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A LIBERTARIAN FANTASY IN THE TROPICS  
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Bruce Nissen
September 1, 2024
Stansbury Forum
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_ Rightwing libertarians around the world are attempting to erode and
virtually erase governmental measures that protect both people and the
environment from corporate misconduct and unrestrained capitalism. _

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Do you find that right-wing proposals to shred our country’s social
safety net to pieces and to unburden giant corporations from
regulations that protect the environment, worker’s rights, health
and safety, and so forth, to be scary?  If so, you should look at
experiments being tried in Honduras — experiments that make anything
being tried here look like half-hearted amateurish measures.  

In early January 2024 I joined a delegation of U.S. and Canadian
citizens on a nine-day trip to Honduras that was sponsored by the
Cross Border Network and supported by other groups that were also
members of the Honduras Solidarity Network (also a sponsor).  The
purpose of the tour was to learn about the effects that our
multinational corporations and governments were having on this
country, which is the poorest of all the Central American
countries.  

I learned a lot about Honduras and the perilous existence of many of
its residents, be they laid off and injured workers in a local
“maquiladora,” racial minorities, trade union leaders (the country
recently earned the dubious distinction of having the highest
percentage of its union leaders murdered), and in general a country
traumatized by a 2009 coup by the military.  But nothing I saw or
heard left as lasting an impression as something I had never heard of
before: special economic zones known as ZEDES (Zones for Employment
and Economic Development) that are designed to bypass or evade almost
any form of democratic or governmental control over the behavior of
those investing in them.  We visited and saw up close the
country’s most advanced ZEDE, named Prὀspera, on Roatan, a
Honduran island off the north coast.  

WHAT IS A ZEDE?

How a ZEDE is defined seems to depend a lot on who is doing the
defining.  Fans of ZEDES describe them as being massive job creators
and prosperity generators due to their cutting unnecessary and
job-killing government regulations.  Detractors tend to define them
as the hyper-capitalist embodiment of right-wing fantasies that
empower wealthy owners to evade taxes, mistreat workers, and despoil
the environment.  

The Prὀspera ZEDE is the country’s most ambitious of the three
chartered under the previous government.  It has the following
features:   

* While it remains subject to Honduras’s constitution and criminal
code, for non-criminal legal matters the ZEDE has its own civil law
and regulatory structure.
* The ZEDE civil disputes are handled by an extremely flexible
arbitration structure designed to enforce the laws of whatever country
a ZEDE business chooses to place itself under (in other words, it
could be enforcing the labor laws of Slovakia or any other country
from a list of permissible countries to suit the self-choice of any
ZEDE enterprise).  
* The administrative governance of the ZEDE is handled by a
Technical Secretary (TS) who is responsible to and is overseen by a
primary governing body known as the Council of Trustees (see
below).  
* Honduras Prὀspera, Inc. is a private company that owns the
ZEDE.  It sits on Prὀspera’s Council of Trustees (aka “The
Council”) and has veto power over it.  The Council is composed of
nine individuals, five elected and four appointed by Honduras
Próspera Inc. (Those “elected” are chosen by a complicated
process that gives landowners more votes depending on the size of
their land plot.)  Decisions to change any of these arrangements
must have a 2/3 majority, or 6 of the 9.  (This means that Honduras
Prὀspera Inc. holds a veto over any changes.)  The Council is the
primary governing body; it has a private police force and its own tax
system, with extremely low tax rates.
* A non-elected Committee for the Adoption of Best Practices (CAMP)
oversees the Council and has the power to approve all internal
regulations and to provide policy guidance.  It was appointed by the
corrupt Honduran government that initially pushed through the ZEDE law
(and whose president at the time, Juan Orlando Hernandez, has
subsequently been found guilty of narcotrafficking and was sentenced
to 45 years in a U.S. jail in June 2024).  Nine of CAMP’s members
are from the U.S.; only four come from Honduras.  CAMP fills its own
vacancies, ensuring no political influences can change its orientation
or trajectory.  
* All basic services that a government normally provides or
regulates, such as water, electricity, education, healthcare, etc. are
provided by private entities that contract with the ZEDE Council to
provide them.  

Looking at the above bullet points, it should be obvious that any
normal “government” with governmental powers is basically absent
in Prὀspera.  Virtually everything is privatized.  Anything a
government would typically do is to be provided through a private
contract either between private citizens and private companies or
between a “private government” controlled by a for-profit company
based in the U.S. (Honduras Prὀspera Inc.).

