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LATIN AMERICA ADVISOR

LATIN AMERICA ADVISOR

A daily publication Of the dialogue

May 31, 2022

Why Is Honduras Reversing Course on Economic Zones?

Honduras’ Congress, pictured above, earlier this year repealed a 2013 law that had allowed for the creation of special economic zones, known as ZEDEs. // File Photo: Honduran Government.

Q

  • Honduras’ Congress in April unanimously repealed a law that had allowed for the establishment of special economic areas known as Zones for Employment and Economic Development, or ZEDEs. Lawmakers had passed the measure allowing for the zones’ creation in 2013, and former President Juan Orlando Hernández strongly promoted them. How much did ZEDEs encourage investment and create jobs in Honduras, and what will be the economic impact of the law’s repeal? To what extent did the zones violate Honduras’ sovereignty, as their detractors have argued, and what have been their most controversial aspects? Which sectors will be the most affected by the law’s repeal, and what recourse can be sought by foreign businesses that have taken advantage of ZEDEs?

A

Guillermo Peña, chairman at Fundación Eléutera in San Pedro Sula, Honduras and technical secretary of ZEDE Orquídea: “Since the Honduran organized private sector did not defend the ZEDE system for a variety of reasons, it did not get the needed buy-in from the rest of the economy, and it did not become a major investment tool. Nonetheless, the construction industry and hardware stores were receiving a direct benefit from the construction processes of the ZEDEs. Even if the economic effect was limited due to the short time since operations began, a message is permeating local and foreign investment regarding the lack of respect for contracts and institutions. The weakening of contract protection has also been seen in the energy sector with a recent reform and with contracts in public-private partnerships. It is becoming a major theme of the Castro administration…”

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