Charter cities in Honduras?

Are private cities the miracle cure for Honduras' surging violent crime, state violence and institutional disarray?

For many Hondurans, the past few years have been among the worst in memory. In the wake of a June 2009 coup that removed leftist president Manuel Zelaya from office, violent crime has soared and state institutions have fallen into disarray if not outright failure. Five months after the coup, the de facto government held elections which members of the political opposition boycotted and regional heads of state overwhelmingly refused to recognize. Under the resulting government, led by the National Party’s Porfirio “Pepe” Lobo Sosa, lawyers, journalists, human rights defenders, and Zelaya loyalists have routinely been the victims of threats, arrests and assassinations.

The role of the national police in violent, often politically motivated crime became a liability for the Lobo administration, which responded by developing a highly publicized police reform law. The bill appeared on its way to passage until November 2012, when a Supreme Court panel, by a 4 to 1 vote, ruled the law unconstitutional. Shortly after the court’s decision, the congress, in an extraordinary session reminiscent of Zelaya’s ouster years earlier, voted to dismiss the four justices who rejected the cleanup law. The press raised concerns that the move could turn into a full-blown crisis, many commentators focused on the police reform ruling as the conflict’s source; others pointed elsewhere.

A month earlier, the same four justices had ruled unconstitutional a law that would allow the creation of privately run municipalities with their own police, tax structures, and judicial systems, known as Regiones Especiales de Desarollo, or RED. According to Russell Sheptak, a Research Associate at the University of California and co-author of the Honduras Culture and Politics blog, the proximate cause for the justices’ removal was their ruling on the police reform law. “However, the muttering against them began at the top with Lobo Sosa chastising them over the RED ruling,” Sheptak wrote in an email, “and remained in the background of the debate about removing them.”


A protest against Charter cities legislation in Honduras. Reading: Coup d'etat: Economic crisis + model cities. Image credits: Black Fraternal Organisation of Honduras (OFRANEH)

Charter cities in Honduras?

The idea of building private cities is a divisive one. Many of the country’s elite advanced the concept as something new to spur economic growth. The cities would facilitate foreign investment and development, which would reduce the influence of criminal networks. Those opposing the concept, however, variously rejected the proposition as a neoliberal gift to the rich, a continuation of oligarchic rule and a threat to democratic governance. These objections came in the context of economic policies that have exacerbated inequality, poverty and unemployment. According to a recent report by the Washington-based Center for Economic and Policy Research, from 2010 to 2011 over 100% of income gains went to the 10% of Hondurans at the top of the income distribution ladder.

In 2009 Paul Romer, an economist then teaching at Stanford University, started presenting his idea to build new cities in poor countries as an innovative economic development strategy. The RED came to prominence in Honduras shortly after Pepe Lobo met with Romer. The new “charter cities,” as the U.S. economist called them, would be overseen by developed countries with a stronger rule of law and would prioritize investments in infrastructure. Each city would resemble a country within a country and would compete for hard-working, law-abiding residents from around the world. The islands of economic development would, in Romer’s vision, pressure governments to clean up their act and, cumulatively, could have a massive global impact.

Honduras’ governing officials enthusiastically embraced the idea and, given the country’s poverty and crime, Romer likely saw it as a natural fit. Yet after Lobo’s emergence through fraudulent elections, with the country’s institutions in shambles and many leading officials suspected of having ties to criminal networks, one could begin to see the plan’s inherent contradiction: How could you build brand new, principled institutions in partnership with a government so plagued by corruption?


Trujillo has been touted as a site for a charter city. Image: David Sherwood.

Development in exchange for democracy

Despite its enthusiasm for Romer’s thinking, the government balked at handing over sovereignty to another nation’s courts. Rather than creating a charter backed by a foreign country, officials proposed establishing an external court of appeal and a transparency commission with Romer as its chairman. Among the responsibilities of this interim commission would be to propose to the president the nine members who would form the permanent commission. That group would be responsible for choosing the RED’s governor, though at some unidentified time in the future the commission would transfer its full authority to the city’s residents.

Many of the law’s skeptics have been particularly critical of the RED’s antidemocratic design. Others have characterized Romer’s thinking as being informed by a colonialist view of development. As Rosemary Joyce, a professor of anthropology at the University of California at Berkeley and Sheptak’s co-blogger, wrote in an email, the charter cities concept “presumes that certain places in the world are too backward to be allowed the luxury of normal aspects of democratic governance, such as self-determination through elections based on the principle of one person, one vote.”

The RED unravels

Romer says he had reservations about the transparency commission’s arrangement all along. Those fears were validated in September 2012, when the Honduran government signed the first RED contract with a group of foreign investors. Romer only learned of the deal by reading about it in a newspaper, and when he asked for details he was rebuffed. Shortly thereafter he resigned from the commission and distanced himself from the project.

