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Haiti: Relief and Reconstruction

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A Review of the U.S. Government’s Review of Its Haiti Quake Response Print

This guest post is cross-posted from the Center for Global Development.

By Vijaya Ramachandran and Julie Walz

Last week, USAID finally published an evaluation report on its activities in Haiti: “Independent Review of the U.S. Government Response to the Haiti Earthquake”.  The report is dated March 28, 2011. Yes, 2011. It took over a year to post the document on the USAID website.  The review was conducted by MacFadden and Associates – which operates an $80M Indefinite Quantity Contract from USAID.  There are some frank and enlightening assessments of USG response and coordination, but very little discussion of aid accountability.

Here are some impressions of the report:

Let’s start with the good.

Strengthen USAID. The report very clearly calls for a strengthening USAID: improved institutional structures, more staff and capacity, investments in new technology, and a reduction in reliance on outside contractors.  It is a call that has been made many times before, as USAID has evolved from a development implementer into an organization that manages contractors and grantees.  For example, USAID’s direct-hire workforce has decreased from around 8600 in 1962 to 2900 in 2009, despite an increase in foreign assistance. The report says that USAID’s weaknesses were especially apparent because the President appointed USAID as the lead agency in the USG Haiti response.

Nix the “whole of government” approach in disaster response. The report recommends that a “whole of government” approach should not be used in future international disaster response.  It is a concern that our colleague Todd Moss has previously discussed.  Although the idea of having all federal agencies at the table seems logical, it also creates parallel chains of command and further constrains the USG’s ability to get things done.  This is especially true in a disaster situation where rapid response is needed.  After the quake, more than 12 federal agencies sent staff to Haiti.  This created problems in terms of clear lines of authority, with specific reporting structures and delineated functions between agencies.

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Donor Disbursements Slowing According to Latest Data from Special Envoy Print

The Office of the Special Envoy for Haiti released updated data this week on public sector donor disbursements since the earthquake in Haiti. The Special Envoy has been instrumental in holding donors accountable for pledges they made at the March 2010 New York donor’s conference. For the period 2010-2012, 55 public sector donors pledged $5.48 billion dollars with $2.48 billion, or 45.3 percent being disbursed so far. This represents an increase of $96 million since the last update in December 2011, the smallest such increase since the Special Envoy has been tracking donor disbursements.

Overall, the $2.48 billion has been disbursed through four main channels:

-          $1.65 billion (66.6 percent) in grants to multilateral agencies, NGOs and private contractors
-          $337.2 million (13.6 percent) in budget support to the Government of Haiti
-          $295.6 million (11.9 percent) to the World Bank, IDB and UN through the Haiti Reconstruction Fund (HRF)
-          $196.9 million (7.9 percent) in loans to the Government of Haiti

The vast majority of these funds were disbursed in 2010. According to the Special Envoy (PDF), $1.61 billion was disbursed in 2010, $843.1 million in 2011 and just $27.8 million thus far in 2012.  An important qualifier is that disbursed does not mean spent. For example, of the $295.6 million that has gone to the HRF, only $55.7 million has been spent on the ground.

As can be seen in Figure 1, many of the top donors have failed to live up to their pledges (PDF).

Figure 1.

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Haiti Using Funds from PetroCaribe to Finance Reconstruction Print

"The cooperation with Venezuela is the most important in Haiti right now in terms of impact, direct impact," President Martelly told the Associated Press in December. The most important channel for this cooperation is the PetroCaribe agreement, which most Caribbean countries are currently a part of and which the government of René Préval joined in 2006. Through the agreement Venezuela finances part of Haiti’s fuel import bill, allowing for a portion to be paid up front and the remainder to be used as a loan with a long maturity and low rates. The funds made available through PetroCaribe are, as the International Monetary Fund (IMF) explains, “under the control of the central government”. This makes PetroCaribe assistance drastically different from aid provided by traditional donors, which by and large bypasses the government. In fact, traditional budget support to the Haitian state was lower last year than the year before the earthquake.

Over the duration of the agreement, which began in 2008, Venezuela has provided nearly $1.9 billion (PDF) in petroleum products, with over $800 million being paid up front. Following the earthquake, Venezuela cancelled some $400 million of PetroCaribe debt, yet with large disbursements since the earthquake Haiti still owes some $580 million. While significant resources have already been spent, Haiti maintains a balance of $350 million in PetroCaribe funds.

The government of Haiti has predictably turned to one of its only pools of un-restricted funds to finance reconstruction and development programs. The IMF notes that the GOH has “committed to only use PetroCaribe resources to finance growth-enhancing investment projects.” The spending with PetroCaribe funds represents a significant portion of capital spending undertaken by the central government. In the latest IMF review of Haiti’s economy, the IMF estimates that PetroCaribe funds will account for nearly half of domestically-financed capital spending in 2012, amounting to 4.7 percent of GDP. While foreign financed capital spending still overshadows this (it is projected to be 14.9 percent of GDP in 2012), the PetroCaribe funds are unique in that they are directly under the control of the government.

