Important development role for banks as finance sector shows its potential
The new Investment code is more in tune with today’s globalized economy and offers significant benefits to investors

Haiti’s principal economic indicators suggest that there is room for improvement, but the country seems to be taking positive action. Much of the difficulty can be attributed to the recent foreign credit denial that is referred to everywhere in the country as “the embargo”.

Yet Faubert Gustave, Minister of Economy and Finance, is far from despondent. He sees Haiti as a land of opportunity, especially for foreign investors. “Everything remains to be done,” he declares.
Mr. Gustave highlights tourism as an obvious area for expansion. “We used to be the number one in the Caribbean,” he notes. “The opportunities are there. In the short-term, we hope that those people who are attracted by the advantages we offer will express an interest.”

He cites Hilton’s decision to open a hotel near Port-au-Prince airport as an encouraging precedent. “This kind of development has a knock-on effect,” he stresses. “It not only attracts other investors, but also has effects on other sectors, such as agro-industries.”

The other sector the Minister sees as a potential growth area is sub-contracting in manufactured goods. Indeed, Haiti established a significant niche for itself in finishing goods for the U.S. market before political troubles took hold. At one time, 100,000 workers were employed in the sector, though that figure is now more in the region of 30,000.

FAUBERT GUSTAVE Minister of Economy and Finance

“We have got a well-trained labor force and quite a high productivity rate, by regional standards,” Mr. Gustave says. “Our labor costs are one of the lowest, if not the lowest, in the region.”
Moreover, the new investment code, more in tune with the demands of today’s globalized world, offers significant attractions to overseas investors. “It is very liberal and very aggressive in terms of incentives,” Mr. Gustave says. “We hope investors will understand that this government wants to work in a close partnership with them, to create jobs and sustainable income, as well as working for the development of the country.”

One advantage Haiti does have — a great help, given the size of its trading deficit — is the large amount of hard currency remittances from Haitians living abroad. The downside to this is that it is contributing to a dollarization of the economy, at a time when confidence in the local currency, the gourde, is weak. The gourde has fallen sharply in value against the dollar, but this has made Haiti’s exports much more attractive.

There is an agreement between the Ministry of Economy and Finance and the Central Bank (BRH) to try to limit public spending, to avoid an unsustainable financial deficit. The Central Bank Governor, Venel Joseph, is well aware of the need for strict financial discipline, so Haiti can handle the difficult situation in which it finds itself. “Haiti is a small, open economy, with a high level of imports in relation to its exports, given the deficiencies in our productive capacity,” he says. “That is one of the major structural constraints affecting the source of convertible currency, as well as the exchange rate of the gourde.”

Haiti’s banking sector is seen as being both sound and professional. But there are only about 500,000 bank accounts in the whole country. The number of depositors is even smaller, as richer clients often have several accounts. The majority of the population has not taken advantage of the banking system, though this does mean that the sector should grow substantially in the future as the branch networks and their services become more readily available.

“Meanwhile, the accumulated experience of commercial banks over more than 30 years of operation has enabled them to acquire a special expertise in offering banking services, as well as a capacity to innovate so they can face the future in which there will be an ever more demanding clientele for specialist services,” Mr. Joseph says.

He believes private banks have a particularly useful role to play at the moment. “They receive deposits from customers, who they remunerate with interest levels determined by the market, and they act as intermediaries for the supply and demand of funds. From the macroeconomic point of view, they take part in creating jobs, and they contribute to GDP through an ever increasing value added, at a time when there has been a certain slump in our primary sector.”

Microfinance is a growing phenomenon with obvious advantages in a business environment such as Haiti’s. It makes credit available for small-scale initiatives, as well as attracting external funds towards small enterprises.
“Integrating microfinance into the formal financial system will entail a new dimension to our supervisory role,” the Central Bank Governor says. “In fact, this dimension is now being taken into account by the setting up with the BRH of a directorate charged with regulating and controlling the activities of credit cooperatives.”