[House Hearing, 111 Congress]
[From the U.S. Government Publishing Office]
HAITI DEBT RELIEF
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HEARING
BEFORE THE
SUBCOMMITTEE ON
INTERNATIONAL MONETARY
POLICY AND TRADE
OF THE
COMMITTEE ON FINANCIAL SERVICES
U.S. HOUSE OF REPRESENTATIVES
ONE HUNDRED ELEVENTH CONGRESS
SECOND SESSION
__________
MARCH 4, 2010
__________
Printed for the use of the Committee on Financial Services
Serial No. 111-105
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56-769 PDF WASHINGTON : 2010
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HOUSE COMMITTEE ON FINANCIAL SERVICES
BARNEY FRANK, Massachusetts, Chairman
PAUL E. KANJORSKI, Pennsylvania SPENCER BACHUS, Alabama
MAXINE WATERS, California MICHAEL N. CASTLE, Delaware
CAROLYN B. MALONEY, New York PETER T. KING, New York
LUIS V. GUTIERREZ, Illinois EDWARD R. ROYCE, California
NYDIA M. VELAZQUEZ, New York FRANK D. LUCAS, Oklahoma
MELVIN L. WATT, North Carolina RON PAUL, Texas
GARY L. ACKERMAN, New York DONALD A. MANZULLO, Illinois
BRAD SHERMAN, California WALTER B. JONES, Jr., North
GREGORY W. MEEKS, New York Carolina
DENNIS MOORE, Kansas JUDY BIGGERT, Illinois
MICHAEL E. CAPUANO, Massachusetts GARY G. MILLER, California
RUBEN HINOJOSA, Texas SHELLEY MOORE CAPITO, West
WM. LACY CLAY, Missouri Virginia
CAROLYN McCARTHY, New York JEB HENSARLING, Texas
JOE BACA, California SCOTT GARRETT, New Jersey
STEPHEN F. LYNCH, Massachusetts J. GRESHAM BARRETT, South Carolina
BRAD MILLER, North Carolina JIM GERLACH, Pennsylvania
DAVID SCOTT, Georgia RANDY NEUGEBAUER, Texas
AL GREEN, Texas TOM PRICE, Georgia
EMANUEL CLEAVER, Missouri PATRICK T. McHENRY, North Carolina
MELISSA L. BEAN, Illinois JOHN CAMPBELL, California
GWEN MOORE, Wisconsin ADAM PUTNAM, Florida
PAUL W. HODES, New Hampshire MICHELE BACHMANN, Minnesota
KEITH ELLISON, Minnesota KENNY MARCHANT, Texas
RON KLEIN, Florida THADDEUS G. McCOTTER, Michigan
CHARLES A. WILSON, Ohio KEVIN McCARTHY, California
ED PERLMUTTER, Colorado BILL POSEY, Florida
JOE DONNELLY, Indiana LYNN JENKINS, Kansas
BILL FOSTER, Illinois CHRISTOPHER LEE, New York
ANDRE CARSON, Indiana ERIK PAULSEN, Minnesota
JACKIE SPEIER, California LEONARD LANCE, New Jersey
TRAVIS CHILDERS, Mississippi
WALT MINNICK, Idaho
JOHN ADLER, New Jersey
MARY JO KILROY, Ohio
STEVE DRIEHAUS, Ohio
SUZANNE KOSMAS, Florida
ALAN GRAYSON, Florida
JIM HIMES, Connecticut
GARY PETERS, Michigan
DAN MAFFEI, New York
Jeanne M. Roslanowick, Staff Director and Chief Counsel
Subcommittee on International Monetary Policy and Trade
GREGORY W. MEEKS, New York, Chairman
LUIS V. GUTIERREZ, Illinois GARY G. MILLER, California
MAXINE WATERS, California EDWARD R. ROYCE, California
MELVIN L. WATT, North Carolina RON PAUL, Texas
GWEN MOORE, Wisconsin DONALD A. MANZULLO, Illinois
ANDRE CARSON, Indiana MICHELE BACHMANN, Minnesota
STEVE DRIEHAUS, Ohio ERIK PAULSEN, Minnesota
GARY PETERS, Michigan
DAN MAFFEI, New York
C O N T E N T S
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Page
Hearing held on:
March 4, 2010................................................ 1
Appendix:
March 4, 2010................................................ 33
WITNESSES
Thursday, March 4, 2010
Adams, Hon. Timothy D., The Lindsey Group........................ 18
Hart, Thomas H., Senior Director of Government Relations, ONE.... 21
Lee, Nancy, Deputy Assistant Secretary for the Western
Hemisphere, U.S. Department of the Treasury.................... 7
St. Louis, Melinda, Deputy Director, Jubilee USA Network......... 19
APPENDIX
Prepared statements:
Meeks, Hon. Gregory.......................................... 34
Adams, Hon. Timothy D........................................ 37
Hart, Thomas H............................................... 39
Lee, Nancy................................................... 46
St. Louis, Melinda........................................... 52
Additional Material Submitted for the Record
Green, Hon. Al:
Citizens' Petition for Haiti................................. 63
HAITI DEBT RELIEF
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Thursday, March 4, 2010
U.S. House of Representatives,
Subcommittee on International
Monetary Policy and Trade,
Committee on Financial Services,
Washington, D.C.
The subcommittee met, pursuant to notice, at 10:02 a.m., in
room 2128, Rayburn House Office Building, Hon. Gregory W. Meeks
[chairman of the subcommittee] presiding.
Members present: Representatives Meeks, Waters, Watt,
Carson; and Miller of California.
Ex officio present: Representative Bachus.
Also present: Representative Green.
Chairman Meeks. This hearing of the Subcommittee on
International Monetary Policy and Trade will come to order.
Without objection, all members will have 10 minutes for opening
statements, which will be made a part of the record. And then
we will get to our witnesses.
I will start with an opening statement. And I would like to
begin by thanking, of course, the ranking member on the full
committee, Mr. Spencer Bachus, and my colleagues and the
ranking member on this subcommittee, Mr. Miller, for their help
in organizing this very important hearing on Haiti Debt Relief.
I also, of course, want to thank all our witnesses who have
taken the time to come and share their valued experience on the
topic of debt relief for Haiti.
A few notes on procedures before we begin. We are going to
have a tight schedule today, with two panels to testify this
morning, and a mark-up of H.R. 4573 scheduled to start at 1:00
p.m. this afternoon. And so, therefore, we are going to try to
move as quickly as we can. And I am told we're going to have
some votes somewhere around 10:30.
Today, we will consider an issue that is close to all of
our hearts. Haiti suffered a devastating earthquake on January
12th of this year, a country which was finally making strides
to more stable economic growth, and whose government was
finally showing signs of becoming more stable, credible, and
accountable was rocked by a natural disaster of historic
proportions.
The images from the disaster are fresh in our minds. The
immediate needs of the people are clear. And the desire of the
global community and of average American citizens to help Haiti
recover as fast as possible are clear, and give us all hope.
This is a bipartisan issue, because it is a human issue at
its simplest. And all of us have come together, as human
beings, to deal with this issue. This is not about Democrats or
Republicans, or about whether or not we are in an election
year. This is about America showing its true compassion and
capacity to help our neighbors in their time of greatest need.
Average American citizens mobilized to help Haiti in a way
that gives me great pride in my country. Our government stepped
up to the challenge in the immediate aftermath. We are now
moving to the second and third phase of the process, namely
moving from immediate rescue and survival concerns, though they
are still critical, to a reconstruction and, ultimately, long-
term economic recovery.
A critical step to this transition will be providing Haiti
with debt relief, and working with the multilateral development
banks and the IMF to ensure that Haiti will be provided the
resources it needs in the medium- and longer-term, without
adding to the nation's debt burden.
I look forward to hearing our witnesses here today, and I
look forward to working with my good friend, Gary Miller--
Ranking Member Gary Miller, from California--on moving a bill
to empower the Administration to promote Haiti's debt relief
from the international institutions in which we are major
shareholders, as well as pushing for bilateral debt relief from
other nations holding Haiti's debts today.
Finally, I did want to inform you that this will be just
the first in a series of hearings focused on Haiti. As some of
you know, I chaired a bipartisan, members-only briefing on
multilateral aid and financing coordination in February, at
which the Treasury Department, the IDB, the World Bank, and the
IMF provided clarity into how they planned to collaborate to
ensure efficiency, and to eliminate waste and duplication of
efforts in their work in Haiti.
The next hearing is scheduled for March the 16th, and we
will focus on the longer-term prospects of strategy for Haiti's
economic recovery. Long after the news cameras have left, we
will continue to monitor the progress in Haiti, and to provide
assistance to ensure that the nation can get back on its feet,
back on a path to economic growth and political stability.
We believe that this is our moral obligation to do, to help
one of the poorest nations, economically, get on its feet by
some of the most resilient people that you will ever see.
Because if you just go to Haiti, they are a resilient and rich
people in that spirit. And we need to stand by them and by
their side through this critical period of time.
With that, I will yield to Mr. Bachus for an opening
statement.
Mr. Bachus. Thank you, Chairman Meeks. And I thank you for
calling this important hearing, to focus on debt relief for
Haiti in the aftermath of the devastating earthquake of January
the 12th, and to consider legislation authored by
Representative Waters to effectuate that relief. And I commend
you and Ranking Member Miller for your strong participation in
this effort.
Creditors cannot expect Haiti to service its debt at a time
when the country is lying in ruins. As former Under Secretary
Adams, one of our witnesses today, says, ``It is a cruel hoax
on both the people of developing countries and on the taxpayers
of donor countries to pretend that even without an earthquake,
a country whose citizens subsist on a dollar or two a day is
ever going to pay back billions of dollars in loans.''
The United States has always been a benevolent and caring
country. Even during our current economic challenges, we have
not lost our compassion. In fact, our present travails have, in
some respects, engendered us with an appreciation for the
desperation and suffering of those facing challenges and
hardships in other parts of the world. Of course, to compare
what we face here with the struggle to just exist in these
countries is really a pale comparison.
