TEGUCIGALPA (Askume) – Honduras’ Supreme Court on Friday declared unconstitutional the legal basis of special economic zones (ZEDEs), exempt from local laws and taxes, which attract foreign investors lured by promises of lighter taxes and regulations.
A handful of ZEDEs operate in Honduras after receiving 50-year concessions, including so-called start-up cities that have considerable autonomy in their operations.
Laws permitting the entities were approved nearly a decade ago by a conservative government that touted the zones’ potential to spur needed investment and create jobs, but leftist President Xiomara Castro has called for them to be repealed.
“Justice for the people of Honduras does not mean selling our territory piecemeal or privatizing our sovereignty,” Castro wrote on X on Friday.
The Court ruled by majority that the law providing for the creation of Employment and Economic Development Zones (ZEDEs) and related constitutional reform provisions violated “unchangeable” constitutional provisions.
The ruling bars the establishment of new ZEDEs. Court spokesman Melvin Duarte said it would also mean that existing ZEDEs would be declared illegal.
But he said the court needed to issue an “explanatory addendum” on what to do with ZEDEs already operating in Honduras, but their ultimate fate remains unclear.
The most famous ZEDE is called Prospera, located on the island of Roatan off the coast of Honduras. Before the court’s decision, it warned that the ruling declaring the zones unconstitutional would “create a climate of insecurity and uncertainty for investors and employees” and undermine relations between Honduras and the United States.
ZEDE has attracted interest mainly from US investors, Prospera said, adding that “dozens” of US lawmakers had expressed concerns ahead of the decision.
Prospera said the decision could lead to “visa cancellations, support suspensions and even disruptions in remittance flows.”
