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



 
                       PROMOTING SMALL AND MICRO

                          ENTERPRISE IN HAITI

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


                                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

                               __________

                             APRIL 28, 2010

                               __________

       Printed for the use of the Committee on Financial Services

                           Serial No. 111-127



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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:
    April 28, 2010...............................................     1
Appendix:
    April 28, 2010...............................................    29

                               WITNESSES
                       Wednesday, April 28, 2010

Barrau, Olivier, Managing Director, Alternative Insurance Company     6
Pierre, Mathias, President, GaMa Consulting s.a..................     4
Roodman, David, Research Fellow, Center for Global Development...     8
Sanbrailo, John, Executive Director, Pan American Development 
  Foundation.....................................................    10
Winter, Simon, Senior Vice President, Development, TechnoServe 
  Inc............................................................     2

                                APPENDIX

Prepared statements:
    Bachus, Hon. Spencer.........................................    30
    Waters, Hon. Maxine..........................................    32
    Barrau, Olivier..............................................    34
    Pierre, Mathias..............................................    44
    Roodman, David...............................................    59
    Sanbrailo, John..............................................    65
    Winter, Simon................................................   177


                       PROMOTING SMALL AND MICRO

                          ENTERPRISE IN HAITI

                              ----------                              


                       Wednesday, April 28, 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 2:12 p.m., in 
room 2128, Rayburn House Office Building, Hon. Gregory Meeks 
[chairman of the subcommittee] presiding.
    Members present: Representatives Meeks, Waters, Watt, and 
Driehaus.
    Chairman Meeks. This hearing of the Subcommittee on 
International Monetary Policy and Trade will come to order. 
Without objection, all members' statements will be made a part 
of the record. And I will start by making a brief opening 
statement.
    I want to first start by apologizing for starting the 
hearing a few minutes late. I am sitting on a conference 
committee on the Iranian Sanctions Act, and that's all the way 
over on the Senate side. And so I have been intricately 
involved there. That is the reason for us being a little tardy 
today.
    But I would like to thank--and I know he may be here 
shortly--Representative Miller, the ranking member of this 
subcommittee, for his help in planning this hearing, and to 
express my gratitude for our ability to work in a truly 
bipartisan manner in seeking solutions to the critical 
situation in Haiti.
    This hearing is the third in a series of hearings on the 
situation in Haiti. And in considering the situation in Haiti, 
we have tried to consider the principal economic layers of the 
crisis. We started with the sovereign issues of Haiti's 
unsustainable foreign debts, and I was thrilled to see such 
bipartisan support for passage of the Haiti Debt Relief bill in 
both the House and the Senate, which was signed into law on 
Monday by President Barack Obama.
    The last hearing we held, on March 16th, considered the 
macroeconomic plan for Haiti's private sector. Specifically, we 
discussed the importance of including a specific plan and 
strategy to promote Haiti's competitiveness in key sectors, and 
the critical importance of incorporating a Haitian-led private 
sector recovery plan as a central component of the global 
initiative to assist Haiti following the devastating 
earthquake.
    Today's hearing will focus on small and micro enterprises. 
The vast majority of Haitians derive their income from informal 
micro enterprises. As is the case in most developing countries, 
much of private enterprise is informal, unstructured, 
agricultural in nature, and provides little long-term security 
on which to build a prosperous, stable future.
    Indeed, when we hear, as our witnesses will speak to, that 
no more than 10 percent of the private sector is formalized in 
Haiti, and that 10 percent or less of private enterprises 
contribute to the nation's tax base, and that nearly 35 percent 
of the Haitian government's budget is driven by the tax base, 
with the rest financed from aid and donor budgets, it's hard to 
see a credible role for the government or a path to locally-
driven economic recovery.
    When we think of the entrepreneurship here in America, we 
take certain concepts for granted, including access to capital, 
proper regulation and oversight, delivery of government 
services, insurance, banking services, access to markets, 
enforcement of contract law, a deep and qualified talent pool, 
etc. But in Haiti, each of these can be a major barrier to 
starting or growing a business.
    What's more, as our witnesses spoke to at the last hearing, 
promoting a culture of entrepreneurship in Haiti will also 
depend on changing perceptions of the social role of the 
entrepreneurs and companies and business leaders.
    I look forward to the testimony of our witnesses, and hope 
to take the findings from these hearings to work with my 
colleague, Representative Miller, and others on this committee 
in a bipartisan manner to promote Haiti's private sector and to 
help drive a vibrant economic recovery owned and driven by the 
hard-working, ambitious, and resilient people of Haiti.
    And I will now go to Mr. Watt.
    Mr. Watt. Mr. Chairman, I came to hear the witnesses, and I 
think I will pass on an opening statement. I appreciate the 
chairman calling the hearing; these are very important 
witnesses. Thank you.
    Chairman Meeks. We will start with Simon Winter, the senior 
vice president of development for TechnoServe Inc., who has a 
knowledge of management strategy, leadership, strategy 
planning, program development, and leading fund-raising and 
partnerships. There are various other things that I could say 
about him, but I want to get right to the testimony so we can 
get as much as we can in, before we have votes.
    Mr. Winter?

STATEMENT OF SIMON WINTER, SENIOR VICE PRESIDENT, DEVELOPMENT, 
                        TECHNOSERVE INC.

    Mr. Winter. Mr. Chairman, members of the subcommittee, 
thank you for the opportunity to discuss creating economic 
recovery in Haiti through private enterprise. In my written 
testimony, I show how the promotion of small growing businesses 
and a culture of entrepreneurship can make a vital contribution 
to putting Haiti on the path to recovery and growth.
    Haiti's history lacks a strong and vibrant small business 
sector. It has been dominated by a handful of multi-national 
businesses and a small local elite. Without direct intervention 
to promote economic plurality at the grass roots of the 
economy, development efforts will fail to alter the structure 
of the business sector, and restrain the potential for new, 
broader sources of growth to emerge.
    Haiti does not have to wait for the macro policy and 
infrastructure environment to improve before seeing benefits 
from such grassroots efforts. TechnoServe's current work with 
USAID in Haiti started in July of 2009. We identify promising 
local businesses, analyze their financial or business needs, 
facilitate negotiations with financial institutions and 
business service providers, and monitor the results.
    We believe that the approaches we have used elsewhere are 
applicable in Haiti. Our recommendations are to include two key 
types of interrelated programs in any new reconstruction 
recovery and development programming for Haiti.
    First, Haiti needs a much-strengthened culture of 
entrepreneurship, which can be enhanced through the types of 
entrepreneurship programs that TechnoServe has implemented 
successfully across many countries.
    Second, Haiti will benefit from strengthening programs, 
also along the lines of those implemented elsewhere with 
positive socio-economic impact by TechnoServe. In my written 
testimony, I provide examples from our work in Tanzania, 
Uganda, and Mozambique: countries with similar ratings to Haiti 
on the World Bank's Doing Business Project. They all 
demonstrate that, in such countries, entrepreneurial people can 
be identified, who can be trained and mentored to establish 
small growing businesses that, over time, can stand on their 
own feet.
    The Tanzania business plan competition trained 110 
entrepreneurs over 6 months. It exposed them to experienced 
local business leaders, local role model entrepreneurs, venture 
capitalists, bankers, private investors, university professors, 
technical experts, and other professionals from Tanzania's 
private sector.
    Local financiers shift to considering small and medium 
enterprises as a viable customer base. Half of those 
entrepreneurs trained are now using business support vouchers 
provided and accessing expansion capital. And the entrepreneurs 
form an alumni network for mutual support, and become the 
kernel of a shift in the local entrepreneurial culture.
    Recently, research of 590 entrepreneurs from previous 
Central American competitions demonstrates that participants in 
the training phases dramatically outperformed their peers who 
did not participate. We are busy with such a competition in 
Haiti. We received 99 completed applications by February, of 
which 50 applications were submitted after the January 
earthquake.
    To ensure that Haiti's high-potential sectors receive the 
support and attention they need to become the engines of 
economic recovery and growth, it will not be enough to 
stimulate entrepreneurship and hope that some good 
entrepreneurs arise in each sector.
    Comprehensive sectoral programs are also required. The 
written paper includes references to our work in cashew, 
poultry, and savory bananas in Africa.
    In Mozambique, a country ranked 172 out of 182 in the 
UNDP's 2009 human development index, we ceased 7 years of 
active support for the cashew processing sector 2008 by when 40 
percent of nuts produced were processed locally, from zero 7 
years earlier. Five thousand jobs have been created, about half 
held by women. In January 2009, we found that, since 2001, the 
aggregate positive impact of the renewed cashew industry had 
been 11.5 million to the entrepreneurs, and over 100,000 small-
scale farmers.
    Based on the establishment of a similar program to boost 
the mango and passion fruit sectors in East Africa in 2009, 
Coca Cola has selected TechnoServe to be their implementing 
partner for the recently announced Haiti Hope project. This 5-
year project seeks to double the income of 25,000 Haitian mango 
farmers, and establish local institutions and infrastructure to 
support the ongoing growth and competitiveness of this sector, 
including value-added enterprises.
    We believe that the Haiti Hope project can become a role 
model for sectoral revitalization that can contribute to the 
long-term development of Haiti. I believe that, out of the 
recent crisis, there is a moment of discontinuity that will 
allow the U.S. Government and other donors and philanthropists, 
as well as private sector investors, both local and 
international, to create a new beginning for Haiti.
    Thank you, Mr. Chairman, for the opportunity to speak to 
you. I would be pleased to follow up with you and committee 
members, or any of your staff.
    [The prepared statement of Mr. Winter can be found on page 
177 of the appendix.]
    Chairman Meeks. Thank you, and thank you for finishing 
right on time. Our next witness is Mr. Mathias Pierre, who is 
the founder and CEO of GaMa Consulting. Mr. Pierre is a very 
successful Haitian entrepreneur, who wants to make his all-too 
rare success a far more common story in Haiti.
    He is educated, an electrical engineer, and he founded his 
company--and it's an IT consulting firm that's based in Haiti--
in 1998.
    Mr. Pierre?