The income tax is nominally 10% but since only 10% of business income
is taxed, the effective business income tax rate is 1%.  Tax
avoidance is a major incentive to invest in Prὀspera.  Matters of
justice are also addressed through contracts and a private arbitration
dispute resolution system.  There is no room for any kind of welfare
measures of a public nature.  

In other words, the Prὀspera ZEDE aims to be the embodiment of an
economic libertarian’s dream: almost total absence of government and
taxes, with all relationships between people and people-created
organizations to be governed only by signed contracts.  Market
relations and enforceable contracts constitute the entirety of
economic interactions.  Any kind of governmental intervention to
regulate the behavior of private corporations are to be eliminated or
at least reduced to the maximum extent possible.  

The allergy to government regulation even extends to the ZEDE’s
currency: the official currency of Prὀspera is the cryptocurrency
Bitcoin. Bitcoin is not issued by any government and theoretically is
not subject to any regulation by any government.  (This combination
of Bitcoin currency, virtually non-existent regulation, and virtually
no taxes would seem to make Prὀspera a perfect candidate for money
laundering and other illegal financial activities.)  

HOW DID ZEDES COME ABOUT?

ZEDES are a product of a military coup in 2009.  In 2006 Manuel
Zelaya became president following a November 2005
election.  Although he came from the landed aristocracy, Zelaya
increasingly moved left after his election, increasing the minimum
wage by 80%, reducing bank interest rates, providing free electricity
to the very poorest residents, and shifting the country’s foreign
policy toward allying all Latin American countries into a common block
to escape U.S. domination as well as forming friendships with Cuba’s
Raul Castro and Venezuela’s Hugo Chavez.  During his
administration poverty declined by 10% in two years.  

The Honduran elite families that owned much of the country’s land
and wealth found Zelaya’s policies to be intolerable, as did the
military and apparently U.S.  policymakers.  A military coup in
June 2009 deposed Zelaya and deported him to Costa Rica. The U.S.
government did not insist that he be returned to power.  Instead,
the U.S. supported new elections proposed by coup-leaders, and the
consequent conservative/right-wing governments that were installed
through widely criticized and rigged “elections” brought about the
country’s ZEDE law.  Porfirio Lobo Sosa, president from 2010-2014
attempted an initial ZEDE law, but it was overturned by the
country’s Supreme Court as unconstitutional and a violation of
Honduras’s sovereignty.  A majority of the Supreme Court justices
were then dismissed, and a new more pliant Supreme Court approved a
second slightly amended version which was implemented under the rule
of Juan Orlando Hernandez (generally known as JOH – pronounced like
“hoe”), Lobo’s conservative/right-wing successor who ruled from
2014 to 2022.  (As alluded to previously, JOH was convicted in the
U.S. of narcotrafficking and weapons-related charges, along with
Lobo’s son Fabio, JOH’s brother Tony, and JOH himself but that is
a side-story to this brief history of the genesis of ZEDEs.)

After JOH’s National Party lost the 2021 Presidential elections to
Xiomara Castro, wife of ousted former president Manuel Zelaya, her new
government passed legislation abolishing the ZEDE law and attempted to
dismantle the three existing ZEDES.  This attempt to get rid
of Prὀspera and other ZEDEs is being resisted, as will be related
in a later section. 

WE VISIT THE PROSPERA ZEDE IN JANUARY 2024

The leaders of our delegation had arranged for us to visit Prὀspera
to see for ourselves what a ZEDE actually looks like.  Prὀspera
carefully guards who is allowed in (the public is not necessarily
allowed to enter), so we had to fill out long and detailed
questionnaires about our occupations, purpose in visiting, addresses,
etc. before we were allowed in.  By filling out these forms, we
became “e-residents” of Prὀspera – to this day I receive
communiques asking me to report the income I made in the last year
within the ZEDE (which for me is of course nothing) for purposes of
accounting and registration. 

My first impression was not all that favorable.  There is a very
rough dirt road leading to the ZEDE; it certainly did not give the
sense that a lot of commerce of a physical variety was entering or
leaving the place.  I know that a semi-finished resort is being
constructed in Prὀspera and that residential and commercial
construction is planned, but I didn’t see much of this.  On the
other hand, it is located on the northern coast of Honduras and has
breathtakingly beautiful views of the sea, and for that reason alone
could easily be a prime candidate for tourist development.  

