Haiti Finance Profile 2012

Market-based competition The market in Haiti operates under a weak institutional framework with hardly any regulatory mechanisms. Over the last 20 years, the informal sector in Haiti has grown considerably, providing a living for an estimated 70% of the population. A World Bank needs assessment for Haiti estimates that 95% of private employment is in the informal sector. This sector, like all informal markets, generates a high degree of insecurity, as markets clear rapidly and prices and incomes can fluctuate substantially over short periods. Haitian women working in agriculture are the main category of workers in the informal sector. Structures that could support and protect those operating in informal settings are absent. Careful estimates show that there are some 300,000 informal microenterprises in Haiti, which are mainly concentrated in the trade and service sector. To a high degree, Haitians engage in informal business on a day-to-day basis in order to ensure their survival. Bringing informal sector businesses into the formal sector is seen as critical to ensuring Haiti’s economic development and establishing a strong market economy.

Anti-monopoly policy  During most of Haiti’s history, the elite classes’ economic monopolies were protected by the military while the interests of the poor majority were suppressed. The inherent trend towards monopolistic and oligopolistic practices in Haiti is not sufficiently controlled. The weak institutional framework and a general lack of set rules of the game allow powerful economic stakeholders to develop unregulated rent-seeking strategies. Due to this lack of regulation, Haitians are often forced to pay exorbitantly high prices for commodities.

Liberalization of foreign trade Haiti is one of the most open economies in the world, having liberalized its economy significantly in the 1980s and 1990s. The tariff structure has been simplified and rates greatly reduced as a part of broad structural adjustment measures applied over the course of a very short period. This has led to a flood of cheaper imported goods into local markets, facilitating the demise of local production. Haitian producers simply have not been able to compete against imports, given the agricultural sector’s low levels of productivity and high vulnerability to natural risk, as shown in 2008. The rice sector shows how this trend has developed. Whereas in the 1980s, Haiti used to import only 8% of the rice it consumed, today between 60% and 68% of rice – which represents the basis of most Haitian’s daily diet – is imported. Haiti’s domestic food production can provide only 46% of the country’s demand. In 2008, the parliament ratified an agreement to join the common market of the Caribbean Community (CARICOM), other members of which have suffered similar problems, albeit far from the same extent. With the enactment of the Hemispheric Opportunity through Partnership Encouragement (HOPE II) agreement, which gives Haiti nine years of duty-free and quota-free access to the U.S. market, new opportunities have emerged. But so far, the recurring crises have limited achievements in this sector.

Although the Haitian banking system has been significantly modernized in recent years, and now applies most of the precautionary measures of the Basel Accords, it still lacks overall stability and trustworthiness. Nevertheless, according to IMF reports, the country’s financial system has not been significantly affected by the ongoing global crisis. Indicators of banking sector soundness remained mainly satisfactory at the end of September 2008, with increased net profits and declining non-performing loan ratios. However, the financial situation of two small banks had worsened further. An independent assessment indicated that the Banque Nationale de Crédit (BNC) would need to be recapitalized to accommodate its 2006 absorption of Socabank, and its operational structure reviewed.