Próspera: a private town in Honduras causes controversy.

The Honduran island of Roatán is a Caribbean palm paradise – and the scene of an experiment. A city is emerging here in which entrepreneurs, not politicians, write the rules.

When Erick Pitsikalis leads visitors to his shell, he gets enthusiastic. The view over the turquoise sea on the small island off the coast of Honduras is breathtaking. He says his company was able to build the 14-storey office tower 20 percent cheaper and much faster.

Marie Kristin Boese
ARD studio Mexico City

A maximum of eight floors is allowed on Roatán, but this rule does not apply in Prospera. "For business people, this means a lot of opportunities to develop," emphasizes Pitsikalis.

Critics fear that state sovereignty will be sold out

"Próspera", translated "prosperity" – that’s the name of the autonomous investor enclave that is being created in the palm jungle on 23 hectares, called "ZEDE" for short. Pitsikali’s shell is still one of the few buildings here.

But signs announce further construction work and warn that this is private property. More precisely: on the territory of "Próspera Inc.", the Delaware-based company behind ZEDE.

"Próspera" is one of the most controversial projects in Honduras recent history. For some: the longed-for chance of prosperity. For the others: the sell-out of state sovereignty.

Enclave with its own rules

The mastermind behind it, Erick Brimen, was born in Venezuela, grew up in the USA and is CEO of "Próspera Inc.". "Our mission is to create wealth where it is most needed," emphasizes Brimen.

And it’s supposed to work like this: By law from 2013, the state of Honduras ceded sovereign rights to ZEDE. The enclave sets its own rules in a kind of constitution. Low tax rates apply in Próspera: ten percent income tax, one percent property tax.

Everything becomes a private achievement

Disputes are not decided by Honduran courts, but by arbitral tribunals. Education, health, police, urban development – everything becomes a private service. The rules are made by a city council of nine people, some of whom are determined by companies and some of whom are elected by future citizens.

The residents sign a contract. Foreigners pay US$1,300 per year for the right of residence, Hondurans pay US$260 per year. The state of Honduras has almost nothing to report.

60 percent of the people live in poverty

So-called "charter cities" go back to an idea of ​​former World Bank boss Paul Romer. Their goal is to create jobs and show the host country how supposedly "good governance" works, in this case in Honduras.

In fact, more than 60 percent of the people here live in poverty, corruption is rampant, and 14 percent of the population have left the country due to a lack of prospects.

Brimen is therefore selling Próspera as an opportunity: "There will be overflow effects on Honduras’ entire economy because the labor and materials will come from the country."

Is the market doing better?

Behind the private city movement are pro-market, ultra-liberal, and libertarian thinkers who believe the market manages things better than the state.

The German venture capital entrepreneur Niklas Anzinger, who wants to move to Próspera, doesn’t see himself in this spectrum – but is attracted to the idea. "I believe that market processes are more open to change," he says.

But democratic decisions also have their place – for example to prevent dictatorships. If you don’t like it in Prospera, you can move away again, says Anzinger. CEO Brimen even hopes that more regions will join the Prospera rules in the future. This is how ZEDE expands. Voluntarily, he emphasizes.

"They will grow like a cancer"

In the fishing village of Crawfish Rock, just a stone’s throw from Prospera, that’s exactly what they’re afraid of. So far, the English-Creole-speaking islanders have lived in modest wooden houses from what the sea and the earth have to offer.

Community President Luisa Connor is certain that if foreign investors are in charge next door, they will be evicted. "They will grow like a cancerous growth," she says.

Connor fears that the state will expropriate their community on behalf of Prospera. A model city will not tolerate a poor fishing village nearby, she suspects.

In addition, Próspera was only looking for cheap labor in the community. She calls the project "modern colonialism."

Abolition was a campaign issue

The current Honduran government, which is working feverishly to stop the project, takes a similar view. The left-wing President Xiomara Castro had made the abolition of the ZEDE law her campaign issue.

Now the man in charge, Fernando Garcia, is sitting between piles of files in the capital and meticulously combing through the rules of Prospera. He is convinced that the law from 2013, which he interprets as enabling a state within a state, is unconstitutional.

Unwanted Verdict – Judges Exchanged

A year earlier, a similar project had failed at the Constitutional Court. Critical constitutional judges were then exchanged.

In 2013, corrupt politicians cleared the way for private cities, says Garcia. On the other hand, he does not believe in a job miracle in Prospera.

Lawsuit for $10.7 billion

It all boils down to a showdown between the Honduran state and Prospera. The new Congress abolished the ZEDE law in the first reading last year in order to deprive Próspera of its basis.

However, a second vote, which requires a two-thirds majority, is still pending. Brimen, the CEO of Próspera Inc., on the other hand, refers to a contract that gives them a 50-year guarantee.

130 companies are already registered and enormous damage has already been done. He plans to sue Honduras for $10.7 billion in damages.

The government, on the other hand, is now hiring internationally renowned lawyers to win the legal battle against the investor city. Meanwhile, facts are being created on the site in Roatán: excavators and construction workers are at work. The state has not yet been able to stop the construction work.

You can see the detailed report on the subject in Weltspiegel – on Sunday at 6:30 p.m. in the first.