Private Charter City in Honduras Articles


The government in Honduras is convinced that a charter city could be the safe playing field, with new rules, where Hondurans of all backgrounds can come together and put their skills to work with the financial resources, expertise, and technology available in the rest of the world.

To implement this vision, the Honduran National Congress has already passed an amendment to the constitution that gives the government the power to create special development regions (which based on the name in Spanish, are abbreviated as REDs). The amendment passed with 126 votes in favor from a total of 128 members of Congress (one abstention and one vote against.) The nearly unanimous vote sends a strong signal about the breadth of support for this new initiative. The National Party, the party of the government and the President (who is elected separately), has about 70 seats in Congress. Members of all parties supported the amendment, including members from rival factions within the opposition Liberal Party.

To become a part of the constitution, the amendment must be passed again in the new Congressional session, which has already begun.

Here are the key points in the amendment:

The government of Honduras has the option to create one or more REDs, but in no way locks them into to doing so.

To create an RED and establish its basic system of governance, the amendment requires that the Congress pass a piece of enabling legislation that they call a Constitutional Statute. This requires a two-thirds majority to pass. A subsequent Congress can change this enabling legislation only with the same two-thirds majority and approval by referendum from the citizens living in the RED.

The REDs would be areas with their own legal personality and jurisdiction, their own administrative systems and laws. An RED can also negotiate international treaties with partner countries or organizations. Congress would need to ratify these international treaties with a simple majority.

Judges for its judicial system will be nominated by the governing authority in theRED but subject to approval by a 2/3rds majority in the Congress. The judicial arrangement would allow the use of an external body that acts as the court of final appeal for judicial decisions from the zone.

Laws developed by the governing authority of the RED require a ratifying vote by the Congress. This vote would be a simple vote to approve or reject. Approval requires only a simple majority. (This is similar to the BRAC rules that govern military base closures in the United States.)

Most important among the immediate next steps is a public discussion about the merits of establishing the first RED, its location, and the specifics about how foreign governments can assist in its governance. The government is already working to raise awareness of the effort both in Honduras and internationally. The international efforts will focus on potential partner countries, major investors, firms and individuals with special expertise, and influential supporters in the broad community of people concerned with economic development.

Charter Cities will continue to play an independent advisory role. As a 501( c )(3) we rely exclusively on philanthropic support. We do not accept consulting fees or expense reimbursement from the Honduran government or any other government. Nor will the organization or anyone who works for it have any financial stake in the development of a new city.

A new city in Honduras could create important opportunities. Each year, roughly 75,000 people leave Honduras in search of jobs in the United States. Many go without their families. Around 10,000 of them are kidnapped along the way and held for ransom. Many who reach the United States live in fear of deportation.

The total number of people who incur these risks and deprivations to seek out opportunity is very large. Before the most recent slump, estimates suggest that about 1 million migrants from Latin America reached the United States each year and that at least two-thirds of them do not have legal status.

The passage of the amendment is a decisive first step toward creating in Honduras the kinds of opportunities that migrants seek up north, but in a place where families can stay together, be safe, and enjoy the full protection of the law. The specifics have yet to be determined, but discussions have centered on a site large enough to accommodate a city that could eventually grow to 10 million people. As large as this sounds, it is small compared to the annual flow of migrants from the region into the United States.

This bold step did not go unnoticed—several major international investors have already expressed interest in the project. President Lobo will soon travel abroad to build more public and private support. We hope that the rest of the world will respond in kind, working with the Honduran people to establish a new city—a city that could become an important hub for the Western hemisphere and a driver of growth and development in the region.



Honduras is set to host one of the world's most radical neo-liberal economic experiments under a plan to build from scratch the rules, roads and rafters of a "charter city" for foreign investors.

The Central American nation hopes the plan for model development zones, which will have their own laws, tax system, judiciary and police, will emulate the economic success of city states such as Singapore and Hong Kong.

But even as the government signed a "memorandum of understanding" with a group of international investors on Tuesday, opponents tried to lodge a suit at the supreme court for the arrangement to be declared illegal because the "state within a state" risked undermining national laws, sidestepping labour rights, worsening inequality and creating a modern-day enclave that impinged upon the territory of indigenous groups.

The Honduran president, Porfirio Lobo – a landowner from the rightwing National party – has given his full backing to the plan, which was inspired by US economic advisers.

During the signing ceremony, government officials said the initial $14m phase of the project would start in October and create 5,000 jobs in the first six months and 40 times that number in the future – a major incentive in a country where one in four of the workforce are unemployed.

"This is the most important project in half a century for Honduras," said Carlos Pineda, head of the Commission for the Promotion of Public-Private Partnerships, which represented the government at the signing of a memorandum of understanding with the business consortium NKG.

