Libertopia: Private city in Honduras will have minimal taxes, government.

[Atlas]

http://www.foxnews.com/world/2012/09/11/private-city-in-honduras-will-have-minimal-taxes-government/

Small government and free-market capitalism are about to get put to the test in Honduras, where the government has agreed to let an investment group build an experimental city with no taxes on income, capital gains or sales.

Proponents say the tiny, as-yet unnamed town will become a Central American beacon of job creation and investment, by combining secure property rights with minimal government interference.

“Once we provide a sound legal system within which to do business, the whole job creation machine – the miracle of capitalism – will get going,” Michael Strong,  CEO of the MKG Group, which will build the city and set its laws, told FoxNews.com.

Strong said that the agreement with the Honduran government states that the only tax will be on property.

“Our goal is to be the most economically free entity on Earth,” Strong said.

    “Our goal is to be the most economically free entity on Earth.”

- Michael Strong, CEO of MKG Group

Honduran leaders hope that the city will lead to an economic boom for the poverty-stricken country south of Mexico. The average income in Honduras is $4,400 a year.

“[It] will bring a lot of investment into the country [and be] a center for many employment opportunities for our people,” Honduran President Porfirio Lobo Sosa has said.

The laws in the city will be separate from those in the rest of Honduras. Strong said that the default law that will be enforced in the city will actually be based on Texas state law, which has relatively few regulations.

“It will be Texas law with more freedom of contract. Texas scores well on state economic freedom rankings,” he explained.

“Texas law is also very familiar to American business people, and it is very familiar to Hondurans, because a lot of Hondurans have gone there or have family there.”

Investors who think the city will do well will also be able to buy land there.

“There will be a free market in land,” Strong said.

The rules for immigrating to the city have yet to be finalized, but are expected to be loose.

“It will be designed to be very welcoming to those with a minimum threshold of skills or capital,” Strong said. However, businesses in the city will be required to employ a minimum proportion of native Hondurans – a requirement imposed at the outset by the Honduran government to ensure that the city’s benefits largely go to Hondurans.

To insure the city against political change, the Honduran Legislature has agreed that a two-thirds majority will be required to interfere with the city.

MKG will invest $15 million to begin building basic infrastructure for the first model city near Puerto Castilla on the Caribbean coast, said Juan Hernandez, president of the Honduran Congress. That first city would create 5,000 jobs over the next six months and up to 200,000 jobs in the future, Hernandez said.

Strong said construction could begin in months.

“First, we will build the critical infrastructure -- roads, water, power, sewers," Strong said. "In collaboration with the [Honduran] government, we will then create the city’s government system and the security, and 3 to 6 months after that we will build the first factories.”

The MKG Group city is the first to get approval, but Honduras plans to create other “free cities” as well.

The bill to allow the creation of such cities passed the Honduran Legislature nearly unanimously, by a vote of 126 to 1. But not everyone is on board with the project. Left-wing Hondurans have filed a complaint before the Honduran Supreme Court, arguing that the free cities project violates their constitution and treats “national territory as a commodity.”

The indigenous Garifuna people in Honduras also have protested the creation of free cities, saying that they are worried the cities will be built on their land.

Strong said that they need not worry.

“The media reports are full of inaccuracies. We're not even remotely close to [the Garifuna]. We're literally hundreds of miles away,” he said.

Additionally, the new city will be built on unoccupied land.

“We will be selecting unoccupied land so that everyone will be opting in by choice,” Strong said.

But some oppose the project being built anywhere in Honduras.

“I can't help but suspect that the promise of plenty of jobs is nothing but a Trojan horse,” Teofilo Colon Jr., who runs the Garifuna cultural group Being Garifuna, told FoxNews.com.

“The prospect of setting up a charter city, with its own laws, [that] is sovereign to itself and doesn't have to pay taxes, is a dubious one at best. It'd be tantamount to inviting pirates to come in and have free reign to essentially raid the country's resources/riches.”

The MKG Group says its plan, however, is not to take advantage of natural resources, but rather to attract entrepreneurs using good laws and low taxes.

Strong cited Hong Kong as a city that prospered under that model.

“Hong Kong’s poverty once was roughly on the level of Africa. Today it is one of the wealthiest places.”

Strong says that the same could happen in Honduras.

