By Patrick Moynihan and Tommy Cody
When small, oft-forgotten countries like Haiti experience high inflation, it does not make the news like a country such as Mexico or Argentina would. However, the people of Haiti are likely to suffer as much or more given that their buying power is already the weakest in our hemisphere.
Whether it is on our radar or not, skyrocketing inflation, unemployment, and a quickly weakening currency are destabilizing an already vulnerable country adding daily to the heightened political unrest. There are ongoing riots in the country asking for answers; some are even asking for the president to step down.
Most recently, as if the situation was not dire enough, the very agency responsible for collecting import taxes—the main source of revenue for the struggling nation other than direct aid—has gone on strike. Workers at the Directorate General of Taxes (DGI) want their pay adjusted. Who wouldn’t if your paycheck just lost over 30% of its buying power? However, they may end up with a nose-less face given it is their work that brings in the money the government has to pay salaries.
In the past 12 months, the Haitian gourde has decreased precipitously in value. It now takes over 90 gourdes to purchase one US dollar—it was in the low 60s last June and as little as 45 in 2015. The resulting high inflation (over 25%) is sending an already poor nation into greater poverty and increased political turmoil.
Since Haiti produces very few goods, currency devaluation has a direct and immediate impact on the livelihood of everyday Haitians by increasing the local cost of imported goods. Already struggling, those at the bottom of economy—70% of Haitians—are hurting the worst. However, the economic crisis is severe enough to curtail normal operation of even large businesses.
To take a step back, Haiti’s current economic turbulence is not solely a result of internal issues. The recent failure of Venezuela’s economy is a major factor. How? Out of appreciation for the safe-harbor Haiti provided to Simon Bolivar, the great South American liberator, Venezuela has historically provided Haiti with aid through its PetroCaribe program in the form of subsidized petroleum products. Much like a grotesquely played game of musical chairs or the stomach punch end to a Ponzi scheme, when the Venezuelan subsidy stopped, several politicians and an economy were scrabbling for a place to land.
Haitian private sector member, Patrick Brun, worries that Haiti’s currency problems have kick-started a treacherous cycle. “Businesses adjust their prices to replacement cost and this drives prices up,” Brun stated. “As a result, people need more gourdes to purchase the same quantity of goods while revenues do not increase.”
Unfortunately, the pattern Brun details above weakens the gourde even more; it causes increased incentive to ‘dollarize’ (to post prices or makes sales in US dollars) the economy. This forces the everyday Haitian to buy dollars—putting more downward pressure on the gourde. This negative cycle places greater stress on families’ budgets, making even small, daily purchases high-stress decisions.
Even those fortunate enough to keep their jobs suffer and risk losing the economic foothold they established for themselves. As Brun warns, Haiti’s middle class is at great risk. “Where higher income households can cope for a limited period of time with the difficulties caused by accelerated devaluation, borderline middle-class households drop quickly below poverty levels,” he stated. What exactly this drop below the poverty line looks like depends on what families value and are able and willing to sacrifice. For many, this means difficult choices with long-term consequences.
Haiti’s recovery from immediate issues has proven near miraculous in the past. This can be attributed to its amazing people and their hearty love and willingness to sacrifice for nationhood. However, a country cannot simply will itself a future. A country must also have a working economy for even the best of people to have a fighting chance.
Dear Friends, though these issues may seem beyond our control, there is a way you can help. Please consider a donation to The Haitian Project at this time. This will help create the financial flexibility to allow us to continue to work with our employees to alleviate the economic issues they are experiencing. We hope to move forward on salary raises and annual contract payments as a first measure.