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REGIONS AMERICAS


THE ZEDE LEGISLATION ISONEOF THEMOST ADVANCEDOF ITS KIND IN THEWHOLEWORLD


Honduras’seconomic experiment


OPERATORS SAY HONDURAS’S SEMI-AUTONOMOUS CITIES COULD IMPROVE GENERAL PROSPERITY AND GOVERNANCE. JACOPO DETTONI REPORTS


according to consultancy EY. Located on an initial 58-acre stretch of coastal land on the tourist island of Roatán, the development is a blueprint for the concept of semi-autonomous cities, and has ambitions to become the HongKong of Central America. The only caveat: Roatán Prospera, as the whole project is known, is part


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of Honduras, a country not known for its busi- ness opportunities. It ranks 133th out of 190 countries in the latestWorld Bank’s Ease of Doing Business report, and has been plagued with violence and instability for years. However, Roatán Prospera is set apart legally


from the rest of Honduras: as its first zone for economic development and employment (Zede), the development enjoys a large degree of self- governance. Fully private, it can have its own laws, tribunals and security guards, as well as its own taxes and budget – as long as it pays the Honduranstate about 15%of its revenues. It is in Honduras, yet not fully inHonduras. With the first investors chipping in, and


another such Zede taking its first steps in Choloma, the country’s light manufacturing hub, Zedes are gaining momentum after failing for years to become the expected catalyst for investment, and a proof of concept for private, alternative forms of governance able to lift the whole country.


Creating Zedes Hungry for investment in the aftermath of a coup d’état in 2009, the Honduran government workedwithUSeconomist PaulRomer(co-recipi- ent of the Nobel prize in economics in 2018) to test the concept of ‘charter cities’ under the name of special development regions (REDs). Mr Romer dropped out of the process, however, due to what he sawas a lack of transparency, and the government had to tweak and rebrand the programmeto clear the supreme court.


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f it was a country, Prospera Village would be the ninth most competi- tive business location in theworld,


The reform was finally approved in 2013,


when Zedes were “authorised to set up their own policies and laws in order to [...] allow the country to enter the global markets through competitive and stable rules”, according to the government decree. Roatán Prospera, then known as Zede North


Bay,becamethefirstauthorisedZedein late2017. “I would characterise Roatán Prospera as a


public-private partnership between a private group of investors and the government of Honduras, with the key intention being a better environment in which to do business,” says Erick Brimen, the US investor who proposed the pro- ject and is nowserving as its CEO.


Less bureaucracy Roatán Prospera has designed an environment that minimises red tape and volatility to attract investment into prospective residential proper- ties and businesses. Income tax does not exceed 10%, plus an annual resident fee of $1300 for for- eigners ($260 for Hondurans). Legal disputes will be handled by default


through arbitration or local courts applying the principles of English common law, mirroring a model pioneered by the Dubai International Financial Centre (DIFC).Atechnical secretarypro- posed by the operator or the residents will act as the main governing authority, while the Honduran supreme court retains the power to vet the Zede’s courts and judges. Mr Brimen believes that the project will be


sustainable in the long term if it can attract 10,000 inhabitants and workers. EY, one of the project’s partners, believes it can mobilise pri- vate investment in the order of $500min its first phase, which includes a hospital, a university, an innovation centre and residential properties. Officially launched in May, so far Roatán Prospera has sold 20 of 100 planned residential units in pre-sale. A second Zede is shaping up in a 20-hectare


area in Morazán, an area in northern Honduras known for its light manufacturing industry. The Zede Morazán has the same degree of


www.fDiIntelligence.com August/September 2020


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