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Impact of Haiti Earthquake on Economy

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Rosena Favecal, earthquake survivor, at the Red Cross medical observation tent inside General Hospital on February 8, 2010 in Port-au-Prince, Haiti. L'Hopital General is the largest hospital in Haiti, currently housing over 3,500 patients seeking treatment within its compound walls. Within this complex is a ward rarely visited by doctors or foreign relief volunteers known to as the 'Catacombs' due to the dim lighting and the overbearing humidity. Many of the patients here suffer from chronic cases of malaria, dementia or severe cases of pulmonary tuberculosis due to living conditions in Haiti since the earthquake on January 12, 2010 that has claimed more than 250000 lives.

Photo by Kim Badawi/Getty Images haiti-gravediggers.jpg

Jean Meyer swings a pick into the rocky soil in preparation for the burial of about 30 unclamimed and unidentified earthquake victims February 25, 2010 in Titanyen, Haiti. About a dozen grave diggers work each week to bury the dead from the Port-au-Prince General Hospital in the same area where tens of thousands of people were buried in mass graves after last month's 7.0 earthquake that left more than 200,000 people dead and 1.2 million homeless.

Photo by Chip Somodevilla/Getty Images Haitian Earthquake Survivor

Haitian Earthquake Survivor

Photo: Joe Raedle/Getty Images

Between 200,000-250,000 people were killed by the 7.3 magnitude earthquake that ravaged Haiti in January 2010. That was 2%% of the total Haitian population of 10 million. The Inter-American Development Bank estimated that it cost $8.5 billion in damage to Haiti's economy. The earthquake caused the country's GDP to contract 5.1% that year.

Haiti’s economy was just starting to grow again, thanks to the 2006 passage and 2008 extension of the Haitian Hemispheric Opportunity through Partnership Encouragement (HOPE) Act. It boosted the local apparel industry by allowing duty-free exports to the United States.

Access to the U.S. market, combined with Haiti’s supply of young workers, created an opportunity for growth. Haiti was the 17th-largest apparel supplier to the U.S. Exports were around $424 million in 2009, according to the American Apparel and Footwear Association. The U.S. is Haiti’s biggest trade partner. Apparel made up more than 75% of exports to the U.S. (Source: United Nations, January 2009)

Haiti was already the poorest country in the Western Hemisphere. More than three-fourths of the population were under the poverty line and over half lived in abject poverty. Nearly two-thirds of all Haitians are subsistence farmers. Haiti is vulnerable to damage from natural disasters, thanks to widespread deforestation.

The Haiti earthquake won't impact the U.S. economy much. That's because Haiti is the poorest country in the Western Hemisphere. Its economy only produced $12 billion in 2008. That's less than a tenth of a percent of U.S. GDP of $14 trillion. Its GDP per person is only $1,300, compared to over $40,000 per person in the U.S. Remittances from abroad make up a quarter of GDP and are worth more than twice as much as the country’s total exports.

The Haiti earthquake inspired massive donations to help relief efforts. Most of these donations are made via credit cards. Normally, credit cards charge 1%-3% fee for their use. These fees, known as interchange, generate $45 billion a year in revenue for the companies. However, Capital One, Visa, MasterCard, American Express and Discover have waived fees for some donations to Haiti earthquake relief efforts.

Usually, credit card companies make around $250 million a year from charitable donations. These fees cover transaction costs, and are charged for all credit card use. Only Capital One waived fees for all charitable donations made through their credit cards.

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