Model Cities Update

The Honduran press has been full of news about Model Cities over the last couple of weeks.

As our readers will recall, the oversight and transparency commission, headed by Paul Romer resigned en masse because they were shut out of the negotiations with Grupo MGK, and when they asked, denied permission to review the Memorandum of Understanding between Honduras and this group.

This lack of transparency seems not to bother Porfirio Lobo Sosa one bit.  With the removal of Romer and the other "transparency commission" members from the oversight and approval process, this means that the Honduran Congress has all the oversight  and approval power in the Model Cities process.

In a 50 minute interview with Michael Strong on a libertarian internet radio program on September 10, we learned that Strong plans that his model city will be in the valley around San Pedro Sula, and is not interested in the other locations being discussed.  So much for idea that model cities would be in uninhabited areas: the San Pedro Sula area is the business and industrial center of the country, a region already host to many free enterprise zones (maquilas). San Pedro itself is the country's second-largest city.

Michael Strong is not proposing to build Paul Romer's vision of a model city.

Strong's vision differs, he says, in four key ways.  First, it is based on the entrepeneurial model he says rules in Silicon Valley:  start small and when that works, scale it up.  In Strong's Free City, residents have access to the best laws without having to be governed by foreigners.  Strong sees this as more respectful of local autonomy and sovereignty than Romer's model. Third, the governor, a Honduran, chooses what legal systems are available to the residents. Thus residents can have contracts based on Honduran law, or, as Strong advocated in the interview, on Texas business law, because that is the closest to the 19th century ideal he favors.  Strong says, finally, that his model does not rely on a land grant from the Honduran government, but rather purchases the land to increase its size as needed.

There are signs that this normally rubber-stamp Honduran Congress is restless about the Model Cities project, however.

Juan Orlando Hernandez, the head of the Congress, and  a presidential candidate for the National Party, announced this week that any vote establishing the bounds of the land for Grupo MGK would be delayed until after the primary elections in November.  Ostensibly, the reason was that there were then 24 legal challenges to the law filed with the Supreme Court-- a number now much, much higher.

Practically, model cities are a political hot potato with the electorate.  Moving the vote after the primary elections may also be intended to prevent voter backlash.

Meanwhile, Hernandéz main legislation writing proxy in the Congress is hard at work, trying to fix the flaws in the law, presumably so that after the primaries, Hernandéz and company can proceed with their ever-evolving introduction of new colonialism in Honduras.

Where is Lempira when you need him?

Behind the Model Cities Memorandum of Understanding

There's a lot of misinformation floating around about who is behind the Honduras Model Cities memorandum of opportunity (MOU).  This is the agreement, announced by Juan Orlando Hernandez of the Honduran Congress, that would authorize a specific group of investors to build the first such enclave in Honduras.

So here's what we can find out:

Grupo MGK  (note, not NKG, NGK, or MKG as the careless or perhaps terminally dyslexic Honduran papers keep reporting) is the consortium behind the memorandum of understanding signed last week with Honduras to develop a model city.

The group, whose bare bones generic website grupomgk.com (in English and Spanish) was hastily erected in the last week, claims to have developed plans for a model city-like project in Estonia, but shelved it upon hearing of the Honduran opportunity.

Their new website has already been updated since it was first made public. Michael Strong registered the domain name with GoDaddy on September 8. The website was last updated on September 21.

There are currently four public faces for Grupo MGK:  Michael Strong, Gabriel Delgado, Robert Haywood, and Nadine Spencer.

Michael Strong reportedly studied economics at the University of Chicago, but dropped out of the graduate program when he was offered a job teaching his socratic training seminar to teachers in Homer, Alaska. This in turn, led to a 15 year career in education consulting.

Strong met John Mackey, the founder of Whole Foods, during this period, and together they founded Freedom Lights Our World (FLOW), dedicated to the proposition that entrepeneurs and markets were the most effective way of creating a better world.  They have since moved on to more targeted projects: Conscious Capitalism, Radical Social Entrepeneurs, and Peace Through Commerce.

