Haiti Stakes Recovery on Clothiers
Wall Street Journal, May 14, 2010
By IANTHE JEANNE DUGAN And DAVID LUHNOW
CARREFOUR, Haiti—Strolling the floor of the T-shirt factory he manages, Alexandre Petion stopped at the sewing table of a worker who was looking dazed and moving slowly. He asked why. "I'm afraid," the seamstress, Lucienne Loza, replied.
More than 300 of Ms. Loza's co-workers were crushed to death on Jan. 12 when Haiti's earthquake collapsed the main building of the factory, Palm Apparel SA. Now, she and hundreds of colleagues are back at Palm producing hundreds of thousands of T-shirts every week. The challenges are immense, underscoring the rough road ahead for the garment industry, a key engine to rebuilding Haiti.
Photo: Some 300 workers died when January's quake hit the Palm Apparel factory, above. Haiti is pinning recovery hopes on a revived apparel industry.
Two decades ago this industry thrived, with 90,000 employees. But years of coups, trade embargoes and crumbling infrastructure brought its numbers down to about 28,000. Then the earthquake struck. It killed workers, shut down plants, scattered veteran seamstresses to the countryside and ruined millions of dollars worth of U.S.-bound T-shirts, suits and scrubs.
Now Haiti's government is hoping to make the industry a centerpiece of its rebuilding efforts. At a recent international donors' conference, Haiti's leaders presented an economic revival plan that focused on textiles, along with agriculture and tourism, envisioning a new industrial park and a free-trade zone that will be part of efforts to create as many as 250,000 textile jobs.
The industry is reaching out to investors, manufacturers and retailers. And it stands to get a big boost from a U.S. law passed this month—called the Haiti Economic Lift Program Act, or HELP— that expands a program that waives tariffs on clothes imported from Haiti.
Haiti's garment industry generates a relatively modest $450 million annually producing products for Gap Inc. and brands such as Hanes and New Balance. That, however, represents 90% of the nation's exports—and represents a key source of potential jobs in a country where the unemployment rate among the working-age population is 80%.
"Expanding the garment industry could single-handedly bring the jobless rate down drastically," said Ji Woon Park, an investment specialist with the World Bank Group, on a recent plane ride into Port-au-Prince. He was going there to calculate the industry's potential capacity so the World Bank could help channel investors to Haiti.
Among its textile makers is Quick Response Manufacturing, owned by Joseph Stephenson, a Florida native who was one of the few Americans running a Haitian textile business. Quick Response employed about 500 workers who made 40,000 pairs of pants a week that would wind up in the U.S. on everyone from operating-room doctors to McDonald's Corp. burger-flippers.
After the earthquake, the building was condemned.
"This is heartbreaking," says Georges Sassine, a factory owner who heads Haiti's garment-industry trade group. "Haiti's politics are a man-made disaster that crippled our industry. Now we have a natural disaster to add to that."
Mr. Stephenson was drawn last year by earlier U.S. tariff waivers on Haiti-made clothes. Another plus is its proximity to the U.S.—36 hours to Miami by water, which some investors call a key advantage.
But Haiti is a costly place to do business. Labor costs are low, notoriously so. Last year, Haitian lawmakers lifted the country's minimum wage to $5 a day but raised garment workers to $3.09, after factory owners appealed to President René Préval.
But the state-run port, damaged in the quake and hobbled by corruption, is one of the region's most expensive. So is electricity—25 cents per kilowatt hour, above the 15-cent rate manufacturers need to be competitive, according to Stewart Paperin, president of the Soros Economic Development Fund. Power is also undependable, so manufacturers need their own generators.
Mr. Stephenson, 59, said operating costs were higher than he had expected and he had trouble finding managers. "Haiti is the lowest cost in the Western Hemisphere but in practicality it is not," he says. Still, he decided to reopen after an investor and some garment-industry advocates helped him find new space.
Michael Benstock, chief executive of Superior Uniform Group in Seminole, Fla., was a client of Quick Response and another Haitian-owned business.
"The roads are terrible. The power grid is awful, the Internet service sketchy. Telephone service is never any good," Mr. Benstock says. But he will continue to do business in Haiti, he says, because he is socially committed to the region and because there is hope for improvement.
Among those trying to revive the industry is Fritz Mevs, one of Haiti's wealthiest men, who plotted out a $43 million area called the West Indies Free Trade Zone, where construction is set to begin later this year. It would essentially bypass Haiti's infrastructure, providing electricity, water and access to Mr. Mevs's port.
On a recent day, Mr. Mevs stood near the port as dump trucks poured earthquake rubble into the ocean to form a new, deeper jetty he says will help the port accommodate the world's largest ships. The free trade zone, he says, could boost neighboring Cité Soleil, a seafront slum where Mr. Mevs expects to draw 90% of the work force.
The Palm plant is a testament to changes in Haiti since 1991, when assembly plants here employed nearly 100,000 workers mainly producing clothes but also Wilson golf clubs and Sperry shoes.
Company President Alain Villard inherited the business from his family, which began stitching baseballs for Rawlings in the 1970s. Manufacturers in Haiti once made all the balls—20 million annually—used in Major League Baseball and the minors.
Rawlings and other manufacturers left the country in the mid-1980s after a coup ousted dictator Jean Claude "Baby Doc" Duvalier. A 1991 military coup overthrew the country's democratically elected president, the firebrand priest Jean Bertrand Aristide, leading to a U.S. trade embargo that wiped out textile jobs.
When the embargo ended in 1995, Mr. Villard reopened the business, making everything from varsity letters for colleges including Notre Dame to fish hooks. In 2002 the company settled on T-shirts, which it now which now makes exclusively for Gildan Activewear Inc. of Montreal.
Mr. Villard surveyed the factory recently, explaining that he had to reopen quickly after losing hundreds of employees in the earthquake—both for business and to keep a strong public face. "We had to show the world that Haiti can get back on its feet."
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