2009 INVESTMENT CLIMATE STATEMENT - HAITI

UNCLAS PORT AU PRINCE 000086


WHA/CAR FOR JTILGHMAN, SROBINSON
EB/IFD/OIA
SANTO DOMINGO FOR FCS

E.O. 12958: N/A
TAGS: KIDE EINV ECON EFIN PGOV HA OPIC USTR KTDB ETRD
PGOV
SUBJECT: 2009 INVESTMENT CLIMATE STATEMENT - HAITI

REF: 08 STATE 123907

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Openness to Foreign Investment
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1. (U) Haiti's openness to foreign investment is codified in its
laws. Import and export policies are non-discriminatory and are not
based upon nationality. There is no significant public opposition
to foreign investment in Haiti. The Government of Haiti (GoH) has
made notable progress in recent years to improve the legal
framework, create and strengthen core public institutions and
enhance economic governance. The constitutional government of
President Rene Preval continued the monetary, fiscal, and foreign
exchange policies initiated under the 2004-2006 interim government
with the assistance of the International Monetary Fund (IMF) and the
World Bank. Such policies include reducing interest rates to
facilitate access to credit. Continued political instability and
weak institutional capacity within the GoH and in the private sector
have reduced the impact of the government's initiatives and hampered
its ability to modernize its commercial, investment, tax, and
banking laws. Moreover, the global economic downturn, the food
crisis which led to violent riots in April, and a deadly hurricane
season deeply impacted investment incentives in Haiti during 2008.


2. (U) In November 2002, the Haitian Parliament passed an
investment code prohibiting fiscal and legal discrimination against
foreign investors. The 2002 code explicitly recognizes the crucial
role of foreign direct investment in spurring economic growth and
aims to facilitate, liberalize, and stimulate private investment.
The code contains exemption regimes to promote investment likely to
enhance competitiveness in sectors deemed priorities or
strategically important, especially export-oriented sectors. Tax
incentives, such as reductions on taxable income and tax exemptions,
are designed to promote private investment. The investment code
grants Haitian and foreign investors the same rights. Foreign
investors must be legally registered and pay appropriate taxes and
fees.


3. (U) An additional requirement of the 2002 investment code is the
establishment of an Inter-ministerial Investment Commission (CII) to
examine investor eligibility for license exemptions as well as
customs and tariff advantages. The CII is composed of
representatives of the Ministries of Economy and Finance, Commerce,
and Tourism, as well as those ministries with purview over the
prospective area of investment. The CII must authorize all business
sales, transfers, mergers, and partnerships within the scope of the
code. The CII also manages the process of fining and sanctioning
enterprises that ignore the code.


4. (U) The majority of economic activities are open to both Haitian
and foreign private investors. Investment in certain sectors,
however, requires special government authorization. Investment in
"sensitive" sectors, such as electricity, water and
telecommunications, requires a government concession. Investment in
the public health sector requires authorization from the Ministry of
Public Health and Population. Investment in agriculture is subject
to the Ministry of Agriculture's approval. In general, natural
resources are considered to be the property of the state. As a
result, prospecting, exploring, or exploiting mineral and energy
resources require concessions and permits from the Bureau of Mining
and Energy, Ministry of Public Works. Mining, prospecting, and
operating permits may only be granted to firms and companies
established and resident in Haiti.


5. (U) Haiti has made several commitments to the World Trade
Organization (WTO) in relation to the financial services sector.
These commitments include permitting foreign investment in financial
services, such as retail, commercial and investment banking, and
consulting. Currently, there are two foreign banks operating in
Haiti, Citibank of the United States and Scotia Bank of Canada.


6. (U) An initiative designed to attract investment was the
establishment in July 2007 of the Investment Facilitation Center
(CFI),a one-stop investment facilitation center to promote
investment opportunities. The CFI's major activities include:
streamlining the investment process by simplifying the procedures
related to trade and investment; providing updated economic and
commercial information to local and foreign investors; and promoting
investment in priority sectors. The GoH considers strategic
investments in sectors that contribute substantially to reductions
in the balance of payments deficit, increase economic growth, and
improve the skill level of the labor force as priorities.
Investments that lead to permanent job creation and a renewal of the
domestic production structure are also considered priority or
strategic investments.


