A lesson on the Haitian economy

On Tuesdays and Thursdays I usually play soccer in an men's over 30 league. Last night in between games I sat down to one of the top economists in Haiti. He is on the board of directors of one of the largest banks in Haiti. He said that his bank processes the most money transfers in Haiti. Then he proceeded to tell me a statistic that astounded me: There are over 900,000 people who receive money transfers regularly. On average, the people who receive money transfers support 5 people. Therefore, about 45% of Haiti's population of about 10 million depend on money transfers for their livelihood.

He said that in his opinion, this is a form of welfare and most who receive transfers have little incentive to work because if they start to support themselves, the transfers will stop. He also said that most of the people who send the transfers are pretty poor themselves by western standards and are making sacrifices to send money to their relatives in Haiti.

Another interesting statistic he mentioned is that the Haitian workforce between the ages of 15 and 64 is about 5 million, or 50% of the population of Haiti. This means that even if Haitians were fully employed, they would still have at least one person dependent on them for financial support.

Haiti's unemployment rate is very difficult to determine, but estimates range from 40% in 2010 to 90% in 2012.

Another interesting perspective my friend gave me was on the value of the Haitian gourde vis a vis the US dollar. Currently the US dollar is worth about 42 gourdes. My friend said that it would be better for Haiti it is was more like 50 gourdes to the US dollar because then Haitian products, which are 90% textiles (T-shirts, etc.) and commodities like Coffee, Mangos an other agricultural products would be more competitively priced. He said that the value of the gourde should be depreciated more because of the 8.5% annual inflation rate compared to 3.1% in the US. This means at a minimum, the Haitian gourde should have devalued by 5.4% in 2011. Instead it only devalued by 4.5% to 5.0%.

If the gourdes was devalued, this would also mean that those who receive transfers from the US would have more spending power in Haiti.

He said he used to work at a bank in the Ivory Coast in Africa and the fact that the currency there was overvalued compared to the US dollar cost the country millions of dollars in cacao sales because it made their product artificially more expensive than other countries that grow cacao.

So please continue to pray for the economic situation in Haiti. Although the economy is grew at 5.6% in 2011, there is still a long way to go!