Strong is also a founder of the Free Cities Institute, whose website, described as "gorgeous" in this announcement of its founding, has since disappeared.  Free Cities were the focus of a conference held in Guatemala in April 2011, sponsored by the Universidad Francisco Marroquin, in Guatemala.

All of these movements share the idea that bad legal systems create poverty by keeping poor people from founding businesses and therefore keeping them off the road to wealth and success.

Robert Haywood is Director of the World Economic Processing Zones Association (WEPZA), a collective for Free Trade Zones world wide.  WEPZA was founded by Richard Bolin, who performed the economic studies that led to the development of Mexico's maquila industry.  WEPZA is a dependency of Bolin's Flagstaff Institute.  Haywood is said to have participated in the design and development of Honduras's maquilas as well.

Nadine Spencer is an entrepeneur, born in Jamaica, who is founder and CEO of Nadine Spencer, Inc. a gourmet food and lifestyles conglomerate.  Her expertise is in marketing.  She particularly supports work to develop women entrepeneurs.

Gabriel Delgado is described as a telecommunications entrepeneur and fellow in the Aspen Institute, an education and policy studies nonprofit that is generally described as "centrist".  He reportedly founded and developed IT companies in Chile, Guatemala, and Mexico.

On the website, Strong and Delgado are described as the "Leadership" while Haywood and Spencer are described as "advisors".  Delgado was added to the Leadership section in a round of revisions to the website.  His name has not previously appeared associated with Grupo MGK.

Grupo MGK lists a single investor, Calidad Immobiliria, a real estate development company located in Guatemala and El Salvador, a branch of Grupo Entero. The real estate company specializes in urban development projects.

Grupo Entero is a Guatemalan company founded using the principles of Stephen Covey's The Seven Habits of Highly Effective People to develop its own staff.  They focus on commercial and residential real estate, construction, and health in large parts of Latin America.

Legal Challenges to Model Cities Law Proliferate

The law in Honduras that enables the Regiones Especiales de Desarrollo (RED), better known in English as model cities, is facing increasing opposition from Honduran citizens. 

The constitutionality of the law was first challenged in October, 2011 by the Asociación de Juristas para la Defensa del Estado de Derecho (Association of Jurists for the Defense of the Rule of Law).

Fourteen challenges against the model cities enabling law were filed on September 18, 2012. These fourteen challenges were filed on behalf of 14 separate individuals, including Miriam Miranda Chamorro, head of Organización Fraternal Negra Hondureña  (OFRANEH), a Garifuna organization.

On September 18, the Public Defender of the Constitution, a prosecutor with the Public Prosecutor's office, filed a brief with the Supreme Court on an October 2011 case challenging the constitutionality of the law. The Honduran Supreme Court solicits the opinion of the Defender of the Constitution whenever there is a constitutional challenge present in a case before the Supreme Court.  A legal countdown clock has now started, that by law gives the Supreme Court's Constitutional group of five judges just 20 days to render an opinion in that first legal challenge from October, 2011.

Nine more challenges to the constitutionality of the law were filed with the Honduran Supreme Court on September 21, 2012.  Eight of these were filed by the Consejo Cívico de Organizaciones Populares e Indígenas de Honduras (COPINH, the Civic Council of Popular and Indigenous Organizations) and the nineth by Father Fausto Milla, a Catholic priest in the Lenca region of Honduras.

On September 25, the LGBT community filed 30 more challenges to the constitutionality of the Regiones Especiales de Desarrollo law.

On September 26, a further 22 challenges against the law were filed.  One of these was by the Colectivo de Mujeres Hondureñas (Collective of Honduran Women), and the rest by individuals challenging the legislation.

For those of you keeping score, that's 76 separate challenges to the constitutionality of the RED legislation.

And that's not the only bad news. The Honduran Congress apparently agrees that the law, as written, is unconstitutional.

Oswaldo Ramos Soto, who drafted the existing RED law and is  Juan Orlando Hernandez's go-to guy for writing legislation, is preparing to introduce an amendment which will "fix" the unconstitutional parts of the law.

Ramos Soto wants to change Article 1 of the RED law to make it clear that the judicial system in the RED is still answerable to the Supreme Court, which is the court of last resort in Honduras.

