Architect of Honduran privatised cities drops out over lack of transparency

Paul Romer attacks Honduran government over its failure to ensure accountability of the new privately-run cities.

Honduras' plans for "model cities" – entire settlements managed by private corporations – already seem to be settling in to a pattern of secrecy and corruption worthy of the best dystopian futures.

The idea to create the cities – known as Regions Especial de Dessarrollo (Special Development Regions), or REDs – was suggested a year ago, but this month the first deals were signed, with US-based investment group MGK, to build one.

The Financial Times' Ron Buchanan reported (£):

The model cities are to be states within a state, with their own legal and law enforcement agencies, tax and monetary systems – “Hello US dollar”, “Adiós Honduran lempira”, presumably – and every conceivable facility to attract investment.

The concept sounds like a steroid-enhanced vision of a free-market enthusiast. Which it is. The US economist Paul Romer has dreamed up the idea of creating cities, along the lines of Hong Kong and Singapore, which have created poles of dynamic investment that have spilled over into their once impoverished hinterlands.

Even before the real problems began, there was already opposition to the plan. The Independent's Suzy Dean wrote, back in January, that:

What sets the REDs apart from other charter cities is the belief that in order for the cities to thrive they must suspend democracy. The unelected [Transparency] Commission will govern the new city, until they decide the population is ‘ready’ for democracy; only then will new local councils be set up. . .

The establishment of the Transparency Commission reflects the belief of the Honduran government that the public might ‘get it wrong’. The Transparency Committee will not engage with or respond to public demands.

The economist Paul Romer has been the guiding voice behind the plans, and was one of the five people originally slated to be on the Transparency Commission. But yesterday, he sent Marginal Revolution's Tyler Cowen a statement detailing his growing problems with the project. In short, the Transparency Commission has been shuttered, and Romer only even heard about the MGK deal from the press:

From recent newspaper reports, I learned that the Honduran agency responsible for public-private partnerships had signed an agreement about a RED with a private company. When I asked for information, I was told that I could not see this agreement.

This was a departure from the standards of transparency that the administration had led me to expect. It was also a departure from the role for the Transparency Commission outlined in the Constitutional Statute passed by the Honduran Congress.

So the model cities, which were going to have a transparency commission in the place of democratic governance, now have… nothing. Except the corporation that runs them.

Meanwhile, Antonio Trejo Cabrera, a lawyer who had helped to prepare motions declaring the the model cities unconstitutional, was murdered on Sunday, according to the Associated Press:

Antonio Trejo Cabrera, 41, who died early Sunday after being ambushed by gunmen, was a lawyer for three peasant cooperatives in the Bajo Aguan, a fertile farming area plagued by violent conflicts between agrarian organizations and land owners. The most prominent is Dinant Corporation owned by Miguel Facusse, one of Honduras' richest men. Thousands of once-landless workers hold about 12,000 acres (5,000 hectares) of plantations they seized from Dinant.

Trejo, who was shot six times after attending a wedding, reported threats in June 2011, according to documents obtained by The Associated Press, including photocopies of a BlackBerry message he received saying: "Trejo, you dog, you have 48 hours to get out or you're dead." . . .

MGK director Michael Strong said the company is "horrified" by Trejo's killing.

"We believe that Antonio Trejo, had he lived long enough to get to know us, would have concluded that our approach is 100 percent beneficial to Honduras and Hondurans. We are saddened for his family and understand what a tragedy this is for trust and goodwill in Honduras," Strong said in a statement to The Associated Press.

The plans to construct the first RED remain in effect.

A still from the dystopian future of the upcoming film Dredd 3D. Photograph: Lionsgate/Reliance Entertainment

Alex Hern is a technology reporter for the Guardian. He was formerly staff writer at the New Statesman. You should follow Alex on Twitter.

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Debunking Boris Johnson's claim that energy bills will be lower if we leave the EU

Why the Brexiteers' energy policy is less power to the people and more electric shock.

Boris Johnson and Michael Gove have promised that they will end VAT on domestic energy bills if the country votes to leave in the EU referendum. This would save Britain £2bn, or "over £60" per household, they claimed in The Sun this morning.

