A group of 85 economists has voiced their support for Honduras’ decision to withdraw from the World Bank’s arbitration body, adding a new dimension to the ongoing clash between Honduras and the crypto island project Próspera Inc.
Próspera, the Bitcoin-friendly special economic zone located on Roatán Island in Honduras, has been embroiled in a legal battle with the Honduran government after legislative changes in 2022 revoked the island’s special status. The company is seeking $10.8 billion in compensation for the perceived damages caused by the regulatory shift.
The dispute has been playing out in the International Centre for Settlement of Investment Disputes (ICSID), where Próspera lodged its claim against Honduras for breaching a “50-year legal stability guarantee.”
In a recent open letter dated March 19, the group of economists expressed their solidarity with Honduras’ decision to exit the international court, framing it as a crucial defense of Honduran democracy.
The economists, organized by the left-leaning Progressive International, argued that mechanisms like ICSID do not necessarily spur significant foreign direct investment, challenging the notion that such arbitration bodies benefit governments.
Since President Xiomara Castro assumed office in 2021, Honduras has faced ten cases at ICSID, with Próspera’s nearly $11 billion claim representing a substantial portion of the country’s GDP.
Castro’s administration made significant legislative changes, including repealing laws that established Zones of Employment and Economic Development (ZEDEs) intended to attract foreign investors and stimulate economic growth.
The United Nations previously raised concerns about ZEDEs’ legal frameworks, particularly regarding human rights and the lack of informed consultation with affected communities, especially indigenous and Afro-descendant populations.
Próspera’s establishment of a ZEDE on Roatán Island, granting it considerable autonomy and control over the territory, further fueled tensions between the company and the Honduran government.
The dispute reflects broader debates about economic development, sovereignty, and the impact of foreign investment in emerging industries like cryptocurrency. As Honduras navigates these complex challenges, the support from economists underscores the significance of its stance in defending national interests and democratic principles.
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