The ZEDEs Law in Honduras: Sanctuary for Exploitation, Corruption, and Organized Crime 

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Author: Ana Pereyra Baron

What is a Zone for Employment and Economic Development (ZEDE)? Its supporters sell it as a chance for countries to attract investment and increase economic development. ZEDEs is a fancy term to cover up the fact that foreign investors can buy territory and hold complete control over a large portion of land within the state of Honduras. Yes, you read that right. This means the government of Honduras practically gives up its rights over that land. The ZEDE becomes a state within a state. This law has the potential to undermine the rights of workers, Afro-Indigenous, Afro-descendant, and Indigenous people and poor farmers, and leave them vulnerable to the whims of private investors. In 2021, the United Nations warned the Honduran government that the ZEDE law could threaten the human rights of Honduran citizens. There are currently three ZEDEs in the country. Ciudad Morázan outside Choloma, Orquídea, and Próspera, which is located in Roatán, an island in Honduras.

This sounds bizarre, but ZEDEs are not a new concept. It originated with a U.S. economist at New York University, Paul Romer. The law establishing the ZEDEs was originally passed in 2013. Former Honduran President Juan Orlando Hernández, who was extradited to the United States on drug trafficking and firearms charges, intensely promoted this avenue of investment in Honduras between 2014 and 2021. 

On April 21, 2022, President Xiomara Castro announced that Congress had voted unanimously to repeal this law, claiming it was a violation of national sovereignty. After the law’s repeal, on December 20, 2022, ZEDE Próspera announced that it would sue the Honduran government for $10.7 billion. The jaw-dropping sum sought by Próspera equals roughly two-thirds of the national budget for the fiscal period of 2023. Próspera argues that the government is violating the Central America and the Dominican Republic agreement, CAFTA-DR. 

The ABCs of the ZEDE Law 

Let’s take a closer look at the ZEDE law. Article 1 and 2 explains the principal ideas of what a ZEDE can do. Article 1 claims that these zones “are authorized to establish their own policies and regulations.” The Honduran government in essence sold a part of its land to investors that have the freedom to create their own systems on Honduran land. Article 2 states that ZEDEs can be “national and international financial centers, international logistics centers, autonomous cities, international commercial courts, special investment districts… or any other special regime not indicated in this article.” This law hands over power from the government to businesses, leaving the rights of people who work or live in or near ZEDEs at risk. The ZEDE law provides investors with ways to gain more money and natural resources while leaving the Honduran citizens living or working in or otherwise affected by these zones with limited rights.  

The ZEDEs law can create a sanctuary for exploitation. As the ZEDE owners have a free hand to create their own laws and regulations, these zones cannot be easily held accountable for violations of political, social, economic, cultural, or human rights. Labor and environmental protections are particularly at risk.

 Articles 25, 26, 27, and 28 describe the way in which the Honduran government can expropriate land to create or expand ZEDEs if deemed necessary for the development of these special economic zones. Article 43 mentions that ZEDEs can not expropriate land from Afro-Indigenous and Indigenous persons if they have been granted land titles from the government, but if ZEDEs expand, this may not protect Indigenous and Afro-descendant groups because many such communities have not received clear titles, even for the land they have occupied for decades or centuries, due to the land tenure system’s inherently racist and discriminatory practices. Moreover, article 43 does not extend the same protections to campesinos. These articles demonstrate the potential for the ZEDE law to affect the land rights of historically marginalized communities. 

These communities have historically been neglected and affected by extractive projects. ZEDE Próspera, located in Roatán, is right at the boundaries of a large Black Caribbean Honduran community in Crawfish Rock. The people of Crawfish Rock have protested against the investors’ plans, arguing that people were pressured to sell their land and were not informed of the implications of the ZEDEs.

The ZEDEs law can create a sanctuary for corruption. Article 3 states the ZEDEs can create their own autonomous judicial system. With the supposed purpose of attracting more foreign investment, Article 5 declares ZEDEs can “develop economic and legal environments appropriate to position themselves as centers of national and international investment.” One of the main arguments of ZEDEs supporters is that these zones provide an alternative to Honduras’ corrupt institutions; however, according to the Center for Economic and Policy Research, the ZEDEs structure “combines a lack of public accountability and deep conflicts of interest with the secret financing, thus creating a perfect environment for corruption.” 

The ZEDEs law can create a sanctuary for crime. Article 22 of the ZEDE law states that these economic regimes can have their own internal police force, prison, and intelligence system which holds exclusive jurisdiction in the area. In a Honduran ZEDE called Ciudad Morazán, the state’s police force is not allowed inside without “invitation or supervision” from the ZEDE’s security forces. Again, this opens the door to organized crime and corruption. Also, having their own ZEDE police force can increase the chances of criminalization and violence against labor activists and Indigenous and Afro-Indigenous groups, and land defenders.

Honduran Movement Against ZEDEs

In Honduras, various communities and organizations came together to create the National Movement Against the ZEDEs and for Sovereignty to mobilize and declare themselves free of these economic zones. There are over 180 municipalities that have declared themselves free of ZEDEs. Groups like Alternativa de Reivindicación Comunitaria y Ambientalista de Honduras (ARCAH), an outspoken organization against ZEDEs, denounced police and members of ZEDEs for threatening ARCAH’s general coordinator, Christopher Castillo. In September 2022, the Honduran Center for the Promotion of Community Development (CEHPRODEC), an organization that focuses on the defense of human and environmental rights for rural communities in Honduras, filed two appeals of unconstitutionality against the ZEDES. 

What’s Next?

Aside from this billion-dollar lawsuit, what happens to the existing ZEDEs already in Honduras? Unfortunately, there is a loophole in Article 45 of the ZEDE law that asserts that investors can keep their zones for 10 years after the law is revoked. As of today, ZEDEs in Honduras are still running. The ZEDEs law and the Próspera lawsuit against Honduras show how businesses can be more powerful than the country’s government.

It is critical to shine a light on the harmful effects of ZEDEs in Honduras to the American public. Unfortunately, ZEDEs investors seem to have had an impact on the voice of the US Embassy in Honduras and members of Congress. Some members of Congress, labeling the Honduran legislature’s legitimate repeal of the law as “expropriation,” are starting to call for pressure on the Honduran government.  Instead, the U.S. government should push for an end to this extreme form of investor control which negates the rights of many Honduran citizens. 

One of the Biden Administration’s top-stated policy goals towards Honduras is to address the root causes of migration. This goal will certainly not be reached through supporting extreme investor models like the ZEDES, which are unlikely to create decent jobs, can harm the environment,  and can potentially cause displacement. Moreover, the damages sought by Próspera are higher than the amounts of foreign aid the United States has provided to all three northern Central American countries to address the root causes of migration under the last three U.S. presidents.

We must continue to bring awareness to ZEDEs and their negative social and environmental effects because these extreme investment models can harm the most vulnerable populations in the country. Although the Honduran Congress unanimously repealed the ZEDEs law last April, the fight is not over. There is still a second vote in Congress in order to repeal the constitutional reforms on which the ZEDE law was based though there is no set date for this vote. Removing the ZEDEs in Honduras is still an uphill battle. 

Private interests cannot come at the cost of a dignified life for the people of Honduras. Honduran citizens opposed to this extreme project should be heard.  “Honduras will not be ZEDE-d,” 

Lisa and Ana meeting with ARCAH in Honduras in October 2022. Photo taken by human rights advocate. 
Lisa and Ana meeting with CEHPRODEC in October 2022. Photo taken by Ana Pereyra.