Showing posts with label economic recovery. Show all posts
Showing posts with label economic recovery. Show all posts

Feb 1, 2010

How Nadia François survived the earthquake in Port-au-Prince, Haiti

by Jon Lee Anderson

February 8, 2010


Nadia François walks miles to town from a ravine in the hills in  search of supplies. Photograph by João Pina.

Nadia François walks miles to town from a ravine in the hills in search of supplies. Photograph by João Pina.

On the morning of Monday, January 18th, I set out with Frantz Ewald, a Haitian-born painter, to drive into Port-au-Prince from the hilltop suburb of Pétionville, where I was staying. It had been six days since the earthquake struck, and the city was still in chaos. As rescuers hacked at the rubble, looking for survivors, residents were out on the streets searching for water, for food, and for fuel. In Pétionville, a gas station had opened for business, and that morning a long line of cars formed; mixed among them were men and women on foot, holding plastic jerricans and waiting anxiously for their turn at the pump. An elderly woman came up to the people in line and asked politely for help. The charred corpse of a man, said to be a thief, lay at the curbside across the street, in front of a bank. His head was crushed and his legs were strangely folded behind him, and a small pile of rubbish was gathering around him. As people walked past, they cupped their hands over their noses and mouths because of the smell. A few feet away, young touts sold scratch cards for a mobile-phone company to passing motorists.

Frantz and I were in his black Toyota pickup truck, and we had not gone far when we braked to allow a group of teen-agers to cross the street in front of us. They were being led by a tall young woman in a white tunic and a long black skirt. They trailed behind her as if she were some kind of Pied Piper. As they passed in front of us, she gave us a sidelong glance of polite recognition, and we carried on.

Four or five hours later, in the flatlands at the edge of the Port-au-Prince airport, we saw the young woman and her followers again. She was standing amid a scrum of onlookers outside the gates of the airport, where U.N. and American planes were landing on the airstrip beyond the little terminal building. We stopped and hailed her, and she spoke to us, surprisingly, in English, with a Southern drawl. She said that her name was Nadia François and she was from Delmas 75—a neighborhood five miles back up into the hills. She had come down, she said, in representation of some three hundred people there who were in need of help. She handed us a paper with a handwritten message that attested to her mission, signed and stamped by a Protestant pastor. Nadia had led her group down to the airport after hearing that the U.S. military was handing out food.

We told Nadia and her companions—there were nine of them—to hop into the back of the truck, and we set off to look for food. Despite the rumors, which had attracted several hundred Haitians to the road by the airport, to gather and stare hopefully, no food was being given out there. We drove onto a nearby field where there were tent camps and aid supplies, demarcated with a dozen or more national flags, but it was a bivouac, not a food-distribution point. We asked a U.N. peacekeeper where to find aid; he said he didn’t know. Someone told us that food was being handed out at a factory nearby, where the Dominicans had set up a base, and so we drove there.

The earliest and most visible relief presence in Haiti had come from the neighboring Dominican Republic. When I first entered Haiti, in the early morning of January 15th, I had been waved across the border with a long stream of vehicles carrying relief supplies. There was also a convoy of trucks, driven by soldiers, that were inscribed with messages that the relief had been dispatched as a personal gesture by the Dominican President, Leonel Fernández.

Now a vast international aid effort was beginning to establish itself. Humanitarian assistance and rescue teams were appearing daily from all over the world—from Spain, France, Russia, Israel, Venezuela, and Cuba, as well as the United States. A team of yellow-shirted Scientologists showed up, as did one from the order of the Knights of Malta. Countless tons of supplies had been flown in or were on their way. But the distribution of food was scattershot, and every outlet was swamped with desperate crowds. All over the city, banners and signs painted on sheets asked for aid. Only the patient and motivated seemed to be getting it.

Nadia said she had grown up in Miami with her family. She was thirty-six, “going on thirty-seven,” she said, and had been back in Haiti for only the past two years. I asked her why she had returned. She gave a rueful smile and said she had “been bad” and had had “immigration difficulties.” In the past week, she had become a principal means of support for her community. Every day, she’d come into the center of town and tried to return with food and other essentials.

At the Dominican food depot, a detail of Peruvian U.N. peacekeepers nervously clutched acrylic shields and assault rifles as they tried to hold back a large crowd of Haitians who had gathered at both sides of the gated entrance. The soldiers were harried and flushed, and they yelled when we pulled up to talk to them, as if they had been deafened by the noise of the crowd. We persuaded them to let us through, and inside we found a tumultuous scene: trucks came and went, and civilians who had slipped through the cordon mingled with Haitian police, Dominican soldiers, and dozens of yellow-T-shirted volunteers for Haiti’s Ministry of the Feminine Condition—a legacy of the populist Presidency of Jean-Bertrand Aristide. An official from the ministry was standing in the loading bay of the warehouse, where relief supplies were being piled haphazardly onto trucks.

The aid consisted of plastic bags with the essentials to sustain a single family for a day: rice, cornmeal, beans, sardines, and Vienna sausages. The official wore a decorative print dress with a matching head scarf and large sunglasses, and she spoke intently and continuously on a cell phone. Around her, arguments erupted as unauthorized people tried to sneak through the final barrier to get to the food in the loading bay. A fierce-looking woman wearing a bandanna came in and began screaming that she wanted food. A soldier pushed her. She yelled at him, and he shoved her again. He protested that the woman had been there the day before and was making off with the supplies to sell them.

A hapless-looking Dominican Army colonel was trying to oversee the proceedings. He gave Nadia’s group permission to take some food, and then added, a little apologetically, that he was under orders to distribute food through the Haitian government, and therefore could not take it directly to the people in the city. He led us to the ministry official, who removed her cell phone from her ear and listened as we pled the case. She looked sternly at Nadia, nodded in assent, and went back to her phone.

We loaded the pickup with seventy or eighty bags and secured them with yellow plastic cargo webbing, and then made for the gates. Outside, the throng was bigger, and the soldiers had grown agitated. They yelled at us to go fast and not to stop for anything, because the people would overwhelm our vehicle in order to get the food. We gunned the pickup and made it past the crowd; on the way into the hills, we drove cautiously through back streets. After a few miles, we stopped on a middle-class street, fringed with shade trees, where there was a gap between houses at a bend in the road. A crude patchwork awning of sheets and tarps stretched across the gap, and underneath were a large number of women and children, living on mats that had been laid over the pavement.

At the far edge of the awning, the street ended, and the ground fell sharply away. Below, in a ravine twenty or thirty feet deep and about a hundred feet across, was Nadia’s community, Fidel—named after Fidel Castro, she said—where she and three hundred other people normally lived. (Delmas 75, I realized, corresponded to the street that ran past the ravine and appeared on city maps; Fidel itself was off the grid.) It was a dry, stone-filled riverbed, filled with a geometry of cinder-block and tin-scrap dwellings, one of which was her house, a twelve-foot-square cinder-block structure that she rented for the equivalent of about three hundred U.S. dollars a year.

Most of the residents of Fidel had moved up to the street to sleep under the awning. They were frightened by the continuing aftershocks, and did not want to be caught in the ravine if there was another earthquake. Nadia pointed to a broken section of rock-and-block wall on the far cliff edge; I could see the outlines of an unfinished residential development there. Nadia said that the residents of Fidel had asked the developer not to put the wall so close to the edge of the cliff, but he had ignored them. During the earthquake, a section of the wall had collapsed on top of Nadia’s neighbor, hitting her on the head and killing her.

Beside the truck, Nadia called out for help, and soon a group of young men and boys began to carry the bags of food down into a small rudimentary Protestant church, the Église Pancotista Sous Delovy. The church, built into the side of the cliff, was made of sheets of salvaged corrugated tin, painted blue and pink. The altar and benches were down a steep concrete staircase, at the bottom of what seemed almost like a well. As Nadia called out orders to the youths, the pastor, Jean Vieux Villers, vowed that he would see that the food was fairly distributed; everyone seemed happy with this arrangement.

Fidel was settled thirty-two years ago, according to Verner Lionel, a neighbor of Nadia’s, when the area above the ravines was developed. Lionel was considered a leader in Fidel, because, at fifty-two, he was the oldest man there. Like many other men in Fidel, he was an itinerant construction worker and jack-of-all-trades. He had come there in the nineteen-seventies, as a worker for a developer, a woman he called Prosper, who allowed him to build a shack for himself in the ravine. “Mine was the first house,” he said. Friends and relatives of Lionel from the countryside followed him to the ravine, and then others came. Today there are some eight hundred and sixty people living there, according to Nadia’s calculations. Haitians have big families; international-aid agencies tend to estimate five or six people per family, and some have many more. Nearly half the country’s nine million people are under eighteen.

