Not Really Model Cities Again

Juan Orlando Hernandez is determined to get new legislation approving Regimenes Especiales de Desarrollo (RED), what people have been calling "model cities", through the session of the Honduran Congress that ends this month.  To that end, he has introduced a new package of legislation.

He says this draft law takes into account the objections raised by the Supreme Court that made the previous law unconstitutional.  Uncommented on is why he did this, since he later got Congress to illegally dismiss the justices that found the law unconstitutional.  Might it be that they were right?  Oh my!

What he proposes is the establishment of 12 special kinds of entities:

international finance centers
international logistics center
autonomous cities
special economic zones
international commercial courts
special investment districts
renewable energy districts
zones with their own legal system
special agro-industrial zones
special tourist zones
mining zones
forest zones.

What Juan Orlando Hernandez has done is change the name, change the function, and keep the acronym.  This is meant to preserve the mental link to model cities, but this legislation is not about model cities.

The proposed entities are nothing like the previous Regiones Especiales de Desarollo proposed under the  unconstitutional law. Nor are these any kind of model city using either Paul Romer's or Michael Strong's definitions.  Forget everything you've read.  This is something very different.

These zones will all supposedly have "functional and juridical autonomy", although later in El Heraldo's brief description of this new system they say that conflicts will be handled either through arbitration or through a new branch of the existing Judicial system.  So that's clear, right?

There's a twist, though given Honduran electoral politics, not much of one: these new entities can only be established by a referendum and once established their charter can only be modified by a referendum of those who live within them.

The law will modify the Honduran constitution, which is why it's urgent to get it passed in the next few days, before this legislative session ends.  In Honduras, constitutional amendments must be passed by two successive sessions of Congress. More or less what Juan Orlando Hernandez plans is to bring this up as soon as January 19, then again right after January 25th when the new Congressional session begins. 

Article 294 of the constitution would be modified to divide the national territory into Departments (the existing administrative units, equivalent to states) and special zones:

The national territory will be divided into Departments and zones subject to special rules in conformity with Article 329 of this constitution.  Their creation and boundaries will be decreed by the national Congress.  The Departments will be divided into autonomous municipalities administered by officers elected by the people, as governed by law.

Also due to be modified is Article 329. It currently gives the government the power to develop economic plans, in consultation with its citizens and to set up whatever mechanisms are necessary to achieve these goals. El Heraldo does not give us the new language of this constitutional modification, but it will be the key to understanding these new special development regimes.  However, later in the day, Tiempo published the proposed language of Article 329 which seems to contain no changes to the existing language.

The new law would modify Article 303 of the Honduran Constitution, changing the rules governing how justice is administered.  The new Article 303 would read:

The ability to impose justice comes from the people and it is offered freely for the state, by magistrates and independent judges, only subject to the Constitution and the laws.  The Judicial branch is made up of a Supreme Court, special jurisdictions in regions of the national territory subject to special rules created by the Constitution of the Republic, by appeals courts, the courts and other dependencies indicated by law.

Again the modification here is to add the reference to special rules zones.  The key will be how justice in those special rules zones articulates with the Judicial branch, which notably is not spelled out in this change.

Along with Hernandez, the new law is being pushed forward by Congressman Rodolfo Irias Navas, a National party member and owner of TV stations (Channel 8 in Tela, Channel 45 in La Ceiba) and radio stations (Communicaciones del Atlantico, Radio El Patio of La Ceiba, Stereo 92 FM, Stereo 102.5 F, and Romantico 103.5 in La Ceiba, Radio Aguan in Colon, 91.5 and 92.7 FM in Tela).

(Irias Navas was also one of the spokespeople for the 2009 coup, who kept saying that the international community wasn't listening and would understand if they would only listen.)

Anyone who can read should see that this is not anything like the previous legislation, and that it's not about real development.  It's a law designed to benefit the monied class in Honduras that's responsible for underdevelopment, the class that sees the government of Honduras as its reliable income stream.

We're not the only ones to see it that way.

Analyst Raul Pineda pointed out that the reason this law is being rushed through is the urgent need for some in the oligarchy who owned or speculatively purchased lands they expected to be appropriated under the unconstitutional model cities law, to sell those properties for financial reasons.

Or as he put it: it's because a few people need to do business.

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?

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.

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.

Is Honduras Too Backward to Have Sovereignty?

Pardon us for being blunt. But that is, really, the question at the heart of Paul Romer's promotion of his charter cities idea for Honduras.

