Martin Ibasco

mdibasco@bu.edu U96565117

EC102 DD

Jay Zagorsky

EC102 D2

Eyno Rots

Boston University

Haiti-t or Love it
The Modern Day Model of Inequality

Martin Ibasco

EC102

Haiti, The Minuscule Meniscus

Located in the Caribbean, west of the

Dominican Republic, in between the Caribbean Sea and the North Atlantic Ocean, is
Haiti. Formally known as the Republic of Haiti,
the country is governed by a republican administration that has been independent since
January 1, 1804.

Haiti has a population of around 9.9

million people (as of July 2013) with three

main ethnicities. Blacks are the majority composing 95% of the population. Mulattos and whites are the minority composing 5% of the
population. Considered to be a country rich in natural resources, nearly two-fifths of all Haitians depend on the agricultural sector of the economy.

Despite being a free market economy benefitting from low labor costs and tari free

access to the US for most of its exports, corruption is prevalent in Haiti. The eects of which
have been passed on to most of the population, maintaining high levels of poverty (80% of
the population living under the poverty line of $2 per day) together with low levels of education (more than 50% of children aged 4 to 12 are not enrolled in school). Bearing in mind
Haitis susceptibility towards natural disasters, the continuous growth of its economy can
only be considered as dependable as the stability of a torn meniscus.

This paper will explore the dierent macroeconomic trends in the history of Haiti, util-

izing factors such as growth, debt, and labor, in conjunction with the current state of widespread poverty and income inequality present in its society.

Haiti-t or Love it The Modern Day Model of Inequality

Martin Ibasco

EC102

A Bumpy Economic Path

Macroeconomics in Simple Terms
Terminology

What is it?

How is it calculated?
GDP is the sum of

Nominal GDP is the value all

The market value of all goods and Consumption (C),

GDP
Gross Domestic Product

services produced in a countrys

Investments (I), Government

geographic boundaries in a given Purchases (G), and Exports

time period, minus the value of all (X), minus Imports (M).
goods and services used in the

In formula form:

process of production.

goods and services produced, not

adjusted for inflation using the
current price.
Real GDP is the value of all goods
and services produced, adjusted

GDP = C + I + G + X - M
GNI is the sum of GDP, Net
The sum value of GDP plus net
GNI

Types

receipts of primary income

(employee compensation and

Gross National Income capital investment income) from
abroad.

Income (Foreign Income FLDomestic Income DL), and

Net Capital Income (NCI)
In formula form:

for inflation using a constant price.

Nominal GNI is the combined
value of GDP with net receipts of
primary income abroad, not
adjusted for inflation using the
current price.
Real GNI is the combined value of
GDP with net receipts of primary

GNI = GDP + (FL-DL) + NCI income abroad, adjusted for

inflation using a constant price.

After defeating the French forces on January 1, 1804, Haiti was declared an inde-

pendent nation. Exactly fifty-nine years later, on January 1, 1863, Abraham Lincoln recognized Haiti, authorizing the provision of tari free exports to the US, commencing Haitis
route towards economical
Nominal"vs"Real"GDP"

(199142011)&&

Real"GDP""

In early years of the

1990s, there much political instability in Haiti. Aristide, a

8"
6"

priest, was elected president in

4"
2"

1990 but was ousted in 1991

0"

only to be restored to power by

1991"
1992"
1993"
1994"
1995"
1996"
1997"
1998"
1999"
2000"
2001"
2002"
2003"
2004"
2005"
2006"
2007"
2008"
2009"
2010"
2011"

Billions&

Total&GDP&

Nominal"GDP"

progress.

Year&

Haiti-t or Love it The Modern Day Model of Inequality

the UN in 1994. During this time,

Martin Ibasco

EC102

the GDP of the country decreased significantly, plummeting a net of 21% over the four years.
It was only in the latter part of the 1990s that Haitis GDP improved, soaring 10% (Real GDP)
in 1995 when UN peacekeepers started replacing US troops. The election of Rene Preval reinforced this growth as, after his election in 1996, Real GDP grew at a constant rate of
around 3% per year all the way till 2000.