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We got to meet two of the most important people involved in
running Prὀspera.  Ricardo Gonzalez is the Assistant ZEDE
manager.  And Jorge Colindres is the Technical Secretary in charge
of its overall operations.  Both spoke perfect English and were
educated in the U.S. They both spoke to us at some length, especially
Colindres.  

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Both Gonzalez and Colindres are fervent believers in ZEDEs and the
philosophy underlying them.  They claimed that Prὀspera either had
already or would soon attract carpentry businesses, export services,
private education companies, restaurants, real estate firms, finance
tech companies, medical clinics, and much more.  Colindres called it
a “Hong Kong in Honduras.” 

Colindres noted that Honduras Prὀspera Inc. is a private U.S.
company that created the ZEDE as a “platform for investment.” And
he claimed that those investments would create prosperity for all and
lessen or eradicate poverty.  He (correctly) noted the widespread
corruption in Honduran society and (dubiously) claimed that the ZEDEs
would somehow be immune to such corruption.  Everything is to be
governed by binding contracts that individuals voluntarily sign, and
these are enforceable by arbitration proceedings taken to the
Prὀspera Arbitration Center (PAC) or else the business-oriented
International Centre for Dispute Resolution (ICDR).  This he claimed
would settle disputes in a clean way that ordinary laws and
regulations would not.  

When pressed on the need for some form of regulation to prevent
harmful “negative externalities” to others, he did concede that
some form of controls is necessary and mentioned that according to the
ZEDE’s charter ten industries in Prὀspera are not entirely free of
oversight.  I got five of these down in my notes:  banking,
healthcare, education, restaurants, and construction.  How are these
regulated?  A company operating in any of these industries can
choose its own regulations from those of 36 different
countries.  Thus, you could have a restaurant operating under the
laws and regulations of, say, Estonia, while a restaurant across the
street was governed by the laws and regulations of Brazil.  It would
be up to the owners of each restaurant to decide.  Enforcement would
be strictly by arbitrators deciding any disputes.  Outside of the 10
industries there would be no regulatory control over the behavior of
businesses or investors beyond any individual contracts they may
sign.  

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Our delegation peppered Mr. Colindres with skeptical questions about
the absence of regulatory control over especially big
businesses.  The most interesting thing about his answers is that
they fell into two categories.  The first category was a variant of
the “trust me” justification.  Since he is the Technical
Secretary and hence the chief administrator of Prὀspera, he had the
power to see that things were done properly, and he would never allow
any violations of human rights or undue power for moneyed interests:
we could count on it.  

Second, he claimed (oddly enough for someone praising freedom from
government) that many of our worries were addressed by Honduran
government regulations that do apply to the ZEDEs.  For example, he
stated that the Honduran minimum wage (currently ranging from
$1.94       US to $2.77 US per hour in manufacturing depending
on the number of workers) applied to Prὀspera, so workers could not
receive egregiously low payment.  (He also claimed that
Prὀspera’s charter requires payment 10% above the minimum
wage.)  Finally, he stated that if no other law or regulation
applied to a business or industry, the prevailing standard would be
“common law” enforced by the arbitrators, so the absence of firm
written laws or rules should not be troubling.  

A final guarantor of fairness is the fact that businesses operating
in Prὀspera have to have insurance, he claimed.  Since insurance
companies do not like to make big payouts, they will protect worker
rights, the environment, and the like, by refusing to insure companies
taking shortcuts in these and other areas.  (I found this claim to
be especially ludicrous given the track record of U.S. medical
insurance companies that raise their premium rates if they have to
make a big payout, rather than cancelling coverage or pushing a
company to reduce risk.)  

Wandering around the room where we were given the lecture by
Colindres, I found some interesting things.  One was a money
changing machine to convert other currencies into bitcoin and vice
versa.  (I regret I did not get a picture of this machine.)  Also
interesting were posters and books for sale that were inside
bookcases. For example, here are some stickers photographed from one
of the laptop computers sitting around the room: 

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Note the many stickers boosting bitcoin currency as well as the
“Less Marx, More Mises” sticker.  Karl Marx is of course well
known; the “Mises” refers to Ludwig Von Mises, the libertarian
Austrian American thinker who argued that any governmental
intervention in the economy would inevitably be for the worse.  

