Identifier
Created
Classification
Origin
05PORTAUPRINCE3136
2005-12-28 20:27:00
UNCLASSIFIED
Embassy Port Au Prince
Cable title:  

Haiti: 2006 Investment Climate Statement

Tags:  KTDB EFIN ECON EINV ELAB PGOV HA OPIC USTR 
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UNCLAS SECTION 01 OF 09 PORT AU PRINCE 003136 

SIPDIS

WHA/CAR
EB/IFD/OIA
USDOC FOR 4322/ITA/MAN/WH/OLAC (SMITH, S.)

E.O. 12958: N/A
TAGS: KTDB EFIN ECON EINV ELAB PGOV HA OPIC USTR
SUBJECT: Haiti: 2006 Investment Climate Statement

REF: SECSTATE 201904

UNCLAS SECTION 01 OF 09 PORT AU PRINCE 003136

SIPDIS

WHA/CAR
EB/IFD/OIA
USDOC FOR 4322/ITA/MAN/WH/OLAC (SMITH, S.)

E.O. 12958: N/A
TAGS: KTDB EFIN ECON EINV ELAB PGOV HA OPIC USTR
SUBJECT: Haiti: 2006 Investment Climate Statement

REF: SECSTATE 201904


1. Per reftel, post submits the following 2006 Investment
Climate Statement for Haiti.

Openness to Foreign Investment
- - - - - - - - - - - - - - -


2. Haiti's openness to foreign investment is codified in
its laws. Officials at the highest level have affirmed the
Government of Haiti's interest in attracting foreign
investment. Haiti does not have economic or industrial
strategies with discriminatory effects on foreign investors.
Import and export policies are non-discriminatory and are
not based upon nationality. The IGOH, installed in March
2004 following President Jean Bertrand Aristide's
resignation and departure, has taken initiatives in economic
and monetary policies as well as governance and transparency
to pave the way for new investments such as reducing
interest rates to facilitate access to credit, the
implementation of a trade facilitation unit, and an effort
to enhance the dialogue between the public and private
sectors. However, the continuing climate of insecurity has
lessened the impact of the Interim Government's initiatives.
As a result, the government's commitment to modernize
commercial laws, investment, banking, and tax codes has not
produced results. Still, there is no significant public
opposition to foreign investment in Haiti. Most Haitians
welcome foreign investment because it means new jobs in
difficult economic times.


3. In November 2002, the Haitian Parliament passed an
investment law prohibiting fiscal and legal discrimination
against foreign investors. The 2002 law explicitly
acknowledges the crucial role of foreign investment in
assuring economic growth and aims to facilitate, liberalize,
and stimulate private investment in Haiti by offering
benefits to enterprises in agriculture, craft making,
tourism and other "special" sectors. New enterprises in
these sectors may benefit from license exemptions as well as

customs and tariff advantages depending on their physical
location and the market for which they produce. Haitian
lawmakers drafted the law in an effort to create
competitiveness and employment, increase national
production, reduce the deficit, and form a national work
force in sectors supported by the law. Since the passage of
the law, foreign and Haitian investors are afforded equal
rights and protections provided that foreign investors are
legal residents and pay the appropriate taxes and fees.


4. Some investments, however, still require special
government authorization. Investments in electricity, water
and telecommunications require both government concession
and approval. Additionally, investments in the public
health sector must first receive authorization from the
Ministry of Public Health and Population. Finally, broadly
speaking, natural resources are considered to be the
property of the state. As a result, prospecting, exploring
and exploiting mineral and energy resources require
concessions and permits from the Office of Mining and
Energy.


5. Haiti has also made several commitments to the World
Trade Organization with respect to the financial services
sector. These include allowing foreign participation in
financial services, retail, commercial and investment
banking, as well as in consulting and auxiliary services in
each of these areas. As a result, the Haitian banking
system is open to the entry and operation of foreign banks.
At present, there are two foreign banks operating in Haiti:
Citibank of the United States of America and Scotiabank of
Canada.


6. The Interim Government of Haiti has created an Inter-
ministerial Investment Commission (CII),comprised of
representatives from the Ministries of Tourism, Economy and
Finances, and Commerce and Industry. The CII monitors the
eligibility of investors for license exemptions as well as
customs and tariff advantages. In addition, the CII
verifies compliance with the present code and establishes
agencies or other entities to help facilitate foreign
investment. All business sales, transfers, mergers and
partnerships that fall under the 2002 law must be authorized
by the CII. The CII also manages the process of fining and
sanctioning enterprises that fail to abide by the 2002 law.


