Honduran Government Hypes Its New "Free Zones" with New President


Libertarians the world over have had their eye on Honduras as it experiments with the notion of special economic zones that allow great liberty in some respects than the rest of the nation.

Over the weekend the administration of new president Juan Orlando Hernandez issued a press release hyping them.

From the release:

Innovative "Zones for Economic Development and Employment" (ZEDE) are designed to be the most competitive new jurisdictions in the CAFTA space.

Unlike traditional special zones that just address a single dimension by using only economic incentives, the Honduran ZEDE considers four critical dimensions and addresses the legaleconomicadministrative, and political (LEAP) factors that in the CAFTA region are vital for winning investment leadership….

The advantage for Honduran workers is real:

By building competitiveness across all the LEAP factors, the Honduran ZEDE avoids the "race to the bottom" that is driven by the lowest wage countries of Asia and Africa and instead adds greater value and security for investors seeking the most credible "near-shore" production and employment platform in a new, first-class jurisdiction in the CAFTA region….

the Honduran ZEDE jurisdiction competes for world investment with additional advantages unique in the CAFTA region:

-- International legal standards, dispute resolution mechanisms and institutions, using Common Law, mandatory arbitration, and special judges.

-- A 21st century, business-efficient, non-politicized, transparent, stable, system of administration, plus a special police and security institutionality to overcome regional issues and meet world standards….

-- For high value brands, a modern and transparent export jurisdiction able to provide superior confidence and predictability. For innovative sectors that work with new technologies, processes and markets, an agile new jurisdiction with a unique, rapid customization capacity.

-- A durable and transparent investment regime secured by a strong law, guaranteed by a constitutional amendment, reinforced by an international treaty, and further protected by international trade agreements including CAFTA and others.

I wrote of the history of this idea in Honduras back in Reason's June issue, "The Blank Slate State."

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  1. If (and it's a big if) the Honduran government can keep their hands off this, it could be big.

    1. That was my largest concern with the idea. They're only as permanent as the next regime allows them to be. I would think it would be hard to convince skeptical investors that ZEDE's would be allowed to operate for a long term (30+ year) time frame without substantial interference.

      ESPECIALLY if they are successful. Success breeds envy and thus rape and pillaging.

      1. One way to "convince" those investors would be to place no restrictions on the size and quality of their private security forces.

        1. We should all go and join a badass private army in Honduras! John and RC Dean will provide the actual military knowledge, and the rest of us will engage in hilarious hijincks. We'll be like the Bad Company from BF:BC. And we'll have small cameras strapped onto us to document our time in war. Best idea ever.

      2. Success also breeds power and influence. Imagine how much leverage these free cities could gain with key players in the Honduran government just with bribery. Add in a sort of dirt-gathering intelligence and you've got blackmail. This is all without any armed forces.

        Hong Kong has yet to be pillaged.

  2. The same thing could happen here in the United States. Set up special economic development zones. They would need to be exclusively urban areas, and of course they would have to include a livable minimum wage for workers and stringent labor safety and environmental regulations. A salary cap for business leaders would be essential, but also there would need to be healthy tax revenue coming from the zone to keep public budget deficits almost nearly under control. Oh, and there would need to be an independent advisory panel in each zone who would approve any business venture that went on in any of these freedom zones. And so on...

    1. You mean the entire United States?

  3. I wonder how my wife feels about a multi-cultural experience for the wee'un.

    1. If you're going to Honduras you want to be very careful. The violent gang problem there has grown progressively worse over the last decade or so. It's too bad really. Used to be very friendly place for ex-pats.

  4. *Starts packing bags*

    Wait a minute...let me check the internet...


    1. These cities will be VERY autonomous. Even if these anti-gun laws *technically* apply, I have to wonder how it will actually work on the ground.

  5. Are these "free zones" the same thing that trade agreements are to free trade? In other words, not free?

  6. By building competitiveness across all the LEAP factors, the Honduran ZEDE avoids the "race to the bottom" that is driven by the lowest wage countries of Asia and Africa...

    This "race to the bottom" argument is just as much horseshit when deployed to protect the political class as it is when it is deployed to protect the labor cartels.

    People who run businesses are not blind. They know when they are getting a raw deal. California and New York have preached the doctrine of "high taxes for high services" since the late 50s. Well, the taxes bills have appeared promptly, but the so-called services have either never materialized or were decidedly underwhelming.

    Today, there are almost as many securities and investment banks in New Jersey as New York. Texas is the number one place business owners flee to from California. And why? Taxes are one thing, but when the regulatory apparatus of a state is so onerous that not only must you expend large amounts of money just to begin a business, but you have to beg and plead with bureaucrats just to get the doors open, most people will throw up their hands and say "fuck it, I'm out."

  7. The blindingly obvious question every media reporter should be asking every politician is, "If these 'free zones' create businesses and help workers, why don't we do it everywhere?"

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