Honduras, Open for Business

John Perry

The government of Honduras, which justified the illegal coup that brought it to power in 2009 on the grounds that it was necessary to protect the constitution, recently amended the constitution to give itself the power to create ‘special development regions’ with their own (yet to be determined) laws. The hope is to build a brand new ‘charter city’ with up to 10 million inhabitants (in a country with a current population of only seven million).

 Charter cities are the brainchild of Paul Romer, an economist at Stanford. In poor countries people vote with their feet, and the enterprising try to migrate to Europe or the US. Supposing then, that they were offered the opportunity of migrating to a new city, with all the opportunities of a developed country, but inside their own country’s borders? For Latin Americans this should be a more attractive option than the highly risky journey to the US, where even if you make it you might well get sent back.

‘When Romer explains charter cities,’ according to an admiring profile in the Atlantic last year, ‘he likes to invoke Hong Kong’:

For much of the 20th century, Hong Kong’s economy left mainland China’s in the dust... Hong Kong’s colonial authorities put in place low taxes, minimal regulation, and legal protections for property rights and contracts; between 1913 and 1980, the city’s inflation-adjusted output per person jumped more than eightfold... Then China created a series of special economic zones that followed Hong Kong’s model. Pretty soon, one of history’s greatest export booms was under way.

In Honduras, the charter city would be given a similar degree of autonomy, and citizens would give up their notional democratic rights to be part of the economic powerhouse, and subject to its laws.

The appeal of Honduras to the architects of a charter city is obvious. Its government is regarded by the State Department as democratic but its interest in democracy is purely token. It has plenty of emigrants who might be persuaded to stay if something better were on offer. Large corporations have little difficulty in obtaining large areas of land. It’s only just over 1000 miles from Tegucigalpa to Houston. The president, ‘Pepe’ Lobo, is desperate to erase the memory of the coup, and is now busy looking for the international investment that he believes will make the charter city a reality.

Romer suggests that the charter city in Honduras could also be a new ‘aerotropolis’ like Dubai (one of the places where the Honduran coup was plotted.) Dubai, however, has some advantages over Honduras: it already has a lot of rich inhabitants, and its airspace is criss-crossed by major routes. Honduras is a poor country in a poor region, where the really wealthy people wield a lot of power but are a tiny minority. And would there be any logic in another major air traffic hub so close to Dallas Forth Worth?

In the real Honduras, meanwhile, the repression continues. I’ve just received an email announcing the death of the 11th journalist since the dubious election that gave Lobo the presidency. The number of politically active people who have died or disappeared since the coup is now more than 300. Forty campesinos have died in the Aguan valley, where Miguel Facussé, one of Honduras’s most powerful businessmen, has been turning their land into African palm plantations to serve the growing US biofuel market.

Instead of condemning the repression, the US government has extended its military collaboration with the government. And US officials recently attended a conference in San Pedro Sula entitled 'Honduras Is Open for Business'. Romer was one of the speakers. The aim was to ‘relaunch Honduras as the most attractive investment destination in Latin America’. I wonder whether Romer has thought about the methods that the government and the business elite would deploy if the massive international capital that would be needed to bring the charter city to fruition ever arrived.


  • 18 May 2011 at 6:19pm
    klhoughton says:
    So Paul Romer wants to do for Honduras what Friedman and (mostly) Harberger did for Chile: make it so that all criticism of murdering your countrymen and destroying the economy can be described as "political sour grapes"?

    Well, at least it will ensure Romer's Nobel, in the same manner as giving it to Friedman in 1976 gave the imprimateur to 11 Sep 1973. And it will only be a few million Hondurans who suffered for his Art.

    I'm certain that Chiquita or Dole or some other U.S. multinational will be willing to fund the charter city. And if they don't, Fortnum & Mason can always follow the path of the late, lamented Greater Atlantic and Pacific Tea Company...

  • 18 May 2011 at 6:52pm
    pinhut says:
    Thanks for this, John, and trust you are well.

    Charter city? Reading through the description, it sounds like a scaled down version of the CPA in Iraq.

    Given the fact that the concept depends on making the charter city the most attractive place to engage in economic activity, it is hard to see how it would not simply transplant a population to a new location, where, as the charter FAQs explain, none of the inhabitants will own the land. However, if Honduras is comparable to Guatemala (for example) in its pattern of land use, the charter city concept is omitting a major difference between Latin American cities and their Western counterparts, which is people often don't just own their house but the plot itself.

    It may be that Tegucigalpa becomes, simultaneously, a depopulated (of the poor) playground for the rich, and poor families occupying tiny smallholdings will be cleared from land that will then spike in value as it is consolidated for new apartment complexes, luxury malls, etc. (This is already happening in Guatemala City, with reinvestment of narco dollars being seen as the motor of both inflation which drives the poor to sell their plots and of the large building projects that are a good money-laundering method).

    Just a few speculative thoughts.

  • 11 June 2011 at 7:12pm
    John Perry says:
    By way of an update to the story of charter cities and the background to them in Honduras, there is an excellent article (in English) in the April issue of the Nicaraguan magazine 'Envio'. It can be read online at