Prospera, Honduras
Every continent in the world has its financial hub. North America has New York City, East Asia has Hong Kong and Shanghai, Europe has London and Frankfurt, Africa has Casablanca, and South America has Sao Paulo.
Zaha Hadid-designed buildings overlook Prospera’s beach. Source: Zaha Hadid Architects
It’s not a continent, Central America’s financial capital has a bit more unusual of a story.
Prospera, Honduras, also known as Prospera ZEDE (Zone for Employment and Economic Development in Spanish), is located on an island about 80 kilometers north of the mainland. It is a for-profit, privately-owned city designed to be a haven for startups and those seeking to conduct business under a “government” where taxes are optional. The taxes that do exist are incredibly light: 5% for personal income, 1% for business income, 2.5% for sales, and 1% on land value. No other taxes exist, other than an annual fee to live there ($260 for Hondurans, $1300 for foreigners). Businesses can even choose a regulatory framework consisting of any combination of up to 36 countries, or even customise their own.
It’s definitely not without success: since its launch, Prospera’s site boasts that the city has been responsible for the creation of over 200 businesses, 950 jobs, USD $100 million invested, and nearly 2,000 residents from over 40 countries. Le Monde also reported on some of the stranger projects that go on here, including bleeding-edge cryptocurrency tech development, subdermal magnetic implants, and longevity gene therapy trials.
Honduran protestors want the zone brought under control. Source: El Faro
Perhaps unsurprisingly, Prospera’s investors include Silicon Valley giants such as Peter Thiel, Sam Altman, and Marc Andreessen who see it as a groundbreaking frontier for governance and economic development experimentation.
But the Honduran government wants it gone.
Prospera was allowed to be created by a conservative government that established Special Economic Zones to bring in foreign investment. But the current leftist administration wants to abolish them, stating that they are far more extreme in nature than those found in Singapore or the Cayman Islands. They’re widely unpopular among Hondurans too, but the company behind Prospera is suing the Honduran government, citing potential future losses in an investor-state settlement at a World Bank court.
If Prospera wins, it could bankrupt one of Latin America’s poorest countries.
TAI Score: Degree 2. While it’s highly unlikely that geopolitics will undergo any seismic shifts even is Prospera wins, the precedent it sets could be damaging to future resolutions over corporations taking advantage of cash-strapped countries that will attract anyone that promises investment and incoming money.