“We'll see Hondurans having more jobs, higher income, and more security than they've ever had.”

[wachtwoord]

Thanks for posting this. Very very cool. Will watch how this develops.

[Stephen Gornick]

Honduras plans to create other “free cities” as well.

Another thread on the topic:

Bitcoin in Honduras' new charter cities

 - http://bitcointalk.org/index.php?topic=53990.0

[Rassah]

Guess I'll have to expand my job search to Honduras now

[Charlie Prime]

My daughter worked in Honduras last year.  Awesome coffee.  Nice people.

Restrictive Honduran gun laws are the deal-breaker for me:  https://en.wikipedia.org/wiki/Gun_politics_in_Honduras#Current_firearm_and_ammunition_law

[FreeMoney]

I don't think Honduran law applies, you can probably have guns since (I think) I read safety/law enforcement would be an open system.

What is a free market in land? I would take that to mean that you don't have to pay a third party for owning or transferring land, but that is explicitly contradicted.

[TheButterZone]

Will it have its own airport, and how will you take your guns from the U.S. there as if you were going from, let's say, Alaska to Texas?

[Topazan]

Is "Libertopia" the actual name of the city, or a description?  If the latter, I think it's a bit premature.  The article says the city will be business friendly, but I'd want to see what level of personal and social freedom they achieve before I'd call it "Libertopia".

[Charlie Prime]

I did some searching.

There is very little information online about this project or MKG Group.

I wanted to look at their financials, but can't even find out what State they are incorporated in.

[Explodicle]

What is a free market in land? I would take that to mean that you don't have to pay a third party for owning or transferring land, but that is explicitly contradicted.

+1

If they're trying to copy Hong Kong's growth they'd want land taxes, not property taxes.

[Rassah]

Their FAQ says that they will retain all land ownership, and all land will be leased.

[herzmeister]

Just leaving this here...

http://abcnews.go.com/International/wireStory/honduras-human-rights-lawyer-murdered-17302257

Honduras Human Rights Lawyer Murdered

A leading human rights lawyer who represented several Honduran agrarian groups in disputes with large landowners was killed by gunmen on Sunday, a land rights organization said.

Antonio Trejo Cabrera, 41, was shot five times while attending a wedding in the capital, Tegucigalpa, the Peasant Movement of the Valley of Bajo Aguan said in a statement.

Trejo was a lawyer from three peasant cooperatives in the Bajo Aguan, a fertile farming area plagued by violent conflicts between agrarian organizations and land owners. More than 60 people have been killed in such disputes over the past two years. The lawyer had recently helped farmers gain legal rights to several plantations.

Trejo had also helped prepare motions declaring unconstitutional a proposal to build three privately run cities with their own police, laws and tax systems.

Just hours before his murder, Trejo had participated in a televised debate in which he accused congressional leaders of using the private city projects to raise campaign funds.

The lawyer was to travel to Washington in October to participate in hearings on the Bajo Aguan situation at the Inter-American Commission on Human Rights, said Annie Bird, co-director of Rights Action.

Trejo "had denounced those responsible for his future death on many occasions," said Vitalino Alvarez, a spokesman for Bajo Aguan's peasants. "Since they couldn't beat him in the courts, they killed him."

No arrests have been made in Trejo's killing.

[Vandroiy]

FreeMoney and herzmeister give the major problems to an otherwise great idea.

• Strong property tax and no sales tax might not be the best incentive system. It punishes long-term investment too much.
• I don't know whether the location is all that good. That area is plagued by a lot of things that make it look... uncivilized. Hard to tell whether they'll be able to keep law and order for those who don't bring their own defense force the anarchist way. If the investors have a solid plan for this, I'm curious to see it.

So... I'll keep watching this, but it's not yet above the threshold where I start packing things and moving over.

[Explodicle]

The tax disparity would create a wealth gap, preventing the working class from using the city, whereas the low-tax "manager class" would enjoy the fruits of the cheap labour.

(emphasis mine)
What makes you think a free-market city wouldn't have slums? It's hard to believe that it would be cheaper to commute to a different city every day than to just reside in low-cost housing.

[Rassah]

I'm actually wondering whether Honduras already has a huge wealth gap, or worse, has everyone being very poor, in which case how can something like this make things worse?