Paul Romer on what happened in Honduras

The fragments leaking out of Honduras have been disturbing to say the least. The Transparency Committee has still not been formalized. So when the news of private development deal leaked the Committee wrote what is essentially a resignation letter. Paul has just emailed some details to Tyler Cowen

Paul sends me the following, which he describes as “a personal statement to the news media”:

Qn: Prof. Romer, are you still working with the government of Honduras on the creation of a RED – a Region Especial de Dessarrollo? Or on what some have called a model city?

Ans: I and the other people who were named to the Transparency Commission wrote a public letter to President Lobo stating that we have no ongoing role in the project. Personally, I have also resigned from the CORED advisory committee.

Qn: In the beginning, you were an active supporter of the RED project. What changed?

Ans: 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.

Qn: How can it be that a member of the Transparency Commission could not see such an agreement? Under the process set out in the Constitutional Statute, doesn’t the Transparency Commission have to give an opinion about any proposed RED?

Ans: In December 2011, President Lobo signed a decree naming me and four other internationally respected individuals to the Transparency Commission. At the time, these appointments were reported in the international news media, in particular by the The Economist. However, the government never completed the process of publishing this decree in the Gazette. The administration’s current position is that because the decree was never published, the Transparency Commission does not exist in the eyes of the law and the five named members have no legal basis for reviewing any agreements.

Qn: Can the government create a RED if the Transparency Commission does not yet exist?

Ans: If the Transparency Commission does not yet exist, the administration can propose a RED directly to the Congress. The RED will then come into existence if the Congress passes an act describing its geographical boundaries. Passing an act that specifies boundaries may seem like a minor detail, but under the Constitutional Statute, it has important legal consequences.

Qn: Does the administration have to disclose the terms of any agreement that it signs with a company that will invest in or manage a RED? Does the company have to disclose the identities of its financial backers? Does the company have to disclose anything about its experience or qualifications?

Ans: The law states that the Transparency Commission must be given all the information needed to evaluate any proposed RED. If there is no Transparency Commission, the Congress is the only remaining protection. To make sure that it is comfortable with the identities of the investors and the governance structure that the investors have negotiated in their agreements, the Congress could insist on full disclosure before it votes a RED into existence. The Congress might also want to insist that it have a separate right to approve any agreement related to a proposed or existing RED that could place a financial burden on the Honduran government. This kind of burden could arise, for example, through an agreement that lets a private party bring a claim for damages against the government.

Qn: Do you know how the misunderstanding about the legal status of the Transparency Commission came about?

Ans: Various explanations have been offered, but I cannot be certain why the decree naming the members of the commission was never published in the Gazette. Nor can I be certain why the administration did not disclose its decision not to publish the decree.

Whatever the reasons for these decisions, the result was an important failure of transparency. The public perception, that the Transparency Commission was in operation, differed from the reality. This gave the wrong impression about the checks and balances that would be operating as the first RED came into existence.

From the very beginning, I made a commitment to the citizens of Honduras, to the members of the Honduran Congress, and to the many people around the world who wish Honduras well. I committed that I would work for their benefit and do so transparently. This means that at a time such as this I have to be willing to state to the public what I know to be true.

Paul also sends along these links (in Spanish):

http://www.elheraldo.hn/Otras-Secciones/Portada-Impresa/Romer-Hay-un-fracaso-importante-de-la-transparencia http://www.elheraldo.hn/Secciones-Principales/Al-Frente/Romer-Han-desviado-las-normas-de-transparencia-en-ciudades-modelo http://www.laprensa.hn/Secciones-Principales/Honduras/Apertura/Hubo-fallo-importante-en-la-transparencia-Paul-Romer#.UGBt_aT9FGg

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