IN ECONOMIC DEVELOPMENT, SMALLER AND MORE ISOLATED IS BETTER (via Tom Morin):

Could Puno and Guantanamo Be The Next Hong Kongs? (Alvaro Vargas Llosa, August 9, 2006, Independent Institute)

Puno, a poor region in southeastern Peru, could become an economic powerhouse and stem the politics of resentment that is invading the Andes—if the government would allow a real free-enterprise zone to be established. Likewise, Guantanamo could erode Cuba's communism in the way West Berlin eroded East Berlin's communism if the U.S. authorities gave Cubans an opportunity to turn the controversial naval base into a new economic Hong Kong.

The Andean region, where authoritarian populism is ripe, needs a quick economic success story. Social resentment has already produced two Andean presidents—Venezuela’s Hugo Chavez and Bolivia's Evo Morales—and came within an inch of producing a third one, Ollanta Humala in Peru. The way to erode these movements that play the ethnic and the ideological card against globalization is to permit free enterprise.

Puno is 60 times bigger than Hong Kong. Unlike the rocky Chinese territory, it has agriculture, livestock, silver, copper, the highest navigable lake in the world and a mythology going back to the origin of the Incas. Peru's successive regimes have kept that region poor by using political tools to prevent local entrepreneurship from flourishing. Today, 80 percent of the population is impoverished. Puno would be even poorer were it not for 20,000 people who smuggle products from neighboring Bolivia and resell them across the country. [...]

President Alan Garcia, who took office last month, says he supports plans for Puno’s free-enterprise zone. If he truly does, he should go beyond the law that was passed by Congress and his recent decree expanding its purview. The law frees industrial and agricultural activities, but keeps many commercial restrictions that affect small businesses and current smugglers of consumer products and other goods from Bolivia. If special interests elsewhere in the nation are affected by free commerce in Puno, then that is a great argument to get rid of commercial barriers the way the Baltic country of Estonia did in 1992—which touched off an economic boom.

Guantanamo is another interesting prospect.