7. In addition, the Ministry of Commerce drafted
legislation to establish an "Office de Facilitation" or a
"one-stop" investment promotional office to help potential
investors and streamline the bureaucratic process. However,
the "Office de Facilitation" has not yet opened. Still,
ministerial interest in creating an office to facilitate
foreign investment continues. Recently, with the financial
support of USAID, the Ministry of Commerce contracted with a
consulting firm to articulate the final format of the
office. It was expected that the "Office de Facilitation"
would open in 2005. At the end of 2005, the Decree creating
the investment promotional office has not yet been
published. In the interim, a small group of officials in
the Ministry of Commerce is available to act as the
intermediary between investors and the Government of Haiti
to facilitate the investment process.


8. In October 1996, the Government of Haiti established
legislation on the modernization of public enterprises,
which allows foreign investors to participate in the
management and/or ownership of Haitian state-owned
enterprises. A modernization commission (CMEP) was
established in 1996 to choose among management contract,
concession (long-term lease) or capitalization for each of
the companies to be privatized. The CMEP was also tasked
with determining, in the case of capitalization, the
percentage of an enterprise to be retained by the government
of Haiti (between 20 percent and 49 percent). Selection of
the foreign investor was supposed to be made through
international competitive bidding.


9. Since 1996, in conjunction with Unifinance, an arm of
Haiti's second largest banking group, two Haitian state-
owned enterprises have been privatized. First in 1998, two
U.S. companies, Seaboard and Continental Grain, purchased 70
percent of the state-owned flourmill. Currently, each
partner owns 23.33 percent of the re-christened "Moulins
d'Haiti." In 1999, a consortium of Colombian, Swiss and
Haitian investors purchased a majority stake in the national
cement factory.


10. However, since the privatization of the cement factory,
privatization has stalled and appears to have been put on
hold until installation of a new government in 2006. None
of the major infrastructure-related enterprises (the
airport, seaport, telephone company or electric company)
have been privatized. The privatization of two state-held
banks as well as an essential oil plant is also unlikely in
the near future. However, several private banks have
expressed interest in merging with the state-owned banks
when the economy improves. Although these entities were
supposed to have been privatized by 2002, persistent
political crises, strong opposition from the former
administration, and a general lack of political will have
delayed the process indefinitely.


11. Some opposition to the privatization of state
enterprises continues from groups such as employee's unions
who have expressed opposition to workforce reductions that
privatization might entail.

Conversion and Transfer Policies
- - - - - - - - - - - - - - - -


12. There are no restrictions or controls on foreign
payments or other fund transfer transactions and little to
indicate that this policy might change.


13. Foreign exchange is freely and readily available.
Banks and exchange houses are free to set their own exchange
rates. In general, the spread between buying and selling
rates varies is less than five percent. The central bank
publishes a daily reference rate that is a weighted average
of exchange rates offered by the formal and informal
exchange markets. The outlook for the gourde to remain
stable in 2006 depends on the political situation as well as
whether the country continues to receive expected levels of
budgetary support from the international community and
remittances from Haitians living abroad.

Expropriation and Compensation
- - - - - - - - - - - - - - -


14. The 1987 Constitution allows expropriation only for
public use or land reform, and requires an advance payment
of just compensation as determined by an expert. If the
initial project for which the expropriation occurred is
abandoned, the Constitution stipulates that the
expropriation will be annulled and the property restored to
the original owner. The constitution prohibits
nationalization and confiscation of real and personal
property for political purposes.


15. Over the last 25 years, there have been a number of
property disputes involving U.S. citizens. A majority of
these disputes are among private individuals and are not
instances of expropriation. However, the Embassy has been
engaged on some cases that may involve expropriations of
property owned by U.S. citizens or corporations.

16. The Haitian government maintains an office charged with
implementing expropriations of private agricultural
properties with proper compensation, which was responsible
for the creation of a free trade zone near Ouanaminthe. The
agrarian reform project has been controversial among Haitian
and U.S. property owners alike. In the past, the Embassy
has received complaints from individuals who claim that they
have not been compensated for the expropriation of their
property. These cases are complicated by the unreliability
of land records, surveys and titles in Haiti.

