[House Hearing, 111 Congress]
[From the U.S. Government Publishing Office]




                           HAITI DEBT RELIEF

=======================================================================

                                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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                 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

                              ----------                              
                                                                   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

                              ----------                              


                        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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