7. (U) In October 1996, the GoH established legislation on the
privatization of public enterprises, which allows foreign firms to
invest in the management and/or ownership of Haitian state-owned
enterprises. The government established the Commission for the
Modernization of Public Enterprises (CMEP) in 1996 to facilitate the
privatization process by creating strategies to privatize Haitian
state enterprises. Despite initial enthusiasm in both the public
and private sectors for privatization, progress has been slow. To
date, only two Haitian state-owned enterprises have been privatized.
In 1998, two U.S. companies, Seaboard and Continental Grain,
purchased 70 percent of the state-owned flour mill. Currently, each
partner owns 23 percent of the new company known today as "Les
Moulins d'Haiti".


8. (U) In 1999, a consortium of Colombian, Swiss, and Haitian
investors purchased a majority stake in the national cement factory.
Since then privatization has stalled. The government has expressed
renewed interest in privatizing the state telecommunications company
(TELECO),the Port-au-Prince airport, and selected seaports. The
GoH has allowed private sector investment in electricity generation
to compensate for the state electricity company's (Electricite
d'Haiti - EDH) inability to supply sufficient power. In 2006, the
GoH conducted financial audits of the National Port Authority (APN),
TELECO and EDH in order to pave the way for privatization. In June
2008, TELECO took its first step toward privatization, consisting of
an evaluation process conducted with the financial support of the
International Finance Corporation.


9. (U) Despite recent progress and the GoH's commitment to improve
investment, Haiti's investment climate improved only incrementally
during 2008. The fiscal year was characterized by political
instability; food price rises followed by violent riots which caused
serious damage in the private sector; and a deadly storm season that
deeply impacted economic activities. Despite improvements in the
telecommunications sector, Haiti did not become more competitive
compared to the rest of the region. Overall costs to start a new
business in Haiti remained high, while access to credit as well as
structures for investor protection are still insufficient.


10. (U) Haitian law is deficient in a number of areas, including:
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.

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Conversion and Transfer Policies
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11. (U) There are no restrictions or controls on foreign payments
or other fund transfer transactions and foreign exchange is readily
available. All citizens or legal residents have the right to
dispose of their assets.
The GoH does not impose restrictions on the inflow or outflow of
capital. Banks and currency exchange companies set their rates at
the market-clearing rate. The spread between buying and selling
rates is generally less than five percent.


12. (U) The Haitian Central Bank (BRH) publishes a daily reference
rate, which is a weighted average of exchange rates offered in the
formal and informal exchange markets. The exchange rate for the
Haitian Gourde (HTG) is determined by the market and based on a
floating exchange rate mechanism. During FY 08, the average exchange
rate was 38.27 HTG/USD. The current exchange rate is approximately
40.5 HTG/USD. The upward trend of the exchange rate during FY 08
was driven by the erosion of the internal value of the Haitian
gourde and a deteriorating balance of payments due to rising fuel
and food costs which increased import levels. This increase led to
depreciation expectations, thus generating higher demand for
dollars. Meanwhile, remittances, which usually boost overall
foreign currency supply, decreased by over ten percent in 2008,
despite increasing aid flows.

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


13. (U) The 1987 Constitution allows expropriation or dispossession
only for reasons of public interest or land reform and is subject to
prior payment of fair 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 returned to the original owner. The
Constitution prohibits nationalization and confiscation of real and
personal property for political purposes or reasons.


14. (U) Title deeds are vague and insecure. The GoH has an office
(INARA) to implement expropriations of private agricultural
properties with appropriate compensation. The agrarian reform
project initiated under the first Preval administration was
controversial among both Haitian and U.S. property owners. There
have been complaints of non-compensation for the expropriation of
property. The lack of access to land records, surveys, and property
titles in Haiti complicates most cases.