  STATEMENT OF MATHIAS PIERRE, PRESIDENT, GAMA CONSULTING S.A.

    Mr. Pierre. Thank you, Mr. Chairman. Mr. Chairman and 
honorable members of the House subcommittee, thanks for 
providing me the opportunity to talk to you about my views on 
the aid and construction effort and the critical role that 
MSMEs should play in the process.
    I am an entrepreneur who started with nothing. When I think 
of my past, and the current involvement in my country's private 
sector, I believe that not only it is possible to change one's 
future, but most importantly, I have learned that change can be 
learned. We are not conditioned to change by our own genes. It 
is, instead, necessary to define new ways to do things. And I 
believe, as a cornerstone for rebuilding Haiti, we must instill 
change in the minds of Haitian youth.
    Though I do not come from a wealthy family, I was capable 
of establishing a model of financial performance in applying 
certain principles prescribed in my book, ``The Power of a 
Dream.'' Today, I am the president and general manager of GaMa, 
beneficiary of the model award over 500 competing companies in 
the Caribbean.
    In North America, I would be considered a very active 
businessman. However, in Haiti, this type of participation is 
mostly viewed as an exception to the rule. So, I would consider 
myself a relatively rare species of businessman.
    I am convinced that what I have accomplished is possibly 
only because I actually did it. I believe that I can share my 
proven know-how by working to the foundation, Working Space for 
the Success of Being Haitian. With more than 500 university 
students, my goal, I would like to see the students serve as 
models, inspiring symbols to those who decide to get involved 
in sustainable development.
    Haiti is more emotional then rational. Haiti is a country 
where emotion and perception plays an important role in the 
ways an individual acts, his attitude and behavior. Therefore, 
this is why those who succeed are perceived as drivers of 
growth and seem to, therefore, be destined to be depositories 
for wealth. Those who are deprived of means are perceived and 
consider themselves of being incapable of participating in the 
growth process.
    Life is considered as a hostile heritage. One must make an 
utmost effort to survive, making it difficult to overcome the 
realities of one's origin and social status. Compared to the 
United States, where poor become rich in one generation, a 
typical Haitian destiny is determined by his parents' status. I 
believe this is driven by an environment of scarce resources 
and an economic model which is not based on growth and wealth 
creation. This leads to a predatory distribution of wealth that 
accentuates the divide between rich and poor.
    Ninety percent of Haiti's economy depends on the informal 
sector, because 90 percent of the private sector's jobs come 
from the informal sector.
    January 12th, consequences and opportunities--it is in this 
context that January 12th occurred, completely changing our 
business environment. Haiti's most important symbols have been 
destroyed, and a country has been deeply hurt to its core. It 
has adversely impacted most small entrepreneurs and small 
merchants in the informal sector: no insurance; destruction of 
physical assets and inventory; lost revenues; and no access to 
credit and public facilitation. The earthquake aftermath offers 
an opportunity for a new beginning--most importantly, to put in 
place new elements to remodernize the economy.
    Intelligent and efficient injection of capital--according 
to the USAID survey, $2.7 billion is needed for the economy to 
recover the MSME sector after the $2 billion lost in 35 
seconds. Tangible activities must be undertaken that address 
the financial needs of the productive sector.
    I believe that this could be achieved by adopting the 
following financial and non-financial measures: provide capital 
fund in three current underserved segments in the private 
sector; establish an MSMEs support and assistance fund; 
establish a growth capital for small and medium businesses in 
the range of $100,000 and $1 million size; establish a fund for 
the development of entrepreneurship; make available to young 
entrepreneurs start-up funds for a business; organize contests 
at the level of university and the technical training school to 
obtain financial, fiscal, and legal assistance; foster an 
entrepreneurial--
    Chairman Meeks. Can I ask you to start wrapping up? We're 
just trying to make sure we get as many people to testify 
before votes start. So if you would, wrap it up. Your statement 
will be in the record. So, please, just summarize, and we will 
take--
    Mr. Pierre. Basically, it's to provide management skills to 
those kids. And, at the end, I think by doing so, we can help 
Haiti and the country and the young people, first, to help them 
to get started and think differently about the private sector, 
because they are a part of the private sector.
    Mr. Chairman and honorable Members of Congress, in my 
closing, I would like to once again thank you for giving me the 
opportunity to express my views on the role of the MSME sector 
in the rebuilding effort for a more prosperous and wealthy 
Haiti. Thank you.
    [The prepared statement of Mr. Pierre can be found on page 
44 of the appendix.]
    Chairman Meeks. Thank you. And I am going to go right--
without a real introduction; so I apologize, Mr. Barrau--to 
you. You are the managing director of the Alternative Insurance 
Company, and a promoter of innovative tools for economic growth 
in developing countries.
    I want to go directly to you to get your testimony. Thank 
you.

  STATEMENT OF OLIVIER BARRAU, MANAGING DIRECTOR, ALTERNATIVE 
                       INSURANCE COMPANY

    Mr. Barrau. Thank you, Mr. Chairman, and Honorable 
Congressmen. Thank you for providing me the opportunity to 
express my views on the critical role that micro, small, and 
medium enterprises, MSMEs, and especially insurance, should 
play in the rebuilding process of Haiti.
    Following the biggest catastrophe that Haiti, and maybe the 
world, has known, besides the suffering and loss of lives, I 
think we have several opportunities in front of us, such as 
what ingredients were missing in the previous attempts to get 
Haiti on a durable path of economic and social development.
    I would like to stress that the important missing link in 
the prosperity chain is risk management. This is well 
illustrated in a famous quote by Sir Winston Churchill, where 
he says, ``If it was possible for me, I would write the word 
`insurance' in each home and on each man's forehead, since I am 
so convinced that insurance can, at a moderate price, liberate 
families from irreparable catastrophes.''
    Observers argue that there is a direct correlation between 
the number of deaths following a catastrophe and insurance 
penetration rate in a society. A vivid example can be seen this 
year. Haiti faced a 7.2 magnitude earthquake with over 250,000 
deaths. And Chile, a much more developed country--and maybe the 
richest nation in South America--faced an 8.8 magnitude 
earthquake, which is 500 times stronger, with less than 1,000 
deaths, though twice as many buildings were damaged.
    Haiti's penetration rate is close to nil, and there is more 
information about that in my written remarks. Answering how 
Haiti can increase its insurance penetration rate will help 
answer some of the questions above--or at least reduce the 
reliance on international aid. The only way to increase the 
penetration rate in Haiti is through the MSME sector, which, 
according to a USAID study, are the ones that suffered 65 
percent of the losses on January 12th. They were not insured.
    Given the investments required to rebuild Haiti, we need to 
facilitate the role insurance has to play in this economy. By 
making the MSME sector financially stronger, the social fabric 
of Haiti will be transformed and benefit all. The government 
will have a bigger fiscal plate and a vibrant economy. MSMEs 
and the private sector will have bigger buying power and better 
social services and protection from the international 
community, reduced dependency on foreign aid, and a more stable 
Caribbean region.
    It is important to support the traditional banking system 
also in difficulty, but it's even more important to support 
other financial actors, such as development banks and micro-
finance institutions. Traditional banking activity will not 
fulfill our hope that money will trickle down within the 
pyramid, and the bottom will benefit. Today, entrepreneurs who 
may have great ideas and do not qualify for traditional 
banking, will never be able to emerge.
    Our mea culpa should be to accept that we did not do a good 
job at protecting the wealth that we Haitians were creating. 
Challenge has to start from the top. The leadership of Haiti 
needs to lead the way by protecting itself.
    Mr. Chairman, Honorable Congressmen, the message should be 
clear from the international community that its effort to 
rebuild Haiti needs to be protected this time. The Haitian 
government has to understand that risk management is important 
if Haiti is to have a sustainable society and economy. Most, if 
not all, of the government's assets were not insured. More 
information also is included regarding this in my remarks.
    Low levels of social security and insurance access is the 
common denominator that is found in all underdeveloped 
countries. Haiti is no different. Faced with such a situation, 
populations are forced to turn to unconventional risk 
management methods that are more costly and always fall short 
of the expected results.
    In my written remarks, I talk a lot about how poverty can 
be considered as a transitory state that is linked directly to 
risk management. With private/public donor partnerships, 
innovative ideas and mechanisms can be put in place so that 
insurance and social security can be complementary and more 
inclusive, as explained in my remarks.
    How is the insurance industry following the earthquake, you 
may ask. For the first time in its history, the insurance 
industry is in financial difficulty. The reinsurance cover 
bought by local companies is not sufficient to cover the 
losses. There is a gap in the system of approximately $40 
million. It is crucial and very much time sensitive that 
insurers who qualify find help to face their immediate 
obligations. Without insurance coverage, credit to MSMEs and 
entrepreneurs will continue to be prohibitive.
    There is also an opportunity today to properly regulate and 
supervise the insurance industry, so that it can meet the 
region, in terms of prudential norms and transparency, but also 
set the foundations for its growth.
    Mr. Chairman, Honorable Congressmen, in closing, I thank 
you very much for giving me the opportunity to express my views 
on the role of the MSME sector, and especially the role the 
insurance industry should play in building a more prosperous 
and wealthy Haiti.
    I am available for your questions, if you have. Thank you.
    [The prepared statement of Mr. Barrau can be found on page 
34 of the appendix.]
    Chairman Meeks. Thank you. Let me just briefly explain, 
just so--I know you all don't know what's going on, but votes 
have been called, and that's what members are doing. They are 
running out and making votes, and I am trying to make some 
determinations here, as to whether I adjourn, whether I miss a 
couple of votes and make sure I get to the both of the two 
witnesses that we have left and then get to the questions. And 
there are some members who did want to come here, and they said 
they want to come after votes, so we're trying to, you know, 
ascertain exactly what we're doing.
    In the meanwhile, I am going to push forward, I think, and 
go to Mr. David Roodman, who is the research fellow for the 
Center for Global Development.
    And I again apologize for not reading your full biography, 
but I think it's more important to hear what you have to say.

