Curses of Aid and Gold in Haiti
Haitian soil may hold $20 billion in precious minerals. The country hopes gold doesn’t prove to be a bigger curse than aid.
In the fall of 1920, Wendell P. Woodring and three other Americans carried out a geological survey of Haitian territory. “[W]e worked in two parties,” Woodring wrote of the trip, “traveling by automobile, on horseback, and on foot…mapping the geology as we traveled, thus making a reconnaissance survey of almost the entire Republic.” The survey happened during the U.S. Marines’ 19-year occupation of the country and had a straightforward goal: “to ascertain the extent of the mineral deposits and the possibility of utilizing the underground-water resources.”
Nearly a century later, foreigners are again captivated by Haiti’s potential underground wealth. There are no active mines in the country, but a handful of U.S. and Canadian companies have invested $30 million in recent years on exploratory drilling to try to figure out whether Haitian soil holds enough copper, silver, and gold to make mining worthwhile. Reports suggest that the land contains up to $20 billion worth of precious metals.
On June 3, government ministers and mining experts from around the world sat on bleach-white seat covers in a Port-au-Prince hotel ballroom at the first ever forum on mining held in the country. “The mining sector can help Haiti liberate itself,” said Prime Minister Laurent Lamothe, “at least a little bit, from dependence on international aid.” After the earthquake of January 2010, donors pledged $5.4 billion in aid for Haiti, and aid currently makes up more than half of the country’s $1 billion annual budget.
Critics, however, wonder who stands to be enriched by mining proceeds: Haitians, or the foreign companies lobbying for tax breaks and favorable extraction terms. Haiti’s current mining laws date to 1976 and are by all accounts too complicated and unclear to be interpreted with certainty. The World Bank is assisting the government in crafting legislation to update mining law.
Lamothe stressed that the state doesn’t know the extent of the value of its mineral resources and called for further research to “allow the Haitian government to better understand our potential and be in better position to negotiate and defend the interests of Haiti.”
But if a large chunk of the proceeds from Haiti’s precious metals are funneled to the state, the country could face another quandary. “Natural resources can either help lift Haiti out of poverty or make things much worse,” Yolette Etienne, Haiti associate country director for the non-governmental organization Oxfam, said in a recent statement. “We all need to work together to ensure Haiti’s mineral wealth become truly a blessing rather than a curse.”
The worry is that natural resources like oil and minerals may actually retard a country’s development and hurt economic growth in some cases — the so-called resource curse. Natural resources that channel revenue directly to a government can eliminate incentives to establish proper institutions, such as a well-functioning tax system. And if mineral extraction raises the value of local currency, the natural riches can reduce the competitiveness of other export sectors. Resource wealth could also distract investment from value-adding industries, the sectors that transform raw materials into finished products and power an economy over the long term.
Haiti may already be familiar with a similar ‘curse.’ A body of economic research suggests that foreign aid can be a hindrance to development in much the same way that oil or diamonds can. “Large aid flows may eliminate the need to create a responsive, tax-collecting civil service, while a need to collect taxes enhances the capability and accountability of government,” economists Tim Harford and Michael Klein wrote in a 2005 study. “Aid-dependent governments are accountable to donors, not to their population.”
Another study by World Bank economists tried to suss out whether aid can be a detriment. It found that “foreign aid has a negative impact on democracy,” as measured by things like openness of elections and constraints on executive authority. The economists also tried to assess the relative effects of aid and oil to determine which resource might have more potential to hold a country back. Their conclusion: “Aid is a bigger curse than oil.”
At the recent forum, Lamothe said that “Haiti would like to place itself as an emerging mining country over the next 20 years.” Haitians may simply hope that in 20 years, copper, silver, and gold haven’t proven to be bigger curses than aid.