Dispute Settlement
- - - - - - - - -


17. There are several ongoing private disputes between U.S.
and Haitian entities. Americans seeking resolution of these
disputes are often hindered by Haiti's slow, inefficient and
antiquated legal system. Additionally, there are persistent
allegations that Haitian officials use their offices to
obtain a favorable resolution for personal profit. While
considerable international assistance has been directed
toward rendering the police and judicial systems more
credible and effective, serious structural weaknesses remain
with both systems.


18. The protection and guarantees that Haitian law extends
to investors are severely compromised by weak enforcement
mechanisms, a lack of updated laws to handle modern
commercial practices and a poor judicial system. Business
litigants are often frustrated with the legal process and
some commercial disputes are settled out of court. In
addition, commercial litigation entails certain risks.
Bonds to release assets frozen through litigation are
unavailable, and judges sometimes inflict their biases
against commercial litigants through their application of
"public order" policy concepts. Finally, the Embassy has
received reports that widespread corruption has allowed
disputing parties to purchase favorable outcomes.


19. Haiti's commercial code dates from 1826 and underwent
its last significant revision in 1944. There are few
commercial remedies available in the law. Injunctive relief
is based upon penal sanctions rather than on securing
desirable civil action. Similarly, contracts to comply with
certain obligations, such as commodities futures contracts,
are not enforced. Judges are not specialized, and their
knowledge of commercial law is deficient. Using Haitian
courts to settle disputes is a lengthy process and cases can
remain unresolved for decades. For this reason, many
litigants pursue out-of-court settlements.


20. U.S. Government and Haitian efforts to improve Haiti's
legal system by training judges and other judicial personnel
have not produced significant results. Through the
Presidential Commission on Growth and Modernization, Haiti
has committed to reforming its commercial, investment and
financial codes; drafting new patent and trademark laws;
introducing legislation on loans and guarantees; and
developing legal regimes for credit institutions, capital
markets, savings, and other financial services. However,
little progress has been made on any of this legislation
except the investment code, which was passed in November

2002.


21. Haiti's bankruptcy law dates from 1826 and was last
modified in 1944. There are three phases of bankruptcy
under Haitian law. In the first stage payments cease and
bankruptcy is declared. In the second stage a judgment of
bankruptcy is rendered, which transfers the rights to
administer assets from the debtor to the director of the
Haitian taxation office (DGI). In this phase, assets are
sealed, and the debtor is confined to debtor's prison. In
the third phase, assets of the debtor are liquefied, and the
debtor's verified debts are paid. In practice, the above
measures are seldom applied. Since 1955, most bankruptcy
cases have been settled through the courts. Debts are
normally paid in local currency.


22. Although the concepts of mortgage and chattel mortgage
exist, real estate mortgages involve antiquated procedures
and may fail to be recorded against the debtor or other
creditors. Property is seldom purchased through a mortgage
and secured debt is difficult to arrange or collect. Liens
are virtually impossible to impose and using the judicial
process for foreclosure is time consuming and nearly always
futile. Banks frequently require that loans be secured in
U.S. dollars.


23. Disputes between foreign investors and the state can be
settled in the Haitian courts or through international
arbitration, though claimants must select one to the
exclusion of the other. A claimant dissatisfied with the
ruling of the court cannot request international arbitration
after the ruling is issued. The priority of law in Haiti in
descending order is the constitution, international
agreements and finally internal legislation. Foreign court
decisions are not enforceable in Haiti. However, Haiti is a
signatory to the 1958 United Nations convention on the
recognition and enforcement of foreign arbitration awards,
which provides for the enforcement of an agreement to
arbitrate present and future commercial disputes. Under the
convention, courts of a contracting state can enforce such
an agreement by referring the parties to arbitration. Haiti
is not a signatory to the Inter-American-U.S. convention on
International Commercial Arbitration of 1975 (the Panama
Convention).


24. Haiti signed the 1966 Convention on the Settlement of
Investment Disputes between states and nationals of other
states (ICSID),but has not yet ratified it.