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Dispute Settlement
--------------


15. (U) Haiti's commercial code dates to 1826 and underwent a
significant revision in 1944. There are few commercial legal
remedies available. 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 weak judicial system. Injunctive relief is based
upon penal sanctions rather than securing desirable civil action.
Similarly, contracts to comply with certain obligations, such as
commodities futures contracts, are not enforced. Judges do not have
specializations, and their knowledge of commercial law is limited.
Utilizing Haitian courts to settle disputes is a lengthy process and
cases can remain unresolved for many years. Bonds to release assets
frozen through litigation are unavailable. Business litigants are
often frustrated with the legal process and pursue out-of-court
settlements.


16. (U) In October 2007, the Haitian Chamber of Commerce and
Industry (CCIH),in partnership with the GoH and funding from the
European Union, established a commercial dispute settlement
mechanism -- the Arbitration and Conciliation Chamber -- to provide
mechanisms for conciliation and arbitration in cases of private
commercial disputes.


17. (U) There are several ongoing private disputes between U.S. and
Haitian entities. Americans seeking resolution of these disputes
are often hindered by Haiti's inefficient legal system. There are
persistent allegations that some Haitian officials use their public
office position to influence commercial dispute outcomes for
personal gain. As a result of international assistance, progress is
being made to increase the credibility of the judiciary and the
effectiveness of the national police.


18. (U) Disputes between foreign investors and the state can be
settled in 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. Foreign court
decisions are not enforceable in Haiti. 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 (Panama Convention).


19. (U) Haiti signed, but has not yet ratified, the 1966 Convention
on the Settlement of Investment Disputes between states and
nationals of other states (ICSID). The GoH appears to recognize
that the protections and guarantees that Haitian laws extend to
investors are severely compromised by weak enforcement mechanisms
and a lack of updated laws to handle modern commercial disputes.


20. (U) Haiti's bankruptcy law was enacted in 1826 and 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 last stage,
the debtor's assets 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 courts. Debts
are normally paid in Haitian Gourdes.


21. (U) Although the concepts of real property mortgages and
chattel mortgages -- pledging of personal property, such as
machinery, furniture, automobiles, or livestock to secure a 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 futile. Banks frequently require that loans be
secured in U.S. dollars.

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Performance Requirements and Incentives
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22. (U) Haitian law confers equal treatment to manufacturing
companies that produce for the local market regardless of their
nationality, as long as they reside in Haiti. There are several
special status categories for certain types of investment in
priority or strategically significant enterprises.


23. (U) In order to attract investment to certain industries, the
2002 Investment Code created a privileged status for certain
manufacturers. Eligible firms can benefit from customs, tax, and
other advantages under this code. Investments that provide added
value of at least 35 percent in the processing of local or imported
raw materials are eligible for preferential status.


24. (U) The statute allows for a 5- to 10-year income tax
exemption. Industrial or crafts-related enterprises must meet one of
the following criteria in order to benefit from this exemption:

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

-- Increase national income.

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

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

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

-- Create and/or intensify backward or forward linkages in the
industrial sector.

-- Export-oriented production.

-- Substitute a new product for an imported product, provided that
the new product presents a quality/price ratio deemed 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 process imported raw materials or
components for finished goods that will be re-exported.

-- Utilize local inputs at a rate equal or superior to 35 percent of
the production cost.


25. (U) For investment that matches one or more of the criteria
described above, the GoH provides customs duty and tax incentives.
Companies that enjoy tax exemption status are required to submit
annual financial statements. Fines or withdrawal of tax advantages
may be assessed to firms failing to meet the Investment Code's
provisions.


26. (U) A progressive tax system applies to income, profits, and
capital gains earned by individuals. The tax rates on individuals
are as follows (40.5 HTG/USD):

Income (Gourdes) Rate (percent)
--------------
Up to 60,000 0
60,001 to 240,000 10
240,001 to 480,000 15
480,001 to 1,000,000 25
Over 1,000,000 30

The tax rate on corporate income is 30 percent.


