Model Cities definitively unconstitutional

The Supreme Court of Honduras ruled today that the Honduras legislation establishing charter or model cities was unconstitutional.  A ruling two weeks ago from the constitutional branch of the court established by a 4-1 vote that the law was unconstitutional. Because that decision was not unanimous, the entire Supreme Court had to consider and vote on the issue.

The full court voted 13-2 that decreto 283-2010 which reformed two constitutional articles to enable the model cities legislation violated the constitution.  

The court will release the reasoning behind its finding tomorrow. 

Grupo MGK reacted to the constitutional branch decision on October 8, stating:

We hope and expect that whether or not the full Supreme Court chooses to invalidate particular articles of the Constitutional Statute, that they will preserve enough of it intact that Grupo MGK along with other organizations will be able to create hundreds of thousands of jobs in Honduras.

While Honduras's model cities initiative was on hold, we learned a little more about Grupo MGK.  It is not a fully formed business entity, but rather is said to be part of a newly formed Nevada limited partnership that is not fully set up under the laws of Nevada.

La Prensa reported that Grupo MGK is part of Grupo de Desarrollos Especiales LLC, a company registered with the state of Nevada on September 4, 2012, by Kevin Lyons, a business partner of Michael Strong..  Like MGK, this is a newly registered company, with no track record.  It has until October 31 to file its list of officers, pay fees, and obtain a Nevada business license

Kevin Lyons was also responsible for setting up Grupo Ciudades Libres, a never-legally-established Nevada company whose goal was to set up a Free City in Honduras, according to The Economist.  Grupo Ciudades Libres LLC's filing as a partnership was revoked by the state of Nevada for not paying any of the associated legal fees that were due as part of establishing the company in 2011.

Now that the full Supreme Court has invalidated the Model Cities law, it will be interesting to see whether Grupo MGK persists in its efforts to create a free business colony in Honduras. Meanwhile, we would be willing to bet that the legal arrangements for Grupo de Desarrollos Especiales LLC won't be completed by October 31.

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.