Running Out Of Time To Avoid Political Crisis

BMI View:  While the appointment of a provisional election council in Haiti moves the country closer to holding its long-delayed legislative election, a number of obstacles remain. Should the country fail to hold the election before the expiration of the current legislative term, we believe this would present substantial risks to both the political and economic stability of the country.

We maintain a cautious stance on Haiti's political risk outlook, noting that further setbacks to the long-delayed legislative elections could have substantial negative ramifications on the stability of the country's governing institutions. There have been some positive signs recently, with President Michael Martelly announcing both the completion of the nine-member Conseil Electoral Provisoire (CEP) and the date for the election (October 26). However, while this is an important step in paving the way for the vote to take place, there are still a number of obstacles which could stall the electoral process, not least the current gridlock between the executive and opposition-led Senate on passing the election law. Should this delay the vote into next year, it would present significant downside risk to both the country's political and economic stability.

A Step Forward, But Election Not Assured

Trailing The Pack By A Wide Margin
Caribbean - Short-Term Political Risk Ratings, Out of 100

Running Out Of Time To Avoid Political Crisis

BMI View:  While the appointment of a provisional election council in Haiti moves the country closer to holding its long-delayed legislative election, a number of obstacles remain. Should the country fail to hold the election before the expiration of the current legislative term, we believe this would present substantial risks to both the political and economic stability of the country.

We maintain a cautious stance on Haiti's political risk outlook, noting that further setbacks to the long-delayed legislative elections could have substantial negative ramifications on the stability of the country's governing institutions. There have been some positive signs recently, with President Michael Martelly announcing both the completion of the nine-member Conseil Electoral Provisoire (CEP) and the date for the election (October 26). However, while this is an important step in paving the way for the vote to take place, there are still a number of obstacles which could stall the electoral process, not least the current gridlock between the executive and opposition-led Senate on passing the election law. Should this delay the vote into next year, it would present significant downside risk to both the country's political and economic stability.

A Step Forward, But Election Not Assured

In recent years Haiti's political climate has deteriorated considerably, and if the country fails to hold an election in the coming months, the situation could become even more dire. Indeed, since May 2012, the 30-seat Senate (upper house) of Haiti's bicameral parliament has had only 20 active members, as disagreements between President Martelly and opposition party leaders in the legislature have stalled the passage of electoral reform. This has not only made it difficult to meet the 16-member quorum necessary to conduct business in the Senate, but with the terms of 10 more legislators set to expire in January, it means that without an election in the coming months the upper house will be left without quorum, threatening a dissolution of the body.

While the appointment of the CEP and the announcement of October 26 as the election date are key steps toward holding the long-delayed elections though, there are still a number of obstacles. Most crucially, at the time of writing, the election law - necessary to holding the vote - has still failed to pass the Senate. While a deal (the 'El Rancho' Accord) had been brokered between the president and members of the legislature in March to create the necessary political consensus and legal framework to hold the election, several legislators have indicated that they believe the Accord includes unconstitutional elements and so failed to approve it. Moreover, we have seen little indication that this impasse will end in the near future. Indeed, a number of senators have been quoted in local news sources in recent days stating that the lack of 'constitutionality' of the electoral process will encourage their continued opposition to the election law. This sustained opposition suggests potential for continued stalemate in Haiti, threatening the election, and the ultimately, the functioning of the country's government.

The country's tenuous position is reflected in its Short-Term Political Risk Rating (STPRR), with Haiti retaining the lowest STPRRs in the Caribbean. Moreover, after revising down the country's scores late last year, we do not believe the news of the CEP's appointment is sufficient to encourage us to bump up the country's score in the absence of more fixed resolution regarding the election.

Trailing The Pack By A Wide Margin
Caribbean - Short-Term Political Risk Ratings, Out of 100

Moreover, the tenuous situation surrounding the election could threaten Haiti's international financial assistance, with potentially devastating consequences ( see 'Political Uncertainty Threatens Downside Risks To Growth', July 16). In the wake of the 2010 earthquake, foreign aid has come to play a major role in offsetting otherwise sizeable external account shortfalls, and supporting growth. However, organisations like the US State Department have threatened to withhold funding should Haiti not take steps to hold elections. While the news of the CEP appointment has been greeted as a positive sign by much of the international community, a failure by the country to hold an election before January would pose significant threats to continued aid.

Could The Inflows Get Cut Off?
Haiti - Official Grants & Donations, US$mn
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