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Zone for Employment and Economic Development

A Zone for Employment and Economic Development (Spanish: Zonas de empleo y desarrollo económico, or ZEDE, colloquially called a model city) is a type of administrative division in Honduras that provides a high level of autonomy, with its own civil code, while still subject to the criminal code of the Honduras government.[1]

ZEDE cities were planned in conjunction with Nobel Laureate Paul Romer[2] to attract investment in currently uninhabited parts of the country, or in municipalities that agree to be converted into ZEDE zones. Every zone was to be governed by a technical secretary, elected by a committee appointed by the president of Honduras.[3] ZEDEs were inspired by free trade zones in China (Hong Kong, Macao,[4] Shenzhen, Shanghai),[5] South Korea (IFEZ), Singapore and in part the Free Private City model.

ZEDEs originated in the government of Porfirio Lobo Sosa; the first draft of the law was in 2011, but the necessary legislation was not passed until 2013. The ensuing Juan Orlando Hernández administration continued them.

In 2022, Honduran president Xiomara Castro began proceedings to repeal the 2013 legislation that enabled them.[6] However, ZEDEs were created within a framework of 50 year sunset clauses and internationally binding agreements, to make them functionally unrepealable.

Próspera takes the legal position that ZEDEs are "Built to Last",[7], and have threatened to sue the Honduran government for $11 billion if it reneges on its legally binding commitments.[8] It has also written to the US State Department requesting that the US "encourage" Honduras to respect its legal commitments.[9]

History

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The first attempt to create later became known as ZEDEs, the REDs (Regiones Especiales de Desarrollo or Special Development Regions) was struck down as unconstitutional in 2011 by the Supreme Court of Honduras. In September 2013, after amending the law, and after a change of 4 supreme court justices and a constitutional amendment, the law to create ZEDEs was passed.

In September 2024, the Honduran Supreme Court declared zones for employment and economic development unconstitutional. [10]

Objectives

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ZEDE has the following objectives for economic development:[11]

  1. International logistics centres that permit the processing of goods at a grand scale (such as the Colón Free Trade Zone in Panamá).
  2. International business courts that resolve disputes between both national and foreign business entities (such as the Isle of Man, United Kingdom).
  3. Special investment districts that permit the creation of centres for the service sector (such as the Cayman Enterprise City, Cayman Islands).
  4. Districts for renewable energy that permit investment in renewable energy (such as the solar parks in Arizona, United States).
  5. Special economic zones in which the laws that govern the economy will be different from the rest of the country. National laws might be suspended in favor of solutions based on a free market. Compare Shenzhen, China.
  6. Zones subject to a special judicial system that function under a judicial tradition different from the usual (such as the courts in the financial districts of Dubai that are subject to Common Law).
  7. Special agro-industrial zones that permit incentives for exporting high-quality agricultural products (such as the cultivation of asparagus in Peru).
  8. Special tourist zones that permit special conditions for creating centres for tourism in undeveloped parts of the country.

Projected impact

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Economists at the Universidad Francisco Marroquín conducted an economic impact analysis examining how ZEDEs might impact the Honduran economy.[12] They found that a ZEDE which resembles the growth rates of China's Special Economic Zones would reach $36,000 GDP per capita by 2050.

Current ZEDEs

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  • Próspera, Technology and Services ZEDE. It is located next to the village of Crawfish Rock on the island of Roatan.[13] Prospera's Laws allow for expansion along coastal Honduras. On March 18, 2021 they confirmed the addition of an area near the Satuye area of La Ceiba, labeled as "Port Satuye".[14]
  • Ciudad Morazán, Low Income Manufacturing (Maquila) Employee Community and Industrial Zone. It is located near the city of Choloma in the Department of Cortes.[15] Phase 1 of the development will entail in a gated low-income housing project. Phase 2 will create manufacturing areas within the gated community.
  • ZEDE Orquídea,[16] in Choluteca, for the agricultural industry with the parent company Agroalpha. It is located at Las Tapias in the municipality of San Marcos de Colón. Agroalpha will construct a large greenhouse for cultivation of produce for foreign exports. ZEDE Orquídea has adopted the common law of the State of Delaware as its applicable private law.[17]

