When running for president in 2016, Donald Trump infamously said, “I could stand in the middle of 5th Avenue and shoot somebody and I wouldn’t lose voters.” In 2019, Haitian Senator Ralph Féthière decided to test that theory for his supporters. The Haitian Senator found himself in the middle of a protest and shot into the crowd, injuring two, including an Associate Press reporter.
2019 was full of popular protests against government corruption, rising gasoline prices, and an economy in decline. The protests brought thousands into the streets of Port-au-Prince, a dazzling display of popular unity.
But while the protests were demonstrating against economic decline, they also might have been contributing to it. President Moïse acknowledged this in a speech following the Féthière incident. He worried the protests were shuttering businesses, which impeded the state’s ability to collect the tax revenue it needed to function and address the problems the protests were highlighting.
While Moïse was worried about businesses closing, I was wondering whether the tumultuous year was hurting the formation of new businesses. Who would want to start a business during mass protests and high gas prices?
I decided to investigate business formations using the announcements for new sociétes posted in Le Nouvelliste. When a new business partnership forms, the law requires the partnership to publish an announcement in a newspaper, and since Le Nouvelliste has the widest circulation, most go through there. (Note, these are not societés anonymes, which must publish their affairs in Le Moniteur.) Since the government does not publish (or, possibly, even collect) data on new partnerships, this is the best source I have found to explore one side of business dynamism in Haiti.
I collected all societé announcements from January 2011 through July 2021. Below is a graph depicting the number of societés formed each quarter. The key takeaway: 2019 saw a massive decline in new businesses, hitting levels we have not seen since before the earthquake.
A first glance at this graph may convince you that the protests and peyi lok prevented the formation of new businesses. But, as an economist, I want to be careful about hastily imposing causality. After all, the protests were demonstrating against economic decline. Couldn’t the drop explain why Haitians were protesting? In which direction does causality flow?
Let me advance some evidence that the tumultuous year caused the drop. First, the protests organized around the social media trend #KotKòbPetwoKaribeA?, which was first tweeted in August 2018. That hashtag’s momentum grew through the end of 2018 when business formations were following the normal trend (see the few good months right after the vertical red line). Then the first significant protests hit at the beginning of 2019, when business formation peaked. The drop in business formations came after the protests began.
Another point is that the worst quarter was during peyi lok at the end of 2019. It’s hard to start a business when the country is immobilized. And when peyi lok lifted at the beginning of 2020, we saw a resurgence in business, even though the world was entering a recession due to COVID-19.
While the timing suggests that the drop was caused by the events of 2019, the graph cannot answer why it dropped. Were entrepreneurs afraid to start businesses among large protests? Were they trying to start businesses but unable to get the authorizations they needed? Could entrepreneurs see other problems on the horizon? I’m sure many of my readers have ideas about this and I’d love your comments on it.