Etienne, a representative of the
left-leaning workers' rights group Batay Ouvriye, many of
Grupo M's problems in Ouanaminthe (on Haiti's northeast
border with the Dominican Republic) originate in Grupo M's
negotiations to establish the Ouanaminthe free trade zone
(FTZ). Etienne said that many of Grupo M's initial dealings
with former President Aristide's administration happened
behind closed doors, which alienated the people of
Ouanaminthe.


3. Etienne claimed that the farmers whose land was
expropriated to make the FTZ were not notified until the day
ceremonial ground breaking on April 8, 2002. In addition,
she said, there is no definitive list of the farmers whose
land was expropriated, and there is an on-going dispute
between Grupo M and Haitians who claim they were never
compensated for their land. Etienne's claims, while echoed
by other unions, are not reflected in press coverage at the
time or by Grupo M's accounts of the process. However, the
ceremonial groundbreaking in April 2002 happened before both
the passage of the FTZ legislation in July 2002 and the
publication of the Company for Industrial Development's
(CODEVI) Social Compensation Plan in June of 2003. The
timing of the groundbreaking, the FTZ legislation passage,
and the publication of the social compensation plan lend
credence to Etienne's claim that farmers were left out of
the process.


4. In June 2003, in response to the outcry from the farmers,
CODEVI and Grupo M published and put into action a social
compensation plan. Through meetings publicized by
loudspeakers on cars Grupo M successfully incorporated many
Haitians living in Ouanaminthe in the resettlement process.
The plan provided education, land, potable water, and
training to the farmers. However, according to Etienne, the
plan came too late; the Aristide Administration's closed-
door dealings with Grupo M set a bad tone, which workers and
citizens in Ouanaminthe have not forgotten.


5. Further, according to Etienne, though the Aristide
administration and Grupo M were equally responsible for the
opacity of the initial FTZ negotiations, Grupo M took most
of the blame because Haitians historically do not trust
Dominicans. Grupo M's subsequent actions, using the
Dominican Army to secure the FTZ in February 2004 and a
vaccination campaign that some Haitians in Ouanaminthe
believe gave recipients reproductive problems, further
aroused the ire of Haitians suspicious of the Dominican
company.


6. Comment: Grupo M's closed-door dealings with the
Aristide administration and their subsequent troubles are a
familiar refrain of businesses that have been burned making
back-room deals with Haitian governments. Unfortunately,
this trend continues. Companies have tried to get a leg-up
on the competition by seeking to secure contracts with the
Interim Government of Haiti (IGOH) without going through a
tender process, and occasionally even operate without
contracts for long periods of time. The IGOH's continued
informal treatment of contract negotiation encourages this
practice, and opens the way for corruption. End Comment.