27. (U) The GoH does not impose discriminatory requirements on
foreigners who wish to invest. Haitian laws, related to residency
status and employment, are reciprocal. Foreigners who are legal
residents in Haiti and wish to engage in trade have, within the

framework of laws and regulations, the same rights granted to
Haitian citizens. However, Article 5 of the Decree on the
Profession of Merchants reserves the function of manufacturer's
agent for Haitian nationals.


28. (U) A foreigner who wishes to obtain residential status to
conduct business in Haiti must deposit HTG 50,000 (USD 1250) in a
blocked account at the BRH. A professional identity card, issued by
the Ministry of Commerce and Industry, is also required. Transient
business persons and those temporarily in the country must be
accompanied by locally licensed agents when visiting clients or
soliciting business.


29. (U) Foreigners working in Haiti are subject to property
restrictions. Foreigners, excluding foreign corporations, may not
own more than one residence in the same district or own real estate
without prior authorization from the Ministry of Justice. Land
ownership is limited to 1.29 hectares (about 3 acres) in urban areas
and 6.45 hectares (about 16 acres) in rural areas. Additionally,
foreigners may not own property or buildings near the border.
Foreigners who establish Haitian corporations with corporate offices
located in Haiti are not affected by restrictions on ownership of
property or buildings adjacent to the Dominican Republic border.

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


30. (U) 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.


31. (U) 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. Additionally,
they are permitted to operate businesses without equity-to-debt
ratio requirements. Accounting law allows foreigners to capitalize
using tangible and intangible assets in lieu of cash capital
investments.


32. (U) 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 are regulated by the state.


33. (U) Entrepreneurs are free to dispose of their properties and
assets and to organize production and marketing activities in
accordance with local laws.

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


34. (U) Haitian law protects copyrights, patent rights, and
inventions, as well as industrial designs and models, special
manufacturers' marks, trademarks, and business names. The law
penalizes individuals or enterprises involved in infringement,
fraud, or unfair competition. Haiti is a signatory to the Buenos
Aires Convention of 1910, the Paris Convention of 1883 regarding
patents, and the Madrid Agreement regarding trademarks. Haiti has
ratified the Bern Copyright Convention.


35. (U) The current draft trademark law appears to reflect the
GoH's determination to revise its intellectual property legislation
in line with its international agreements. As noted, weak
enforcement mechanisms, inefficient courts, and judges' inadequate
knowledge of commercial law may significantly impede the
effectiveness of statutory protections.


36. (U) Real property interests are handicapped by the absence of a
comprehensive civil registry. Bonafide 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 are expensive and
involve cumbersome procedures. They are not always recorded against
the debtor or creditors.

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


37. (U) Haitian laws are transparent and theoretically universally
applicable, but legal enforcement is not universally applied nor
observed. The bureaucracy and "red tape" in the Haitian legal
system is often excessive.


38. (U) Haiti does not have laws to specifically foster
competition. The GoH established an Investment Facilitation Center
(CFI) in 2007. Since its implementation, the CFI has significantly
reduced delays facing investors in starting a business in Haiti,
thereby reducing transaction costs. As a result of CFI efforts,
cumbersome entry procedures were reduced from 12 procedural steps to

5. This may foster competition by facilitating the entry of
additional investors.


39. (U) Tax, labor and health, and safety laws and policies are
also 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 government agencies.

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


40. (U) The scale of financial services remains modest in Haiti.
In principle, there are no limitations on foreigners' access to the
Haitian credit market and credit is available through commercial
banks. The free and efficient flow of capital is hindered by the
difficulties in obtaining financing and by Haitian accounting
practices, which often fall below international standards. 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. Discussions are underway to establish a Haitian stock
market.


41. (U) 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).


