Honduran Private City Plan Shot Down by Its Supreme Court


A roadblock on a very interesting plan to create experimental, freedom-friendly governing structures down in Honduras, reported by Associated Press via CBS:

The constitutional chamber of Honduras' Supreme Court ruled Wednesday that privately run cities in the Central American country would be unconstitutional, threatening a project to build "model cities" with their own police, laws, government and tax systems.

The five-judge panel voted 4-to-1 in a ruling that goes against the Honduran government and the country's elite.

Because the decision was not unanimous, the case now goes to the full 15-member Supreme Court, which is expected to take it up within 10 days….

The investment group MGK and the Honduran government last month signed a memorandum of understanding on the construction of three "private" cities that supporters of the project say would bring badly needed economic growth to the poor country.

MGK was expected to 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, authorities said. South Korea has given Honduras $4 million to conduct a feasibility study.

Another city was planned for the Sula Valley in northern Honduras and a third in southern Honduras.

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 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.

Authorization for the creation of private cities was passed by the Honduran Congress in January 2011 amid much controversy…

That vote in the Honduran congress had only one vote in opposition, by the by.

Fox News reported on the plan a couple of weeks ago, with some interesting details:

"Once we provide a sound legal system within which to do business, the whole job creation machine – the miracle of capitalism – will get going," Michael Strong,  CEO of the MKG Group, which will build the city and set its laws, told FoxNews.com.

Strong said that the agreement with the Honduran government states that the only tax will be on property.

"Our goal is to be the most economically free entity on Earth," Strong said.

While this may not sound like a libertarian dream to you, Strong has his eyes on Texas as a model:

The laws in the city will be separate from those in the rest of Honduras. Strong said that the default law that will be enforced in the city will actually be based on Texas state law, which has relatively few regulations.

"It will be Texas law with more freedom of contract. Texas scores well on state economic freedom rankings," he explained.

"Texas law is also very familiar to American business people, and it is very familiar to Hondurans, because a lot of Hondurans have gone there or have family there."…

The rules for immigrating to the city have yet to be finalized, but are expected to be loose.

The bigwig academic associated with a version of this plan, an idea he calls "charter cities," Paul Romer of New York University, dropped out last week, as the New York Times reported. Romer didn't like that the Honduran government went ahead and made a deal with Strong's MKG Group without Romer signing off on it. Details:

"I do feel disappointed on behalf of the people I have gotten to know," said Mr. Romer, an economist at New York University's Stern School of Business and the director of its Urbanization Project. "The Hondurans who hoped this would be a way to escape from business as usual."

The tipping point came with the announcement a few weeks ago that the Honduran agency set up to oversee the project had signed a memorandum of understanding with its first investor group.

The news came as surprise to Mr. Romer. He believed that a temporary transparency commission he had formed with a group of well-known experts should have been consulted. He withdrew from the project….

According to Mr. Strong and others involved in the project, including Mark Klugmann, an American consultant who is working with Mr. Sánchez, the transparency board never legally existed. Mr. [Octavio'] Sánchez [the Honduran government point person on the project] agreed, although he had never disputed the existence of the board in the past.

Mr. Romer said that President [Porfirio] Lobo signed the decree in his presence in December. But he acknowledged that the board was on tenuous legal footing because of the challenges in the Supreme Court. The decree was never published.

Ronald Bailey interviewed Romer for Reason back in December 2001. I wrote here about an earlier attempt, not the one run by Strong, to bring a private city idea to Honduras in December 2011.

The history of attempts to carve more libertarian space in the world through separate governing structures free from existing national laws is long and storied, and talked about some in my July 2009 feature on the idea of "Seasteading," building independent private cities on the ocean.