Performance Requirements and Incentives
- - - - - - - - - - - - - - - - - - - -


25. Haitian law requires that manufacturing firms producing
products for the local market receive equal treatment
regardless of their nationality, as long as they are
productively engaged in Haiti. There are several special
status categories for certain types of investment in
priority or strategically designated enterprises.


26. In order to attract investment to certain industries,
the industrial investment code has created a privileged
status for certain manufacturers. Eligible firms can
benefit from customs, tax, and other advantages under this
code. The statute allows for a 5 to 10 year income tax
exemption, following which, corporate income tax augments in
15 to 20 percent increments. In order to take advantage of
this statute, industrial or crafts-related enterprises must
meet one of the following criteria:

--Make intensive and efficient exploitation of available
local resources (i.e. advanced processing of existing goods,
recycling of recoverable materials).

--Increase the national income.

--Create new jobs and/or upgrade the level of professional
qualification.

--Reinforce the balance of payments position and/or reduce
the level of dependency of the national economy on imports.

--Introduce new techniques or new technology more
appropriate to local conditions (i.e. utilize non-
conventional sources of energy, use labor intensive
production).

--Develop backward or forward links (i.e. process local
materials to supply capital goods, semi-finished products,
or packaging for existing production units).

--Conform to the guidelines of projected production of the
national economic and social development plan.

--Meet the requirements for the level of integration of
manufactured product(s).

--Orient production toward export.

--Substitute a new product for an imported product, provided
that the new product shows a quality/price ratio considered
acceptable by the appropriate entity and comprises a total
production cost of at least 60 percent of the value added in
Haiti, including the cost of local inputs used in its
production.

--Prepare, modify, assemble or finish materials imported in
bulk, as loose parts, or components for finished goods that
will be exported.

--Provide direct costs of production (labor and its
supervision) equaling at least one-third of investments in
imported capital goods and at least 15 percent of the total
production cost.


27. A firm's location in Haiti and the market for which its
products are intended also affect its eligibility for
specific benefits.


28. Companies enjoying tax exemption status are required to
submit annual financial statements. Fines or a revocation
of tax advantages may be assessed to firms that do not
comply with this provision. In the event of a dispute, the
revenue code offers protection against arbitrary sanctions
and provides legal recourse for the taxpayer.


29. A progressive tax system applies to income, profits and
capital gains received by individuals and that are not
exempt from taxation. The tax rates on individuals are as
follows (GDS 43 equals USD 1):

Up to 60,000 GDS, 0 percent
60,001 to 240,000 GDS, 10 percent
240,001 to 480,000 GDS, 15 percent
480,001 to 1,000,000 25 percent

The tax rate on corporate income is 30 percent.


30. The Haitian government does not impose discriminatory
requirements on foreigners wishing to invest. Haitian law
concerning residency and employment is reciprocal.
Foreigners residing legally in Haiti who wish to engage in
trade enjoy, within the framework of laws and regulations,
the same rights granted to Haitians who are involved in the
same profession in the foreigner's country of origin.
However Article 5 of the Decree on the Profession of
Merchants reserves the position of manufacturer's agent for
Haitians.


31. A foreigner wishing to obtain a residence visa to
conduct business in Haiti must deposit 50,000 GDS in a
blocked account at the Bank of the Republic of Haiti. A
professional identity card, issued by the Ministry of
Commerce, is required. Transient businessmen and those on a
temporary stay in the country must be accompanied by locally
licensed agents when visiting clients or soliciting
business.


32. Foreigners working in Haiti are subject to certain
property restrictions. Foreigners, excluding foreign
corporations, may not own more than one residence in the
same district or own real estate without authorization from
the Ministry of Justice. Further, land holdings of
foreigners are limited to 1.29 hectares in urban areas and
6.45 hectares in rural areas. Additionally, foreigners may
not own property or buildings near the border. However,
foreigners who establish Haitian corporations with corporate
offices located in Haiti are not subject to property
restrictions.

Right to Private Ownership and Establishment
- - - - - - - - - - - - - - - - - - - - - -


33. Investors in Haiti can create the following types of
businesses: sole proprietorship, limited or general
partnership, joint-stock company, public company
(corporation),subsidiary of a foreign company, and co-
operative society. Corporations are the most commonly used
form of business in Haiti.


