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Jonathan Watts, Latin America correspondent, Saturday 8th September 2012 01:26
Plans to create a neo-liberal start-up city in Honduras with its own laws, tax rules and police force suffered a setback on Friday when the economic guru who inspired the project said he has been unable to act as its guarantor and watchdog.
Paul Romer, an influential professor at New York University, is seen as crucial to the credibility of the plan, which aims to transform enclaves in the Central American nation into magnets for investors similar to Hong Kong, Shenzhen and Singapore.
But days after the deal was announced, Romer said he had not been given the powers and information necessary to fulfil his role as chairman of the transparency commission, which is meant to ensure governance of the new development zones.
Romer said he and four other international figures were appointed by presidential decree to the commission, which has wide-ranging powers to appoint and fire governors, nominate judges and hire auditors in the proposed new zones. But the five will issue a statement distancing themselves from this week's announcement and calling into question the legality of their appointment, which they say has not been published in the official gazette as required by Honduran law, ostensibly because of a challenge in the constitutional court.
"Thus the conditions have not existed to permit the transparency commission to play the role envisioned for this ambitious and important project," they write in an open letter to President Porfirio Lobo Sosa, to be released online. "As you continue to work to attract foreign investment ... in this period of uncertainty, we feel it would be wise to release you from any sense of obligation to proceed with publication of the decree and thus with our formal appointment."
Romer said he was surprised to hear the announcement this week that the Honduran government had signed a $14m memorandum of understanding with the business consortium NKG. "We're not involved in any discussions with anyone involved in this deal. Our statement is an attempt to clarify to the public what our role is. At the moment the commission does not exist, we do not have any information, or means to check or look into any aspect of the negotiation... We cannot serve the guarantor or endorser function the commission was that supposed to provide."The five commission members said they continued to support the project and were willing to work with the government in the future. But their lack of involvement at this initial state is likely to alarm potential investors.
The Honduran administration said the issue was overblown. "This was not a legally binding agreement. It was a memorandum of understanding," said presidential adviser, Octavio Sanchez.
"We want the area to become a successful place so the models that work there can be adopted elsewhere. It's not an isolated island of success. It is an inspiration for others to follow. It is a showcase."
Government officials said earlier this week that the project was the most important in Honduras for 50 years and would start in October. However, Sanchez said that everything must await a ruling by the Supreme Court, which could take anything from a week to 10 years.
Romer's plans to build "charter cities" – which are envisaged as ideal locations for wealth creation – have long been controversial. Critics fear they may become states-within-states for a privileged elite, worsening inequality and bypassing labour and environmental laws.
But Honduras' new plan may go a step further, due to the influence of radical libertarians who are now talking of creating "private cities".
Romer appeared unsure what direction the government was taking: "I don't know what people mean when they refer to private cities. But if it suggests that there will be no institutions or government, then I fear that misses the essential requirement for successful urbanisation. I would be concerned about how a private attempt to provide things like policing services could be held accountable."