US embassy cable - 05PORTAUPRINCE1666

UNCLAS PORT AU PRINCE 001666 
 
SIPDIS 
 
WHA/CAR 
EB/IFD/OIA 
WHA/EPSC 
INR/IAA (BEN-YEHUDA) 
INR/EC 
DRL/IL 
STATE PASS AID FOR LAC/CAR 
TREASURY FOR ALLEN RODRIGUEZ, GREGORY BERGER, WILLIAM 
BALDRIDGE, LARRY MCDONALD 
USDOC FOR 4322/ITA/MAN/WH/OLAC (SMITH, S.) 
 
E.O. 12958: N/A 
TAGS: ELAB, PHUM, ECON, EINV, HA 
SUBJECT: Grupo M Update: Source of the Problem 
 
REFA: Port au Prince 1366 
REFB: Port au Prince 0234 
 
1. Summary:  As described in reftels, a long-standing labor 
dispute between Dominican manufacturer Grupo M and workers 
in Ouanaminthe was recently settled.  According to Yannick 
Etienne, a labor representative, the fight has its origins 
in the closed-door negotiations that established the Free 
Trade Zone (FTZ).  The farmers were left out of the 
negotiating process until the day of the FTZ ground breaking 
ceremony in 2002, when they were told their land was being 
expropriated.  Grupo M eventually published a social 
compensation plan in 2003, however, it came too late for the 
farmers whose land was already gone, and whose suspicions of 
the Dominicans were already aroused.  Grupo M's experience 
is instructive for foreign investors in Haiti.  Government 
contracts are often made informally and are rife with 
opportunities for corruption.  End Summary 
 
2. According to Yannick Etienne, a representative of the 
left-leaning workers' rights group Batay Ouvriye, many of 
Grupo M's problems in Ouanaminthe (on Haiti's northeast 
border with the Dominican Republic) originate in Grupo M's 
negotiations to establish the Ouanaminthe free trade zone 
(FTZ).  Etienne said that many of Grupo M's initial dealings 
with former President Aristide's administration happened 
behind closed doors, which alienated the people of 
Ouanaminthe. 
 
3. Etienne claimed that the farmers whose land was 
expropriated to make the FTZ were not notified until the day 
ceremonial ground breaking on April 8, 2002.  In addition, 
she said, there is no definitive list of the farmers whose 
land was expropriated, and there is an on-going dispute 
between Grupo M and Haitians who claim they were never 
compensated for their land.  Etienne's claims, while echoed 
by other unions, are not reflected in press coverage at the 
time or by Grupo M's accounts of the process.  However, the 
ceremonial groundbreaking in April 2002 happened before both 
the passage of the FTZ legislation in July 2002 and the 
publication of the Company for Industrial Development's 
(CODEVI) Social Compensation Plan in June of 2003.  The 
timing of the groundbreaking, the FTZ legislation passage, 
and the publication of the social compensation plan lend 
credence to Etienne's claim that farmers were left out of 
the process. 
 
4. In June 2003, in response to the outcry from the farmers, 
CODEVI and Grupo M published and put into action a social 
compensation plan.  Through meetings publicized by 
loudspeakers on cars Grupo M successfully incorporated many 
Haitians living in Ouanaminthe in the resettlement process. 
The plan provided education, land, potable water, and 
training to the farmers.  However, according to Etienne, the 
plan came too late; the Aristide Administration's closed- 
door dealings with Grupo M set a bad tone, which workers and 
citizens in Ouanaminthe have not forgotten. 
 
5. Further, according to Etienne, though the Aristide 
administration and Grupo M were equally responsible for the 
opacity of the initial FTZ negotiations, Grupo M took most 
of the blame because Haitians historically do not trust 
Dominicans.  Grupo M's subsequent actions, using the 
Dominican Army to secure the FTZ in February 2004 and a 
vaccination campaign that some Haitians in Ouanaminthe 
believe gave recipients reproductive problems, further 
aroused the ire of Haitians suspicious of the Dominican 
company. 
 
6. Comment:  Grupo M's closed-door dealings with the 
Aristide administration and their subsequent troubles are a 
familiar refrain of businesses that have been burned making 
back-room deals with Haitian governments.  Unfortunately, 
this trend continues.  Companies have tried to get a leg-up 
on the competition by seeking to secure contracts with the 
Interim Government of Haiti (IGOH) without going through a 
tender process, and occasionally even operate without 
contracts for long periods of time.  The IGOH's continued 
informal treatment of contract negotiation encourages this 
practice, and opens the way for corruption.  End Comment.