Honduras' mysterious private-city plan

So who’s behind the mystery Canadian company ready to put up big money to build a private city in Honduras?

The concept’s appeal is clear. The “charter cities” being promoted by the Honduran government are as close as you could come to setting up your own country, with your own rules.

The cities would mostly have their own laws and taxes and police forces. They might, for example, contract with Canada to provide policing. They would set up their own schools and health systems. 

There would be an appointed governor and, at some point, an elected council to approve the laws recommended by the governor and city investors. But, during the startup particularly, the investors will decide on policing and schools and taxes and most everything else, limited only by basic constitutional rules. (The private city law is here.)

I wrote about Honduras’ interest in the idea a few months ago. The plan has now, apparently, moved into the action phase. The government has announced three sites, and signed a letter of intent with an unknown U.S. company - MGK Group - to start development on a city, most likely on the Caribbean coast.

But MGK, while saying it’s a consortium, hasn’t said much about who is in the group. It’s putting up $15 million to start on infrastructure, and hopes businesses will quickly move into the city. That’s not enough money to do much.

Press reports also say a major Canadian investor will soon be revealed.

The whole idea has been pitched by libertarian and technocratic theorists who see it as a way for countries like Honduras to start fresh. Cities would work better, they argue, if smart people made the rules starting from scratch. For a country like Honduras, where most institutions work badly or not at all, it’s an appealing pitch.

Once safe, secure cities with working systems were established, proponents say, businesses and Hondurans would move to them, the economy would improve and everyone would be better off.

As I noted in a previous post, it’s the kind of idea I would have dismissed out of hand before I lived here. I’m not so sure anymore.

But now that the first proposal, sketchy as it is, is out there, the problems and becoming more evident and the debate more intense.

One obvious problem is that countries that need model cities are much less likely to be able to manage and control the process.

The government’s legislation calls for an independent Transparency Commission to oversee the development process, particularly until the cities are large enough to have elections. 

The commission would appoint the governors - though the country’s president gets to name the first one. It would approve or disapprove the governor’s decisions, oversee the appointment of judges and generally make sure things didn’t spin out of control.

The government signed a memorandum of understanding last year that established the first Transparency Commission, an attempt to reduce concerns about oversight. It was to be headed by economist Paul Romer, an advocate of the cities, well-respected as a good, independent choice.

But Romer and the group have, politely, backed away. Their positions were never made official, and they weren’t consulted on the agreement with MKG or any aspect of the plans for the first city.

A key safeguard has already broken down.

The private-city law is also already facing constitutional challenges, mainly arguing it undermines Honduran sovereignty. It’s become a political issue as the country moves through it’s 16-month-long election campaign. 

And there are almost certain to be disputes over ownership of whatever land is chosen for the city. MKG says it won’t rely on land grants from the government, so presumably will buy land or work with existing owners. But land title is murky in Honduras, and clashes are frequent, and often violent.

The vision was for shiny new cities in Honduras - a “little Canada” in the middle of the country, a proponent suggested in a Globe and Mail column, a place where people would live and work happily and the economy would thrive.

The reality, at the moment, looks a lot more like another factory zone, offering low or no taxes and few rules.

If the project moves forward at all.