They are right that this is not something that could be done without leaving the Union. But is such a promise responsible? Might Brexit in fact cost us much more in increased energy bills than an end to VAT could ever hope to save? Quite probably.

Let’s do the maths...

In 2014, the latest year for which figures are available, the UK imported 46 per cent of our total energy supply. Over 20 other countries helped us keep our lights on, from Russian coal to Norwegian gas. And according to Energy Secretary Amber Rudd, this trend is only set to continue (regardless of the potential for domestic fracking), thanks to our declining reserves of North Sea gas and oil.


Click to enlarge.

The reliance on imports makes the UK highly vulnerable to fluctuations in the value of the pound: the lower its value, the more we have to pay for anything we import. This is a situation that could spell disaster in the case of a Brexit, with the Treasury estimating that a vote to leave could cause the pound to fall by 12 per cent.

So what does this mean for our energy bills? According to December’s figures from the Office of National Statistics, the average UK household spends £25.80 a week on gas, electricity and other fuels, which adds up to £35.7bn a year across the UK. And if roughly 45 per cent (£16.4bn) of that amount is based on imports, then a devaluation of the pound could cause their cost to rise 12 per cent – to £18.4bn.

This would represent a 5.6 per cent increase in our total spending on domestic energy, bringing the annual cost up to £37.7bn, and resulting in a £75 a year rise per average household. That’s £11 more than the Brexiteers have promised removing VAT would reduce bills by. 

This is a rough estimate – and adjustments would have to be made to account for the varying exchange rates of the countries we trade with, as well as the proportion of the energy imports that are allocated to domestic use – but it makes a start at holding Johnson and Gove’s latest figures to account.

Here are five other ways in which leaving the EU could risk soaring energy prices:

We would have less control over EU energy policy

A new report from Chatham House argues that the deeply integrated nature of the UK’s energy system means that we couldn’t simply switch-off the  relationship with the EU. “It would be neither possible nor desirable to ‘unplug’ the UK from Europe’s energy networks,” they argue. “A degree of continued adherence to EU market, environmental and governance rules would be inevitable.”

Exclusion from Europe’s Internal Energy Market could have a long-term negative impact

Secretary of State for Energy and Climate Change Amber Rudd said that a Brexit was likely to produce an “electric shock” for UK energy customers – with costs spiralling upwards “by at least half a billion pounds a year”. This claim was based on Vivid Economic’s report for the National Grid, which warned that if Britain was excluded from the IEM, the potential impact “could be up to £500m per year by the early 2020s”.

Brexit could make our energy supply less secure

Rudd has also stressed  the risks to energy security that a vote to Leave could entail. In a speech made last Thursday, she pointed her finger particularly in the direction of Vladamir Putin and his ability to bloc gas supplies to the UK: “As a bloc of 500 million people we have the power to force Putin’s hand. We can coordinate our response to a crisis.”

It could also choke investment into British energy infrastructure

£45bn was invested in Britain’s energy system from elsewhere in the EU in 2014. But the German industrial conglomerate Siemens, who makes hundreds of the turbines used the UK’s offshore windfarms, has warned that Brexit “could make the UK a less attractive place to do business”.

Petrol costs would also rise

The AA has warned that leaving the EU could cause petrol prices to rise by as much 19p a litre. That’s an extra £10 every time you fill up the family car. More cautious estimates, such as that from the RAC, still see pump prices rising by £2 per tank.

The EU is an invaluable ally in the fight against Climate Change

At a speech at a solar farm in Lincolnshire last Friday, Jeremy Corbyn argued that the need for co-orinated energy policy is now greater than ever “Climate change is one of the greatest fights of our generation and, at a time when the Government has scrapped funding for green projects, it is vital that we remain in the EU so we can keep accessing valuable funding streams to protect our environment.”

Corbyn’s statement builds upon those made by Green Party MEP, Keith Taylor, whose consultations with research groups have stressed the importance of maintaining the EU’s energy efficiency directive: “Outside the EU, the government’s zeal for deregulation will put a kibosh on the progress made on energy efficiency in Britain.”

India Bourke is the New Statesman's editorial assistant.