{ "episodeId": "SLP529", "speakers": { "stephan": { "name": "Stephan Livera", "role": "host", "tag": "STEPHAN" }, "stephan_livera": { "name": "Stephan Livera", "role": "guest", "tag": "STEPHAN" } }, "segments": [ { "speaker": "stephan", "time": "00:00", "start": 0.28, "text": "Our example is not only good for Honduras, and I think we can really transform Honduras, but it's an example for the world." }, { "speaker": "stephan_livera", "time": "00:19", "start": 19.09, "text": "Hi everyone, welcome to the Stephan Livera podcast, it's all about Bitcoin and Austrian economics, brought to you by swan dot com. Joining me today is Massimo Mazzone, and we're gonna be talking a little bit about free private se- Cities and his efforts in pushing this forward. So, first of all, welcome to the show, Massimo." }, { "speaker": "stephan", "time": "00:36", "start": 36.24, "text": "Thank you, Stephan. Thank you for inviting me. It's a pleasure to be here." }, { "speaker": "stephan_livera", "time": "00:40", "start": 40.0, "text": "Great. So, look, let's-- We're talking about free private cities, so listeners, you can check out some of my earlier episodes with Peter Young, T. J. Gable, Eric Brooman to get some other context, but let's hear it from you, Massimo. Let's hear, how did you first get into and hear about the concept of free private cities?" }, { "speaker": "stephan", "time": "00:57", "start": 56.63, "text": "Well, I've been a libertarian all my life, and, I was, living in, Honduras, when there was the first iteration of the ZED law. it was the time that, Paul Romer was in Honduras, that was about twelve years ago, and, he wanted to meet, some entrepreneur that might be interested, in, in the legislation, and so I ended, I ended up, having a breakfast with him. I was skeptical That was going to work, and actually didn't work the first i-iteration, as you probably know, I don't know about your, audience, and that was twelve years ago. Then, the law, that, was the output of that first effort, was rejected by the Supreme Court of Honduras. But then they changed the law addressing the problem that the Supreme Court, highlighted. They did a new iteration in, two thousand and thirteen. I was still skeptical, but in, two thousand, eighty-- At the end of two thousand and eighteen, I met with the commission that was in charge of implementing the program, and also because I saw Prospera was actually having traction, right? And, I have to thank, Prospera And Titus Gabel in particular, because they worked at least a couple of year to make it possible. The law, it's a great law, but as any law is kind of generic, and so there was a million of small things from customs to veterinary services to taxes to work out. That was a very heavy job that people in the Commission, from the government and, especially Titus did. And, so pro- So I was actually working, so at that point I, I, I met with the commission, I said, \"Okay, I'm ready to go too.\" In this sense, I kind of piggyback, the, the work of Titus, and I am, I'm very grateful to him." }, { "speaker": "stephan_livera", "time": "03:01", "start": 180.82, "text": "Excellent. And so just to make sure everybody can follow along, for people who aren't familiar, free private cities, it's this radically different concept, and of course, a lot of libertarians are interested in this idea, but it's not only for libertarians. But the basic" }, { "speaker": "stephan_livera", "time": "03:18", "start": 198.43, "text": "And have a certain agreement that is between the citizens and the people running, that area. So maybe if you could explain it just for somebody who's new, what's a free private city? What, why is that interesting?" }, { "speaker": "stephan", "time": "03:31", "start": 210.82, "text": "Yeah, let's say that, the, in terms of special economic zone, there are, I think fifty-five hundred in the world, and most of them are private actually, but all of them, the, the one private, are, place of work. People go in the morning, work, and go back. Back, in the evening, wherever they, they live, they usually go to public school, outside the zone, right? The zone is just typically it's in, emerging country and it's what is called sweatshop, right? I, I am a great admirer of, sweatshop because it's a stepping stone to richness for a country. Set up, this is the typical private, special economic zone. There are a few special economic zone where it's possible to re- Decide to live there, for example, in the, well, where you live, in the, the Emirates, and in, in China of course, Shenzhen, but also other, like, Jiaolong, it's, it's a new, let's say, a new wave of the, of special economic zone in China. but these aren't private, are owned by the government. Now, the, the important thing and why this is really new and disruptive, what is- It's happening in, in, in Honduras is that this private, this special economic zone are private and allows for residents, and the reason it's radical is that, when you have residents, you have, law and order, you have crime, right? Because, It's, yeah, crimes can also happen in a special economic zone, but I mean, it's very difficult that a guy is drunk and stab, another guy in, in, in, in, in a sweatshop. While, while if you are in a normal city where there are, all type of people living there, law and order is important, and of course, this means that the government has to- give us a certain level of police, discretionality or responsibility to a private owner. So yes, if you're talking, in general about, free private city, this is especially the idea that, Titus is pushing, they are, Places with a certain level of autonomy, it's very important fiscal autonomy, it's very important, at least civil jurisdiction autonomy, penal that the judges are, your judges, it's actually in, in criminal issue, it's actually not very important on one side, and on the other side, it's, it's, it's almost impossible to receive from a host state. but it's very important to all the regulatory side, for, for companies and, for residents, it's very important that the owner, the private owner, provides, what is called public services that are not public goods in economics, because scarce goods like, like, education and, healthcare. so I think in this environment, the ZEDO is, it's definitely the most advanced in the world, as Ciudad Morazán, each, each, each ZED has, the possibility of, raise the taxes they want. In our case, it's five percent. I didn't want to raise taxes because our business model is to make money on rents, and I want, I wanted to pay for public services with rents. But, we were forced, to have a five percent, tax on income. It's the only We don't have, value added tax, sales tax, inheritance tax, it's any type of tax. It's the only one, it's a flat tax of five percent on income. And out of this five percent that we collect, we give, the zero, twelve percent of it, which means zero point six percent of, income to the government to provide for, let's call it, national, public goods like the army, the main arteries that brings the value city. Together and criminal justice, because we don't have responsibility of criminal justice. so the law are extremely low. I didn't want to do that, but I was forced by the government. But it's only five percent, it's flat for a legal entity or private individuals, and, even if it's a minimum salary or a salary very low or five million dollar per year, you pay five, five percent. We are responsible to give, education and education up to eighteen years old, so, primary and secondary, and, health