World Bank must stop repression of Honduran democratic processes

World Bank must stop repression of Honduran democratic processes
Island of Roatán, courtesy of Roatán Tourism.

Honduran President Xiomara Castro has threatened to withdraw from the World Bank’s investment dispute centre (ICSID) after the controversial Próspera private city project was outlawed. Investors, as well as CEO of Próspera, Eric Brimen have demanded the state pay about $11bn USD, which is roughly two thirds of the national budget, for reversing the policies of the previous administration that was introduced via military coup d’etat in 2009. The Delaware-based company looked to build their own privately-run, semi-autonomous, city on an initial 23-hectare plot of land on the Island of Roatán north of the mainland. Brimen and investors have looked to capitalise on the ‘Employment and Economic Development Zones’ or ZEDE’s introduced by former President Porfirio Lobo Sosa. The ZEDE law allows for the creation of a type of administrative (semi-)autonomous zone where private investors and corporate entities have their own political, judicial, economic and administrative mechanisms with very limited (criminal jurisdiction only) oversight by the Honduran state. 


The idea was first discussed by Paul Romer, former World Bank Chief Economist and Nobel Prize winner, Próspera is meant to emulate the financial successes of city states like Hong Kong and Singapore and is reminiscent of ancient city states. The idea came to prominence after Romer’s TED Talk, where he hailed the idea as a remedy for poor economic development in regions that are unable to compete with established markets and states. Attracting private investors and other large entities through highly flexible regulatory measures, it is supposedly meant to create a wealth of opportunities for both migrants and locals, advancing markets and economic processes. As stated, Romer’s idea found a home in Honduras shortly after the 2009 military coup d’etat that installed former President Porfirio Lobo Sosa. By 2013, the ZEDE laws were passed, and Próspera looked to capitalise. 


The idea has been hailed by some, echoing notions of financial and economic development unburdened by traditional state policies, which allows locals to remain in their home but rise out of poverty. To many, Honduras seems like the perfect site. With 70% of the 7 million Hondurans living in poverty, Próspera was described by Brimen as a way to create a “meritocracy with no entrenched interests putting their thumb on the scale” and supposedly pull millions out of destitution. 


Local support however, is meagre. Residents from the community of Crawfish Rock explain that they were deceived. Initially, investors first appeared on the island three years before the initial building process to discuss the supposed opening of a community centre and tourist facilities. To many this was unsurprising as the Caribbean island is a hotspot for tourism. Residents at the time stated that they had no reason to be suspicious and Crawfish Rock Community President Luisa Connor stated “didn’t even know was a ZEDE was”. It was not until 2019 that residents were made aware of the full potential of the project as website pages for the city indicated plans to develop closer and closer to Crawfish Rock over time. Though representatives have said they informed the community of their intentions in June 2019 and a document with 49 signatures has been provided, locals insist that details were intentionally vague and the project was only listed as a “real estate and community development project” without going into further detail. By 2020, Brimen and investors had begun development. An estimated $100m was committed, workers hired, and buildings erected, though with only a few inhabitants. Meanwhile locals continued to oppose construction. 


Residents became hopeful after a landslide victory for Xiomara Castro who stepped into office in 2022 and deployed serious political capital to prevent the project from going any further. In April last year, the appeal for the removal of ZEDE laws was sanctioned. She later stated that it “was the most important day of my Presidency so far” and presented the company with 12 months to comply with the repeal. The community was understandably ecstatic; “words cannot describe how happy we are”. However, Brimen and Próspera remain committed, they announced a new round of investment that secured up to $60m and the official adoption of bitcoin as legal tender. 


Advertised as a revolutionary project that would fire struggling regions into stratospheric economic development, impACT implores the international community to proceed with serious caution. The idea that non-native corporate entities and private investors can cordon off a parcel of land in a region, likely bulldoze native cultures, customs and communities and exploit ‘underdeveloped’ or natural areas for economic development is a distinctly colonial notion. Though, of course, these activities are not new to the Caribbean or Central America. First the region struggled with Christopher and Bartholomew Columbus, who raided local Mayan trading vessels and native communities. Next the arrival of the Spanish Colonial authorities in earnest, which pillaged the region of silver through slave labour, decimating the native population and repopulating with slaves, mostly from Angola. Then, of course, the United Fruit Companies and others exploitation of cheap labour and extraction of wealth across Central America and the creation of “Banana Republics” supported by extensive US military presence


Even supporting voices have echoed colonial-type sympathies. A short piece from the Eurasia Review stated that ZEDE’s will “foster a new and upwardly mobile generation of entrepreneurs and start-ups that will drive the country’s economy forward”, becoming a “key special economic zone” and an important “nearshoring site for US companies relocating from China”. Recognising the colonial elements of this project must be recognised by the World Bank and they must allow President Castro to continue her trajectory. It is evident that proper consultation with local communities on Crawfish Rock was not carried out, and likely, development on Roatán will hugely disrupt, possibly even eradicate local ways of life. Removing native populations, in the name of economic development which is often paired with notions of lifting people out of poverty, often does the opposite and will likely follow this trend if Próspera is allowed to continue. ‘Extractivist’ corporate entities will likely enter the space, hire locals at low wages, marginally better than previous rates, and extract large profits whilst putting little back into communities through low tax thresholds. If the ICSID decides to carry out the $11bn demand, it will clearly mark the mechanism as a way in which corporate entities can circumvent state and democratic policies to constrain decision-making in the interests of the people. impACT sides with recent UN rapporteurs who have been highly critical, indicating that investor protection is prioritised over human rights, the rule of law and democracy. 


The May 2023 letter signed by five US Senators and 28 members of Congress that opposed the development summed up this situation well:


“Large corporations have weaponised … this faulty and undemocratic dispute settlement regime to benefit their own interests at the expense of workers, consumers, and small businesses”. 


impACT implores the international community, particularly those at the UN who have already criticised the dispute settlement process to form a union with President Castro, US political opposition and mos importantly, the Crawfish Rock community to vehemently oppose Próspera and back Honduran democratic decision-making processes.


Further, it is clear to impACT that this is an opportunity for the Community of Latin American and Caribbean States (CELAC) to demonstrate it’s ability to carry out its prerogatives. It must meet with both the UN and World Bank in order to protect its member state from oppressive settlement practices.


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