Nadia waved to the many mothers and babies and children on the tarp and said something had to be done for them. “The thing is,” she said with a tone of fond disparagement, “these Haitians don’t know what to do.” The immediate problem was that the people of Fidel ordinarily bought their water from a cistern truck, but it hadn’t appeared since before the quake on January 12th, and so there was no longer any easy access to water. (This problem was widespread; even before the earthquake, half of the people in Haiti couldn’t reliably get water.) There was no food or medicine, either, since there was no work, and no one had any money saved. These people were poor; like many of their countrymen, Nadia included, they were living below the poverty line and had been since long before the earthquake.

Haiti has been in a state of persistent struggle since it won its independence from France, in 1804. It is the poorest country in the Western Hemisphere, with seventy-eight per cent of its people living on less than two U.S. dollars per day and fifty-four per cent on half that. Its traditional exports, coffee and sugar, have collapsed, and manufacturing has been in decline for decades. It has suffered riots and hideous violence and depressingly regular political upheavals, led by a succession of despots and cheats: Papa Doc, Baby Doc, the priest Aristide.

Amid all this, Haiti seems almost uniquely victimized by nature. From June to October, it has severe storms and hurricanes. In the span of just two months in the summer of 2008, it was walloped by Tropical Storm Fay, Hurricane Gustav, Tropical Storm Hanna, and Hurricane Ike, which together left eight hundred thousand people homeless and the country’s infrastructure severely damaged.

Haiti relies heavily on foreign aid, but little of that money contributes to sustained development, and it has often been withdrawn for political reasons. Most of the jobs are in agriculture; as exports have dipped, nearly a hundred thousand Haitians a year have made their way from the country to Port-au-Prince. There they work largely in the “informal” sector: as bellboys, day workers, shoe shiners, and street venders. Now even those jobs are gone.

One day, Frantz and I drove past the Port-au-Prince cemetery, on our way from the small cinder-block judicial police headquarters, near the airport, that had become the provisional seat of Haiti’s government. Bodies were everywhere in the city—lying on street corners and sometimes dumped in the middle of avenues—and, at the office, the mayor of Port-au-Prince and the director of the Ministry of Health had both informed me that they were doing what they could to clean them up. Disposing of bodies was, for all intents and purposes, now the extent of the Haitian government’s capabilities. The Prime Minister, Jean-Max Bellerive, had told me that seventy thousand bodies had been collected by bulldozers and dump trucks and buried in four mass gravesites, in town and outside. One of those places was the main cemetery.

As we approached, I saw three bodies lying face down on the dirt in a gap in the wall. Two of them appeared to be women, one very young. The other bodies I had seen in Port-au-Prince were distended and blistered from the heat. These were fresh, with no visible injuries. They reminded me of photographs I had seen of victims of death squads in El Salvador. An overwhelming stench permeated the air, even inside the truck.

Lying next to the cemetery wall was a young man, drenched from head to foot in blood; more blood had pooled around him on the sidewalk. He lay on his side, with an elbow propped up on the ground so that he could cup his head in his hand. There was a bright-red advertisement for Nino cell phones painted on the wall just above him, and next to it a crucifix embossed within a circle. Frantz said, “I think he’s still alive.” Several people gathered on the median strip to stare down at him. One of them said, “He’s a thief. The police executed him and dumped him here. And those people, too”—he indicated the fresh bodies. “They are thieves.”

During the earthquake, hundreds of prisoners had escaped from the national penitentiary, just a few blocks from the Presidential Palace and the cemetery. The fugitives included hardened criminals and some of Port-au-Prince’s most violent gang leaders. Looters—thousands of them, by some reports—had overrun the Grand Rue, the main commercial area, and other places in the city. The police were hard pressed to respond, having lost half their force around Port-au-Prince. I had heard reports of police shooting thieves and of looters killed by vigilantes. There was gunfire at night in the neighborhood where I was staying, and at one point rumors spread of nocturnal kidnappers who were stealing people’s babies to sell for adoption, supposedly abducting them as they slept in the streets outside. One day, I saw a man tied to a pole, hacked up by machetes and beaten to death with rocks.

The man on the sidewalk twitched; his chest rose and fell slowly a couple of times. A yellow bulldozer came up the street, and a rough-looking man, walking in front of it, directed it toward the three bodies lying inside the cleft in the wall. The bulldozer, amid great noise and fumes, scraped them up into its iron beak and then, in several violent motions, rolled them into a mound of yellow dirt that rose some fifteen feet inside the broken wall. Within a minute, the bodies had vanished. The bulldozer came along the sidewalk and lowered its beak. Before it could scoop up the wounded man, though, the worker directing operations walked over. Seeing that the man was still alive, he waved the bulldozer away. As it roared off, we asked him what he planned to do about the wounded man. He said, “I am only responsible for the dead,” and walked away.

When the quake hit, Nadia had tried to run out of the ravine. She was halfway up the crude concrete steps that led to the street when she heard screaming from near her house. She ran back, and saw her neighbor lying dead under the pile of cinder blocks. The neighbor had a seven-month-old boy. “I said, ‘Where’s the baby, where’s the baby?’ and we saw him lying there on the ground.” She had managed to toss the child clear just as she was buried by the blocks. “A woman picked him up and gave him to me,” Nadia said. “He was covered with blood, and there was also blood on his socks. One arm looked dislocated, and one of his legs, too, and he had a swelling on his head. I was scared he would die in my hands. He kept trying to go to sleep, and I was trying to wake him up.” Nadia went looking for his relatives and found his aunt, who lived in Ravine 75, a few blocks away from Fidel. “After, I went outside and sat, and I was crying, because I didn’t know what happened to my boyfriend.” Her boyfriend, a young man named Kesnel Jean, had left earlier in the day on a bus for Jacmel, a town on the southern coast of Haiti. He had not been heard from.

That night, “after it stopped,” Nadia said, she walked down to Delmas 36, about thirty-five blocks away, to see if her cousin and his family had survived. They had, but what she saw of the city—“a lot of houses down,” and people dead and wounded everywhere—saddened her. Nadia recalled that a rumor had begun circulating after the disaster struck. “The Haitians started saying that it was the U.S. doing an experiment that caused it, because they wanted to take over Haiti. But I know it’s God’s work, because if it was the U.S. that did it, then did they also do the earthquake in California a few years ago? I tried to tell them it don’t make no sense.”

In the next days, she continued roving out of Fidel. “On Wednesday, I walked all the way to downtown and back up, looking for my boyfriend. I saw dead people lying around,” she said. “I saw one kid who had tried to run out of a building, and it smashed down on him, and all you could see was his face and one of his arms. I saw looters taking things and throwing them down from one building that was destroyed, and I took off running, because I didn’t want to get taken by the police.”

It was in those initial sorties of hers, looking for Kesnel and for her relatives, that Nadia had started searching for food. She told me, with a kind of fierce pride, “I never suffered in the U.S. for things like food and water, so I don’t think I should have to in Haiti.” She brought the food she found to Pastor Villers, to be stored in the little Pancotista church until it could be handed out.

It wasn’t until two days after Kesnel went missing that he arrived back in Fidel, injured in one leg but otherwise unharmed. When the earthquake had struck, his bus had crashed; a U.N. vehicle was also in a wreck nearby. Many passengers had been killed, he told Nadia, but he had been pulled to safety by the U.N. people. He had managed to hire a motorcycle to get partway back to Port-au-Prince, and had hitched a ride the rest of the way.

On the coastal road leading west out of Port-au-Prince to Léogâne—an old plantation town that had been almost entirely destroyed in the quake—I stopped one day at the home of Max Beauvoir, Haiti’s preëminent houngan, or vodou priest. Beauvoir’s rambling complex was situated in a shady glade of tropical trees—an unusual sight in this part of the country, which, like much of Haiti, has been largely deforested. The coral-rock wall in front had partly collapsed in the earthquake. A section of his temple and an open-air kitchen had been damaged, too, but his home was intact. Several statues of vodou gods overlooked the garden from the parapets of the buildings.