care. In terms of, administrative, autonomy, it's extremely high. we are only constrained by immigration, meaning that if somebody wants to come to live with us, us to be first approved" }, { "speaker": "stephan_livera", "time": "08:29", "start": 508.71, "text": "at the Honduran level before they can come to Honduras. You're inside Honduras. In" }, { "speaker": "stephan", "time": "08:33", "start": 513.03, "text": "Honduras, they can come to us. We can't, allow them to enter if, Honduras doesn't want. Yeah. We can't have an army, of course. We can't have, foreign policy like, But your side, which are all things that we are not interested, by the way. but, for example, okay, the day-to-day police, it's our police, it's people that we pay, and, we don't have to follow regulatory agency of the host nation, for example, we have our own, company registry, we can, give, charter for banks, the school doesn't have to follow the curri- Curriculum, or the regulation of the Ministry of Education, one that is very contentious is that the labor code of Honduras that do not apply in the CDE, so we are very, very autonomous." }, { "speaker": "stephan_livera", "time": "09:29", "start": 569.11, "text": "Okay. So, so let's just summarize a few of the key points because we've gone through, we covered a lot there. So essentially, I think we should get to the question of, you know, why, why is this interesting for people? And I think One, one answer could be, okay, maybe it's lower taxes, maybe it's, less regulation, maybe there's, certain, economic opportunities that are afforded to people. That's, I guess, that's why the model is interesting. So if you had to answer that question, if somebody said, \"Okay, Massimo, why is this idea of a free private city interesting? Why is it interesting to you?\"" }, { "speaker": "stephan", "time": "10:00", "start": 599.84, "text": "Well, it's all of above, in terms of the first two, thing, very low taxation and, I'm libertarian, I believe in Aikian, in Aik, so, I don't know what's gonna, what, what's gonna be the best industry in Ciudad Morazan, which is the name, of my city. I guess, it's gonna be something that it's, typically done in Honduras. In Honduras there are traditional free tra-- free trade zones called Zolys, that are places where you go to work, and, yes, a lot of, textile, seventy percent is textile It's automotive, Arnesis, and I guess, the, the first clients and the clients that were interested, at the beginning, before the, the change in government, were just this, this type of people. But I don't know, I mean, there are also Americans, in, involved in, crypto space, libertarian that decided to come to live with us, and they are starting, some, small business, I don't know where, the society goes. I mean, a city, a society, as Ferguson said, is the product of human action, but not of human design. It would be very arrogant from my part, to direct, what, the residents should do, right? I, I just provide, a safe place, a place with low taxes, a place where people can have, life with dignity. And, and this sounds strange, but our objective is, is people in Honduras, it's not, For, I mean, if foreigners were to come, they can come, but our main objective people in Honduras and security and, life with dignity, it's, it's a very important issue. So people come there, and then, the spontaneous order of the market will take care of it. We, we already start to have a small business catering to the residents, like we have a mom and pop convenience store, we have a cafe, we have a gym, we have a girl that cut your hair, well, doesn't apply to both of us. And, we have, we have this type of, small businesses that are already growing, and, and we'll see. I mean, it's, I know it's gonna work, I don't know how it's gonna work, but I trust the market." }, { "speaker": "stephan_livera", "time": "12:23", "start": 742.68, "text": "Of course. And so just to give people a rough idea, how many people live or work in, Ciudad Morazan nowadays?" }, { "speaker": "stephan", "time": "12:32", "start": 751.51, "text": "Yeah, at this moment there are about two hundred people living there. We have sixty-four hours. So, up to now we invested, fifteen million dollars, one five, and all this was until, November, two thousand and one, because it was when, the left beginning, twenty twenty-one, yeah, because The, the gove- the new, new government came along and, the electoral campaign was, one of the main issue, I think one of the three main issue was the, according to them, the elimination of the Z. And since then, we had the, a, a terrible rhetoric. I mean, they say that we are, criminals, we are, narco-traffickers," }, { "speaker": "stephan_livera", "time": "13:16", "start": 795.92, "text": "So just, just to clarify for listeners who aren't familiar, the Zelaya Law was the law that actually enabled this, you know, free private cities to exist, right? So I guess the history for listeners who aren't familiar is that this Zelaya Law was what enabled free private cities to exist. Then we've had a change of government, and as part of, yeah, in election that they were going to try and take away the ZL law, and that's maybe where some of the conflict or the uncertainty is at this point." }, { "speaker": "stephan", "time": "13:44", "start": 823.84, "text": "Yeah, they deserve the TSA, because we are very defended, legally, I mean, the, the law was at its constitutional level, it's, there is international treaties protecting it, it's, it's very, very strong, but this government, it's very left leaning. So, I had, i-in, in, in the, in the business plan that I, I was actually executing, at that moment, called for one hundred and fifty million dollar of investment in the next three years, and I could spend only fifteen. It was question of time because we received the charter, let's say that the- We, we were born in two thousand, two thousand twenty, but just at the beginning of COVID. So, it was very difficult to work, so we, we could only invest fifty million dollars, which is we bought the land, forty-five hectares, it's about one hundred, acres. we built sixty-four houses, four thousand square meter of industrial space, well, the wall because we're a duty-free zone, so We, by law, we are forced to have a wall around it to avoid smuggling, and then, you know, water well, the, the, the recycle plant, the main road, roads, the line, three kilometer line to bring electricity from, the substation of the, state provider of electricity. so we were just starting. but, but at that moment, even if we were in the middle of COVID, it was working beautifully. so you-- When we talk about-- We're talking about the Zedel, right? Not in general about Free City, but in this specific case, you, you have to understand that there are two different entities involved. One is a political entities, like a municipality. The Zedel is a subdivision of the territory of Fondo. Ciudad de Morazán. In Honduras, there are about two hundred and fifty, municipalities and three zed. The zed takes a territory, it's like a, a municipality. This is the entity that raise taxes and provide the public services. And it's a non- of course, it's a non-profit, entity, it's a political entity. And actually, at the end of the year, if the money raised is more than the, than the cost of the public services, the money is given back, to the taxpayer in proportion to what they paid. So the first, nine or ten months, since the beginning of two thousand and twenty-one, we actually had companies there and we were