Haiti’s Debt

An Unending Debt: Financial Neocolonialism in Haiti from 1825 through Today

Haiti, as is widely known, is the poorest country in the Western Hemisphere. Its health statistics resemble those of Sub Saharan Africa and 80% of its people live below the poverty line (CIA World Factbook). Like its peers in Sub Saharan Africa, Haiti struggles with the legacy of colonialism; unlike its peers, it has been a (nominally) free and independent nation for two hundred years. Though Haiti declared its independence in 1804 and had its sovereignty recognized by France in 1825, it is still a country bullied and controlled by outside powers, including France, the United States, and international financial institutions. Haiti serves as a prime example of the subjugation through debt that Marx described as essential for primitive accumulation and continued resource expropriation. For the past two hundred years, Haiti has been re-colonized through foreign and international financial systems; though its slaves revolted and gained their freedom, Haiti continues to be enslaved by debt, and though some loans are canceled, new ones are made, perpetuating a cycle of financial neo-colonialism.

Haiti exemplifies Marx’s arguments regarding primitive accumulation, colonialism, and the international credit system. The French, Spanish, and British, at varying times and to varying degrees, sought the riches of the island of Hispaniola (which Haiti today shares with the Dominican Republic). Through “brute force” (Marx 915) they annihilated the native indigenous population just as the Dutch did in Java (Marx 916). France imported African slaves and established a plantation economy. The violence of the colonial system did not end once the former slaves threw out the French, declaring Haiti independent on January 1st, 1804. Rather, the “brute force” of the military colonial system was perpetuated by financial colonialism. Marx argued that the colonial system forced the development of the credit system (919); the development of the international credit system creates the debt that subjugates the colony and continues to provide resources to the colonizer (Marx 920). This often hidden source of primitive accumulation and resource expropriation, debt, is what has strangled Haiti’s development for two centuries and continues to do so today.

Historical Debt

Though Haiti gained its independence by throwing off France in 1804, twenty years later France regained economic control over the country by imposing a huge indemnity, by which the new nation would be indebted for 122 years. In the years following 1804, France sent commissioners to Haiti to retain colonial ties, in the face of which, Haitian leaders reaffirmed their nation’s independence (Heinl 156-157). On March 17, 1825, the French king sent two admirals with a royal ordinance in hand, and fourteen warships with 494 guns behind them, to President of Haiti Jean-Pierre Boyer in order to impose a unilateral arrangement on the island (Heinl 158). Through this ordinance, France declared that Haiti must pay it 150 million francs over the course of five years, and that it would not be declared independent until it had done so (Heinl 158). To put this into perspective, 150 million frances was equivalent to fourteen times the nation’s annual export revenues in 1825 (Lytje 1). Furthermore, Haiti would have to grant France a 50% tariff preference (Heinl 158). For the next four years President Boyer tried to re-negotiate the terms of the arrangement, but France would not yield. Boyer argued that the country was unable to pay such a sum, but France believed it could, since “The entire world knew the riches of ancient Saint-Domingue [Haiti]” (Heinl 159). That is, they knew the productive capacities of the island under the brutal colonial regime of France, but once the lands had been destroyed from over-production and the slaves made themselves free, the same riches could not be exhumed from the Haitian soil.

Robert and Nancy Heinl, like many other historians, writes that the Haitian president agreed to such an arrangement because he “had no choice” (158). Though the style and terms of the agreement were humiliating and would prove detrimental for the development of the nation, the country had no other options. The French commander-in-chief declared to the Haitians that “either … a new life of repose and happiness would begin for them or the large squadron would commence military operations” (Heinl 158). Paul Farmer argues that President Boyer, like many of his successors, saw the external debt as a “business expense” for diplomatic recognition (2003 67). At a time when the new country had not yet been recognized by others (most did not recognize it until the late 19th century), this was essential, especially because the nation’s revenue came from agricultural exports (Farmer 2004 1).