The books for sale that were inside wall cabinets were also
interesting.  I’ll start with two children’s books which are
take-offs from well-known children’s books in the U.S.: 

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_Goodnight _Bitcoin imitates one of the best-known children’s books
of all time:  _Goodnight Moon._   _If you Give a Monster a
Bitcoin_ emulates the beloved children’s book _If You Give a Mouse
a Cookie_.  I guess it’s never too early to begin inculcating into
the mind of a child the individualist libertarian mindset necessary to
make a currency free from any government seem plausible.

Then we come to the adult books.  As you might suspect, they were
all right-wing libertarian tracts.  Here are a few pictures:  

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Note especially both the foundational book of this type, Von
Mises’ _The Theory of Money and Credit_ and a very recent book by
modern billionaire and well-known anti-government crank Peter
Thiel, _Zero to One._  

One more picture gives you the flavor of the books favored by and
hawked by the Prὀspera ZEDE:  

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I had to include this picture because it shows perhaps the most famous
individualist/libertarian book of all time:  Ayn Rand’s _Atlas
Shrugged_.  This book has sold many millions and is still selling
briskly 70 years after it was published.  I also found the title of
the book on the far left to be astounding: making a moral case for
maintaining fossil fuels.

Our delegation’s trip into the libertarian paradise came at a time
when it was in peril, as it still is.  This is the subject of the
next section.  

NEW GOVERNMENT FOLLOWING A GENUINE ELECTION MOVES TO ELIMINATE ZEDES

As noted previously, a reform government led by former first lady
Xiomara Castro took power in January 2022 after a November 2021
election.  Castro immediately reversed the trajectory of her
conservative predecessors.  She stopped a wealthy landowner from
evicting indigenous people from land south of the capital, citing
indigenous rights.  She banned new open pit mining to protect the
environment, introduced reforms to the tax system that close tax
loopholes for the very richest (these tax reforms have not yet passed
Congress), made electricity free to the poorest residents who used
small amounts of it by billing the biggest users, and took other
measures favoring those less well off.  

In May 2022 she presented to the Honduran Congress legislation
abolishing the ZEDE law.  It passed unanimously, with parties from
the left, right, and center all supporting it. This move was immensely
popular in the country; mass demonstrations had been held opposing the
existence of ZEDEs.  

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Amnesty International of the Americas lauded Castro’s move because
they asserted that ZEDEs threatened the human rights of Honduran
residents. But Honduras Prὀspera Inc. immediately filed a charge
against Castro’s government with the International Centre for the
Settlement of Investment Disputes (ICSID), a business-oriented
arbitration mechanism set up by the World Bank to protect foreign
investors as an Investor-State Dispute Settlement (ISDS) mechanism for
cases like this.  They demanded $10.8 BILLION for the estimated
loss of expected future profits from the Prὀspera ZEDE.  That
amount equals approximately two-thirds of Honduras’s annual state
budget; it would cripple the country if the plaintiffs should
prevail. 

Two treaties with the United States commit Honduras to use this ISDS
arbitration system to settle disputes with investors: the Dominican
/Republic-Central America Free Trade Agreement (CAFTA-DR) and a
U.S.-Honduras Bilateral Investment Treaty (BIT). Castro had declared
in her campaign that Honduras would withdraw from these two treaties,
but the government has not left either CAFTA or BIT to date.  She
resisted sending a government representative to the arbitration
proceedings that were set up to hear the Prὀspera claim before the
ICSID.  But eventually she was forced to send a lawyer to the
proceedings to represent Honduras.  This lawyer argued that private
companies had to exhaust national legal remedies before coming to the
ICSID tribunal, but this argument has not been accepted. 

Eighty-five prominent international economists signed a letter in
support of Castro’s move to withdraw from the ICSID, stating, 

We economists from institutions across the world welcome the decision
by the Honduran government to withdraw from the International Centre
for Settlement of Investment Disputes (ICSID).  We view the
withdrawal as a critical defence of Honduran democracy and an
important step toward its sustainable development. 