42. (U) Practices in the banking sector, however, are superior to
other sectors. Under Haitian law, banks are not required to comply
with internationally recognized accounting standards nor to be
audited by internationally recognized accounting firms. Haiti's
Central Bank, BRH requires only that banks be audited. Nonetheless,
most private banks follow international accounting norms and use
consolidated reporting.


43. (U) 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. Three major
banking institutions hold 80 percent of total banking sector assets,
valued at HTG 95.8 billion (over USD 2.35 billion) in 2008 -- 37
percent of GDP. The three major commercial banks hold also 70
percent of total loan portfolios, while 80 percent of total loans
are monopolized by 10 percent of borrowers, which increases Haitian
banking system's vulnerability to systemic credit risk. In 2008,
the quality of the loan portfolios in the banking system has
slightly improved, with non-performing loans accounting for 9.7
percent of total loans, down from 10 percent in 2007. However,
equities were more exposed with non-performing loans accounting for
nearly 16 percent of total equities, up from 6.4 percent in 2007.


44. (U) In 2008, the BRH's main challenge was to maintain monetary
stability while public authorities urged it to implement
inflationary measures in response to the food/fuel crisis and
hurricane devastation. In order to stimulate credit to private
sector, the BRH lowered its benchmark interest rates from 17.8
percent in early 2007 to 8 percent in 2008. The refinancing
interest rates decreased from 27 percent to 19 percent.


45. (U) There are no legal limitations on foreigners' access to the
domestic credit market. Credit is available on market terms through
commercial banks. However, banks demand a pledge of real property
to grant loans. Given the lack of effective cadastral and civil
registries, loan applicants face daunting challenges in obtaining
credit. The banking sector is very conservative in its lending
practices. Banks typically lend exclusively to their most trusted
and credit-worthy clients. In addition, the high concentration of
assets does not allow for product innovation at major banks.


46. (U) In order to give greater financial services access to
individuals and prospective investors, the GoH drafted a mortgage
and chattel law to adopt a system of tangible movable property (ex.
portable machinery, furniture, tangible personal property) as
collateral for loans. These laws are currently before the Haitian
Parliament and would allow individuals to buy condominiums and banks
to accept personal properties, such as cars, bank accounts, etc., as
a pledge for loans. USAID/Haiti has a portfolio guarantee program
with major banks in order to encourage them to expand credit to
productive small and medium enterprises and rural micro-enterprises.
The GoH is planning to establish a credit rating bureau to
disseminate data on the total indebtedness and concentration of
credit risks of businesses and individuals in the financial sector.
The banking system is sound, although net profit declined last
year.

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Political Violence
--------------


47. (U) Over the last two years Haiti's political situation has
improved, but still remains fragile. Riots over the high price of
food erupted in April 2008, which resulted in the fall of the
government, but which did not target foreign business. There have
been no recent cases of political groups targeting foreign projects
and/or installations. Historically, politically motivated civil
disorder, such as periodic demonstrations and labor strikes,
occasionally interrupted normal business operations. Land invasions
by squatters are a problem in both urban and rural areas, and
requests for help to law enforcement authorities often go
unanswered.

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Corruption
--------------


48. (U) Corruption is an ongoing challenge to economic growth.
Transparency International's Corruption Perception Index for 2008
ranked Haiti the fourth most corrupt country in the world. The GoH
has made incremental progress in enforcing public accountability and
transparency, but substantive institutional reforms are still
needed. In 2004, the government established the Specialized Unit to
Combat Corruption (ULCC) in the Ministry of Economy and Finance. In
February 2008, the law on disclosure of assets by civil servants and
high public officials prepared by ULCC was voted by the Parliament.
The ULCC is in the process of drafting a national strategy to combat
corruption and is preparing a code of ethics for the civil service.
ULCC will send a specific anti-corruption bill to Parliament for
consideration in the coming months.


