Xiomara Castro, the president of Honduras, won a primary victory for democracy this year when Congress repealed the Employment and Economic Development Zones (ZEDE) law. The law allowed the creation of special government zones, which “functional and administrative autonomy” vis-à-vis the national government. The zones have allowed investors to create their own systems of government, regulations and courts, offering room for experimentation with a privatized government to create a “proper legal environment. . . to be competitive abroad. “
This policy was highly controversial and won opposition from Honduran industry unions, peasants, indigenous organizations and even the country’s largest business groups. As described by the U. S. State Department, it is not possible to do so. a vehicle for corruption. ” When President Castro proposed abolishing the policy, the Honduran legislature unanimously repealed it.
Biden’s administration has argued that corruption is one of the biggest obstacles to progress in Central America. The U. S. Strategy to Address the Root Causes of Migration in Central America promises to “[p]oritize an anti-corruption agenda. . . “But when this purpose conflicts with others, such as selling American investments, which is more important?A recent State Department report criticizing President Castro for getting rid of the ZEDE Act suggests that personal interests take precedence over public transparency and accountability.
“Commitment to the Industrial Rule of Law”
The Biden administration’s timeline for Central America is ostensibly intended to address the “root causes” that lead to migration to the United States. But the plan’s heavy reliance on attracting consistent personal investment from multinational companies undermines many of its laudable top goals. Ignoring corporate exploitation of land and personnel as the root cause of migration consistent with itself, the White House’s plans will be some of the same corporations that create the messes they hope to solve.
Every year, the U. S. Department of Stateissues “Investment Climate Statements” to countries around the world, identifying foreign policies deemed detrimental to U. S. corporate interests. U. S. The reports serve as a signal to investors, but they also help shape government priorities when interacting with other countries and with U. S. diplomats “working with spouse countries to succeed over those obstacles. . . “
The 2022 investment climate for Honduras is the first time the U. S. government has been in the U. S. government. The U. S. government issues such a report for President Castro’s government, which won a landslide victory in last year’s election. One of the keys to his coalition’s good fortune was his commitment to fighting endemic corruption in Honduran politics embodied through former President Juan Orlando Hernández (“JOH”), who is lately prosecuted in the United States for drug trafficking.
When Castro won the presidential election last year, the State Department congratulated her and said she would “fight corruption. “However, in choosing to comment on the repeal of the ZEDE Act, the State Department condemned the resolution in harsh terms: “The [Honduran] government has exposed itself to potentially significant responsibility and fueled considerations about the government’s commitment to the rule of law. “. “
The report blames Castro for getting rid of unpopular policies instead of “seeking reforms or seeking discussion with ZEDE investors. “This decision, they say, “has contributed to uncertainty about the government’s commitment to shield the investments required through foreign treaties. “
The U. S. government’s condemnation The U. S. government directly contradicts its public anti-corruption commitments. While ZEDE proponents claim that autonomy of the zones will provide Hondurans and foreign investors with opportunities for Honduras’ “corrupt” legal system, the style combines a lack of public accountability and integrated conflicts of interest with secret investments to create an environment highly conducive to corruption.
Zones can create “their own police, as well as agencies responsible for investigation, intelligence, prosecution and. . . of a prison system for criminals”. However, those personal agencies are not required to share data with local citizens and possibly even unilaterally to restrict their cooperation with Honduran government authorities. One area, Ciudad Morazan, said Honduran police cannot enter “without invitation and surveillance. “
The zones themselves are approved and constituted in secret. The framework created in the 2013 law to monitor the progression of the ZEZ, the Committee for the Adoption of Good Practices (CAMP), has come under scrutiny for its lack of transparency and anti-democratic character. . While the original members of the foreign committee had to be ratified by Congress, the committee can update its own members without any control. No one knows who is listed lately, despite requests for disclosure through academics and civil society organizations under access to data laws. A 2013 list of clubs includes former members of Ronald Reagan’s Central American defense organization and troubled actors such as Ebal Diaz, a former JOH adviser who may have recently fled the country to avoid a corruption investigation.
