“Charter/Model Cities”: A Privatization Scheme That Violates the Sovereignty of Nations

 

By David Starr

 

“Build New Cities. Maximize Human Prosperity.” That’s the slogan of Prospera, an entity that creates what it calls “model cities” or “charter cities,” a privatization scheme built for investors like libertarians etc., in other words, voracious capitalists. These cities have operated in foreign countries, like Honduras, a victim of this mad, monetary experiment. 

 

Prospera’s website says that it is “for builders, pioneers, and risk-takers who believe in the boundless potential of human achievement and choose to build the future we want.” (Who is “we”?) It continues: “Our platform powers the development of new cities in special economic zones that maximize generalized prosperity and wealth creation.” Translating the rhetoric: it is a haven for the privileged, mainly white people, who come from developed countries like the United States to get obscenely rich. 

 

What Prospera’s website does not mention is that these cities govern themselves, can ignore labor rights and, can sue real governments if the latter tries to implement policies that truly benefit the population and for a government to protect a nation’s sovereignty. 

 

For Honduras, charter/model cities began in 2011 by the passing of constitutional amendments that would allow them. This occurred under the rule of right-wing President Porfirio Lobo Sosa, who benefitted from a 2009 right-wing coup overthrowing the previous President Manuel Zelaya Rosales. Zelaya was challenging the Honduran elite, trying to implement progressive policies. 

 

It was a typical right-wing coup, with elites taking over while the United States eventually looks the other way. And in conclusion, the U.S. says that the country, where the coup occurred, is a “struggling democracy,” when in reality it is not.

 

Inevitably, there was, and is, organized resistance to Prospera in Honduras. Writing in the publication, In These Times, Kari Lyderson, a Chicago-based journalist, author and assistant professor at Northwestern University, detailed the consequences of charter/model cities and described the opposition to them. 

 

In November 2013, Honduras had a presidential election that included Zelaya’s wife, Xiomara Castro, who had gained momentum in the polls. But the Candidate for the conservative National Party, Juan Orlando Hernandez, supposedly won and became president. Voter fraud would not be surprising. The human rights situation in Honduras at the time had worsened. Before the election, there were 36 killings and 24 armed attacks against candidates and family members of candidates. 

 

Castro was backed, Lyderson wrote, “by the multi-faceted National Front of Popular Resistance.” The Resistance movement had begun after the 2009 coup. A number of groups that comprised it had never worked together in such away before. They included, “union members, campesino organizations, indigenous people, the African-descended Garifuna communities on the Caribbean coast, students, and gay and lesbian groups.” There was, thus, strength-in-numbers for this movement. 

 

The Resistance movement was strongly opposed to the government’s allowing the building of charter/model cities. Lyderson wrote that these cites would be “enclaves free from Honduran laws that would be planned and run by private entities and meant to stimulate business and foreign investment.” But who would really benefit? The private entities and their investors. 

 

Among those challenging the charter/model cities were Antonio Trejo Cabrera, an attorney. As a result, Trejo was eventually shot dead in Tegucigalpa, Honduras’ capital. Santos Cruz, “a national campesino leader who has spent his entire life fighting for land and human rights” was another. Over the years, Cruz had seen various incidences of repression and atrocities that resulted in the murder of campesino activists, for example. The death threats against Cruz and other activists have been constant.

 

Backing up the Resistance movement in this struggle are “Critics in Honduras and abroad,” who see the private cities set up inevitably “violating labor rights, civil rights and the Constitution.” 

 

Foreign actors have been the deciders and influencers of the charter/model cities. Paul Romer, U.S. economist and New York University professor, was one of the original founders of the cities. Romer boasted that these cities offer a new start for eliminating corruption, bureaucracy, and economic and social problems in an effort to “help” the Global South. With that kind of help, the Global South doesn’t need enemies. 

 

Besides Prospera, another project of this nature is a British outfit called Grupo MGK. One of its leaders  is Kevin Lyons, who wanted to establish a charter/model city in Nevada, but was denied by the state. Another leader was Michael Strong, “the American founder of charter schools and head of a touchy-feely-save-the-world-through-entrepreneurship outfit called FLOW (Freedom Lights Our World),” wrote Lyderson. 

 

Additionally, “The Economist described the Honduras model cities movement as the playground of seemingly fringe American libertarians with ‘links to prominent libertarians with deep pockets…’” For Strong, quoting from Fox “news,” the goal is “to be the most economically free entity on Earth.” But free for whom to do what? Profiteers making obscene amounts of money, and to hell with everyone else.

 

One example of the continuing struggle by Hondurans against the likes of Prospera is the situation on the island of Roatan. In it is a community called Crayfish Rock, inhabited mostly by blacks of Caribbean descent who are English-speaking. Next door there is the headquarters of a city that is being established, and a security booth with cameras monitoring the area, a gate and a security guard, resembling what sounds like a gated community. 

 

The phrase, “Go home,” is the feeling of many Hondurans toward Prospera. Land rights and sovereignty are the crucial issues for Hondurans, not just on Roatan, but for the country as a whole. Jeff Ernst, writing for The Guardian, describes the foreigners taking advantage of the situation. There are “often cryptocurrency enthusiasts, libertarians or both,” who are “invading” (my word) the country.

 

The charter/model cities would be located in what is called Employment Development Zones or ZEDEs. But a new Honduran government repealed the laws that allowed the ZEDEs to exist. Investors of Prospera then challenged the decision to repeal the laws. The investors cited agreements and treaties that they say make the ZEDEs, and in turn the cities, legal. Ernst wrote, “The result was a standoff in which investors are gambling with millions, the government could be at risk of a costly lawsuit and the fate of the affected communities hangs in the balance.”

