By Maya Kroth, Foreign Policy, September 1, 2014
AMAPALA, Honduras--In a cinder-block building at the end of a narrow, washed-out dirt road, Alberto Cruz, the mayor of Amapala, wipes the sweat from under his white baseball cap. The July heat is oppressive, and beads of moisture form as Cruz faces the insistent stares of hundreds of his constituents, gathered for a town-hall meeting. People fill the small room before him and spill out into an adjacent, dusty lot, peering in through metal window screens. They are eager to pepper him with questions about a provocative new law that could change their lives permanently.
âIâm not here to defend or condemn a law that I didnât make or a project that I donât know about,â Cruz tells the crowd. âBut we need to be open to investment.â
âThis law was passed without consulting anyone here,â protests one man in the crowd.
âWeâre only fishermen and farmers,â says another, rising from his chair and stabbing the air with an angry finger. âWe wonât stand for the invasion of these model cities created for the benefit of the rich!â
The room erupts in applause.
Here, in a poor corner of one of the poorest countries in the Americas, a radical economic and political experiment may soon be underway. In May, the Supreme Court of Honduras ruled in support of a constitutional amendment and attendant statute that allow for the creation of âzones for economic development and employmentâ (ZEDEs). Sometimes called âcharter citiesâ or âmodel cities,â these zones would be quasi-sovereign entities built on Honduran soil with backing from foreign investors. Unlike the worldâs thousands of âspecial economic zones,â such as Shenzhen in China, which attract foreign direct investment through tax breaks and other flexible economic policy measures, ZEDEs would operate with âfunctional and administrative autonomy that includes the functions, powers, and dutiesâ of ordinary cities, according to the constitutional amendment. They could enact their own laws, set up their own courts, even establish their own police forces.
The first zone may be built on southern Hondurasâs picturesque Gulf of Fonseca, specifically in the small province of Valle (home to some 176,000 people, according to a recent estimate). The Honduran government has mentioned Amapala, which comprises several islands, as a potential charter-city site, and it is among the Valle municipalities that the Korea International Cooperation Agency (KOICA), South Koreaâs bilateral aid bureau, is analyzing in a $4 million feasibility study.
ZEDE supporters--both in Honduras and around the world, including famous free market champions in the United States--cheer what they see as a way to bring investment, jobs, and the rule of law to parts of Honduras, a notoriously unstable country. And admittedly, with the worldâs highest murder rate, rampant legal impunity and poverty, and tens of thousands of people fleeing across its borders, itâs hard not to look at Honduras and think that something drastic needs to be done.
But are charter cities too drastic? Countless questions about how they would operate remain unanswered because the government enacted the ZEDEs legislation with minimal transparency and has offered little information since. Critics worry that charter cities would be little more than predatory, privatized utopias, with far-reaching, negative implications for Honduran sovereignty and the well-being of poor communities. Diminishing confidence further, the recent Supreme Court decision is mired in controversy and allegations of corruption.
In the town-hall meeting, peopleâs anxiety is palpable. Some want more honest talk from the government about what ZEDEs would mean for them. Others, however, insist they will never allow charter cities in their backyards.
In 2009, far from Honduras, respected economist Paul Romer, then of Stanford University, appeared at a TED conference in the United Kingdom to unveil a big idea. Against the backdrop of a satellite image of the Korean Peninsula at night, Romer compared the Northâs blackness with the South, which glowed with electricity and economic activity. Causing the stark contrast, Romer argued, were the Hermit Kingdomâs bad or impractical regulations. Similar problems existed throughout the developing world. Romerâs plan? Sign over a large tract of âuninhabitedâ land in a struggling country to a developed guarantor nation, which would create and oversee an investment zone free from the host countryâs fickle politics and troublesome rules. Enter the charter city.
Romerâs idea captured headlines in the Atlantic and the New York Times. Many international development advocates criticized it for its blatantly neocolonialist features, but it found supporters too. Proponents invariably pointed to Hong Kong, Chinaâs âspecial administrative regionâ that operates under different rules than the mainland, as a shining example of the results that autonomy can yield. And charter cities almost got off the ground in Madagascar, where Romer found a receptive partner in President Marc Ravalomanana. Malagasy charter cities went down the drain, however, when Ravalomanana was forced to resign, partly because of fierce opposition to his willingness to hand over land to foreigners. (He had negotiated a plan to lease more than 1.2 million hectares to South Koreaâs Daewoo, to grow corn and palm-oil exports.)
