Haiti: Risk Assessment

Country Rating¹

Rating: D

Business Climate Rating¹

Rating: D

Risk Assessment²

After the earthquake, a humanitarian crisis, and uncertainties over the recovery outlook
From 2006 to 2009, despite a series of external shocks (natural phenomena, global crisis) and the persistence of political instability and social unrest, Haiti had succeeded in maintaining relative macroeconomic stability and initiating implementation of structural reforms backed by the IMF. The earthquake of 12 January 2010, which left nearly 250,000 dead, resulted in a major setback for Haiti with damages and losses estimated at over 120% of GDP. Late 2010, over a million people who lost their homes were still living in temporary camps. The disorganized state of the country, the destruction of infrastructure, the dismantlement of the productive apparatus, and the displacement of the people triggered a marked rise in unemployment (already above 30% before the shock) and a substantial decline in economic activity. The large reconstruction  programs, backed by a massive influx of international aid, implemented with great difficulty in 2010, are expected to foster an economic rebound in 2011 likely to be driven by agriculture, construction, and the textile industry. The "money for work" aid program could significantly improve the process of re-integrating Haitians into the labor market. Funds transferred by the diaspora, representing over 20% of GDP, will moreover provide support for private consumption. The ultimate speed and scale of the recovery remains nonetheless shrouded in persistent uncertainty. The reconstruction is subject to the actual disbursement of aid, a slow and complex process impeded by an often difficult coordination of local and international actors and by inadequate infrastructure. Corruption and both health and security risks could also undermine the process.

In the middle of the crisis, elections pose major challenges
In this turbulent context, the election calendar has been disrupted. The legislative elections (all deputy seats and a third of the senators), scheduled in February 2010, have been postponed and took place at the end of the year, along with the presidential election. President Preval, is in effect barred by the Constitution from running for a second successive term, and will complete his current term in office 7°February 2011. The logistics of these elections was made extremely difficult because of communication difficulties, the many displaced persons, the cholera epidemic (that broke out in mid-October), the hurricane Tomas (November 2010) and the climate of insecurity. The results of the first round of presidential elections have been disputed. But whatever the outcome of the second run, it is unlikely that it will foster the stability necessary to enable implementation of effective reconstruction policy. Lacking a parliamentary majority the new president will have to deal with many unstable political groups.

Strengths

• Mobilization of massive aid by the international community in the aftermath of the earthquake
• Reconstruction policy and economic development strategy established in cooperation with donors
• Membership in various regional organizations (Association of Caribbean States, CARICOM, CARIFORUM)

Weaknesses

• Deterioration of public finances
• High level of insecurity (reason for the UN Stabilization Mission since 2004)
• Vulnerability to natural catastrophes compounded by extreme poverty
• Critical state of the environment
• Energy dependence
• Infrastructure demolished