VZCZCXRO9945
OO RUEHQU
DE RUEHPU #0232/01 0461834
ZNR UUUUU ZZH
O 151834Z FEB 08
FM AMEMBASSY PORT AU PRINCE
TO RUEHC/SECSTATE WASHDC IMMEDIATE 7683
INFO RUEHZH/HAITI COLLECTIVE
RUEHBR/AMEMBASSY BRASILIA 1796
RUEHMN/AMEMBASSY MONTEVIDEO 0118
RUEHSA/AMEMBASSY PRETORIA 1601
RUEHSG/AMEMBASSY SANTIAGO 2361
RUEHMT/AMCONSUL MONTREAL 0260
RUEHQU/AMCONSUL QUEBEC 1024
RUEATRS/DEPT OF TREASURY WASHDC
RUCOWCV/CCGDSEVEN MIAMI FL
RUMIAAA/HQ USSOUTHCOM J2 MIAMI FL
UNCLAS SECTION 01 OF 03 PORT AU PRINCE 000232
SIPDIS
SIPDIS
STATE FOR WHA/CAR, DRL, S/CRS, INR/IAA
SOUTHCOM ALSO FOR POLAD
STATE PAS AID FOR LAC/CAR
TREASURY FOR MAUREEN WAFER
E.O. 12958: N/A
TAGS: PGOV PREL HA
SUBJECT: PRESSURE MOUNTING ON HAITI GOVERNMENT OVER COST OF LIVING
REF: A. PORT AU PRINCE 0163
B. PORT AU PRINCE 0161
C. PORT AU PRINCE 0155
D. PORT AU PRINCE 0147
E. PORT AU PRINCE 0144
F. PORT AU PRINCE 0091
G. PORT AU PRINCE 0038
PORT AU PR 00000232 001.2 OF 003
Summary
-------
1. Summary: After the security situation largely stabilized
in the course of 2007, inflation, poverty and joblessness
have moved to the political forefront in Haiti. President
Preval and Prime Minister Alexis are facing escalating
political pressure over the rising cost of living and
persistent unemployment. The Government is promising to
expand existing programs targeting municipalities and small
business. Certain Senators castigate the government's
policies as "neoliberal." Some are calling for direct
government subsidies of basic commodities. Since Haiti's
inflation is not amenable to short-term fixes, the
Preval/Alexis government will remain hard-pressed for the
foreseeable future on the economic front. It is
supplementing its policies as part of a formal
poverty-reduction and development strategy to be presented to
international donors in April. End summary.
Inflation Hitting the Poor Hardest
----------------------------------
2. Inflation slowly crept upward in the second half of 2007,
reaching a yearly rate of 10 percent in December. The
overall inflation figures, however, fail to tell the whole
story. Inflation was led by increases in basic staples such
as rice, corn, plantains and cooking oil (Ref C). The
early-January ban on imports of eggs and poultry products
from Haiti's main agricultural trading partner, the Dominican
Republic, after an outbreak of avian influenza in that
country, has further spurred inflation this year. Although
inflation by definition hits the poor the hardest, the
structure of Haiti's current inflation, concentrated on basic
food items, is causing disproportionate suffering for Haiti's
poor -- which accounts for over half the population.
3. Rising inflation is occurring against a backdrop of
continuing slow economic growth and job creation. Growth of
3.2 percent in FY 06/07 followed by anticipated growth of
just over four percent FY 07/08 is too weak to make a real
dent in unemployment, which stubbornly persists at an
official rate of around 60 percent (Ref A).
Cost of Living Eclipses Security As Top Political Issue
--------------------------------------------- ----------
4. Although domestic security remains a topic of political
and social concern, the relative stabilization of the
security situation since MINUSTAH's intervention in Cite
Soleil in late 2006-early 2007 has reduced (but not
eliminated) the relative political dominance of domestic
security. Overshadowing it since late 2007 has been
continuing unemployment and the rising cost of living. These
are now the primary issues that grassroots groups and certain
politicians are taking up against the government.
Rising But Manageable Public Discontent
---------------------------------------
5. Since January, Post has noted increased public discontent
and rumblings among grassroots organizations around the high
cost of living, accompanied by small demonstrations (Ref B).
There has also been a measurable increase in repatriations of
Haitians caught at sea by the U.S. Coast Guard. There have
been 474 repatriations thus far in 2008, vs. 350 in the
entire first quarter of 2007. If the current rate continues,
the first quarter of 2008 will have seen a 2.7-fold increase
in repatriations over the same period in 2007. The figure
for interceptions of boats carrying economic migrants is one
indicator of economic hardship in Haiti.