U.S. politicians have weighed in on both sides of the
dispute.  Senator Elizabeth Warren (D-Massachusetts) and U.S.
Representative Lloyd Doggett (D-Texas) rallied over 30 Congressmen to
write U.S. Secretary of State Anthony Blinken asking that he intervene
on the anti-ZEDE side.   U.S. Senators Bill Haggerty (R-Tennessee)
and Ben Cardin (D-Maryland) asked Blinken to do the exact
opposite.  

Legally the case is tangled and murky: Can Castro unilaterally
(without congressional authorization) pull out of these
treaties?  Can the Prὀspera ZEDE lock in its own existence
because it signed a 50-year treaty with Singapore while existing
Honduran law guarantees protection of such treaties for a
decade?  While new ZEDEs are clearly illegal since the ZEDE law was
rescinded, can existing ZEDEs also be eliminated
retroactively?  Answers to these questions are ambiguous at the
present time.  

Even more important, where does the U.S. government stand on the
issue?  Since the U.S. has almost-complete hegemony over what
happens in a small and poor Central American country like Honduras,
where it stands is crucially important.  The Biden regime has talked
out of both sides of its mouth.  Former president Biden fulminated
against Investor-State Dispute Settlements (ISDSs) and vowed to not
include them in any future trade agreements.  In contrast, Laura
Dogu, the U.S. ambassador to Honduras, has strongly endorsed ZEDEs and
Prὀspera in particular.  She sharply criticized Xiomara Castro’s
abolition of the ZEDE law, stating that such “actions are sending a
clear message to companies that they should invest elsewhere, not in
Honduras.”  The U.S. State Department issued a similar statement,
criticizing Honduras for having an uncertain “commitment to
investment protections required by international treaties.”  

WHAT IS THE LESSON FROM PROSPERA?  WHAT CAN WE DO? 

Rightwing libertarians around the world are attempting to erode and
virtually erase governmental measures that protect both people and the
environment from corporate misconduct and unrestrained capitalism.
Thus, the most important lesson we can learn from the Prὀspera case
is that we must remain vigilant worldwide.

To fight the good fight only domestically is to leave us all more
vulnerable on a worldwide scale to a dystopian future of unrestrained
selfishness, ever-growing inequality, and the consequent
authoritarianism and militarism needed to hold down the subject
peoples and to keep them from emigrating to wealthier countries like
the U.S. In addition, Honduras and similar countries are laboratories
for what might be done domestically in the future. This battle must be
fought especially sharply in those areas of the world most lacking in
resources needed to fight for and sustain a more humane cooperative
and people-oriented society.  Places like Honduras.  

Here in the United States an urgent need is to demand that the
administration not only vow to keep ISDS measures out of all future
trade agreements (as the President has pledged to do) but take them
out of all existing trade agreements. Fortunately, there is already
action being taken by citizen groups and members of Congress to do
just that.  This move could use our help.  

Congressmembers Linda T. Sanchez (D-California) and Lloyd Doggett
(D-Texas) have marshalled 47 members of the House of Representatives
to sign a letter to Secretary of State Anthony Blinken and U.S. Trade
Representative Katherine Tai demanding that ISDS measures be taken out
of CAFTA-DR and other such economic and trade agreements.  This
letter has been endorsed by Public Citizen, AFL-CIO, Greenpeace,
Sierra Club, Pride at Work, Unitarian Universalists for a Just
Economic Community, Honduras Solidarity Network, Oxfam America,
Progressive Democrats of America, and a number of other groups.  

We can aid this cause.  If your Congressperson in the House has not
signed on to this letter, we can pressure them to do so.  If they
have signed it, we can thank them for doing so and also write to our
Senators to demand that they also sign on to this or an identical
letter in the Senate. We can also ask the organizations we know and
are affiliated with to endorse this letter, get their members to
publicize it and contact their congresspersons, and so on.  

Here are the materials you need to take action: 

* First, you can go to the webpage that explains the issue and
contains the
letter:  [link removed]
* Second, you can download, circulate and publicize the letter
itself, which is at this
link:  [link removed]
* Finally, publicize all of this on social media!  

_Bruce Nissen is a retired labor educator living in St. Petersburg,
Florida. He has been a union activist and leader since the 1970s in
both factory and higher education settings. His books and articles
attempt to chronicle and draw lessons from his long union activities.
Recently he has been focusing on Honduras through his work with the
Cross Border Network._

_Special thanks to Judy Ancel and Karen Spring for judicious edits and
corrections on earlier versions of this article._

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