STATEMENT OF DAVID ROODMAN, RESEARCH FELLOW, CENTER FOR GLOBAL 
                          DEVELOPMENT

    Mr. Roodman. Thank you, Chairman Meeks. I am going to skip 
the first half of my written testimony, which offers some 
general principles for how to support Haiti's small and micro 
enterprises, and just focus on micro finance and what to expect 
and what not to expect of micro finance in Haiti.
    And to convey my thinking, which has come out of both a 
book and a blog that I am writing on micro finance, I would 
like to start with a story.
    A couple of years ago, I spent a good deal of time 
scrutinizing what was then the leading study that told us that 
micro credit reduces poverty, especially when it was given to 
women. And to decide whether I believed this crucial study, I 
decided to replicate it. That means running all the original 
math on the original data. And the math and the computer 
programming and this were really very complex, and I found 
myself getting into the weeds and crunching a lot of numbers. I 
would eventually conclude that I didn't believe the study, 
which is not to say that I think micro credit doesn't help, but 
that we couldn't answer the question with this data.
    Now, while I was doing that, I had the privilege of 
visiting several micro finance programs, including a couple in 
Egypt, which were supported by USAID. And I will never forget 
the scene that I saw in one of the bank branches in a very poor 
neighborhood of Cairo. It was loan disbursement day, and there 
were hundreds of women who had filled this lobby. And then the 
crowd sort of spilled into the hallway and down the stairs and 
onto the streets, and they had their kids, and they were 
clearly going to have to wait hours. And they were all there to 
get their loans, and it seemed like a very excited group. I got 
to speak to them briefly through a translator.
    I thought about the irony of this situation. Should I tell 
these women that, ``I have been crunching numbers on my laptop 
back in my hotel room, and actually, we are not quite so sure 
if you should take those loans?'' I mean, that would be absurd. 
There is no way that I could tell them how to live their lives, 
lives I don't really understand.
    So, I reflected on this sort of conflict between the 
uncertainty of the research on the impacts of micro finance and 
the vitality of the scene that I saw, and I decided that I had 
to take both seriously. And the realizations I came to by doing 
that, I think, are essential for developing realistic 
expectations of what micro finance can do in Haiti, and also 
for supporting micro finance wisely.
    So, from the research side, I am convinced that we have, 
essentially, no solid evidence that micro credit--which is the 
dominant form of micro finance--reduces poverty, on average. 
That's a strong statement. Let me give you a couple of reasons 
why I believe that.
    First of all, while there are lots of success stories about 
micro finance--you know them well--there are also failure 
stories: women who borrow and get in over their heads with 
high-interest debt, women who can't pay back, so their 
borrowing peers in these credit groups come and take their pots 
and pans or their tin roofs to sell in order to repay the 
loans.
    The other reason beside those stories that I think we need 
to bring some skepticism about the impacts of micro finance is 
it's really hard to tell whether people are better off because 
they're borrowing, or they're borrowing because they're better 
off. And I could say a lot more about that, but I won't. And so 
it's a very difficult statistical problem.
    The most credible way to pin down cause and effect, to find 
out whether micro finance is really helping, is to randomize, 
the way it is done with good drug trials to see whether drugs 
are safe for people. If people who are randomly offered micro 
finance do better than those who don't--are not randomly 
offered, that's pretty powerful evidence that it's helping. And 
just last year, we got the first randomized studies of micro 
finance--or I should say micro credit, in particular.
    And the two that we have of micro credit did find that 
micro credit stimulates micro enterprise. More people start 
businesses, and that's a good thing. But at least in the 15 to 
18 months that were studied, that did not translate into 
reduced poverty, in terms of income or spending of households, 
number of children in school, and so on. So, that's a fairly 
muted verdict, compared to what people usually hear about micro 
finance.
    But that said, micro finance has scored some impressive 
achievements, I think, and I want to--and I think our job is to 
help micro finance play to its strengths. And I would list two.
    The first is the ability of micro finance to build dynamic 
and large institutions. The Grameen Bank, which won the Nobel 
Prize, has thousands of employees. It serves millions of 
people. It's nonprofit, but it acts a lot like a business. It 
competes, it innovates, it's improving services for very poor 
people. And it's hard to find such aid-fostered business-like 
institutions in other areas of aid, outside of finance. There 
is no Grameen Bank vaccination.
    The other strength I see in micro finance is the ability it 
has to give poor people--really, millions of poor people--more 
control over their financial circumstances. If you live on $2 a 
day, you don't actually live on $2 a day. You live on $2 one 
day, $.50 the next, $2 the next. That's because you're selling 
vegetables at the corner, or selling the rickshaw rides. Your 
income is unpredictable and volatile. And when you live that 
way, you actually need financial services more than we do. You 
need ways to put aside money on good days and good seasons, and 
draw it down in bad. And all the kinds of micro finance--micro 
credit, micro savings, micro insurance, even transfers of 
money--can help people do that in different ways.
    But in this light, micro credit starts to look a little bit 
dangerous, because it can actually reduce people's control over 
their financial circumstances in some cases. Think about that 
word, ``bond.'' It's easy to imagine--and we know it happens--
that sometimes people get in trouble with micro credit. It's 
hard to imagine people getting in trouble by saving too much.
    Now, Haiti has a vibrant micro finance sector that, in many 
ways, embodies the strengths that I have just talked about. 
There appear to be competitive, creative, growing 
institutions--
    Chairman Meeks. I need you to summarize.
    Mr. Roodman. Yes, I'm close. There is more savings, they do 
more savings than borrowing. So I would endorse efforts to 
bolster Haiti's micro finance sector in this difficult time, 
and I detail how to do that a little bit more in the testimony.
    That said, it's important to keep in mind that micro 
finance currently in Haiti reaches about a quarter of a million 
people, which is roughly about 2.5 percent of the population. 
That's a great achievement, no doubt, but it's also something 
that ought to be kept in perspective. If one of our goals in 
helping recovery is getting cash to Haitians so that they can 
help themselves, so that they can buy stuff in the local 
economy and support small businesses, then I think we need to 
look at other potential avenues that may exploit networks that 
have far greater reach, including the mobile phone networks and 
the remittance networks.
    If we could set up a mobile money system, as now has been 
set up in Kenya, that would allow people to save through their 
phones, then with a stroke of the pen, a donor like the U.S. 
Government could increase the bank balances--essentially, the 
cash in people's pockets, of every Haitian with a phone number, 
with the stroke of the pen. Thank you.
    [The prepared statement of Mr. Roodman can be found on page 
59 of the appendix.]
    Chairman Meeks. Thank you.
    Last and far from least, we have Mr. John Sanbrailo, who is 
the executive director of the Pan American Development 
Foundation.

