Por: Lara Caldas

Imagine a city with completely privatized governance and rules. An environment where a single company unilaterally provides every urban and livability service in exchange for a subscription fee while preserving free market policies. This libertarian utopia became a reality in Honduras, indicating that emerging radical urban imaginations might not align with democracy’s ideals.

Figure 1. Photo-collage by the author, using images from: https://www.goodfon.com/city/wallpaper-zaha-hadid-s-innovation-tower-zdaniia-arkhitektura-rastiteln.html and https://www.needpix.com/photo/609300/roatan-honduras-landscape-seascape-caribbean-travel-nature (both licensed as Creative Commons)

The initial idea of a private citadel traces back to Paul Romer, a renowned economist and once the World Bank’s vice president. In the early 2000s, Romer suggested that Charter Cities (CC) could serve as a developmental solution for the Global South. The colonial regime of Hong Kong inspired him to imagine exceptional territories operating under separate, improved rules than those of a “mainland.” These new cities would have their own normative apparatus – a charter –, making them partially independent of the country in which they are located. 

The goal of a CC is to establish a special economic zone with urban dimensions. Experts would design a charter to favor foreign investment and promote economic development, covering labor laws, environmental and urban planning regulations, special tax regimes, and even the justice system. The latter is crucial, as Romer believes that countries in the Global South are socially prone to having bad rules and failing to enforce contracts. Moreover, Romer proposes suspending political-democratic rights, such as direct elections. Since experts predetermine every decision, popular participation is deemed unnecessary. Hence, Romer suggested that residents should “vote with their feet,” leaving the city if the regime proves unsatisfactory, something akin to switching banks.

The obvious consequence is reducing political rights to consumer rights. However, CCs can appeal to the political class by addressing real social demands like safety, employment, and economic growth – though through an elitist framework with a homogeneous idea of development. Against accusations of neocolonialism, Romer argues that their legitimacy lies in their exceptional nature. The proposal is not to occupy entire countries nor to create these territories by force (although Romer presents a very insufficient notion of force, one that ignores countries’ power disparities and the capacity of market actors to meddle with politics). These zones are portrayed as innovation sandboxes, small special areas for investment and governance experimentation.

In 2009, shortly after the coup d’état, Juan Orlando Hernández, President of the National Congress of Honduras, and Porfirio Lobo, then-President, invited Paul Romer to lead a Charter City project. In February 2011, the Honduran Congress passed a constitutional amendment to enable Charter Cities in Honduras, initially called Regiones Especiales de Desarrollo (REDs). In July, the governance statute for REDs was approved. According to this document, REDs were designed as special zones with broad administrative, fiscal, legal, and regulatory autonomy, provided with a transparency commission appointed and overseen by the President. In 2012, the Honduran government entered into an agreement with MGK Group (a company associated with Michael Strong, a well-known libertarian activist) to develop the first RED. This agreement was made without Romer’s knowledge or the involvement of the transparency commission, leading to Romer’s abandonment of the project.

In October, the Honduran Supreme Court declared the REDs unconstitutional, stating that the law violated Honduras’ territorial integrity, sovereignty, and independence. Shortly after, in December, Congress removed four Supreme Court judges who had voted against the REDs. The President of Congress then appointed replacements aligned with the government’s plan, a move criticized as illegal by commentators. Less than a month later, amid fierce opposition from Indigenous islander communities and without consultation or social participation, a new constitutional amendment was approved, establishing the Zonas de Empleo y Desarrollo Económico (ZEDEs).

Figure 2: The Garifuna people protesting the RED project in Tegucigalpa, 2012. Photo by: Honduras Delegation, on flickr.

Prospera is the first ZEDE in Honduras, established in 2017 by the company Prospera LLC, based in Delaware, a well-known tax haven in the United States. Its main investor was NeWay Capital, a financial group based in Washington, DC. This company is linked to the Tipolis Inc. group, led by Titus Gebel, a German economist and founder of the non-profit organization Free Private Cities. Gabel is also the author of a homonymous book that promotes private cities as a solution for those dissatisfied with the rules of nation-states. The project attracted entrepreneurs associated with neoliberal and libertarian activists, including the then-president of the Hayek Institute and prominent figures from the cryptocurrency sector. The ZEDE was implemented on indigenous lands without prior consultation (despite legal prerogatives) and faced widespread opposition.

Figure 3: Prospera is located on the island of Roatan, Honduras. (Google maps with author’s edition).

Prospera embodies many of Romer’s ideals. The new city is an autonomous zone, both financially and administratively, managed by a non-elected council. It has its own governance and justice systems, operating under rules distinct from the national legal framework. Prospera’s court functions through an app developed by an investor and advisory board member of the same company that manages the ZEDE.

Legal experts say that constitutional protections have been weakened, including guarantees of free speech, protections against forced labor, safeguards against discrimination based on gender and race, and even the right to Habeas Corpus. Land ownership rights are among the most undermined, as the regulatory decree stipulates that no precautionary measure shall be implemented to prevent or delay land expropriation. While compensation for expropriations is required, it is only provided in cases where formal ownership titles exist, something that many traditional indigenous populations lack. Luxury condominiums designed by international “starchitect” Zaha Hadid are replacing traditional fishing communities. Prospera is a new city, but more importantly, it is a normative innovation, semiautonomous from Honduras and oriented towards the interests of a transnational class of investors.Prospera falls under the Honduras-United States bilateral agreement (CAFTA-DR), which protects U.S.-origin investments. Therefore, although Honduras elected the socialist Xiomara Castro in 2022, who managed to repeal the ZEDE law, the national government cannot unilaterally terminate the agreement with NeWay Capital without facing indemnity proceedings. Additionally, ZEDEs have vested rights under the Honduran Constitution. Even with the repeal of the legislation, all concessions will remain in effect for at least 10 years. While this process is lengthy and cumbersome, Prospera remains a concrete example of corporations’ power in the South and their capacity to shape urban futures according to their interests.

Lara Caldas is a postdoc fellow in Political Science at the University of Brasilia. She is a researcher at Observatório das Metrópoles and a member of the research group Geopolitics and Urbanization. Her research interests lie in the intersection of urbanization and democracy. Contact: lara.cfsilveira@gmail.com