Beauvoir, seated at a round table beneath the trees behind his house, greeted me graciously. A tall, handsome man with deep-set, intense eyes, he had a pair of huge Rottweilers at his feet and a pack of Marlboro Lights on the table, which he drew from as we talked. He said he was upset about remarks made by the American evangelical preacher Pat Robertson, who had blamed Haiti’s tragedy on a pact with the Devil. “I feel that Pat Robertson missed a very good opportunity to close his mouth,” Beauvoir said. “What is needed most in Haiti now is certainly compassion. A tragedy like this is the fault of nobody, and to look for fault is ridiculous, and it seems to me that was not very intelligent. It would have been more intelligent on his part if he had simply shut up.” Beauvoir was also upset about the mass burials of the earthquake victims. Tens of thousands of unidentified human bodies a day were being bulldozed into the ground without any ceremony, and he wished for a way to bring greater dignity to the process. “We all have a part of God in us, and our bodies should be disposed of in a decent way. The way they are doing it, picking them up and putting them in holes, it’s undignified.”

I told Beauvoir about the bodies I had seen dumped at the cemetery, and he nodded. On January 16th, he said, he had been summoned by Haiti’s President, René Préval, to an emergency cabinet meeting, along with the Prime Minister, the police chief, and the surviving heads of the Catholic and Protestant churches. At the meeting, the leaders had discussed the unravelling security situation in Port-au-Prince. “We decided we had to deal with them in an emergency way,” he said. “Beginning on the seventeenth and for the next two weeks,” criminals were to be treated “as in an emergency.” I asked him if this meant capital punishment, and he said it did: “Capital punishment, automatically, for all bandits.” Some of the looters were taking what they desperately needed, and from places where it wouldn’t be missed. And some of them must have been supplying those too sick or badly injured to fend for themselves; Nadia couldn’t have been the only one tending to a community. Others, of course, were stealing out of greed and opportunism. But this seemed an impossible distinction to make, especially for a beleaguered and diminished police force.

I asked if such license could extend to the killing of a young girl, and mentioned the girl whose body was among those dumped at the cemetery.

Beauvoir nodded. “It could include anybody.” He seemed to think of such harsh treatment as a lamentable necessity. “I personally regret this,” he said. “I regret all death. I regret the many calls I have received asking for help. I regret that people are still trapped in their houses. I regret the earthquake we had this morning.” (Earlier that day, an aftershock registering 6.1 on the Richter scale had rattled Port-au-Prince.) I told him about the young man I had found shot and left for dead, and how it had been American soldiers, in the end, who had taken him away for medical treatment. I told Beauvoir that I had tried to follow up on his case but had been unable to find him. This, too, he said, was regrettable. “But if you want to look for him, I can tell you, go and look in the graves.”

The Haitian government has denied ordering the police to use extrajudicial means to deal with looters. But when I told Nadia what Beauvoir had said, she wasn’t surprised. A few days earlier, a policeman who lived in Fidel had told her and her neighbors, “If you catch a thief, kill him.”

Nadia spoke English and Spanish and Creole, but, she told me, she felt more American than Haitian. When I asked her what her favorite television programs were, she laughed and said, “Oh, ‘The Dukes of Hazzard’ and ‘Punky Brewster’!” Her mother took her and her siblings to the U.S. when she was six, on a boat with other Haitian illegal immigrants, going first to Cuba and then to Florida. Her father was in prison in the United States, and joined them when Nadia was fourteen. Soon afterward, she caught him sniffing cocaine in the house, and he had tried to beat her. Her mother threw him out. When she was still in high school, he shot someone and escaped to Port-au-Prince. Not long afterward, she heard, he was shot dead after a drug deal in Delmas 33—about thirty blocks from where she lived now.

As a child in Miami, she had wanted to be a marine or a model. “My mother kept promising to take me to Barbizon, but she lied, she never did.” Nadia smiled. Life had been difficult. Her older brother, she explained, had fallen ill after a vodou curse was put on him. Her mother had returned to Port-au-Prince to nurse him, but he had died. Nadia’s mother had brought the illness back with her, and died soon afterward. That was in Nadia’s senior year of high school. She graduated, but after her mother’s death she and her sister had had to move out of their rented house.

For a time, she said, she studied “H.R.S.” at Tallahassee Community College. When I asked what that meant, she said, “Human resources services,” uncertainly, as if she couldn’t quite remember what the initials stood for. She had also studied cosmetology, and got a certificate for call-center work. She had three children, two by one man and one by another.

In 1992, she was arrested and spent five and a half years in prison. The charges were for forging a Treasury check and for armed robbery. She told me at first that she had been arrested in a car that had a gun in it which didn’t belong to her. Then she looked at me and said, “I fell in with the wrong people.” After prison, she was deported. In 1999, she returned to the U.S., hoping to see her daughter, who she said was being abused in foster care. She was picked up by police for entering the country illegally, and spent seven years and one month in the federal correctional institution at Tallahassee. In June, 2007, together with other detainees, she was sent by special plane back to Port-au-Prince. They were greeted by Haitian policemen, whose faces were hidden by masks, and placed in detention. “I was afraid, because I didn’t know what to expect,” she said with a shudder. “I don’t know why they had to wear masks.” After a couple of weeks, a cousin came to fetch her. Not long after, she rented the small house in Fidel and had been there ever since, earning a little income by cutting women’s hair.

Nadia hadn’t seen any of her children since her last arrest. Her youngest had been a baby when she went to prison. All three had ended up in different foster homes. Nadia’s greatest wish was to return to the States with her nephew (the son of the brother who had died in Haiti), to be reunited with her children, and to have a job. “I can work at anything, I don’t mind what,” she said. “They say that if you pay your dues you’re supposed to be given a second chance. Isn’t that right?”

When I arrived to see her one morning, Nadia was on the street, talking heatedly with the woman who sold water, sugarcane, and soda from a hole-in-the-wall shop at the end of the street, where everyone from the ravine congregated. Nadia was loudly admonishing her in Creole. It went on for some time. The day before, Nadia explained, the woman had taken receipt of some boxes of Chinese rice that had been intended for her. The donor was a Canadian man whom she had stopped as he was driving by; she had persuaded him to bring food for her and her neighbors, but he had apparently returned while Nadia was away. The shopkeeper said she had already handed it out. “So she claims,” Nadia muttered disgustedly.

When I asked Nadia how the people of Fidel had come to regard her as a leader, she said that it was because she spoke English. Then, harshly, she added, “And because I’m the one searching for help while they’re sitting on their sorry behinds.”

Fidel was not especially hard-hit by the earthquake; other than Nadia’s neighbor and a couple of women farther down the gulch whose house crumbled and injured their legs, it experienced none of the ravages that destroyed so much of the city. But, in the absence of a viable economy and national infrastructure, it was still a hopeless place, a symbol of Haiti’s deep and persistent problems. Many of the men in the neighborhood seemed to sit around most of the day. Some played dominoes to pass the time. There was no work for them, and would not be until the aid money for reconstruction created jobs. Lionel Verner hasn’t had construction work for a long time, he said; he sells cell-phone scratch cards to make a living. He has eight sons and no wife, and he makes twenty to thirty gourdes—something less than one U.S. dollar—a day. Nadia explained that before the earthquake a small bag of beans sufficient for a family meal cost twenty-seven gourdes, a bag of rice about fifty. By now, prices had risen substantially. Verner said that he and his sons usually ate one meal a day: spaghetti or rice, and sometimes cornmeal mash with beans. Since the earthquake, Nadia and a large group of others from Fidel—those sleeping under the awning—had begun cooking a collective evening meal in a large pot over a charcoal fire, right on the street. They wasted nothing. Some of the blocks that had fallen on Nadia’s neighbor had been repurposed as a base for a washtub. Nadia had stored the baby’s disassembled crib.

On January 25th, twelve days after the earthquake, Nadia asked me to go with her to the Pétionville Country Club, a nine-hole golf course studded with flamboyant orange trees. There was a displaced-persons camp there, she said, and the American Army was giving out food. Nadia said she had found the camp after she noticed U.S. military helicopters and followed them “to see where they were going.”

At the golf course, we walked onto an incongruously clipped lawn at the second tee. Ahead of us, spreading out over the slopes of the hillside, were thousands of shelters, made out of every conceivable material: bedsheets, sacking, plastic, and in one case, a greenish plastic printed with the words “Caution: Contains Infectious Biological Waste.” Small tent-shops had sprung up, including one that sold wigs and hair weaves, and another in which a young man with a tiny generator was recharging cell phones.