Details of the arrangement remain sketchy. Three possible locations were mentioned – Sula valley, Agalta valley and the southern region of Honduras – and the initial investments seemed small compared to the scale of the ambition.

The plan appears to have been thrown together in the space of less than a year, partly to boost the economy and partly to make Honduras more attractive to foreign investors who fear crime (Honduras has the world's highest murder rate) and political instability (Lobo was elected following acoup d'etat in 2009).

It is the realisation of a proposal for "charter cities" proposed by the US economist Paul Romer, a graduate of the University of Chicago school of economics, who is currently professor at the Stern School of Business atNew York University.

Citing Hong Kong as an example, Romer argues that cities based on a "charter" of strong, pro-business laws and institutions are the key to rapid growth, particularly when they can act as international gateways to larger regions such as China. In countries that lack such fundamentals at a state level, he proposes the creation of special zones where they can be established from nothing.

Soon after Romer visited Tegucigalpa at the start of the year, the Honduran congress approved an enabling bill for the creation of economic development zones. Lobo has reportedly taken fact-finding delegations to Hong Kong, Singapore and Dubai to look at possible models.

None of those cities, however, attempted the urbanisation from scratch now being eyed in Honduras.

Proponents say this is an advantage because the governance systems and rights can be designed. "It's easier to create something new that will be healthy and safe than to go and deal with the serious problems that exist across the whole nation," said Mark Klugman, a government adviser.

But the idea has provoked controversy in a country already suffering from one of the worst levels of inequality in the world.

Critics say it will allow a foreign elite to set up a low-tax, sympathetically regulated enclave where they can skirt labour standards and environmental rules.

"This would violate the rights of every citizen because it means the cession of part of our territory to a city that would have its own police, its own juridical power, and its own tax system," said Sandra Marybel Sanchez, who joined a group of protesters who tried to lodge an appeal at the supreme court.

Ismael Moreno, a correspondent for the leftwing Nicaraguan magazine Envio, compared the charter cities to the banana enclaves, which were run on behalf of a foreign elite. He also spelled out the environmental risks, particularly if one of the development sites is the Sico valley, an area of virgin forest on the Mosquito Coast.

"This model city would end up eliminating the last agricultural frontier left to us," he wrote.

Indigenous and ethnic groups also expressed hostility to the move. Miriam Miranda, president of the Fraternal Black Organisation of Honduras, said a project in the Puerto Castilla – close to one of the three sites – would threaten the continuity of the Garifuna people and culture.

Michael Strong, an NKG executive, insisted, however, that the project would be a driver for poverty elimination. "The main goal of our project is to create the basis for a safe and prosperous future for Hondurans," he was quoted as saying by local media.



Honduras plans to form three 'charter cities' that will operate outside the nation's constitution as 'special economic zones' in a bid to promote foreign investment in a country with the world's highest murder rate and where over half the population lives below the poverty line.

The Honduran government signed an agreement this week with U.S. development firm MKG Group, which will begin laying down the initial infrastructure for the first city within six months.

"The future will remember this day as the day that Honduras began developing," MKG CEO Mark Strong said at the signing ceremony Tuesday.

The three proposed cities will have independent governments, legal systems, tax laws and police forces as determined by their charters, which could potentially be drawn out in agreement with other countries or corporations willing to invest in their development.

The concept of a charter city was first proposed by American economist Paul Romer, who theorized that developing countries could circumvent obstacles to building vibrant urban, economic centers by drawing in foreign investors through the establishment of separate laws and institutions that would appeal to them.

"Economists tend to assume that societies will naturally adopt good rules. If that were true, societies would put in place the rules needed... and well-run cities would indeed spring up," Romer said in a 2009 interview for the Freakonomics blog.

"The evidence suggests to the contrary that many societies are stuck with bad rules. Moving from bad rules to better ones may be much harder than most economists have allowed. The construct of a charter city is a suggestion about how we can change the dynamics of rules. It is a way to speed up the rate of improvement in the rules."

While Honduras will be the first country to try out Romer's model for charter cities, similar examples already exist.

Singapore and Hong Kong are perhaps the most famous prototypes of cities that were politically separated from their associated countries -- Malaysia and China respectively -- and became economic powerhouses by creating pro-business environments that attracted strong foreign investment.

The Honduran government hopes to recreate the success of these Asian metropolises, but it also faces the prospect of creating a starkly divided society, where these independent cities may be viewed as wealthy enclaves, which will undoubtedly require heavy security measures.

