Haiti's Seaport...Corrupt and it Must Change

Posted on Sat, Jul. 17, 2010
Seaport, the engine of Haiti's recovery, is sputtering
BY JACQUELINE CHARLES
jcharles@MiamiHerald.com

PORT-AU-PRINCE -- The day the ground buckled, a $3.2 million crane crashed into the water off this country's main seaport, the pier crumbled and cracked containers spilled into the sea.

Six months later, the crane and containers remain in the water and two floating barges have temporarily replaced the pier.

The Port-au-Prince seaport, a main economic driver of Haiti's economy, is critical to the country's recovery from the worst natural disaster in the Western Hemisphere. But six months since the Jan. 12 catastrophic earthquake, the facility remains crippled.

The international community and aid groups complain bitterly that Haiti's government has failed to present a master plan to revive the port sector -- criticized as a pocket of government neglect, cronyism and fierce rivalries even before the disaster.

``The port is a broken asset,'' said Adrian van der Knaap, head of operations for World Food Program Haiti, one of the largest users of Haiti's ports.

``The island needs well-functioning ports. It can be much, much better than it is now.''

Samuel Perez, formerly U.S. military commander in charge of reopening the port, was more blunt.

``The Haitian government has to come to grips with how they are going to reconstruct that port,'' said Perez, who spent three months here. ``The port people are very, very satisfied with the fact they are making money hand over fist. . . .They are fleecing poor Haitians.''

Any long-term improvement in Haiti's economy depends on both repairing and reforming the country's ports system, including its underused and neglected ports.

ULTIMATE CHALLENGE

Tackling the ports and their entire supply chain, including customs clearance, could be the litmus test for a 31-member reconstruction commission chaired by Haitian Prime Minister Jean-Max Bellerive and former U.S. President Bill Clinton.

``A lot of issues are going to come on the table as a real condition to invest in Haiti and the port is one of the first on the list,'' Bellerive told The Miami Herald. ``I don't see how we can dodge on that.''

But Haitian President René Préval's government, like Haitian governments since the main seaport was constructed in the 1970s, has refused to provide transparent and clear rules on how port facilities should operate, critics say.

The port -- located next to a sprawling seaside slum and congested downtown -- has come to symbolize the Haitian government's shortcomings:

Before the quake, the port was a cash cow, earning millions from a $310 wharfage tax on every 20-foot container brought into Haiti. But instead of investing the money in equipment and upgrades at all government ports, the money went to paying the salaries of hundreds of unnecessary and ghost employees, government officials said.

``The port became more of a social program rather than a commercial program,'' said Hughes Desgranges, senior advisor to the director general of the National Port Authority (APN), the government overseer. ``You have a port that can be the engine of the Haitian economy, but it's been badly steered.''

At the same time, the government discouraged the expansion of private ports in the capital and other seaside cities, cornering the shipping market for the Port-au-Prince port.

The few port improvements over the years have been modest at best: In a post-disaster report, the government conceded that the port's cranes were insufficient for major shipping, and the channel was never dredged, preventing large ships from docking.

COSTLY, INEFFICIENT

Its flaws have made the port among the most expensive in the world for consumers and haulers. Although it falls under the auspices of APN, a cadre of shipping agents and terminal owners operate everything from the cranes to the warehouses. The port is also among the least efficient shipping hubs in the world, according to a recent survey by the International Finance Corporation, an arm of the World Bank. To complete shipment of a 20-foot container of dry goods to Haiti, it took an average of 33 days, the survey found, compared to 10 days to ship to the neighboring Dominican Republic's main port.

The same study estimates that the cost of port and terminal handling fees for Haiti is $700 for imports. In the Dominican Republic, it is $460.

The various costs and inefficiencies deter serious investments or job creation.

Since the quake, complaints have mounted. Prospective investors struggle with congestion. Increased costs include a $300 fee that port operators now charge to cover the leasing of barges for offloading cargo.

``It's scandalous,'' Mark Billingham, a frustrated British businessman, said about all the costs, after paying $32,000 to move his 78 containers onto land.

``The corruption is blatant, the bureaucracy and uncertainty, a terrible mix,'' he said.

Billingham said his company, Modular Construction, had planned to invest in Haiti, but the experience has soured him.

``We are going to do the best we can to build and sell some schools, recoup our money and say `Adios' to Haiti,'' he said.

Soon after the 7.0-magnitude earthquake rocked Haiti's capital and nearby cities, the country was forced to turn to the Dominican Republic to truck in life-saving aid.

With a government-estimated 300,000 dead, an equal number injured and surgeons forced to sterilized instruments with vodka, the port became critical to saving lives.

