It seems as though Honduras is going ahead with a Charter City. I’ll have a bit to say about that in some later posts, but right now I just want to aggregate some primary source information about what the Honduran legislature has and has not passed. The basic idea is to create a city where national laws and national institutions do not apply. Instead, new rules can be written on a clean slate, with a government that can outsource and contract functions to any other government (or private entity) that it wants. The result, it is hoped, with be economic growth with political order, a made-to-measure version of Dubai. After all, if an absolute monarchy bordering Saudi Arabia could do it, why can’t anyone?
The first part was a pair of constitutional amendments. Article 304 now allows Congress to select judges (with a two-thirds vote) for special courts in the “Special Development Regions.”
Article 329 meanwhile, now states: “The Special Development Regions shall have their own legal personality, their own public administration, their own legal system that will be approved or disapproved by a simple majority of the national Congress, their own legal exemption in conformity with Article 304 of this Constitution, the power to sign treaties and international agreements concerning trade and cooperation in matters under their control, subject to the ratification of the national Congress … In the fields of budgets, taxes, tax collection, tax administration, as well as the ability to sign contracts that shall pass into the next national administration, and the ability to borrow internally or externally as long as such debts lack any guarantee from the State of Honduras.”
So far, so vague. But on August 23rd, Congress passed the enabling legislation for the special development regions. It added that the regions will have the ability “shall establish their own police and have the power to exercise their function themselves or by delegation. To this effect, they have the power to sign cooperation agreements to strengthen the same with other countries.” More impressively, the statute restricts the ability of the national government to intervene in the special region’s affairs, and states that any “jurisdictional conflicts” will be settled by an arbitration panel of three judges selected from a pre-assigned list of forty people, half selected by Congress, and half selected by the “Transparency Commission” that runs the region. (An unofficial translation of the amendments and the legislation can be found here.)
The Transparency Commission is kind of sort of limited by the “Normative Councils,” elected by the region’s permanent residents (foreign and Honduran). The normative councils set taxes and ratify changes to the region’s governmental organization
Now, Hondurans will be allowed free entry to the region, and any businesses there will need to have at least 90% of their workforce and 85% of their payroll go to Hondurans, except that “both ratios can be modified in exceptional cases determined by the special development region’s regulations.”
Finally, on December 6th, President Porfirio Lobo appointed the Transparency Commission. It consists of five people: two American economics professors, the former head of the INCAE business school in Costa Rica, a former IABD vice-president, and a former Singaporean general.
The boundaries of the region have not yet been established, and although the Economist mentioned that the region will use the Mauritian legal system (and therefore ultimately the British one, since Mauritius, like the Bahamas, still uses the Privy Council as its ultimate court of appeal), I have not yet obtained independent confirmation of that fact.
And there you have it. Before I discuss what I think the implications will be, what do you think? Does this idea have potential, or will it be a failure?