Given the immediate pressure of the French navy at Haiti’s ports, it is evident why the Haitian government signed the agreement. Yet it is still difficult to comprehend how the French could justify demanding reparations for the loss of their slaves. Indeed, Haiti is the only country where former slaves were made to pay another nation for their freedom (von Tunzelmann 1). Not only do contemporary observers struggle to come to terms with the injustice of the indemnity, contemporaneous writers did as well. For instance, French abolitionist Victor Schoelcher poignantly summarizes the injustice of the indemnity: “Imposing an indemnity on the victorious slaves was equivalent to making them pay with money that which they had already paid with their blood” (quoted in Farmer 2004 2).

The indemnity to France crippled Haiti’s economy almost immediately. For the payment of the first thirty million francs, President Boyer mortgaged Haiti’s revenue, and for the six million francs of interest, he depleted the national treasury of its liquid reserves (Heinl 159). On January 23rd, 1838 Haiti and France re-negotiated the indemnity: in exchange for its sovereignty and independence, Haiti would have to pay France 60 million francs, rather than the 120 million remaining francs, over thirty years (Heinl 160). Even with this reduction, Haiti was unable to pay the large sum. By the end of the nineteenth century Haiti was sending 80% of its national revenue to France (Farmer 2003 77).

In order to pay its debt to France, Haiti sought loans from other nations, mainly the United States, Germany, and France, pushing itself deeper into debt (von Tunzelmann 1). For instance, in 1922 the United States lent Haiti $40 million (during this time the U.S. occupied Haiti and New York banks took over the national bank and national treasury) (Farmer 2003 88). Thus the cycle of debt payment and new loans continued: the indemnity that had been imposed upon the Haitians forced them into a position in which they had to seek out loans from other nations, providing no relief from the crushing debt.
In 1947, Haiti finally finished paying off the debt, from the indemnity plus interest, to France(von Tunzelmann 1). Sixty years later, the first democratically-elected president of the country, Jean-Bertrand Aristide, began a lawsuit and a public campaign to force France to compensate Haiti for the money it had stolen from them through the indemnity. Aristide demanded $21,685,135,571.48, the modern equivalent of all the money Haiti had sent to France. Soon after, Aristide was removed from office in a military coup for the second time. Many Haitians and scholars outside of Haiti argue that there is a direct causal link between the two events (see Chomsky 2004, Farmer 2004), though not surprisingly the governments of France and the United States deny this. Even now, France apologizes for the role it has played in blocking Haiti’s development, but dismisses any ideas of reparation payments to Haiti. In February of this year Nicholas Sarkozy became the first French president ever to visit Haiti (he stayed a grand total of four hours). He pledged aid to the country and acknowledged that: “We are staring at history in its face, we have not discarded it and we assume responsibility,” yet when asked if France would pay Haiti back for the indemnity, he responded “Non, non, non” (Al Jazeera).

Thus its former colonizer, France, maintained a strong hold over Haiti for 122 years after its independence, not through military might but through financial strangling. Haiti’s initial debt forced it to take on new loans, pushing the nation further into debt and away from economic development. The case of Haiti’s indemnity to France exemplifies the way that (former) colonies are kept subjugated through debt, as Marx predicted they would.

Recent Debt

The reparations Haiti sent to France stagnated its development, so much that international financial institutions (“predatory lenders” one may call them) closed in on this desperately poor nation. In the past few decades, Haiti’s debt has grown exponentially, from $302 million in 1980 to $1.134 billion in 2004 (Farmer 2004 3). In 1986 the country took out an IMF loan of $25 million, on conditions of structural adjustment that included privatizing infrastructure and transferring responsibility for service delivery to NGOs (Nicholls xxi; Beeton 2). Haiti had to pay so much in arrears of these debts that as of July 2003 Haiti was sending 90% of its foreign reserves to financial institutions in Washington D.C.(Farmer 2004 3). In 2007 Haiti’s foreign debt totaled $1.54 billion, which represented 27% of its GDP (Weisbrot 5). 78.5% of this debt was owed to the InterAmerican Developmental Bank (IDB) and the World Bank (Weisbrot 4).