When I asked about his thoughts on the commission’s demise, Romer wrote, “In the future, I would not agree to work with a country that proposes a [transparency commission] structure as a way to establish rule of law.” But the economist did not express regrets regarding his engagement with the controversial Honduran government. “If I had the decision to make again, I would still try to do something if people from a country ask for help and if their elected leader is someone like Lobo, who was making a serious attempt at reconciliation,” he wrote in an email.

Others strongly disagree with Romer’s characterization. Referring to U.S. efforts to promote Lobos’s government as engaging in reconciliation, Joyce wrote, “No one in Honduras, and no one who understands Honduras, would take this seriously.”

While Romer suggested he would have done some things differently, he also made clear his frustration with his critics. “For a country like Honduras, what still surprises me is how many people seem to think that it is morally preferable to just look away and do nothing while the people who live there continue to suffer.” When asked whom he was referring to as preferring “moralistic rationalizations for apathy,” Romer chose not to answer the question.

The RED law in Honduras was barraged by legal challenges from civil society, LGBT, indigenous and religious groups. And after the Supreme Court’s ruling and the removal of the four justices, the law was eventually abandoned.  At the center of the legal challenges, according to Sheptak, was the contention that the law violated Honduras' sovereign control over its territory and the constitutionally established judicial structure. In other words, the aspects of the law that are seemingly crucial to Romer’s utopian vision appeared also to have been its greatest liabilities.

In place of RED

As one would expect following the removal of the four justices, leading officials were not simply going to let the RED fade into oblivion. In January the president of the congress, Juan Orlando Hernández, announced a new version of the law that he explained would resolve the outstanding legal issues. Yet while Hernández deliberately drew a line between the visionary ideals of Romer’s RED and the new law, the latter had little to do with high-minded development; instead, it arguably amounted to a gift to the country’s richest families that regularly use the state as a mechanism for enrichment. Among other aspects of the new law, which would create Zonas Especiales de Desarrollo Económico, or ZEDE, it lowers restrictions on business by prioritizing industries such as mining, forestry, agriculture and tourism in different parts of the country.

One significant difference between the RED law and its successor is how they affect land ownership, a highly contentious issue in Honduras. Under the RED, the government had purportedly planned to grant sparsely inhabited land to investors who would then build new cities, arousing opposition from indigenous and minority groups that have often suffered the effects of land dispossession in the name of national economic development. With the new law, the zonas would instead be established in areas that may already be densely populated. Those directing a zona would have to purchase land from its current owners, rather than have land granted to them by the state. Sheptak notes, however, that both the Honduran and the ZEDE governments could invoke eminent domain to acquire land from holdouts.

Given the state’s abysmal record of granting property title to its citizens, and its violent repression of those asserting their rights to land in the Bajo Aguan region, Sheptak and Joyce expect the new law to escalate conflicts. Joyce noted that “ZEDEs have explicitly been discussed as means to transform existing economic targets into new forms,” such as tourist development. “The fact that these existing places have existing populations will inevitably place the ZEDE and these people in conflict.”

A changed political landscape

This November, Hondurans returned to the polls for the first national elections in four years. Xiomara Castro, the wife of the deposed Zelaya, was the presidential candidate for the new LIBRE party, which formed as a coalition of diverse opposition groups in the wake of the 2009 coup. Despite campaigning under constant threats and targeted violence—over the election weekend alone, three party activists were killed—LIBRE mobilized massive popular support. By the official count, the party received 29% of the vote and nearly a third of all congressional seats, second only to the National Party.

LIBRE and international observers have nonetheless cried foul, pointing to significant discrepancies in the tally sheets, evidence of vote-buying, and acts of outright intimidation by actors sympathetic to the National Party. Castro has asserted that she won the election. Yet despite mass demonstrations demanding a comprehensive recount, the supreme election tribunal declared Castro’s closest competitor and the National Party candidate Hernández the next president of Honduras.

Looking ahead, it remains unclear what will become of the ZEDE law. Joyce suggests that “the law as written is flawed enough, and the apparent policy direction provided by Congress is confused enough, that the whole thing may come to nothing.” Whether or not the law’s many outstanding legal challenges are ruled upon, Joyce comes back to the significance of the recent election. “The new Congress—with blocks for National, Liberal, LIBRE, and Partido Anti-Corrupción that are of significant size—will always require coalitions on any major issue. That should mean that there will be more debate about the substance of any laws like these in the future.” Although many in Honduras feel the presidency was stolen, LIBRE’s showing at the polls could mean the country will no longer be ruled by an ideologically homogenous government looking only after the interests of the elite.

About the author

Arthur Phillips is a writer and researcher based in New York City.

Read On

Honduran Charter Cities are a symptom of, not a solution to, instability. Keane Bhatt on NACLA.org.