Honduras top court declares self-governing ZEDE zones unconstitutional (updated)

Prospera Energy

21/09/2024 24:18

(Adds Castro comment in paragraph 4, comment from ZEDE Prospera
in paragraphs 8-10)
    By Gustavo Palencia
       TEGUCIGALPA, Sept 20 (Reuters) - The Honduran Supreme
Court on Friday declared unconstitutional the legal underpinning
of special economic zones exempt from local laws and taxes known
as ZEDEs, which have drawn foreign investors lured by the
promise of light taxation and regulation.
    A small number of ZEDEs operate in Honduras after they were
granted 50-year concessions, including so-called start-up cities
that enjoy significant autonomy over how they are run.
    The law allowing them was approved about a decade ago by a
conservative government that touted the zones' ability to boost
needed investment and job creation, but leftist President
Xiomara Castro has called for the semi-autonomous entities to be
abolished.
    "Justice for the Honduran people," Castro wrote on X on
Friday, "means not selling off our territory piecemeal or
privatizing our sovereignty."
    By a majority vote, the court ruled that the law laying out
the terms for creating the Zones for Employment and Economic
Development, or ZEDEs, as well as related constitutional
reforms, violated articles of the constitution "written in
stone."
    The ruling prohibits new ZEDEs from being established.
According to court spokesman Melvin Duarte, it also implies that
existing ZEDEs will be declared illegal.
    But he added that the court will need to publish an
"explanatory addendum" regarding how to deal with ZEDEs already
operating in Honduras, leaving their ultimate fate unclear.
    The most well-known ZEDE, called Prospera, is located off
the Honduran coast on the island of Roatan. Ahead of the court
decision, it warned that a ruling declaring the zones
unconstitutional would "create a climate of insecurity and
uncertainty for investors and employees" and undermine ties
between Honduras and the United States.    
    ZEDEs have attracted interest largely from U.S. investors,
according to Prospera, which added that "dozens" of U.S.
lawmakers had expressed concern ahead of the ruling.
    The decision could cause "visas to be canceled, the
suspension of support and even a disruption in the flow of
remittances," Prospera said.

 (Reporting by Gustavo Palencia; Editing by David Alire Garcia)
 ((Kylie.Madry@thomsonreuters.com;))