raising, we, the ZEDE. the ZEDE raised, seventy thousand dollar per month of taxes, the famous five percent on income, and the cost of the ZEDE was, about forty thousand dollar per month. So he had, it had a surplus of thirty thousand dollars dollars per month that was going to be given back to the taxpayer. Now at that moment, we still didn't have the school, so possibly, thirty thousand dollar at least twenty thousand would be a-absorbed by the school. But the point is we are actually at, if you wanna call it, a fiscal surplus, right? On the other side, there is the private entity, which in our, our case, is what, in, in, in literature is called an entrepreneurial community, meaning it's like a mall. We don't sell anything, we only live out of rents. It's different from Prospera that monetize the increasing value of the land, selling the land. We monetize this increase with higher rents, which in our case, with, they are still not very high because we just started. But the, the private entity, was, was making, in terms of revenues, renting the sixty-four houses in the four thousand square meter, was making about, fifteen thousand, eighteen thousand dollar per month and at cost only of, three thousand dollars because two, three persons. because actually the, the, the gardeners, and the police, and these people were paid by the city, right? By the public entities. so of course, the, the money we were making, about fifteen thousand dollars per month, were didn't justify the investments of the fifteen million, one five, that we put up today, today. But you have to consider that ninety, maybe eighty percent of that, fifty million million were assets that weren't monetizable yet, the land, the, the, the walls, the walls, the, the, the part that was monetizable, meaning leaseable, that was the houses and the, the industrial space, were just three million of the total and, and from an accounting point of view, actually it was working because, I, I gave a, a loan without interest to this private company that is called Communities Artists, and, they were making money from an accounting point of view. Now, of course, the money they were making, were not paying, the opportunity cost of the capital, right? But, from an accounting point of view, they were making money. And in September, I was closing two- feels, one was a pharmaceutical company that wanted to put, a plant of ten thousand square meter. In that case, it wasn't, it's a very specific asset of pharmaceutical company. So I was just leasing the land for ten years, renewable, and I was leasing at one dollar per square meter. so the plant would have been ten thousand square meter, but the land would have been fifty thousand square meter because of parking and all of these things. So that would be another fifty thousand dollars, without investment from our part, and, with another one of my companies, we were centralizing the call center It's, their business that have call centers all across Central America. we were centralizing all the call center in, in, Morazan, building a tower with, five hundred, jobs. the idea was to recruit, secondary school graduate in the area, people eighteen years old, to work in the call center, to give them, a decent salary, but pretty low, about four hundred and fifty dollars, which anyway it's a good salary in Honduras, four hundred and fifty dollar per month, a house, one of the house to live there, and a IT," }, { "speaker": "stephan", "time": "20:43", "start": 1242.8, "text": "course in the evening, and after a year, if they pass the course, they would enter in our company in the IT department with a minimum salary of one thousand dollars. the, the tower would have paid, forty thousand dollars per month. So we were already signing contract with, revenues of one hundred thousand dollars per month with cost that would probably increase, the, the cost of community artists, I mean, probably increase, at, I don't know, ten thousand dollars. So at that point, we would actually make, what, one million dollar out of maybe fifteen, which is still very low, but we were just, Scratching the surface, right? So it was working. We demonstrate up to November to twenty twenty-one that both the private entity and the public entity were working, the economics was working." }, { "speaker": "stephan_livera", "time": "21:38", "start": 1297.92, "text": "Back to the show in a moment. The lead sponsor of this show is Swan Dot Com. With Swan Dot Com, you can buy Bitcoin and also learn about Bitcoin. Now you can do this on the website or also on the Android or Apple apps that are available if you search Swan Bitcoin. Over at Swan Dot Com, there are different ways ways you can purchase Bitcoin. One is to do a smash buy and buy a chunk of Bitcoin in one go, or you can set up an automated recurring purchase plan where you buy a set amount every week or every month, and you can then automatically withdraw that Bitcoin to your self-custody with free automated withdrawals. Swan also makes a range of educational material available, such as Swan Signal podcast, the Swan Bitcoin Canon, and all other kinds of Of resources that you'll find if you get started stacking with Swan. Swan also has different service lines for, for example, if you are a high net worth investor, go to swanprivate dot com and you can have a concierge person who will help you and give you specialized guidance on your Bitcoin journey. Or if you are a business, you can go to swan dot com slash business and make use of the services that are tailored for you as a business owner and operator. So if you wanna start stacking with Swan, go to swan dot com. And start stacking there. And now, back to the show. Yeah. So fundamentally, you've set up this free private city, you've started the process of getting businesses and people to move there or set up business there, but then this, this unfortunately, the political climate sort of shifted against, you know, the Zeta law. Totally, totally." }, { "speaker": "stephan", "time": "23:15", "start": 1394.78, "text": "I mean, f- For example, I had a company, I have a chain of, pharmacies, seven hundred pharmacies, Central American and the private, label. Logistics was, centralized there, was one of the main contributor of, taxes, and, they threatened me to stop the container with, medicine, just with, with the police putting a roadblock. This was the vice, the, the president of the Congress, or probably number three in terms of power in the country, and he said in television, \"Don't worry, we'll put a roadblock and stop all the containers, and we'll leave the containers to weekend of the...