Haiti Protests: More than Gas Prices

Update: Prime Minister Jack Guy Lafontant resigned today (Saturday, July 14). Details here.

On Thursday, the government in Haiti announced a roll back of fuel subsidies that would result in increases of 31% to 50% of the cost of gasoline, diesel, and kerosene.  Gas prices are already extremely high in Haiti, but with the increases, a gallon of gas was projected to cost $5.

The announcement led to protests throughout the country, in which 3 people were killed on Friday, business were looted and buildings set on fire. On Saturday President Moïse cancelled the rollback of subsidies, and yet protests continued, with people calling for Moïse to step down.

It is too early to know where this is heading. But a few points are important to provide context for what is happening.

The first, is that the announcement came as the government is under increasing pressure from the International Monetary Fund (IMF) to reduce the fuel subsidies program as part of a broader set of market reforms the IMF is requiring of Haiti if the country is to be able to access additional funding. Haiti has been under the scrutiny of international financial institutions for decades, with access to funding continually tied to structural reforms aimed at reducing government expenditures. Though Haiti had qualified for debt reduction under the Heavily Indebted Poor Country Initiative some years back, the reductions were highly conditioned, and benchmarks impossible to meet, given political instability, four hurricanes and the 2010 earthquake. The resulting hollowing out of state capacity to deliver social services makes it difficult for the government to meet the demands of the people, and leaves the country dependent on non-governmental and church organizations for the provision of health and education services. Actual debt cancellation is still required - as most of the Haiti’s multilateral debts have been accrued under un-elected governments.

A second point is that the Haiti’s participation in PetroCaribe has not provided the hoped for benefits, with political leadership using the funds for investments into business ventures that had no impact on poverty reduction. PetroCaribe is a program launched by Venezuela. Under the provisions of the program, a country may pay back a portion of the bill for oil sales at a very low rate of interest over an extended period of time. In Haiti’s case, 40% of the revenue from the sale of oil could be held and used for social services, with the payback of the balance over a 25-year period at 1% interest.

Earlier this year, an audit of the program as administered under former presidents Preval and Martelly  showed a number of problems. Questions arose, particularly, around Martelly’s prime minister, Laurent Lamothe’s facilitation of projects geared toward tourism. An example:

In another case, the Dominican corporation Ingeniería ESTRELLA was given a contract of   nearly US$20 million by the Martelly/Lamothe government to build an airport on Ile-à-Vache, which it was trying to develop as a resort for rich tourists. Le Nouvelliste visited the island recently and found that, although the company had pocketed more than $5.2 million in revenue, work on the project ended more than two years ago and left behind an unpaved landing strip half the size contracted for. No planes have been able to land on it.

The release of the audit back in January of this year led to much anger at the government - including the current government of President Moïse, who is from the same party as President Martelly, and has done little to confront these past abuses. Given past anger, Moïse clearly did not have the political capital and legitimacy with the people required to make the controversial announcement about steep increases in fuel costs.

Finally, the question of legitimacy is not a small one. In 2011, the United States intervened in elections in Haiti, demanding that Martelly be included in a runoff for which he did not qualify, according to Haiti’s electoral council (Martelly had come in third in first-round voting that year). The government eventually gave in under enormous pressure, and Martelly won the elections with a very low voter turnout. The United States seemed to embrace Martelly - the first president to win an election outside of the Lavalas movement or Preval’s Lespwa, a political coalition that included many former Lavalas members. Such a victory, long sought by U.S. policy makers, was not greeted warmly by the people of Haiti. This cloud hangs over President Moïse who has struggled to build a coalition within the context of PetroCaribe corruption scandal, controversies over re-establishing the army, and ongoing economic hardship. It doesn’t help Moïse’s case that there are reports that the U.S. State Department indicated he may be on the way out.

As one might expect, people are not simply burning tires and buildings over gas prices. The demonstrations have deeper roots, and thus it is not surprising that they have continued even after the cancellation of the increases.