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The dilemma of DR investments in Haiti

Some 15 companies have installed themselves and invested nearly US$200 million, others have had iss

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The dilemma of DR investments in Haiti
SANTO DOMINGO. The conversations and compliance with requisites that were demanded by the Haitian authorities do not stop the bureaucratic and technical difficulties which motivated that in 2009 the Dominican Republic through its investors stopped installing flour mills in the neighboring country, a joint project that was being supported by the European Union.

Since 2006 the Reserve Bank (Banco de Reservas) has petitioned the Haitian financial and banking authorities for permission to install offices in that country. The most recent meeting was at the beginning of this month. They have yet to gain access.

Helados Bon (Bon Ice Cream), Industrias Empacadoras Dominicanas (Meat packers) with their products Jajá and Tripijugos are other companies of local capital which over the last 10 years, according to information provided to Diario Libre, have had problems when they established themselves in Haiti.

The next-door nation is the second largest receiver of Dominican exports, which last year were some US$1.7 billion. Nonetheless, among the business sector there is talk that there are difficulties with investing in this country, due to the fact that the Haitians protect themselves from competition-as happens in other economies-

The neighboring country does have a representation of Dominican micro-businesses dedicated to commerce, hair dressing and beauty salons, where the latter dominate 95% of the market. At the macro level, some 15 Dominican investors have grown in Haiti.

Although the public offices and the Dominican embassy in Haiti do not have an organized registry of the local capital in that nation, the director of the Center of Exports and Investment (CEI-DR), Eddy Martinez, estimates it to be around US$200 million, without including contracts for projects and small businesses.

DR money in Haiti

Until the economic effects of the 2010 earthquake forced their withdrawal, there were five Dominican textile factories in the Port-au-Prince Free Trade Zone.

Today, besides the textile part, the large companies have mostly gone into the construction sector, building bridges, buildings, hotels and other projects, while generating thousands of jobs. There are Mera, Muñoz & Fondeur, with an investment of US$35 million; Construcciones Civiles y Maritimas (Cocimar), the Estrella Group, which has invested US$80 million; Constructora del Pais (Codelpa), Constructora de Proyectos Multiples (La Gela) and Constructora MAR, among others.

At the public level, the Dominican government recently invested US$30 million in the Henri Christophe University in Limonade, some 10 kilometers from Cap Haitian.

The problems

In December 2010, the Diagnostic Study of Incentives for Commercial Exchange with the Republic of Haiti, carried out by the Dominican government by DASA Economic and Financial Consultants, indicated: "According to some representatives of the private Dominican sector, the reason for the absence of more Dominican investments in Haiti has to do more with reasons relating to legal and citizen insecurities than with the attractiveness that might result within the framework of foreign investments in Haiti." They add that this perception is also held by the international community.

In spite of the positive results from local businesses, they point out the inconveniences. "As an example of the operational difficulties which occur in Haiti, the study cites the case of the investment by Grupo M which has had to face serious labor problems as well as substantial costs in order to guarantee the safety of its factory," says the DASA report.

In spite of all this, Fernando Capellan, the president of Grupo M, minimizes the inconveniences and considers them as "situations that occur in any company where there are 7,000 persons at work."

The Grupo M decided to install the Compañía de Desarrollo Industrial (Codevi) -the Industrial Development Company-a free zone for the production of pants, t-shirts, shoes, and feminine lingerie in the northern city of Ouanaminthe (Juana Mendez), with an investment of over US$35 million and supported by the World Bank. Its market is essentially the United States given the customs facilities that are provided by the HOPE project for the Haitian textile industry.

"The government of Haiti, headed by then-President (Jean-Bertrand) Aristide, and through the Minister of the Interior, Jocelerme Privert, gave us all the facilities for the beginning of the project...CODEVI is a Haitian company that is controlled under the Haitian laws," Capellan explained.

Invest or not invest

The Dominican government, through forums and meetings sponsored by the CEI-RD, is working to increase local and international investments in Haiti. Why the local companies do not increase is attributed by the president of the National Council of Private Enterprise (CONEP), Manuel Diez Cabral, to three problem areas: "Insecurity (judicial as well as personal), a very weak and uncertain business climate and the lack of infrastructure."

