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Honduras’ City-State Experiment

In what is perhaps a dream come true for political science researchers, Honduras has agreed to let investors build three private cities inside its territory. In about six months the investors—business consortium NKG and the South Korean government—will supposedly begin to construct the first of three private city-states complete with their own police, government, legal parameters, and tax systems. The cities will be empowered to sign international agreements on trade and investment and set their own immigration policy. Honduran president Porfirio Lobo has given his full backing to the plan and the government signed the memorandum of agreement approving the project earlier this month.  Envisioned to be like other city-states such as Hong Kong and Singapore, the idea is a clear example of a neo-liberal experiment. 

Honduran Congress President Juan Hernandez said that NKG will invest $15 million to begin building basic infrastructure for the first model city and South Korea has given Honduras $4 million to conduct a feasibility study. The first city will be built in Puerto Castilla on the Caribbean coast and that the other two would be built in the Sula Valley and an area in southern Honduras. Hernandez added that the project in Puerto Castilla would create 5,000 jobs over the next six months and up to 200,000 jobs in the future.

These investments will provide a boost for the economy and give Honduras a much needed facelift for investors. The project’s aim is also to strengthen Honduras’ weak government and withering infrastructure.

Honduras has the world’s highest murder rate, even higher than Iraq, Afghanistan and Somalia. Honduras has a population of 8 million, and in 2011 recorded 86 murders per 100,000 inhabitants, compared to Mexico’s rate of 18 murders per 100,000 people. In fact, the violence forced the withdrawal of Peace Corps volunteers from the country in early 2012 after a number of attacks on their staff.  Some argue that the cause of such violence is the illegal drug trade, but it is more complex than that. While there are attempts at cracking down on narcotics trafficking in Hondurasnot all of them successful—the city-state experiment is an attempt to turn these trends around. Indeed, with a security vacuum created by the political instability that followed the 2009 coup, the government is resorting to any means necessary to improve the country’s image, since outside help in the traditional way of foreign aid is marked by problems

Opposition to this experiment has come from Indigenous and civic groups. They argue that the land is being seized from Indigenous populations and that the idea is inherently against the principle of state sovereignty.  Moreover, there is the argument that the cities will only increase inequality, as the cities would most likely be controlled by elites who could skirt labor and environmental laws and would hurt the agriculture sector.   

A Garífuna political group known as La Organización Fraternal Negra Hondureña (Fraternal Organization of Black Hondurans—OFRANEH) launched an online petition that called on the Honduran Supreme Court to strike down the law that created the charter city. The Supreme Court could hear the case; if it doesn’t, it could take up to 10 years to decide on a ruling

The project is plagued by another problem. It no longer has direction from its original creators. The project was going to be overseen by “economic guru” Dr. Paul Romer of New York University, but he quit the position last week, citing transparency and communications issues. This means that Honduras’ plan to take drastic steps to address its social and economic problems and attract more foreign investment may be on permanent hold.

Sabrina Karim is a contributing blogger to AQ Online. She is a second year PhD student at Emory University studying the intersection of gender and security.  She completed a Fulbright Fellowship in Peru in 2010. She is currently studying the impact of women in the security sector in conflict zones.

Any opinions expressed in this piece do not necessarily reflect those of Americas Quarterly or its publishers.
Tags: Honduras, Development, Foreign Direct Investment

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