Consistent with our principles is forgiving the debt Haiti
owes to multilateral agencies, in which the United States, in
most cases, is the largest single donor. We can lead by example
while we lend a helping hand. And when we do so, we will be
doing so consistent with our principles and values as a
country.
I support this legislation, and I yield back the balance of
my time. And I would also--I think it's my understanding that
we are going to move this legislation to the Floor early next
week, and hopefully get it over to the Senate without delay.
Chairman Meeks. As I said, we thank you for the
bipartisanship of this.
Mr. Bachus. Thank you.
Chairman Meeks. And the timeliness in which we were able to
get this done.
I would now like to yield to the gentlelady from
California, who is the author of this bill, Maxine Waters.
Ms. Waters. I would like to thank you, Mr. Chairman, for
organizing this hearing on Haiti debt relief, and for agreeing
to mark up my legislation on this subject.
I also appreciate the support of several members of the
Financial Services Committee for this bill, including Chairman
Barney Frank, of course, Chairman Gregory Meeks, and Ranking
Member Spencer Bachus.
Haiti was struck by a devastating earthquake on January 12,
2010. According to the U.S. Agency for International
Development, 230,000 people were killed, and 1.3 million people
were displaced from their homes. There is a desperate need for
clean water, food, shelter, and basic sanitation. Three million
people, one-third of the country's population, were affected by
the quake.
Prior to the earthquake, Haiti was already the poorest
country in the Western Hemisphere. I have traveled to Haiti
many times, and I have seen the poverty and desperation of the
Haitian people with my own eyes. According to the Central
Intelligence Agency's World Fact Book, there is widespread
unemployment and underemployment, and more than two-thirds of
Haitian workers do not have formal jobs. There is a high risk
of infectious diseases, including diarrhea, hepatitis, typhoid
fever, and malaria. The infant mortality rate is nearly 6
percent. Almost half of the adult population cannot read and
write.
One of the simplest but most important things we can do to
help Haiti is cancel its debts.
Haiti's democratic government has worked very hard in
recent years to qualify for debt relief. In order to qualify,
the Government of Haiti successfully developed and implemented
a comprehensive poverty reduction strategy paper under the
direction of the IMF and the World Bank. As a result,
multilateral financial institutions provided Haiti 1.2 billion
in debt relief last June. This was a critical step forward for
Haiti.
Nevertheless, despite previous debt relief, Haiti still has
a significant debt burden that will interfere with relief,
recovery, and development efforts, unless the remaining debts
are canceled. According to the most recent figures provided to
my office by the U.S. Treasury Department, Haiti still owes
$828 million to multilateral development institutions. This
includes $47 million to the Inter-American Development Bank--
that is, IDB--$284 million to the IMF, and $39 million to the
World Bank Group's International Development Association, IDA,
and $58 million to the International Fund for Agricultural
Development.
I introduced H.R. 4573, Haiti Debt Relief and Earthquake
Recovery Act of 2010, to free Haiti from the burden of these
debts. H.R. 4573 requires U.S. executive directors at
multilateral development institutions to use the voice, vote,
and influence of the United States to do three things: one,
cancel immediately and completely all debts owed by Haiti to
these institutions; two, suspend Haiti's debt service payments
until such time as the debts are canceled; and three, provide
additional assistance to Haiti in the form of grants, so that
Haiti does not accumulate additional debts.
The bill also requires the Secretary of the Treasury to
urge other bilateral, multilateral, and private creditors to
cancel the debts that Haiti owes them.
Chairman Meeks is planning to offer a manager's amendment
to this bill. The chairman worked with full committee Chairman
Frank and myself on drafting this amendment. The manager's
amendment adds a provision directing the U.S. executive
director of the IMF to advocate that some of the excess profits
from the sale of IMF gold, which Congress approved last year,
be used to provide debt relief and grants to Haiti. The
amendment also adds updated statistics on Haiti's debts to the
bill's findings, and makes other technical changes. I support
the manager's amendment, and I appreciate the efforts of Mr.
Meeks, Chairman Frank, and others.
Debt cancellation will allow the Government of Haiti to
focus its meager resources on essential humanitarian relief,
reconstruction, and development. The people of Haiti are poor,
but they are resilient. I know that with the support of the
international community, they will recover from this tragedy
and create a brighter future for their children.
I urge my colleagues to support the debt relief for
earthquake recovery in Haiti, this act of 2010.
Once again, I thank the chairman for holding this hearing
and mark-up. I look forward to hearing the witnesses' views on
the benefits of debt relief for the people of Haiti. And I
yield back the balance of my time.
Chairman Meeks. I thank the gentlelady, and I now yield to
the ranking member of the Subcommittee on International
Monetary Policy and Trade, Mr. Miller, from California.
Mr. Miller of California. Thank you, Mr. Chairman. In June
2009, Haiti completed the requirements of the enhanced Heavily
Indebted Poor Countries, HIPC, initiative, which made it
eligible for debt relief from multilateral institutions, and
for relief of some of its bilateral debt.
The enhanced HIPC initiative, coupled with the multilateral
debt relief initiative, provided Haiti with $1.2 billion in
debt relief. A particular note, the American Development Bank,
Haiti's largest creditor, forgave $511 million in debt for
Haiti. At the time of the cancellation, Haiti still owed the
IDB approximately $429 million, because the lending occurred
outside the agreed-upon debt relief period.
Also in the agreement, the United States canceled $12.6
million in Haiti debt relief, relieving Haiti of its entire
outstanding bilateral debt to the United States.
Currently, Haiti still is burdened with approximately $1.24
billion in external debt. This is comprised of debt owed to
both multilateral institutions and other bilateral creditors.
On the multilateral side, Haiti owes approximately $165
million to the International Monetary Fund, IMF; $441 million
to the Inter-American Development Bank, IDB; $38 million to the
World Bank's concession lending arm, the International
Development Association, IDA; and $54 million to other
multilateral creditors.
At present, the World Bank is suspending debt service for
$38 million debt for 5 years. The IMF will require virtually no
payment from Haiti until 2013. The IDB debt service obligation
is, by prior agreement, paid by the U.S.-supported trust fund.
As the members of this panel know, on January 12, 2010,
Haiti experienced a 7.0 magnitude earthquake centered
approximately 15 miles southwest of the nation's capital, Port-
au-Prince. What followed were 50 aftershocks of magnitude over
4.0, all occurring within 24 hours. The Haiti Government has
estimated 230,000 deaths, and 300,000 injured. Approximately
700,000 people have been displaced in the Port-au-Prince area.
Damage caused by the quake is estimated between $8 billion
and $14 billion, and speculation to reconstruct will be about
$14 billion.
Following this hearing, the subcommittee will be voting on
legislation to require the Secretary of Treasury to instruct
the U.S. director of the IMF, the World Bank, and the Inter-
American Development Bank, and other multilateral development
institutions, to use a voice vote to seek the immediate and
complete cancellation of the debt owed by Haiti in such
institutions.
There is a serious situation we are trying to deal with,
and we could all continue to read. But the issue is we have to
help these people. They are good people. They have been
devastated beyond what any of us can imagine. And I am really
looking forward to hearing from our committee, what they have
to say. I yield back the balance of my time.
Chairman Meeks. I now ask for unanimous consent to allow
Mr. Green from Texas to participate in today's hearings. He is
a member of the full committee, but he is not on this
subcommittee. So I ask unanimous consent.
There being no objection, Mr. Green is acknowledged for an
opening statement.
Mr. Green. Thank you very much, Mr. Chairman. Mr. Chairman,
I especially thank you for hosting this hearing. I thank
Ranking Member Bachus, the ranking member of the full
committee. I thank Representative Waters, who has been a friend
of Haiti, as has been the case with you, Mr. Chairman, for many
years. She has been there for Haiti on many occasions, and
continues to fight the good fight for Haiti.
I also thank Chairman Frank, and I especially thank also my
friend, Ranking Member Miller, because he and I have worked on
a bipartisan basis before, and we continue to do so. I look
forward to this bill passing. I support the bill.
I came by this morning to make the moral argument that
supersedes the monetary argument. The moral argument for
passage of this legislation is one that, in my opinion, must be
made for the record. And if the moral argument is to be made,
we cannot escape some history that we have to understand.
We have to understand that Haiti was in human bondage--it's
no secret; and that it won its independence in 1804. But when
Haiti became the first African nation to win its independence,
in a sense, in the Caribbean, when it did so, France threatened
to reinvade, and would have reinvaded, but for Haiti's agreeing
to pay 150 million francs, the equivalent of $21 billion today.
And Haiti has been paying ever since. It has gone from human
bondage to economic bondage.
And this economic bondage is what this really is about
today, eliminating the economic bondage that Haiti has suffered
from these many years.
Until last year, Haiti was forced to pay between $60
million and $80 million per year in debt service. At a time
before the hurricane, when more than 75 percent of the
population was living on less than $2 a day, when more than 50
percent of the population was living off of less than $1 per
day, when 80 percent of the people were living in poverty, when
the life expectancy of a typical Haitian was 52 years, when
there was something called a ``hunger season'' that lasts from
October through February, at a time when this country could
barely afford to feed itself, it had to pay this debt service.
It is time to liberate Haiti from economic bondage. And it
is also time for us to understand that if we return Haiti to
the status that it was in prior to the devastation from the
earthquake, it would be sinful. It is time for us to strategize
and compromise and work together, so that Haiti can have the
future it richly deserves in this hemisphere.
And, Mr. Chairman, I am so grateful that you allowed me to
say this. I appreciate very you much, and I commend you very
much for what you have done, as well as Representative Waters.
And I yield back any time that I have left. God bless you.
Chairman Meeks. Thank you, Mr. Green. We will now go to our
first witness, Ms. Nancy Lee, who is Treasury's Deputy
Assistant Secretary for the Western Hemisphere, responsible for
managing Treasury's engagement on economic and financial issues
with Latin America, the Caribbean, and Canada.
In 2008, she spent a year on sabbatical, as a visiting
fellow at the Center for Global Development in Washington,
focusing on the future of regional integration in the Western
Hemisphere. She was Treasury's Deputy Assistant Secretary for
Europe, Eurasia, and the Western Hemisphere from 2002 to 2007.
