How Haiti Can Dig Itself Out of PovertyJuly 25th, 2012 | by Keith Slack
Recent press reports suggest that Haiti is about to reap a major bonanza in minerals such as gold, copper, and silver—more than $20 billion-worth according to government estimates. This is obviously a huge sum of money in the poorest country in the Western Hemisphere. The country receives hundreds of millions of dollars in aid each year, so mining could theoretically allow the country to end its dependence on this aid. Because of the country’s long-running political instability, the country is largely “under-explored” (in mining industry lingo) and so this resource wealth remains largely untapped, despite some previous mining activity in the country. Mining companies, such as US-based Newmont, are already streaming in to start exploiting it.
With this much wealth in the ground, it’s tough to fault the Haitian government for wanting to “dig it up”, in the recent words of Haiti’s prime minister Laurent Lamonthe. Nevertheless, leaving the stuff in the ground at least for the foreseeable future might actually be the best option for Haiti if the country wants to ensure that these minerals actually benefit the country instead of making its governance, human rights, and environmental problems even worse. The fundamental issue is that the revenues that come from natural resources have a lousy global track record of contributing to economic development in poor countries—especially those that face Haiti’s level of governance challenges.
Natural resources can produce a lot of money very quickly for governments during boom times (like now) that is easily manipulated by corrupt government officials and squandered in off the book transactions, poorly-conceived vanity projects or outright corruption. There are abundant examples of this—particularly in the oil states of Africa, to which Haiti might most readily be compared. However, even in relatively-well governed middle-income countries, mineral revenues have generally not trickled down to communities in mining-impacted areas. Peru is the most prominent current example of this, where despite impressive mining-driven economic grown over the past 10 years, widespread community protests have put the continued viability of the mining sector in jeopardy.
If Haiti is to avoid, or at least mitigate, these problems in developing its mining sector, a number of important steps need to be taken right now. I’ll describe these in turn below.
First, the capacity of the government to manage mining revenues needs to be strengthened drastically. This means ensuring that government officials in charge of negotiating mining contracts know (1) the real value of the country’s resources and (2) what a fair government take should be. Many African countries have negotiated embarrassingly bad agreements with oil and mining companies that have left governments with only a fraction of the revenues they should have been getting. Mining company lawyers are extremely skilled at getting the best possible deals for their clients, which often include clauses that allow them to pay almost nothing in taxes. International donors should help Haitian officials ensure that they are getting a fair deal and not getting taken to the cleaners by mining company sharpies. On the flip side, Haiti would be an excellent place for mining companies to put into practice their current rhetoric about wanting to be good “development partners.” Companies operating in Haiti, e.g. Newmont, should commit themselves to doing deals that are in the best interests of the country—even if that means forgoing profit that these companies could otherwise obtain.
A critical corollary of increased government capacity is transparency. The Haitian government and mining companies should agree to publicly disclose all contracts for mining projects, as is now required by projects funded by the World Bank’s International Finance Corporation. There is no reason that these contracts can’t be made public. “Business confidentiality” is a bogus claim that has been widely debunked. Mining companies should commit from Day 1 to fully disclose all revenues, taxes and other payments to the Haitian government. Newmont already does this in other countries; they should continue in Haiti. The smaller junior companies that are operating in the country should do this as well. Without exception. The Haitian government should insist on full revenue disclosure as a pre-condition of any contract they negotiate with a mining company.
Setting up a multi-stakeholder oversight committee to monitor Haiti’s use of mining revenues would also be a good idea. The World Bank tried this with Chad’s oil revenues and it was largely a failure. However, it might work better in Haiti, which gets more international attention and has a somewhat stronger civil society than does Chad. Such a committee should include civil society representatives with training and capacity to understand mining revenue issues. The committee should be given full access to all information on mining revenues coming into the country and government expenditures made using those revenues.
Having a plan for how Haiti’s mining revenues will actually be spent is also critical. This seems to be the missing piece in a lot of mining-based development schemes. (I explore this issue more deeply in this book.) It’s just sort of assumed that all that money will be used constructively somehow. A national-level development plan that includes explicit commitments to developing industries, supporting rural agriculture and funding social protection programs should be developed with full participation of Haitian civil society. Despite its troubled history, Haiti does have certain advantages, not least of which is its proximity to the US, which could be an even greater market for Haitian exports than it is now. Channeling mining revenues into industries that could help diversify the country’s export based and link it to the US market could be a productive use of that money. The hows and whys of this, however, would need to be explained clearly. Donors, particularly the US, would have an important role to play.
There’s no magic formula for ensuring that the exploitation of Haiti’s mineral wealth doesn’t end up making the country even worse off than it is today. The steps listed above are a starting point and would need to be combined with efforts to address the inevitable negative social and environmental impacts mining will have at the local level. What is clear is that the time to address these issues is right now, before development of the sector gets any further down the track and Haiti squanders what could be a unique opportunity to break out of a too-long history of poverty and suffering.