34. Foreign investors are permitted to own 100 percent of a
company or subsidiary. As a Haitian entity, such companies
enjoy all rights and privileges provided under the law.
Foreign investors are permitted to operate businesses
without equity-to-debt ratio requirements. Accounting law
permits foreigners to capitalize using tangible and
intangible assets in lieu of cash capital investments.


35. Foreigners are free to enter into joint ventures with
Haitian citizens. The distribution of shares is a private
matter between two partners; however, the sale and purchase
of company shares is regulated.


36. Entrepreneurs are free to dispose of their properties
and to organize production and marketing activities in
accordance with local laws.

Protection of Property Rights
- - - - - - - - - - - - - - -

37. Property rights are guaranteed and protected under
Haitian law; legal statutes offer protection of intellectual
property rights as well as real property rights. However,
the weak judicial system compounded with poor national
records impede practical enforcement of the law.

38. Haitian law protects copyrights, inventions, patent
rights, industrial designs and models, special manufacturers
marks, trademarks, and business names. The law penalizes
persons or enterprises involved in infringement, fraud or
unfair competition. In order to ensure that these rights
are protected, the law requires that certain formalities,
such as filing with the Ministry of the Interior, be
observed. The constitution recognizes certain intellectual
property rights. Scientific, literary and artistic
properties are protected under the law.


39. However, weak enforcement mechanisms, inefficient
courts, and judges' poor knowledge of commercial law
significantly dilute the effectiveness of statutory
protections. Moreover, injunctive relief is not available
in Haiti, so imprisonment of offenders is often the only way
to enforce compliance.


40. Further, real property interests are handicapped by the
lack of a comprehensive civil register. Bona fide property
titles are often non-existent. If they do exist, they are
often in conflict with other titles for the same property.
The Embassy periodically receives reports of fraudulent or
fraudulently recorded land titles. Mortgages exist, but
real estate mortgages involve lengthy procedures and are not
always recorded against the debtor or other creditors.


41. Haiti is a signatory to the Buenos Aires Convention of
1910, the Paris Convention of 1883 regarding patents, and to
the Madrid Agreement regarding trademarks. It is, however,
not a signatory to the Bern Copyright Convention.

Transparency of Regulatory System
- - - - - - - - - - - - - - - - -


42. Though transparent, Haitian law suffers from
significant weaknesses in many areas. While the law is
theoretically universally applicable, legal enforcement is
neither universally applied nor observed. Additionally, the
bureaucracy and red tape involved with the Haitian legal
system is often excessive and inconsistent.


43. Haitian law is deficient in the following areas:
operation of the judicial system; organization and operation
of the executive branch; publication of laws, regulations
and official notices; establishment of companies; land
tenure and real property law and procedures; bank and credit
operations; insurance and pension regulation; accounting
standards; civil status documentation; customs law and
administration; international trade and investment
promotion; foreign investment regime; and regulation of
market concentration and competition. Although these
deficiencies hinder business activities, they are not
specifically aimed at foreign firms and appear to have an
equally negative effect on foreign and local companies.


44. Tax, labor as well as health and safety laws and
policies are theoretically universally applicable. However,
they are not universally applied, observed or enforced.
Many in the private sector provide services, such as health
care, for employees that are not provided by dysfunctional
state agencies.

Efficient Capital Markets and Portfolio Investment
- - - - - - - - - - - - - - - - - - - - - - - - -


45. The financial sector suffers from problems endemic to
property ownership issues and a lack of effective
regulation. In principle, there are no limitations on
foreigners' access to the Haitian credit market, and credit
is available through commercial banks. However, the free
and efficient flow of capital is hindered by the difficulty
of attaining financing and Haitian accounting practices,
which often fall below the standards used in international
commerce. Additionally, while there are no restrictions on
foreign investment through mergers or acquisitions, there is
no Haitian stock market, so there is no way for investors to
purchase shares in a company outside of direct transactions.


46. The standards that govern the Haitian legal, regulatory
and accounting systems often fall below international norms.
Haitian laws do not require external audits of domestic
companies. Local firms calculate taxes, obtain credit or
insurance, prepare for regulatory review, and assess real
profit and loss. Accountants use basic accounting standards
set by the Organization of Certified Professional
Accountants in Haiti (OCPAH). These standards are often
below those commonly applied in international commerce and
investment.