The aid was being dispensed by Catholic Relief Services, and Nadia stopped a C.R.S. worker as he trotted through the crowd, an Irishman named Donal. Although he looked busy and exhausted, he listened patiently as Nadia made her appeal. He explained that he could do nothing for her until she first went to their office, in Delmas. A team would be sent to survey the ravine, and if her claim was accepted then food could be given. The camp had at least twenty-five thousand people in it already, Donal said, and the number was swelling by the day. Because there were no latrines, everyone was defecating in the open, a major health hazard. There had been three rapes, and he was worried about fires. C.R.S. was trying to cope, but it was on the verge of being overwhelmed.

Nadia nodded sympathetically, but she was relentless. “So what do I have to do?” she asked. Before she let him go, Donal had told her where to get help and supplied her with his own cell-phone number.

At the C.R.S. office, Nadia found a tall, amiable Oregonian of thirty-five, Lane Hartill, who got her a chair and a bottle of drinking water and listened intently as she described the situation in Fidel. C.R.S. wanted to help as many people as it could, he told Nadia; the agency had already brought in sixteen hundred tons of food, and it planned to put people back to work by hiring them to clear rubble.

Hartill offered to come with Nadia to survey Fidel himself. When he arrived, he was amazed that there were people living in the ravine. “What do they do in the rainy season?” he asked. “They get wet,” Nadia said.

Back at the office, a waybill was drawn up that authorized Nadia to go to the C.R.S. compound across town and collect a hundred and fifty buckets of food, a hundred and fifty hygiene kits (buckets containing towels, soap, sanitary napkins, and detergent), and fifty cases of drinking water. Nadia went off on a motorbike that belonged to a young man who lived nearby and soon returned with four small pickup trucks.

While the trucks were being loaded at the C.R.S. compound, Nadia cracked jokes and flirted with a contingent of Nepalese U.N. soldiers who were on guard there. She was overjoyed at the supplies. When she returned to Fidel, Pastor Villers threw open his church doors, and soon there was a stream of boys and girls and men going to and from the trucks, carrying the C.R.S. buckets and water and stockpiling them on the church floor.

Nadia moved back and forth, issuing orders. She told people to line up, and, using a list of names she had compiled in girlish handwriting, she began to call them forward.

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Dec 29, 2009

Emerging Markets Keep Soaring Past Their Doubters

Published: December 29, 2009

NEW DELHI — This was a lost decade for the American stock market. But for much of developing world, it was the Roaring ’00s — a period of soaring markets and breakneck investment that left even some bulls wondering if the good times can last.

Rajanish Kakade/Associated Press

Onlookers reacted to the stock display at the Bombay Stock Exchange building last May, when the market rallied following the decisive victory of the Congress Party.

While the broad American market lost about a fifth of its value in the last 10 years, emerging markets like Brazil, Russia, China and India powered ahead with gains in the double or even triple digits.

The numbers are staggering. On the Ukraine’s PFTS Stock Exchange — a Wild East of investing that did not even exist until 1997 — shares soared more than 1,350 percent over the last decade. In Peru, stocks jumped more than 660 percent. Here in India, the Sensex index leaped more than 240 percent.

The {{w|Potential superpowers}} or {{w|BRIC}} ...Image via Wikipedia

To believers, those heady gains underscore profound shifts taking place in the global economy, where investment dollars, euros and yen whiz across borders and time zones with the stroke of a computer key. As many Americans wait for an economic recovery, money is pouring into the fast-growing economies of Asia and Latin America, as well as into oil-rich Russia and the former Soviet bloc.

“What we’re living through now is something of epic proportions,” said Allan Conway, the head of emerging markets equities at Schroders, the big money management company in London. He likened the economic rise of nations like Brazil, Russia, India and China — the so-called BRIC countries — to that of postwar Japan.

Amid all this euphoria, even some longtime bulls wonder if investors are getting a bit carried away. Emerging markets have a history of giddy booms and crushing busts dating back to the 19th century. They collapsed spectacularly in 1997, as a chain reaction of currency devaluations, bankruptcies and recessions rocked East Asia. In 1998, the Russian market plunged more than 80 percent after the country defaulted on its debts.

Thematic map with the estimates of the countri...Image via Wikipedia

More recently, emerging markets tanked with the rest of the world in 2008, after shell-shocked money managers pulled cash from anywhere that seemed risky. But they were a bright spot in 2009 — the MSCI Emerging Markets index increased 73 percent in 2009, compared with a 25 percent jump in the S.& P. 500 index.

Despite 2009’s gains, few predict a major setback today. Since the 1998 debacle, some developing countries have cleaned up their acts, balancing their budgets and improving their trade balances. As their economies grow, domestic investors have become big supporters of these countries’ stock markets. With interest rates low around the world, companies based in emerging markets, like their counterparts in the developed world, enjoy access to cheap money. High commodities prices have buoyed stock and bond markets in nations that are big exporters of commodities.

But the recent travails of Dubai, where a debt-driven bubble economy is now bursting, provide a powerful reminder that in up-and-coming economies, what goes up can come down — and fast. That these markets have gained so much, so quickly — with some white-knuckled drops along the way — gives some investment professionals pause.

Municipality of Shanghai · 上海市Image via Wikipedia

Mark Mobius, one of the deans of emerging market investing, said that while developing markets still have room to run, the first half of 2010 could be bumpy.

“We continue to see upside, but with substantial corrections along the way, which could be as much as 20 percent,” said Mr. Mobius, the executive chairman of Franklin Templeton Investments, which is based in San Mateo, Calif.

Some market specialists worry that asset bubbles akin to the one that inflated and burst in the American housing market might be growing in places like China and Hong Kong. Others fret over the risks posed by volatile commodities prices, as well as over the inevitable end of this period of ultralow interest rates.

Leon Goldfeld, the chief investment officer for HSBC Global Asset Management in Hong Kong, told reporters this month that HSBC had cut its exposure to Asian equities, anticipating a 10 percent to 15 percent decline in early 2010. After that, Mr. Goldfeld said, Asian stocks would represent a “good buying opportunity.”

As long-term investments go, emerging markets seem to have a lot going for them. On average, developing countries have less sovereign, corporate and household debt than developed countries. Their economies are also growing faster than industrialized ones. Merrill Lynch predicts that emerging market economies will grow 6.3 percent next year, while the global economy expands by 4.4 percent.

Emerging markets are eclipsing their developed peers in other ways as well. Imports to the BRIC nations are likely to surpass imports to the United States for the first time ever in 2009, according to Morgan Stanley.

For the moment, the developing world is the engine of global growth. Emerging markets accounted for virtually all of the year’s growth in global output, because developed economies shrank or were flat. Even if developed countries recover completely in 2010, emerging economies will account for 70 to 75 percent of the growth in global output “for the foreseeable future,” said Mr. Conway of Schroders.

Developing nations are also assuming a bigger role in the world economy. Morgan Stanley predicts that developing countries, including those in the Middle East, will account for 36 percent of total global gross domestic product in 2010, up from 21 percent in 1999.

All of this is a big lure to investors. Funds focused on equities in emerging markets attracted a record $75.4 billion this year, far surpassing their previous high of $54 billion in 2007, according to EPFR Global, which tracks fund flows.

Even after that influx, emerging markets still account for only a small fraction of investment portfolios in United States and Europe, the world’s money management centers. Less than 3 percent of assets managed by United States fund managers are invested in emerging markets. That number could double in the next five years, some investment experts say.

Even normally conservative investors might be tempted to jump into emerging markets, given the sluggish outlook in the United States and Europe. After a dismal decade for the American stock market, markets in the developing countries might seem attractive.

“Investors are starting to look at this asset class and realize that it is a pretty safe place,” said Kevin Daly, who manages $1.7 billion in emerging market debt at Aberdeen Asset Management.

Despite their volatile history, emerging markets strike some money managers as relatively secure places to invest. Of course, such hopes have been dashed before.

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Nov 20, 2009

Getting Tough on Exploitation - Nation

Uncle Sam, host. Immigrants being served a fre...Image by New York Public Library via Flickr

Last week, Homeland Security Secretary Janet Napolitano announced that the Obama administration would seek legal status for 12 million undocumented immigrants in early 2010. Hard-right tea party organizers reportedly switched gears immediately to denounce the move. Congressman Lamar Smith found it "ironic" that Napolitano framed the push for comprehensive immigration reform as a way to improve the economy. But Napolitano is absolutely right: reforming the nation's immigration laws to bring millions of people already participating in our economy out of the shadows would boost tax revenue, lift the economy and protect working Americans from the unfair labor market competition they now face. The biggest problem is that Congress may be dangerously slow to act: even the much-needed extension of unemployment benefits took the Senate months to approve.