A large portion of these loans, about 40%, were taken out by the Duvalier dictators, who led Haiti from 1957 to 1986 (Farmer 2004 3). It is estimated that when Baby Doc fled the country he took $900 million of these loans with him (von Tunzelmann 2). Still more of these loans were taken out by the military regimes that ruled from 1986 to 1990 (Farmer 2004 3). Though the abuses and resource misuses of the Duvaliers and military regimes were widely known and reported, countries and financial institutions continued to lend to them (Lytje 2). This debt was used, not for the benefit of the people, but to fund their oppression. Thus it is “odious debt” (a categorization the United States developed in the 1920s when it refused to pay Cuba’s debt to Spain), and as specified by international law, it does not need to be repaid (Farmer 2004 3). Though these loans to Haiti’s cruelest leaders have not benefitted the public, it is the Haitian people who are now responsible for the debt their former leaders accrued. As Marx wrote 150 years ago, “The only part of the so-called national wealth that actually enters into the collective possession of a modern nation is – the national debt” (Marx 919). Indeed, in Haiti it is the suffering from debt, not the benefits of new resources that loans bring, that the public owns.

Haiti’s foreign debt was so substantial that many groups, including the Jubilee Network, Jubilee South, and Jubilee Debt Campaign, and the Center for Economic and Policy Research, called for its cancellation (see Lytje and Weisbrot, among others). They argued that the country was so heavily burdened by debt and so impoverished by its history of debt that it could not move forward. In 2007 Mark Weisbrot also goes on to argue that the funds freed up through debt cancellation could be used by the Haitian government to respond to national disasters, such as hurricanes, which between 2004 and 2007 caused destruction of homes and loss of lives that could have been prevented (11). His words proved alarmingly true three years later when the devastating earthquake struck Haiti and the government had little resources to respond.

In June 2009, Haiti had $1.2 billion in debt to the World Bank, IMF, and United States canceled through the Heavily Indebted Poor Countries (HIPC) program. (Lytje 1). This program was established in 1996 by the IMF and World Bank to reduce the debt burden of severely under-developed nations (Lytje 1). It requires recipient countries to first lower poverty, government spending, and inflation before debt cancellation is granted (Weisbrot 9, von Tunzelmann 2). Not only are the conditionalities in this process difficult to achieve, but they also require HIPC countries to rely on loans, thereby creating new debt, while trying to erase old debt (Bretton Woods Project 12 Feb). Haiti’s debt cancellation through this program was delayed and put on hold until the United States agreed to contribute a $20 million advance payment to cover what Haiti owed in debt service, a loan which Haiti would need to later repay to the U.S. (Lytje 1). While this cancellation represented a huge step in relieving Haiti’s debt, 1/3 of Haiti’s total debt remained, which came from loans made since 2004 by Venezuela, the IDB and the IMF (Lytje 1).

Following the devastating earthquake of January 12th, 2010, many nations and institutions responded to Haiti’s dire need by canceling its debt. Prior to the earthquake Haiti’s foreign debt totaled $1.25 billion (Bretton Woods Project 12 Feb). Debt from bilateral loans from Venezuela and the G7 countries was quickly canceled (Bretton Woods Project 12 Feb). On September 30th the IDB erased the $484 million that Haiti owed it, in part because the United States gave this institution a $204 million contribution to cover the remainder of Haiti’s debt to them (IDB).