Ramos Soto also wants to strip away the treaty-making power granted the model city in the existing law.  He proposes changing Article 18 to remove any mention of treaties, and to give to Congress the power to appoint judges in the model city. 

Ramos Soto also proposes changing Article 19 to make the legal system in a RED part of the Honduran judicial system, under the authority of the Supreme Court.

The net effect of Ramos Soto's proposed changes would be to gut one of the key features of Paul Romer's model cities: their judicial independence from the host country.

Both Romer and Michael Strong have argued that it is the legal systems in the host countries that are in part responsible for the poverty in them and the lack of economic development.

The experiment seems to be on the way to being over before it even began.

Honduran Police Failing Evaluation

Forty seven percent of the 70 police officers processed fully by the Dirección de Investigación y Evaluación de la Carrera Policial (DIECP) over the last three months failed their confidence test.

That's 33 police officers that the DIECP will seek to have fired.

Seventy is an admittedly small sample, but if this rate of failure held up for the entire police force, we would be looking at the dismissal of more than 3700 police over the next two years.

The DIECP is moving slowly, though.  In the last 3 months they have conducted their confidence tests on 145 police officers, and only made evaluations of these 70. In addition they collected urine and blood samples from the 90 officers that form the COBRA Special Operations team.

The slowness of their evaluations prompted Julieta Castellanos to ask the Cabinet for an investigation of the DIECP to find out why it is proceeding so slowly.

Corrales: Blame the Civilian Aircraft

According to Arturo Corrales, Foreign Minister of Honduras, the civil aviation planes that were shot down by Honduran Air Force pilots in August were to blame for their own deaths. 

At least that's the conclusion to be drawn from his statements that no one in Honduras is responsible.

Corrales makes some extraordinary claims in an article in El Heraldo, claims that should give the United States pause in negotiating a new four year agreement with Honduras about cooperation in drug interdiction.

The article is primarily about the obligation of Honduras' Public Prosecutor to investigate who gave the order to shoot down at least two civilian aircraft, in contravention of a 1942 treaty on civil aviation.

But it also includes a statement by Corrales, whose position in the Honduran government is equivalent to that of Hilary Clinton in the US administration.

Corrales said no civilian or military official ordered the shooting down of the civilian aircraft:

"I understand that there was no order; I understand that no one gave the order."

At first, this seems like throwing the pilots to the wolves, since they would then presumably be responsible for their own actions.  

But Corrales absolves them:

The responsibility for the downing cannot be attributed to the pilots of the military planes who shot at the illegal planes, since they risk their lives to go in search of irregular flights and an accident can happen in a fraction of a second.

This is, at best, a non sequitur: because they risk their lives and an accident can happen in a matter of moments, they are not responsible for shooting down two civil aircraft in one month?

The last time Honduras shot down a civilian aircraft was in 2004. Corrales' conclusion strains credibility.

There is a simpler explanation: the Honduran Armed Forces has been advocating for exactly this policy, while presumably knowing it violated Honduran treaty obligations, ever since the spring of this year. These pilots were enacting that desired approach, whether there was an official policy or not.

Paraphrasing an anonymous person identifying himself as a former Honduran Air Force pilot, who wrote a comment on the article in El Heraldo: that's how we've been trained at least since General Osorio Canales was a cadet.

The comment is no longer available; but it is consistent with statements in April of this year by Osorio Canales, still the commander of the Honduran Armed Forces, saying

"The National Congress should reform the law [implementing the 1942 treaty] and consider leaving the treaty because we cannot take down civilian planes that illegally enter our airspace".

At the time he said that there was discussion in the Honduran Congress about the proposal.

We might want to remember why the international presumption is against shooting down civilian aircraft that wander into national airspace without responding to requests for identity. It is simply this: you may think they are engaged in illegal activity: but you cannot know that.

Both Peru and Columbia, at US urging, have adopted a policy of shooting down civilian aircraft suspected of drug trafficking. In both countries that policy has resulted in the shooting down of civilian flights carrying missionaries, not drugs.

