R 271422Z JAN 09
FM AMEMBASSY PORT AU PRINCE
TO SECSTATE WASHDC 9438
INFO AMEMBASSY SANTO DOMINGO 
DEPTTREAS WASHDC
USDOC WASHDC
CIMS NTDB WASHDC

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 
 
------------------------------ 
Openness to Foreign Investment 
------------------------------ 
 
¶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. 
 
-------------------------------- 
Conversion and Transfer Policies 
-------------------------------- 
 
¶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. 
 
------------------------------ 
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. 
 
------------------ 
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. 
 
--------------------------------------- 
Performance Requirements and Incentives 
--------------------------------------- 
 
¶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. 
 
-------------------------------------------- 
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. 
 
----------------------------- 
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. 
 
------------------------------------- 
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. 
 
--------------------------------------------- ----- 
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. 
 
------------------ 
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. 
 
---------- 
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 
 
------------------------------- 
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. 
 
-------------------------------------------- 
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 
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¶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. 
 
------------------------------ 
 
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. 
 
------------------------------------ 
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