In the years of the 20th century there has been constant growth in the real GDP of

Haiti. There have been occasional dips which are attributed to the natural disasters that
strike the country such as the severe floods that occurred in 2004 causing a decrease of 4%
in real GDP and the massive earthquake that struck Port-au-Prince, Haitis capital, causing a
5% decrease in real GDP.

In 2007 there were over 1.5 million Haitians working abroad sending more than $1.65

billion in cash to relatives in Haiti. This amount is equivalent to about 30% of the countrys
GDP during that year, emphasizing the significant impact Haitians living abroad have on their
home countrys economy.

Nominal&GDP&vs&GNI&
(2004;2011)&

Real&GDP&vs&GNI&&
(2004<2011)&
Real"GNI"

15"
10"
5"
0"
2004"

2005"

2006"

2007"

2008"

2009"

2010"

Year&

2011"

Billions&

Nominal"GDP"(current"US$)""

Total&Amount&

Billions&

Total&Amount&

Real"GDP"

Nominal"GNI"(current"US$)"

8"
6"
4"
2"
0"
2004"

2005"

2006"

2007"

2008"

2009"

2010"

2011"

Year&

Comparing real GDP with real GNI, there is a discernible dierence in the amount con-

tributed to the Haitian economy with real GNI contributing around 70% more for every year.
Though this is the case, comparing nominal GDP with nominal GNI, GNI contributes an average of 1% more, noting that even though there are over 1.5 million Haitians working abroad
contributing remittances to Haitis economy, they only contribute a small percentage of
Haitis total economical pie.

Haiti-t or Love it The Modern Day Model of Inequality

Martin Ibasco

EC102

Health Very Much is Wealth

In respect with other countries, there is a high risk for being infected with diseases in

Haiti. In 2009, Haiti ranked 29th out of 153 countries in HIV/AIDS deaths that year with 7,100
deaths. The adult prevalence rate that year was also relatively high at 1.9% with 120,000
people living with HIV/AIDS. Despite this, there has been a steady rise in the total population
in Haiti, with an average yearly increase of around 1.7% from 1990 all the way to 2011. In
conjunction with total population, the total labor force has also been increasing from 1990 all
the way to 2010, with a slightly higher average yearly increase of about 2.2%.

Millions&

12"
10"
8"
6"
4"
2"
0"

1990"
1991"
1992"
1993"
1994"
1995"
1996"
1997"
1998"
1999"
2000"
2001"
2002"
2003"
2004"
2005"
2006"
2007"
2008"
2009"
2010"
2011"

Total&Popula*on&

Total&Popula*on&
(199062011)&

Year&

Total"Labor"Force""

4.5"
4"
3.5"
3"
2.5"
2"
1.5"
1"
0.5"
0"

1990"
1991"
1992"
1993"
1994"
1995"
1996"
1997"
1998"
1999"
2000"
2001"
2002"
2003"
2004"
2005"
2006"
2007"
2008"
2009"
2010"

Millions&

Total&Labor&Force&

(199062010)&

Year&

Haiti-t or Love it The Modern Day Model of Inequality

Martin Ibasco

EC102

Relative to its total land area of 27,560 square kilometers, Haiti is a moderately sized

country with a population of around 9.9 million people, ranking 88th out of 239 countries in
terms of population size. Segmenting the whole population by age, it is apparent that Haiti
has a fairly young population with 96% of individuals being below 64 years of age. Of the
youth, 35% are incapable of working while seniors (those above 64 years of age) consist only
4% of the population. With only 39% of the population unable to work, Haiti has a fairly large
labor force of 4.81 million to support the growing economy.
Percentage)Total)Popula/on)by)Age)
(July)2013))
Above%64%%
4%%

Ages"15064"

0"14%%
35%%
25"54%%
35%%
15"24%%
21%%

Ages"15024"

80"
60"
40"
20"
0"

1990"
1991"
1992"
1993"
1994"
1995"
1996"
1997"
1998"
1999"
2000"
2001"
2002"
2003"
2004"
2005"
2006"
2007"
2008"
2009"
2010"
2011"

Percentage)Par*cipa*on)