"We are going to see long, eternal queues like we see in Palestine [for people] to go to work in Israel, or queues just to move around," Honduran congressman Edmundo Orellana told the La Prensa newspaper.

Orellana also argued that the cities would allow multinational corporations to establish "protectorates" at the expense of the country's sovereignty and the rights of the Honduran people.

The congressman's characterization raises the specter of exploitation by corporations that Honduras experienced during the second half of the 20th century when two fruit conglomerates, Standard Fruit Company and United Fruit Company, established tax-exempt enclaves for their banana plantations and exploited cheap labor, while putting very little back into the Honduran economy.

The possibility that these charter cities could end up repeating this kind of exploitation is a very real concern for critics of the plan, while proponents maintain it will provide jobs and improve the standard of living for the Honduran people.

The details of how much wealth will go back into the Honduran economy remain murky, and will ultimately be determined by the agreements set forth in the cities' charters.



The Honduran National Congress is currently reviewing the law to geographically define the first four “Charter Cities” in the world, three sites along the Caribbean coast in Garifuna afro-indigenous territory, Trujillo, the Valle de Cuyamel and the Sico-Paulaya Valley, which includes Miskitu indigenous territory. One is proposed in the Gulf of Fonseca which would include the community of Sacate Grande.

The Charter Cities initiative cedes city-sized sections of Honduras to corporations or foreign governments to govern autonomously, indefinitely. Investors can make their own laws, build their own police force, administer services and regulate their economy.

On September 4, Michael Strong, representing the MKG Group, signed a memorandum of understanding in the Honduran Congress to establish the world’s first Charter City, a contract is surrounded by confusion and secrecy. Strong provided no information about the MKG Group, which has no web site or any other readily available public information.


In blogs and international forums over the past year, a group of free market Libertarians have made clear their intention to channel their ideological vision into the blueprint outlined by New York University economist Paul Romer.

Strong founded the Free Cities Institute [FCI] to promote charter cities, which in July 2011 co-sponsored with Guatemala’s Francisco Marroquin University [UFM] a forum in the Honduran Island of Roatan. Though the FCI web site has apparently been taken down, the UFM page on the event featured articles by Patri Friedman, grandson of Milton Friedman. Friedman and Peter Thiel, the billionaire founder of PayPal, founded the Seasteading Institute in 2008 and Michael Strong is on its Board of Directors.

The Seasteading Institute is dedicated to promoting communities in the sea, free of states. Friedman late last year resigned as the Seasteading CEO to head the Future Cities Development Corporation, dedicated to developing a Charter City in Honduras.


Paul Romer explains that his plan is about starting over, with a clean slate with good laws. The Wall Street Journal’s diehard neoliberal Mary O’Grady noted “What advocate of free markets hasn’t, at one time or another, fantasized about running away to a desert island to start a country where economic liberty would be the law of the land?”

The problem is there are no clean slates. Honduras does not have untouched expanses of territory awaiting homesteaders to lay claim. Trujillo, the site most often mentioned for the first Charter City, has long belonged to afro-indigenous Garifuna communities and campesino farmers, and suffers from a long history of attempted usurpation, from the Republic of Poyas to the United Fruit Company.

US filibuster William Walker, after being chased out of Nicaragua, tried to take his thwarted plan to create a US slave state to Roatan, but was captured and executed in Trujillo in 1860.

Romer argues it is necessary to ‘start from scratch,’ in order to create economic opportunities for the impoverished people of the world. Poverty, he argues, could be ended if impoverished people, and nations, could only let go of the systems of bad laws and social mores that bind them to poverty.

Clearly wealth and poverty are about governance, who makes the rules, who they favor, who must abide by the rules and who is doesn’t have to, who benefits, who doesn’t.


Trujillo’s Garifuna and campesino communities have, over the past 20 years, been preyed upon by violence unleashed as a consequence of a set of rules inspired by one of Michael Strong’s ideological cohorts, and co-author of a book promoting ‘entrepreneurial capitalism,’ Hernando de Soto.

In the heart of the region apparently now proposed as the future home of a Charter City, on August 27 the Garifuna community of Vallecito awaited government officials, who never came, to measure a small portion their land, to which they hold full legal title. The huge majority of their lands has been taken over by businessmen and drug traffickers, mostly, they explain, through violence and fraud. The measurement would be a first step in recovering possession of the land.

The Vallecito community was surrounded by armed bands firing off weapons through the night. A group of heavily armed paramilitaries snuck into the middle of a Garifuna drumming circle, made their presence known and left, the death threat established with clarity. The armed bands have continued to circle the community.