DASA indicates that the Agreement of Economic Association, of which Haiti is a signatory, does not provide any satisfaction for the investor to resolve a controversy in a different jurisdiction.

Of the 183 countries evaluated by the World Bank regarding facilities of starting a business, Haiti occupies the 180th position, and the Dominican Republic the 108th. Within the 32 countries of Latin America and the Caribbean, the neighboring country is number 29 in regard to protecting investors.

The report from DASA indicates that the monopoly of the trucker syndicates on the frontier, which have to be paid US$100 to cross the frontier into Haiti, and the customs processes of verification are a serious limitation on commerce. At the beginning of the month, there were tense situations after the kidnapping of Dominican truckers in Haiti.

"The domination and control which some few Haitian economic groups have, serve at the same time as facilitator and barrier for attracting Dominican investors. As a facilitator, association with one of these groups practically guarantees a privileged treatment with reference to procedures...not associating with these local groups could result in tiresome and awkward bureaucratic complications," the DASA report says.

A recent case has been the questioning and the recommended suspension of contracts given without tenders to a Dominican businessman in the face of the emergency period unleashed by the 2010 earthquake. These contracts were for rebuilding Haiti, such as one given to the Hadom Construction Company, which belongs to Senator Felix Bautista, which was given the job of constructing the Legislative Palace for some US$33.7 million.

"Between neighbors there is love and there are differences, but this is between neighbors, but the neighbors are family, the neighbors have obligations...to see how to manage this type of situation," said Guy Lamothe, the former director of the Center for Facilitating Investments in Haiti, the counterpart of the CEI-RD, in a telephone conversation.

Open doors

Haiti has an Investment Code which promotes freedom of enterprise, gives financial incentives and the legal protection for those who want to invest in a country of 10 million inhabitants and considered to be the poorest in America, which depends of imports, remittances and donations.

After the devastation which resulted from the earthquake, the Haitian President Michel Martelly and his officials are actively promoting foreign investment in Haiti. The say that they have adopted measures to avoid corruption, facilitate the legal processes and provide equal and fair treatment.

During a meeting on 23 February with the Industrial Association of the Dominican Republic, and officials of the government, the former Prime Minister, Max Bellerive, suggested to the Dominican Republic to invest in the creation of more than 3000 new jobs in his country, in the area of housing, production, health and reconstruction. On this occasion, the industrialists said that they will keep talking.

According to signals from the Commercial Attaché at the Haitian Embassy in Santo Domingo, Pierrot Delienne, the United States is the principle investor in his country, with US$1.0 billion. In the meantime, there is a growing interest from the Koreans in textiles. Besides the area of knits, manufacturing, assembly, tourism, agro-business, fishing, livestock, handicrafts, construction and telecommunications are identified by Haiti as the ideal areas for investment.

What to do?

The president of CONEP points out that in order to attract investments the business climate needs to be improved in Haiti and commerce across the border needs to be more transparent.

The president of the Dominico-Haitian Chamber of Commerce, Rosa Maria Garcia, said that Dominicans should try to know the Haitian business culture better and associate themselves with persons from that Nation.

She noted that it is necessary for the government to change the businessmen's vision regarding the Haitian market and carry out progress at an opportune moment. "There is a lot of investment opportunities because everything needs to be done. We are not saying that it will be easy, but if an Irishman, from Ireland, came and installed, pretty successfully, and he is now the leader in Haitian telephones, don't tell me that we Dominicans, who are just as adventurous and just as strong in business, cannot do the same," she said.

The Mixed Bi-lateral Commission between the Dominican Republic and Haiti has been including the promotion of investment in the neighboring country in its agendas. President Martelly has set aside a visit to Santo Domingo next 26 March in order to go over the agreement reached by the Dominican and Haitian chancellors, which include incentives for tourism, investments and commerce.

The director of the CEI-RD said that some twenty local businesses are interested in the areas of energy, foodstuffs and gas, and there are also three Dominican banks looking across the border. "There is interest," he said.