A digital model city is to be created in Honduras

“We are particularly interested in investors from the areas of fintech, medical technology, the health sector, education and accounting,” says ZEDE CEO Brimen in an interview with Handelsblatt. 60 percent of the investments made so far have come from the USA, 33 percent from Europe, including 27 percent from Germany. The rest from Central America. However, Brimen does not want to name the investors.

ZEDE stands for “Zonas de empleo y desarollo económico” (employment and economic development zones) and Próspera means something like “prosperous” and “flourishing”. The demands are high on the project, which not only offers paradisiacal locations for working and living, but above all unusual conditions under which people are employed.

The tech model city works in part according to its own rules and laws: less taxes, higher wages and its own arbitration system for certain disputes. The Honduras planners have taken on similar projects in Dubai and Hong Kong, for example, as Brimen says. But in the Central American country, the project is met with widespread skepticism.

An idea from Nobel Prize winner Paul Romer

The idea of ​​such semi-autonomous territories comes from the US economist Paul Romer, winner of the 2018 Nobel Prize in Economics. Years ago, the professor at New York University worked out the concept of “charter cities”, the idea of ​​demarcated places that have a special responsibility to create their own System of governance.

These charter cities should be guided by the idea of ​​good governance and economic growth, ideally the legal systems of developed countries looking for areas in emerging or developing countries.

According to the theory, best global practices should be adopted in the charter cities. Since a nation-state is too large a unit to test new rules, Romer suggests these newly built “cities” as “ideal” places where new principles and institutions can be tested in order to attract investors and residents.

This should also work in Honduras. In the long term, Roatán should actually develop a real city with the appropriate infrastructure. There, Honduran specialists will then take on jobs for international companies at lower salaries than, for example, their colleagues in the United States. At the same time, however, the ZEDE employees earn significantly more than the minimum wage that is usual in Honduras.

3500 pages of rules for the tech dream

Brimen assumes that around two thirds of Prósperans settle there in order to set up companies or take jobs with local employers.

The 38-year-old Brimen lists other advantages of his project. There is administrative autonomy, “political” representation, a separate jurisdiction that gives employers and employees access to an efficient legal system for resolving labor law and other conflicts. All of this is recorded in a 3500-page set of rules.

But virtual law is still not comprehensive. There is no separate criminal law in the tech city, for example, the Honduran law applies. But Brimen, who studied business in the USA and then worked for a long time in the US-Latin American financial sector, emphasizes: “We use the advantages of the place, but avoid its disadvantages.”

In the Próspera city on Roatán and the other planned special zones in Honduras, one escapes the typical Central American problems such as high administrative costs, bureaucracy and corruption.

The population protests

But the prospect of creating niches of wealth and employment that play according to their own rules is met with resistance, especially in a country like Honduras, and arouses the suspicion that behind them there are particular interests, something semi-legal or even forbidden. In the Central American country, people are used to the fact that politicians do not rule for the people, but in their own interest.

The rule of law, if it exists, only applies to the powerful and the elite, is the charge. In addition, a modern project like a charter city is simply completely unknown to people.

The economic corset of the Central American country is very traditional. The main export products are coffee, bananas and prawns. In recent years, however, it is mainly the Hondurans themselves who are leaving the country by the tens of thousands every year, especially in the USA seeking protection from gang violence and the chronic economic crisis.

And so the ZEDE Próspera has triggered protests by residents and local politicians who see a lack of transparency and few advantages for the local population and, above all, fear displacement with the planned expansion of the area. Intellectuals, business associations, chambers of commerce and even the Catholic Church are against the project. The powerful business association COHEP commissioned an expert opinion that sees a constitutional violation and castigates opaqueness in the passage of the relevant laws.

The ZEDES as a development model are “unnatural and offer more risks than advantages for investors,” it says. In addition, the project was not widely discussed in the country and in society, criticizes the COHEP. On the other hand, President Juan Orlando Hernández countered: “Those who oppose this do not want jobs to be created.”

In Honduras it is an open secret that the head of state in particular pushed the creation of the ZEDES. Hernández is controversial in the country and critics suspect him to be involved in organized crime. New York prosecutors are even investigating him. However, the Honduran head of state was not charged.

Erick Brimen says the ZEDES are being “politicized” in Honduras and prefers to point out that 15 other companies are interested in entering Roatán. “In two years we are already counting on 1,500 employees here.” The close contact, especially with German entrepreneurs, comes from his time at the US university.

Brimen emphasizes the role model function of projects such as Dubai and Hong Kong for his ZEDE, making it clear that Honduras is less about state participation than about an idea that is similar to “public-private partnerships” (PPP).

The development economist and Central America expert Christian Ambrosius, on the other hand, considers the comparison to be wrong and is critical of the “charter cities” project as a whole. “These attempts to create islands of development from outside cannot break free from the social, political and institutional environment of the countries,” says the economist and professor at the Latin America Institute at the Free University of Berlin.

In Hong Kong and Dubai, the projects are at least integrated into a “national development strategy”. That is out of the question in Honduras. There is not enough “spill-over” and “positive effects for the country”. “What does such an enclave economy do in the rest of the country?” Asks Ambrosius.

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