47. Practices in the banking sector, however, are better
than in other sectors. Under Haitian law, banks are not
required to comply with internationally recognized
accounting standards, or to be audited by internationally
recognized accounting firms. The Central Bank requires only
that banks be audited. Nonetheless, most private banks
follow international accounting norms and use consolidated
reporting.


48. The trend in the banking sector has been the
proliferation of branches to capture deposits and
remittances, and the concentration of credit mainly in trade
financing. The lack of deposit insurance in Haiti has in
the past been partially compensated for by high reserve
requirements, which effectively sequester funds that could
be used to compensate depositors in the event of a bank
failure. However, the Central Bank's reserve requirement on
bank deposits has dropped from more than 53 percent in 1994
to 30 percent in early 2005; this decrease has taken place
in conjunction with the issuance of government bonds bearing
market rates of interest to replace non-remunerative reserve
requirements.


49. There are no legal limitations on foreigners' access to
the domestic credit market. Credit is available on market
terms through commercial bank loans. However, difficulties
in obtaining financing constrain the free flow of financial
resources in Haiti. Additionally, the lack of an effective
civil register, frequent absence of proper titles and
problems with creating security interests hinder access to
credit. As a result, banks typically lend exclusively to
their most trusted and credit-worthy clients. This tendency
to restrict lending to a relatively small group of well-
known clients has helped to limit the incidence of non-
performing loans, however it has also limited broad credit
availability. For those who are not credit-worthy, Haiti's
two largest private banks and a program underwritten by
USAID provide micro-lending services. Several other NGOs
also provide micro-financing outside of Port-au-Prince.

Political Violence
- - - - - - - - -


50. Political violence continues to have a long-term
negative impact on the Haitian economy. However, despite
the political uncertainty and widespread violence that has
plagued Haiti since its independence, there is no recent
history of political groups targeting foreign projects
and/or installations. Investment losses caused by Haiti's
political instability are largely the result of an inability
to conduct business in a normal fashion rather than any anti-
business or anti-foreign sentiment. Politically motivated
civil disorder, such as demonstrations or general strikes,
frequently interrupts business activities. Periodic
demonstrations, outbreaks of violence, and a general lack of
security also affect business operations. Land invasions by
landless peasants are a problem in both urban and rural
areas and appeals to law enforcement authorities are often
fruitless.

Corruption
- - - - -


51. Corruption is a major problem and a serious impediment
to doing business in Haiti. Haiti is widely perceived as
one of the corrupt countries in the world.


52. Corruption is addressed in the 1987 Constitution, civil
service law, and the 1835 penal code, which all cast both
giving and accepting a bribe as a criminal act punishable by
one to three years of imprisonment. The government is
responsible for combating corruption, however, the
ineffectiveness of the legal system has frustrated anti-
corruption efforts. As a result, corruption remains a
significant problem in Haiti that persists in many aspects
of Haitian business.


53. Press and other reports have contained allegations of
corruption involving misappropriation of funds and other
malfeasance on the part of government officials and
individuals working in the private sector.

54. U.S. firms have cited corruption as an obstacle to
direct investment. Additionally, corruption among customs
officers is a serious problem: bribes are sometimes demanded
to clear shipments. Some importers reportedly "negotiate"
customs duties with inspectors. Further, smuggling has
become a major problem, and contraband accounts for a large
percentage of the manufactured consumables market. While
customs authorities have the authority to seize both vessels
and cargo in ports and to levy significant fines against
violators, customs officials have not taken significant
action against smugglers.


55. In addition, the Embassy has anecdotal evidence of
corruption in the fields of procurement, transfers,
performance requirements, and regulation. However, much of
this evidence of corruption remains unsubstantiated because
the legal system is inadequate, unresponsive, slow and not
transparent. As a result, legal judgments and contracts are
difficult to enforce and monitor. In addition, judges are
sometimes influenced by business or personal relationships,
as well as through political persuasion with relative
certainty of impunity.


56. In 2004, the Interim Government of Haiti took some
steps towards suppressing corruption, including the creation
of an anti-corruption unit, a financial investigation unit
and a commission to examine Haitian government transactions
between 2001 and February 2004. On November 1st, 2005
Haiti's Interim Government filed a suit in Miami Federal
Court against ex-President Jean Bertrand Aristide who is
accused to have abused of his power and participated in
fraudulent schemes. The suit alleges that tens of million of
dollars were stolen from the Haitian Public Treasury and
were laundered through fictitious companies.


