Haitian Economy and Opportunities for the Private Sector

1. Haitian Economy and Opportunities for the Private Sector Maximo R. Vidal – Gerente General Citi RD April 2010

2. Agenda • Resumen Económico • Introducción Expositores

3. Highlights • After the January 12th earthquake, the Haitian GDP growth is expected to shrink by -3.5% in 2010. However, economic growth is expected to spike in 2011 at a 4% rate. • More than optimistic, the EIU’s GDP growth forecast answers to the two-digit expected inflation rates for 2010 and 2011 of 10.5% and 11% respectively, driven by a substantial increase in the internal demand of basic goods and services. • The construction industry is expected to lead Haitian economic activity, as reconstruction efforts are already under way. • A high inflow of foreign assistance and remittances is expected for the upcoming years, as the international community and Haitians living abroad respond to the humanitarian crisis. • Remittances are estimated to equal 21.5% of GDP in 2010-2011. • Manufacturing industry also expected to be one of the first sectors to recover, as 80% of the industry survived intact. • Garment-assembly industry for exporting purposes also remains among the mayor contributors to Haiti’s GPD. • Most observable business opportunities are within the construction, garment assembly, tourism, property development and power generation industries.

4. Macroeconomics Source: Economist Intelligence Unit estimates.

5. Human, Infrastructure and Economic Impact of the Crisis • Sources: • GDP growth projections from “Role of the Banking Sector in the Economic Recovery of Haiti”, Banque de la République d’Haiti. • “Relaciones Económicas Haití- República Dominicana: Una visión tras el terremoto” Grant Thornton. March 2010.

6. Inflation and GDP Growth Source: “Role of the Banking Sector in the Economic Recovery of Haiti”, Banque de la République d’Haiti. • Strong GDP growth during the last few years will be hindered by the socio-economic crisis that the earthquake has produced in 2010. • EIU estimates real GDP to decrease by -3.5% while the BRH estimates -8.5% for 2010. • GDP expected to grow at an average rate of 8.9% for the next 5 years as result of increased capital inflow and reconstruction plans. • Good monetary policy execution has supported the 2.1% in 2009 inflation rate with respect to previous years. Source: EIU Country Report. Febuary 2010.

7. GDP by Industry Source: LatAm Macro data CEPAL

8. Key Policies and Sectors for Growth • Decentralization of economic activity through the creation of growth poles throughout the country. • Implementation of appropriate and consistent measures to effectively boost the key sectors. • Creation of an enabling business environment, massive investment in key infrastructures (Public, Private, PPP): roads, ports, airports, industrial parks, power, and telecom…(FDIs and PPPs will be crucial). • Active role of the financial sector in channeling credit (or otherwise making funds available) to viable firms and projects. Portfolio of Priority Clusters for Haiti Animal Husbandry Tourism Housing & Urban Development Garments Fruits and Tubers Cross-Cutting Clusters Information and Communication Technology Education and Training Business Enabling Environment Construction & Infrastructure Finance Source: “Role of the Banking Sector in the Economic Recovery of Haiti”, Banque de la République d’Haiti.

9. Haiti-DR Trade Balance

10. Banking System Prior to the Crisis • Well Capitalized • Capital on total assets Ratio of 7% (legal requirement 5%) • Capital on risky assets Ratio of 16% (legal requirement 12%) • Liquid (55% of Total Assets; and loans to deposits ratio 30% versus regional average of 60%) • Cash 38% • BRH bonds 9% • Foreign investments 8% (made up mainly of highly-liquid, low-risk securities) • Profitable • Return on Equity Ratio 18% • Well Managed • NPL 8.5% (3.82% without the outlier BNC-Socabank) of which 70% are provisioned • Flexibility programs • Reforms had been applied in order to increase bank’s credit lines; total credit increased 16.6%; private credit had increased 6.1% • BRH reference rate was lowered from 7% to 3.9%. • Sources: • “Role of the Banking Sector in the Economic Recovery of Haiti”, Banque de la République d’Haiti. • “La Tragedia de Haití: Algunas Implicaciones para la República Dominicana”, Ecocaribe. Febrero, 2010

11. Beyond the Rubble • Donors conference held in NY on March 31st; 60 countries and institutions pledged $9.9 BN in support. • The government asked donors for $350 MM in direct budget support until October; $1.2 BN over the next 18 months. • 10% of grants must be spent on improving government capacity, public administration must be strengthened urgently as there are worries about government corruption and incompetence. • The NY conference called for a single authority to coordinate aid. Interim Haitian Reconstruction Commission –chaired jointly by Jean-Max Bellerive, Haiti’s prime minister, and Pres. Bill Clinton– has the authority to seek, approve and co-ordinate projects. IHRC approved by Haitian Parliament. President of Haiti maintains a right of veto. • The Commission provides parity amongst the membership: on the Haitian side, eight Haitian government officials and 2 representatives from trade unions and business; ten donor nominees, including a Caricom representative. Groups with observer status include the Haitian diaspora in the United States. • A trust fund administered by the World Bank will manage the money. • It is key to balance short-term survival with long-term development. • Trade agreement between Haiti and DR. • Sources: • “The Economist”. April 2010.