A group of businessmen is building a city from scratch in Honduras to overcome the country’s corruption and poor infrastructure.
Does it make sense to let money hungry investors take over the government’s job?
Honduras is set to play SimCity for real, albeit without the economist who devised the rules of the game. Last Tuesday, the government signed an agreement with private investors led by Michael Strong–a libertarian entrepreneur and and close associate of Whole Foods co-founder and CEO John Mackey–to construct a city-from-scratch in one of at least three special development regions (“las Regiones Especiales de Desarrollo” or “REDs”) scattered around the country.
REDs possess the legal right to establish–or outsource to foreign governments and companies as necessary –their own hospitals, schools, judges, and even police, all independent of Honduran law. The first is for profit, and if its founders have their way, it will look and feel a little like the Mosquito Coast’s answer to Austin.
The REDs are the brainchild of Paul Romer, the New York University economist who has proposed building “charter cities” as a solution to endemic poverty. Romer believes that importing sound laws and policies into small corners of badly-run countries will help leaders reform their governments from the inside-out. Honduras certainly qualifies–the original banana republic is still grappling with the political fallout of a 2009 coup while cocaine traffickers have pushed its murder rate to the highest in the world.
In early 2011, aides to Honduran president Porfirio Lobo invited Romer to the capital of Tegucigalpa to make his case to Congress. Within weeks, Congress passed a constitutional amendment granting Lobo’s government the power to create and administer the REDs.
They won’t be built in Romer’s image, however. The Lobo government has instead signed a deal with the MKG Group, a consortium of investors led by Strong that intends to spend $15 million to begin building basic infrastructure on a city near Trujillo on the Carribbean coast. It appears Romer was never consulted.
On Friday night, he published an open letter to Lobo asking that he not proceed with the formal appointment of a five-person “transparency commission” to oversee the RED, of which Romer would be chairman. In effect, he is asking for permission to resign from his own creation. Lobo’s aides told The Guardian that Romer is overreacting, and that nothing can go ahead until the Honduran Supreme Court rules on the project’s constitutionality–which may take anywhere from a week to a decade.
With Romer having second thoughts, the spotlight shifts to Michael Strong, who I met with in February to discuss what his version of a RED would look like if it were actually built. At the time, it seemed unlikely–a few weeks later, Lobo’s chief of staff Octavio Sanchez told me point-blank in the presence of Romer’s deputy that Strong would never receive the legal right to run a RED–but he was optimistic.
via FastCoExist – Greg Lindsay
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