\" Sun, and will make life impossible to people, working there. I mean, a container of, medicine is, one million dollar if, and you have to throw away if, if, if it's, if it's two weeks under the sun. So I, I had to move my company myself, my own company, I had to, to move there because the situation was just uncertain. And so I left, my company left, and all the other company that were already, leasing the four thousand square, meter, left So at this moment, we are left without, the industrial part. The important thing of the industrial part is that it pays, pretty well and it pays taxes, and, and now we are ended up only with the residential part. With nobody works, I mean, with the exception of those four or five small businesses to cater to the community, nobody works in, in, Morazan. We basically are a residential community now. Why? Because We're, I mean, we're not like Prospera place to attract, young, ambitious kind of wealthy people around the world. We are in the middle of, the industrial, heart of Honduras. So our residential clients are blue collar workers in Honduras. We rent sixty square meter houses at one hundred and twenty dollar per month. These people makes, four hundred, five hundred dollar per month, so we're, we can not rent a Thai- Their price. I mean, they don't pay taxes, the fi- the famous five percent, they don't pay that, we have to provide public services. And so at this moment, we are losing all the forty thousand dollar that, were provided by taxes, right? We don't have it anymore, so we have to subsidize with the private, The, the private company is loaning every month the money to keep, the public company alive. And, it, it's normal, I mean, we are completely booked out. I mean, we, we rented everything. We have a, a list of two hundred family that wants to come to live with us, because for a blue collar worker, he doesn't have a lot of, Belongings, if you want. So if the government decide to close us down against the law, but I mean, they are the, they control the people with the gun, so they can do that. at that point, I mean, in two hour with a pickup truck, they can make a, a moving. They don't have a lot, but a couple of beds, a television, it's not a big problem for them, but for a company, it's a big problem because, I mean, when you move into a new place, you have to assets, move, it depends of course on the company, but it's always a few hundred thousand dollars, and then, you always think that the government will retaliate, against you because you live in a place, that they say don't exist, which is absolutely untrue, I mean. It's, we, we exist, we, we are there, you can physically see us." }, { "speaker": "stephan_livera", "time": "27:02", "start": 1622.3, "text": "Okay. So w-we've, we've sort of talked a little bit about the different kinds of people who are there. If you could just explain for people the difference then, at a high level, Morazan as contrasted or compared with Prospera, like how would you compare these different-" }, { "speaker": "stephan", "time": "27:17", "start": 1637.37, "text": "Yeah. There are two main differences. One is, what Prospera is looking for, Prospera wants to provide a superior jurisdiction in the world I mean, it's very advanced in terms like, financial regulation, medical regulation, and many other aspect. And, its job, its job is to attract, as I said, the bright, young people, the same people that might go to Silicon Valley. In our case, we focus, on the traditional-- We want to attract the people of Honduras. I mean, so the, the, the clients are the client that live in Choloma. Ciudad de Choloma is the third city in Honduras, three hundred thousand people. When I arrived, at twenty five years ago, I arrived in Honduras, it had only thirty thousand people, so increased by ten times. There is people moving to Choloma, hundreds of people every week. It's like, John Steinbeck, you know, the all, all the orcs that went to California. So these are people that lives in, the countryside with, subsistence agriculture. And they come to Choloma because they can find a job, and, and they find a job. They, they come from, an honorable life in the countryside, a wretched life, they go to Choloma, they find a job. What do they don't, what they don't find is, it's, it's, it's a nice place because, I guess even in, in Sweden, if, a, a, a count, if a town increased by ten times in twenty five years, it would have, would have problem to cope with the growth, right? But that's absolutely true in Honduras. So, you find, every, every small business pay extortion to the gangs, the police doesn't work, you don't go out after seven o'clock because you're going to be assaulted, most of the people at home are single, mother. Because the, the fathers went to the US, to the US illegally. sea wage, it's open. I mean, there are kids playing, with, black waters. it's awful. Socially, environmentally, and, the, the housing is, is terrible. s-- it's still better than the life they do, because it's a question of, revealed preference. They still move to Choloma. And our objective is, okay, let's take care Of these guys, giving a place, first of all with safety, this is the most important thing in, in, in Choloma. And secondly, with, police that is courteous, that don't, extort you, the police itself, and, parks and houses that, of course, are not luxurious houses, but, but they are houses with, the bathroom inside, the kitchen, running water, electricity twenty-four seven. All things that are not available outside. And, the idea was, okay, there are especially the foreign, companies, like Nike or Fruit of the Looms, they have problem to recruit people there because the condition are so bad that some of these people actually leave to the US, and they also have all this ESG bullshit, right? That they have to take care of their own, so in that case, they can say that their own, workers live in a safe place with, a life with dignity, with a bilingual school for the kids, so in the, in the business model Was based on that. I mean, the traditional Zoli, the traditional special economic zone, charge a typical four dollar per month per square meter, and we were charging five dollar because the idea was that these guys, could say, that, that they were taking care of their people. A-and, and, but, but, but it's much more, Zid, Zid, it's an entire town, so, companies go there because there are people that are, good people, because we choose. Who to give, the rent, next by? I mean, literally one hundred meter away. While they have to boost the worker from even fifty kilometers away in some cases. And the people would like to live there because, not only because of the all the public services and, and the good life, but because they have a job, next door, right? So the business plan, the one hundred and fifty million, you can find it in our website, w w w morassanto city, you can find the urban plan. And the urban plan for the entire forty-five hectares includes, residential unit that would host, fifteen thousand people, one five, thousand, fifteen thousand. one hundred thousand, square meter of industrial space, we would make Ciudad Morazán, the, one of the three largest, provider of industrial space in the country, plus, office tower, supermarket, a church. I'm actually negotiating Working, with the bishop to build a church and to rent to them for one dollar per year, and then, pa-public park, public swimming pool, and all the, let's say, civic, thing that make a city, an entire city. And, this would have been ready in three years. the money is already earmarked, it's there, I don't have to raise money, it's my own money, and, we were just, we were just- When there was this problem. So this is the first difference. They want, they want to attract, the people that goes to San Francisco. We want to attract, What is called under the State, State, Statue of Liberty, New York, you know? Give me your, wretched, poor, I don't remember what it's written, but, but that one, but of Honduras, I mean, we are focused on Honduras. We, we, we already have a few foreigners, mostly libertarian, that came for the idea. But we are built for, the blue collar worker of, Honduras. I'm sure with time there will be people with more money, like, I don't know, the owner of one of this company or a lawyer or somebody else that wants to come, so we will be able to build, real estate more, expensive and to rent to a, to a higher price. Now, why I'm, highlighting rent, because this is the ac-actually the second extremely important difference between us and, and Prospera. Prospera is a subdivision, it's like a condominium. They sell the land. we are, as I said, an entrepreneurial community. We are like a mall, but it's a city, but it's like a mall. This means that there is no need of collective action. This is very important. If you rent a place in a mall, it's not that you decide who's gonna be the head of, security or, how much money the owner has to spend, in, advertising at Christmas, right? when you go there, the guy said, the, the owner said, \"Okay, this is the boss of, security, of private security, and we're gonna spend, I don't know, one million dollar in advertising, and the price is twenty dollar per square meter. Do you wanna enter or not?