Port-au-Prince needs a makeover. Can China be the answer?
Anyone who has been to Haiti's capital knows that crumbling infrastructure, terrible gridlock and blackouts are the norm.
Youri Chevry, the mayor of Port-au-Prince, says foreign aid can help him change all that — but not from Haiti's traditional partners. From mainland China.
“We don’t have a city,” said Chevry, who campaigned on reviving the destitute capital city, which was destroyed in the 2010 earthquake. “It’s not about China, or anybody else. It’s about rebuilding Port-au-Prince. China is offering me something that I like and I want to go for it.”
The Dominican Republic, Haiti's next door neighbor on the island of Hispaniola, has just entered into a new partnership with China after it reportedly offered $3.1 billion in investments and loans. In the process, the Dominican Republic severed diplomatic ties with Taiwan, a relationship it has had for 77 years.
Will Haiti be the next to find China's money too tempting to turn down?
Since last summer, two Chinese companies — Southwest Municipal Engineering Design and Research Institute and the Metallurgical Corporation of China (MCC), a state-owned construction firm — have been negotiating with Chevry over a $4.7 billion plan to rebuild the municipality of Port-au-Prince and transform it into a more modern city, according to the mayor and representatives of the Haitian firm involved in the negotiations.
Southwest Municipal did not respond to an email seeking comment and MCC could not be reached. But in an Aug. 25, 2017, letter sent by Chevry to Southwest adviser Xie Yong Jian, the city government confirmed its acceptance of the proposal. The letter was signed by Chevry and his two vice mayors. The mayors said they decided to support the project "after thorough research and prudent consideration."
Among the offerings to the city of Port-au-Prince: a 600-megawatt power plant, a 559-mile water distribution network, a sewage system with wastewater treatment plants, reconstructed roads, street security cameras, and a reconstructed downtown with a rebuilt city hall, parks and markets.
“If these things happen, it’s going to be a real start for Haiti, not just Port-au-Prince,” said Chevry, who initially just wanted to rebuild City Hall and the famous Croix-des-Bossale market where slaves were once sold, before the Chinese offered much more.
But there is a problem. Haiti remains loyal to Taiwan, which has been scrambling to hold on to its diplomatic allies as China steps up its campaign to force formal recognition of its "One China" policy by luring countries away from Taiwan with economic incentives. Because Beijing considers Taiwan to be a breakaway province that will one day be reunified with China, it won't extend diplomatic relations to countries that recognize Taiwan. The Dominican Republic became the second country in the region, after Panama last year, to make the switch to Beijing, reducing Taiwan’s diplomatic allies to just 19.
China’s latest poaching comes amid a threat of a trade war with the United States, and rising concerns by some U.S. lawmakers and the State Department about China's expansion into Latin America. A State Department spokesperson for the western hemisphere said the department is not only disappointed by the Dominican Republic's decision, but also "the timing of that decision; and the manner in which it was conveyed to the Dominican Republic’s international partners."
In Port-au-Prince, U.S. embassy officials have been trying to assess the state of Haiti and Taiwan’s relationship, which dates back to 1956 following Taiwan and China's bitter 1949 split and the start of their rivalry for global recognition.
On the heels of the Dominican move, Taiwan’s ambassador to Haiti, Hu Cheng-Hao, met with the president of the Lower Chamber of Deputies, Gary Bodeau, and President Jovenel Moïse to convey Taiwan's desire to invest more in Haiti’s agriculture.
Days earlier, in Taipei, Hu's government agreed to a $150 million low-interest loan for Haiti’s rural power grids as it hosted Haiti Foreign Minister Antonio Rodrigue. Rodrigue had traveled to Taiwan to negotiate additional assistance and prepare for an official state visit by Moïse, planned for May 26.
Moïse, who has been in office 15 months, is facing a $155 million budget deficit, dwindling foreign aid and mounting discontent over expected increases in fuel prices. He is under considerable pressure to find external financing to improve Haiti’s poor economic outlook and fulfill a slew of campaign promises, including bringing 24-hour electricity to all of Haiti within the next 13 months.
But with members of the country's private sector intensifying pressure for Haiti to follow in the footsteps of the Dominican Republic, Moïse faces tough questions about whether Haiti is missing out on development opportunities by sticking with Taiwan. While Taiwan recently financed the construction of Haiti's new post-quake supreme court building, its assistance has often been criticized as helping to enrich politicians rather than boosting development because aid checks are often given with little, if any, conditions or oversight.
“After 59 years of diplomatic relations, Haiti has been accustomed to an ally giving money directly to the authorities without ‘conditionalities,’ ” said Fritz Jean, an economist who was briefly prime minister of Haiti. “It helps smooth out political tensions and opens the door for non-orthodox behavior.”
Asked what he expects Moïse to get out of a Taiwan visit, Jean said, “beside the honor of being received as the commander in chief? Well, maybe $50 million more.”
That's enough to pay for roughly 31 miles of new paved road in Haiti, or even a presidential election.
Haiti, which inherited Taiwan’s embassy and ambassador’s residence in Washington after the Carter administration decided to recognize the People’s Republic of China as the only legitimate representative of the Chinese people, “is shortsighted,” Jean said.