49. (U) In 2005, the GoH created the National Commission for Public
Procurement (CNMP) to ensure that government contracts are awarded
through competitive bidding and to establish effective procurement
controls in public administration. The CNMP publishes lists of
awarded government contracts. Substantial public procurement
contracts, notably contracts involving the state-owned electricity
company EDH, routinely bypass the CNMP, leaving open the possibility
of graft.


50. (U) The GoH in 2007 began a high-profile campaign to eliminate
corruption in the public and private sector. This effort has led to
high profile arrests in the business community. Former board
members of SocaBank were imprisoned for embezzling the bank's assets
in 2004. The bank's former director and several of his assistants
remain in detention but have not been tried. Two prominent
businessmen were subsequently imprisoned on suspicion of customs
fraud, but have since been released and the case against them
dropped. The assistant director of Customs as well as several
customs employees implicated in that case remain in prison.


51. (U) President Rene Preval has openly affirmed his commitment to
fight corruption. He is actively seeking technical assistance and
cooperation with countries in the region to reinforce Haiti's
institutional capacity to fight corruption and financial crime.


52. (U) U.S. firms have complained that corruption is a major
obstacle to effective business operation in Haiti. They point to
requests for payment by customs officials in order to clear import
shipments as examples of solicitation for bribes. Some importers
reportedly "negotiate" customs duties with inspectors.


53. (U) Haitian law, applicable to individuals and financial
institutions, criminalizes corruption and money laundering. Bribes
or attempted bribes toward a public employee are a criminal act and
are punishable by the criminal code (Article 173) for one to three
years of imprisonment. The law also contains provisions for the
forfeiture and seizure of assets

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


54. (U) In May 2008, U.S. Congress passed HOPE II, which extends
the trade preference of HOPE I for ten years effective October 2008.
This U.S. trade preference legislation is projected to boost
Haitian private textile investment as well as foreign investment in
the Haitian textile industry sector. To date, HOPE has helped
generate approximately 5,000 jobs. The law is intended to create
new jobs and boost the economy.


55. (U) 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 intends to
deepen its regional integration efforts with its neighbors by
participating in agreements and treaties with countries in the
region. Haiti, a CARIFORUM member, signed an economic partnership
agreement (EPA) with the European Union in December 2007. The EPA
would allow the export of products from Haiti to European Union
countries without tariffs or quotas. Haiti is a member of the
Caribbean Community (CARICOM),which created the CARICOM Single
Market and Economy (CSME) in 1989. CSME, which aims to advance the
region's integration into the global economy by facilitating free
trade in goods and services and the free movement of labor and
capital, became operational in January 2006 among twelve of the
fifteen Member States. Haiti -- a member of CARICOM, but not yet a
participant in CSME -- has expressed an interest in participating
fully in CSME.

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


56. (U) Overseas Private Investment Corporation (OPIC) offers
insurance against political risks and financing programs for U.S.
investments in Haiti. OPIC financing includes two programs: direct
lending and investment guarantees. Direct loans are available to
investment projects sponsored by or significantly involving U.S.
small businesses. Investment guarantees are available to U.S.
eligible investors of any size.


57. (U) In 1996, OPIC established an on-lending facility with
Citibank-Haiti through which the bank loaned to locally investing
businesses. Borrowers do not need to be U.S. investors. In fact,
most of the borrowers have been Haitian. At least USD 3 million
remain available under the OPIC/Citibank facility in Haiti. An
additional amount of up to USD 15 million may be restorable if OPIC
and Citibank amend the facility agreement. In addition, OPIC
recently established a new on-lending facility with Citibank
available to several Caribbean countries, including Haiti.


58. (U) OPIC participation in this new facility is through loan
guarantees totaling USD 100 million, with up to 20 percent of this
amount available for Haiti. For the previous on-lending facility,
OPIC and Citibank have a 75-25 risk-sharing arrangement. The OPIC
risk share for the most recent facility ranges from 25 to 75 percent
for each loan, but is expected to be higher in Haiti relative to
other Caribbean countries eligible under the facility.


