This record is a partial extract of the original cable. The full text of the original cable is not available.

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 
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¶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.