The scene was typical of the region since the 1992 Land Modernization Law unleashed paramilitaries against agrarian communities. The law altered the Agrarian Reform Law from the 1960s, which prohibited the resale of land acquired through the agrarian reform program. Businessmen and drug traffickers, with deep ties to the military intelligence death squads infamous for political killings in the 1980s, used armed bands and other forms of coercion to force Garifuna and campesino communities to sell their land, illegally, and used their political clout to maintain control of the land despite the illegal title transfers.

‘Unlocking the wealth’ held in land through the promotion of land markets was a principal of the “Washington Consensus” ideologically promulgated by Hernando de Soto. The Washington Consensus also involved shifting access to financing from the public to the private sector. The single largest benefactor in Honduras of this shift in the early 1990s was clearly African palm oil businessman Miguel Facusse, who not only used fraud and violence to gain control of land in the Aguan region that Trujillo forms part of, but used political connections to generate even more wealth through access to loans from public entities including the WB (World Bank) and IDB (Interamerican Development Bank).


The written and unwritten rules of Honduras have been set into place over generations by the constant use of force, both violence and other forms of coercion, by the wealthy sectors in Honduras, and by the wealthy nations and corporations of the world.

A recent example is the June 2009 military coup that set the political stage for the Constitutional Amendment that provides the framework for Charter Cities. The on-going usurpation of Garifuna lands in Vallecito is another expression.

The Charter Cities proposal was linked to a government turnover in Madagascar in 2009, this one the consequence of massive protests. Paul Romer first traveled to Madagascar in July 2008, to propose a Charter City, but the deal was left in the air. The same month, the South Korean transnational Daewoo announced it struck a deal to cultivate 1.3 million hectares of farmland for free, over 99 years. In early December 2008, Daewoo announced the deal was uncertain as a contract had not been signed. In late December 2008, Paul Romer traveled to Madagascar and met with President Marc Ravalomanana, who soon announced the intention of creating Charter Cities in Madagascar.

By the end of January 2009, citizens of Madagascar – outraged by these proposals – took to the streets, the military took control and President Ravalomanana left the county. Within a few months both proposals had been scrapped. Though not explicitly linked the Daewoo deal and Charter Cities, the timing leads to the conclusion they were related.


Daewoo is a subsidiary of the South Korean transnational POSCO. Originally a steel corporation, it is today a diversified conglomerate which owns corporations involved in everything from machinery and automobile production to food and biofuel production, mining, textiles, etc. In May 2011, POSCO signed a contract with the Honduran government to carry out initial studies for infrastructure development for the Model Cities.

In March 2011, Honduran President Porfirio Lobo attended a ceremony to place the first brick in a cruise ship dock in Trujillo, there he announced that the IDB would finance studies for the construction of an airport and port for a Charter City.

The cruise ship dock is a venture of Life Vision Properties, a Canadian investment fund (with a Cayman Island shell corporation) promoted by Canada’s “Porn King” Randy Jorgenson and Porfirio Lobo’s brother, Ramon Lobo. The cruise ship dock and mega-tourism project associated with it are annihilating the Garifuna community of Rio Negro, which has literally been bulldozed away, and the families were resettled in a “model community” outside the neighboring Garifuna community of Cristales.

A clear violation of international law regarding indigenous territory and the obligation to gain consent for development projects carried out on indigenous land, community members who opposed displacement have been threatened, particularly Garifuna journalists with the community radio. In December 2011, families from Rio Negro presented a complaint against Randy Jorgenson in the Honduran justice system.


The proximity of coups and international law violations to the Charter Cities initiative probably does not faze the Libertarian cabal promoting them. They have been clear, they have their differences with democracy, and the plans for governance of model cities reflect this.

A recurring theme in interviews with Romer is the concept of ‘voting with your feet,’ as described in a July 2010 Atlantic Magazine article. “Rather than getting a vote at the ballot box, Romer is saying, the residents of a charter city would have to vote with their feet. Their leaders would be accountable — but only to the rich voters in the country that appointed them.”

The article continues, “The real test for Romer’s attitude toward democracy is not whether it conforms to Western ideals, but whether it appeals to the poor people whom Western aid agencies claim to be serving. And on this score, the answer is clear. In fact, you could say Romer’s assertion — that voting with your feet can be a palatable alternative to casting a ballot — already has 214 million adherents, for that is the number of people who have chosen to leave their home countries and settle as migrants in places where they have no political vote.”

In other words, people’s political participation in the Model Cities would be limited to deciding whether or not they would live there, an option that Atlantic Magazine explains 214 million people have “chosen” in deciding to live without a vote outside of their home nation.

This argument, that the hundreds of millions of immigrants who do not benefit from the rights of citizenship where they live is somehow an option they freely “choose” ignores a multitude of elements of coercion, repression, war, poverty, discrimination, etcetera, involved in many such decisions.