While legislators drag their feet, the Obama administration can act quickly on its own to stop the erosion of middle-class jobs. Directing his agencies to enforce the nation's existing labor and employment laws more vigorously, while halting the enforcement of broken, economically harmful immigration laws is one powerful way to do it.

To the uninformed, the relationship between unemployment and immigration looks simple: if we could just deport all undocumented workers and restrict legal immigration, those jobs would instantly become available to American citizens, driving down unemployment. But the old "immigrants steal American jobs" myth holds no water. The reality is that all types of immigrants, including the undocumented, boost the American economy as taxpayers, workers, consumers and business owners. Through their work and consumption, immigrants generate economic activity that creates new jobs, jobs that wouldn't exist if immigrants were not part of our economy. As the President's Council on Economic Advisors concluded in 2007, US natives gain $37 billion a year from immigrants' participation in the economy. If enforcement efforts were effective and we somehow succeeded in pushing undocumented workers out of the country (not a likely scenario, even in these dark economic times), we would lose jobs rather than gain them.

But if the presence of undocumented immigrants doesn't harm the US economy, the fact that they are so vulnerable to exploitation in the workplace does. Because undocumented workers are often too afraid of deportation to speak up about workplace abuses, unscrupulous employers can cut immigrants' wages and benefits and degrade working conditions with impunity. Exploiting undocumented workers can drag down wages for other workers, especially those with little education: as their employers are forced to compete with companies that exploit immigrants, entire industries may see wages decline. Indeed, violations of minimum wage, overtime and workplace safety laws are rampant in the nation's immigrant-dominated low-wage industries, according to a recent eye-opening study by researchers at UCLA, the University of Illinois and the National Employment Law Project. Their in-depth investigation in three American cities reveals that as many as one in four low-wage workers--including hundreds of thousands of American citizens in these cities alone--were paid less than the minimum wage in the week prior to the survey. And while undocumented immigrants appear to be the most vulnerable to abuses, this research vividly illustrates the way that exploitation of immigrants goes hand-in-hand with an atmosphere in which citizens are also taken advantage of on the job. As long as such violations persist, economic recovery will never reach these workers.

That's why a shift from immigration enforcement to labor and employment law enforcement is so critical. Enforcing laws against undocumented immigrants--even by penalizing employers rather than raiding workplaces, as the Obama administration has chosen to do--increases immigrants' fear and corrupt employers' incentive to keep workers off the books. As a result, immigrants are driven further underground and see their risk for exploitation increases. In fact, immigration enforcement itself can be manipulated by employers to undermine all workers' rights and continue to pursue workplace violations, as another recent study illustrates.

Legalizing undocumented workers is ultimately the best way to ensure that they can exercise rights in the workplace and stop undercutting other American workers. Once everyone participating in the US economy is openly subject to American labor laws, pursuing violations of workplace protections, including minimum-wage laws, will become easier. What's more, an analysis of the mass legalization enacted in the United States in 1986 suggests that legalization would raise immigrant wages and lift up entire communities, boosting the US economy. Legalization would require an act of Congress, which may be slow in coming. But the Obama administration could unilaterally halt the enforcement of broken immigration laws, delivering tremendous economic benefits. As the Progressive States Network has pointed out, state governments can also improve conditions for workers by shifting enforcement emphasis from immigration infractions to workplace violations.

The Obama administration is moving in the right direction with the recognition that it is corrupt employers, not undocumented workers, who are a threat to the middle class, but it needs to focus on the real problem: not immigration violations but the exploitation that often accompanies them. While we wait for stronger economic recovery measures and the overhauls of immigration and labor law that American workers need, a shift in enforcement strategy can begin to provide an immediate boost to the economy and the nation's hardest-hit workers.

About Amy Traub

Amy Traub is the director of research at the Drum Major Institute for Public Policy and author of the recent report, Principles for an Immigration Policy to Strengthen and Expand the Middle Class.
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Nov 15, 2009

The Accidental Hero - BusinessWeek

SubwayImage by miskan via Flickr

Subway's $5 footlong, the brainchild of an obscure Miami franchisee, is the fast-food success story of the recession

Stuart Frankel isn't what you'd call a power player in the world of franchising. Five years ago he owned two small Subway sandwich shops at either end of Miami's Jackson Memorial Hospital. After noticing that sales sagged on weekends, he came up with an idea: He would offer every footlong sandwich (the chain also sells 6-inch versions) on Saturday and Sunday for $5, about a buck less than the usual price. "I like round numbers," says Frankel, a brusque New Yorker who moved to Miami in 1972 and owned a drugstore before opening his first Subway outlet in 1988.

Customers liked his round number, too. Instead of dealing with idle employees and weak sales, Frankel suddenly had lines out the door. Sales rose by double digits. Nobody, least of all Frankel, knew it at the time, but he had stumbled on a concept that has unexpectedly morphed from a short-term gimmick into a national phenomenon that has turbocharged Subway's performance. "There are only a few times when a chain has been able to scramble up the whole industry, and this is one of them," says Jeffrey T. Davis, president of restaurant consultancy Sandelman & Associates. "It's huge."

In fact, the $3.8 billion in sales generated nationwide by the $5 footlong alone placed it among the top 10 fast-food brands in the U.S. for the year ended in August, according to NPD Group. That puts the $5 menu's success just a notch behind KFC (YUM) and ahead of Arby's and Domino's Pizza (DPZ). It helped privately held Subway, of Milford, Conn., lift U.S. sales 17% last year at a time when most restaurant chains, save for industry leader McDonald's (MCD), struggled. Actually, make that soon-to-be-former industry leader McDonald's. Subway's low-cost franchising model and mainstream appeal have allowed it to add 9,500 locations in the past five years, for a total of about 32,000 outlets. At its current growth rate of 40 new stores a week, Subway is poised to surpass McDonald's in worldwide locations sometime early next year. (Measured by total sales, McDonald's $30 billion still dwarfs Subway's $9.6 billion, although Subway has now supplanted both Wendy's (WEN) and Burger King (BKC) in market share.)

"A LIFE OF ITS OWN"

Frankel's $5 footlong idea illustrates how a huge company can wake up and eventually seize on a good idea that's not generated at headquarters. Frankel, along with two other local managers in economically ravaged South Florida, ceaselessly championed the idea to Subway's corporate leadership amid widespread skepticism. Once it was approved, Subway's marketing team quickly generated a memorable campaign that firmly established the $5 footlong nationwide. The promotion's success spawned imitators and created an unprecedented demand for staple ingredients such as turkey, ham, and tuna. "The whole thing took on a life of its own," says Jeff Moody, CEO of Subway's franchise-owned advertising arm, the Subway Franchisee Advertising Fund Trust.

The fact that a sandwich, the quintessential American food, has grabbed the spotlight right now comes as no surprise to some. Its appeal goes beyond the low sticker price—you can share a footlong with a co-worker or a friend (something that's not quite as easy with a Big Mac). "People are not eating out as much anymore, so anything that brings people together through food is much more compelling nowadays," says Michelle Barry of the Hartman Group, a Seattle consultancy that employs anthropologists and sociologists to ferret out consumer perceptions for such companies as Kraft Foods (KFT) and Wal-Mart Stores (WMT).

For Frankel, the biggest surprise from his $5 promotion was that his profit margins didn't decline. Many promotions are so-called loss leaders designed to draw customers in the hope they'll buy higher-margin items alongside the featured special. That's one reason most offers have a time limit. Frankel's food costs did rise as a percentage of sales, but that was offset by the overall boost in volume and the increased productivity of his employees, who had less down time. Even after adding two new staffers, Frankel made money on each $5 sandwich.

Frankel kept the weekend promotion going for more than a year. At the same time, Subway's top brass was growing tired of a national ad campaign that featured spokesman Jared Fogle, who had lost 245 pounds almost a decade earlier by eating Subway six-inch subs for lunch and dinner. Company insiders envied the success of McDonald's dollar menu and wanted a "value" offering of their own. In September 2007, Steve Sager, a Subway development agent who oversaw about 225 franchises across South Florida, heard about the success of Frankel's $5 deal. He decided to try it in a troubled Fort Lauderdale outlet on Commercial Boulevard, a gritty thoroughfare dotted with strip malls. On the first day of the promotion, the store nearly ran out of bread and meat. Sales doubled.