Previously at Treasury, she was the Director of the Office
of Central and Eastern Europe, Director of the Office of
Mideast and Central Asia, and Deputy Director of the Office of
Asia and Near East Nations. Also at Treasury, she has served in
the Office of International Monetary Policy, working on G7
issues and U.S. policy in the IMF, and in the Office of
International Trade Policy. She was Treasury's negotiator in
the Uruguay Round trade negotiations, and in the early part of
the NAFTA negotiations.
Prior to her work at Treasury, she conducted the economic
research on U.S. trade and investment relations with developing
countries at the Commerce Department. And in 2002, Dr. Lee
became a member of the Council on Foreign Relations. In 2001,
Dr. Lee was a recipient of the Meritorious Executive
Presidential Rank Award.
She holds a Ph.D. and an MA in economics from Tufts
University, and a BA in economics from Wesleyan College, and
she is married with two children.
Dr. Lee?
STATEMENT OF NANCY LEE, DEPUTY ASSISTANT SECRETARY FOR THE
WESTERN HEMISPHERE, U.S. DEPARTMENT OF THE TREASURY
Ms. Lee. Chairman Meeks, Ranking Member Miller, members of
the House Financial Services Subcommittee on International
Monetary Policy and Trade, Congressman Bachus, thank you very
much for inviting me here today to testify at this important
hearing on Haiti.
I know the leadership role that you and others on this
subcommittee have played on Haiti, both before the devastating
earthquake and after, and it's a privilege for me to testify
today.
I returned early this morning from Port-au-Prince, where I
met with the senior economic team in Haiti's government, as
well as a variety of people from the private sector. And I am
pleased to share my findings.
On the ground, I saw the impact of the earthquake on
Haiti's economy is going to be massive, is already massive and
will be massive. It will vary, though, by region and by sector.
It will take some time before we fully understand the magnitude
and nature of the impact of the earthquake on Haiti's future.
Today, I will provide our best assessment of the economic
and financial challenges ahead for Haiti, and Treasury's
efforts to help Haiti address them.
For the financial sector, initial efforts were focused on
the successful restart of the banking sector and the payment
system, for which, I would add, the Central Bank deserves an
enormous amount of credit. An important aspect of the financial
system for Haiti is the transfer of remittances, which are
playing a vital role in helping people in small businesses
weather this enormously difficult period.
The U.S. role--and particularly our military helped--to get
financial remittance providers access to the physical cash they
needed to distribute remittances around the country. Going
forward, a key challenge will be to create the conditions that
enable the financial sector to better meet the needs of the
Haitian economy.
Credit growth has lagged in Haiti for many years due to
risk factors, risk aversion, institutional weaknesses, and a
variety of shocks. Post-earthquake, as you can imagine, risk
aversion has only increased. But we know that Haiti's
businesses are struggling. They have lost inventories, they
have lost facilities, and they are going to need access to
credit.
On the fiscal side, the government faces a severe financing
gap. The International Monetary Fund estimates that revenues
may decline by as much as 40 percent while expenditures will
surely rise. The IMF has also identified a potential balance of
payments gap of upwards of $300 million, which, at the moment,
is financed by approximately $100 million.
As you know, and as several have already stated, these
pressures come on top of a still significant Haitian external
debt burden. A considerable portion of Haiti's external debt
was relieved when the country reached HIPC completion point, as
was mentioned. At that point, the United States forgave 100
percent of Haiti's bilateral debt to the United States.
However, as has also been mentioned, Haiti's multilateral debt
stock stands now at $825 million, with $447 million owed to the
Inter-American Development Bank alone.
So, let me turn now to the efforts Treasury has taken, with
our U.S. Government colleagues, the Haitian Government, and our
international partners, to address these challenges.
First, Treasury is focused on Haiti, to not just restart
lending, but expand access to lending. The rate of credit
growth will be a principal factor, as in any economy, in
determining the rate of recovery of the private sector, and job
creation. To deal with the very real uncertainties of this
period, we are working with the multilateral development banks
to develop risk-sharing tools to catalyze bank lending.
The view of the people I talk to inside the country is that
a lot of Haitian companies are viable, they are resilient if
they are afforded a breathing space to get through this very
tough period. So this is an urgent and critical challenge.
We can also help Haiti extend a sound regulatory framework
to a broader range of financial services, like microfinance and
like insurance, to critical sectors, going forward. And these
kinds of efforts yield disproportionate benefits, because the
public resources expended leverage much greater amounts of
private finance.
Second, to ease the balance of payments pressures, Treasury
strongly supported the January augmentation of the IMF program
by $100 million. We equally strongly support the commitment by
the managing director of the IMF to develop a means of
financing Haiti's remaining IMF obligations--that is, canceling
that debt--using internal IMF resources. And we are working
closely with the multilateral development banks to ensure that
they strive to meet the substantial budget support needs
generated by the collapse in revenues and the rising
expenditures.
Third, Treasury has called on donors to cancel Haiti's
remaining multilateral debt. As you know, ahead of the G7
ministerial in Canada earlier this month, Secretary Geithner
announced that the United States is seeking commitments by
donors to relieve Haiti's debt to the IDB, to IFAD, and to the
World Bank, to IDA. In his statement, Secretary Geithner
recognized Congress' leadership on this issue, including the
members of this subcommittee. Secretary Geithner was able to
secure the commitment at that point of the G7 to cancel Haiti's
debt.
Treasury has developed what we think is an innovative debt
relief proposal that would relieve Haiti of its debt burden
fully, without displacing or using up resources needed for
Haiti's recovery. So, let me briefly describe the three key
elements of this proposal.
First, transforming funds provided for debt relief into
grant resources available now for Haiti. This would provide an
immediate source of up-front financing for immediate needs.
Second, converting existing loans that haven't been
disbursed into grants, so that this would guard against adding
new debt to Haiti's debt stock, which is something that's
reflected in the legislation that has been proposed.
And separately, we are pressing, in the context of ongoing
negotiations in the IDB with respect to a capital increase, for
a commitment by that institution to transfer a portion of its
annual income to finance projects for Haiti. This would provide
a secure flow of resources going far into the future for the
next decade, because, as has been said, this is a long-term
effort that has to continue after the television cameras go
away.
To be sure, there will be a U.S. component to addressing
the cost of debt relief in Haiti. And our hope is that we can
build on the strong bipartisan support which has been
mentioned, and we look forward to working very closely with you
on this proposed approach on the days ahead.
Let me now just very briefly touch on Treasury's on-the-
ground presence in Haiti. Following the tragedy, Treasury
rapidly deployed staff to work with the Haitian Government to
restore budgetary, tax, and financial functions. We now have a
temporary senior representative, Treasury representative, in
Port-au-Prince. And we sent two seasoned technical assistance
advisors to help the Central Bank very shortly after the
earthquake. Our ability to provide this kind of advice quickly
in crises and in other situations is one of Treasury's
strongest strengths. And I think the governments around the
world very much value that assistance.
After the immediate post-earthquake efforts, our technical
assistance team identified some medium-term priorities, in
consultation with the government, and we aim to begin work on
those as soon as possible.
Our senior Treasury representative has been on the ground
since early February, working on an array of urgent issues. He
is also representing the United States in what's called the
post-disaster needs assessment, the PDNA, led by the World
Bank, the IDB, the United Nations, and the European Commission.
This is the assessment that is fundamental to understanding the
multilateral assistance needed and the bilateral assistance
needed for reconstruction and development. And the results of
that assessment will then inform the high-level donor
conference that will happen at the end of March in New York.
In conclusion, under President Obama's strong leadership,
the United States mobilized our government to help Haiti
weather the aftermath of the devastating earthquake. In close
cooperation with the Haitian Government, its people, our
international partners, and the rest of our government,
Treasury is resolved to play an active role in helping Haiti
build an economy and a financial system that can finally meet
the needs and aspirations of the Haitian people.
Thank you again for the opportunity to appear here today,
and I would be happy to answer your questions.
[The prepared statement of Deputy Assistant Secretary Lee
can be found on page 46 of the appendix.]
Chairman Meeks. Thank you so very much for your testimony
and for your dedication. And I know you're just coming back
from Haiti and seeing what's on the ground.
Let me ask this question. In listening to your testimony,
what I have always been concerned with is how quickly Haiti
seems to incur debt with the IDB. Right after the first round,
you see that their debt is up. Why is that? Can you explain
this? And especially with us being a major shareholder in the
IDB, how do we prevent this from happening in the future? How
do we keep a limit there, so that their debt with the IDB
doesn't continue to rise as fast as it seems it always does?
Ms. Lee. Along with debt cancellation, this is the other
key question, because it's really--as you're pointing out, it's
not just a question of paying the cost of canceling Haiti's
previous debt, it would really, truly make no sense to start
adding debt, as we move forward, in our desire to get
assistance flowing for Haiti. So we really have to take a look
at this in a kind of fundamentally different way, and we have
to create the capacity to mobilize large amounts of grant
resources.
And the direct answer to your question is the reason
institutions lend is that there is always a shortage of grant
finance. And in the IMF case, the IMF does not do grants, and
it does highly concessional lending. So, in the IMF case in
particular, there is a need to cancel the debt that has already
occurred, including the $100 million that was just disbursed,
and the IMF will go forward to do that, using its own
resources.
In these other institutions, they were trying to be very
active in the period over the last 5 years. They disbursed a
lot of assistance, a lot more than they had in the earlier
period, and it was lent on concessional terms, but
nevertheless, lent.
So, at this point, we need to have a new approach. We need
to clear the decks, with respect to their existing debt, and we
need to find a way to convert future assistance in these
institutions to grants, which is why we framed our proposal in
a way that would take the resources we are using to cancel the
debt, and then use those resources to capitalize a fund for
Haiti that would be disbursed in grant form.
So, unlike the usual debt relief procedure in which you
cancel the debt and just provide the institution, as a whole,
with the resources to offset the impact of the debt relief, in
this case we want to provide the resources to the institution,
but create a fund for Haiti alone to use these resources as
grants to go forward. And that's why we can transform the debt
relief financing into grant financing for Haiti. And this is
particularly the case in the IDB, which is, by far, Haiti's
largest creditor.