But the already unstable northern pier had crumbled into 1,476 feet of rubble under the sea, and the southern pier was badly damaged. Long-neglected provincial ports were either too small to handle the flood of containers, or the roads connecting them with the broken capital were themselves broken.

The international airport was also damaged, diverting flights.

AN IMAGE PROBLEM

With the U.S. military commander pressuring to get the main seaport operational, the southern pier was repaired and the decision was made to lease two 100- by 400-foot floating barges from Jacksonville-based Crowley Maritime Corp.

As the U.S. military's $22 million contract with Crowley came to an end on April 15, the maritime agents said they took over the contract at the request of APN.

``We could not allow container flow to stop. We had to accept those costs,'' said Geoffrey Handal, assistant general manager of ETS. J.B. Vital and a member of Association Maritime D'Haiti (AMARH), the 10 agencies and three terminal owners operating in the port.

In an interview with The Miami Herald, AMARH representatives said they've received a bum wrap.

``The port itself is efficient. It's once you get to the container yard and to customs and you have to deal with all of the paperwork,'' Handal said. ``Doing business in Haiti is frustrating whether you are importing or not, or using the port facilities or not.''

Still critics argue that the entire ports' supply chain has an image problem. Some in the international community suggest a true privatization model where APN's roles as operator and regulator are separated.

``You have a private sector that has made the investment but what has been lagging is the public sector's ability to either effectively help manage that process, or step back and ensure there is enough separation that allows them to regulate the port environment,'' said Anton Edmunds, who advises Caribbean businesses, and is familiar with the challenges of Haiti's ports.

$70 MILLION INVESTMENT

In January, Bellerive asked the International Finance Corporation for an assessment of Haiti's port sector. He disagrees with the current model, he said, because while APN controls the monopoly and should be operator, it has relinquished that role to the private sector, while not allowing competition from non-government owned ports. ``I am not a port specialist, but I cannot accept ideologically that somebody tells me that they are against competition,'' he said. ``I cannot accept that.''

AMARH members say they support privatization, but the field must be level and transparent. The government, they argue, cannot simply shut them down without compensation after they've invested more than $70 million to keep its port facility afloat, at the government's behest.

Bellerive says all the government has is the monopoly. Still, doing away with it will not be easy, he concedes, even if ``there is a lot of political will.'' Any swift decision to change the status quo, could quickly trigger an internal crisis in a country prone to conflict.

``If you close the port for one week, it's going to be a major crisis inside Port-au-Prince because 80 percent of everything that is entering is going out through the port. The people who have a lot of interests, they know that we are afraid of that,'' he said.

Two years ago, the government did quietly clean out the port, cutting the workforce to 500 workers from about 2,000, Alcime Henry, head of port operations, said.

But little else has been done in way of reform.

Meanwhile, the debate over the future of Haiti's ports has become cast in a bitter battle between two powerful Haitian tycoons -- Edouard Baussan, who heads AMARH, and Gregory Mevs, whose family operates a private terminal and port just two miles from the main port.

``It is not a clash of personalities. It is about port policy, a level playing field, uniform application and respect by all of rules and regulations,'' AMARH said in a statement.

In March, the Mevs family announced a $70 million investment project with Miami-based Sante Shipping to redevelop their private Terminal Varreux, and tap into a growing transshipment market with the 2014 expansion of the Panama Canal.

The plan included building two deep-water jetties for container cargo at a cost of between $20 million and $25 million.

RAISED EYEBROWS

The announcement raised eyebrows in Haiti as some questioned whether the company had authority from APN to make such an investment. Under Haitian law, APN is the only one that can grant permission to develop a port, or allow one to receive containers, the more lucrative of the cargo.

Bellerive, who wrote a letter to the Mevs on Jan. 18 allowing for them to make infrastructure investments, says it's clear to him ``they have the authority.''

``I'm very optimistic that the executive branch and the government will respect their contractual obligation with Terminal Varreux,'' Mevs said. ``I know that this government is committed to turning an important page in Haiti's history.''

Mevs has long argued that the government port monopoly is unfair.

But others argue that inviting competition in a country that doesn't receive enough containers could hurt the government port.

``International and private investors are willing to put the money, and private investors should be allowed to compete,'' Mevs said. ``What's important is to build additional facilities, improve competition and service so that prices go down.''

Observers in the international community say Haiti has to get a handle on its ports sector. ``Haiti must become a better, easier and more attractive place to do business,'' said Tony Chan, deputy mission director for the U.S. Agency for International Development in Haiti. ``But in order for this to happen, all of the links of the country's major supply chains have to properly function.''

Herald staff writer Scott Hiaasen contributed to this report.