Are free and charter cities making a comeback in Honduras?

by on January 26, 2013 at 7:56 am in Current Affairs, Law, Uncategorized | Permalink

By a large majority (110 votes to 128), the Honduran Congress approved the modification of three articles of the country’s constitution, giving powers to Congress to create areas subject to special arrangements, referred to as “Model Cities” that were declared unconstitutional last October for being considered “states within a state.” reports that “The law consists of two approved articles. The first amending Articles 294, 303 and 329 of Decree 131 of January 11, 1982 containing the Constitution, which divided the country into departments. These ‘are divided into autonomous municipalities administered by corporations elected by the people, in accordance with the law’.

Without prejudice to the provisions of the preceding two paragraphs, Congress can create areas under special schemes in accordance with Article 329 of this Constitution ‘.

Here is more, and here is a related article of explanation.   I am still told, however, that yet another piece of legislation needs to be passed.  I don’t pretend to understand any of this (for one thing, how much do these developments represent genuine suspense?), but at least one insider seems to think it represents a breakthrough of sorts.

1 Curt Fischer January 26, 2013 at 9:39 am

By a large majority (110 votes to 128)

What, I wonder, would constitute a small majority down there in Honduras?

2 RV January 26, 2013 at 11:31 am

They must mean 110 out of 128, right?

3 M January 27, 2013 at 5:47 pm

Correct. Other news sources (AP) confirm that it’s 110 out of 128.

4 The Anti-Gnostic January 26, 2013 at 9:54 am

Why are American economists and their wealthy tech-entrepeneur buddies thinking they have to move to Honduras? Land is cheap in Detroit, Newark and anywhere 100 miles outside any major city. The court system has excellent transparency, there’s a uniform commercial code, and everybody complains that there’s hardly any taxes or regulation.

I think the people behind this have been to Dubai and decided they need to get that game going here, and tropical coastline in the Gulf of Mexico is a lot nicer place to do it.

5 whatever January 26, 2013 at 11:10 am

Land is cheap in Detroit because no one wants to be there. While all the regulations that made at least some of those people leave remain.

6 Brett January 26, 2013 at 1:49 pm

I would be in favor of declaring some of the “dead”-er parts of Detroit (the parts where there have been serious proposals just to plow it all over and let it revert to a wild landscape) to be under looser “charter city” arrangements, but there’s no political support for it here. The only reason it’s happening in Honduras is because one of the politicians there liked the idea and actively sought out Paul Romer on it.

7 Peter Schaeffer January 26, 2013 at 2:51 pm


Dubai is attractive for a number of reasons, not the least of which is the stability (presumed) of the institutional arrangements. Dubai is also the most open (economically) society in a region with vast resources, but generally much more closed economic systems. Dubai also has no democratic institutions and most of the actual population is further disenfranchised because they are not even citizens. That makes medium and long term political (more relevantly economic) stability a decent bet.

It would be rather hard for Honduras to create the same level of confidence (in the system) in the medium and long term (Honduras has both elections and “history”). In the short term, it is impossible. Perhaps worse, Latin America has nothing like natural resources “near” Dubai and Honduras can never hope to be a unique “open” regime in a region of closed economies.

That doesn’t mean that the Honduras charter city plan isn’t worth trying. It might work. The modern development of Ireland started with a free-trade industrial zone near Shannon airport (then declining because of the 707).

8 John Strong January 27, 2013 at 12:52 pm

The free cities idea is based on a Georgist goal of financing public goods from *expensive* land, not cheap land, and land becomes expensive because of economic freedom. The Georgist idea is that public goods are made sustainable by financing them from a good business climate rather than trying to finance public goods by despoiling your neighbor. Public finance based on rising land values gives all citizens a real stake in community success. Land is cheap in Detroit thanks to its leftwing anti-business political culture. The entire purpose of Free Cities is to create zones where people can escape the sort of economic pathologies that rule in Detroit.

9 Alexei Sadeski January 26, 2013 at 10:40 am

“This American Life” had an excellent segment on the Honduran charter city last month. They interviewed the Honduran behind the plan, who claims to have wanted to do this for a long long time, at length. He is evidently a major political player there.

Godspeed, hope that it works out. If done properly – and that’s obviously a big if – then this project has the ability to help a LOT of people.

10 Bill January 26, 2013 at 11:12 am

Funny to call something a comeback when it was never there to come back from.

You need a new word.

How about “comebeginningback”.

11 ladderff January 26, 2013 at 11:42 am

Here we go again. The charter city that works is the one where you don’t ask the Honduran government’s permission. If it were better at making decisions it wouldn’t need this cockamamie scheme in the first place.

12 Tommy January 26, 2013 at 3:27 pm

Word on the street is that this is just a money grab for Congress (which in Honduras is composed of the country’s business leaders). If they wanted to do this ‘right’ they would have followed through with Romer’s plan instead of blowing him off. I don’t think it ends well.

13 M January 27, 2013 at 5:52 pm

Roemer’s plan was to have a foreign county (say, Canada) run the Charter City. That wasn’t working for 2 reasons: 1) No country wanted to be responsible for enforcing laws in a part of Honduras and 2) Even if it were, it smacks of imperialism.

The path they tried to take — selling plots to of land to private developers, such as the one lead by education entrepreneur Michael Strong — is far better.

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