Model Cities Law

The National Congress completed and passed Model City legislation last Wednesday and while the details continue to trickle out, the law is very different than the prototype they started with.

This was one of the first laws that Congress passed with its new electronic voting system. Instead of debating and passing the law as a whole, Congress debated and voted on each of the 72 individual articles of the law. They also added four new ones. Paul Romer, the Stanford economist whose brainchild this is, was available in Congress all week during the debate and consulted on the legislation without charge.

The new law firmly establishes that any Región Especial de Desarollo (RED) or Model City is part of Honduras and cannot be alienated. The territories encompassed will be subject to the constitutional clauses about national sovereignty, territory, national defense, identity papers, and foreign relations. This explicit bow to Honduran sovereignty was necessary to gain the support of the Liberal Party members of Congress.

Congress will be able to create a RED from either an unpopulated region, or from urban regions that request conversion through a binding local referendum.

Congress will vote on and approve charter legislation for any proposed RED. Congress made it particularly difficult to change approved charters, reportedly to keep from having to respond to jockeying for gains.

Any RED approved will have an Executive Governor, responsible to a "Transparency Commission", appointed for a seven year term.

Here's where things get strange. The Transparency Commission will consist of elected foreigners who reside in the RED. The Transparency Commission-- a group of non-Hondurans-- will function as the governing council of the RED.

An Auditing Commission will be responsible for the day-to-day administration of the RED and will report to the Transparency Commission.

Finally, the law calls for a "Norms Commission" which will function to set the laws and regulations of the RED. It will function somewhat like Congress. Its members will be elected by residents within the RED.

The RED will have its own judges, though in part, they will enforce the Honduran Penal Code. It will have its own police force. It will be able to administer airports and ports freely. It will be free to set its own currency and taxes, though some taxes will also be imposed by the Honduran government.

A RED will have its own labor law. By law, 90 percent of the jobs in a RED must be filled by Honduran citizens. Each RED can set up its own education system and health care system. The import of automobiles into and out of the RED will be regulated by the RED.

Hondurans will, by law, be able to travel freely into a RED, but foreigners will require special immigration procedures. These were not spelled out in press coverage.

So what should we think of this version of the idea? we have previously covered the reasons we think model cities is a bad fit for Honduras-- even if we set aside all the qualms we have about corporatizing governance, it does not seem to us that model cities will deliver on their hype. The places held up as illustrations of the potential benefit from conditions not present in Honduras.

Reaction to the new law in Honduras also is negative-- including from sectors that might have been expected to be more positive.

COHEP, the business council, hates the law, calling it unconstitutional and filled with inconsistencies. According to COHEP it does not provide sufficient guarantees for investors, be they Honduran or foreign.

The law is unclear about whether absolute title to the land involved transfers to the RED, and thus whether they may transfer title when they sell or lease it to others within the RED. COHEP believes title does transfer. This could, depending on the location of any proposed RED, contradict Honduran laws about foreign ownership of lands near the coast or international borders.

From our perspective, the law simply concretizes a lot of the concerns we and others have expressed.

It provides no protections (either through labor law, or social protections like payments to IHSS) for the Honduran workers who work in any future RED.

It is up to the RED to set labor law, including protections for workers, and to establish its own health care system. The law is vague about who will have access to that healthcare system, if created. Nor do employers have to provide health care for workers.

The law is equally vague about an educational system, and whether it would be only for residents, or potentially also for employees who work in the RED.

But regardless of concerns like these, or even those of the Honduran business community, the enabling legislation has been sent to Porfirio Lobo Sosa for signing and publication in La Gaceta.

There is one enthusiastic supporter of the law: Paul Romer told El Heraldo that in six months all kinds of investors will be coming to Honduras to take advantage of this legislation.

Honduras is indeed open for business-- what is utterly unclear is whether predictions like these will actually prove to be accurate; and if they do, whether Honduran workers will benefit or see their social supports erode even more.