\" I mean, it's a market relationship. There is no collective action. There isn't, I mean, it doesn't happen that every year all the owner make a strike, to, to, to have the rent, decrease, right? It doesn't work this way, as Lord Topham used to, used to say, nobody ever strike in a private English school. you pay and you receive what is in the card" }, { "speaker": "stephan", "time": "35:34", "start": 2134.16, "text": "so what's the difference in this terms? Is that once you sell the land, you, you introduce a home owner association, if you want, a way of dealing with, collective action. You introduce all the problem of democracy. now, it's, of course, being Austrian, you're very aware of the public choice school. Now, in a mall, it's not a big problem because Maybe there are two hundred, Lizzie people that lease. It's very important for them, of course, so they, they are invested, even if, even if there is a subdivision that it's a mall, which by the way there isn't, because this is a big problem. But even this actual big problem would be much smaller than in a place with fifteen thousand people for all the problem of racial and ignorance that are typical of, Of, any democracy. We don't have this problem. We, we-- By law, when we have fifty thousand people, the people will be able to, vote on a person, important person that's called the technical secretary. But the level of public goods is provided by us. So the clients that goes there, they can decide, yes, I stay here or not. But- there are not all the pitfalls of public-- but in our version, in the version of Prospera, I respect Prospera enormously and actually am, even a small investor in Prospera, but, you introduce indirect democracy, with the Prospera model, because when you sell land, you can't kick the person out. So what are our advantage? Basically, an Entrecoma, a four level, four, four major class of advantages. The first is the, the management of public service I mean, I am in-incentivized to put a public service like, let's say, a better park only if I think that what I get back in terms of rent is more than what my additional expenses are So there is for the first time a way of deciding what is the rational level of public service. And of course, the public ser-services are also built by, by, by a private person, so they, they don't have all the waste and corruption that happens in, so the first thing is the managing, of the public service. The second is, the, the, the, working, let's say the dealing, dealing, with," }, { "speaker": "stephan", "time": "38:17", "start": 2297.05, "text": "with the conflict, I mean We do, for the residential side, we do only lease, three months lease, renewable. If a person doesn't create problem, we renew the lease. But let's imagine you're problem with this person. very easy, let's imagine that you have, five kids, of university that live in one of the house and keep the music, high until, two o'clock in the morning, and there are laws of, there are regulation indication that you can't keep the music more than, Let's say, I don't know, sixty decibel, after midnight. And but let's say that this guy every single day they put music, they, they create nuisances. If, so at the end of the three months, I say, before I say, \"Look, kids, all you've- Dia-dial down the music, Or at the end of the lease, I won't not, renew the lease, right? So it's very easy, you don't have to show proof and to do... Let's imagine another example, some kids, let's say twelve years old kids, out to school, they start to vandalize, the antenna of, of WiFi or so. I mean, they are twelve years old. I don't have proof. Maybe one of their friends tell the chief of police that they are there, but I don't have proof because the kid doesn't want to testify in a court. And then the kids are twelve. W-what are gonna do with them? I mean, if you think how this, thing would be dealt in a Western country, it's awful. they cannot, I mean, they would probably send a social worker, and even in some case, to take away the kids. from the father, right? From the families. In my case, I just, I just said to the, the head of police, to the father and mother and said, \"Look, you're great clients, you're a part of the community, but you're not disciplining your kid.\" So, make it happen. I don't, I know that they, just make it happen, or if not, in three months I will, eliminate your-- I mean, I will not renew your lease. And at this point, some intrafamilial dynamics with always some heat would work and the problem would disappear. And, so this is the second advantage." }, { "speaker": "stephan_livera", "time": "40:41", "start": 2440.99, "text": "So basically, what is the second advantage of a name that comes?" }, { "speaker": "stephan", "time": "40:44", "start": 2444.35, "text": "Yeah, the first is, public service, the second is this, a very important one It's the flexibility with real estate, where we are be-- if, I mean, if we're successful, we'll become probably the central business district of the Valle de Sula, an area of two million people where they resolve industrial alert of Honduras. Now we are building this, cheap housing in the most, attractive part of, of the future community, the entrance. So you can imagine that in, Ten years, the use of the land to provide one store houses for blue collar isn't the best. Probably we would like to build their high rises with people like Price Waterhouse, McKinsey inside offices, right? To be able to rent at fifty dollar per square meter instead of two dollar, two dollar per square meter that we are renting now. Now, if you have a subdivision, unless you use eminent domain, which for- Libertaria and it's, it's, pretty taboo. you can't do anything. I mean, it's almost impossible to, to, to redevelop, the real estate. In my case, I can just build, two kilometer away, because the good thing of the Z is that they can expand. We can buy the land around and, and, incorporate in the Z. So I can build the same housing, to, one kilometer away and tell my client, \"Look, I'm very sorry, Sorry, I have to create this nuisance, but I need this land. So you have the same rent, and actually I throw a couple of months for free for you, for the disturbance. But, I want to renew your lease here. You have a house, it's just like the house you have, one kilometer away. Please move there, and if they say no, I just don't renew the lease. So this continues. I mean, a city has to- To adapt to the reality that is made by society and technology. You, you, you never know what's gonna happen in the future, and you see with inner city in the US, they were destroyed by the bor-- by the birth of cars and suburban malls. And, but we can, we can re-adapt the real estate easily. And the fourth, the fourth advantage is, i-is the, the, the harmony of the community. I mean, for example, if somebody calls me from Texas and says, \"I lib- even a libertarian, and I'm libertarian,\" a second amendment, fundamentalist, and said, \"I wanna come to live there. can I, bring my gun?