Women walk in the small village of El Guantillo, on outskirts of Tegucigalpa. REUTERS/Jorge Cabrera

For the "charter city" movement in Honduras, overcoming legal hurdles is followed by thousands of crucial questions.

Honduras occupies a grim spot in Latin America. It has the world’s highest murder rate, nearly 65 percent of the population lives in poverty, and about 16 percent of its GPD comes in remittances from the United States. Violence and income inequality increased even more following a military coup in 2009. The country has since held presidential elections, though opposition politicians and observers questioned the process.

This context helps explain why an idea as drastic as the “charter city” model took hold in Honduras several years ago. The concept, usually credited to the economist Paul Romer, aims to recreate the success of city-states like Hong Kong and Singapore by creating business-friendly, quasi-sovereign villages or even cities, free from government regulations and the messy realities of politics. Touted as a revolutionary development tool, the idea promises fresh opportunities for countries mired in poverty and poor governance.

Despite marked opposition from human rights organizations and a multitude of legal challenges, these theoretical “model cities,” as they’re called locally, might actually be up and running in the near future. A 2011 law permitting the creation of autonomous zones was struck down by the Honduran Supreme Court, but the current “Zones of Employment and Economic Development” law (ZEDE in Spanish), passed in 2013, has since been upheld by a reconfigured court, paving the way for the great experiment to be put into practice.

The possibility of a real ZEDE being created soon has raised widespread concern, both locally and internationally. Romer himself, initially deeply involved in the Honduran initiative, stepped aside citing transparency concerns. A recent spate of articles in the international press focuses on the situation of residents in the sparsely populated areas that could theoretically house these zones: they would be forced to join the ZEDE or sell-out from their homes.

The form and function these “model cities” will take remains remarkably vague. The ZEDE legislation does outline ground rules: the president will appoint a “Committee of Best Practices,” which will develop more specific regulations for the areas. Committee members will also appoint a sort of technocrat mayor for each zone. The ZEDE authority is free to develop a judicial system as well as social security and education policies. These policy areas will not be subject to Honduran legislation.

But otherwise, no one really knows what these communities will look like, or what it might actually be like to live in one. This is largely by design. The legislation is intended as a framework that will permit investors to determine what best suits their needs, according to Octavio Sanchez, a former Honduran presidential advisor who was instrumental in developing the ZEDE legislation and a member of the newly minted committee in charge of ZEDE supervision. The law “lends itself to an infinity of industries,” he says, from remote mining sites to a financial center. “It can be as big or as little as you wish. The objective is not a city, the objective is to attract different types of investment to the country.”

Some potential developers do see an opportunity to reinvent urban existence, however. “Imagine, it’s like a free-trade zone, but centered around the residents,” says Gabriel Delgado, who directs Elevator City, a potential ZEDE development group. “Within an area that functions like a private condominium you have your job, your recreation, the possibility to start a business without so many restrictions. It’s very appealing.”

Areas would be managed by developers and investors, under an appointed technical secretary and the national Committee of Best Practices, but residential areas could also be organized by homeowner associations or condo-style boards, Delgado says. Still, the main accountability of the ZEDE management will be to investors.

A "code of coexistence" (presumably prohibiting unseemly begging, street vending, etc.) will ensure neatly regulated public spaces. Protests will be limited to a specially designated zone, to avoid the “typical disorder” found in regular cities, says Sanchez.

Some developers with their eyes on launching a ZEDE envision experimentation with social service formats, especially in education and technical training for workers, but there is little detail in terms of how this might actually work for residents. In interviews, potential ZEDE investors are bursting with ideas for innovative traffic systems, charter and trade schools, commerce-protecting regulations and resident-run associations. They imagine neatly organized “cities” that resemble enlarged private neighborhoods, complete with industry and job sources.

“It would be logical for the developers to take into consideration making schools and health centers … because that is going to make going to work or live or invest in that area more appealing,” argues Guillermo Peña, the executive director of Fundación Eléutera, a libertarian NGO that has been tracking the ZEDE developments.

The reigning image is of a privatized paradise of happy middle-class workers, whose children go to modern schools and who have private hospitals all within the bounds of the ZEDE. Peña and Delgado both say the market would also provide solutions for the poor, but there are no real details on how this could be guaranteed.

“What we are interested in is a city,” says Delgado. “We need and want to attract all social classes to participate. We want there to be a lot of social mobility.” The pro-ZEDE camp frequently brings up the current situation of thousands of Hondurans, adults and minors, who travel illegally to the United States despite the life-threatening risks the journey entails. “Imagine a situation where a person comes to work in the city, and on the weekend, instead of having to call his mother or send her a remittance, he goes and gives it to her himself, because all he has to do is get on a bus and in a few hours he’s home. I find that inspirational,” Delgado says.

Critical observers, though, question whether private investors will create real opportunities for poorer residents, especially considering the legislation’s main goal is to create a business-friendly environment.

“The long-term plan for getting people truly out of poverty, it needs more elements than just getting an investor to build a maquiladora,” says Zachary Caceres, executive director of the Guatemala-based Startup Cities Institute, which has been following the ZEDE development. “Our concern is that there is this excessive focus on investment and things for physical infrastructure, but there’s not enough focus on, essentially, the social infrastructure.”

Critics are also concerned that the ZEDEs could lead to a divided country: those who can live in private suburbs and those who are stuck in the messy reality of poverty, gangs and shaky governmental stability. Will the attempt to enter a ZEDE begin to resemble the attempt to enter the United States? It’s easy to imagine developers creating low-income housing for staff—if it suits them. But it’s just as plausible that shantytowns would grow outside the ZEDE walls, as happens outside of private luxury neighborhoods everywhere in Latin America.

All of this is of course tempered by the fairly desperate situation Honduras currently finds itself in. At heart, the best-case scenario is an optimistic leap of faith. Believers envision that private developers and a committee will act flawlessly, that business and residential interests will dovetail, and that only politicians and bureaucrats can be corrupted or led astray. The people whose lives will truly be affected—poverty and violence-stricken Hondurans—will determine the validity of this radical experiment by voting, with their feet if not by ballot.

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