Blog - Haiti and Debt Cancellation Legislation

Despite the the constant focus of our national media and political blogs (including this one) on the big trends (namely, health care for the past 6 months), members of the United States Congress still manage to introduce and debate legislation on a myriad range of issues. With the number of constituencies and interests represented by the 541 Representatives, Senators and Delegates who can introduce legislation, it’s not hard to find legislation related to the topic of the day. And this week, of course, the topic is Haiti.

One of the most intriguing pieces of legislation I found is H.R.4405, the Jubilee Act for Responsible Lending and Expanded Debt Cancellation of 2009. As you may have heard, Haiti is generally viewed as the least developed country in the hemisphere. Haiti’s long road to this position is a tale of economic hardship for its population, starting with its independence from France in the 19th Century. in 1852, France demanded Haiti pay 150 million francs (which would be about $21 billion today) in reparations for war. It took 95 years for the country to pay off that debt and other associated loans. Haiti wasn’t in the black yet—between 1957 to 1986, a father/son dictatorship stripped the country’s coffers dry, with additional loans taken out in the country’s name. Coupled with other debts, by 2008 Haiti owed $1.4 billion to lenders including the International Monetary Fund, World Bank, and US government (for a thorough examination of Haiti’s problems, you can do worse than this Times Online piece from back in May).

There’s been a movement afoot to lobby for cancellation of Haiti’s debt, led here by the Jubilee USA Network. The IMF added Haiti to its program for Heavily Indebted Poor Countries—mandating domestic changes regarding capital, finance and governance. Even after four hurricanes hammered the country in 2008, the René Préval-led government was making strides in meeting those requirements. In June, the IMF finalized a $1.2 billion debt cancellation for Haiti.

That leads us to Tuesday’s earthquake, and H.R.4405. Jubilee is advocating that the remainder of Haiti’s debt be canceled (you can read their most recent Haiti update here). In addition, they’re still advocating on behalf of the Jubilee Act, which would have an impact on dozens of other countries that are servicing high levels of debt (a similar effort in the 110th Congress, H.R.2634, was approved in the House, and made it through the Senate Finance Committee). To be eligible for the proposed relief offered under the Jubilee Act, countries would have to meet a separate set of requirements: For instance, avoiding “excessive” levels of military expenditures and cooperating on international narcotics control efforts. In addition, countries would not be allowed to participate if they provided support to terrorists or displayed a pattern of human rights violations.

Other requirements for participating countries would include budget allocations to alleviate poverty (funded in part by money that would otherwise be spent servicing the debt), and making government reforms to promote transparency and democracy. The Act would also initiate steps to prevent predatory lending to impoverished nations and promote the use of grants in place of loans.

The full scope of Haiti’s latest catastrophe remains unknown, and will likely stay that way for some time. But one thing seems certain: The recovery effort will begin from an incredibly low baseline. The existing Haitian infrastructure was poorly developed, and there seems to be broad agreement that the long-term debt was a large reason for that.