Haiti faces red tape, corruption hurdles despite being ‘open for business’

PORT-AU-PRINCE, Haiti—Nickson Toussaint returned to Haiti from Washington, D.C., with dreams of opening a small hotel along the shimmering coast north of the country’s capital. He bought 2.6 acres of land for $70,000 and looked for a loan or investors.

But like other expatriates and people of Haitian descent who glimpsed opportunity in helping rebuild the impoverished country, Toussaint received a rude awakening. A Haitian development group that offers financing to first-time entrepreneurs hasn’t given him a loan.

The U.S. citizen also ran into a thicket of red tape and others laying claim to the land. The project has been stalled for almost two years.

Entrepreneur Steven Giese said he was ensnared in the country’s red tape when he and his 27-year-old son tried to set up an import-export seafood company two summers ago. They left Haiti three months later, $49,000 lighter and without a business.

Giese said he paid $12,000 to ship a 40-foot container filled with Styrofoam coolers from Miami to Haiti, including a $5,000 “handler’s fee” to prevent it from being held in customs up to six months.

“They had exhausted our financial resources,” said Giese, 54, of Mount Pleasant, South Carolina. “At almost every juncture you’re dealing with corruption, serious corruption.”

Nigel Fisher, a former U.N. envoy in Haiti, said in February that the country was not yet “open for business,” infuriating Haitian officials. Fisher said a nearly two-year delay in organizing legislative and local elections had created too much uncertainty for some investors. Haitian President Michel Martelly has said voting will happen before year’s end; if not, he will rule by decree when the terms of 10 Senate seats expire in January.

Corruption has been another hurdle. A U.S. State Department human rights report said Haitian law “provides criminal penalties for official corruption; however, in practice corruption was widespread and endemic.”

Toussaint failed to secure his $248,000 loan, with an interest rate of 10 to 12 per cent, from Sofihdes, a Haitian development finance institution that the U.S. Agency for International Development helped create in 1983. The lender is among several in Haiti that award loans to startups with fewer than 100 employees and less than $1.25 million in assets.

Sofihdes spokesman Serge Richard Petit-Frere denied that Toussaint’s application was rejected. He said the letter described the loan as “postponed” and cited problems with Toussaint’s business model and “lack of relevant experience.”

However, Sofihdes was among several Haitian lenders criticized in a USAID audit this year for not adequately awarding loans to first-time borrowers or small businesses in the countryside.

The government has made some strides to improve life for businesses.

It’s launched a Presidential Advisory Board with the support of former U.S. President Bill Clinton and a $250,000 grant from his foundation. Co-chaired by Clinton, the panel and its 35 members advise Haitian parliament on business issues, while members serve as mini-ambassadors for the country.

A public-private outfit called the Center for the Facilitation of Investments also reports that 33 businesses have either invested or committed to investing $693 million in Haiti, creating almost 23,000 jobs, since Martelly took office in May 2011. Those projects range from a $3.4 million hotel at the northern edge of Haiti’s central valley to a proposed railway that would connect the different districts making up traffic-mired Port-au-Prince.

“We’d like to see a lot of cranes in the sky and buildings going up,” said Georges Andy Rene, CFI’s general director, which reports to the Commerce Ministry.

Despite those efforts, the World Bank still ranked Haiti among the last 10 countries in its annual list of best places in the world to do business. Haiti came in at 174, among 183 countries, based on measures such as the ease of winning construction permits, obtaining electricity, securing credit and registering property.

“There’s definitely a recognition that we need to do better,” said Gregory Mevs, a prominent businessman who co-chairs the advisory panel with Clinton. But, he said, “we shouldn’t be trapped by a World Bank ranking.”