Politics, Business & Culture in the Americas

How to Grow a City: A Look Inside Honduran ZEDEs

Reading Time: 3 minutes

When an outsider looks at Honduras, it’s hard not to see the worst: poverty, institutional corruption and violence run rampant. When a country grabs international headlines for its president being ousted by the military after attempting to extend his own term, or for having by far the highest murder rate in the world, or for being the country of origin for thousands of unaccompanied minors turning up at the U.S. border, it doesn’t inspire confidence in potential outside investors.

And this is the crux of the Honduran dilemma: investment, industry, and jobs—the very things necessary to put the country back on the right track—remain elusive in an environment of political uncertainty and social unrest.

Enter the Zonas de Empleo y Desarrollo Económico (Zones for Economic Development and Employment—ZEDEs)—autonomous zones run by private entities that will provide their own judges, police and public services. Proponents of the idea say that it’s a bold move that could transform Honduras and, eventually, struggling nations throughout the world.

“…This project, if it accomplishes what it’s capable of doing, will demonstrate inside of Honduras and to the world that the capacity for solving problems and for creating jobs in particular can go forward with a velocity that very few people have been expecting,” says Mark Klugmann, co-chair of the Comité para la Adopción de Mejores Prácticas (Committee for the Adoption of Best Practices—CAMP), the board of international reformers authorized by the Honduran government to approve applicants who wish to open a Honduran ZEDE.

The ZEDEs have faced their fair share of criticism from both insiders and outsiders, most notably when a high-profile proponent, Nobel Laureate economist Paul Romer, dropped out and disavowed the project after the government signed a memorandum of understanding with investors without consulting the transparency commission Romer was a part of. Romer claimed that this removed the ability to limit corruption in the deals, although the decree authorizing the commission had never been officially published.

In 2011, legislation from Honduran lawmakers re-worked the plan to prevent foreign governments from administering ZEDEs (then called REDs)—an aspect of Romer’s “charter city” vision that disturbed Hondurans wary of neocolonialism.

In October 2012, the Honduran Supreme Court found the legislation to be unconstitutional. New legislation, approved in Congress in June 2013, created the current ZEDEs and established a new oversight and transparency board known as CAMP. Its 21 members were named in February 2014.

With the new law in place and passing constitutional muster, insiders like Klugmann say it’s only a matter of months before the first proposals make their way through the approval process and ZEDEs begin to pop up in Honduras. The law requires 90 percent of jobs in a given zone go to Honduran citizens, as well as 85 percent of salaries, which means the zones will have to compete and prove themselves in order to attract labor and citizens.

“The opt-in nature is really the key to the whole thing,” says Gabriel Delgado, CEO of Elevator Cities, a company that hopes to open a ZEDE in Honduras. “Because you are not compelling anybody by force to come here. You are showing people the opportunity, and they choose to come. So it’s going to fail or succeed on its own merits.”

Reason TV and the Moving Picture Institute (MPI) have produced a 4-part video series called How to Build a City in Honduras, which explores the past, present, and future of the project in great detail. Part I introduces the key players and concepts behind the Honduran ZEDEs and the broader startup cities movement. Part II explores already existing examples of experimental governance in Honduras, including entire towns commissioned and governed by private companies. Part III delves into the history of the Honduran ZEDEs and highlights both past and current criticism of the project. And Part IV looks at features entrepreneurs who’ve already sketched out business plans for what they hope will be one of the first Honduran startup cities.

Watch the entire series here:  https://www.youtube.com/playlist?list=PLBuns9Evn1w9uuATKAy3qeIABs26NvMDq

Tags: Charter City, Honduras, ZEDEs
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