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Charter Cities: The new neoliberal experiment in Latin America

By Elizabeth Perkins, WfP Honduras Team

Competition. It’s an inherent concept of U.S. meritocracy, the ‘pull yourself up by the bootstraps’ mentality. (That’s assuming everyone has boots in the first place). Neoliberal economic policy promotes competition as a tool for economic growth. It is based on the assumption that competition improves quality and efficiency. For a ‘developing’ country to create desperately needed jobs, it must compete with other countries to attract foreign investment. This ideology is manifested in Structural Adjustment Programs, free trade agreements like DR-CAFTA and the establishment of free trade zones. Most recently, Charter Cities in Honduras have captured the imagination of economists touting free trade and foreign investment as the country’s way out of financial crisis.

Promises of development aren’t new to Latin America. Nearly a decade ago, DR-CAFTA consolidated neoliberal policies that were already in place. When CAFTA was passed in 2006, Central Americans were told that increases in trade, foreign direct investment, job availability, and exports would raise incomes and standards of living. In 2010, when Honduras decided to raise its minimum wage 6.5%, 16 textile factories picked up and moved to Nicaragua, where minimum wage was half that of Honduras. This is just one example of how this agreement prioritizes U.S. corporations over the rights of workers. The next step in a progression of neoliberal policies being forced on Central America seems to be Charter Cities in Honduras, recently passed into law with the name Zones for Employment and Economic Development (ZEDE).

Since the end of 2010, Honduras has been debating the idea of charter cities in its territory. In the most recent incarnation, the cities are defined as administrative divisions of the country, subject to central government but given autonomy with political, economic, and judicial systems with clear market rules that allow high levels of competition. In other words, they are regions within a country with little governmental control and regulation. The goal is to attract investment and generate employment in uninhabited regions of the country or in municipalities applying for conversion by referendum.

It has been an intense debate pushed primarily by National Party representatives Porfirio Lobo Sosa (former president ‘elected’ after the 2009 coup) and Juan Orlando Hernandez (former leader of the National Congress, and current President). For Honduras to accommodate this new idea, first the constitution had to be changed, after which the law needed a majority vote in Congress. Though essentially the same, it has passed through different incarnations – born as Paul Romer’s charter cities, then drafted into law as Special Development Regions (RED), and most recently passed as the Special Economic Development Zones (ZEDE) law. The first time around, the Honduran Supreme Court of Justice declared RED’s unconstitutional in October 2012. Just two months later in what became known as a ‘mini-coup,’ 4 of the 5 justices who passed the ruling were removed from their posts. ZEDE’s were passed into law the following year. Last month Choluteca was declared as a site for the first ZEDE.

“Model Cities = Expulsion of Garífuna People of Honduras.” Resistance groups protest model cities outside National Congress in Tegucigalpa in January 2013. Photo by Elizabeth Perkins

Resistance groups cite “an enormous inequality and social divide, which has been increasing since the 2009 coup d’état.” Socioeconomic inequality is becoming more drastic, as the National Congress pumps out more and more neoliberal laws, like the ZEDE. National Front of Popular Resistance (FNRP) representatives presented arguments to the Honduran Supreme Court in February (link in Spanish) requesting the justices declare the ZEDE law unconstitutional, as it’s essentially the same RED law that was declared so in 2012.

Mark Klugmann, named by Juan Orlando as the North American representative to promote the ZEDE externally, was recently interviewed by Honduran newspaper El Tiempo (article in Spanish). He says, “CAFTA opened up new possibilities and Honduras becomes the most attractive place for investment with the ZEDE. Investors in neighboring countries are looking to relocate to Honduras.” He argues that the ZEDE will help slow migration because it will offer a variety of jobs.

The Black Fraternal Organization of Honduras (OFRANEH) commented on their blog (link in Spanish), “The word employment has become the lure to capture the imagination of a people made poor and intentionally sunk into ignorance and disinformation.” One of the biggest problems with this plan is that there is no piece of uninhabited land large enough for a city of several million people. Small farming communities and indigenous groups like OFRANEH, whose homes have been named as potential ZEDE sites, are worried.

According to OFRANEH, the United Nations Commission for the Eradication of Racism and Discrimination (CERD) in their report (in Spanish) last month expressed concern for the impact the ZEDE law will have on indigenous and afro-descendant groups. The report urges the Honduran government to reevaluate the compatibility of the law with international human rights treaties it has signed protecting these groups.

“The National Party, since it’s founding, has distinguished itself with a paradoxical anti-nationalist attitude, the periods in which they’ve been in power being characterized by the turning over of national territory and subordination to the banana companies,” states OFRANEH. In the interest of big business, not that of the people, the Honduran government is moving forward with the ZEDE law. Though the U.S. government is not directly involved in this project, it will serve to further U.S. investment interests, widening the ever-growing gap between rich and poor in Honduras and the rest of the world.


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