Honduras Scraps Self-governing Economic Zones

Honduras’ new President, Xiomara Castro, has repealed a law designed to attract foreign investment through special self-governing zones over the past decade.

The zones (known as ZEDEs in Spanish) free private investors or business groups from paying duties on imports and exports. The law allowed investors to govern themselves by forming a security force, building schools and even social security systems, according to AP.

Xiomara Castro had promised to repeal the law during her election campaign, saying the legal measure would lead to the creation of independent states within the Central American country.

The ZEDE scheme was passed during the tenure of former president Porfirio Lobo Sosa and later pushed by the administration of Juan Orlando Hernández, who is currently in a US jail for drug trafficking charges.

Castro has described her decision as “historic”, adding that the revocation was a necessary step to help her country retain sovereignty.

Several ZEDEs came into existence in Honduras since 2013, when the law was passed. Ciudad Morazan, in the city of Choloma; Prospera, on the north coast; and Orquidea, in the southern department of Choluteca, are but a few examples.

Reports say the revocation has left the operations of hundreds of foreign companies in limbo. However, the Honduran government has urged these firms to “submit themselves to new economic regimes.”

Duty-free special economic zones are not new to Latin America, but this law openly allowed foreign firms to build semi-autonomous corporate zones.