The most recent volley in this campaign is a blog post on NPR by Romer and an associate. It follows a longer piece in a recent edition of the New York Times described by NPR as a "profile" of Romer.

The NPR piece inaccurately describes the plan as to "build a city from scratch — and get foreign governments to help run it".

The inaccuracy here comes from the fact that foreign governments have in fact declined to be involved. Romer may have wanted the experiment to have a veneer of international development, but it hasn't quite attracted the international support he apparently thinks it should.

Why? Maybe the terms of engagement hinted at in these two news stories give an idea of what might give pause to other governments.

The New York Times piece was titled Who Wants to Buy Honduras?

Too ugly for you? Try the seemingly nicer NPR headline: How Honduras Can Pull Off Five Centuries of Legal Reforms in a Decade.

Are you still not getting the message? Honduras is a backward country that can only be saved from itself by being sold to someone more advanced.

The NPR piece presents this as an opportunity for Honduras to "leverage" the experience of countries that supposedly have been "down [the] long and arduous path" to the rule of law. The authors are not clear about what countries they have in mind, but they quote former UK Prime Minister Gordon Brown saying "the first five centuries are always the hardest" in developing the rule of law.

Apparently, Honduras can profit from the five centuries of experience Great Britain has had in-- what? what do Romer and his associate imagine is relevant experience here? Five hundred years ago, Great Britain was launched on its way to becoming the model of modern colonial power. One presumes that isn't the part of their experience with the rule of law that Romer meant to invoke.

Romer and company ignore the actual history of Honduras including progress in the rule of law-- progress that was erased in the coup d'etat of 2009 and its aftermath, which seems beneath Romer's notice.

Instead, the NPR piece describes the challenges Honduras faces as if they have no recent historical causes, and as beyond any efforts of the Honduran people to solve in ways that would preserve their autonomy:

The rule of law is grounded in trust and shared norms, but establishing trust and shared norms is impossible if people live in fear – rural farmers fear repression; landowners fear expropriation; businesses fear that rivals will gain advantages through bribery; government officials fear that businesses will break contracts with impunity; urban residents fear violence from criminal gangs.

No. The issue in Honduras today is not fear: it is impunity on the part of the rich and powerful.

Rural farmers suffer from the impunity of the powerful who can attack them with private security forces, or can influence the government to call in the army for "enhanced" policing.

Landowners either have impunity-- and can act as they wish, ignoring laws about land use intended to encourage uses that benefit the entire country-- or are at the mercy of those with impunity, not, as the original suggests, government expropriation. As the prolonged negotiations to compensate landowners in the Bajo Aguan show, even when there is a case to be made for claims on the land by dispossessed peasants, the person holding the land in questionable legal circumstances can count on being paid for it, can demand a particular amount, and the peasants who in theory should be receiving land can be bound in almost feudal economic relations to the business of those landowners-- with impunity.

It is notable that the only use of the word impunity in Romer's description refers to a claim that the government "fears" that businesses will break contracts. Really? What we see is a government complicit with the wealthy in letting contracts to shell companies, often with inadequate compliance with environmental protections, without guarantees that the recipients of contracts will ever actually deliver on what they have promised.

And oh, the utter lack of knowledge betrayed in that "urban residents fear violence from criminal gangs". People in cities like San Pedro Sula fear crime-- in large part, because the police will not investigate, the legal system offers no promise of justice. Violence is complicated and multi-centered: reducing it to "criminal gangs" ignores the documented role of the security forces in visiting violence on citizens. It ignores people who, armed with all-too-easily obtained guns, take their defense into their own hands, with fatal results.

We are not going to revisit our previous critiques of the charter cities proposal in detail here. The neocolonialist structure is clearly based on ignoring the external causes of the difficulties of countries like Honduras-- including more than a century of interference in internal politics by foreign governments protecting their economic exploitation of Honduran resources.

Instead, let's look at how weak the current arguments in favor of this proposal are, even in these openly promotional pieces. Here's the New York Times attempting to praise Romer:

Romer’s charter city is trying to avoid this dark side of urbanization by adapting older, more successful models. The United Arab Emirates, Hong Kong and Singapore were able to build well-designed cities that housed and employed millions, in part by persuading foreigners to invest heavily. Dubai created a number of micro­cities — one of which, for instance, is governed by a system resembling English common law with judges from Britain, Singapore and New Zealand. 

Each has had well-known flaws, but Romer said the core idea can be replicated without them. The new Honduran charter city can work, he said, if its foreign leadership can similarly assure investors that they’ve created a secure place to do business — somewhere that money is safe from corrupt political cronyism or the occasional coup. If a multinational company commits to building new factories, real estate developers will follow and build apartments, which then provide the capital for electricity, sewers, telecom and a police force.