Chairman Meeks. They have the mechanism set up to do this?
It seems as though all we have to try--as one of the largest
shareholders--to work with them so that a mechanism can be put
in place so we don't have this headache time and time again.
Ms. Lee. Yes. I mean there is a grant facility that can be
used, and we want to convert it into a grant facility for Haiti
alone. And the resources that would be disbursed out of that
facility would only be grants. This is a new proposal. We have
just formulated it. We are just beginning to talk to the
institutions, to donors, to Haiti itself, and to you all, about
the nature of this proposal.
So, it will--there will be some discussion on it, and a--
Chairman Meeks. Let me ask this in the little time that I
have left. The other area that I am always concerned with is
whether or not--what we're doing in regards to capacity-
building, whether it deals with the institutions or
individuals, so that they can be working on the ground, whether
it's the government. What do you see us doing, or Treasury
doing, in regards to capacity-building for the long-term
rebuilding of Haiti?
Ms. Lee. Well, I heard a lot about that, actually, in Haiti
this past week from the government, itself. And that's an
interesting aspect, going forward. I think there is a new--
there are sort of two new focuses in Haiti that are worth
noting.
One is that--you certainly hear this from the private
sector, but the public sector says over and over again,
``Unless we build the capacity to make our institutions work
better, you can give us an unlimited amount of money, and it's
not going to result in development in Haiti.'' So they take
that as a fundamental challenge, going forward. And there is no
denial on that point.
The other big issue is this question of decentralization,
moving growth centers outside Port-au-Prince to make more
diversified growth and more job creation.
On the question of capacity building, that will play a key
role in the needs assessment that all these multilateral
institutions are--going forward, which is encouraging, because
it will be a focus not just of Treasury efforts to build
capacity in the Central Bank and in the finance ministry, but
of all multilateral donors. So I think there is really a unity
of view in the government itself, that it is really a central
problem, and in the donor community.
Chairman Meeks. My time has expired. Mr. Miller?
Mr. Miller of California. Thank you. We have been talking a
lot about debt relief and grants and stuff, but I keep thinking
about the people, and seeing their faces. How do we effectively
deal with the impact and loss that the government has faced,
the private sector has faced, the government being roads,
bridges, gas, electrical, sewer, those type of things that you
have to provide to get the government operating again? Then the
amount of clean-up we have to implement on houses and
businesses before we can ever start talking about
reconstruction.
But what are we actively doing today? Is the Army Corps of
Engineers out there, working on infrastructure to deal with the
basic government needs so the private sector can be dealt with?
Or how are we systematically dealing with this today?
Ms. Lee. Well, as you're basically pointing out, there are
a variety of facets to attack the problem of how do you
actually reach Haitian people.
Mr. Miller of California. That's what this is about. We
have talked about banks, we have talked about monetary policy,
we have talked about loan relief. But the goal here is to
mitigate the impact on the people, the government
infrastructure and the actual daily lives of people. So how are
we doing that?
Ms. Lee. I will describe the array of activities, some of
which Treasury is involved in, and some of which Treasury is
not involved in. So let's start with the basic issue of
beginning reconstruction.
When you drive around Port-au-Prince, there is just an
enormous amount of destruction. There is rubble everywhere. So,
one of the things that the Administration wants to do is
provide jobs for Haitian people in these immediate
reconstruction efforts. The USAID has started up cash-for-work
programs. And you see teams all over the streets--
Mr. Miller of California. Do they have the capacity and the
expertise in those areas of reconstruction that are necessary,
without some outside help?
Ms. Lee. Does USAID?
Mr. Miller of California. Yes. Do the Haitian people have
those resources, or do they need outside help from the Army
Corps of Engineers and others to accomplish this?
Ms. Lee. There is the issue of trying to create immediate
jobs, and then there is the issue of where you need technical
expertise to figure out what needs to be constructed and how it
needs to be constructed.
USAID is also helping to add to engineering capacity.
Because, of course, there is an enormous challenge in
determining which buildings are salvageable and which are not,
and which people can reenter.
So, there is an enormous U.S. military presence, including
our Army Corps of Engineers. When you go to our embassy, there
are tents all over the grounds of the embassy of people who are
working on this. So, we are supplementing engineering capacity.
Of course, our government is providing relief commodities:
water; food; and shelter.
But we very quickly have to move from these relief efforts
to providing ways for the Haitian entrepreneurs themselves to
start providing goods and services. And one of the things we
have to be concerned about is if you give away food and water
and shelters for too long a period of time, you're essentially
displacing the small businesses that do precisely that kind of
business.
Mr. Miller of California. Yes, but that's not the question.
Yes, we need to help feed the people. Yes, we need to provide
water for the people. And, yes, we need to provide some type of
structure or whatever.
But is the heavy equipment there that they own themselves?
Do they have the expertise to repair the sewer, the gas lines,
put the infrastructure back in, repair the bridge rapidly?
There is a difference between repairing a bridge over 4 years
and putting a bridge back into functionality in 60 days. Do
they have the capacity to do that?
Ms. Lee. The answer is no. They have some capacity, but--
Mr. Miller of California. That, Mr. Chairman, is where we
need to be focusing. It's nice to say that debt has occurred,
debt relief needs to be dealt with. But if we don't make sure
the expertise and the experience that we have in this country
are put to work there with the people--putting the people to
work if they don't know what they're doing doesn't help
anybody. Putting the people to work with individuals who do
know how to accomplish something is what we need to be focusing
on.
And I am not imputing in any way--a lot of the conversation
in this committee has been putting the cart before the horse.
And we need to determine how to get the horse leading, and the
expertise to that country, and the facilities and resources
they need to get this done rapidly with the assistance of the
Haitian people, necessarily. But I'm not sure they have the
capability themselves, if we provide all the money they need,
to do that without the expertise.
And I hope we will get into that as we move along, but I
see that my time has expired. And I thank you very much. If you
would like to conclude in a comment, please?
Ms. Lee. Yes. If I could just link your point with the debt
relief, because there is a very strong link, we need the
multilateral institutions to help add to the capacity,
precisely the infrastructure building capacity that you're
talking about. And we need the multilateral institutions that
do it well--not all of them do it well--to come in quickly.
That has to be financed. In the past, it has been financed
by lending--concessional lending, but lending. We want it to be
financed by grants, going forward. And so we need a lot of up-
front grant finance. And that's what we're trying to do with
this debt proposal.
Chairman Meeks. The gentleman's time has expired. Ms.
Waters?
Ms. Waters. Thank you very much, Mr. Chairman. There are a
couple of quick questions that I have, and then I want to
engage a little bit in the way that Mr. Miller was trying to
deal with the infrastructure development and the long-term
development of Haiti.
First of all, I want to know whether or not Taiwan and
Venezuela, did they actually do debt relief yet? They had
promised, according to the information I received. Haiti owes
about $295 million to Venezuela, and $92 million to Taiwan.
President Chavez announced that Venezuela would forgive Haiti's
debt. Do you know if that has been done?
Ms. Lee. Those are the correct numbers, that's absolutely
right. Those are very large numbers, and so they were
substantial additions to Haiti's debt.
Ms. Waters. Has it been done?
Ms. Lee. President Chavez has announced the cancellation of
Haiti's debt, as of--
Ms. Waters. And what about Taiwan?
Ms. Lee. Taiwan, as we understand it, is exploring the
question. It understands that this is a--
Ms. Waters. Okay, it has not been done. I have to move
quickly--
Ms. Lee. It has not.
Ms. Waters. I only have 5 minutes.
Ms. Lee. Okay.
Ms. Waters. According to the Treasury's justification for
appropriations, the United States owes more than $478 million
in arrears to the World Bank Group's International Development
Association. We also owe $75.4 million in outstanding pledges
to the HIPC trust fund.
Do our arrears make it more difficult for Treasury to
negotiate additional debt relief for countries like Haiti? I am
very pleased with the President, with Treasury, with my
colleagues. Everybody would like to do this debt relief. But
are we going to be hampered in any way because of our arrears?
Ms. Lee. Well, I can just say from my personal experience
on my particular region, the arrears influence--the arrears are
raised with us when we engage with the institutions that deal
in this part of the region--
Ms. Waters. Can we overcome that?
Ms. Lee. We have to do something about the arrears. But we
are pursing this negotiation seriously, and we wouldn't have
proposed it if we didn't think we could get agreement to do
what we proposed to do.
Ms. Waters. You are planning to do--well, we are planning
to do an appropriations request letter, urging support for the
Administration's request of $1.235 billion for IDA's
replenishment, $50 million for IDA's arrears, and $50 million
for the HIPC trust fund. Jubilee USA asked us to do this.
However, I want to know if this is what you want us to do,
if this is what you would urge us to get done.
Ms. Lee. You mean the arrears clearance?
Ms. Waters. Yes.
Ms. Lee. I'm not quite sure I understand the question. The
arrears clearance would not cover these additional debt relief
costs. Is that--
Ms. Waters. Yes, well, actually, my bottom line concern is
that we are all wanting to do this debt relief. And I am very
appreciative for Treasury's support to move forward, to be our
voice and our vote. Are we going to run into any problems doing
it?
Ms. Lee. To do this debt relief, this very ambitious
proposal as we proposed it, it will require a substantial cost,
somewhere--for all of the institutions together, the entire--
sort of the bill for converting the undisbursed money into
grants and for canceling--
Ms. Waters. Are we going to run into any problems doing
this?
Ms. Lee. --all the institutions will be substantial. But we
think--
Ms. Waters. Is there anything else that we should do to be
supportive, to make sure that we don't get bogged down, and we
can actually do the debt relief, particularly by way of grants?
That's really what my bottom line concern is.
I know that everybody wants to do this. Is there anything
that we should be doing to help give support to your voice and
your vote to get this done?
Ms. Lee. The signal you have already sent is critical,
because we can go to donors and say, ``This is an idea that is
attractive on the Hill,'' so that was a key part of why we
proposed what we proposed. But, of course, we will be coming
for resources to finance this proposal.