In April 2022, the Honduran Congress repealed the constitutional amendments and laws that created the ZEDE regime.[18][19] However, the three existing ZEDE are grandfathered in for a period of 50 years, as per their Legal Stability Agreements, Article 45 of the ZEDE Organic Law, and the Bilateral Investment Treaty with the Government of Kuwait.[20]

Potential candidates and failed ZEDEs

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  • Unnamed Peña Blanca ZEDE - Originally proposed as the first ZEDE with a focus in the agricultural sector.[21] Peña Blanca was selected for its location near the agricultural and manufacturing region of Valle de Sula. The project ultimately failed to receive local support.
  • Unnamed Suyapa ZEDE - Religious tourism ZEDE surrounding Districto Central's Basilica de Suyapa.[21] It failed to receive local support.
  • Unnamed Valle ZEDE - Distributed among the three municipalities of Nacaome, Amapala and Alianza. The Valle ZEDE was intended to function as an agricultural and logistics ZEDE, with the department's capital, Nacaome, serving as an agricultural research center, Alianza, on the border with El Salvador, as a logistics free trade zone, and the island city of Amapala as a megaport on the Pacific's Gulf of Fonseca.[22]

See also

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References

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  1. ^ "ZEDE". ZEDE. Archived from the original on 3 August 2020.
  2. ^ Alexander, Scott. "Prospectus On Próspera". www.astralcodexten.com. Retrieved 29 January 2024.
  3. ^ "Official ZEDE Statute, Unofficial English Translation, and Commentary" (PDF). Article 11-12. Archived (PDF) from the original on 29 April 2021. Retrieved 16 March 2023.
  4. ^ Basic law text
  5. ^ World Bank document
  6. ^ Gonzalez, Marlon (30 April 2022). "Honduran economic zones in 'limbo' after government repeal". Los Angeles Times. Retrieved 2 May 2022.
  7. ^ "Built to last: Legal Stability in the Zede Framework". Próspera Economic Development Platform. 21 April 2022. Retrieved 28 May 2023.
  8. ^ "$10.775 Billion Claim Filed Against Government of Honduras". Próspera Economic Development Platform. 20 December 2022. Retrieved 28 May 2023.
  9. ^ "Huge Job and Economic Growth Opportunity for Honduras at Risk If…". Próspera Economic Development Platform. 13 October 2022. Retrieved 28 May 2023.
  10. ^ https://www.reuters.com/world/americas/honduras-top-court-declares-self-governing-zede-zones-unconstitutional-2024-09-20/
  11. ^ ¿Que es un ZEDE? (2013-03-03)
  12. ^ "Economic Impact of a Honduran ZEDE". UFM Market Trends. Retrieved 14 May 2019.
  13. ^ "Próspera Economic Development Platform". prospera.hn.
  14. ^ "Resolution Approving and Authorizing the Incorporation of the "Port of Satuye" into Próspera ZEDE/Resolución por la que se aprueba y autoriza la incorporación del "Puerto de Satuye" a la Próspera ZEDE – Próspera ZEDE". 23 March 2021.
  15. ^ "Ciudad Morazán". Retrieved 19 February 2023.
  16. ^ "Vol 1 No 2 (2021): Special Issue on the Honduran ZEDEs | Journal of Special Jurisdictions".
  17. ^ "Zede Orquidea – Honduras, Centro América". Retrieved 19 February 2023.
  18. ^ "Congreso Nacional deroga en su totalidad las ZEDE". www.laprensa.hn.
  19. ^ "Valid de TodoLegal". valid.todolegal.app. Retrieved 29 April 2022.
  20. ^ "Built to last: Legal Stability in the Zede Framework". Próspera Economic Development Platform.
  21. ^ a b "Peña Blanca y Suyapa serían las primeras ciudades modelos".
  22. ^ Panting, César Andrés. "Nacaome, Alianza y Amapala sueñan con ser primera ciudad modelo". www.laprensa.hn.
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