 STATEMENT OF JOHN SANBRAILO, EXECUTIVE DIRECTOR, PAN AMERICAN 
                     DEVELOPMENT FOUNDATION

    Mr. Sanbrailo. Chairman Meeks, thank you very much for the 
invitation today. I am honored to be here for the Pan American 
Development Foundation. Before beginning, I would particularly 
like to recognize your leadership, and the numbers of times 
that you have visited our projects in Colombia. Thank you very 
much. It has been very motivating for our staff and for all of 
those that we work with there.
    We are here today to talk about Haiti. Again, I 
congratulate you for taking the initiative here, and especially 
in having Haitians, Haitian business leaders as witnesses, 
which is so critical. Our foundation has been operating in 
Haiti for 30 years. We have been one of the leading promoters 
of small and medium-sized enterprises, especially in 
agriculture and community-based enterprises.
    I have also been involved in the design and development of 
these programs for 40 years as a former director of USAID in El 
Salvador, in Honduras, in Ecuador, and in Peru.
    I would like to just briefly summarize key points that, 
from my experience throughout the region, as well as the Pan 
American Development Foundation's experience in Haiti, are 
critical for the success of small and micro enterprises that we 
believe are absolutely critical in the reconstruction and 
recovery of the Haitian economy in promoting sustainable 
development. I have seen this throughout my career--I come at 
this a practitioner--from a number of different country 
perspectives.
    The first point I would like to make, and further elaborate 
in our written testimony, is we need to recognize the 
overriding importance of political leadership and stability. 
And we outline in our testimony how absolutely essential this 
is for the development of any enterprises, and micro and small 
enterprises are certainly part of that.
    The second point I would like to make, and that often gets 
lost in a discussion of small and micro enterprises, is 
encouraging sound macro economic and regulatory reforms. Often, 
there is a--what I refer to as tunnel vision in looking at 
micro and small enterprises. They are not seen in the broader 
macros and regulatory environment. And, from my experience 
throughout the region, it has been those reforms that have made 
the difference between the successes and the failures. 
Throughout my career, I have seen successes and failures 
throughout Latin America and the Caribbean. But those successes 
have always been within environments that encourage and nurture 
small business development.
    We have attached to our written testimony a study by the 
IMF that compares the Dominican Republic and Haiti, and 
highlights the critical importance that policy decisions have 
made in explaining the divergence of overall economic growth.
    I would also like to mention the importance of promoting 
ownership and titling, the important work that 10 years ago the 
U.S. Agency for International Development did in Haiti, in 
supporting property ownership. That work should be restarted 
again.
    The fourth point is to expand successful development models 
for small business and micro enterprises. We are supporting one 
of those in our program that is called Community-Driven 
Development. It's a Haitian government program, and we helped 
the Haitian government implement that program.
    The fifth point is to recognize--that has been mentioned 
here a number of times already--the importance of remittances 
and engagement. More small business development will be done 
through remittances. More homes will be repaired through 
remittances and through international aid. And trying to come 
up with more innovative, creative ways of leveraging those 
remittances is absolutely critical.
    Finally, I would say engage the private sector, as you are 
clearly doing here. Involve the private sector. That is what 
our foundation, the Pan American Development Foundation, is all 
about throughout the region, and especially in Haiti.
    I would also just conclude that there are successes 
throughout the region. There are models from those successes. 
Not everything in Haiti or throughout the region has been a 
failure. I just point to the Dominican Republic, to El 
Salvador, to your leadership in Colombia. And it's those models 
that could help Haiti quickly recover from this terrible 
disaster. And there are important ongoing Haitian models that 
can be rapidly scaled up and developed.
    Thank you very much, Mr. Chairman.
    [The prepared statement of Mr. Sanbrailo can be found on 
page 65 of the appendix.]
    Chairman Meeks. Thank you. What we will do now is we will 
have the subcommittee go into recess. There are several members 
who have indicated they would like to come back after votes, if 
you have the time, because they would like to ask you some 
questions. So we will recess now, and come back right after the 
last vote. Thank you.
    [recess]
    Ms. Waters. [presiding] I would like to thank you very much 
for your patience. The subcommittee has been in recess while we 
took some votes. The chairman is tied up for a while, but I 
think that he will be back. Meanwhile, we will resume this 
particular hearing.
    And, as I understand it, everyone had an opportunity to 
make their statements. At this point in time, those members who 
are present normally raise questions about the testimony and 
the subject matter.
    I understand that much of this hearing focused on the 
potential of micro credit to promote the development of small 
businesses and micro enterprises. Dr. David Roodman's 
testimony, as I understand it, reminded us that micro credit 
has its limits, as well as its benefits. One of Mr. Roodman's 
suggestions was as follows: ``Give USAID and other agencies the 
flexibility to analyze and adapt to the strengths and 
weaknesses of the Haitian economy, procuring locally when 
possibly, eliminating bottlenecks where possible, delivering in 
kind where necessary.''
    And I think that the work that we have done, and the time 
that we have spent in Haiti and with USAID, that we agree with 
this suggestion. A small businessperson will accomplish nothing 
if that person borrows money to set up a business and then 
cannot repay the loan because he cannot sell his products or 
services.
    So, I am going to try and share with you some comments and 
questions relative to what I have discovered. On my last visit 
in Haiti, I asked the contract officer to come to a meeting 
that I had organized with local Haitians. I had about 130 
persons there who--some were in business, others were 
professionals, others wanted to get into business.
    The first thing that I encountered was they had no entry 
point. The persons who attended the meetings could not get into 
the cluster meetings. And I don't know if you're familiar with 
the cluster meetings that go on in Haiti, and all of the 
subject areas, whether it's health or education, what have you. 
They are held behind secured gates and walls with some of the 
local NGOs-mostly local NGOs--and others who provide services 
and talk about the future of Haiti. So, they didn't have an 
entry point.
    I also discovered that the Inter-American Development Bank 
was in Port-au-Prince. And when I went over who had been 
invited, it appeared that they had gotten a list from the 
government, but the list included some of the same familiar 
names of business persons in Haiti. I gave them a list and they 
did include 10 additional people that we referred. And then the 
Inter-American Bank went over to the DR, Dominican Republic, 
where they had another meeting, and because we had not been--we 
were not aware of that, we did not submit additional names, and 
it kind of was the same people again.
    So, we're talking about Haitians doing business and micro 
credit. We are talking about how to do that. When we invited 
the USAID person to come to talk with the business persons, the 
would-be business persons, they brought with them the criteria 
for basically unsolicited proposals, not a lot about requests 
for--proposals that were going out that needed responses.
    But the first thing they said was they--anyone wishing to 
do business with USAID needed to have 3 years of receipts from 
whatever businesses they had been involved in. Some of us 
thought that was laughable, for a number of reasons. The 
Government of Haiti had lost most of its records. They were 
lying in the streets around the palace and the other government 
businesses. They didn't even have their records. And many of 
the people in the room had lost their homes.
    And, number two, many of the people there, they were 
bilingual, per se, but they were much more fluent in Creole. 
And all of the information from USAID was in English. And then, 
the other kinds of requirements were just not culturally 
sensitive.
    And so, that's one of the problems about local Haitians, I 
believe, attempting to do business. And I saw nothing that gave 
credit to businesses, bigger businesses, coming into Haiti if 
they would joint venture with local Haitians. And I asked about 
whether or not there was a policy relative to that, and there 
was not.
    So, now I suppose, here in this hearing, not only are we 
talking about small businesses and their ability to do 
business, we are talking about financing and credit. And I 
would like to ask if any of you testified to or you know of how 
local Haitians wanting to do business and needing to have 
access to capital, how is that accessed, either through the 
Haitian economy or otherwise? Where is it--where do they get 
the money?
    [No response.]
    Ms. Waters. Anyone? Yes?
    Mr. Roodman. Representative Waters, you have raised several 
issues there, and I think you have made some excellent points.
    I think I might focus on this theme of ``do no harm'' that 
I mentioned in my written testimony. I think it's easy to 
underestimate the productive power of the Haitian economy. Mr. 
Pierre here was telling me about how there are various, I 
think, private groups who have set up IT consulting in Haiti, 
and provided free Internet service, and this sort of thing. 
Meanwhile, he is running a business, and there are other 
businesses that can do the same thing.
    And so, when free services like that are brought in--or 
when rice is brought in, that can also be produced locally--
    Ms. Waters. I'm sorry, but slow down just a little bit. 
When what is brought in?
    Mr. Roodman. Rice.
    Ms. Waters. Okay. Let's talk about rice.
    Mr. Roodman. The idea--talk about--when outsiders bring in 
goods or services that can be produced locally--
    Ms. Waters. Yes.
    Mr. Roodman. --and give them away for free, that actually 
damages the Haitian economy.