Ms. Waters. Okay. And I think what my staff is telling me--
that there is an Administration request, and we should be
gathering support over here for that request, if that would be
helpful in helping to get the job done.
Ms. Lee. We are evaluating the need for a supplemental
budget request for Haiti's relief and reconstruction and
recovery needs. And a decision will be made very soon about
that. So we will then come back to Congress.
Ms. Waters. All right. Thank you very much. Mr. Miller--is
he still here? One of the concerns I--oh, my time is up. Okay,
thank you very much, Mr. Chairman.
Chairman Meeks. I'm going to try to get to Mr. Bachus and
Mr. Carson. Mr. Bachus?
Mr. Bachus. Thank you. And I will yield part of my time to
the sponsor of the bill, Ms. Waters.
I want to commend the Treasury for your presence on the
ground, and all you have detailed in your testimony. I
appreciate that. I appreciate the Administration's leadership
in coordinating efforts with other countries.
Ms. Lee. Thank you.
Mr. Bachus. I commend you for that. Let me ask one
question. How aggressive is the Department of the Treasury, in
ensuring that other actors or countries, whether they be
private creditors or sovereign nations such as China, are not
saddling Haiti with new debt, or taking advantage of the
nation's resources?
I think there is a history of that happening in other
countries. Would you comment on that?
Ms. Lee. Well, in the context of the HIPC debt relief, we--
which is the bilateral debt--all of the Paris Club creditors
get together. And when the HIPC debt relief decision was taken,
all bilateral debt in the Paris Club was supposed to be
canceled. And we use our voice in that club to urge others to
get on with it.
Mr. Bachus. Sure.
Ms. Lee. As there are some--so--
Mr. Bachus. Of course what I'm talking about is a country
coming in and trying to take advantage--
Ms. Lee. Yes.
Mr. Bachus. --by buying resources for less than value or by
saddling them with new and onerous debt to--
Ms. Lee. Yes. I would say our intervention on that, when
Haiti takes on what we call non-concessional debt, it's really
through the international financial institutions, in
particular, because they--and particularly the IMF, because
that is the institution which is supposed to worry about debt
sustainability.
Mr. Bachus. Yes.
Ms. Lee. Haiti is a sovereign country, and it has decided
to take on this debt. But our role is really to try to fit this
into some sort of--
Mr. Bachus. But the Treasury, I think, is one of the
departments that could be uniquely positioned to--since you're
involved in the debt relief, not to really keep your eye on
this, and at least come up with a game plan, as opposed to
leaving it just to the international organizations.
Ms. Lee. Yes.
Mr. Bachus. Or, take a leadership role with them on the--
Ms. Lee. Yes. There are some countries, though, where we
have very--we, in terms of the creditor countries, we have very
little influence. I would say the most effective thing that
Treasury can do is to try to mobilize the grant resources, so
that Haiti doesn't have to--
Mr. Bachus. Right, and--
Ms. Lee. --go to a country and take on non-concessionary--
Mr. Bachus. And, I'm talking about somebody coming in or--
Ms. Lee. Yes.
Mr. Bachus. --taking advantage, going forward.
Ms. Lee. Yes.
Mr. Bachus. Congresswoman Waters, I will yield my remaining
time to you. And I commend you for your leadership.
Ms. Waters. And I appreciate the relationship that we have
developed over the years. Many in the Jubilee movement helped
to bring us together years ago, we have been working together,
and it has been very rewarding. And I appreciate that.
Mr. Miller, you asked about the water systems and the
infrastructure and the development. And those are the kinds of
questions that I think that the Congress of the United States
is really going to have to get involved with, some real public
policy about Haiti.
What has happened is we have allowed some of our
international funding organizations to be very slow in the way
that they gave out the money. We have allowed too much of our
resources to go to some--I don't know, it's 6,000 NGOs in Haiti
now, rather than helping to see that there is a strong
government, and that there are contracting systems put in place
for specific projects.
They need a water system in Haiti, even if the earthquake
never hit. And they don't have potable water. And that's
shameful, for the length of time that this has gone on. We have
had the City of Gonaives that has been wiped out, promises that
are made about the kind of reconstruction that would divert
water that comes down off of the mountain that flooded out
Gonaives, the historic City of Haiti. We have bridges and roads
that were wiped out in the hurricane--
Mr. Miller of California. Let me respond to a little of
that, I think it's important. The Haitian people are very hard-
working people, but they don't necessarily have the talent.
Ms. Waters. That's right.
Mr. Miller of California. We have a tremendous amount of
talent unemployed in this country today.
Ms. Waters. That's right.
Mr. Miller of California. We are spending--American
taxpayers, to help good people--we're spending their dollars.
Why don't we invest that into American labor, too, to assist
the people of Haiti in reconstructing the areas we need to get
their infrastructure back, providing the basic services they
need, and accomplish it rapidly, rather than some of the ways
we're doing it? We're throwing money out to organizations who
are not getting it to the ground, where it needs to be put.
And I would like to have this committee, whether it be in a
formal hearing or on the Floor, talk about investing the
talents of the American people. We are investing their monies,
we might as well put it to the people who need the work in this
country, who can benefit the Haitian people. And I would love
to talk to you some more about that.
Chairman Meeks. The gentleman's time has expired. Mr.
Green?
Mr. Green. Thank you, Mr. Chairman. Mr. Chairman, I want to
compliment you. You used a term that I think we need to
revisit, and that term was a ``Marshall Plan'' for Haiti. I am
not sure that it will be called ``Marshall,'' but I am sure
that kind of thinking will be helpful. I compliment Treasury on
what you have done, the creative thinking, in terms of how you
would use grants so as to eliminate debt. I think that's a
wonderful thing.
But I see this as compartmentalized into three components.
There has to be this initial response, which is almost an
emergency response that's still continuing. Then you have to
have a mid-term response, because you have to deal with the
infrastructure, as Congresswoman Waters has indicated.
Contracting. You have to deal with the constabulary. You have
to deal with the transit. You have to deal with all of the
mobility questions that have to be dealt with.
But then, long term, there has to be the leadership
provided by the United States. We are the preeminent leader of
the world, when it comes to helping countries redevelop
themselves, and help themselves to extricate themselves from
some of their economic woes. To do this, I think we have to get
the rest of the world engaged in this Marshall Plan, as it
were, that the chairman talked about, a plan that views Haiti
as a long-term, independent, autonomous nation that can sustain
itself in this hemisphere.
I think that aid is great. Aid gives people hope, and they
need hope now. But, in the final analysis, it's trade that
provides the help that they need. And I want us to move from
that aid to trade, so that they will have the help to have the
autonomy that they richly deserve.
I thank you, and I especially thank Mr. Miller. Your words
have warmed my heart, sir. He has been a dear friend, we have
worked together on many things. But this one is exceptional,
and I appreciate the way you and Ranking Member Bachus have
embraced this.
I yield back the balance of my time, Mr. Chairman. Thank
you so much.
Chairman Meeks. Thank you, Mr. Green. And thank you, Ms.
Lee, for your testimony here today, and for your cooperation in
working with us on behalf of the United States of America with
people in Haiti.
At this time, we have three votes. So we are going to
recess and come back after the three votes, and commence with
the second panel. Thank you.
Ms. Lee. Thank you.
Chairman Meeks. This committee stands in recess.
Ms. Lee. Thank you.
[recess]
Chairman Meeks. I have been informed that Mr. Adams has
time constraints, and so we will start right out, as soon as I
get myself organized here, with Mr. Tim Adams, who is the
managing director of The Lindsey Group.
Previously, Mr. Adams served as Under Secretary of Treasury
for International Affairs. As Under Secretary, Mr. Adams was
the Administration's point person on international financial
issues, including exchange rate policy, G7 meetings, and the
IMF and World Bank issues. He regularly interacted with
counterparts in key emerging markets, including China, India,
and Brazil, and traveled extensively throughout Asia, the
Middle East, and Europe.
Prior to assuming his post as Under Secretary, Mr. Adams
had served as Chief of Staff to both Treasury Secretary Paul
O'Niell and Treasury Secretary John Snow. He was the Policy
Director for the Bush-Cheney reelection campaign from November
2003 through the end of 2004, and also served as a full-time
member of the Bush-Cheney campaign staff in Austin in the 2000
campaign.
Mr. Adams also served in the White House under the first
President Bush at the Office of Policy Development. And he
holds a BS in finance and a master's in public administration
and an MA in international relations from the University of
Kentucky. Mr. Adams, welcome.
STATEMENT OF THE HONORABLE TIMOTHY D. ADAMS, THE LINDSEY GROUP
Mr. Adams. Thank you, Mr. Chairman, and Congressman Bachus.
It is an honor to be here today to talk about such an important
issue. I obviously can't speak to it with the same eloquence
and passion that I have heard from the members of this
committee today, so I won't even begin to try. And, for the
sake of time, I will be quite brief--and also to create time
for my good friends here on the panel.
I would like to just make three quick points, Mr. Chairman.
One is that I enthusiastically support debt relief for Haiti.
The conditions there, as Dr. Lee described this morning, as we
have witnessed through various forms of media, certainly demand
all that we can do. And debt relief is an important piece to
the puzzle of support for this country, which has gone through
such a terrible tragedy.
Two is that we shouldn't kid ourselves into believing that
debt relief, however important it is, is a panacea, a silver
bullet, for what ails this country, the challenges it faces in
the short-term and medium- and long-term. It can't substitute
for other forms of support, whether it's in-kind support or
grants, or technical assistance, or humanitarian assistance.
It's an important piece, but there are so many other things
that need to be done. And we need to commit ourselves for a
long period of time to provide the resources that this
impoverished country is going to need. It will require our
attention for not weeks and months, but years and decades.
And, three, an issue which is important to me and was
important to me in my previous position at the Treasury
Department, and that is to take an opportunity to reaffirm an
approach to development which tries to move away from excessive
lending for the poorest countries, and focuses more on grant
funding for development. I was a part of the process, the
multilateral development relief--debt relief initiative, and it
was a highlight of my tenure in government, and I think
certainly one of the highlights of the previous
Administration's tenure.