The reconstruction projects financed with PetroCaribe funds have come under scrutiny recently as allegations emerged that Martelly received some $2.5 million in kickbacks related to contracts awarded by the Haitian government. Yet it is also true that the PetroCaribe funds represent some of the largest infrastructure related investments in Haiti since the earthquake. Overall, $380 million has been awarded to firms for infrastructure-related work (PDF) and the most recent data shows that over 73 percent has already been spent. For comparison, the Government Accountability Office found in November that of $412 million in infrastructure projects approved by USAID, only 0.8 percent had been disbursed. It is no wonder then that Martelly told the AP that Venezuela aid stacked up favorably with US assistance, which often takes more time:

"Sometimes for a simple project, it might take too long for the project to happen," he said. "If you're asking me which one flows better, which one is easier, I'll tell you Venezuela."

Amazingly, despite the clear benefits of the PetroCaribe agreement for Haiti, a steady supply of oil, concessional financing, unrestricted funds, it almost never happened.

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Haiti Reconstruction Fund: Building Back …When? Print

The Haiti Reconstruction Fund (HRF) was a center piece of the international community’s pledge to “build back better”, yet its latest financial report reveals that despite receiving a significant share of donor disbursements, very little has thus far been spent on the ground. Additionally, without the Interim Haiti Recovery Commission (IHRC), unallocated resources from the HRF remain unutilized, collecting interest in bank accounts.

The HRF, established in March 2010, aims to coordinate and fund priority projects for Haiti’s reconstruction. The Fund has received 18 percent of all donor disbursements as of December 2011 and describes itself as the “largest source of unprogrammed funding for the reconstruction of Haiti”. The HRF allocates funding to projects that have been approved by the now defunct IHRC.

According to its February 2012 financial report, the HRF has received $377 million from donors, allocating $274 million (73 percent) to 16 projects. When the HRF allocates money for a project, the funds are transferred to a “partner entity”; either the UN, World Bank or Inter-American Development Bank, which then carries out the project. The financial report shows that while the Fund has transferred a large amount of resources, the partner entities have disbursed very little of it on the ground.

Figure 1 (click to enlarge)

haiti-recon-fund-4-2012

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USAID's Disclosure of Local Partner Info Raises Troubling Questions Print

Following a request from HRRW, USAID yesterday released information on the amount of relief and reconstruction funds that have gone to local partners in Haiti. The info, available here, is a positive step towards transparency and provides the only official information on the level of local contracting by USAID in Haiti. As can be seen in figure 1, about $9.5 million has gone to local organizations and firms since the earthquake. An additional $18.3 million has been awarded to Haitian-American firms, according to USAID data.

Figure I

Firm Name Sector Amount
GHESKIO
Health
 $       3,589,938
St. Damien Hospital
Health
 $       1,081,000
Hopital Adventiste d'Haiti
Health
 $         990,000
La Fondation Héritage pour Haïti (Transparency International)
Non-Profit
 $         800,000
Mérové-Pierre - Cabinet d'Experts-Comptables (MPA)
Auditing
 $         740,208
L'Hôpital de la Communauté Haïtienne
Health
 $         400,000
Hopital l'Ofatma
Health
 $         400,000
Experts Conseils & Associates
Auditing
 $         393,890
Jurimedia
Non-Profit
 $         300,000
Inter-American Institute for Cooperation on Agriculture
Non-Profit
 $         250,000
The American Chamber of Commerce in Haiti
Non-Profit
 $         238,420
PAGS Cabinet d'Experts-Comptables
Auditing
 $         145,000
ECCOMAR
Construction
 $           63,000
National Transport Service (Natrans)
Transportation
 $           60,000
TOTAL
TOTAL

 $      9,451,45

Source: USAID

Although ascertaining the total spending by USAID in Haiti since the earthquake is not an easy feat, the $9.5 million that has gone to local firms represents a small fraction of total spending by USAID. In fiscal years 2010 and 2011, USAID reported spending over $700 million on humanitarian programs (not counting funding through USAID/OTI, which is included in Figure II). Additionally, the most recent data compiled by HRRW reveals nearly $400 million in contracts that have been awarded since the earthquake. As can be seen in figure II, only 0.02 percent of these contracts have gone directly to local firms, while over 75 percent have gone to firms located in the Beltway (DC, Maryland, Virginia). The largest of these beltway contractors is Chemonics International, which has received $173.7 million from USAID since the earthquake. The company came under criticism in recent weeks regarding the temporary parliament building that was constructed under a Chemonics contract. Haitian lawmakers told GlobalPost that the building was nothing more than a “shell”, and that it would cost the government as much to finish it as USAID had spent on building it. The building remains vacant four months after it was inaugurated by USAID and Haitian officials.

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