This makes it quite clear what the charter cities are about: safety for investors, security for business, a place where "money is safe". People become ancillaries to money in this nightmare vision.

Who will the servants of money residing in these mini-states be? Romer has visions of a city of 10 million people, more than the entire population of Honduras. Romer himself wants to be the chairman of the board that will run the Honduran experiment (required because no international government would sign on). No suggestion that he will move there (which the enabling Honduran law requires of the governing board). But obviously, his goal is to promote others to emigrate, although only the right kind of compliant laborers:

His charter city will have extremely open immigration policies to attract foreign workers from all over. It will also tactically dissuade some from coming. Singapore, Romer said, provides a good (if sometimes overzealous) model. Its strict penalties for things like not flushing a public toilet may make for late-night jokes, but they signal to potential immigrants that it is a great place if you want to work hard and play by the rules.  

Work hard and play by the rules. Unlike who?

Unlike Hondurans themselves, who haven't managed to make any progress toward the rule of law, and need a benign dictator to come and rescue them-- or at least, to rescue the money to be made in the land they currently occupy, without realizing its full potential.

After all, as the fawning author of the New York Times' piece reminds us

It’s easy to criticize experimenting with the livelihoods of the poor, but... the poor are already conducting daily experiments in how to make life better outside the formal economy. By and large, it isn’t working. We have to try some new things, probably many new things. And we have to accept that some of them won’t work.

That's what Hondurans deserve: to be made the material of international experiments taking place without their consent, against the protests of even the business community (contrary to the NPR article's counter-factual claim of broad support), that will deprive them of the right to control their own country, and that if successful, will pay international investors with the fruits of their labor.

This has been tried. It was called slavery. It is no prettier dressed up in academic dreams and ignorance.

Model Cities Are Unconstitutional

Model cities, or Redes Especiales de Desarrollo (RED) as they are known in the law (decreto 238-2010) enabling them, are "an attempt on the form of government and national sovereignty," according to a report issued by the Public Prosecutor's office. In it, the Defender of the Constitution, Xiomara Osorio, reasoned that because the law contemplates changes in the form of government over these regions, the lawmakers committed treason against their country. As such, the law is unconstitutional.

The legal opinion of Public Prosecutors office, which is not binding, was in a report they filed with the Supreme Court as part of the appeal of this law. They are agreeing in this report with a group of lawyers who filed a legal challenge to the law in November 2011 and have asked the Supreme Court to overturn the law.

One commentator on the El Heraldo report, said "That they violated the constitution, how is this news? They [Congress] do that every day!"

El Tiempo ran an editorial Monday in which it pointed out how the report from the Prosecutor's office echoes the points raised in their own editorial on the subject published last June 30.

While this is not the death knell of Model Cities in Honduras, it is none-the-less a severe blow. It is now up to the Supreme Court to rule on the constitutionality of the Model Cities enabling legislation.

Songdo, Korea A Model City For Honduras?

Juan Orlando Hernandez has a facebook page in which he chronicles the 63 person Honduran delegation's trip through Asia to visit model cities. First up is Songdo, Korea, or more properly, SongdoIDB.

Songdo is an international business district of 1500 acres (or 6 square kilometers) built on reclaimed land along Incheon's waterfront. It is part of the Incheon Free Economic Zone. It is a planned city developed by Gate International and POSCO E&C. The master plan developed by the design firm Kohn Pederson Fox includes 100 million square feet of commercial office space, retail shops, hotels, residences, schools and cultural facilities. There are currently $10 billion invested in its development. Its first phase opened in August 2009.

So why Songdo in Korea. The key here is the location. It lacks its own airport, but is only 15 minutes away from Incheon's international airport. From there, all the major business centers of Asia are close by. As their website says,

3.5 hours to a third of the world's population,

for which they call it an "Aerotropolis".

It is scheduled, when fully built, to have 22,500 luxury condominiums giving it a population density as great as, or greater than Tokyo (5600 people per square kilometer). Public and private schools will serve the populace, and it will have its own state of the art hospital system.

Residents can shop in an opulent retail mall or stroll through picturesque local markets.

But how exactly is this a model city in Paul Romer's sense and how will it help develop Honduras?

It is office space, not manufacturing. Its goal is to attract businesses to locate offices in it. It will provide only luxury housing, golf courses, charter schools and hospitals, and by its own description, "opulent malls". This is meant to cater to the rich.

