Caracol Industrial Park is failing to deliver on the promises made to foreign investors and Haitians
On the fifth anniversary of the 7.0 magnitude earthquake in Port-au-Prince, Haiti remains a poster child for waste, fraud and corruption in the handling of aid. Nowhere is the bureaucratic ineptitude and greed harder to accept than at the 607-acre Caracol Industrial Park, a project launched by former Secretary of State Hillary Clinton with U.S. taxpayer money, under the supervision of her husband Bill and his Clinton Foundation.
Between the State Department and the Inter-American Development Bank (IDB), which hands out grants to very poor countries thanks to U.S. generosity, hundreds of millions of dollars have been spent on this park in an attempt to attract apparel manufacturers. But the park is falling far short of the promises made to provide investors with necessary infrastructure. If things continue this way, frustrated investors will look for greener pastures.
Successful industrial parks are built by people who know the business and who demand accountability. This park was put in the hands of State, the IDB and Bill Clinton. The results have been predictable.
I had been warned about Caracol going to the dogs by sources on the ground in Haiti. So last month I traveled east by truck from Cap Haitien, across the poor rural north of the country to see if the alarm was justified. I found a project in trouble. It can be saved, but only if it is handed over to professionals with skin in the game.
On paper Caracol makes sense. Thanks to special trade legislation passed by the U.S. Congress in Dec. 2006, Haitian-sewn apparel enters the U.S. duty free and the manufacturers can use fabric purchased from anywhere in the world. This gives Haiti a big advantage over apparel exporters to the U.S. who have to source the fabric in the U.S. even if they sew overseas. With lower wages than in many Asian markets and proximity to North America, Haitian-based producers have comparative advantages that might offset the country’s low productivity.
The State Department initially promised that the park would be able to support 65,000 direct jobs by 2020. The Clinton Foundation has made similar statements. That means constructing 40 10,000 square-meter buildings for garment assembly. It won’t happen at the current pace.
The total job-creating capacity since the foundation stone was laid in November 2011 is three assembly buildings and a 10-megawatt power plant. A fourth workshop is under construction but is unlikely to be completed before late spring.
This must be tough to take for the anchor tenant, the Korean manufacturer Sae-A Trading Ltd. It has committed to a $78 million investment at Caracol and currently employs some 4,500 Haitians. It says it wants to hire 20,000. To do so it needs another dozen buildings.
A Dec. 12 IDB press release says the Haitian government is approved for a new $70 million grant to construct, among other things, three new production buildings by 2018 with a goal of providing space for 6,800 workers. Bank officials have to know that putting Haitian government officials in charge of such a project is likely to doom it. But let’s suppose I’m wrong and the buildings go up. The Caracol workforce will then be 11,300—a far cry from the State Department’s estimate of 65,000 direct jobs or even the IBD’s forecast of 40,000.
It’s understandable for the IDB to want to lower expectations. But the target should be higher and it shouldn’t take three years to boost capacity. Craig Miller, president of the Boston-based Waterfield Design Group and a consultant for the Haitian apparel sector, told me that “once the materials are on site, a 10,000 square-meter production workshop can be built in six to eight months.”
Apparel manufacturers in Haiti are hungry for production space but my sources say investors were not given an option to build their own workshops in Caracol. The Clinton planners—Hillary at State and Bill at the Clinton Foundation—wanted to retain that responsibility for reasons that can only be guessed. So now the producers have to wait.
This is tragic for the thousands of Haitians eager to get the sewing jobs. Factory workers earn three times the average income in Haiti’s north. Sae-A produces for a wide number of American labels, such as Target and Wal-Mart, WMT +0.24% and the American companies regularly dispatch auditors to inspect work conditions. Even without the U.S. Labor Department breathing down its back, Sae-A has incentives to care for workers to retain them and boost productivity. Getting a spot on the assembly line opens the door to economic mobility, and that’s unusual in Haiti.
Haiti has a rare opportunity. Investors want to invest, workers want to work, and consumers want to buy. This seems like a good time for government to get out of the way.