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Privatization Among The Ruins...Has The Old Guard Hopping Mad (Int'l Edition)


Business Week International Spotlight on Haiti

PRIVATIZATION AMONG THE RUINS...HAS THE OLD GUARD HOPPING MAD (int'l edition)

The clock is ticking on the survival of democracy in Haiti, whose populace rejoiced when U.S. troops restored President Jean-Bertrand Aristide to power last October. They're sure to cheer President Clinton when he arrives on Mar. 31 to mark the transfer of peacekeeping duties from U.S. troops to U.N. forces. But with the economy in a shambles, stability will ultimately depend more on foreign capital than on foreign military might.

The U.S. has been unable to restore complete civil order, and Haitians still suffer from decades of corrupt rule and a devastating international embargo imposed in 1991 after a military coup. Joblessness exceeds 60%, and illiteracy tops 80%. Public services have long since broken down: Port-au-Prince's potholed streets are strewn with garbage. And doctors--fed up at not being paid--sometimes refuse to treat the sick and wounded. "Much of the population is in serious hardship. If they don't start seeing an improvement in 12 to 18 months, there could be an explosive situation," says a prominent Haitian businessman.

That would be a political bomb for Clinton, who has invested Presidential capital in a democratic Haiti. To nurture budding reforms, the U.S. Administration is seeking to jump-start the economy with incentives to spur private investment. On Mar. 8, it unveiled a package of guarantees that will underwrite $65 million in commercial loans from Bank of Boston Corp. The news came during a two-day trade mission that whisked a planeload of U.S. executives to Port-au-Prince. Five more trade missions are planned for 1995.

Such efforts and the lure of $1.2 billion in international aid are triggering a trickle of investment. H.H. Cutler Co., a big U.S. children's-clothing maker, signed contracts to reopen two factories that will employ 1,500 people by yearend. First City Development of Haiti, a Des Plaines (Ill.) company, will reopen a copper mine in June, putting 300 back to work.

YEARS OVERDUE. But much-needed power and telecommunications projects that would employ thousands and improve the business climate are languishing while the government wrestles with privatization plans. Aristide officials finally are poised to open up the market for cellular phone networks. Nearly two dozen companies, mostly American, are vying for franchises. "It's going to be a feeding frenzy," says Roger A. Dorf, president of AT&T Network Systems for the Caribbean and Latin America. Readying state-owned Electricite d'Hati for sale will be a nightmare: The company has $6 million in uncollected bills, some of them years overdue. For now, would-be foreign investors had better keep their flashlights handy.

While the Aristide government is wholeheartedly embracing foreign investment, it is snubbing the homegrown elite: Plans to privatize nine state enterprises would forbid any stock purchases by Haiti's wealthiest families, which have long overwhelmingly dominated the private economy.

President Aristide's aim is to attack the concentration of wealth that lies at the root of Haiti's poverty. The business Establishment fumes that it's being discriminated against--which it takes as further evidence that Aristide is a socialist in capitalist's attire. But what's really fueling the elite's frequent clashes with Aristide, others argue, is its fear of losing cozy monopolies. "It's not about Aristide," says Jean Maurice Buteau, president of JMB Export Co., a Port-au-Prince exporter of fruits and vegetables. "It's fear of competition."

Buteau, 41, is in the vanguard of an emerging class of politically active executives who are prodding Aristide to adopt free-market policies. But without privatization, free-market reforms don't have a chance of amounting to much. And unless they get their share of privatization, the powerful old families are certain to defend vigorously the status quo.By Amy Borrus in Port-au-Prince EDITED BY JOHN E. PLUENNEKE


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