    Ms. Waters. Absolutely.
    Mr. Roodman. And so, the problem that I think you're 
pointing to is that the way that the USAID and other public 
agencies sort of constitutionally work, it's hard for them to 
procure locally, partly because of concerns about 
accountability and proper use of funds.
    And so, I see AID and the other agencies as sort of like 
bulldozers, you know. The Haitian economy is like this delicate 
ecosystem, and it has been damaged, but it's still alive. And 
the bulldozers come in, and they manage to build something, but 
they also do a lot of damage along the way.
    And Congress isn't driving the bulldozers, but it did 
design them, to a large extent. And so the question is, can 
they be redesigned so maybe they're not bulldozers any more? I 
don't know what they are--they would be bicycles, or something 
else that can be operated with much more finesse.
    In my written testimony, I refer to some really interesting 
work that is already being done by USAID, what they call market 
mapping, which looks at what the local economy is capable of 
producing now, what are our bottlenecks, such as lack of 
warehousing, which, if released, could improve the ability of 
the economy to supply even more.
    And if you start to think about this, it leads to a 
different way of thinking, where outsiders need to first figure 
out what the economy, Haitian economy, can produce, or could 
produce with a little help, and try to fill in the gaps. But 
make sure not to step on local producers.
    And the nice thing--I don't pretend that this is an easy 
thing to fix in how USAID operates, but it's something that 
would not require a large budgetary expenditure, so it's 
attractive in that way.
    Ms. Waters. Thank you very much. Some of us believe, and I 
believe, that USAID needs to come up with a whole new way of 
doing business in Haiti that would take into consideration all 
of what you said, and more.
    But the problem for Members of Congress is this: We are 
public policymakers, but we don't normally sit down and write 
the details of an operation. So, what we really do need is we 
need those who understand this to come up with some suggestions 
for us about what USAID should be doing, in order to credibly 
do business in Haiti with Haitians participating.
    For example, someone said to me recently that they had 
problems with Haitians building--for example, if you have to 
build a school--because they wouldn't keep up with the 
receipts, and they could only be reimbursed if they kept up 
with the receipts.
    Well, I think that's a poor excuse for not contracting with 
Haitians, because there may be some technical assistance that 
you can provide to talk about, ``This is the way we do 
business, and here is how I think we can make it easier for 
you. Let me show you how we have learned that some business 
people keep their receipts,'' and help to set up a system by 
which people--I don't care if they drop it in a bucket every 
time they pay for something, or they assign a person to follow 
up with every expenditure, or what have you. But it seems to me 
those are problems that could be solved.
    So, what we need is we need ideas and suggestions about how 
to do business in ways that would keep USAID and others from 
having excuses about why they can't do business with local 
Haitians.
    The other thing is this--there are several other things. 
It's not just USAID. Politics is a part of what goes on in that 
country, just like it is in this country. And there are people 
who are identified and selected, because the government is 
asked by USAID and other American agencies, ``Who do you 
identify to do business with?'' And so, that has to be dealt 
with.
    There is a governance problem that we can--because we're 
friends, and everybody wants to work with the sovereign 
countries in ways that are respectful, I think we can talk 
about that. We have to have some leadership to do that, and we 
have to think about how to get that done so that we're not 
simply doing business with the same old people, or just some 
selected people. So that's another kind of problem of being 
able to, you know, have the business opportunities spread out.
    Right now, one of the things that is--they are wrestling 
with is the over--humanitarian effort of passing out food, 
because it's killing the local market in Haiti, of people who 
make a living selling food. I just had an eye-opener on 
something that I'm not sure about, I'm still wrestling with, 
because I am worried about the shelter, or lack of, for the 
coming season, and afraid of hurricanes, etc. And I know that 
the tarps and some tenting is just insufficient. It's not going 
to do the job. And I was thinking about what could be done in 
the absence of being able to put housing online fast enough.
    And I thought about containers that could perhaps serve the 
purpose. Because, as these big international shipping 
containers are very well-constructed, a hurricane can't move 
them, etc., but someone said to me, ``Well, first of all, it 
takes up space, and the government now is supposed to be 
identifying the lots that are available to build the housing 
on, and, secondly, it displaces potential labor,'' except they 
would have to be retrofitted, which is--you know, which would 
create some labor, but they are thinking that building the 
housing, of course, you know, from the ground is more labor-
intensive. But it's going to take a longer time. And what is 
the cost of doing that in human suffering?
    So, these kinds of things, I know, are complicated, and 
they have to be raised. But who--which one of you would have an 
idea about something that the USAID could do to foster and 
facilitate the ability to involve more Haitians in business and 
entrepreneurial opportunities? Who could help me with that? Mr. 
Roodman, you have already spoken. What about Mr. Sanbrailo?
    Mr. Sanbrailo. Thank you very much. I speak here as the 
representative of the Pan American Development Foundation, an 
NGO, but I spent much of my career as a USAID director in a 
number of very difficult assignments. And I would beg to 
disagree that it's necessarily the rules in which AID operates. 
I think much of the AID funds are actually spent for local 
procurement in Haiti right now, as in most other countries.
    I think the cases that are being referred to are largely 
food aid, where there is only one example of rice, and the 
unfortunate case of rice, and there are other cases like that. 
But most of the funds are being actually spent in Haiti for 
local procurement for a number of programs.
    Let me just address, specifically, your question. What can 
USAID do? We have worked in Haiti for 30 years. We worked 
closely with USAID, as well as with other donors: the World 
Bank; the Inter-American Development Bank; and other agencies.
    One of the biggest issues that I see with USAID and Haiti 
right now is the mission there is tremendously understaffed. It 
does not have the necessary people, particularly compared to 
the dimensions of the disaster. I have been through natural 
disasters in El Salvador, in Honduras, and in Peru as a 
director, and I compare the missions that I directed at that 
time to one in Haiti, and you just do not have sufficient 
staff.
    AID also, over the years, has not been able to recruit 
senior people, people with tremendous experience, to be able to 
deal with multiple natural disasters. So I think it is people 
who are--that I would say are the real constraint. People will 
make the rules work, and address the issues that I think you 
are rightly pointing to.
    There are all kinds of issues that Haitian groups and 
Haitians have in dealing with U.S. foreign aid, as with other 
assistance. And there is just no substitute to having a well-
staffed, proactive--and I want to underline ``proactive''--aid 
mission that reaches out to the Haitian community, and involves 
the Haitian community in the design, development, and 
implementation of those programs.
    Let me also just mention that we are implementing a home 
improvement program with AID funding, as well. And what is 
absolutely critically important is to get Haitians back into 
homes that can withstand heavy rains and the hurricanes through 
home repair. I think we are going to be able to get more 
Haitians back into homes through rapid repair, assuming the 
houses can be safely repaired, and we are putting together 
teams of engineers who can do that, and we are confident that 
we are going to see alternatives.
    Clearly, you need different types of options and 
alternatives to be able to address the dramatic situation of 
shelter in Haiti right now, but we feel this is one of those. 
Thank you very much.
    Ms. Waters. Thank you very much. Mr. Pierre, is it GaMa 
Consulting?
    Mr. Pierre. Yes, correct.
    Ms. Waters. What do you consult about?
    Mr. Pierre. That's a good question. Actually, this is a 
company that was created--me and my partners, my wife--we were 
looking for a name. And we come up with ``Consulting,'' because 
we didn't know anything about business. And what--we do 
consulting in computer and engineering, and--but we have a--
today it's a type of CompUSA type business in Haiti. I mean, we 
sell computers and Internet and technology.
    But if--I want to address one important point regarding 
your question today. I think in order for the local people to 
be able to sell to big entities like USAID or big businesses, 
they need to know you. I mean you need to go from the informal 
to become formal. And when you started, access to capital, it's 
a real challenge for all young Haitian business--or all young 
Haitians who started a business.
    I remember what I go through in 10 years. It cost me, in 
the last 3 years, approximately $60,000 to $70,000, going from 
bank to bank, to get the right finance in order to buy a 
building, because I wanted to do something different than 
others--$60,000 in 3 years.
    Ms. Waters. You're talking about U.S. banks?
    Mr. Pierre. Local banks in Haiti.
    Ms. Waters. Yes.
    Mr. Pierre. Because I couldn't get access to credit, even 
with the bank that I was working for 10 years in the past. 
That's the situation of the access to capital.
    But when I finally got access to credit, I was able, in 2 
years, to double the revenue of my business. And this is why, 
today, I pointed out the idea of how to address the question of 
capital to help business grow, and what a business can do for 
this country when this business is growing. Because I was able 
also to go from 10 employees to 30 employees in that same 
period of time. And I have been able to pay more taxes to the 
government, contribute more to the government, and help the 