59. (U) The GoH has ratified and completed its accession to the
World Bank's Multilateral Investment Guarantee Agency (MIGA) that
can now operate in Haiti.

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Labor
--------------


60. (U) Haiti has an abundance of unskilled labor. Measures are
currently underway to enhance the technical skills of the Haitian
workforce and thereby facilitate the transfer of technology. A plan
to reform vocational and technical training is underway with the
cooperation of the Inter-American Development Bank (IDB) and other
international multilateral agencies.


61. (U) Labor unions are generally receptive to investment that
creates new jobs. In June 2001, the Ministry of Labor and Social
Affairs submitted a draft of a revised labor code to the Prime
Minister, but the new code has not yet been ratified.


62. (U) Labor-management relations in Haiti have at times been
strained. In some cases, however, industries have autonomously
implemented good labor practices. For example, the assembly
industry established its own voluntary code of ethics to encourage
its members to adopt good labor practices. In addition to local
entities, the International Labor Organization (ILO) has an office
in Haiti and operates an on-going project with the assembly industry
to improve productivity through improvement in working conditions.

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


63. (U) A law on Free Trade Zones (FTZ) entered into force on July

2002. It sets out the conditions for operating and managing
economic free trade zones, together with exemption and incentive
regimes granted for investment in such zones. The law is not
specific to a particular activity. The law defines FTZs as
geographical areas to which a special regime on customs duties and
controls, taxation, immigration, capital investment, and foreign
trade applies and where domestic and foreign investors can provide
services, import, store, produce, export, and re-export goods.


64. (U) Free Trade Zones may be private or joint-venture. The law
provides the following incentives and benefits for enterprises
located in FTZs:

-- Full exemption from income tax for a maximum period of 15 years,
followed by a period during which there is partial exemption that
gradually decreases;

-- Customs and fiscal exemptions for the import of capital goods and
equipment needed to develop the area, with the exception of tourism
vehicles;

-- Exemption from all communal taxes (with the exception of fixed
occupancy tax) for a period not exceeding 15 years; and

-- Registration and transfer of the balance due for all deeds
relating to purchase, mortgages, and collateral.

A Free Trade Zone has been established in the northeastern city of
Ouanaminthe, where American companies -- Sarah Lee, Nautica,
Dockers, Fruit of a Loom and Levi Strauss -- are currently
operating.

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Foreign Direct Investment Statistics
--------------


65. (U) 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 (FDI) has been limited. In general, FDI
remains low. A large increase in FDI in 2006 occurred due to
Digicel investments in the telecommunications sector. FDI inflows
were very limited in 2008, partly because of natural disasters and
global economic downturn. As of June 2008, total FY 08 FDI inflows
amounted to USD 19.3 million, down from 75 million in FY 07. (Note:
much of the high FDI level for FY 07 was due to the arrival of
cellular company Digicel in Haiti. End note.)


66. (U) Statistics on direct foreign investment by country of
origin and sector are not available. Detailed and reliable
statistics on total investment are also difficult to retrieve.

Major Foreign Investors
--------------
U.S. Companies:

- American Airlines
- Citibank
- Compagnie de Tabac Comme Il Faut (Luckett Inc.)
- Texaco (Chevron)
- Seaboard Marine
- Continental Grain
- Trilogy Inc.
- Spirit Airlines
- Newmont Mining

Other countries:

- Elf Acquitaine (France)
- Scotia Bank (Canada)
- Royal Caribbean (UK/Norway)
- Digicel (Ireland)
- Eurasian Minerals Inc. (Canada)
- The Sol Group (Puerto Rico)


67. (U) Resident U.S. citizens own light manufacturing assembly
sector plants in Haiti. Other manufacturing plants operate as
subsidiaries of U.S. manufacturing companies. The government does
not consider these firms as major investors since they generally
occupy leased facilities, and capital investment is often limited to
sewing machines and office equipment. Some smaller agribusiness
enterprises and hotels, partly owned by U.S. citizens, also operate
in Haoti.


SANDERSON