President Preval Acknowledges Issue
-----------------------------------
6. Preval acknowledged the cost of living issue in his
independence day speech (Ref G) and in his swing through the
Central Plateau in late January (Ref D). In that tour,
Preval encountered opposition from certain groups he
addressed, as well as press commentary critical that he
failed to address economic hardship seriously (Ref D). In
the week prior to the Feb. 1-5 Carnival celebrations, various
grass roots organizations, including some close to the
pro-Aristide party, Fanmi Lavalas, promised to mount street
demonstrations protesting government inaction on employment
and the cost of living.
But Leaves PM to Take Political Heat
-----------------------------------
7. Under the initiative of Senator Yourie Latortue
(Artibonite in Action Party, Artibonite Department) Haiti's
Senate summoned the Prime Minister and five Ministers
(Commerce, Economy and Finance, Agriculture, Planning, and
Social Affairs/Labor) to testify on the cost of living issue
over two days February 12-13. (Note: Latortue has both
presidential ambitions and a personal rivalry with PM Alexis,
particularly in Gonaives, where the two grew up. End note.)
Alexis' presentation listed external and internal factors
causing the rise in prices: increasing demand caused by
population growth, rising world energy prices, climate
change, depreciation of the U.S. dollar, deterioration of the
industrial and agricultural sectors during Haiti's political
instability over the last two decades, and flood and
hurricane damage. All these factors, Alexis noted
defensively, were outside the control of Haiti's current
government. Minister of Economy and Finance Daniel
Dorsainvil defended Haiti's policy of economic stabilization.
Social Affairs Minister Gerard Germain said that removing
taxes on basic staples, a proposal of Senator Rudolph Boulos
(Fusion, Northeast Department) would eliminate the source of
financing for GOH efforts to stimulate national production of
these staples.
8. The PM drove home the point that the government cares
about the people's suffering and is trying to do something
about it. Alexis said there are 1.1 billion gourdes
available (USD 30.5 million) to finance a range of programs,
including expanding the current "Communal Impact Program"
(PIC - Ref F) to 30 additional municipalities from the
current 110, increasing domestic meat and poultry production,
overhauling infrastructure with job-creating construction
projects, extending small and micro-credit, and assisting
poor university students. An additional 700 million gourdes
(USD 19.4 million) would have to be made available in the
"amended budget" that would soon be submitted to parliament.
Alexis related these initiatives to the GOH "Strategy
Document for Growth and Poverty Reduction," a strategy paper
finalized last November that the government intends to use as
a guide to economic and development policy, and to appeal to
foreign donors at an April 26 international donor conference
in Port au Prince.
Senators Pile On; a Few Street Protests
---------------------------------------
9. Senator Youri Latortue immediately pronounced that the
"government in power has failed," and that the people's
"patience has limits." He accused the government of pursuing
"neo-liberal" policies responding to the demands of
"international financial institutions" rather than to the
needs of the Haitian people. Senator Gabriel Fortune (Union,
South Department) predicted the PM's proposals would be
ineffective, and said that these government resources would
be better used to directly subsidize basic food and medicine.
Senator Ultimo Compere (Lespwa, Center Department) called
the PM's proposals "a drop in the ocean." On the other side,
former Senate President Joseph Lambert (a strong
Preval/Alexis supporter) termed the PM's address a
recognition of the gravity of the situation and a refutation
of charges the government is doing nothing. As many as a few
hundred demonstrators outside the parliament chanted slogans,
some opposing and others supporting the Prime Minister.
Demonstrations in front of at least one government ministry
called for stronger government measures against unemployment
-- and for good measure, against the continuing lack of
security, and to help victims of a bank-fraud scheme that
defrauded thousands of Haitians of their savings in the
waning days of the Aristide government.
Comment
-------
10. A negative confluence of factors influencing the economy
is forcing the government to sit up and take notice. Ten
percent inflation and sixty percent joblessness have no
short-term cures. The cost of living is an issue tailor-made
for demagoguery and browbeating the government, which Senator
Latortue is spearheading for now. It is difficult to fully
assess the extent to which his and his colleagues' criticism
reflects broad popular sentiment, but they clearly believe
the issue can be used to make hay against the government.
SANDERSON