55"64%%
5%%

Labor)Force)Par*cipa*on)Rate)by)Age)
(199092011))

Year)

Using the information given by percentage total population by age and labor force

participation rate by age, the average labor force participation rate for the age group 25 to
64 years old as well as the total population participation in the dierent age groups was determined.
Age Group

Percentage of
Total Population

Total Population in Age Group

Average Labor Force

Participation Rate

Total Population
Participation in Age
Group

15-64

61%

6,039,000

68.87%

4,166,910

15-24

21%

2,079,000

39.60%

831,600

25-64

40%

3,960,000

84.23%

3,335,310

Haiti-t or Love it The Modern Day Model of Inequality

Martin Ibasco

EC102

Looking at the graph of age de-

Age)Dependency)Percentage))
(199092011))

pendency percentage over time, it is seen

stant increase in Haitis total population, it

can be concluded that, every year, there
are more individuals that join the productive part of the population than they do

90"
80"
70"
60"
50"
40"
30"
20"
10"
0"

19
90
19 "
91
19 "
92
19 "
93
19 "
94
19 "
95
19 "
96
19 "
97
19 "
98
19 "
99
20 "
00
20 "
01
20 "
02
20 "
03
20 "
04
20 "
05
20 "
06
20 "
07
20 "
08
20 "
09
20 "
10
20 "
11
"

age annual rate of 1.33%. With the con-

100"

Percentage)of)Working)Age)

that dependency is decreasing at an aver-

Year)

the dependent.

In 2012 Haitis exports totaled $785 million or around 11% of its GDP. Of the com-

modities that were exported, most were agriculture products such as cocoa, mangoes, and
coee. If the countrys GDP was segregated by sector, agriculture would compose 25% of
total GDP, with an occupational labor force of 38.1%. Considering that of 27,560 square
kilometers available, 18,400 square kilometers are being used for agricultural purposes
(66.76% of all available land) Haitis economy can be said to be dependent on agriculture.

With agriculture economies requiring large amounts of labor, the trend of a growing

population along with an increasing labor force, will ensure future growth in Haitis currently
modest economy.

Haiti-t or Love it The Modern Day Model of Inequality

Martin Ibasco

EC102

The Gift That Keeps On Giving

Historically speaking, Haitis first incurred debt was on January 1, 1804, the day it

gained independence. After the successful rebellion, France, in admittance of defeat, demanded compensation for lost property and freed slaves. The debt was priced at 150 million
gold francs to be paid over the next 122 years. With the acceptance of the debt, one colonizer was merely traded for another.

As of 2012 Haitis external debt stood at $1.125 billion, a 67% increase from the

$674.6 million external debt the country had on 2011. The large increase in debt size is due
to the lack of promised financial aid to continue the reconstruction eorts from the aftermath
of the 7.0 earthquake that the country two years back. Contributing to the debt was the deficit of $113 million incurred during the year as government revenue was $1.001 billion while
government expenditures was $1.114 billion.
Macroeconomics in Simple Terms
Terminology

What is it?
The sum of public, public guaranteed, and private non-guaranteed long-term debt, use of IMF

External Debt Stocks

credit, and short-term debt.

An organization of 188 countries, working to foster global monetary cooperation, secure

IMF

financial stability, facilitate international trade, promote high employment and sustainable
International Monetary Fund

economic growth, and reduce poverty around the world.

Billions'

Amount'

Total'External'Debt'Stocks'
(1990<2011)'
2.5"
2"
1.5"
1"
0"

1990"
1991"
1992"
1993"
1994"
1995"
1996"
1997"
1998"
1999"
2000"
2001"
2002"
2003"
2004"
2005"
2006"
2007"
2008"
2009"
2010"
2011"

0.5"

Year'

Haiti-t or Love it The Modern Day Model of Inequality

Martin Ibasco

EC102

Looking at the graph of total external debt stocks, it is apparent that from 1990 all the

way to 2008 there has been an upwards trend in the total debt incurred by Haiti. It was only
in 2009 onwards, when Haiti met the requirements of the IMFs HIPC (Heavily Indebted Poor
Countries) initiative that the countrys debt showed a significant downwards trend, decreasing by an annual average of 26%. The IMF has given Haiti around $1.2 billion in debt relief so
far.

