Honduras sets stage for 3 privately run cities
Investors can begin construction in six months on three privately run cities in Honduras that will have their own police, laws, government and tax systems now that the government has signed a memorandum of agreement approving the project.
An international group of investors and government representatives signed the memorandum Tuesday for the project that some say will bring badly needed economic growth to this small Central American country and that at least one detractor describes as "a catastrophe."
The project's aim is to strengthen Honduras' weak government and failing infrastructure, overwhelmed by corruption, drug-related crime and lingering political instability after a 2009 coup.
The project "has the potential to turn Honduras into an engine of wealth," said Carlos Pineda, president of the Commission for the Promotion of Public-Private Partnerships. It can be "a development instrument typical of first world countries."
The "model cities" will have their own judiciary, laws, governments and police forces. They also will be empowered to sign international agreements on trade and investment and set their own immigration policy.
Congress president Juan Hernandez said the investment group MGK will invest $15 million to begin building basic infrastructure for the first model city near Puerto Castilla on the Caribbean coast. That first city would create 5,000 jobs over the next six months and up to 200,000 jobs in the future, Hernandez said. South Korea has given Honduras $4 million to conduct a feasibility study, he said.
"The future will remember this day as that day that Honduras began developing," said Michael Strong, CEO of the MKG Group. "We believe this will be one of the most important transformations in the world, through which Honduras will end poverty by creating thousands of jobs."
Hernandez said another city will be built in the Sula Valley, in northern Honduras, and a third in southern Honduras. He gave no other details.
The project is opposed by civic groups as well as the indigenous Garifuna people, who say they don't want their land near Puerto Castilla on the Caribbean coast to be used for the project. Living along Central America's Caribbean coast, the Garifuna are descendants of the Amazon's Arawak Indians, the Caribbean's Caribes and escaped West African slaves.
"These territories are the Garifuna people's and can't be handed over to foreign capital in an action that is pure colonialism like that lived in Honduras during the time that our land became a banana enclave," said Miriam Miranda, president of the Fraternal Black Organization of Honduras.
Oscar Cruz, a former constitutional prosecutor, filed a motion with the Supreme Court last year characterizing the project as unconstitutional and "a catastrophe for Honduras."
"The cities involve the creation of a state within the state, a commercial entity with state powers outside the jurisdiction of the government," Cruz said.
The Supreme Court has not taken up his complaint.
In an interview Wednesday, Strong said that as soon as the Honduras government gives final approval to the boundaries of the sites, the developers will begin building infrastructure on the first half square mile of the first city, where they hope to have two or three businesses as tenants within 18 months.
He said the $15 million investment was contingent on Honduran government approval. He added that no tenants have made commitments to locating to the future private city yet, but the investors envision textile manufacturing, small-product assembly and outsourced businesses like call centers or data processing as possibilities.
"People are not going to put up big money for something that could fall through," Strong said. He did not name any of the investors in the project.
He said workers will be able to live in the cities, and the Honduran laws setting up the private areas guarantees that any citizen of the country can also live there.
"It can be a full-scale city," Strong said. "Once we have jobs then we will need affordable housing, schools, clinics, churches, stores, restaurants, all the businesses that create a real community."
The president of Honduras will appoint "globally respected international figures" without financial interests in the projects to nine-member independent boards that will oversee the running of the cities, whose daily operations will be administered by a board-appointed governor. Future appointments to the board will be decided by votes by standing board members, Strong said.
The governors will establish the rules by which the cities are initially run in conjunction with the developers, Strong said, but those rules can be changed in the future by popular votes among all residents of the cities.
Strong said Honduran law would not apply in the cities but they would have to adhere to international conventions on human rights and other basic principles.
He called the cities based on the best practices of free-trade zones around the world, like in Dubai, and he expected that they would successfully create jobs and help the development of Honduras.
"In general, free zones have been a spectacular success in terms of economic development," he said. "I'm very optimistic."
Associated Press writer Michael Weissenstein in Mexico City contributed to this report.