\" Say, \"Yes, you can bring your gun, because penal, criminal law, as you know, is the Honduran law. We can't change the criminal law.\" but criminal law allows for guns. Y-y-y-you can bring your guns. And he said, \"Okay, because I have sixty.\" I, I mean, I don't want a fanatic with sixty guns in his house. I'm libertarian, I respect his, his choice, but it's not a person I want around, twenty kids that plays there, right? So I can choose, who to rent or not to rent and, and to maintain. A good community. And, and, and, I believe that one of the major, opportunity for the national state of, of this type of cities, Is also to allow for this immigration, right? And so, so when there was this problem in Afghanistan that, the US had to leave and left twenty thousand interpreter or whatever in Afghanistan, I actually went to the American embassy and I said, \"Look, if you convince the, the, the Honduran government, I can take, maybe ten families. Of course, the, the government has to give them, a working permit because if not, they can't pay the rent.\" But I have, I have sixty-four families, maybe five or six, I can, absorb in, in the community. But if they say, \"I'm sending to you fifty families of, Muslim,\" I don't, I don't want to be disparaging, but this isn't the community I wanna grow. So I can absorb five, six, but not if I have a, a, an entire Muslim community, probably the people from Honduras. Would not come easily. So I need to create a community that it's harmonious, that, that grows, decently. let's say that, for example, prostitution is, is, legal in Honduras. So somebody decided to open a brothel in, In, Ciudad Morazan. No, I mean, I, I have kids there, I have family with kids, I don't want to have a brother there. There is nothing against the law, but it's simply something that I don't want because my selling proposition is, in this case, it's a family place, a place in which a family can, Flower and blossom without being worried. So this choosing who's in the community, it's an extremely important thing. For example, in malls, malls are very, very careful to who they let to, you know, they rent to. And the same thing should, should apply to a private community, a private, managed community." }, { "speaker": "stephan_livera", "time": "46:13", "start": 2772.58, "text": "Back to the show in a moment. Mempool.space is the leading Bitcoin and blockchain visualizer. You can use Mempool.space To target the fee for your Bitcoin transaction before you send it, and you can make use of the different fee priority buckets that you can see when you go to mempool dot space. Mempool dot space allows you to view not just the mempool, but also the blockchain, the historical record of transactions. You can search transactions using the explorer, and you can see all kinds of information such as the fee rate, the type of transaction. You can see even things like the RBF history of that transaction, which shows you things like whether It was replaced or not, and you also have a Lightning Explorer and a mining Explorer also. Mempool dot space is also coming out with a mempool accelerator, so keep an eye out for this. This will be a new program where you can accelerate transactions with a payment to mempool dot space. So if you're interested in all of this, of course, go and check it out over at mempool dot space. Also, CoinKite dot com are a sponsor of this show. When it comes to securing our coins, we need to use hardware that can help us secure our coins, especially for larger amounts. So once you get above the amount that is correct for a phone, let's say a phone hot wallet, it's time to think about hardware. So notably, the Coldcard is a, well-known device in the industry. It's very secure. It uses multiple secure elements to help you secure your Bitcoin private keys, which is what you use when you go to spend Bitcoin. Which means you sign a Bitcoin transaction. So the coldcard is a great device for generating that entropy that relates to your Bitcoin private keys. And of course, there's all kinds of advanced features that you can use. For example, you can use dice rolls, you can use external entropy, you can use multi-signature, you can have a passphrase. There's all kinds of additional features that you can use alongside your coldcard to help secure your coins. The team at CoinKite are continually innovating and adding new features and firmware updates. For their devices. So if you wanna get your cold card, go to coinkites dot com, use code Livera for a discount on your cold cards. And now, back to the show. I see. So, in a sense, it's taking that idea of private property and really applying it, in a certain sense, and you're basically sort of giving people that option of, \"Do you wanna live here under these conditions or not? And if not, go somewhere else, right?\" And that's, that's sort of one of the main-" }, { "speaker": "stephan", "time": "48:38", "start": 2918.43, "text": "Friends are like before. I In this sense, it's just an option more than the Honduran has. I mean, the problem of emigration, yes, there are one hundred and fifty country or so in the world, but the, the, apart from people rich, I can choose where to live basically, but, but the, the po-- the normal people can't choose, not because there is a block to, to emigrating like there was with the Soviet Union, and China. Now, excluding probably North Korea, you can emigrate from every country in the world, even Cuba, if you wanna go, if you have the money to go, you can go. the problem is immigration. The even, that, beacon of liberty and, haven, that is the US, makes it impossible to go to live there. For, for a person that is doesn't have money or a great CV or now not even with that. In that sense, given that we have a very limited welfare, we accept everybody. Everybody provided that they have A good, relationship with the neighbors, right? There are, there are the ideal, tenants that are, for example, the guy that organize football for the kids on Sunday or the guy that organize, put a small business to serve the community. And, and it's great to have this, this, tenants, and in some case we actually make a discount. The guy that organized the football, after a while, we said, okay, instead of one hundred and twenty dollars, it's one hundred dollars because he's adding to the community, he's providing value to me. but there are also normal people that they don't care about the community, but they respect the, the neighbors. So they aren't very friendly. They go to work in the morning, they come back in the evening, hopefully in the future they will work in the community, and these are good as well. I mean, we don't have any problem with them. But they pay, they don't, bother, the neighbor, it's fine. And then of course there are the, I don't know, the drunkard, I don't care if one drunkard drink and then stay at home and doesn't bother the other people, but if he start to scream and to treat, to insult the people, and, and, for example, to hit the kids, in that case, I throw him out." }, { "speaker": "stephan_livera", "time": "51:15", "start": 3075.05, "text": "Yeah, I see. So you're taking a little bit more of an active management, let's say. And so I guess the question could also be, how does this model scale, right? Like, 