APPAREL SECTOR HIGHLIGHTS HAITI'S ECONOMIC RESILIENCE AND

UNCLAS PORT AU PRINCE 000206 SENSITIVE SIPDIS E.O. 12958: N/A TAGS: PREL PINR HA PGOV AID EAID ECON ETRD EINV KTEX SUBJECT: APPAREL SECTOR HIGHLIGHTS HAITI'S ECONOMIC RESILIENCE AND POTENTIAL REF: 10 PORT AU PRINCE 120 ¶1. (SBU) Within two weeks of the January 12 earthquake, Haiti's garment manufacturing sector resumed exports to the US, re-routing shipments through Dominican ports. Prior to the earthquake, apparel assembled in Haiti accounted for three-quarters of the country's exports, employing one-fifth of the formal sector. Of the eighteen garment manufacturers in Port au Prince, two must relocate and rebuild from the ground up; one factory that completely collapsed crushed hundreds of workers inside, at least 300 of whom did not survive. Despite the loss of workers and limited access to basic resources, including electricity, many factories have reopened, simultaneously undertaking minor to moderate repairs, clean-up, and reconstruction. Shipping from Haiti resumed in less than a month, meeting customers' expectations of having their orders filled on time. Logistics constraints, while not wholly solved, have been overcome more quickly than expected, and increased international support for the industry aims to create more jobs and bolster the Haitian economy. ¶2. (SBU) International investors, brands, and manufacturers who expressed interest in expanding production in Haiti before the earthquake renewed their commitment to support the Haitian apparel industry, taking advantage of the trade preferences of the HOPE II Act for duty-free export to the US (reftel A). At the apparel industry's largest trade show in Las Vegas in February, the US Trade Representative (USTR),along with Gap Inc., Hanes Brands, and the US Association of Importers of Textiles and Apparels announced the Plus One for Haiti initiative, urging clothing retailers to "buy Haitian" and source at least one percent of their total apparel production from Haiti. Representatives from the GOH Presidential Commission for the Implementation of HOPE (CTMO-HOPE) are currently in Washington working with USTR on an additional HOPE extension. ¶3. (SBU) Given the increased attention to Haiti, investors are giving consideration not only to build more factories but also to create more jobs by supporting infrastructure, such as electricity and water, needed to sustain the industrial parks and free trade zones that would house these factories in Port-au-Prince, as well as other potential industrial hubs, including Cap Haitien in the north. Representatives from high-volume customers, such as Gap Inc. in Korea, are visiting Haiti to explore expansion plans that originated before the earthquake. The World Bank and IMF are conducting port assessments specifically with respect to capacity to handle shipping containers for garments. ¶4. (SBU) Comment: The apparel manufacturers in Haiti operate on a high volume, thin margin, low capitalization basis where cash flow is extremely important for the business to survive. Industry representatives have told us that the garment sector wouldgreatly benefit from a "soft loan" fund of USD 20 million for their immediate working capital cash needs, granting concessionary loans with an extended grace period and affordable interest rates to enable manufacturers to operate at full capacity as soon as possible, retain the 28,000 workers already employed, and expand production to benefit under the special trade provisions of the HOPE II Act. Combined with other USG initiatives bolstering the garment sector, such a loan would send a positive signal to U.S. retailers and producers in Haiti and the Caribbean, and should also send an encouraging message to the more than 25,000 Haitian factory workers who rely on garment factory jobs to provide for themselves and their families. End comment. ¶5. MINIMIZE CONSIDERED MERTEN