 

Obviously, the cities are a product of capitalist maneuverings. The cities, thus, could be called anti-democratic. After all, when it comes down to it, democracy and capitalism are not compatible. Although in the United States, there is capitalism and a degree of democracy, the latter is always threatened by the former. Democracy is especially threatened now with the greed and callousness as the rule of capital is being not only maintained but expanded.

 

For decades, Honduras has been a market satellite of the United States. It was known as the first “banana republic,” with U.S. corporations, backed by the U.S. military, imposing banana plantations throughout the country. The U.S. and its corporations dominated Honduras’ economy and politics. And Honduras was used as a base for the Nicaraguan contras, fighting a U.S.-backed war with the Sandinista government, and the people. 

 

But in recent years, Hondurans have gradually gained the strength to rebel against the subservient role that Honduras has played. A major example of this was the electoral victory of Xiomara Castro for the Honduran presidency in 2021. Castro has not fooled around in her determination to shut out the charter/model cities. But it’s of course a very difficult struggle with Prospera also determined to maintain those cities.

 

Castro went about repealing the law beneficial to the Zedes. While the people of Crayfish Rock were jubilant about Castro’s action, Prospera made new investments totaling $60 million and put in cryptocurrency bitcoin as the official method of transactions. So, Prospera was not deterred in not only the continuing of the building of these cities but, in Ernst’s words, “clinging to their plan to building a libertarian oasis of sorts.” 

 

Prospera continued to cite trade agreements to justify their “oasis” scheme. But government officials made it clear that the Zedes had one year to adopt to another kind of legal structure. The ZEDEs, however, have a “sunset clause” that Prospera investors wanted to take advantage of, claiming that, according to trade agreements, they have 10 years to adjust. Further, they used the excuse of other trade agreements which they claim gives them 50 years to adjust. 

 

It appears that Propsera technically had a case, but the trade agreements were strongly opposed by the majority of Hondurans who truly had no input in accepting them. It became a decision of the elitist right-wing (and neoliberals), going along with the idea of permanently establishing and developing charter/model cities.

 

In July, on Democracy Now, hosts Amy Goodman and Juan Gonzalez interviewed two individuals fighting the charter/model cities: Melinda St. Louis, Director of Public Citizens Global Trade Watch, and Vanessa Cardenas, a leader of the community of Crawfish Rock. They detailed how the struggle is going for the community and the attempts by Prospera to violate the sovereignty of Honduras. 

 

There are other measures Honduran President Castro promised to implement. According to Rohit Yadav, writer for TFI Global News, Castro, “leading the Liberty and Refoundation party (LIBRE), promised to reverse the severe neoliberal policies, human rights violations, corruption, and drug trafficking that has plagued the nation for the past 12 years.” Yadav is absolutely correct in writing that it is a “daunting task.” 

 

At first the United States didn’t have a problem with the election of Castro. When she proceeded with implementing reforms, however, U.S. leaders/officials had a problem with that since it challenged U.S. corporate interests. Then, the old scenario of U.S. interference in a nation from the Global South became evident. After attempts by the previous government to privatize the National Electrical Energy Company, at the suggestion of international financial institutions, Castro, LIBRE, and the new government implemented the Energy Reform Law to “combat corruption and poverty.” The U.S. didn’t accept this because it would “threaten” power generators and “eliminate” private investment.

 

Castro, nevertheless, stood her ground, and moved on to labor reform. There was the Temporary Labor Law, which was implemented and made permanent in 2014 by the previous government. It gave a chance for employers to not pay the minimum wage and eliminated benefits or healthcare. This move was criticized by labor leaders, among others within the Honduran population. After Castro became president, the Temporary Labor Law was repealed because of the emergence of harsh labor conditions. U.S. Ambassador Laura Dogu criticized the move, and absurdly added that Honduras should respect labor rights. The law, however, violated the Honduran Labor Code.

 

And regarding the ZEDEs, considered to be the charter/model cities and established by what accurately can be called an illegal government (due to the 2009 coup), they were challenged by the Castro government. And for good reason: to reiterate, the cities were set up on Honduran territory and, as written by Yadav, “have their own government, legal and judicial system, tax and social security policies.” Many Hondurans, such as the Movement Against ZEDEs, social movements, and municipalities, rejected the Zedes “for violating sovereignty, national security, the rule of law, and human rights.” The Castro government proceeded to repeal the laws that protected the Zedes. Prospera responded, filing a complaint against the Honduran government and seeking $10.7 billion in “lost” profits.

 

The United States, however still wanted to push the cities on Honduras, claiming it provides economic growth and opportunities. (But, again, for whom to do what?) Meanwhile, Prospera is widely unpopular in Honduras. 

 

Yadav concluded that “[d]espite U.S. attempts to intervene in Honduras, Castro has been successful in thwarting them. Although the U.S. may continue to try to exert influence over Honduras, Castro has proven to be a formidable opponent of U.S. intervention.”

 

Prospera will no doubt try and continue with its imposing of charter/model cities not only on Honduras, but elsewhere, particularly in the Global South. Its creators and investors see a golden opportunity to experiment in various developing countries. They say it is for prosperity and economic growth, but no doubt leaving out the majority of Hondurans. After all, Prospera doesn’t give a damn about them.