government come and find more money to generate funds for 
education, health, and others, provide services to the people.
    And that is the idea behind everything I have been doing 
for the past years. If I can create--to have 200 or 300 
companies like mine around the country, how this country would 
change. And what can USAID do? I remember in the last meeting 
with Ambassador Sanderson, and I remember she was asking the 
same question, approximately. ``What can we do for Haiti?'' I 
told her, ``That's a good thing to give us. That's a good 
thing, to come and help us.''
    I remember when I was a kid, every time I saw a new school 
or a new hospital, I saw a government official. I saw a 
Haitian. And I understood from that Haitians are able to do 
something. Today when you open newspapers, you see on TV, you 
see USAID or foreign companies helping us. When you give me 
fish every single day, you don't teach me how to fish, so what 
am I going to do? Just go and ask you for more.
    And that's what exactly Ambassador Sanderson was going 
through. Every time she was in a plane, people was asking for a 
visa, because they want to leave the country. There is no 
ownership to the country. And that is one of the biggest 
problems Haiti is facing today. The poor people, they are 
trying to find any way to leave their country: by plane; by 
boat; whatever they can do, they're going to leave. The middle 
class comes to the United States to have their kids, because 
they want the safe haven for their kids. And the rich people, 1 
hour and 45 minutes from Miami, make the money in Haiti and 
enjoy it in the United States.
    There is no country that we can change without people, 
their own people, to have ownership of the country. By creating 
more businesses, by providing capital to help young people get 
businesses out, by providing capital for the small businesses 
to grow, for the medium-sized businesses to become bigger, this 
will help the government because they will provide more revenue 
to the government. This will help the country. Thank you.
    Ms. Waters. Thank you. Mr. Driehaus is here. Would you like 
to take 5 minutes for some questions, Mr. Driehaus?
    Mr. Driehaus. I apologize, Madam Chairwoman. I was in the 
Chair over on the Floor, and so I didn't hear most of the 
testimony.
    But just following up, Mr. Pierre, on what you were just 
saying, I'm a former Peace Corps volunteer. I worked in West 
Africa. And I'm familiar with many micro lending arrangements. 
How can we empower Haitians to engage in small business 
development? And can we pursue avenues such as peer lending, so 
that there is the engagement, there is capital infusion coming 
from the outside, but the management decisions are all being 
made internally by Haitians for Haitians?
    Are there models that we can learn, you know, from other 
areas around the world, especially when it comes to micro 
lending and small business development?
    Mr. Pierre. Actually, there is--we don't have institutions 
that are helping in that sense. And we have only one 
institution trying to help some businesses, but it's not 
enough. And when you go and consider the micro enterprises in 
Haiti, they are all collapsed today. I mean there is no money 
in these, they are collapsed.
    What I suggest is a type of institution that can inject, on 
an annual basis, capital in the micro enterprise in the form of 
loans, low interest rate, not the micro credit interest rate 
today. This fund can assist those businesses to get them 
financial training, get them in the training process, and at 
the same time help them formalize. Because the formalizations 
will get them to the point where they're going to pay taxes and 
contribute to the tax base. Because in order to get out of 
poverty, we need to enlarge the tax base.
    Mr. Driehaus. To what extent does the average Haitian have 
faith in the system, in the financial sector, so that they are 
willing to go to the financial institution for a loan, a 
traditional-type loan?
    In so many places--and I'm not familiar with the financial 
sector in Haiti--but in so many places, especially in 
developing countries, there is a great reluctance to interact 
with financial entities, simply because they don't believe in 
the government, they don't believe in those financial entities. 
And that's why pure lending arrangements are often so much more 
effective, because they know who they're dealing with.
    To what extent is the formal financial sector in Haiti able 
to accommodate? And to what extent is their trust between those 
same Haitians that might be developing the small businesses and 
the financial institutions?
    Mr. Pierre. Today, I would say there is no trust. The small 
businesses get their money--the micro gets their money from, 
basically, the micro credit. And the micro credit is a high 
interest rate, but the loans are very fast and they will get it 
there.
    The medium businesses, it is really tough when you have to 
get access to capital. And the traditional banking system is 
very reluctant also to lend money, because of the whole credit 
issue, the old credit system that's in place. So it's a real 
challenge today to access credit in Haiti.
    Mr. Driehaus. I would open it up to any other members of 
the panel, if you would like to talk about other arrangements 
that we have learned from other developing countries that might 
be applied to Haiti. Mr. Winter?
    Mr. Winter. Thank you. Yes. The USAID project that we are 
currently part of, which started the middle of last year, and 
is known as the Haiti Integrated Finance for Value Chains and 
Enterprises program--or HIFIVE for short--is designed to tackle 
exactly the issue that you're talking about.
    There have been a lot of USAID projects over the years that 
have stimulated the development of small businesses, 
particularly in value chain contexts, value chains such as 
coffee, cocoa, mango, tourism, handicrafts--all potentially 
competitive sectors for Haiti. But the businesses, as Mr. 
Pierre says, struggle to get financed. So, the project that 
we're part of is designed to address that gap by supporting 
those businesses to develop stronger business plans and 
stronger businesses, business operations and so on, to be able 
to access that credit.
    Now, you still have a problem, because the financial 
institutions are not really motivated and excited about lending 
into this sector. So I believe there is still significant 
space--if we go back to Congresswoman Walters's point about 
what can AID do, or what can the U.S. Government do, I think 
there is still space for some kind of a funding mechanism or a 
guarantee mechanism that could work alongside those formal 
financial institutions to sweeten the deals--in other words, to 
provide perhaps, for example, seed financing or first loss 
guarantees and so on, to encourage those institutions to 
actually make those loans that they are currently very cautious 
about.
    And I believe that if you can start to get that cycle 
working with good quality businesses, then able to access 
finance, you will change the model and you will change the 
mindset. Thank you
    Mr. Driehaus. Do you still run into an issue of trust, 
though, when it comes to the individual seeking micro 
financing, especially, being far less willing to go to a formal 
financial institution than they might--more traditional means 
of financing?
    Mr. Winter. Yes, I'm talking more about the somewhat larger 
businesses than the micro credit side of things. But I think 
the trust issue is there. It doesn't matter what size the 
business, in a sense. I think you have the trust constraint. 
And I think you break that trust constraint by starting to get 
these institutions working, starting to get them to actually 
deploy credit where it's needed, and the evidence base then 
provoking a shift in culture, and a shift in attitude.
    Mr. Roodman. The title of the hearing includes both micro 
and small enterprises, so there is this distinction. For the 
micro enterprises, we are thinking of the subsistence, economic 
activities within a family, probably. There are a growing 
number of pretty impressive institutions in Haiti serving them: 
Fonkoze; SOGESOL; and others. And maybe they're not yet close 
to meeting the demand. But they are doing what I think you are 
talking about. They are providing credit at the micro level, 
borrowing models and adapting them from the rest of the world.
    And, actually, they are doing--at this point, most of 
them--the big ones have more savers than borrowers, which is a 
sign that they are winning the trust of the Haitian people. So 
I think there is good news there. But that is a separate 
question from whether--probably the system is doing a worse job 
of delivering credit to businesses a step up, the ones that can 
create jobs and grow.
    Mr. Driehaus. Okay.
    Mr. Sanbrailo. I would just like to further expand on that 
last point. There are institutions doing micro credit and small 
business development in Haiti. Fonkoze is one of those, and 
doing some very good work at a very small level, a small number 
of loans, a small number of people being assisted.
    I should--I think we ought to also emphasize that there are 
two--the two leading banks in Haiti, Sogebank and Unibank, also 
have specialized programs for micro credit and for small 
enterprises. And, at least prior to the earthquake, they were 
involved. Those programs could be expanded with additional 
assistance.
    Clearly, the earthquake has disrupted the banking system, 
seriously disrupted, clearly, the entire economy. But there is 
something to be built upon. There are institutions, not-for-
profit institutions, for-profit institutions that are 
attempting to expand credit in Haiti. There are also, as I 
mentioned in our written testimony, examples from the Dominican 
Republic, from El Salvador, and from other Latin American and 
Caribbean countries, as well as from the rest of the world, 
that are well known and can be used and are being used in Haiti 
to do exactly, I think, what is being talked about here.
    Clearly, what is needed is acceleration in the provision of 
funding and technical assistance to be able to support those.
    Ms. Waters. Thank you very much--
    Mr. Pierre. I wanted to make a point--
    Ms. Waters. Yes.
    Mr. Pierre. --regarding that specific aspect. From numbers 
that I get, we have approximately 800,000 micro credit, 
eventually. There is approximately 200,000 recognized--or they 
have inventory approximately 200,000. Only 60,000 receive money 
from micro credit institutions. And when you look at the type 
of funds that we see, the average for some of them is $100 and 
the other average is $1,000. And the interest rate is going 
from 48 percent to 60 percent a year.
