Are Charter Cities the cities of the future?

GREG LINDSAY

Fast Company

As the experiment to create brand new cities with imported civic codes in the Guatemalan jungle takes shape, the question becomes: will it actually work?

This is the second part of a three-part article on Paul Romer and charter cities. Read the first part here,, and the second part here.

Honduras created special development zones once before. More than a century ago, the United Fruit Company and its twin subsidiaries, the Tela Railroad Company and the Trujillo Railroad Company, ran vast banana plantations from private enclaves in Tela Nueva and La Lima known as the Zona Americana--the American Zones. These were your classic company towns, complete with golf courses, hospitals and schools--a few of which are still around.

“They’re some of the best in the country,” insisted Daniel Facussé, president of the Honduran Maquila Association, the trade group for the tax-free textile factories that employed 133,000 Hondurans prior to the financial chaos of the coup. He drew a straight line for me from the zonas to the REDs. “Yes, it’s true that all of them were made by the companies,” he said, “but they were physically set up in a small town. At the time, they also had their own rules and regulations.”

“There was also a change of culture,” he added with a note of admiration. “A culture of saying the company is not only responsible for the benefits of their workers, but also for the benefits of their families…[and for] society itself.”

To say the fruit companies played by their own rules would be an understatement. Honduras was the original “banana republic,” molded by United Fruit and its competitors in their own competing interests. Successive Honduran presidents ceded huge tracts of land for infrastructure that stopped at the plantations’ edges. (To this day, Tegucigalpa lacks a train station.) At one point, United Fruit’s fiercest competitor--and later, its controlling shareholder--sponsored a successful coup to overturn a rival’s concessions. The United States intervened seven times between the turn of the century and 1925; the fruit companies continued to back local military government.

Opponents of President Porfirio Lobo’s government see similar parallels between the zonas and the REDs, with the latter a tool to finish the job started by the coup. When Manuel Zelaya was elected president in 2006, he appeared to be the latest in a long line of entrenched elites to hold office, dedicated to preserving the status quo. But by their standards he turned out to be a reformer, lowering school fees while increasing the minimum wage (which didn’t extend to the maquilas). He cut a deal with Venezuela for oil at below market prices in exchange for closer ties to its president, Hugo Chavez. He also hindered the privatization of the telecommunications industry, which eventually proved to be a massive success. And most alarming of all, in 2008 he called for a referendum to rewrite the constitution drafted under the generals.

Read more here.