The jobs created by such a city located in Honduras would be service jobs, store clerks, office cleaning staff and support staff, groundskeepers, caddy's for the golf course, and none of the people filling these jobs would benefit from the schools or the hospital, which are for residents. These kinds of jobs would be filled by non-residents.

And that brings up another factor in Songdo's success, its locate in a major metropolitan area, to provide the labor, connectivity, and service infrastructure that such a development requires to be successful. Such a development in Honduras would need to be located within commute distance of a major urban center like Tegucigalpa or San Pedro Sula, not the locations currently being discussed.

In some ways, Songdo is reminiscent of the Bahia de Tela resort project being implemented near Triunfo de la Cruz, Atlantida. The plan there is for up to five luxury resorts, housing, and a golf course. The Bahia de Tela resort project will not succeed without a place for its labor force to live nearby. It will need more semi-skilled and skilled labor than Tela and Triunfo residents can provide.

Songdo's success is predicated on its location as a central hub for businesses wanting to do business in all of north Asia, which houses a large segment of the world population. Honduras could be a hub for business, but likely only for Central America and perhaps northern South America, and it would have to develop better air service to do that. TACA airlines serves Central America well, but not frequently enough, from Honduras.

And then there's the infrastructure questions. Korea has sufficient reliable electricity, water, sewer, and so forth. Honduras does not, so all those infrastructure necessities would have to be added to any Honduran similar development.

Songdo is not a model city in Paul Romer's sense. It neither has, nor requires, its own rules, laws, or constitutional exceptions. It is an international business district located within a developed metropolitan area, leveraging that development, to provide luxury services to businesses.

Songdo functions within the laws of Korea, not outside them. Korea chose to modify their local laws to fit international business standards, not come up with new laws that only function within the Incheon Free Economic Zone.

Songdo seems like an interesting place to live, if you can afford it, but we don't see it as a viable model for development in Honduras precisely because of the way it leverages its location and the surrounding metropolitan area. Next?

Lobo's Model Cities

Yesterday Porfirio Lobo Sosa gave a long press conference about model cities and his unqualified support for the idea. From it, it's clear that Honduras will go ahead with the plan, with the National Congress scheduled to hold the first debate on legislation today. It's been fast-tracked, though it will take until 2012 to make all the constitutional changes that are needed to allow model cities. Nonetheless, it's interesting to hear what Lobo Sosa thinks about the idea, and how he conceives of the implementation.

He's thinking of areas of about 33 square kilometers, not the 1000 square kilometers that Romer calls for. He sees nothing wrong with ceding sovereignty over such an area for 80 or more years to either foreign governments or national or international businesses while they go about their business. He said:

"This is nothing for Honduras, above all it will be an unpopulated place not appropriate for agriculture, where now we have nothing and afterwards we will have factories, schools, secondary schools, hospitals, like in the cities of more developed countries."

But El Heraldo reports that Lobo Sosa said that if any campesino or land owner doesn't want to sell his or her land, that

"[they'll] rent their land, that means profits, there's nothing pre-negotiated, first the law, first the rules, and after that, we'll see."

which would indicate these are not unpopulated places. This was clear from another statement of his,

"If there are land holders there, they'll have the option to sell their land, or rent it."

but presumably not withhold it!

The President will have veto power over who administers the model cities.

The rush is to get it approved in this Congressional session, which ends this week, because if not, they won't finish all the approvals until the 2012 session, because of all the constitutional changes that are required. Lobo Sosa wants this done during his administration.

Lobo Sosa indicated the government was looking at Ocotepeque, Trujillo, the Agalta valley, and near the port of Amapala on the Pacific coast, as possible locations for a model city. He projects they will provide up to 3 million new jobs, all of which, Lobo Sosa assures, will go to Hondurans.

Lets see. 33 square km. is about 13 square miles, or smaller than Whittier, California, population 83,000 and exactly the size of the affluent Calabasas, California, population 22,000. Industry, California, is an industrial city of about 12 square miles, with 2500 companies generating about 80,000 jobs but it only has 777 residents.

Hong Kong has a population density of about 6400 people per square km. At that density, a model city of 33 square km. in Honduras would have about 211,000 residents.

Hong Kong is a bad success story for Romer to have chosen. Not only does he ignore the historical contingencies of his example, but he ignores the historically poor distribution of income there as well, the worst in Asia.