'cause maybe at And more easily rule in on some of these cases. How does it happen when, if the thing were to, if, you know, Morazan were to start to grow and there were a lot more families coming, how would you sort of deal with it at that point? Is it more that you, you'd have to still put in certain rules and certain regulations, to apply, much less" }, { "speaker": "stephan", "time": "51:44", "start": 3103.65, "text": "regul- Yeah, much less regulation than pros, but the problem is that you can't make a book of rule for everything that can happen. So you, you just common sense, right? You It's even better that rules, because if you common sense is actually common. If it's not, you fail because people will leave and you don't have friends. Now scaling, yes, I don't think you were referring to the financial scaling because it's very easy. Once you have a model like that, I think it's very easy to raise money. There is a managerial scaling, I think you were talking about that. And, yes, like any company, there is a possible- problem. We, we go now in technical terms, we are going into, in, into the, the cohesion equilibrium of the nature of the firm, right? How big it is when, the, the, the problem, the, the cost of agency of, in organization become higher than the lower transaction cost it's close, right, to the boundaries of the firm. And, given that this is a new industry, it's very difficult, to know. In my experience, the, the managerial sophistication can easily allow for a city of, millions of people, I think. But I wouldn't-- I don't know until we do it, we don't know. Now, there are some example of city like that in medieval times, and I'm not talking about, those great, medieval republic, because those were subdivision, but the real private city City, for example, some of the Anceatic League were private city, completely private city like this. But in that term, a big city, Florence, for example, in, the fourteenth century had twenty-five, twenty-five thousand people. So the big city of that time is actually a small town today. So if it's possible an organization like that, with two million people, let's say, I don't know. I think we will be, if not me, some other entrepreneur better than me, we will be, we'll be able to, to, to make Manage the complexity, but we don't know if we don't try." }, { "speaker": "stephan_livera", "time": "53:55", "start": 3234.53, "text": "Fantastic. And so when it comes to things like setting up a business, I think this is an area where maybe depending on which country you are in the world, sometimes you need to get licenses and permits and these aspects. So I think you- We don't need" }, { "speaker": "stephan", "time": "54:07", "start": 3246.64, "text": "ten" }, { "speaker": "stephan_livera", "time": "54:08", "start": 3247.82, "text": "dollars" }, { "speaker": "stephan", "time": "54:08", "start": 3248.34, "text": "twenty-four hour. In Ciudad Morazan is ten dollar and twenty-four hour, and you have your license. And, if it's a regulated industry, we don't have regulation. you talk to- Us, I mean, you wanna put, if you wanna put a Mama and Papa convenience store, we say go ahead, I mean, there is nothing to do. But let's imagine somebody wants to open a refinery, will, ask all the information, re-retain, a provider of, industrial, safety control that review the business plan and, and the building and all these things, and then ask for an insurance, for damage to third parties. But we don't have, too much regulation. We use, common sense." }, { "speaker": "stephan_livera", "time": "54:55", "start": 3295.2, "text": "Okay. Yeah. And so I guess the other aspect people might be thinking is, okay, so this is very early, what kind of infrastructure is there? Obviously, it won't be the same level of having, you know, the big Western world and so on. But could you just spell out a little bit what, what's the current level of infrastructure and what do you sort of see in the short to medium term, in terms of amenities that are available for people?" }, { "speaker": "stephan", "time": "55:18", "start": 3317.97, "text": "Well, if you, if Morazan dot city, you will see not only the urban plan, but also videos and picture month by month of the community. Now the infrastructure is what is needed for, for this segment, so we have a potable water, we're probably the only place where you can drink water from the faucet. we have the recycling plant, we have, the two main roads, the two main roads of the community, the-- I mean, there are, two, the large road, the big roads, and some smaller roads that goes where the sixty-four houses, are. We have electricity in the, in the business, in the urban plan, in the business plan of the one hundred, one hundred and fifty million, there is investment in our own production of electricity, Now we don't have it because we stopped the, the investments, this is a ten million dollar investment. So, what we have is, a line that we built and gave to, for free to the government to bring the energy from outside, which means that they, when they, when they have a blackout, we also have a blackout, unfortunately. I would say that the, the infrastructure now is sufficient for the need of the community. Maybe Maybe internet, we don't provide internet. Other, local provider came, we, we want to do the minimum. I mean, our business is to do just governments, so we prefer, all the business to have competition. Right, be private, private is good," }, { "speaker": "stephan_livera", "time": "56:59", "start": 3418.91, "text": "obviously, yeah." }, { "speaker": "stephan", "time": "57:00", "start": 3420.18, "text": "Absolutely, but even schools, for example, we have to put our school because there is nobody opening a school, but our idea is to give a voucher of fifty dollar per month for each kids, and then to have many schools com- Competing among them and, because by law we have to provide, I mean, we have to finance, education. but the idea was to have a different provider with different schools and the kids could, the father could, father and mother could choose with the voucher, typical libertarian voucher" }, { "speaker": "stephan_livera", "time": "57:33", "start": 3453.22, "text": "approach, yeah. The" }, { "speaker": "stephan", "time": "57:34", "start": 3454.16, "text": "tip, see, yeah, yeah, but unfortunately we have to provide it now because there is nobody there now. So, yeah, I see." }, { "speaker": "stephan_livera", "time": "57:41", "start": 3461.46, "text": "I guess one other area that people- People would want to know about is just your thoughts on where things are with the Zedelaw and the lawsuit and w-where that is, you know, where you think that might end? We would need," }, { "speaker": "stephan", "time": "57:53", "start": 3473.37, "text": "we would need an entire, episode to talk about the political environment. It's extremely Byzantine. I would tell you that in my own, assessment, I think we have a sixty percent possibility of surviving the next two years, and that in-- I mean, the six- Sixty percent that we will survive, which includes that, we survive the next two years, change the government with somebody with whom we can reach an agreement, and, so at this point, I would bet, sixty, sixty-five percent that we will survive and thirty-five percent that we'll end up with a huge, arbitration case in Washington." }, { "speaker": "stephan_livera", "time": "58:37", "start": 3516.66, "text": "I see. Yeah, well, fair enough. so I guess with that, with that in mind, then I guess you're, you know, the- The best case is if things go well, then what does Morazan look like? You're hoping for, in what way are you hoping for it to grow and advance?" }, { "speaker": "stephan", "time": "58:52", "start": 3532.09, "text": "Well, we are growing now. I'm building now thirty-six, houses, a building with seventy apartment, and as I told you, if we reach an agreement at the church, it's an investment of maybe three million dollars. It's not the fifty million per year that were, that- I was committing to. And the reason there is a lot of, enthusiasm in the community, every time I go there, the resident tell me, \"When are you gonna build?