    We have to be--in order to take development--and that's my 
point, and there is more in my statement regarding that--if we 
think about a developed Haiti, we need to get to a point to 
say, ``Hey, are we going to develop this country with this 
type?'' I don't say we don't need the micro credit 
institutions, but we need different types of funds that help 
those businesses to grow. Because these businesses are not 
paying taxes. They are the informal sector.
    If they are the informal sector, then I contribute to the 
tax base. And what we do need today, in order to have Haiti 
sustainable, we need businesses that can grow, that can get 
access to fund with low interest rate, and then receive 
financial, administrative, and fiscal assistance. And for these 
businesses, when they're going to grow, they can give the 
result that I have been giving with my business. That's what 
we're thinking about.
    And this has to be serious, and we have to consider 
different, effectively, size of businesses. The micro, the 
small, and the medium size, different approach. Banks usually, 
in Haiti, said, ``Hey, we are not going to go for the medium-
sized businesses, because they are not profitable. They are not 
profitable.'' If you consider, like, my business, for example, 
the amount of money that I am paying for banks, compared to my 
profit, it's very high.
    But this is the situation we have to address in Haiti. And 
I think--and that's why exactly I go in my testimony--I--to 
provide capital fund to three current underserved segments of 
the private sector. Three segments--
    Ms. Waters. Thank you very much. I am going to kind of cut 
you short at this point. The chairman came in. Mr. Chairman, we 
were just breaking all the rules and having a conversation 
here, because there are so few of us. And I was trying to 
solicit from this panel ideas about where to get capital, 
learning more about what's happening in Haiti with the many 
capital opportunities.
    But, Mr. Chairman, as I turn this over to you, we had some 
testimony from Mr. Winter, the senior vice president of 
development for TechnoServe, and he said something about 
funding opportunities under HIFIVE. If you don't mind, I would 
like to know what that is. Is there a source of money in USAID 
that we don't know about? Please tell us.
    Mr. Winter. Thank you. No. The HIFIVE program is not a 
fund. The HIFIVE program is a program to provide training, 
technical assistance, and guidance to the enterprises that are 
being identified through other programs that are funded by AID 
that are constrained from accessing capital.
    It's effectively a smart brokerage system, if you like, 
because it is going to then take those entrepreneurs, introduce 
them to the sources of capital that are available in Haiti 
right now, find out why they can't be financed, and then put in 
place the business-strengthening programs and advisory programs 
and consulting support and training that is needed, then, to 
get those businesses up to the point where the lenders and 
investors can then put the money in.
    Ms. Waters. Mr. Chairman?
    Chairman Meeks. Thank you. Let me start right out with Mr. 
Winter, because I was in the UN. They had the donor's 
conference, etc., and they gave us some juice that was there 
that was from fruits, we were told, from Haiti, and that was 
utilized by helping farmers in Haiti.
    I was wondering if you could tell me--and I think they used 
that number, he was going to be trying to reach up to 25,000 
farmers--whether you could tell me what's happening with that 
program, whether or not there is going to be value-created 
benefit to these local farmers, and where we're at right now?
    Mr. Winter. Okay. Thank you, Mr. Chairman. Yes, that 
project, which is called the Haiti Hope Project, is being 
supported by Coca Cola, through the sales of the juice, the 
Haiti Hope juice being currently branded under Odwalla, as a 
mango limeade. The profits, 100 percent of the profits from 
that juice, are going to support the funding of this program. 
We are also hoping the program will be funded by the IDB, 
Inter-American Development Bank--there is a proposal currently 
going through--and USAID. And we are at early stages with AID 
right now.
    What the program is going to do is take a comprehensive 
look at what has already been achieved in the mango sector, and 
the--as we have heard from many colleagues on the panel, there 
are things happening, very positive things happening, on the 
ground. Mangoes is a huge opportunity--it's the third largest 
export out of Haiti on the agro side at the moment--but a tiny 
percentage of the potential value of that sector is currently 
being created.
    To give you some numbers, something between 200,000 and 
400,000 tons a year of mangoes are produced in Haiti. Only 
10,000 tons a year of those are exported. And well over 50 
percent of the rest rots before it ever gets to market. So 
there is huge value in that sector that is not currently being 
realized for the farmers, and potentially for entrepreneurs in 
Haiti.
    The project design, which is currently being done on the 
ground by a team in Haiti right now, is designed to unlock that 
value, to help to train the farmers in improved agricultural 
practices, to help organize those farmers so they can establish 
farming groups to access imports, to access the output markets, 
to build collection centers so that they can aggregate those 
mangoes into--and package them then for the market that would 
be farmer-owned businesses--and there are some good models 
already, but there are very few of them currently operating--
and then to look at value-adding opportunities for processing 
those mangoes into juice and into other products--dried 
mangoes, and so on. There is virtually no capacity in that 
middle segment of the mango sector right now in Haiti. Huge 
potential for it. And that would be a great entrepreneurial 
opportunity for Haitian entrepreneurs. And that's what we want 
to try and develop.
    So, it's local markets and export markets, value-adding 
opportunities--25,000 farmers is the initial target. We believe 
there are at least 100,000 people--families in Haiti right 
now--who have access to mangoes. The idea would be that you 
catalyze change in the entire sector. But it also becomes, 
then, a role model for such development in other sectors, as 
well. Thank you, Mr. Chairman.
    Chairman Meeks. Are you looking to develop capacity, 
especially for the value-added? Because one of the ideas now, 
because of the devastation in Port-au-Prince, is to create 
towns outside of Port-au-Prince, and those kind of value-added 
benefits could create small cities outside.
    But, you also have to make sure you're creating capacity-
building. Is there any kind--in regards to the project and 
capacity building so that you can create the jobs?
    Mr. Winter. Yes, Mr. Chairman. The preliminary design 
that's unfolding at the moment would have six regional towns 
outside of Port-au-Prince in the rural part of Haiti be the 
sites for those initial aggregation points and the collection 
centers. So the idea would be to create employment in those 
places, locations outside of Port-au-Prince, as the first 
collection points, and potentially the processing centers, as 
well. So it is absolutely designed to do that.
    We haven't consulted yet as widely as we want to on the 
design of this. So, the team on the ground that is designing 
this program has done a lot of consultation with the existing 
industry stakeholders. But we do want to have a much broader 
consultative process, to make sure this is really a Haitian-
owned and Haitian-led and Haitian-driven initiative.
    I don't want to commit to anything at this point, because 
we do really want the Haitian voice to be in there, and making 
sure that they are making the decisions about the perfect 
locations for these programs.
    Chairman Meeks. Thank you. Mr. Barrau, let me ask you 
quickly, I was interested in your testimony, and there was 
something that you said, and, quite frankly, sometimes we deal 
with the same issue in the African-American community here, in 
the United States, where you mentioned the importance of 
changing--understanding the culture of Haitians, of course, but 
you talked about changing the mentality of ``God will 
prevail.'' You talked about that as it was related to financial 
planning and risk management in Haiti, and that yet it seems 
that this is deeply ingrained in people, you know, as opposed 
to getting financial literacy, etc. Can you elaborate on that?
    What do you think--how much of it is actual cultural--
because what happens, I have found here, some of it is 
cultural, but some of it really is having the financial 
barriers. You can't get the door open. You can't get in there, 
so you get frustrated because the opportunities doesn't seem to 
be there for you. Some people will say it's cultural, but the 
fact of the matter is the system is lined up against you so 
that you can't knock the doors down. What would you say?
    Mr. Barrau. Thank you, Mr. Chairman. I think, with all the 
surveys that we have done throughout the country and with--
specifically for micro insurance products, we had to understand 
the people, we had to understand the market that we were 
targeting. And in the surveys we realized that Haitians use 
different types of vehicles to manage risk. It's just that they 
couldn't find the proper tool, which would be insurance, 
because it was not adapted to their needs. It was not adapted 
to their culture, in how do you explain the product to them. 
And also their cash flow, because they don't have a constant 
cash flow. It comes in and out.
    So, building products was a challenge, and taking all of 
these points in order to develop a product was very 
challenging. And I will take a couple of quick examples, is 
that out in the rural areas each animal represents, at the end, 
in our understanding, a financial tool for that person. The 
chicken that the farmer has is like their checkbook. If they 
have something that they need, it can be easily sold. A little 
money takes care of that situation right away. If he has a cow, 
the cow is the CD to him, which is only for big emergencies 
that they could--they need to address that issue.
    So, taking all of the way that they are thinking about risk 
management, the challenge was to find ways to find a product 
that works better, so that they don't have to go to their 
savings or their CDs or their checkbook. So that's why I was 
saying that culture is important. And this needs to be really 
taken into consideration. You cannot force on them the 
traditional products. They have to be adapted.
    One of the biggest issues that helped us also make our 