Sager called Subway co-founder Fred DeLuca, who lives in the vicinity, and excitedly shared the news. An intrigued DeLuca came by the shop and, Sager says, "saw the potential instantly." (DeLuca declined to comment.) Charlie Serabian, the owner of 50 South Florida Subways, decided to launch the promotion in some of his stores. To advertise, he slapped crude homemade signs in the windows that spelled out "ALL FOOTLONGS $5." DeLuca joked that they looked like ransom letters. It didn't matter: Sales rose as much as 35%. Some locations, such as those housed inside Wal-Mart stores, did even better.

Moody, the marketing chief, hopped a flight to Fort Lauderdale a month later. He arrived at one store at 11 a.m. to find a line out the door. Frankel and Sager, who accompanied him, jumped behind the counter to help make sandwiches, while Moody talked to customers. Most were buying footlongs, and some were saving half for later.

Clearly, the South Florida crew was onto something. The question was whether it would resonate elsewhere. "Unless it was in your store, you were skeptical," Moody says. At a meeting of the franchisee marketing board that fall, Frankel presented his idea. Many owners thought the promotion would send food and labor costs soaring, erasing any hope of profits. A motion to roll it out nationally failed.

ANNOYING JINGLE

But others picked up on Frankel's idea and tried it in locations ranging from Washington to Chicago. Right before Christmas 2008, the board voted again, and the motion passed. (Franchisees still had the option to not do it.) Moody pushed ahead with a national campaign, despite having no market research to back up the idea. "It violated all our normal processes," says Moody, whose annual ad budget is around $500 million.

Subway soon brought in its ad agency, MMB of Boston. "Let's not overcomplicate this," MMB managing partner Chad Caufield recalls thinking. The idea was to use hand gestures and an irritatingly addictive jingle to convey both the price (five fingers) and the product (hands spread about a foot apart). MMB also shot on a soundstage, giving the commercial a stylized, campy look. "We wanted to create the feeling that this was a movement taking hold," Caufield says.

The campaign was launched on Mar. 23, 2008—the same month that Bear Stearns collapsed into the arms of JPMorgan Chase (JPM). "The timing could not have been better," says Dennis Lombardi, executive vice-president at restaurant consultancy WD Partners. Over the first two weeks, franchisees reported that sales shot up 25% on average. Within weeks, 3,600 videos of people performing the jingle appeared on YouTube (GOOG). Fogle, attending the NCAA Final Four college basketball tournament soon after the launch, was serenaded with the song by students. The $5 footlong was mentioned on ESPN, The Tonight Show, and celebrity gossip site TMZ (TWX). The North Carolina State Fair even held a $5 Footlong Song Challenge—an American Idol-style event for the 4-H crowd.

The franchisee marketing board quickly voted to extend the four-week promotion to seven weeks. When that ended, Subway kept it going but limited the number of $5 sandwiches to just eight, removing items with high ingredient costs, such as the Chicken & Bacon Ranch sandwich.

Suddenly Subway needed 50% more food supplies. Bread shortages became a problem, as the ratio of six-inch sandwiches to footlong orders, normally 2 to 1, flipped. Subway's franchise-owned Independent Purchasing Cooperative, or IPC, had to scramble to find new sources of bread. Even mundane items, such as plastic sandwich bags from China, nearly ran out. "I was in a panic," recalls IPC CEO Jan Risi, who furiously worked the phones, cajoling her network of suppliers to run extra shifts.

EVEN CHEAPER

Soon, copycat offers emerged. Boston Market offered 11 meals for $5 each, while Domino's sold sandwiches for $4.99 and KFC launched $5 combo meals. T.G.I. Friday's began selling $5 sandwiches. "Five dollars is the magic number now," says restaurant consultant Malcolm Knapp. "It's become a price point that consumers respond to," says Judy Cantrell, Boston Market's chief brand officer.

The question now is when the campaign will run out of steam. MMB's Caufield admits the issue keeps him up at night: "Are we riding this pony too long?" Tony Pace, a senior executive who works with Subway's marketing arm, replies bluntly: "If you had a brand that represented nearly $4 billion in sales, would you plan an exit strategy for it?"

Pace says the footlong will remain "as long as it makes good economic sense," so a decline in footlong sales could force price hikes, or limits such as $5 after 4 p.m. (Serabian has gone the other way as the South Florida economy has worsened, offering footlongs for $4 in his stores.) There are also concerns that Subway's focus on the footlong could distract it from new growth areas, such as a planned push into breakfast items or international expansion. (Save for some tests in Australia and Canada, the $5 footlong hasn't gone beyond the U.S.)

Meanwhile, Frankel has moved on to a new idea. Now he's pushing for Subway loyalty cards that let purchasers accrue points toward free sandwiches. Driving down Interstate 95 toward Jackson Memorial on a cloudy autumn day, Frankel chronicles the frustrations he's had convincing DeLuca and others that this could be a hit. Maybe now that Frankel is the Father of the $5 Footlong, they'll listen.

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Nov 3, 2009

Latvia's Tiger Economy Loses Its Bite - Nation

View a slideshow of images from Latvia, with photographs by Akim Aginsky and captions by Kristina Rizga.

Valdis Novikovs sells remnants of bankrupt businesses from a rental space in Riga. AKIM AGINSKY FOR THE PULITZER CENTER

AKIM AGINSKY FOR THE PULITZER CENTER
Valdis Novikovs sells remnants of bankrupt businesses from a rental space in Riga.

Riga, Latvia

Kristina Rizga reported from Latvia on a grant from the Pulitzer Center on Crisis Reporting. Gatis Visnevskis contributed research for this story.

Despite his 33 years, Valdis Novikovs still radiates teenage energy and a hunger for adventure. Latvia is a small country (population: 2.2 million), and like a lot of young people who felt suffocated and needed to get out, Novikovs left for England in 2005. He worked as a sous-chef at the Hard Rock Cafe in Birmingham and shared a studio apartment with a Polish roommate. When he went back to Latvia two years later, he barely recognized his own country. The moderately ticking postcommunist economy he'd left behind had turned into a booming engine, propelling rapid changes almost everywhere he looked.

"I come back and everyone around me is buying and selling properties," Novikovs says. "People have two luxury cars. They are traveling all over the world. I'm laboring overtime like a fool in England, but I can't do any of that." Sitting in his apartment in Riga, Novikovs speaks animatedly: "I felt like something gigantic was happening in Latvia, and the train was leaving without me!"

In fact, "something gigantic" was happening in Latvia: sweeping across the country was the biggest real estate (and luxury car) bubble in Europe. Less than a year after Latvia joined the European Union in 2004, its growth rate topped all of Europe. As global stock markets overheated and competition for investment opportunities intensified, Scandinavian banks showered Latvia with cheap credit. Eighteen years ago, when Latvia was under Soviet rule, the vast majority of the population had no experience with banking, investments or credit; no one owned property. But by 2005 Latvians could buy everything they ever dreamed of on credit--from teakettles to Bentleys to luxury apartments. As hundreds of office and apartment towers reached skyward, some construction workers started earning more than doctors. Novikovs, who had no experience in construction, got a job as a "plumber's assistant," in addition to managing a Jamaican-inspired restaurant, Coco Loco, at night. He was making more than $2,800 a month in construction alone, twice what he made in England.

Increased earnings and easy credit fueled a hunger for owning property. Oskars Kurdeko felt anxious that by 2007 he still didn't own a home. "All of my friends had already bought their apartments," Kurdeko explains. A percussionist for two local pop-rock bands, Putnu Balle and Tumsa, Kurdeko saw his income shoot up 70 percent that year, fueled by corporate gigs. He took out a $272,000 mortgage on a two-bedroom apartment in Riga with no down payment.

But as the global financial storm swept across Europe, the dreams of Latvians like Novikovs and Kurdeko were blown apart. By the end of 2008 Novikovs had lost both his jobs. Kurdeko's monthly mortgage payment now exceeds his pay, and his apartment is worth a fraction of what he owes on it. He's not alone: almost a third of all Latvian households have mortgages for homes or apartments that have dropped 50 percent in value since last year--the deepest plunge in the world, according to the Global Property Guide.