57. Previous efforts to stem corruption in Haiti have not
proved effective. For example, the State Secretary position
created in June 1999 to oversee tax and customs duty
collection has thus far been minimally effective in
combating contraband and corruption. Further, the law
enforcement system remains weak and ill equipped to place
the weight of the law behind anti-corruption efforts.

Bilateral Investment Agreements
- - - - - - - - - - - - - - - -


58. Haiti signed mutual investment protection treaties or
conventions with the U.S. (1953, 1983),France (1973, 1984),
Germany (1975) and Canada (1980). The U.S. Senate has not
ratified the treaty signed by the U.S. and Haiti in 1983.
Haiti is willing to enter into similar agreements with other
capital exporting countries.

OPIC and Other Investment Insurance Programs
- - - - - - - - - - - - - - - - - - - - - -


59. OPIC offers insurance against political risks and
financing programs for U.S. investments in Haiti, and offers
an on-lending facility through Citibank. The GOH has
ratified and completed its accession to the World Bank's
Multilateral Investment Guarantee Agency (MIGA) that can now
operate in Haiti.

Labor
- - -


60. Haiti has an abundance of unskilled labor and the labor
movement is generally receptive to investment that promises
new jobs. With an effective adult illiteracy rate of
approximately 50 percent, Haiti's workforce is largely
concentrated in agriculture, light manufacturing and
unskilled service sectors. In June 2001, the Ministry of
Labor submitted a draft of a revised labor code to the Prime
Minister, but by the end of 2005 the new code has not yet
been ratified.


61. Labor-management relations in Haiti have at times been
tenuous. However, in some cases, industries have
autonomously achieved good labor practices. For example,
the assembly industry established its own voluntary code of
ethics to achieve good labor practices. When the tripartite
commission investigated assembly firms it found them to be
compliant with local labor laws. In addition to local
entities, the International Labor Organization (ILO) has an
office in Haiti and operates an ongoing project with the
assembly industry to improve productivity through
improvements in working conditions.

Foreign-Trade Zones/Free Ports
- - - - - - - - - - - - - - -


62. In July 2002, the Haitian Parliament voted on a new
free trade zone law that allows for the development of
commercial, industrial, warehousing and services free trade
zones. The law provides fiscal and customs incentives for
enterprises in these zones. Under the law, some enterprises
benefit from a 15-year tax exemption. After the 15-year
mark, 15 percent of their income will be taxed at the end of
the first year, 30 percent the at the end of the second
year, 45 percent at the end of the third year, 60 percent at
the end of the fourth year, 80 percent at the end of the
fifth year, and 100 percent at the end of the sixth year.
An extension of the 15-year period can be granted in certain
cases. One such free trade zone has been established in
northern Haiti in Ouanaminthe and is used for textile
production.

Foreign Direct Investment Statistics
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63. According to the United Nations Conference on Trade and
Development (UNCTAD) total foreign direct investment in
Haiti is approximately USD 240 million. OAS trade sanctions
in 1991 and a comprehensive UN trade embargo in 1994 led to
significant divestment of foreign holdings. Since the
lifting of international sanctions in October 1994, new
foreign direct investment has been limited, and has averaged
less than USD 10 million over the past several years.
Breakdowns of direct foreign investment by country of origin
and sector are not available.

Major Foreign Investors:

U.S. Companies:

American Airlines
Citibank
Compagnie de Tabac Comme Il Faut (Luckett Inc.)
Esso (Exxon)
Texaco
Seaboard
Continental Grain
Western Wireless

Other countries:

Elf Acquitaine (France)
Scotiabank (Canada)
Royal Caribbean (UK/Norway)


64. In addition, resident U.S. citizens own light
manufacturing ("assembly sector") plants in Haiti. Other
assembly plants operate as subsidiaries of U.S.
manufacturing companies. These firms cannot be considered
major investors, since they generally occupy leased
facilities, and capital investment is often limited to
sewing machines and office equipment. They generate
approximately 20,000 jobs. Some smaller agribusiness
enterprises and hotels partly owned by U.S. citizens also
operate in Haiti.