Corrales made it clear how poorly justified these incidents actually are, in his comments implying the pilots of these planes were to blame:

The downing was the product of a extreme situations:  such as the flight of the planes was in the early morning hours and the planes were flying at low speed; therefore they were shot at.

A neutral party reading these comments would presumably continue to be troubled that the Honduran government is neither taking responsibility, nor (apparently) is clear on what constitutes a suspicious way of acting (early morning flights at low speed are surely not automatically drug traffickers, even if some drug traffickers fly at those times).

So it is more than troubling that an article early this morning in La Prensa quotes US Ambassador Lisa Kubiske suggesting US radar assistance will be returned to Honduras "soon", specifically because

President Porfirio Lobo and minister Arturo Corrales spoken clearly about the topic of the civilian aircraft and the treaties that Honduras has signed with the international community.

We agree that Corrales has spoken clearly. But we wonder what Ambassador Kubiske finds reassuring in what he has said.

Bumps in the Road Toward "Model Cities"

Xiomara Castro de Zelaya is the presidential candidate for LIBRE, the progressive party founded in the wake of post-coup activism in Honduras. She is also, as most readers of this blog certainly know, the wife of former President José Manuel Zelaya Rosales, the target of the 2009 coup.

Xiomara became the consensus candidate for LIBRE in advance of party primaries, named as the presidential candidate by all the different movements within LIBRE-- a circumstance that actually required the Honduran Supreme Electoral Tribunal to make adjustments in procedures designed to insist that each current have its very own candidate.

No other party has such a consensus presidential candidate, so until the primary elections are held in November, only LIBRE has a clearly designated leader. That puts Xiomara in the unusual position of being able to issue statements on urgent national issues on behalf of the entire party, something other parties are not able to do.

This week, she spoke out against the model cities agreement announced by Juan Orlando Hernández, challenging the constitutionality of the law and describing it as contrary to sovereignty:

On this occasion we would like to alert those who, without having all the elements to judge might plan now to subscribe to contracts in Honduras under the protection of the Ley de Regiones Especiales de Desarrollo, better known as the Law of the "Model Cities". This law has already been judged unconstitutional by the Special Counsel for the Defense of the Constitution and diverse qualified segments of Honduran society have judged it an affront to the sovereignty of our country, that extends illegal privileges to the subscribers while it converts us, the rest of the Hondurans, into strangers in our own territory.

Legal challenges to the law were also filed today by what Honduran media report are fourteen groups or individuals representing affected social sectors, including campesino groups and the Garifuna organization, OFRANEH (the Organización Fraternal Negra de Honduras).

Press accounts of these legal challenges echo Xiomara's statement, citing a motion filed in October 2011 by Oscar Cruz, the former attorney for the Defense of the Constitution in the office of the Public Prosecutor. Presented to the Supreme Court, the news reports note that this motion awaits action.

Cruz is quoted in news reports as saying the law is "a mockery of the state" and "a catastrophe for Honduras":

it proposes the creation of a state within the state, a mercantile entity with state-like attributes outside the jurisdiction of the state, to which will be handed over all the traditional attributes of sovereignty.

Add to this the statement by the godfather of Model Cities, Paul Romer, who is reported to be having second thoughts about the role he supposedly was going to play in Honduras.

The British newspaper The Guardian says Romer may quit because he "not been given the powers and information necessary to fulfil his role as chairman of the transparency commission, which is meant to ensure governance of the new development zones". The report says he and others supposed to form the "transparency" commission

will issue a statement distancing themselves from this week's announcement [of the first agreements to found model cities] and calling into question the legality of their appointment, which they say has not been published in the official gazette as required by Honduran law, ostensibly because of a challenge in the constitutional court.

Meanwhile, on behalf of LIBRE, Xiomara not only challenges the constitutionality of the law: she warned

those who might initiate projects under this unconstitutional approach of model cities, will be exposed to the loss of their investment.

Xiomara ended her statement with a proposition grounded in the unique position of LIBRE as the continuation of participatory citizenship that was central to her husband's administration:

we invite the president of the National Congress and his National Party, based on Article 5 of the Constitution, which regulates plebiscites and referenda, that we should submit the Law of "Model Cities" to the opinion of the sovereign [power], and that it should be the people who decide it.