Patri Friedman wrote, in an April 6, 2009, Cato Institute blog post, “Democracy is the current industry standard political system, but unfortunately it is ill-suited for a libertarian state.” An appropriate precedent to his grandson’s declared belief in the incompatibility of democracy and Libertarian ideals, Milton Friedman was close to Chilean dictator - and darling of free marketers – General Augusto Pinochet.

Peter Thiel wrote, just a few days later, on April 13, 2009, also in the Libertarian Cato Institute’s blog, “Most importantly, I no longer believe that freedom and democracy are compatible.” He later recanted the statement; it is, after all, an impetuous statement from one of the world’s most wealthy and powerful men.


Billionaire Peter Thiel was a founder of PayPal and the financier that made Facebook possible, retaining 10% of its ownership. He then went on to create Palantir in 2004 with joint start-up capital from the CIA-owned technology venture capital firm In-Q-Tel.

Palantir, named for the all-seeing stone in “Lord of the Rings,” is a technology company that – according to a November 22, 2011, Businessweek article – is “tying together surveillance video outside a drugstore with credit-card transactions, cell-phone call records, e-mails, airplane travel records, and Web search information,” to generate dossiers on people of interest, and is used by the CIA, the FBI, and the Department of Homeland Security among many other government and private sector clients.

As if the concept of the ultimate ‘big brother’ technology controlled by a man who explained that democracy is not in line with his ideals is not disturbing enough, Thiel is also on the steering committee of the Bilderberg Meetings, annual meetings which since 1954 have brought together leading businessmen, politicians, academics, and journalists from Western European nations, Canada and the US for off the record discussions about the direction of the world.


As the Garifuna communities, whose territory is slotted to house the worlds’ first Charter City, vocally oppose the project, in Honduras’ capital of Tegucigalpa, there was a strong reaction. Xiomara Castro, Honduran presidential candidate for the new LIBRE party, leading the race in some polls, issued a statement: “The law imposed is inconsistent with the concept of sovereignty, independence in equal opportunities for domestic and foreign investment. Those who initiate projects under this unconstitutional ‘model cities’ scheme are risking the loss of their investment… We invite the President of the National Congress and the National Party, based on Article 5 of the Constitution which regulates the Plebiscite and Referendum, to submit the Law of “Model Cities” to a referendum and let it be the people who decide.”

Since the September 4 contract was signed by Michael Strong a series of complaints have been presented to the Supreme Court arguing the contract is unconstitutional. On September 12 lawyers presented complaints of treason against the congressional representatives who voted for the Constitutional Amendment and Statute that established the Charter Cities.

On February 15, 2011, the Constitutional Reform that established the framework for Charter Cities in Honduras, dubbed Special Development Regions [RED], was published into law, and on August 23, 2011 the statutes that further defined the creation and administration of the REDs was published.

According to Jari Dixon Herrera, Oscar Humberto Cruz and four other lawyers representing the Honduran Jurists Association, the Charter Cities laws are unconstitutional. They presented a legal challenge to that effect on October 18, 2011 arguing the amendment and statute were unconstitutional. The lawyers argue that permitting foreign investors to enjoy territorial and administrative autonomy implies a separation of a section of the national territory, and violates the sovereignty of the nation since the people of Honduras would no longer exercise authority over the area circumscribed as a RED. They also argue that the initiative violates fundamental rights of Honduran citizens recognized by the Honduran constitution and international treaties, including the right to equality, no expatriation, free circulation, the public tutelage of labor relations and the right to not be obligated to change residence.

On January 12, 2012 the Honduran Attorney General’s office gave its opinion to the Supreme Court, that the reform and statutes do violate the constitution and should be overruled.


Five ‘Pro Tempore’ Transparency Commission members were charged by acting Honduran President Porfirio Lobo with overseeing the creation of the initial Charter Cities on December 6, 2012. However, in an interview in The Guardian, Romer said they were not notified beforehand that the September 4 contract would be signed. Implying he was concerned about the constitutional challenge, Romer explained he and the other commissioners had backed away from the Commission. In a September 7 letter, the Commissioners told Lobo they were “relieving him of the obligation” to formalize the commission by publishing into law the December 6, 2011 presidential decree that established the Commission.

The Commission is chaired by Paul Romer, Economics Professor at NYU, and includes Harry Strachan, Nancy Birdsall, George Akerlof and Ong Boon Hwee. They said they were still fully supportive of the proposal and willing to come back to the Commission as soon as soon as “the obstacles to the full establishment of the institutional framework of the RED have been resolved.”