But I hope that we never have to go through that again,
that we don't find ourselves repeating the lend-and-forgive
cycle that we have seen that has occurred before. It is--as I
note in my testimony--a cruel hoax to load up poor countries
with debt that we know they can't sustain, we know they can't
pay back, and to find at some point in the future that we have
to cancel that debt. And it calls into question foreign
assistance and development assistance generally, and it creates
enormous cynicism among our voters and our taxpayers. And you
most certainly must feel that and hear it when you go back to
your districts.
So, if I could do anything other than share the concerns
you will hear with this panel--and again, we have heard from
the members of the committee today--to help this country and do
everything in our power, including debt relief, it is to think
about how we do development assistance in the future, to move
away from lending and to focus more on a grants-focused
development assistance strategy, so that we don't repeat this
cycle in the future.
Thank you, Mr. Chairman.
[The prepared statement of Mr. Adams can be found on page
37 of the appendix.]
Chairman Meeks. Thank you, Mr. Hart. We now will hear the
testimony of Ms. Melinda St. Louis. Melinda St. Louis is the
deputy director of Jubilee USA Network, an alliance of more
than 75 religious denominations, faith-based organizations,
human rights and environmental groups, and the development
agencies dedicated to the debt cancellation for impoverished
countries.
She has more than a decade of experience in policy
advocacy, communications, and nonprofit management both in
Washington, D.C., and on the ground in Latin America and the
Caribbean, as well as a master's degree in international policy
and development from Georgetown University.
Welcome, Ms. St. Louis.
STATEMENT OF MELINDA ST. LOUIS, DEPUTY DIRECTOR, JUBILEE USA
NETWORK
Ms. St. Louis. Thank you. Thank you for having me. Chairman
Meeks and Ranking Member Miller and other members of the
subcommittee, I want to thank you for the opportunity to
discuss debt relief for Haiti today. I would also like to
especially thank both Representative Waters, who isn't here
right now, and Representative Bachus for being such long-time
champions of debt cancellation, not only for Haiti, but for
impoverished countries around the world. We have been very
gratified to work with you over the years.
I am pleased to represent the Jubilee USA Network and our
alliance of our 75 organizations. It's important for us to be
here today because, as has been said, the people of Haiti have
already suffered so much. And now they face a disaster that the
scope is hard to imagine: 1 in 50 Haitians have died; and
millions are affected. And, as many have highlighted, that
means Haiti clearly needs and deserves our generosity and
solidarity.
A critical first step for Haiti's long-term recovery is 100
percent debt cancellation for all of its remaining debt. We are
gratified by all the efforts taken thus far, both in Congress
and by the Administration, to work towards full debt
cancellation for Haiti, both in practical terms and because we
all know Haiti can't possibly repay, but also as a matter of
justice.
I say justice, because when we talk about Haiti's current
debt burden, we must not forget the historic legacy of unjust
debt that was so eloquently stated by Representative Green
earlier. Dating back to its independence from France, the
legacy continued when the international community made loans to
the Duvalier dictatorship, despite widespread reports of
brutality and massive corruption.
So, until last year, Haiti was paying $60 million to $80
million per year in debt service, without any distinction to
the 40 percent of its debt that was incurred under the Duvalier
dictatorship.
The injustice of these debts, and the staggering
development challenges facing Haiti as a result, compelled our
member organizations, allies in Congress, and the
Administration to advocate for many years for debt relief for
Haiti. My written remarks detail how we accompanied Haiti
through the very bumpy ride of the highly-indebted poor
countries, or the HIPC initiative, which finally culminated in
June of last year with $1.2 billion in debt relief, which we
celebrated as a victory for the Haitian people.
But, as we have heard, that wasn't the end of the story.
Because the HIPC initiative had set the cut-off date as the end
of 2003, and Haiti had taken out loans since that time, Haiti
still owed more than $1 billion to external creditors when the
earthquake hit.
Also, in the days following the earthquake, we have heard
the IMF offered Haiti $100 million in emergency assistance
through its extended credit facility, which was an extension of
its previous loan. We and others reacted with very deep concern
at this nearly doubling of Haiti's debt to the IMF, urging them
to not add to Haiti's debt burden, and not to apply the
conditions that normally are placed on IMF loans.
The IMF's managing director's statements, intent to turn
the loan into a grant and to cancel the rest of its debt, is
very welcome. But it does require board action. And we are--but
as of now, a $102 million loan has added to Haiti's debt
burden.
But the very good news is that our swift call for full debt
cancellation for Haiti from members of our network--ONE and
many others--together with allies here in Congress, including
the bill that will be marked up this afternoon, already has had
a tremendous impact, as we heard earlier. We saw a high level
of commitment from G7 finance ministers. And on February 6th,
they indeed made a strong statement in support of multilateral
debt relief for Haiti, which is an important victory, and it's
a critical first step to assuring its cancellation of Haiti's
multilateral debt.
However, as we know, as the devastation in Haiti begins to
fade from the public spotlight, we have to move quickly to
negotiate debt cancellation, to ensure that it actually does
happen. The upcoming meeting, annual meeting of the IDB's board
of governors in Mexico later this month, and the joint spring
meetings of the World Bank and IMF in April, are key
opportunities to secure an agreement. We hope the U.S.
directors will work with their colleagues to negotiate without
a delay. And I am glad to hear that some of that is already
happening.
As we have heard, how to finance debt relief is clearly a
key concern, as debt relief must not replace other donor
assistance for Haiti. Where possible, institutions should use
internal resources to cover the modest reduction in their
income from debt relief. The managers amendment, which was
mentioned earlier, would suggest that windfall profits from IMF
gold sales could be allocated to debt relief for Haiti. I am
glad to hear that the U.S. Treasury and the IMF are pursuing to
use internal resources to benefit Haiti.
I also want to underscore what has been said before, in
that we must provide support as grants, and not loans. The
United States needs to play a leadership role. It sounds like
we're already doing that. And to ensure that assistance is
provided solely as grants.
And, in addition to these immediate recommendations, I
think the Haiti case should also encourage us to think more
broadly about how to better deal with sovereign debt issues.
The fact that we have to talk about negotiating voluntary debt
relief on an ad hoc basis separately for each institution, and
for a country that has already completed HIPC, highlights the
limitations of our current mechanisms.
Interesting ideas for future consideration, which I have
briefly elaborated in my written remarks, include creating a
multilateral disaster global fund, and mechanisms to coordinate
debt reduction in a single process, pursuing procedures for
fair and transparent arbitration for sovereign debt, and
establishing international frameworks for responsible lending
and borrowing to avoid build-ups of odious and illegitimate
debts.
I want to conclude by urging support of Haiti debt
cancellation through H.R. 4573, as well as quick passage of the
Jubilee Act, which is H.R. 4405, which begins to address some
of these broader sovereign debt challenges. We really must work
to avoid the mistakes of the past, and ensure a brighter future
for Haiti and for other impoverished countries. Thanks so much
for taking the time to listen.
[The prepared statement of Ms. St. Louis can be found on
page 52 of the appendix.]
Chairman Meeks. Thank you. And I think I previously
misspoke upon the conclusion of Mr. Adams's testimony. I said,
``Thank you, Mr. Hart, for your testimony.'' And we know we
didn't hear Mr. Hart yet.
And so, now we will hear the testimony of Mr. Hart. But let
me thank Mr. Adams for his testimony.
STATEMENT OF THOMAS H. HART, SENIOR DIRECTOR OF GOVERNMENT
RELATIONS, ONE
Mr. Hart. Mr. Chairman, it is an honor to be confused with
Tim Adams in this regard. So I am happy to associate all my
remarks with him, as well as Melinda. Mr. Chairman and Mr.
Bachus, thank you so much for the honor of coming before you
today to talk about this important issue.
My organization, ONE, is a global advocacy and campaigning
organization backed by more than two million people nationwide,
dedicated to fighting extreme poverty and disease. We are
probably best known by our co-founder, Bono, who actually began
his advocacy in the United States working with Mr. Bachus and
Ms. Waters and others 10 years ago on the Jubilee 2000 movement
for the first round of HIPC debt relief.
Members of this committee, frankly, should be proud of all
that has happened in the last 10 years on debt cancellation.
Chairman Frank, Ms. Waters, Mr. Bachus, Chairman Meeks, and so
many others, as well as President Clinton, President Bush, and
now President Obama have all been deeply committed to debt
cancellation and bringing the poorest countries out from
underneath unpayable debts.
I am not going to take time this morning to review all that
has happened over the last 10 years. Suffice it to say 35 out
of the 40 poorest countries on the planet have qualified for
debt service relief, 26 of them have now received both full
bilateral and multilateral debt stock cancellation, freeing up
$117 billion, so far, of debts that couldn't be repaid. And, in
fact, this freed up around $2 billion annually, that these
countries were paying back to these institutions, and are now
going in to service the needs of their countries and to fight
poverty.
We have been pleased to see that the World Bank has tracked
social service spending during the course of this debt relief,
and we have seen a nearly fivefold increase in social sector
spending, such as education and health, for these 35 countries
during the HIPC and MDRI programs.
Last summer, as has been said a number of times, Haiti
qualified for this debt relief. They got about $1.2 billion of
debt that was incurred prior to 2005 written off. Venezuela and
Taiwan did not participate in that, which is why their debt
remains on the books, and is a real concern today.
But at the time of the earthquake, Haiti still had more
than $1 billion of loans from 2005 to present. And I think the
committee is now well familiar with the major shareholders: the
IMF; the World Bank; the Inter-American Development Bank; the
International Fund for Agricultural Development; Taiwan; and
Venezuela.
I do want to note that the large volume of debt from the
Inter-American Development Bank in such a short time is of
particular concern. And, Mr. Chairman, you raised this earlier
with Treasury. I think the Treasury Department has a particular
burden, as the largest shareholder at that institution, to seek
ways to avoid such a rapid debt reaccumulation there.
Fortunately, all the major bilateral donors, including the
United States, have gone to grant-only assistance to Haiti, and
that should be applauded.