The recent erasure of debt, through both the HIRC program and responses to the earthquake, challenges Marx’s ideas of subjugation through debt, and yet in some ways also reaffirms them. Marx would not have anticipated the acts of solidarity made by the world’s capitalists towards the suffering Haitians. This humanitarian endeavor of debt cancellation releases colonies from the hold of their neo-colonizers (i.e. financial institutions and sovereign nations). It alleviates the “brute force” of financial colonization, providing hope for a path forward, debt-free. Yet the debt cancellation processes that require structural adjustment and new loans perpetuate the cycle of debt. Upon closer examination these debt erasure programs are merely shams, methods of re-instituting new debt and new forms of control over the financial dealings of the nation. They illuminate the lasting power of the international credit system as Marx saw it. Civil society organizations like the various Jubilee campaigns, which advocate for true debt cancellation without conditions and new loans, may eventually exert enough pressure to achieve real debt erasure. But until that time, international financial institutions and lender nations continue to control the resources and future of Haiti through debt.

New Debt

Since the January earthquake, more loans have been made, and Haiti continues to be burdened by debt. In January, the IMF gave Haiti an emergency assistance loan of $102 million that had no interest, but would have to be repaid after five years, adding to the $166 million debt already owed to the IMF (Bretton Woods Project 12 Feb). In July of this year, the IMF cancelled $258 million of Haitian debt, but on the same day released another loan of $60 million (Bretton Woods 12 Feb). Haiti must start repaying this loan in 2016, and it comes with the conditions of “macroeconomic stability,” inflation control, and “strengthening fiscal governance” attached (Bretton Woods Project 30 Sept; Dearden 1).

This type of “pretended debt relief” is not uncommon (Bretton Woods Project 30 Sept). Much lauded debt cancellation from financial institutions and lender nations requires new forms of indebtedness, new conditions attached, and new expropriations of natural resources (Bretton Woods Project 30 Sept). Nations and international financial institutions lend to weakened and impoverished countries, especially those suffering from disasters such as the Haitian earthquake, because they are unable to decline an offer and are desperate for funds (Gunewardena).

Marx summed up the IMF debt cancellation and new debt dispersal simply: “It was not enough that the bank gave with one hand and took back more with the other; it remained, even while receiving money, the eternal creditor of the nation down to the last farthing advanced” (Marx 920). Though the Fund gave to Haiti by canceling part of its debt, it simultaneously took from the country by burdening it with a debt that will continue to delay the day it can achieve true independence.

No Debt?

The utter violence of the system of international credit is that it not only forces loans upon unwilling nations, but it also makes those nations dependent on loans, trapped in a cycle of debt and new loans that is difficult to escape. Haiti provides a case in point. In 2001, the freezing of loans to Haiti caused a halt in the function of the state and nation, revealing the severity of the nation’s reliance on these loans.

In the May 2001 Haitian elections, eight parliamentary positions were contested; in response to allegations of election fraud, the United States froze its aid to Haiti and called on the Inter-American Development Bank to block its loans. These loans, totaling $500 million, had been designated for four areas: health, education, road construction, and drinking water improvement (Beeton 3). Without the funds to proceed with these projects the Haitian government stood at a standstill. Even when seven of the eight senators resigned, the freeze on aid and loans continued (Farmer 2004 3). Many observers challenge the allegations of fraud, but as Beeton writes, “even if [they] had been true… it would have been nothing different from what has occurred in dozens of countries around the world receiving support from the IMF, World Bank, and the U.S. itself” (Beeton 4).

Whether or not the allegations were grounded in truth, this case demonstrates Haiti’s complete dependence on foreign loans. Burdened by the initial debt of $21 billion to France, Haiti has had to rely on foreign funds in order to pay back loans, and then to pay for the infrastructure and services it never had a chance to develop because of prior debt. The power of the international credit system is that it keeps Haiti stuck in a cycle of debt and new loans; even if Haiti wishes to decline new loans or is suddenly denied the resources from current loans, as in this case, it has little to no other available options for freeing itself from debt and developing independently than to turn back to foreign loans.

