Key View:

  • Recent unrest in Haiti will weigh on investment into the construction industry over the coming quarters.
  • Weakened tourism demand will limit investment into hotels and other tourism infrastructure, a key driver of construction activity in recent years.
  • Infrastructure development will be dogged by slow approval as well as high political risk and policy uncertainty, weighing on investor confidence.

Elevated unrest in Haiti will have negative impacts across the country’s construction industry in 2019 and potentially beyond. Since early February, social unrest in the country has escalated with sustained mass demonstrations driven by popular anger over austerity measures, high inflation and reports that government officials in the last two administrations misused approximately USD2.0bn in funds provided by Venezuela’s subsidised oil scheme Petrocaribe between 2011-2016. Protests and violent clashes have negatively impacted economic activity in recent weeks, reportedly grinding the local economy to a standstill. The outburst of popular anger has also driven up political risk, with President Jovanel Moise’s hold on power increasingly in question (see ‘Haitian President’s Hold On Power Increasingly Unclear’, 14 Feb 2019).

High Political Risk To Deter Investment

Select Caribbean Markets – Short Term Political Risk Score

Note: Scores out of 100; higher score = more attractive market. Source: Fitch Solutions Political Risk Index

Ongoing unrest will weigh on construction investment at least through 2019 as elevated risk will hurt investor confidence and the slower growth of key economic sectors will limit demand for new construction. Particularly important for the construction sector will be the impact of unrest on tourism, an important driver of construction investment in recent years. In the wake of the protests, a number of developed nations including the United States, Canada and France issued warnings to citizens not to travel to Haiti while unrest persisted. Additionally airlines including Air Canada and Jet Blue announced cuts to the number of flights to Haiti and travel booking websites including Expedia have reportedly blocked visitors from booking trips to the country. While these steps may be reversed in the coming weeks or months, the damage to the image of Haiti as a growing tourist destination will likely last much longer, heightening perceptions of risk among tourists and limiting tourism demand in the country. This in turn, will likely slow investment in new hotels and other tourism infrastructure.

Heightened unrest will also set back the advance of infrastructure development projects, with unrest slowing the approval of at least one project and more broadly weighing on investor confidence in the market. According to Taiwan’s Ministry of Foreign Affairs, the inability of Haiti’s parliament to meet since the crisis began has stalled the start of construction on a Taiwanese-backed electricity grid project, which is awaiting parliamentary approval of a USD145.9mn commercial loan from a Taiwanese bank. The project, which will be built by Taiwanese firm Overseas Engineering and Construction Co., is one of the largest and strategically important infrastructure works in Haiti’s project pipeline and its delay will have a negative impact on the country’s infrastructure sector. The challenges seen by the Taiwanese-backed project and more generally the risks of continued unrest over the coming quarters will weaken investor confidence in the market, with negative impacts on infrastructure development well beyond the next several months. Haiti is highly reliant on foreign aid and investment to drive building construction and infrastructure investment given very limited funding sources domestically and a lack of domestic large-scale civil and building construction firms.

More broadly, the political risk exacerbated by recent unrest will weaken already-low investor confidence in the market, negatively impacting investment across the infrastructure, residential and non-residential construction sectors. Haiti remains one of the most risky markets globally given major operational and security challenges, high perceptions of corruption, a weak bureaucratic and legal environment as well as elevated political uncertainty. The recent uptick in unrest will highlight these challenges, raising investors’ perception of risk. As a result, international investors in particular will be increasingly wary of the market, posing a major obstacle for the country given Haiti’s high reliance on foreign aid and investment to support construction activity as domestic funding sources are very limited and the country lacks large-scale civil and building construction firms.