I want to echo Tim's sentiment that debt relief is not a
silver bullet. In the immediate aftermath of the quake, of
course, urgent relief is the most appropriate and most
effective mechanism. Haiti was actually servicing very little
of its current debt. Therefore, debt relief relieves very
little immediately. But, over the long term, that $1 billion
would have to be paid back. And so, we believe debt relief
occupies a very smart and important piece of the long-term
reconstruction puzzle.
I think the case for relieving Haiti's debt really boils
down to two very practical things. First, these loans were
taken on with certain economic assumptions in mind. Haiti
appeared to be on the way up, the IMF thought that it would
grow at an annual rate of 4.5 percent, exports were growing,
governance indicators were improving. And so, one might have
assumed that some of these loans could be serviced.
Well, all of those assumptions are no longer appropriate.
And to continue to hold Haiti accountable for a bunch of debts
under assumptions that are no longer appropriate makes little
sense.
Second, holding Haiti to its international debts diminishes
the impact of the assistance that the U.S. Government is
providing, and the support the American people are providing.
Donor assistance will hopefully continue to pour in. And if
Haiti is still burdened with debt, some of that assistance will
go to repaying those old debts.
So, this ``revolving door'' of assistance--we provide
assistance that then gets turned back into debt payments to
donor-led institutions--defies common sense. Fortunately, I
think common sense is prevailing, and I really applaud the
committee, members of the committee and the Administration for
having moved forward very rapidly in seeking support for debt
cancellation for Haiti.
We experienced a tremendous outpouring of support for this
initiative among ONE's own membership. Over 200,000 people
signed a petition in support of debt cancellation. And we
joined with Jubilee and other organizations to collect another
200,000 people's names.
The G7 finance ministers typically find the most remote
location on the planet to meet, so that people like us don't
find them. We were lucky to have a ONE member, a Haitian-born
citizen of the 6,000-person Arctic village where the G7 finance
ministers were meeting a month ago, deliver these 400,000 names
to them. It was a very poignant moment, and also a moment
showing broad public support for an initiative that the United
States and Canada and others were adopting, to relieve Haiti of
its debts.
We applaud Secretary Geithner's announcement of this and
the G7 finance ministers' support.
In my written testimony, you will see a chart of all the
institutions Haiti owes money to, and who the major
shareholders are. Of course, the G7 countries are the major
shareholders in these institutions. But key players like
Argentina, Brazil, and Mexico are key players in the IDB, for
example. And so, securing their support is going to be very,
very important.
Just quickly, on next steps, the IDB board meets in a
couple of weeks in Cancun, where we hope they will deal with
this subject very rapidly. Then, in April, the spring meetings
of the IMF and World Bank meet, where again we hope they will
approve cancellation.
Another essential step is that each of the donors
contribute a bit to a fund to help cover the cost of the
cancellation. The cost of cancellation is not usually the face
value of the loans that were lent, but donors do need to
contribute in order to secure a global deal. We expect the
Administration to request such funding in their Haiti package,
which will hopefully soon be before Congress. ONE strongly
supports this request.
Let me conclude, given that time is short, by once again
thanking the committee, Mr. Chairman, and my colleagues. I
think, again, the argument in favor of canceling Haiti's debt
is compelling and very, very urgent. And I am happy to answer
any questions. Thank you.
[The prepared statement of Mr. Hart can be found on page 39
of the appendix.]
Chairman Meeks. Thank you. Thank all of you for your
testimony. And knowing that Mr. Adams is short on time, I think
we will ask him a couple of questions, and then we will let him
go.
In your reference to the cruel hoax of a lend-and-forgive
cycle to which we subject many of the world's poorest
countries, I wonder what conclusions you think we should draw
from the amount and the speed at which IDB acquired new loans
following the last round of debt relief for Haiti? Can you give
me some thoughts there? Similar to what I asked the Treasury.
Mr. Adams. Yes, Mr. Chairman. Well, it's somewhat
troubling, how quickly the lending was done in the aftermath of
debt relief.
Now, I understand the structure of these institutions,
they're there to lend money. It's a wonderful institution just
down a few blocks from here. It's populated with thousands of
people who come in every day trying to do the right, noble
thing. But the objective is to push money out the door. And
having been a former official at Treasury, it's easy to get in
the habit of saying, ``We need to do something. Let's use the
institutions, let's call in the institutions, let's do
something.''
And because of the limited nature of grant-based funding,
it's easy for those institutions to do what they do, which is
to lend. And so, it's not just the IDB--although I think that's
worth looking into--it is a development structure, a
multilateral development structure, that has a bias toward
lending, and an incentive toward lending. And I think we ought
to think about that in a much more systemic way.
Chairman Meeks. What I'm going to do now is reserve the
balance of my time. But if you--either one--have a question for
Mr. Adams, because I know we had promised him to get out of
here by 12:15, you can ask him a question and then let him go.
Mr. Miller?
Mr. Miller of California. No, I'll hold.
Chairman Meeks. Mr. Bachus?
Mr. Bachus. One question. I referred to, in my opening
remarks, and you have referred to in your testimony, that some
creditors attempt to take advantage of the country if there is
any freed-up borrowing capacity in the wake of debt relief,
either countries coming in or private companies, in trying to
take advantage of asset sales, or their natural resources, or
putting more debt on them. How do we prevent this from
happening?
Mr. Adams. A great question, Congressman. And I share the
concern, because I think we are seeing it happen. And it is
unfair to the American taxpayer to pay the price of debt
relief, only to find that other countries are coming in and
loading poor countries up with debt, and we know they can't
afford it.
There are mechanisms in place, in the aftermath of MDRI in
2005. We began something with the IMF and the World Bank that
looks at debt sustainability analysis and models, then also
work with the OECD and the export credit agencies. And Dr. Lee
talked about bilateral assistance, and how it's treated through
the Paris Club.
But we need to have a much more broadly encompassing
mechanism to pull in those countries that don't participate in
these institutions. And I notice that Jubilee talked about an
international framework for responsible lending. We need to
think about new mechanisms much more broadly encompassing.
And we have a G20 summit that's going to occur in Canada in
just a couple of months. I don't know why the G20 couldn't put
this on the agenda for the things they are looking at. Because
I think if we don't, in 5 years we're going to find a number of
countries in Africa and other places that owe a tremendous
amount of debt to countries who have been out there lending to
get at natural resources. And it's a new form of colonialism,
and we need to stop it.
Mr. Bachus. Let me--if I could, I'm supposed to go to a
speech--if I could just take 1 minute to wrap up, and then I
appreciate the chairman and the ranking--
Chairman Meeks. Without objection.
Mr. Bachus. I want to illustrate, and I want to use Tom's
example. What Tom has reminded us all of, and what the Congress
needs to realize, and I think the American people, is that debt
relief is working in these countries. As you say, it's not the
total solution, it's not a cure-all. Their problems were
daunting. But there are more children in school. In many cases,
either the life expectancy or the infant mortality has either
been reduced or slowed. Now, some of them would have a famine
or there would be something else, but it has really worked
fantastically.
And, as we predicted 8 or 10 years ago, for just pennies,
just what an American would really--pocket change, it's meant
the ability of people to survive and better themselves.
Two countries--and I will close--Afghanistan was one of the
most illiterate countries with the lowest number of children in
school. There was no debt relief. It was a highly impoverished
country. We saw what happened there. You have groups take over,
and they agree to educate the children. And we have a
tremendous loss of life there, and with our troops.
We cannot--I had a Marine brigadier general who told me
several years ago, ``This is a partial solution to our national
defense, because we can't be in all these countries.'' And so I
think Afghanistan is a wonderful example of how--I don't know
if we could have avoided it, but I wish we had known.
The other is Namibia. About 6 years ago, I visited there--
and I don't know if it was the president or the prime
minister--thanked me for debt relief. And we had not given debt
relief to Namibia. And no one else had. They had the--I don't
know if good fortune, of being colonized by the Germans. And
their debt was wiped out in World War II, and they apparently
never incurred much, unlike Haiti, their experience, and many
other countries, which have just been in a cycle of debt for
hundreds of years.
So, I said, ``Well, I didn't realize that you received debt
relief.'' He said, ``We didn't. Our neighbors did.'' And he
said, ``There is instability on our borders, disease, there are
rebel groups.'' And that's one of the most stable countries in
Africa. It's a success story. But part of the reason is that--
and he said it was the neighbor to the north. It had had some
stabilizing influence there. I thought this was a powerful
message. And I think, just like Namibia, the United States--
there are may benefits that Americans don't realize.
And then, finally, as Mr. Adams said, if other countries do
not follow suit, or if we don't pass this bill, we will
continue to pay the debt. I am encouraged that the world
community is realizing that this is a problem which not only
affects these citizens, it affects all of us. Thank you.
Chairman Meeks. Thank you, Mr. Bachus.
Mr. Bachus. Every one of your testimonies was excellent. I
think everything about it--I thought it was wonderful. I wish
every American could have heard it.
Chairman Meeks. Thank you, Mr. Bachus. And, Mr. Adams, we
want to thank you. We know that you have to leave. We held you
a little bit longer, but thank you for coming and giving your
testimony.
Mr. Hart, let me ask you a question really quick. I think
that you have put forward the idea of having like a shock
insurance facility for vulnerable, poor countries that would be
able to buffer the fiscal and balance of payment shock for
natural disasters, for example, among other things.
Such a facility could be mobilized in a coordinated manner,
which would happen automatically, I guess, in the event of a
shock, something of that nature, giving folks like us--
policymakers, etc.--more time to react to them as we are trying
to do here today.
Now, a couple of questions on that: One, could such a
facility be financed entirely with existing resources from the
international institutions; two, in your opinion, would the IMF
be the best place to house such a pooled insurance mechanism;
and three, has there been any more substantive discussion about
this within the institutions?
Mr. Hart. Thank you for raising it, Mr. Chairman.
Fortunately, there is a modest form of this idea already in
existence. The HIPC and MDRI processes actually take a look at
what they call ``topping up.'' If countries have gone through
the processes, met all the qualifications of HIPC and MDRI,
arrive at the debt cancellation that they were expected to get,
and have experienced some sort of, as they say, ``exogenous
shock''--food or fuel price changes, difference in the
commodities, exports--they can receive a topping up of
assistance, or additional debt relief, in order to get them
back to the level that was expected.
