WASHINGTON D.C., United States, Wednesday April 16, 2014 – The recent shuffling of cabinet officials in Haiti and the return of a finance minister who had previously stepped down, is seen by some as a sign that the government is serious about addressing a variety of financial and economic challenges facing the country.
The reality is that the Haitian economy is being weaned off of international aid flows that immediately followed the earthquake. Even more importantly may be the fact that the volatility of the situation in Venezuela is putting pressure on Haitian leadership to find ways to manage internal and external financial obligations. Venezuela’s social and economic woes threaten its ability to maintain its largess as it relates to direct supports to the Haitian government, financial supports that were used to cover operational costs. Further, Petrocaribe and its payment terms for energy product for Haiti may well be in jeopardy.
All of the above may well be contributing to a recalibration of the country’s economic future by the government as the inflows of revenue from donors, grants and subsidies have served to mask weak internal fiscal controls, including unchecked and untaxed trade flows coming across the Haiti – Dominican Republic border.
While the task of determining how best to harness trade across the border is clearly not an easy one, it is in this area where the administration and the minister have to focus significant attention. An effort to exercise effective fiscal management and border security using state tools, for example the customs apparatus is probably overdue. Details on how best to deploy customs officials to the regions near where there exist illegal trade centers will have to be worked out, but the willingness of officials to take on this issue would be a welcome sign to many in the local and international community.
Equally as important as collecting revenues from the identified illicit trade of over $100 million in eggs and poultry at the border with the Dominican Republic, would be the capturing of a larger percentage of the $1.4 billion in goods that it is estimated crosses the border on an annual basis. Ultimately, if the average tax rate applied at the port of Port-au-Prince were applied to imports coming through the border region, the Haitian government could well see over $400 million in revenue on an annual basis.
Unfortunately, all indications are that customs border points generate less than $60 million per year. While the collection of revenue will do much to address shortfalls in revenue, important is going to be the investing of some of this revenue into the community of Haitians that live in the border region. A balanced approach to securing the border and ensuring fair trade with the Dominican Republic, while addressing the needs of those involved in the informal sector within that region will be critical.
Interestingly, while the postponement of talks between Haiti and the Dominican Republic on trade, health, tourism and migration worry some, this pause gives both parties time to get things right. Specific to the border trade issue, this breather gives the Dominican Republic an opportunity to address the fact that within its borders, there exist illegal trade areas that are inconsistent with the concept of free and fair trade. On the Haitian side, the postponement gives Haitian leadership time to develop a plan to address the loss of revenue that has to be corrected to address acute financial needs.
Ultimately it gives both parties time to map out realistic and practical working models to deal with concerns about sanitary issues associated with the movement of agricultural items from the Dominican Republic to Haiti. It also allows the variety of tariff and non-tariffs barriers that it is claimed are employed by the Dominican Republic, to prevent Haitian exports from entering into that country, to be added to the agenda.
At the end of the day, while Haiti’s financial challenges are real, the securing of agreements on fair trade with its neighbor, and the collection of previously uncollected revenues are practical solutions within reach that have to be pursued. Click here to receive free news bulletins via email from Caribbean360. (View sample)
Anton Edmunds is a commentator on Caribbean issues. He is the head of The Edmunds Group International, an advisory service firm that focuses on emerging markets and a Senior Associate at the Center for Strategic & International Studies (CSIS). He blogs at www.onthecaribbean.com, tweets at @theedmundsgroup and can be contacted at firstname.lastname@example.org.