A Singapore in Central America? An interview with Octavio Sanchez Barrientos.
Honduras loses thousands of its citizens to the United States every year, with a total of one million emigrants to date. In February 2011, the Honduran National Congress passed landmark legislation to create a special development region (SDR) modeled as a charter city) As described by Paul Romer, professor of economics at New York University, charter cities allow for "cross-national government partnerships that facilitate the transfer of working systems of rules to greenfield locations." (2) Romer believes that importing good rules from elsewhere can trigger development, so long as the rules apply to all residents equally, and only to those who choose to live under them. (3) For Honduras, this means allowing a piece of its own sovereign territory to be developed and administered by a body beyond the control of the country's central government and allowing its citizens to move in and out as they choose. Octavio Sanchez Barrientos, the chief of staff to Honduran President Porfirio Lobo Sosa, is leading the charter-city initiative in Honduras. He discussed the project's development with the Journal's Ethan Wilkes. (4)
Journal of International Affairs: What inspired the Honduran government to consider building a charter city?
Octavio Sanchez Barrientos: The government wasn't talking about a charter city initially, which we are calling a special development region, or SDR. The idea originated during the administration of President Rafael Leonardo Callejas Romero, who was in office from 1990 to 1994. First, the American company Bethlehem Steel was trying to manage and develop a shipbuilding industry in the area of Trujillo, which has the third-deepest natural bay in the world. Second, before Hong Kong was returned to the People's Republic of China in 1997, there was uncertainty about that city's future; some businessmen were talking about the possibility of building a similar city here in Honduras instead. But neither of those initiatives took hold at the time. Still, during the Romero administration, we were looking for a strategy to divorce our economy from our political instability. One of the ideas that we discussed was the SDR.
Journal: Can you fast-forward twenty years and describe your grand vision for Honduras's charter-city project today?
Sanchez: Eventually, the SDR can become the place to do business in this part of the world. Obviously it will take a very deep commitment, a lot of work and a lot of patience to achieve this. Currently, Hondurans do not have many opportunities. This city is not just about creating better jobs, but also allowing greater exchange with the rest of the world. It is an opportunity to access better education, health-care systems and laws that will enable Hondurans to be more productive. Some say that we are aiming to build Singapore in Central America, but we don't want to compare our city to other cities. The SDR in Honduras will be uniquely open and, most importantly, autonomous from the Honduran government. It will also be a city that is built using best practices from all over the world. When you put those qualities together, it may resemble Hong Kong or Singapore because those two cities were built on similar philosophies. But ultimately our city will have its own distinct character.
Journal: Who will control the charter city, and how will it insulate its economy from the political pitfalls that have plagued Honduras in the past?
Sanchez: It has a lot to do with the government structure of the SDR. It is designed so that the central government has no power to intervene in this region. You may have all kinds of political crises outside of the region, but the region can make long-term plans without getting bogged down by national problems.
The city will be led by a governor, who will be accountable to a body called the Transparency Commission that functions like a board of trustees. Nine independent experts will be appointed to the commission and will be charged with the hiring and firing of the city's governor. The commission can include anyone from anywhere in the world. It can include Hondurans expatriates, foreigners or well-respected Hondurans who reside in the country. The commission can also be reformed so that it can grow and incorporate other members beyond the initial nine.
The key to the success of the city is granting it a very high degree of autonomy. Once we finish deciding which areas of the country will be affected by this project and we set up the governance structure, it can run on its own--forever.
Journal: Is there another body, like a legislature, to which the Transparency Commission will be accountable?
Sanchez: At this point there is no other institution or governing body besides the Transparency Commission. Eventually there will be a legislature, which is required once the city population reaches a certain level.
At that point, if a member of the Transparency Commission is not acting appropriately, the people of the city can decide to amend the basic law--the constitutional statute--and create a different structure. But initially there will be very few people in the city.
Journal: Didn't President Lobo recently request that the Supreme Court of the Republic of Mauritius, a country with strong legal institutions, consider acting as a court of appeals in the SDR?
Sanchez: That is a possibility. There are other countries that we are also interested in collaborating with. Essentially, if you can give investors and residents alternative options for legal appeals, then the more, the merrier.
Journal: Who will be responsible for providing public services, such as education, health care, transportation, utilities and law enforcement?
Sanchez: Ideally, public services will be outsourced to private companies. I think that in order for this city to be successful, the government inside the region must have a very limited role. It will basically be an arbiter for the people that live in the city.
The city can have a separate police force, but the Honduran military will remain in charge of defending the city from foreign aggression. The possibility also exists to have a separate judiciary.
Journal: How will the SDR generate revenue to finance these services?
Sanchez: The city will generate revenue from taxes. It will tax individuals up to 12 percent of their income and corporations 16 percent. The city will also charge sales or value-added taxes. It can also lease its land to fund the treasury. Most importantly, these taxes are capped, meaning the rates will stay the same.
Journal: Over the next five to ten years, what are the steps for realizing Honduras's vision for this project?
Sanchez: Over the next five years, a government structure will be put in place and the initial investors will enter the region. After that, my personal hope is that there will be a significant advance in the quality of education and health care, compared to what is offered in the rest of the country by the central government.
Moving five years ahead, the main agenda is to strengthen institutions. By then, we will have had the first acid test to see if the institutional structure works and if it will be able to address problems early.
Journal: Will the economic development strategy of the SDR be rooted in a low-cost manufacturing base, similar to those that helped propel the growth of Hong Kong and Singapore? Or is there a plan to leapfrog ahead to a service economy?
Sanchez: In this regard, I think we have to follow the same model as Hong Kong or Singapore. We don't have other options. Our people have very low incomes and education levels. They need to be exposed to the outside world.
Journal: How do you see the Honduran SDR fitting into the broader Latin American region? With Mexico City to the north and Panama City and Bogota to the south, what will Honduras's new city offer the world that is different from what already exists in other prominent Latin American municipalities?
Sanchez: The key will be having quality institutions. This is not as much a matter of how the city is run--such as whether or not you have potholes in your streets--as it is the quality of the education, the quality of production, the presence of little to no corruption and the ease with which you can do business. Regarding this last point: if you can copy the best practices from cities around the world, you can create a region that can compete with Hong Kong or Singapore or any of the top ten cities in the world. This would be very different from the rest of Latin America, and this is what we hope to offer the world.
(1) "A New City in Honduras," Charter Cities, accessed 9 Match 2012, http://chartercities.org/blog/191/a-new-city-in-honduras.
(2) "Concept," Charter Cities, accessed February 13, 2012, http://chartercities.org/concept.
(4) This conversation took place by phone on 26 January 2012. The interview is a condensed and edited version of the exchange.