Throughout Haiti’s history it has been crippled by debt. Its independent development has been denied by foreign nations and by international financial institutions. Clearly the diversion of funds from service provision and infrastructure improvement to paying debts for centuries has inhibited Haiti’s economic growth:

Each payment to a foreign creditor was money not spent on a road, a school, an electrical line. And that same illegitimate debt empowered the IMF and World Bank to attach onerous conditions to each new loan, requiring Haiti to deregulate its economy and slash its public sector still further (Klein 2).

Thus not only did the debt pull resources from other sectors, but the institutions lending the funds forced the government to cut any remaining social services it could provide.

Naomi Klein argues that Haiti’s foreign debt should not just be forgiven. It should in fact be repaid. The direction of the flow of reparations should be turned around so that Haiti receives compensation for all that is has suffered at the hand of foreign nations and international institutions: slavery, US occupation, dictatorship, and climate change (Klein 1). Such a reversal would require a dramatic movement of power and resources from the Global North to the Global South, one that Marx predicted would inevitably occur through a world-wide proletariat revolution. Until that time, if it ever arrives, Haiti will most likely remain a country crushed by cycles of poverty, hunger, poor health, and of course, national debt. Despite the great demonstration of collective action in Haiti, its successful slave revolution of 1791-1804, the country has never achieved true independence, but has instead remained tied to the Global North through debt.

Works Cited:

Beeton, Dan. “What the World Bank and IDB Owe Haiti.” Global Policy Forum. 24 July 24, 2006.

Bretton Woods Project. “Debt aftershocks to shake Haiti’s recovery? IMF and World Bank debts provoke outcry.” 12 February 2010. http://www.brettonwoodsproject.org/art-565913

Bretton Woods Project. “IFI-induced debt catastrophes?” 30 September 2010. http:// http://www.brettonwoodsproject.org/art-566639

Dearden, Nick. European Network on Debt and Development. “IMF debt cancellation for Haiti at least (and a new loan).” 27 July 2010. http://www.eurodad.org/whatsnew/articles.aspx?id=4208

Farmer, Paul. The Uses of Haiti. Maine: Common Courage Press, 2003.

—. “Who Removed Aristide” The London Review of Books. 15 April 2004: 28–31.

“France pledges $450m to Haiti.” Al Jazeera, English ed. 18 February 2010. http://english.aljazeera.net/
news/americas/2010/02/2010217161123953477.html

Gunewardena, Nandini and Mark Schuller, eds. Capitalizing on Catastrophe: Neoliberal Strategies in Disaster Reconstruction Plymouth, U.K.: Altamira Press, 2008.

“Haiti.” CIA World Factbook. 2010. Central Intelligence Agency. 22 September 2010 https:// http://www.cia.gov/library/publications/the-world-factbook/geos/ha.html

Heinl, Robert Debs and Nancy Gordon Heinl. Written in Blood: The story of the Haitian People 1492-1995. 3rd Ed. New York: University Press of America, 2005.

Inter-American Development Bank Press Release. “With U.S. contribution, IDB cancels Haiti’s remaining debt.” 30 September 2010. http://www.reliefweb.int/rw/rwb.nsf/db900SID/ KHII-89T3VV? OpenDocument

Lytje, Mimi. Jubilee USA Network. “Policy Update: Debt Cancellation for Haiti.” August 2009. http://www.lwr.org/Haiti/advocacy/docs/ Policy_Update_Debt_Cancellation.pdf

Klein, Naomi. “Haiti: A creditor, not a debtor.” The Nation. 11 February 2010. http:// http://www.thenation.com/doc/20100301/klein.

Marx, Karl. Capital: Volume 1: A Critique of Political Economy. New York: Penguin Classics, 1992.

Nicholls, David. From Dessalines to Duvalier: Race, Color and National Independence In Haiti. London: Macmillan, 1988.

von Tunzelmann, Alex. “Haiti: the land where children mud.” The Times. 17 May 2009.
Weisbrot, Mark and Luis Sandoval. “Debt Cancellation for Haiti: No Reason for Further Delays.” Center for Economic and Policy Research. December 2007.