A Humble Assessment

I met somebody the other day. At the request of a client I had woken up extra early to drive down the mountain where I live and meet him at his hotel. After exchanging pleasantries and asking for a cup of coffee and eggs on toast we sat down to talk. The smell coming out of the fresh cup of joe, one of Honduras's finest, finished lifting my spirits as I got ready to listen. Here was a man in his late fifties, or maybe early sixties, who had worked pushing for democracy and assisting developing countries carry out reasonably clean elections, a democrat through and through, which is why I was surprised to hear him say that after nearly 40 years doing this kind of work, he now believed that democracy on its own would not solve the problems of the developing world. Democracy —he said— did not on its own guarantee that people would choose the path to a better future. Short-termist mentality and populism seemed to always win over common sense. This was a man who, like me, believed in free markets, small government and individual freedoms. Still, he was convinced that maybe democratic rule needed a sprinkle of authoritarianism to deliver results.

After talking about this in general terms and asking for a refill of my cup of joe, we moved on to Honduras. He told me he had first come to my country as a six-year-old, accompanying his father on a diplomatic mission, then returned to observe the 1989 election, after which the winner had led the country through a process of economic liberalization that produced some limited success. He had been back for every election since. What he said next was sad yet not as revealing as I would have thought. He told me that after that single election, he could not see any real change. Not in the political system, not in the administration, not in the economic model. Honduras, he said, had been trying the same model for decades and had never managed to bring poverty down to approximate even fifty percent, despite every other Central American country but Nicaragua making substantial progress. It was so obvious to him that we needed to try something else that he could not fathom why we were so hell bent on sticking to what we were doing.

I must admit that the comment stung, yet I couldn't disagree with it. For over a decade I had helped draft laws and regulations that were very much attempts to shift Honduras toward a more market-friendly, rule-of-law-based model. I had started building institutions that became competitive, only to see them dismantled by the next election and had seen noisy and occasionally violent opposition to every change, fueled by mistrust, special interests and political manipulation.

Around the year 2000 I started looking at economic progress, comparing central American economies out of pure curiosity. Back then the economies of Guatemala, Honduras and El Salvador were roughly the same with GDP per Capita differing barely by a couple of hundred dollars. Both El Salvador and Guatemala have since gone on to almost double that of Honduras. In 1990 we became leaders in manufacturing thanks to free zones and textiles and somehow managed to lag since in every other possible way.

It has been almost 37 years since that 1989 election. Long enough for places like China, Singapore, South Korea and even Chile to take off and bring a substantial part of their population out of poverty, yet here I was, begrudgingly agreeing with someone who had been watching my country and declared it sclerotic.

It took me a couple of days to work out what was wrong with his conclusion. Not the diagnosis, which I think was accurate. It was the prescription.

He had watched enough failed democracies to conclude that the missing ingredient was a firmer hand. But that is not, on closer inspection, what distinguishes the handful of developing nations that broke the pattern. What Singapore had that Honduras never did was not authoritarianism, though Lee Kuan Yew certainly had an authoritarian streak. It was the humility to admit, plainly, that it did not yet have the institutional capacity to build a credible, predictable legal system on its own, and the discipline to import that capacity from elsewhere while it developed it.

This is not a new idea. Egypt's Mixed Courts, established in 1875, were staffed two-thirds by foreign judges specifically because Cairo could not yet promise foreign creditors the predictable justice their capital required, ran for seventy-four years with enormous success, closing only in 1949, undone not by failure but by a nationalist movement that came to see any foreign judicial presence as an affront to sovereignty, however well it worked. The pattern would repeat, nearly a century later, in Dubai, Singapore, Hong Kong. And in Honduras.

The Dubai International Financial Centre Courts were established in 2004. They operate as a fully common law jurisdiction inside a civil law country, staffed by judges from England, Australia, New Zealand, and other common law jurisdictions, applying English common law rather than UAE federal civil procedure. Dubai did not spend twenty years training a domestic judiciary before opening its doors to international capital. It imported a functioning judicial system wholesale, ran it in parallel with its own courts, and let international investors trust the part that was, by design, built to be trusted immediately. I was told the story at the DIFC itself by people working inside it, and earlier by a friend who had worked in one very prestigious law firm there while it was happening. Now, twenty two years later, there are some Emirati judges serving alongside the foreign ones. The capacity they've built is beginning to be transplanted to the locals.

Singapore did something similar with the Singapore International Commercial Court, launched in 2015 with a panel of international judges sitting alongside the local judiciary. Jurists from Australia, the United States, Austria, England were specifically hired to handle cross border commercial disputes with a credibility that a purely domestic bench, however competent, would have taken decades to earn among foreign parties.

Hong Kong offers the oldest and, I think, the most instructive version of this story, precisely because it shows both halves of the argument. Since the 1997 handover, Hong Kong's Court of Final Appeal has included non-permanent judges from other common law jurisdictions. For most of its history, these have been judges from Britain, Australia, and Canada, several of them among the most eminent jurists in the common law world. For over two decades, their presence was treated, correctly, as a signal of judicial independence too credible for outsiders to ignore. It worked. Hong Kong became one of the world's great financial centres partly because its courts were, by design, harder to capture than the courts of the mainland beside it.

It is failing now, and the reason why tells you something important. Since Beijing imposed the National Security Law in 2020 and the further Article 23 legislation in 2024, five or six of these foreign judges have resigned in succession amid open debate over whether their continued presence still signals independence or merely lends respectability to a system that no longer deserves it. The mechanism of imported capacity did not fail because it was poorly designed. It failed because the domestic political system decided, deliberately, to take back the control it had once agreed to share.

In Honduras the biggest point of contention was the establishment of a special jurisdiction where foreign judges could serve under common law rules. Most of the country's legal profession qualified this as an abomination and an attack on Honduran sovereignty while a small minority saw it as a beacon of hope that could help the country overcome the weakness of its judiciary, as exposed in my previous essay "A Nation of Lawyers." The Supreme Court eventually declared it constitutional and even issued a decree ordering the creation of this jurisdiction. After all, Honduras had choice of law clauses and banks had been operating under such contracts for decades. Yet once the political winds changed and new justices were appointed by the leftist government that took power from 2022 to 2026, they revised the four previous rulings that had declared the matter stare decisis and declared the law unconstitutional anyway, based on arguments that contradict the constitutional text itself.

We had included this in the enabling legislation because we understood exactly what Dubai and Singapore understood: Honduras did not yet have the institutional capacity to guarantee the kind of predictability international investors require, and pretending otherwise would have fooled no one. What we built worked, for a while, for the same reason Hong Kong's courts worked for two decades. And it was dismantled for the same reason Hong Kong's independence is being dismantled now. Not because the imported capacity failed on its own terms, but because a domestic political system eventually decided it no longer wanted to share control with anything it could not fully command.

Though I believe he remained a democrat at heart, my new friend's forty years of watching elections led him toward a contradictory conclusion: that democracy needed a strongman to work. I understand the appeal of that conclusion. It is simpler than mine, and it does not require admitting that the actual solution was available the whole time, sitting in plain sight in Dubai, Singapore, and Hong Kong's own history. Honduras just lacked the humility to reach for it.

The lesson those three places teach is not that developing nations need a firmer hand. It is that they need firmer institutions, and the honesty to say, clearly and without embarrassment, we cannot yet build this ourselves.