products viable is the fact that throughout the world--
especially in South Africa, for example, where funeral 
insurance is a very big product, but they have a very, very low 
renewal rates. And in our survey, the low-income populations 
couldn't understand that if they pay for the insurance and 
nothing happens, that they don't give them back the money that 
they paid.
    So, by doing this, what we did was we told them--we made 
some sort of a savings, where we told them, ``You will get part 
of your money back, but within 3 years.'' And it was okay for 
them and at the same time okay for us because our renewal rate 
went fly off the roof that no other countries could do. 
Because, for example, South Africa is 40 percent renewal rate 
when we, ourselves, we got to 89 percent renewal rate, just by 
listening to these people, what their needs were, and how we 
developed the products.
    So, finding ways to insure--which is extremely important--
the small to medium enterprises and the micro also, is 
important because it can be counterproductive. You know, micro 
credit, or credit in general, can help somebody move forward in 
the ladder. But it can be also counter-productive if it's not 
accompanied by the tool that helped these people face their 
shocks.
    Or, if you use micro finance to generate income, and that 
person doesn't have a safety net, once they have a shock they 
will pull out that money to face that shock, and that money 
will not be generating income any more. So micro insurance and 
micro credit, micro finance, are together, they need to be 
together. Otherwise, it will be counterproductive.
    Chairman Meeks. And my last question would be--I want to 
ask Mr. Pierre one, too, but--the government didn't appear to 
have insurance, either, after the earthquake and some of the 
other storms. Could you say anything on that?
    Mr. Barrau. That was the next step in my written remarks, 
is that to change that culture we have to start from the top. 
No government buildings, no infrastructure, nothing was 
insured. There are a couple of independent government-owned 
agencies, such as the Central Bank and BNC, which have their 
own insurance products. But the government had nothing.
    They benefitted from the CCRIF. The CCRIF is a program that 
was put in place with the help of the World Bank to help 
nations face short-term liquidity needs that they have 
following a disaster. But that's to start rebuilding efforts. 
Haiti benefitted about $8 million from this program, which is a 
very low amount of what is needed. But, in reality, none of 
their properties for their operations was insured. The 
parliament is down. The palace is down. The justice system is 
down. The public health hospital is down. None of that was 
insured. And this is all going to be very, very costly to put 
back together.
    So, again, a question of culture. We need to see things 
going. We need to be doing much more risk management. And it 
has to start from the top. Government has to take the lead on 
this, I believe.
    Chairman Meeks. Mr. Pierre? But let me give you my question 
also, and you can add on to what you say, because that will be 
my last question. As we were trying to put together this 
hearing, we were asking a number of individuals in Haiti to 
give us a successful business person who really started from 
zero, who didn't come from a family who had a lot of money, or 
anything of that nature. And no matter who we went to, they 
always came up with your name.
    But then, when we would ask for someone else, they were 
hard-pressed to come up with anyone else, which seems to me to 
be part of the fundamental flaw. And I don't know whether Ms. 
Waters has said so yet, but at a number of hearings we have 
come where we have seen entrepreneurial opportunities, 
especially given the crises that are currently about to take 
place because of the rainy season, where there are NGOs that 
are building homes that could have been business people 
building homes, and other activities there that could have some 
who has an entrepreneurial spirit put them in business.
    So, my question to you is, what do you think can do to help 
generate the entrepreneurial experiences of individual Haitians 
to take the place of the NGOs, and how can we, from the USAID 
or others, help make more people like you?
    Mr. Pierre. I think that is a good question. And I think 
also that is what I have been fighting for.
    In 2008--April 8, 2008--when I started my journey, when, 
after the food riots there were--all my business was broken 
down. I had insurance with AIC. That saved my business. And I 
understood that day, when I was in the middle of the street 
with those young people who were throwing rocks at my business, 
they were breaking a bourgeois business--that means a rich 
person's business. They didn't recognize me as the business 
owner. And that's the problem of the culture and attitude 
regarding private investment.
    At a certain point, the young Haitian doesn't believe that 
he could ever be a businessman. When they saw me sometimes they 
identified me as a driver of my wife, or the driver of 
somebody. I am not a businessman until they know. And if they 
know that I am a businessman, then I become a bourgeois, I mean 
a rich person coming from another world.
    That is the whole thing we have to change. And that day I 
decided to write a book about my life, and the powerful dream, 
and the book that I have been going around the country and 
telling young people, ``If I did it, you can do it too.''
    I didn't have a chance to study in the United States or in 
Canada or in France, anywhere else. I studied in Haiti, in the 
state university. I studied engineering. And 6 years later, I 
decided to start a business. I applied certain rules. And that 
is exactly, I am suggesting to USAID, to any groups or any 
people who want to help Haiti today.
    Haiti has been in a circle of survival. Poverty, 
decapitalization, international aid, and so on. Mistrust and 
the survival cycle continue. We are talking about what? We are 
talking about Haiti becoming a prosperous country. In order for 
Haiti to become sustainable, we need young Haitians to start to 
create businesses. By creating businesses, they have to start 
somewhere. First, it's a mindset. We have to tell them they 
can. How to do that? It's through role models. We need role 
models, and that's why the Pioneers of Prosperity contest was 
very important.
    But now, today, I said there is a problem. I cannot be that 
model. I need to create 200 young people, young businesses, who 
come out and say they were in their neighborhood, they created 
it. And others will follow. And I keep on saying President 
Obama today is the result of a dream 45 years ago of Martin 
Luther King, Jr. People see it as model. And I have been 
looking for a certain time. Black Americans used to see 
themselves as basketball players. Now they see that they can be 
President of the United States. It's through role models, they 
visualize it. And this is what Haiti needs today. We need to 
invest in those people.
    How? We need to create a fund to--when they started, after 
they receive the education, after they have the ideas, to get 
them to start, and give them the proper training to avoid the 
steps that I went through, because it has been a long process 
for me, 12 years, to get to where I am. Now I need those kids 
to do it in 5 years, because Haiti cannot wait any more.
    Ms. Waters. [presiding] Thank you very much, Mr. Chairman. 
This hearing, Mr. Chairman, has been very good. Each time we do 
this, we learn a little bit more. I think the testimony that I 
have heard, or the questions that have been answered by all of 
the panelists have been very helpful. I am particularly 
inspired and enlightened by Mr. Pierre's testimony, because he 
has such a positive vision with so much hope for the 
possibilities of Haiti.
    And, Mr. Chairman, I suggest that coming out of this 
committee one of the things you may provide us with some 
leadership on is this. We were at the donors conference in New 
York, where a number of countries stepped up to the plate. The 
United States, I think, stepped up to the plate with $5.7 
billion/$5.9 billion, in addition to what we are already doing.
    We, from this side, maybe with the bill that you 
initiated--and I would certainly support that--could carve out, 
in our donations, a loan guarantee fund or a loan fund. Because 
this access to capital is at the basis of everything. And there 
is technical assistance, there are creative and alternative 
ways to look at insurance. There is the possibility of 
renovating some of the existing structures, to make them 
livable. There are a lot of possibilities here.
    But the basis of the progress is going to lie in the 
ability to get some capital. And I see no reason why, if USAID 
has not stepped up to the plate with a loan guarantee fund or a 
pure fund to be managed in some way--it seems to me that what 
was suggested, I think by Mr. Winter, had to do with getting 
the local banks, who are very reluctant, even after they redo 
themselves after this earthquake, to lend money. And if they 
had a guarantee, I think they would certainly--you know, you 
could do, you know, anything from a 90 or an 80 percent loan 
guarantee, or you could do a 100 percent loan guarantee, 
depending on what you structure.
    And certainly, if we said to the Haitian banks that we 
would guarantee a loan, help to develop the criteria with them, 
working together, that may be a whole new way of infusing some 
capital into Haiti for the entrepreneurs who have the ideas and 
the spirit. And I want to tell you, the entrepreneurial spirit 
is in Haiti. We went into camps where people were selling CDs 
and, of course, selling food.
    And in all kind of ways, I was just amazed at the ways that 
people had created this town inside the camps, and were selling 
things and making money. One person had turned their camp into 
like almost a little movie theater, you know, with the DVDs and 
on and on. So, the entrepreneurial spirit is there. We have to 
get some money. We have to get some money there. And this may 
be one way of looking at it.
    Let's identify and carve out an amount of money, 
legislatively, and say, ``This money is to be used for this 
purpose.'' That may be something we can do.
    I thank you so very much, Mr. Chairman. If you do not have 
anything else you wish to do, 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.
    I thank you, Mr. Chairman, and this committee is adjourned.
    [Whereupon, at 4:50 p.m., the hearing was adjourned.]


                            A P P E N D I X



                             April 28, 2010
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