Novikovs now runs a business selling off remnants of other businesses that have closed or gone bankrupt, including his former restaurant. In May his headquarters--a small, dark rental space in a dilapidated Soviet-era building--was packed to the ceiling with more than 800 pairs of imported shoes, which used to sell for $40 but now go for $5. In one room, Italian sports bras piled up on top of a steel refrigerator. Recently, he and his partner started selling wood processing equipment and other machinery, as local manufacturing output continues to drop.

Latvia's economy has been among the worst hit by the global economic crisis, and it is now coping with Europe's second-deepest recession, after Lithuania. Its GDP dropped by an annual 19 percent in the second quarter of 2009. In February 2008 its government requested an emergency bailout loan from the International Monetary Fund. The IMF, with the help of the EU, approved an emergency aid package of more than $10 billion. Per capita, it is estimated to be one of the IMF's largest bailout loans.

Outside Riga, among the hardest hit are the large farms, which increased by 25 percent between 2005 and 2007, fueled by easy credit. "It's very hard for large farmers right now, who focused on producing one thing, like milk or grain, and took out large loans to expand their facilities," explains Liga Martuzane, a small farmer in Adazi. Now that the prices of grain and milk have dropped, many farmers are drowning in debt. Martuzane mentions the tragic suicide last year of her friend Gatis Karlovs, who operated a large farm. In February more than 1,000 farmers blocked the streets of Riga with their tractors in anger over the government's failure to protect them from the onslaught of subsidized EU imports, which they believe contributed to their bankruptcy. The protesters forced the resignation of Martins Roze, Latvia's agriculture minister.

The IMF and EU emergency loans have their own downside--they are given on condition of drastic cutbacks in government spending. The Latvian government has agreed to cut about $1 billion from its budget each year until 2012, the year it hopes to adopt the euro. Government officials waited until the day after the June 6 municipal elections to announce 10 percent cuts in pensions and 50 percent cuts to teachers' salaries. They feared the same public reaction that shook the country on January 13.

On that day more than 10,000 people took to the streets to protest spending cuts. What started as peaceful protests turned into the worst riots Latvia has seen since the collapse of the Soviet Union in 1991. Prime Minister Ivars Godmanis dissolved his center-right government coalition and stepped down in February, but his successor, Valdis Dombrovskis, assembled another center-right cabinet, which has pursued the same fiscal austerity policies. Latvia has since seen four more massive protests, as many Latvians feel that the cuts are arbitrary, without any clear vision or planning, and are directed disproportionately at the masses.

"It just doesn't look to me like the top is making the same sacrifices while they squeeze the bottom," Dagnija Kamerovska, the director of a local homeless shelter, said in May. The Latvian state controller, Inguna Sudraba, came out with a preliminary report in September that found that most large state bureaucracies, which swelled in the boom years, hadn't made the required 20 percent cuts in their salaries.

In the meantime, budget cuts are affecting areas like education and healthcare. On September 6 more than 400 protesters blocked two bridges to oppose the closing of the only hospital in Bauska, a rural city about an hour away from Riga. "Bauska's hospital has been here since the nineteenth century. It lived through both wars, all regime changes.... I don't understand why we have to close it," Bauska's City Council chairman, Valdis Veips, told the Latvian newspaper Diena. Instead of explaining the closure, government officials sent in a special unit to break up the protest. A Bauska newspaper reported the next day that city residents had received a government fax stating that financial support for the hospital, though reduced, would continue.

As Latvia prepares to receive the third installment of the $10 billion package from the IMF and the EU, the British Telegraph reported on October 5 that Sweden's finance minister, Anders Borg, had told banks secretly to prepare for the collapse of international talks. According to the Telegraph, Latvia's government had failed to deliver a 20 percent cut to pensions and a 15 percent cut to public wages, as requested by the lenders.

Meanwhile, the pain and suffering in Latvia continues. Unemployment has already doubled this year, and the IMF reports that more than 10 percent of Latvia's borrowers are over ninety days late on their mortgage payments. Although banks have resisted evicting homeowners, they haven't been totally idle; in June, on an unused airstrip at the Riga airport, more than 500 cars, trucks and bulldozers sat idle, all repossessed by the banks.

Since my mother and I emigrated from Latvia to the United States in 1994, I have visited my homeland every year. As I traveled around Latvia in May, I wondered, How did it get so bad? How did Latvia go from being one of the most developed regions in the Soviet Union to an area experiencing one of the worst depressions in the world?

The trajectory began in 2004, when Latvia formally joined the EU after nine years of negotiations. Credit rating agencies blessed the deal, with Moody's upgrading Latvia from a "stable" to "positive" grade in 2005. According to the Bank Association of Latvia, loans and cheap credit quadrupled from 2004 to 2008, reaching 95 percent of Latvia's GDP by early 2008. Most investment went into the construction of new luxury condos and office buildings--rather than export capacity--under the assumption that real estate values would grow indefinitely. The rest went into buying imported goods, many of them subsidized, weakening Latvia's local manufacturing and export base. By 2007 Latvia had the second-highest trade deficit in the EU, after Bulgaria.

To make matters worse, the real estate bubbles in England and Ireland sucked away local labor. At the same time Valdis Novikovs left for England, an estimated 1.5 percent of Latvia's labor force went abroad. Unemployment dropped to an unprecedented 5 percent in Riga, and from 2006 to 2008 the cost of labor doubled. As inflation tripled, Novikovs noticed that local clothing and food cost almost twice as much as in England. "Latvians were traveling to Germany and Finland to buy cheaper clothes and furniture," he recalls with outrage. In 2007 Latvians had the lowest household savings rate in the EU.

The Latvian government didn't do much to stop this economic transformation. If anything, it stepped on the gas. Riga's new deputy mayor and millionaire Ainars Slesers, who served in the Latvian Parliament during the boom years, coined a phrase that is sure to become a symbol of the prevailing government attitude at the time: gazi grida (pedal to the metal). Enabled primarily by foreign banks, Latvia's government created a bubble economy financed by debt without developing sustainable means to pay off these loans. Now Latvia's economy looks like a race car that has smashed into a concrete wall.

While economic indicators are a crucial part of Latvia's story, they don't fully explain why its bubble was the biggest in Europe or why its citizens so fully embraced extreme, gazi grida neoliberalism. Latvia's Soviet legacy still drives much of its politics. For centuries, the territories where Latvia, Lithuania and Estonia are located served at best as stable colonies and at worst as bloody battlegrounds where major Western and Eastern empires like Germany, Sweden and Russia fought for control. The Soviet occupation of Latvia in 1940 is the most recent and painful scar. As many as 200,000 Latvians were imprisoned or deported to Soviet gulags, and for the next fifty years Russian was made the sole official language in all political and economic spheres. In this context independence often took the form of cultural resistance--language, traditions and cultural heritage. My family celebrated summer solstice and Christmas in secret.

I grew up in the small, rural city of Livani, about 100 miles south of Riga. My late father, Peteris Rizga, helped build a new factory, Livanu Majinas, in the early 1970s that helped move Soviets from bloc apartment buildings into modern, single-family houses. My Jewish mother, Fruma, worked in the glass factory Livanu Stikls, which produced some of the most coveted vases and glass in the Soviet Union. Thanks to these and other new factories, rural Livani was transformed into an industrial center. A similar trend of Moscow-driven strategic industrialization took place across Latvia, absorbing laborers and military personnel from other Soviet republics. These waves of migration changed the Latvian share of the population from 75 percent in 1935 to 52 percent by 1989. Today, Latvia has the highest proportion of Russian-speaking minorities in the Baltic states, raising the fear of cultural extinction more acutely than in neighboring countries.

In the '80s my mother became very active in the Independence Movement of Latvia. On January 13, 1991, she packed sandwiches, made hot coffee in a thermos and said, "We are going to defend Riga from the Soviet tanks." Thousands of farmers drove their tractors from across the country to use them as shields. Small fires flickered throughout downtown Riga at night, as my mother and I passed out hot coffee. On March 3 of that year, 70 percent of the Latvian public voted in a referendum to support independence, and on August 21 Latvia officially regained its independence. I was 14 then, walking around with an inflated sense of pride and self-importance. My mother and I had helped defeat Russian tanks without any guns.