There is no possibility this "invitation" will be accepted.

What the statement does is focus attention on the fragile legitimacy of entrenched political structures in Honduras, which operate without real support from the people. Hernández will have to work hard to demonstrate any broader popular support for the controversial policy, something no one has challenged him, or Porfirio Lobo Sosa, to document before.

Command Change in Honduras: US Role?

Did the United States force the removal of the Honduran Air Force Commander?

On September 1, 2012, the then-current head of the Honduran Air Force, Colonel Luis (or Ruiz) Pastor Landa  stepped down as head of the Air Force, turning over his command to Colonel Miguel Palacios.  

At the ceremony, Armed Forces Chief General Rene Osorio Canales lavishly praised Pastor Landa, and later told Radio Globo:

We're not happy; we're uncomfortable with these situations because we must be Hondurans with love of country..."

What did Osorio Canales mean by this?

On June 13, 2012, the Honduran Air Force shot down an alleged civilian drug plane, killing the two crew members.  One of the crew members, the Honduran press says, was a DEA agent who had infiltrated the drug cartel. This was not revealed to the press at the time. 

Shooting down suspected drug planes is controversial, on its face, an illegal act in violation of paragraph 3bis of International Civil Aviation Organization's (ICAO)  Convention on International Civil Aviation.

This is not to say there is universal agreement as to the meaning of paragraph 3bis.  As we wrote last April, the Convention says:

the contracting states recognize that every state must refrain from resorting to the use of military weapons against civil aircraft in flight, and that in case of interception, the lives of persons on board and the safety of aircraft must not be endangered.

It establishes that civil aviation aircraft are supposed to obey orders from military aircraft.  The Convention, however, recognizes a nation's sovereignty over its airspace, a loophole that in the past has been used by some nations to justify the downing of civilian aircraft.

The Honduran military, since last spring, has been vocally in favor of shooting down drug planes, though at the same time they claim not to be capable of doing so without the purchase of new aircraft.

General Rene Osorio Canales, back in April, called shooting down civilian airplanes suspect of drug trafficking, "more effective than legalizing drugs" for combating the drug cartels.  In fact, the Honduran military itself advocated for shooting down civilian aircraft suspected of engaging in drug trafficking back in March, 2012 when they supported Juan Orlando Hernandez, president of Congress, in his call for such a procedure.

So why is General Osorio Canales unhappy?

It seems, based on the evidence at hand, that the head of the US Southern Command, General Douglas Fraser, met with Porfirio Lobo Sosa on August 24, 2012 in Honduras.  Ambassador Lisa Kubiske also was at the meeting.  Based on a letter from the Defense Minister, Marlon Pascua, translated below, General Fraser expressed his unhappiness with the current Honduran policy (unacknowledged) of shooting down civilian aircraft suspected of drug running; and objected to Honduras compromising an ongoing investigation of the DEA.  As Porfirio Lobo Sosa stated at the time, Fraser

"expressed his concern over some incidents that in some manner violated the agreements on aerial navigation."

Air Force Colonel José San Martin F. wrote an editorial in La Tribuna published on September 2 calling for a rewrite of paragraph 3 bis of the OACI Convention.  Colonel San Martin F. was frustrated by the Honduran Air Force's inability to respond in 2009 when a plane carrying deposed President Manuel Zelaya was trying to land in Tegucigalpa.  Paragraph 3bis, Colonel San Martin F. writes,

"unfortunately permitted that that violation [of Honduran airspace] went unpunished."

La Tribuna published a letter from Secretary of Defense, Marlon Pascua to his Foreign Minister, Arturo Corrales the same day stating:

With respect to what was discussed in our recent visit to the Southern Command of the United States in a meeting held this day with General Fraser and Ambassador Kubiske, and following the instructions of the President we have sent the following instructions:

1.  In the command structure we make the following changes

a) The Commander of the Air Force starting September 1 will be Colonel Miguel Palacios Romero.

b)  The head of the Air Force command starting September 1 will be Colonel Jimmy Rommel Ayala Cerrato.