George Akerlof created the field of ‘identity economics’, exploring how social psychology affects economics, arguing that social norms linked to a person’s identity impact their behavior within an economy, a vision shared by Romer, which in effect presents poverty as a cultural problem. The key to prosperity is eliminating cultures or cultural norms that generate poverty.

Nancy Birdsall was an Executive Vice President of the IDB when the IDB aggressively promoted Plan Puebla Panama. She is also a former Senior Associate at the Carnegie Endowment for International Peace and currently is president of the Center for Global Development. She advocates for economic reforms within the framework of the ‘Washington Consensus’ a set of neoliberal economic policies.

Ong Boon Hwee, Brigadier General of the Singapore Army who specialized in crisis management, currently directs two different consulting firms: Beyond Horizon Consulting (BHC), which describes its activities as people development, strategic thinking and change management, and Temasek Management Services (TMS). He also owns Stratton Management Company (SMC) which manages his joint investments in a range of sectors, particularly renewable energy, and is the former CEO of Singapore Power (SP).

While Romer, Birdsall and Akerloff provide the Commission with a theoretical framework, Birdsall and Hwee undoubtedly also provide important connections to financial backers. Hwee’s inclusion in the Commission gives an important insight into the vision for the Honduras RED. He has been a top ranking military officer in Singpore, widely described as an authoritarian police state.

Harry Strachan appears to be key to on the ground implementation. Over the past two decades, he has networked Central American oligarchs, constructing financial and political alliances, pushing Central American wealth management from family centered corporations into shared investment funds, and building up networks of strategic political influence.

A partner in the Boston financial advising firm Bain & Company, Harry Strachan started Central America’s leading financial management firm, coordinating regional mergers and acquisitions. He was Rector of the leading Central American Business school INCAE. When he first moved to Costa Rica in 1992 he dedicated much of his time to promoting the Central America Free Trade Initiative [CAFTA] that unified Central America’s mega-wealthy through a platform he helped to found, the US-AID-funded Caribbean Central America Alliance (C-CAA) which coordinated forums where Strachan presented at panel discussions with former Honduran president Ricardo Maduro. After CAFTA was ratified across Central America, in 2007 he founded the Central America Leadership Initiative, a networking platform.


In 1984, it was Strachan that connected Republican Presidential candidate Mitt Romney with El Salvadoran investors at same time they financed the ARENA party with its associated death squads. According to Huffington Post, the Salvadoran group provided a significant 40% of the start-up capital for a spin-off of Bain & Company, Bain Capital, launched in 1985 by Mitt Romney. The Salvadorans have been loyal patrons of Bain capital ever since.

Romney explains that his Salvadoran customers not only facilitated his massive fortune but he also learned from them: “These friends didn’t just help me; they taught me.” Romney describes as friends his initial investors, including the Salaverria, Poma, de Sola and Dueñas families who “were also at the time financing, either directly or through political parties, death squads in El Salvador.”


In 1992, Strachan moved to his birthplace, Costa Rica, where he had grown up in a Presbyterian missionary family. In Costa Rica, Strachan founded Mesoamerica Investments, which INCAE’s website describes as ”the leading regional mergers and acquisitions firm with strategic consulting and private equity branches,” while the firm’s own website emphasizes its ongoing relationship to Bain Capital and Bain & Company.

Central American wealth and political power is coordinated through family dynasties, powerful oligarch clans that control different sectors of the economy in different countries – as Strachan describes them, family businesses. The trend over the past two decade has been to diversify, moving beyond financial alliances through marriages, to the creation of regional capital investment funds and corporations jointly owned by many families.

The Poma clan, whose patriarch Ricardo Poma is described by Harry Strachan as one of his best friends, is one of Central America’s wealthiest families and is an investor in Bain Capital. Both Poma and Strachan are close to former Honduran president Ricardo Maduro. Maduros’ company Inversiones la Paz manages Poma’s Grupo Roble and Grupo Poma’s Honduran subsidiarias.

The idea for the Charter City was reportedly presented to current Honduran leader Porfirio Lobo through Xavier Arguello Carazo, private secretary to the President of Honduras during Ricardo Maduro’s term. Maduro is on the Presidential Model City Advisory Committee.


In the map of oligarchic fiefdoms that overlays Central America, the areas proposed as the home of the future Model City / Charter City is controlled by palm oil magnates, principally Honduran Miguel Facusse who gained control of the territory through violence and fraud, taking wealth from the State and its citizens, and using public funds from international development banks and national banks.