\" That I have to bring my mother, my sister, my cousin, and, we wanna grow and, I have a cafe. So it's quite popular. We have a, we have a waiting, list of two hundred families ready to come here. To come in. And, so I decided to invest, two, three million dollars to maintain this enthusiasm. But, but of course, it doesn't have the power of fifty million dollar in one year for three year in, in a row. I hope I'll be able in, two years, most likely with a new government. I don't think we'll reach an agreement with this government. Simply to, and, and Prospera will be the lead of that, because a lot of the, administri-- administrative freedom and autonomy that the ZED law allows are actually needed by, by Prospera, not by us. We don't need to have our own banks, right? We, we-- it would be nice to have it, but we can live without it. we don't need to be free of the control of, the, the health secretary in order to make, the, the trial that they are doing in, in Prospera. So whatever Prospera will be able to work out with the government, assuming, they will, it will be good for us, right? I mean, the, the minimum, i-i-is, is Prospera. If it's okay for Prospera, it's okay for us. Yeah. And I'm pretty sure they'll be able to work out something with the government." }, { "speaker": "stephan_livera", "time": "01:00:56", "start": 3656.44, "text": "Okay. Yeah, that sounds good. I guess one other-- obviously, I'm focused on Bitcoin as well, so obviously I had to ask a little bit about, whether there's any Bitcoin news or First" }, { "speaker": "stephan", "time": "01:01:07", "start": 3667.34, "text": "of all, we don't have, any fi- fiat currency, like Ayek, it's private, it's, whoever, I mean, in our case, any contract can be done in any currency, limpias, dollars, Bitcoin, gold, cows, whatever they want, it's fine for me. there isn't the use of Bitcoin, but there is one of the residents, it's an American, I don't know if you met him, you should, Alex Urgoche. I think I" }, { "speaker": "stephan_livera", "time": "01:01:35", "start": 3695.82, "text": "might have met him actually, yeah, go on, yeah." }, { "speaker": "stephan", "time": "01:01:37", "start": 3697.96, "text": "Okay, so he launched a stable currency, eLemp, one, Lempira is the money of Honduras. So he launched the e-lamp, don't ask me what technical, blockchain is using, I have no idea. I don't know any details" }, { "speaker": "stephan_livera", "time": "01:01:53", "start": 3713.69, "text": "of this either. Yeah." }, { "speaker": "stephan", "time": "01:01:55", "start": 3715.25, "text": "I think it's based on eCash, but, it, it works because, clients can pay all the public services, if they want with this e-lampira. It's baked one hundred percent, I mean, it's every-- all the money that we emit, it's in the bank. it's actually his business. And they start to use also at the pulpería, they start to use the wallet at the pulpería. Pulpería is the mom and pop convenience shop or at the café. So there is this cri- cryptocurrency, stablecoin that starts to be used, of course, it's not used outside Morazán. So when they, when for example the pulpería has to buy the food to, to sell, they come to our office, give us, coins, we burn coins, and we give them physical limpias so they can, Spend outside. And we start to have, a little bit of use, but it's-- Right. I mean, we are not particular. You can use Bitcoin, but you're not forced to use Bitcoin. It's not fiat money, and we, we don't want to enter in private decision of, a, adults." }, { "speaker": "stephan_livera", "time": "01:03:02", "start": 3782.2, "text": "Well, yeah, fair enough. I, I think, given enough time, people will sort of adopt it, but I also understand a lot of people want to, transact in their fiat currency, so I can't really judge, on that. so let's, let's leave it there. So listeners, make sure you check out Morazan Dot City, it's an interesting idea. Any, I guess, any parting thoughts for listeners, Massimo?" }, { "speaker": "stephan", "time": "01:03:23", "start": 3803.89, "text": "Well, I'd say that, this is not our example. It's not only" }, { "speaker": "stephan", "time": "01:03:32", "start": 3812.4, "text": "But it's an example for the world. We are providing a public service, I'd say, quality better than, Honduras and probably in line with Western, nation states with five percent of, taxes. Now, nation states in the Western Europe occupy between forty and seventy percent. And you might ask, \"Oh, it's possible to do with five percent what, the country do with sixty percent?\" And the reason is that we don't waste. But, I mean, the US under Grover Cleveland, so only one hundred twenty years ago the federal taxation, there was no income taxes, as most of your audience knows, but the federal taxation that was mostly duty, tariffs, was three point five, three point five percent of, GDP. Schools, and some other public service like local police were given by the states, but even in the states, were not more than five percent. So if you add the federal and local, taxation was no more than ten percent, and this is the history of the world. Up to the twenties, the twenties of la-las century, of course, taxation was not more than ten, fifteen percent of GDP, and world was working beautifully. And, we are demonstrating that we-- we already demonstrated in the past, in those ten months, that we can do that. It's still possible. You don't have to waste, sixty percent of your income to be won by, by the state to have the same type of public services. So we are an example, I think we are an example for the world, even in rich country It will never happen in a socialist country like, Canada or what the US is becoming, but maybe in places, like, Estonia, even Australia, they can, where they have a lot of land and they can, start to experiment with, example, like us." }, { "speaker": "stephan_livera", "time": "01:05:34", "start": 3934.87, "text": "Yeah, I think this is a great example of libertarian ideas in practice, and, let's see what happens. And I think to your point that, many nation states around the world World are taxing people at just ridiculous rates, the regulation is way too high, and it doesn't have to be that way. And I think this is an example of showing that in practice. I hope, you know, more people look at this idea. I'm, I'm also a, a fan and a promoter of free private cities. I'd like to see this idea succeed in, in many places. When are you coming down," }, { "speaker": "stephan", "time": "01:06:04", "start": 3964.13, "text": "Stephan? When are you coming down?" }, { "speaker": "stephan_livera", "time": "01:06:05", "start": 3965.77, "text": "Maybe sometime next year. I'll, I'll try and find a time. So, it's, it's a long Thank you, Massimo. And, listeners find the show notes at stephanlivera dot com. Thank you, Massimo." }, { "speaker": "stephan", "time": "01:06:19", "start": 3979.87, "text": "Thank you." } ] }