So, this idea is certainly not a unique one, not my own.
And I merely wanted to make the point in my written testimony
that, of course, a 7.0 earthquake would certainly qualify as an
exogenous shock. We shouldn't be concerned that now many other
countries would expect additional debt cancellation. Clearly,
countries experiencing natural disasters such as this one
deserve--as I think we have discussed today, and as so
eloquently put by Mr. Bachus a moment ago--to get that
additional relief.
Could such a facility be entirely financed by the
institutions themselves? I think it certainly is possible.
Looking at the IMF's resources, they are going to be able to
cover, through their own resources, the cost of the
cancellation of Haiti's debt. They--as I think this committee
knows well--sit on millions and millions of ounces of gold. And
that gold can be sold on open markets, as has been the case in
the past, to finance debt cancellation. An amount of that could
be sold and the proceeds of that used to cover this exogenous
shock facility.
I think the IMF certainly could be the place to house this.
It could be housed in a number of places. And so, I think there
is discussion around the additional topping up of debt
assistance.
There is not enough discussion of what Mr. Adams relayed,
which is how do we avoid getting back in these circumstances?
We don't want to have to continually top up countries. We want
to avoid getting them in this circumstance in the first place.
So we need to, as a global community, pause before we release
another ``X'' billion dollars in new debt, and think, ``Can we
finance this through grants?''
Chairman Meeks. Thank you. Ms. St. Louis, let me ask you a
question really quick, before I go to Ranking Member Miller,
because you talked also about establishing a mechanism for more
transparent and accountable debt accrual, and I guess where
applicable, debt default for forgiveness.
What agency? Would it be the IMF? Who do you think is best
suited to establish and administer such a mechanism?
Ms. St. Louis. The mechanism for responsible lending and
borrowing? Well, there is an interesting initiative that has
been launched, actually, by the United Nations Conference on
Trade and Development, UNCTD, which begins a process of
bringing together legal experts and governments and the
nonprofit sector, coming together to come up with a set of
guidelines for responsible lending and borrowing that could
kind of be a code of conduct, initially, and then kind of build
toward responsible--toward more soft law, perhaps down the
road.
And this is an interesting initiative, particularly because
China is at the table, and that has been one of the problems
within the Paris Club and within other institutions. It gets a
little bit to the question that Ranking Member Bachus talked
about earlier.
So, having an initiative through the United Nations, which
is a place where some of these other kinds of emerging markets
that are engaging in lending--to get them to make sure that
they are engaged at the table, I think it is more likely to
have success more broadly.
And so, that's one initiative where we are recommending
that the U.S. Government play a constructive role. It's really
getting off the ground. I think it will take a while. But I
think that having those guidelines in place, and trying to
ensure that all of the relevant actors who are lending are at
the table at the beginning will be really important.
Chairman Meeks. Thank you. Mr. Miller?
Mr. Miller of California. Thank you, Mr. Chairman. Mr.
Hart, in your testimony, you mentioned the importance of
country ownership of programs. I believe, more specifically,
you said, ``country ownership of development initiatives where
funding supports country priorities, rather than donor
priorities.'' Then you go on to say, ``country-owned poverty
reduction plan increase in ownership,'' and in many cases there
has been a lack of poverty reduction efforts on the part of
government.
Could you explain that more fully?
Mr. Hart. Sure, of course. The HIPC and MDRI initiatives
are built upon the foundation that the amount of payments going
to old debts that is now freed up, that those proceeds, the
windfall from debt relief, would go to poverty reduction.
And so, the World Bank has led a process with these
countries called the Poverty Reduction Strategy Process. It's a
process by which the countries themselves consult with civil
society, begin a national dialogue about what their poverty
reduction and development plans are, and they put together
these strategies, which debt relief--and other assistance--go
to fund. Now--
Mr. Miller of California. How can donor priorities, rather
than country priorities, differ that are in conflict with each
other?
Mr. Hart. Oh, very often donors--
Mr. Miller of California. We have an initiative to get the
money to the people.
Mr. Hart. Right.
Mr. Miller of California. And to help the people. Perhaps
if it went to the government, it might not get to the source
we're trying to achieve.
Mr. Hart. I think it's not necessarily a case of giving it
to the governments of these countries directly, so much as
having a country plan that says, ``We need this number of
schools, we need this number of clinics. It would be great if
we had a farm-to-market road system.'' If the donor community
understands what the development priorities of the country are,
their donor assistance is going to be that much more effective.
Oftentimes in the past, our assistance has gone into
priorities that we think we want to achieve, but don't
necessarily resonant with what the countries, themselves, need.
A very innovative example of that new approach is, frankly,
the Millennium Challenge account, which was set up during the
last Administration. It's a negotiation across the table. It's
a, ``Hey, we would like to do this. We need this. How can we
work together to get it done?'' And that's really the process--
Mr. Miller of California. That can be done, though, without
necessarily country ownership, can't it? Just do bilateral
agreements on issues.
Mr. Hart. The best bilateral agreements are obviously going
to be where the country and its citizens are fully bought in.
Mr. Miller of California. Okay. Buying in is different than
ownership. I see where you're going, then.
Ms. St. Louis, you talked in here about the flaws of a
multilateral debt relief process that is voluntary. How would
that impact shareholders if it were not voluntary, being this
is a contribution? How would you have shareholders involved,
and then have their debt relief be non-voluntary on their part?
Ms. St. Louis. Well, what I was referring to in that was
the fact that for sovereign--for countries that are in debt
distress, the--there is no international bankruptcy type of
mechanism that, you know, an individual or a corporation that's
in debt distress has. There is a way for an orderly work-out of
the mechanism. And that doesn't exist in the international
framework.
And so, that's one of the things we were talking about.
It's not so much saying that it's going to be involuntary, but
that there is actually a comprehensive mechanism where
everybody is at the table together, and--so that there aren't
hold-outs, there aren't countries, there aren't corporations
that, therefore, hold out of negotiations, and therefore
benefit from U.S. taxpayer--or debt relief, and so forth.
Mr. Miller of California. Sure.
Ms. St. Louis. So the need to have something that's
comprehensive and that--fair and transparent arbitration for
countries that are in debt distress that would benefit both
creditors and borrowers, because there would be, again, orderly
work-outs.
Mr. Miller of California. How would you do that? Let's look
in the future. We have a country that we want shareholders to
invest in. And their company is thinking, ``We're going to make
loans, we're going to invest, and we're probably going to get
repayment on our loan, eventually.''
How would you structure those prior to that situation
occurring to still encourage donors and shareholders to be
involved, if it's not a voluntary situation?
Ms. St. Louis. Well, again, I make the analogy to the--
Mr. Miller of California. I'm concerned about even the
debate would impact countries in the future from receiving
assistance that they might not otherwise receive if
shareholders thought they could be wiped out.
Ms. St. Louis. Right. Well, I guess I would continue to
make the analogy to the bankruptcy, that knowing there is going
to be an orderly debt work-out is actually beneficial to
lenders, as opposed to thinking there might be a chaotic series
of defaults.
And so, the approach is to say--I mean, every lender knows
that there is a risk involved in lending, and that if they
could count on an arbitration mechanism that's fair and
transparent, that actually is beneficial to lenders. And I
think that it would not be--that it wouldn't cause a--
Mr. Miller of California. I would really like to have more
information, because my concern--Mr. Chairman, and you can see
it--is if a bank lends me money, they know that I might go
through bankruptcy or whatever, and it's figured in the rates.
But if a state or government sells bonds, the bond holder
doesn't assume that they're going to go bankrupt on them.
They're going to get their bond repayment back.
So, when we talk about anything that's not done on a
voluntary basis, I could see somehow maybe somewhere down the
road, that might hurt the very countries we are trying to help,
as it puts their shareholders in a situation where they feel
like they could be put at risk they didn't otherwise believe
they--
Ms. St. Louis. Well, no, I--
Mr. Miller of California. I understand--I know where you're
trying to go, but I'm cautious on how we get there.
Ms. St. Louis. No, I think it definitely is an idea that's
in development. It does need to be fleshed out.
The UN commission that was headed by Nobel laureate Joseph
Stiglitz has a whole section, where they actually look at that
issue and address some of them. And they come down pretty
strongly that it would be beneficial. But I think you do have
to work out the details of how that--
Mr. Miller of California. And on that, I am going to close
with, it's very easy for somebody to determine what might be
beneficial when it's not their money. When the other group is
coming in and putting their money into it, they look at it from
a different perspective.
It's always easier to--I'm willing to go out to dinner and
spend his money and have a great time. But when I go to dinner,
I'm going to check the bill, if I'm paying. There is a
difference there. So that's where my cautions arise.
And I really appreciate the testimony. I was not impugning
anything you said. Please don't take it that way. It's more of
a concern--
Ms. St. Louis. Sure.
Mr. Miller of California. --that we might hurt the people
we're trying to help in the future by creating a situation that
might cause confusion, more than anything else.
I yield back, and I thank you, sir.
Chairman Meeks. Thank you, Mr. Miller. And I want to thank
our witnesses. I think that you have been absolutely excellent.
And the line of work that you have chosen is really what I call
God's work, in trying to make sure that you are taking care of
those who really need a hand up and a change around. It's
really humanitarian.
And I think that the unfortunate situation that we're
dealing with in Haiti because of the earthquake is just a
testament to the great organizations that you belong to, and on
the ground and hands on.
And again, I thank the ranking member for your
steadfastness and real heartfelt concern on how we really make
a difference, we don't continue to stay in this spin of loaning
money without it changing the reality on the ground for the
people. How do we really get that done? So I really appreciate
everybody on this.
The Chair notes that some members may have additional
questions for this panel which they may wish to submit in
writing. Without objection, the hearing record will remain open
for 30 days for members to submit written questions to these
witnesses and to place their responses in the record.
This hearing is now adjourned.
[Whereupon, at 12:38 p.m., the hearing was adjourned.]
A P P E N D I X
March 4, 2010
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