Though Facusse has never been associated with the Charter Cities in any public way, it is impossible to escape the fact that he has territorial control over much of the area surrounding proposed Charter Cities. His hold on much of that territory is challenged by campesino and Garifuna communities who never accepted the transfer of their lands to his control, and the control of a set of large landholders who appear to coordinate with Facusse, sharing security forces.

While the exact location of the first Charter City is unclear, there is virtually nowhere in Honduras that land conflicts of this nature do not exist, the legacy of the Washington Consensus’ land modernization. It looks as though the free marketeers and Libertarians may be starting the world’s first Charter City, with authoritarian governance, facilitated by a military coup, coordinated using political sway with business partners, using public funds from the IDB for infrastructure plans, and built on land stolen from indigenous communities, small farmers and the state of Honduras.

The Model (Charter) Cities proposal is hardly a new set of transparent rules, it follows the tradition of imposing laws through networks of power controlled by wealthy nations – neo-colonialism.



Small government and free-market capitalism are about to get put to the test in Honduras, where the government has agreed to let an investment group build an experimental city with no taxes on income, capital gains or sales.

Proponents say the tiny, as-yet unnamed town will become a Central American beacon of job creation and investment, by combining secure property rights with minimal government interference.

“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

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.

Honduran leaders hope that the city will lead to an economic boom for the poverty-stricken country south of Mexico. The average income in Honduras is $4,400 a year.

“[It] will bring a lot of investment into the country [and be] a center for many employment opportunities for our people,” Honduran President Porfirio Lobo Sosa has said.

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.”

Investors who think the city will do well will also be able to buy land there.

“There will be a free market in land,” Strong said.

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

“It will be designed to be very welcoming to those with a minimum threshold of skills or capital,” Strong said. However, businesses in the city will be required to employ a minimum proportion of native Hondurans – a requirement imposed at the outset by the Honduran government to ensure that the city’s benefits largely go to Hondurans.

To insure the city against political change, the Honduran Legislature has agreed that a two-thirds majority will be required to interfere with the city.

MKG will invest $15 million to begin building basic infrastructure for the first model city near Puerto Castilla on the Caribbean coast, said Juan Hernandez, president of the Honduran Congress. That first city would create 5,000 jobs over the next six months and up to 200,000 jobs in the future, Hernandez said.

Strong said construction could begin in months.

“First, we will build the critical infrastructure -- roads, water, power, sewers," Strong said. "In collaboration with the [Honduran] government, we will then create the city’s government system and the security, and 3 to 6 months after that we will build the first factories.”

The MKG Group city is the first to get approval, but Honduras plans to create other “free cities” as well.

The bill to allow the creation of such cities passed the Honduran Legislature nearly unanimously, by a vote of 126 to 1. But not everyone is on board with the project. Left-wing Hondurans have filed a complaint before the Honduran Supreme Court, arguing that the free cities project violates their constitution and treats “national territory as a commodity.”

The indigenous Garifuna people in Honduras also have protested the creation of free cities, saying that they are worried the cities will be built on their land.

Strong said that they need not worry.

“The media reports are full of inaccuracies. We're not even remotely close to [the Garifuna]. We're literally hundreds of miles away,” he said.

Additionally, the new city will be built on unoccupied land.

We will be selecting unoccupied land so that everyone will be opting in by choice,” Strong said.

But some oppose the project being built anywhere in Honduras.

“I can't help but suspect that the promise of plenty of jobs is nothing but a Trojan horse,” Teofilo Colon Jr., who runs the Garifuna cultural group Being Garifuna, told

“The prospect of setting up a charter city, with its own laws, [that] is sovereign to itself and doesn't have to pay taxes, is a dubious one at best. It'd be tantamount to inviting pirates to come in and have free reign to essentially raid the country's resources/riches.”

The MKG Group says its plan, however, is not to take advantage of natural resources, but rather to attract entrepreneurs using good laws and low taxes.

Strong cited Hong Kong as a city that prospered under that model.

“Hong Kong’s poverty once was roughly on the level of Africa. Today it is one of the wealthiest places.”

Strong says that the same could happen in Honduras.

“We'll see Hondurans having more jobs, higher income, and more security than they've ever had.”



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

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 aprivate 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.



Once regarded as the archetypal banana republic, the Central American republic of Honduras has become known as a classic basket case – with all due respect, as they say.

Honduras has the highest murder rate in the world, an impoverished population and political instability from the 2009 coup. In response, the government of Porfirio Lobo has decided to throw in the towel. Or launched a master stroke to reverse the decay, depending on whose point of view you accept.

A scheme to create Honduran “model cities” – a term redolent of George Orwell – was created a year ago, but only this week an agreement was reached with a US-based investment group MGK to build the first of three.