“It’s a brave new world out there and mainland China is evolving to be on top of it economically and otherwise,” he said, noting that the Dominican Republic is demonstrating it understands the changing international landscape. “Sooner or later, we will have to concede involuntarily to the new world order [but] without the capacity to negotiate as our neighbors did. And we will receive peanuts.”
Nicolás Santo, an entrepreneur who has experience in doing business with China and its investments in Latin America, said the Dominican Republic was right to join "the overwhelming majority of the world in recognizing the [People's Republic of China]. This decision will certainly bring a lot of prosperity to the Dominican people.
"Rejecting the possibility of establishing diplomatic ties with the largest economy in the world makes no sense. China is the largest exporter in the world, the second largest importer, the second largest investor. By not having diplomatic ties with the PRC, a country is only missing the biggest opportunity of the century," he said.
And, Santo said, China also would get something out of the deal. "Helping Haiti and investing in Haiti would help China create a great regional branding and prove that when [former U.S. Secretary of State] Rex Tillerson said that China was an imperial power, he was wrong."
Chinese assistance isn’t without problems or critics.
In remarks delivered at the annual Washington Conference on the Americas at the State Department last week, Florida Sen. Marco Rubio, chairman of the Senate Foreign Relations Western Hemisphere subcommittee, called China a threat and said its expansion into the region needs to become a priority for the United States.
“The Chinese investment is not like our investment,” Rubio said. “Number one, they bring their own workers. Number two, it’s a one way street, but they use their political leverage to try to align the foreign policy of the country with theirs, and often against ours, including votes in international forums. And the third is, it’s a fountain of corruption. If an American company tries to bribe an official in one of these countries they're going to go to jail. That is a matter of practice, that’s the way they conduct business, and that’s difficult to compete against.”
At a Senate Foreign Relations subcommittee hearing on Tuesday, Rubio, questioning Deputy Assistant Secretary of State Alex Wong, asked if the State Department was reaching out to countries in the hemisphere about leaving Taiwan for Beijing and telling them "we don’t want to continue to see them to do so?"
"Attempts to close off the international space of Taiwan and to alter the status quo across the strait are disturbing to the United States," Wong said. "Any moves to strip Taiwan of its diplomatic partners disturbs that status quo and that’s something that we make clear to our partners and we make clear to Beijing as well."
"So we made it clear to the Dominican Republic that they shouldn’t do what they did?" Rubio asked.
"That is my understanding," Wong said.
"And they did it anyway," Rubio said.
Daniel Erikson, a former Obama administration expert on Latin America, said while a few members of Congress have been vocal, the Trump administration has been sending out mixed messages on whether its sees Chinese engagement in Latin America as a threat, a nuisance, or a fact of life.
"The paradox here is that the Trump administration professes to be greatly concerned about Chinese influence in the hemisphere, but then yawns when China succeeds in peeling away Taiwan’s allies,” Erikson said. “Why should countries in Latin American take broader U.S. warnings about growing Chinese influence seriously?”
The Port-au-Prince municipal renovation project is not the first time Haitian leaders have sought Chinese assistance. In 2015, then-President Michel Martelly’s government signed a $289.3 million contract with the Chinese to build a new airport terminal and upgrade Toussaint Louverture Airport. The contract required Haiti to pay down $42.5 million on the loan, which interim President Jocelerme Privert's government paid months later.
Privert was forced to back away from the contract after the U.S. and other donors objected because it violated Haiti's agreement with the International Monetary Fund, which had cancelled Haiti's debt after the earthquake. Under the agreement, Haiti can only accept low-interest or concessional loans, which the Chinese money was not. Up to now, Haiti has been unable to recover its down payment from China, Haiti's finance minister confirmed last week.
Under the Port-au-Prince deal being discussed with China, the money is a combination of low-interest and commercial-rate loans, said Hans Tippenhauer, CEO and vice president of Bati Ayiti. A local company, Bati Ayti has partnered with Metallurgical Corporation of China (MCC).
Tippenhauer said the funds would not be allocated to the municipality of Port-au-Prince or Haiti's central government, but rather a yet-to-be-created Haitian private-public company. The company would manage the investment during the construction and then operate the projects for 30 years, under what's known as build-operate-transfer, to recover the funds before transferring everything over to the municipality.
“All contracts are already signed and we are just now waiting for the president and prime minister to make up their minds,” said Tippenhauer. “China is offering Haiti an opportunity to not only repair its infrastructure, but also change its story and become a platform for the development of other Caribbean countries.”
Still, former government ministers and some economists remain skeptical of the project's feasibility. They cite not only the lack of diplomatic relations with China and Haiti's loan restraints, but question Port-au-Prince’s ability to repay such a debt even under the proposed build-operate-transfer structure. The city has very limited resources and even delivery of basic services like trash pickup is a challenge.
Chevry acknowledges his city has a revenue problem. His budget last year was just $7.7 million for more than a million residents living in a densely urbanized area. Meanwhile, a 2016 survey of 47,000 houses, found that only 5,000 had actually paid taxes.
"I won't be able to repay $4 billion," he concedes. "This isn't a loan, it's a type of financing. They are going to build these things...run it and they are going to get their money back."