2. [We will] restructure the Operations Center of the Air Force.

3.  [We will change] the general process of certification of the pilots in the finding, identification, surveillance and interception of civilian aircraft

4. Honduran Air Force pilots who have participated in interception missions in this year will be sent back for a process of reinduction and retraining.

The letter is signed Marlon Pascua Cerrato and dated August 24, 2012.

The letter from Pascua seems pretty clear.  The US Southern Command "requested" a change in the command structure of the Honduran Air Force in General Fraser's meeting with Porfirio Lobo Sosa, and Corrales is being told of the results of the meeting, what Lobo Sosa will order as civilian commander of the Honduran Armed Forces.  Its also clear that General Osorio Canales doesn't like it.

Nor do high ranking members of the Honduran Air Force.

The editorial by Colonel José San Martin F. on September 2 challenges the decision expressed in Marlon Pascua's letter to rescind the policy the Air Force had been using to train pilots.  He wants clearer guidelines about when he can shoot, and he wants shooting down civilian aircraft suspected of drug running to be the policy in Honduras. He best expressed this position in writing of his frustration at not being able to do anything in 2009 against the plane that was carrying President Manuel Zelaya trying to land in Tegucigalpa after the coup.  Unstated was his clear desire to shoot it down.

In March, General Osorio Canales seemed to be both for it, and against it on the same day, in articles in the same newspaper.  On the same day, in another newspaper, Porfirio Lobo Sosa, Osorio Canales's commander in chief, said that such a policy would be a violation of international law.  Even Osorio Canales, in one of the two articles, acknowledged that there needed to be legal changes before drug planes could be shot down.

It therefore seems likely this the adoption of a shoot-down policy was instituted by the military without civilian government approval.

Pascua's letter confirms that the United States forced the removal of Colonel Pastor Landa as head of the Honduran Air Force.

Agreement for a Model City

Juan Orlando Hernandez, the head of the Honduran National Congress announced Tuesday afternoon that COALIANZA, the Comisión para la Promoción de Alianzas Público-Privadas, had signed an agreement for the first of three model cities in Honduras.

The agreement will cover one of the regions being discussed as possible locations for a model city.  The three regions mentioned as possibilities for model cities are:  near Puerto Cortés, the Agalteca Valley or the Sicaya-Paulaya valley near Puerto Castilla, and Choluteca. According to COALIANZA, it must be located near to both an airport and a port.

Hernandez told the press:

"It should be noted that these model cities will be established in depopulated areas of Honduras.  It does not imply the displacement of people or social groups."

None of these regions is completely vacant. Reading between the lines, what Hernandez is saying is that there are no large cooperatives or powerful landowners in these regions, groups that might vocally protest the expropriation of the land on which they live and work. 

La Tribuna reports that a funding partner for this model city will be the US company MKG Group, which has agreed to invest some 15 million lempiras ( or $7.8 million dollars ).  Michael Strong, identified an executive with the company, is reported to have said:

"The future will remember this day as that day that Honduras began developing.  We believe this will be one of the most important transformations in the world, through which Honduras will end poverty by creating thousands of jobs."

We were unable to locate any information on MKG Group, though the Michael Strong in question is, we believe, the Michael Strong associated with FLOW and the Free Cities Institute. Strong formed the Grupo Ciudades Libres LLC, a Nevada Company, with Kevin Lyons in 2011. 

Another group that claims to be involved is the Future Cities Development Corporation, one of whose founders is Patri Friedman, grandson of Milton Friedman, nobel laureate in economics. This group has previously been linked by The Economist to the Model Cities project in Honduras.

Hernandez said that the main funding partner of the project, whose identity will be revealed later, is a Canadian company that has been investing in development regions worldwide for the last 15 years, but he would not identify the company.

According to COALIANZA, the project will provide 5000 direct and indirect jobs this year, 15,000 next year, 30,000 in 2014, and 45,000 in 2015.

The agreement must still be approved by the rubber-stamp Honduran Congress, and the Executive Branch must appoint a governor.