Haiti, one of the most urbanized nations in Latin America and the Caribbean region, occupies the western third of the island of Hispaniola. Haiti’s investment climate offers opportunities but also major challenges for U.S. investors. The opportunities offered by ample arable land and young population are countered by endemic corruption, poor infrastructure, instability, violence in the capital, high inflation, and the migration of thousands of skilled Haitian private sector and medical sector workers.
Despite efforts by the Haitian government to achieve macroeconomic stability and sustainable private sector-led and market-based economic growth, Haiti’s investment climate is characterized by an unstable national currency (Haitian gourde, or HTG), persistent inflation, high unemployment, political uncertainty, and insecurity. The 2020 global outbreak of the coronavirus, multiple national lockdowns that paralyzed economic activities, and the delayed resolution of the political crises following former president Jovenel Moise’s assassination further complicated the Haitian government’s capacity to achieve macroeconomic stability, create jobs, and encourage economic development through foreign trade and investment. As a free market system, the Haitian economy traditionally relies on the agriculture, construction, and commercial sectors, as well as the export-oriented apparel assembly industry in the north of the country. However, the proliferation of gangs in metropolitan Port-au-Prince and persistent roadblocks put in place by the gangs along the main north and south access routes to the capital create major challenges for goods to freely circulate in the country. Haitians and expatriates perceived to have access to wealth are the targets of kidnapping for ransom, with some Haitian gangs showing increased sophistication in conducting complex kidnappings that can overcome traditional mitigation methods such as the use of armored cars. The DC-based Inter-American Development Bank (IDB) Country Representative for Haiti said security problems are making it increasingly hard for the IDB to continue working in Haiti, as gangs increase their activities. A significant portion of their local staff have already quit, and those that remain either want to live in secured hotels or leave the country. The World Bank is also facing the same problem with their local staff, while many of their foreign staff work from overseas.
Although the business climate is challenging, Haiti’s legislation encourages foreign direct investment. The government has prioritized building and improving infrastructure, including boosting energy production, and has additionally designated agriculture, manufacturing, and tourism as key investment sectors. The latter revealed itself to be particularly challenging, given the current security situation and potential for civil unrest. Agricultural producers reduced their production as road blockages prevent movement of goods toward the capital. Several years of drought, have also reduced the crop production capacity of the country’s arable land and an El Nino climatic event is anticipated in 2023.
The Haitian investment code provides the same rights, privileges, and equal protection to local and foreign companies. Under Haitian law, Haiti’s business climate affords equal treatment to all investors, including women, minorities, and foreign nationals.
Political uncertainty has increased as insecurity and gang violence increase, and democratic elections are delayed. The absence of a stable government that could create long-term economic policy complicates the workings of an already opaque bureaucracy. On February 6 2023, Prime Minister Ariel Henry installed a High Transition Council (HCT) made up of three representatives chosen on a consensual basis whose job will be to prepare for presidential and legislative elections. While the country maintains a liberal trade and foreign exchange regime, and largely adheres to World Bank programs to fight poverty, continuing reports of corruption and financial mismanagement have raised challenges for investment and investors.
The Government of Haiti (GoH) Post-COVID Economic Recovery Plan (PREPOC 2020-2023) included the textile sector as one of the most important means for achieving economic transformation and diversification in country. However, due to supply chain and fuel problems, many companies have had to reduce staffing while a small number have closed operations entirely.
According to the World Investment Report 2021 United Nations Conference on Trade and Development (UNCTAD), the United Nations Economic Commission for Latin America and the Caribbean (ECLAC) reported that Foreign Direct Investment (FDI) flows to Haiti rose to $50 million in 2021 from $23 million in 2020, a 117 percent increase. In the recent past, Haiti has been unable to increase its domestic production, and as a result most of its consumer products are imported. The impact of the war in Ukraine has been severe on Haiti’s economy and a contributing factor to inflation reaching an all-time high. The cost of imported goods has risen significantly, and according to data published by The Haitian Institute of Statistics and Technology (IHSI) the year-to-year inflation from January 2022 to January 2023 is 49.3 percent, whereas imported inflation accounts for 61.5 percent. Gang control of transportation routes used to support supply chains has also contributed to inflation. Five million Haitians face food insecurity, according to the Ministry of Social Affairs and Labor – nearly half the population. Russia’s war in Ukraine has additionally disrupted security equipment trade between Haiti and its partners, depriving the nation of necessary assistance.
Haiti’s net international reserves were around $227.2 million as of September 30, 2022. Improving the investment outlook for Haiti requires political and economic stability, underscored by the enactment of institutional and structural reforms that can improve Haiti’s business and political environment. The Haitian economy showed a negative GDP growth of 1.7 percent in 2019, (3.3 percent in 2020; 1.8 percent in 2021, and 1.7 percent in 2022).
The United Nations uses the human development index (HDI) to measure the progress of a country and Haiti was measured at 0.535 points in 2021, placing it 163rd out of 191 countries ranked.
|TI Corruption Perceptions Index||2022||164 of 180||https://www.transparency.org/en/cpi/2021/index/hti|
|Global Innovation Index||N/A||N/A||https://www.globalinnovationindex.org/analysis-indicator|
|U.S. FDI in partner country ($M USD, historical stock positions)||2021||$26.0M||https://apps.bea.gov/international/factsheet/|
|World Bank GNI per capita||2021||$1,430||http://data.worldbank.org/indicator/NY.GNP.PCAP.CD|
Government spending, fiscal discipline and inflation:
The Ministry of Finance (locally known as the MEF) signed an agreement with the Central Bank (BRH) in November 2020 to strengthen fiscal discipline and limit government monetary financing. The Ministry of Finance also implemented measures to improve revenue collection and control spending. From October 2021 – January 2022 government spending was $213.1 million (21.3 billion gourdes) whereas, for the same period ending January 2023, spending went down to $83.76 million dollars (12.3 billion gourdes), a 42 percent decrease. On the other hand, for the first 5 months of fiscal year 2022-2023 revenue collected increased by 36 percent compared to the same period for fiscal year 2021-2022. These numbers show there is a willingness from the government to implement unpopular financial austerity measures and increase tax and tariff collection.
For the Fiscal Year 2021-2022, the Central Bank loaned $408.7 million dollars (47 billion gourdes) to the Government of Haiti, significantly increasing inflation. The goal for fiscal year 2022-2023 has been to limit the Central Bank financing at $228.67 million dollars (34.3 billion gourdes). As of March 2022, monetary financing from the Central Bank decreased by 60 percent over the same period the previous year and has reached 21 percent of the $228.67 million dollars cap.