The unelected CAMP has disproportionate strength in Honduras. CAMP has approved 3 known spaces behind closed doors, and the committee has not yet published data on the other spaces under consideration. In sparsely populated spaces on the north and south coasts of Honduras, CAMP has the sole authority to approve new spaces; congressional approval is not required. CAMP can even interfere in the internal politics of a domain and influence the selection of its leader, the “Technical Secretariat”. Meanwhile, nothing prevents CAMP members from occupying positions of strength in ZEDE governments.
In fact, corruption is one of the only reasons why ZEDE’s policy was implemented. After the 2009 coup against Xiomara Castro’s husband, then-President Manuel Zelaya, Honduras’ coup government presented its first attempt to create special tribunals, much to the delight of wealthy libertarian investors in the United States. Paul Romer, a Nobel Prize-winning economist who helped motivate the policy, temporarily distanced himself from it, raising concerns about the lack of transparency.
The policy, then known as the “Special Development Regions” (RED) law, was temporarily challenged through indigenous, Afro-indigenous and land rights teams across the country. It was declared temporarily unconstitutional by the Honduran Supreme Court of Justice. In 2012, the Honduran legislature responded by replacing 4 of the five Supreme Court rulings. The only convict who voted in favor of the RED zones, Oscar Chinchilla, was later appointed Attorney General of Honduras. Once all judicial opposition was eliminated, the ZEDE law was amended and officially added to the national constitution. Thus, the very adoption of the law became imaginable through the Honduran elites who circumvented the law to gain advantages from investors.
Who benefits?
The first zone to open in Honduras, “Prosperous,” has temporarily become a magnet for controversy. It provoked resistance from the nearby town of Crawfish Rock, where the cession interfered with local business and water. More recently, the domain joined neighboring El Salvador by accepting Bitcoin as its currency. While Prospera claims to adhere to anti-money laundering standards, organizations ranging from Fitch Ratings to the International Monetary Fund have warned that such a policy can lead to money laundering opportunities.
Who are the investors who allocate these zones? No one is safe. “Honduras Prosperous, LLC” is a registered subsidiary of NeWay Capital, an investment company founded in Washington, DC. The CEO of NeWay Capital, Erick Brimen, introduces himself as “founder and CEO of Prospera” and serves on the board that governs the area. He also informed the Financial Times that Prospera’s assignment was in charge of the US embassy.
Many Prospera board members and well-known investors are connected to the libertarian “free cities” movement and conservative politics in general. One of the investors is Pronomos Capital, a fund run by Milton Friedman’s grandson and subsidized by far-right billionaire Peter Thiel. Another is Free Private Cities Inc. , whose chief executive noted in an interview that Prospera can be selective about who it allows access to the area: personal government “reserves the right not to settle for serious criminals, communists and Islamists. “
Despite the repeal of the law that allowed their existence, the ZEDEs are still active today. The Honduran government insists on reorganizing to adhere to legal norms used through other special economic zones, but Prospera has hinted that it will forget about them. The company took advantage of the State Department report to state that there is no need to change, arguing that “the repeal of EDZE cannot legally be interpreted as the elimination of existing EDZEs. “Even in the event of defeat, those personal territories refuse to recognize the imposing authority of the Honduran government.
Accountability and democracy will have to come first
In condemning the repeal of the ZEDE Act, the State Department continues to place the interests of the U. S. business sector above its own stated intentions in Central America. Indeed, such a loyal position to the “commercial rule of law” at the expense of the democratic rule of law. By prioritizing U. S. -based investment firms, you will not be able to do so. In the U. S. as Neway Capital on transparency, accountability, and grassroots participatory democratic governance, the U. S. government is in the U. S. government. The U. S. is contributing to the unrest plaguing the region.
In a country where corruption is already entrenched, personal government spaces with opaque money flows and little oversight can serve as fertile soil for unfair gambling. constitutional democracy in the region, then recognizes the completion of the EDZE as a positive step forward.
This first gave the impression on the Americas blog.