Around the same time, in Honduras, President Manuel Zelaya was ousted in a coup and replaced by the more conservative Porfirio Lobo Sosa. The new president faced a dire national situation: 60 percent of Hondurasâs citizens lived in poverty, its murder rate was climbing (from 50 homicides per 100,000 people in 2007, to 70.7 in 2009), and immigration to the United States was rising so fast that a domestic manufacturing association launched a campaign beseeching workers, âStay With Us.â While looking for ways to kick-start investment in the country, a Lobo aide named Octavio SĂĄnchez discovered Romerâs TED talk. It echoed similar ideas being proposed by Mark Klugmann, an American political consultant and former speechwriter for President Ronald Reagan who had worked on Loboâs campaign. Romer and SĂĄnchez set up a meeting and began working on a plan to build charter cities in Honduras.
For now, precise details on what a charter city in Valle might look like are hard to come by. The lack of clarity has left people on the ground scrambling, wondering whether a ZEDE would bring economic bounty or strip away what little they have now. In many Valle communities, including Amapala, thatâs no small question.
The oft-contested borders of Honduras, Nicaragua, and El Salvador meet somewhere in the placid waters of the Gulf of Fonseca. Under a vast dome of sky, the gulfâs largest island is El Tigre (âThe Tigerâ), formed from a conical, extinct volcano that is commemorated on the back of Hondurasâs 2 lempira note. On the front is a portrait of former President Marco Aurelio Soto, sporting muttonchops; Soto briefly made the island the countryâs capital in 1876. Today, El Tigre forms the bulk of Amapala.
The island was once Hondurasâs most important port, but lacking a bridge to the mainland, its economic prospects eventually disintegrated: In 1979, the port was moved to the mainland. This plunged Amapala into a depressed state that persists today. Most residents are poor, many living in mud-walled shacks with dirt floors. On some of the municipalityâs smaller satellite islands, people lack regular access to fresh water and electric power.
Economist Miguel CĂĄlix has fond memories of growing up in Amapala, where as a boy he was the best student in his class despite not being able to afford shoes. He recalls spending days at the port helping inventory boxes of goods. Today, CĂĄlix, a former presidential advisor and retired economic consultant at the Central Bank of Honduras, would like nothing more than to see his hometown and the region in which it sits make a comeback--and he believes charter cities could make that happen. âTo lift up the south, we have to make these model cities,â says CĂĄlix, who now lives near Tegucigalpa.
Others, however, are less sure that unelected administrators and investors could do--or would want to do--much to improve the lives of gulf residents. About a 10-minute speedboat ride away from El Tigre, on the tiny island of Inglesera, itâs harder to imagine a container ship sailing into port than it is to picture developers salivating over the chance to erect a five-star resort among swaying palms and gently breaking waves. Rodolfo NĂșñez Pacheco, a fisherman whose family has lived here for six generations, worries about being evicted. About two years ago, âmoney men,â as he calls them, started showing up--lawyers and people with guns who told him the island had been sold and his family could be jailed for illegally squatting.
According to Father Roger Rudery Galo of Amapalaâs Santa Cruz Church, âThe majority of the inhabitants ⊠donât have papersâ for their land. This leaves people like NĂșñez vulnerable to dispossession, which Galo worries a ZEDE might exploit. He also opposes charter cities because he doubts their overseers will keep promises pertaining to employment. The ZEDEs law stipulates that Hondurans must comprise 90 percent of a zoneâs workforce and receive 85 percent of all wages. âWe donât have enough trained people for it to be 90 percent Honduran,â Galo argues. âThese poor people, what can they offer to the ZEDE? Here there are no architects; there are no engineers. The people here are illiterate.â He also worries that there will be weak legal protections for workers.
On his island, NĂșñez pulls in a length of empty fishing net after a fruitless morning on the water. With little to sustain his household, he says he welcomes investment that could bring jobs. Yet he doesnât know much about charter cities or how one might affect his family. âWe live poor,â NĂșñez says, crinkling his eyes as he looks out over the gulf, âbut we live happy.â