At the time, Latvians feared that in a full democracy, the Russian-speaking minorities might elect Russian communists back to power. In Riga only about 40 percent of residents were ethnic Latvians; the rest were Russian-speaking minorities--Russians, Belarussians, Ukrainians and other ethnicities. In 1991 the party my mother supported initiated stringent citizenship laws, naturalizing only those who could prove their residence in Latvia before 1940, as well as their descendents. Under these laws, my mother, who had come from Ukraine in 1956, could not become a citizen. She felt betrayed. In 1994 she and I packed our entire life into two suitcases and came to the United States. In the late 1990s the Latvian government started gradually reforming its citizenship laws--and now they are similar to those of the United States--but for years citizenship laws that favored ethnic Latvians kept Russian-speaking minorities from joining the country's political elite.

In its drive to contain Russian influences, the Latvian government also prioritized entry into the EU and NATO, a policy goal that overshadowed other domestic priorities, like stimulating local manufacturing or supporting agriculture. As in most Eastern European bloc countries, Latvia's politicians looked to the West, and the United States especially, for economic models. The resulting reform strategy of the ruling Latvia's Way government during the '90s is often characterized by Western analysts as "soft shock therapy." Latvia has had a flat tax since 1997, and until this year progressive taxation has never been on the agenda of any ruling coalition. The Latvian government also refused to tax capital gains, which turned real estate trading into one of the most lucrative professions in the boom years. This unique confluence of nationalism and neoliberalism took Latvia from the extremes of communism to the extremes of capitalism in less than twenty years.

Nil Ushakov, the newly elected mayor of Riga, believes that Latvian nationalism has allowed politicians to pander to their base and ignore important economic issues. "What is easier, reading EU documents in French and English on how to protect our local sugar refinery, or talk about nationalism?" he asks. "What we have as a result is an economy that's based too heavily on transit, finance and imports, while our huge potentials, such as an educated workforce, manufacturing and agriculture, have been lost."

Unlike its neighbors Estonia and Lithuania, Latvian left-opposition parties have not been a part of the ruling coalition in Parliament since 1991. That has meant that neoliberalism has dominated Latvian politics virtually unchallenged since 1991. Two decades of this unchallenged center-right rule have also fueled high levels of corruption. From 2000 to 2002 several international studies found that Latvia had one of the worst corruption records among its high-ranking government officials in the post-Soviet states. In 2004, when Latvia joined the EU, it received more than $1 billion in "structural funds," aimed at developing Latvia's infrastructure--modernizing schools and building roads and bridges, among other things. But along with those funds came a resurgence of the old Soviet-era affliction of bribery.

Delna, an anti-corruption watchdog group, believes there are widespread but hard to trace kickbacks from contractors vying for lucrative government projects. In her stylish glasses and short, spiky hair, Delna's 26-year-old Aiga Grisane looks more like a musician than a legal analyst. Grisane sees direct connections between government corruption and the Latvian real estate bubble. When Grisane monitored land development for two years, for example, she discovered that there was essentially no government regulation of construction development. "In Estonia, if you are building a bunch of skyscrapers, you have to submit a plan for roads, kindergartens, stores. In Latvia, you could do whatever you wanted." Grisane believes such unregulated development inflated Latvia's real estate bubble more than in neighboring Lithuania or Estonia. She observed many cases in Jurmala, a small city near Riga, where city officials passed laws erasing regulation at the last minute without any public scrutiny.

Although the media cover government corruption scandals regularly, high-ranking officials are rarely caught or prosecuted. As a result, many Latvians don't feel like giving their taxes to arrogant and corrupt state officials. Grisane also believes that a widely accepted underground cash economy helped inflate Latvia's bubble. "Most of these construction workers were getting salaries under the table. That definitely contributes to inflation." A 2004 report by the European Commission estimated that about 20 percent of the Latvian workforce operates off the books, compared with only 9 percent in Estonia.

The economic crisis of recent months, along with the January protests and the resignations of two ministers, has been a boon for the left coalition party called the Harmony Center. It now holds the largest share of seats in Riga's City Council, the first time since Latvian independence that the most left-leaning major party has done so. And for the first time since 1991 an ethnic Russian, Nil Ushakov, is the mayor of Latvia's capital, home to 700,000 people, almost a third of the country's population.

The Harmony Center owes its success in large part to the charismatic 33-year-old Ushakov, who represents a new generation--young, progressive, cosmopolitan--with no record of scandals or corruption. A former journalist, Ushakov studied economics in Denmark and speaks five languages. "You can't run your country like a business; you have to treat your country like your family," Ushakov explained in campaign videos.

Ushakov's main opponent for mayor was Ainars Slesers, the millionaire entrepreneur who had coined the phrase gazi grida. Riga's residents--ethnic Latvians and Russian-speaking citizens--clearly rejected Slesers's philosophy of unregulated capitalism, and gave Ushakov's party twice as many votes (Slesers became deputy mayor). The People's Party, considered among Latvians the most corrupt, and For Fatherland and Freedom, the most extreme on issues of nationalism, suffered significant losses in the country's June 6 local elections. But the right-wing People's Party still holds the largest share of seats in Parliament, for which elections take place in October 2010.

These changes may signal a new era in Latvia, one in which ethnic divisions become less relevant, nationalism is not a campaign mantra, capitalism is tempered with regulation, and government helps stimulate local businesses while reducing red tape and corruption. In a sense, hope has arisen from crisis. "I like this crisis," says Dagnija Kamerovska, director of a homeless shelter. "People forgot that you need to produce something valuable to get paid. I hope it will change people's attitude toward labor." From entrepreneurs to teachers to farmers and the unemployed, a surprisingly high number of Latvians (about 80 percent) said in May that for the past five years, they've felt that their country was headed in the wrong direction. And despite the hardships of the past year, there is a sense that the current situation will "correct a lot of wrongs."

Kristine Drevina, a 34-year-old member of a new Latvian left-opposition party called Jaunlatvija (New Latvia), sits in a cafe and talks about why she got involved in politics. For the past six years, Drevina worked at the European Central Bank in Frankfurt. But it dawned on her in early 2008 that "the country is going in the wrong direction, and I have no right to complain if I'm not doing something about it." Her party wants to reorient Latvia away from blindly following neoliberalism and focusing on ethnic tensions. "In the current situation, we have definitive proof that you can't let the markets run completely free. The state has to be involved to assure fair rules for everyone and provide safety nets for the most vulnerable."

Like Drevina, most members of the new party are in their 30s and have studied or worked abroad. "New Latvia will be a test for our democracy. Can we rise to power without a long [money] tail behind us?" Drevina says. The party was founded only two months before the municipal elections and has made minimal gains. But it is determined to boost its visibility and membership before the October 2010 parliamentary elections.

Another new entrant into politics is Laura Mikelsone, Delna's director, who stayed away from politics until last year. She worked in the Ministry of Economics and also as a human resources consultant helping colleagues start a business in China. Now, as part of a team of mostly young women who work at Delna, Mikelsone wants to see leadership that is capable of going beyond nationalism and embracing the full complexity of Latvia's history. "I want a Latvian Obama," she laughs.

As new leaders, activists and artists are charting a more sustainable political and economic agenda, a new generation of entrepreneurs is also emerging to seek ways of creating sustainable businesses. One such is the green cosmetics company Madara, founded by three women in their 30s, which makes its products using local resources, from plants to labor. The women launched the company in 2006, raising small amounts of capital through friends, and have opened a new store in the thick of an economic recession.

While these green shoots are springing up across Latvia, the austerity measures imposed by foreign lenders threaten to slowly burn them out, raising the specter of more social unrest this winter. A growing number of ordinary Latvians are criticizing the ways their government is handling the crisis. They point to the fact that while the United States and the European Union are growing their deficits to provide economic stimulus, Latvia is still pursuing the opposite strategy.

I called Valdis Novikovs in October, four months after I left Latvia, to see how his company that sells off the assets of bankrupt businesses was doing. "Our business is growing, and we recently started negotiating sales with Lithuanians and Belorussians," Novikovs says, catching his breath after a long day of work.

Will Latvia survive this crisis? "Latvians will be fine," Novikovs says with confidence. "The thing is, even when you ask a Latvian how he is doing in the best of times, they always say, just 'OK.' They don't shine with optimism like Americans, but that's deceiving," Novikovs explains. "We have seen worse things than this crisis, and we always survived."

About Kristina Rizga

Kristina Rizga is the executive editor of WireTap, a political youth magazine, project director of Future5000.com and a member of the editorial board of The Nation.
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