Who benefits in Hong Kong? The gini index measures how income is distributed across households from the poorest to the richest. To the extent that that curve differs from a straight line, income distribution is skewed. Values range between 0 and 1. The lower the number, the more evenly income is distributed. The closer the value is to 1, the more income is concentrated into fewer and fewer families.

The gini index of Hong Kong was .53 in 2008, while Honduras had a gini index of .56 in 2010. That means Hong Kong and Honduras already have similar income distributions, with lots of poor people and a few wealthy households. Would you expect something different in a model city? Why?

This income distribution is what you would expect from little regulation of capitalism. Most European countries have values in the range .2 to .3, while the US has a gini index of .45. The rich get richer, the poor stay poor, and the middle class gets poorer as capitalism is regulated less.

So tell me again how model cities will be good for Honduras?

Update: The legislation was indeed fast-tracked, and has passed. Other blogs are now paying some attention as well. This has led to Romer himself correcting Honduran press reports: Lobo Sosa either said or should have said that these would be 33 km on a size, and thus 1000 km. We would note that the decreto that was passed has nothing about proposed size. We stand by our opinion that this is a bad idea that makes no sense and note that using real people's lives as an abstract experiment should be considered unethical.

Bad Model Cities

Under the rubric of "Model Cities" the Lobo Sosa administration presented a law to Congress which will give the government the right to expropriate any contiguous region of land for the use of "Special Administrative Regions" which will be owned in full by the government, but have their own fully autonomous court system, not answerable to the Supreme Court. This is based on Stanford economist Paul Romer's ideas about "Charter Cities".

Romer's idea of Charter Cities, documented here and here, was advanced by him as a development initiative for poor countries. His specific analog is Hong Kong, which he says brought so much good to China. Romer seems to ignore the fact that it brought no good to China for 156 years, from 1839 until 1997 when it was removed from its status as a British colony and merged, fully formed and developed, as a part of China. It was only when integrated into modern China that it brought any good to the country.

According to La Tribuna's description, these Special Administrative Regions pretty closely model what Romer is suggesting. A large region of land (Romer recommends 1000 square km.) would be allocated by the Honduran government, with a charter set by the National Congress. Mind you, Romer sets the target developed population at 10 million, more than the entire population of Honduras. The Charter outlines the basic set of rules under which the city will begin to operate. It is, however, not answerable to Honduran law or the Honduran constitution and may establish, within the guidelines of its charter, any set of laws it wishes using the form of government specified in the charter (eg, it need not be representative of the population in any way).

As Romer sees it, investors will fund these charter cities by setting up services and collecting fees for them (water, sewer, electricity, etc.). Land title either remains with the national government, which then benefits from the rents on the lands, or is transferred to the development authority, which then finances itself by leasing (not selling) land to developers.

Romer says these are not gated communities for the rich. He sees this as the natural evolution of the maquila, with the first residents being maquila workers assembling garments and making toys, people with little formal education. He holds the mistaken belief that such workers today already can afford city services (electricity, water, sewer) and rents on their existing salaries. Everyone would have to rent, in Special Administrative Regions. No one would own their own residence.

These regions are sort of like today's Export Processing Zones that house the maquilas, except that they will have residents who are no longer full Honduran citizens, governed instead by the laws and rules set up by the local administration to administer these areas. There is no requirement for worker participation in the local government, for example. It harkens back to the banana company towns, with the potential for all the benefits and worker abuses, except that these would be industrial rather than agricultural workers.

Why is this idea attractive to the Honduran government? It might be the claimed potential for development of the host country, although Romer basically glosses over that part in his descriptions; but I think it specifically is attractive to the Honduran government because such zones are claimed to attract the people who currently leave the country to pursue social and economic opportunities in other countries. It is said to bring home all the migrants who currently enter the US illegally after traversing Guatemala and Mexico and being victimized by criminals in those countries.

Romer came to Honduras on January 3 and presented the idea of constructing a charter city in Trujillo to the BCIE, Juan Orlando Hernández, and Porfirio Lobo Sosa. Romer is interested in setting up and financing a demonstration project in Honduras if the government will only turn over the land to him for a few years. Juan Orlando Hernandez said of the pilot

"There are many countries that are fighting to be the site of this project. Honduras has all the possibilities to do it and the government, we are interested in doing it to benefit all the population."

It's clear that this law was fast-tracked after Romer's visit. Perhaps the government should, as Mario Argueta noted in an editorial in El Heraldo, remember previous development attempts that gave concessions to foreigners. They all failed, and were bad for Honduras.

Are Special Administrative Regions Lobo Sosa's solution to the Bajo Aguan problem?