The model cities are to be states within a state, with their own legal and law enforcement agencies, tax and monetary systems – “Hello US dollar”, “Adiós Honduran lempira”, presumably – and every conceivable facility to attract investment.

The concept sounds like a steroid-enhanced vision of a free-market enthusiast. Which it is. The US economist Paul Romer has dreamed up the idea of creating cities, along the lines of Hong Kong and Singapore, which have created poles of dynamic investment that have spilled over into their once impoverished hinterlands.

So far, so good. But Singapore and Hong Kong were cities in their own right before they become poles of development for neighboring regions. In Honduras, the aim is to build each city on a huge vacant lot. Everything is to begin from scratch.

So far, MGK has promised to invest $15 million in the first model city, and the government of South Korea has chipped in with $4 million. That would be plenty of money to invest in a chain of British fish-and-chip shops, but hardly enough to put in even the plumbing for the first model city in tropical Honduras.

As protests grow by those who regard the model cities as an affront to national sovereignty and say they will seize traditional lands from ethnic minorities, Carlos Piñeda, the president of the Commission to Promote Public-Private Partnership has responded. He says the project has the potential to turn Honduras into an engine of wealth.

It can also, Piñeda added, “a development instrument typical of first-world countries”.

Next stop Scunthorpe, perhaps.



Honduras' plans for "model cities" – entire settlements managed by private corporations – already seem to be settling in to a pattern of secrecy and corruption worthy of the best dystopian futures.

The idea to create the cities – known as Regions Especial de Dessarrollo(Special Development Regions), or REDs – was suggested a year ago, but this month the first deals were signed, with US-based investment group MGK, to build one.

The Financial Times' Ron Buchanan reported (£):

The model cities are to be states within a state, with their own legal and law enforcement agencies, tax and monetary systems – “Hello US dollar”, “Adiós Honduran lempira”, presumably – and every conceivable facility to attract investment.

The concept sounds like a steroid-enhanced vision of a free-market enthusiast. Which it is. The US economist Paul Romer has dreamed up the idea of creating cities, along the lines of Hong Kong and Singapore, which have created poles of dynamic investment that have spilled over into their once impoverished hinterlands.

Even before the real problems began, there was already opposition to the plan. The Independent's Suzy Dean wrote, back in January, that:

What sets the REDs apart from other charter cities is the belief that in order for the cities to thrive they must suspend democracy. The unelected [Transparency] Commission will govern the new city, until they decide the population is ‘ready’ for democracy; only then will new local councils be set up. . .

The establishment of the Transparency Commission reflects the belief of the Honduran government that the public might ‘get it wrong’. The Transparency Committee will not engage with or respond to public demands.

The economist Paul Romer has been the guiding voice behind the plans, and was one of the five people originally slated to be on the Transparency Commission. But yesterday, he sent Marginal Revolution's Tyler Cowen a statement detailing his growing problems with the project. In short, the Transparency Commission has been shuttered, and Romer only even heard about the MGK deal from the press:

From recent newspaper reports, I learned that the Honduran agency responsible for public-private partnerships had signed an agreement about a RED with a private company. When I asked for information, I was told that I could not see this agreement.

This was a departure from the standards of transparency that the administration had led me to expect. It was also a departure from the role for the Transparency Commission outlined in the Constitutional Statute passed by the Honduran Congress.

So the model cities, which were going to have a transparency commission in the place of democratic governance, now have… nothing. Except the corporation that runs them.

Meanwhile, Antonio Trejo Cabrera, a lawyer who had helped to prepare motions declaring the the model cities unconstitutional, was murdered on Sunday, according to the Associated Press:

Antonio Trejo Cabrera, 41, who died early Sunday after being ambushed by gunmen, was a lawyer for three peasant cooperatives in the Bajo Aguan, a fertile farming area plagued by violent conflicts between agrarian organizations and land owners. The most prominent is Dinant Corporation owned by Miguel Facusse, one of Honduras' richest men. Thousands of once-landless workers hold about 12,000 acres (5,000 hectares) of plantations they seized from Dinant.

Trejo, who was shot six times after attending a wedding, reported threats in June 2011, according to documents obtained by The Associated Press, including photocopies of a BlackBerry message he received saying: "Trejo, you dog, you have 48 hours to get out or you're dead." . . .

MGK director Michael Strong said the company is "horrified" by Trejo's killing.

"We believe that Antonio Trejo, had he lived long enough to get to know us, would have concluded that our approach is 100 percent beneficial to Honduras and Hondurans. We are saddened for his family and understand what a tragedy this is for trust and goodwill in Honduras," Strong said in a statement to The Associated Press.

The plans to construct the first RED remain in effect.