Ranked as 154th out of 205 in the world in terms of debt it seems that Haiti has a

moderate debt when compared to other economies such as Nigeria (ranked 93rd out of 205)
with a debt of $10.1 billion. When comparing debt in terms of debt per capita, Haiti has a
higher debt per capita of around $113 compared to Nigerias debt per capita of $57. Considering that 80% of the population is living under the poverty line of $2 per day, this 98% difference in debt per capita merely exemplifies the massive burden current Haitians face, and
with Haitis yearly budget deficit and dependence on foreign aid, the next generation of Haitians may face serious problems.

Haiti-t or Love it The Modern Day Model of Inequality

Martin Ibasco

EC102

Impeccably Indiscernible Inequality

Poverty and corruption, are amongst, if not, the most commonplace happenings in

Haiti. Considered the poorest country in the Western Hemisphere, 80% of Haitis population
lives under the poverty line, having an income of less than $2 per day. Even worse is that
54% of the total lives in abject poverty, having an income of less than $1 per day.

Looking at the figures of Haitis economy, one would assume that Haiti, despite the

large amounts of debt, is stable and growing economy. Most of the numbers show that
Haitis GDP, population, as well as labor force has been, and is predicted to grow in the future. The dierence between the perception and reality of Haiti is mostly due to the corruption prevalent in Haitis government, with the poor getting poorer while the rich get even
richer. As described by BBC news, the enormous gap in wealth is due to 1% of the Frenchspeaking mulattos (a mix of black and white) owning nearly half the countrys wealth.

One of these elite mulatto families are the Bigios. The Bigio family settled in Haiti in

1896 and established their name in the Haitian economy, owning a group of diversified group
of companies under the name of the Gilbert Bigio Group. Segregating the companies by industry, the family operates a fully pledged oligopoly under almost all industries such as agriculture, construction, consumer goods, energy, environmental service, infrastructure, telecom, trading, and transportation. With such a diversified group of companies, one would figure that looking at financial figures would not be a problem, but it was. There are no annual
reports or any estimates of the groups financial figures whatsoever, leading one to assume
the extent of the Bigios political ties.

With the presence of these oligopolies existing in Haiti, it is no wonder that lowest
10% of the population has an income of 0.7%
relative to the rest of the economy.
Wealth is not always everything, as seen from the
Bigio groups misuse of the spellcheck.

Haiti-t or Love it The Modern Day Model of Inequality

10

Martin Ibasco

EC102

Conclusion

Despite blatant problems with poverty, corruption, and inequality, Haiti is taking baby

steps in growing its economy. For one, the debt of Haiti is shrinking due to the help of the
IMF, freeing up government revenues to be focused on stimulating other parts of the economy such as healthcare. With a growing population and labor force together with incrementally rising GDP, Haitis economy has a positive future.

Really, the only problem are those damn mulattos.

Haiti-t or Love it The Modern Day Model of Inequality

11

Martin Ibasco

EC102

Sources
1. CIA. "CIA." The World Factbook. N.p., n.d. Web. 10 Apr. 2013.
<https://www.cia.gov/library/publications/the-world-factbook/geos/ha.html>.
2. "Haitians abroad sent $1.65 billion home last year| Reuters." Business & Financial News,
Breaking US & International News | Reuters.com. N.p., n.d. Web. 11 Apr. 2013.
<http://www.reuters.com/article/2007/03/06/idUSN06417841>.
3. "Important Dates in Haitian History." Black News, Opinion, Politics and Culture - The Root.
N.p., n.d. Web. 11 Apr. 2013.
<http://www.theroot.com/views/haiti-historical-timeline?page=0,1>.
4. "The World Bank DataBank." Explore . Create . Share. N.p., n.d. Web. 11 Apr. 2013.
<http://databank.worldbank.org/data/views/reports/chart.aspx#>.
5. Jay Zagorsky Lecture Slides

Haiti-t or Love it The Modern Day Model of Inequality

12