Honduras Resiste - The war over 'investor protections' — and how the South can win it
The Rise of Mel Zelaya and Resistance to US Domination
In 2006, Manuel "Mel" Zelaya took office as president of Honduras, representing the centrist Liberal Party. Once a wealthy rancher, Zelaya’s government moved progressively leftward during his four years in office, joining the Bolivarian Alliance for the Peoples of Our America (ALBA) and raising the urban minimum wage to $300 per month. His administration pursued land reform, economic independence, and sought to organize a constitutional assembly to replace the 1982 constitution written during the waning days of US-backed military dictatorship.
These reforms, though hardly radical, threatened both Honduras’s economic elites and US interests in the region more broadly. The United States had long viewed Honduras as a reliable ally and military platform for intervention throughout Central America. When Zelaya developed relations with Hugo Chávez’s Venezuela, US officials grew alarmed. As Zelaya himself would later recall, John Negroponte and President George W. Bush had warned him that relations with Chávez would lead to "problems with the United States."
The 2009 Coup and Twelve Years of Authoritarianism
In the predawn hours of 28 June 2009, armed Honduran soldiers descended upon President Zelaya’s residence and flew him to Costa Rica in his pajamas—from an airfield controlled by the US military. The coup was orchestrated by Honduras’s military, business, and political elite, with crucial support from the Obama administration. While President Obama initially called it a coup, Secretary of State Hillary Clinton worked behind the scenes to prevent Zelaya’s return to power, strategizing to "render the question of Zelaya moot" through new elections that would legitimize the coup regime.
The coup ushered in twelve years of authoritarian rule, first under Roberto Micheletti and then Juan Orlando Hernández—who would later be convicted of drug trafficking and sentenced to 45 years in US federal prison. During this period, Honduras became the murder capital of the world. Thousands of Indigenous activists, peasant leaders, trade unionists, journalists, and human rights defenders were killed, including environmentalist and social movement leader Berta Cáceres in 2016. The violence and economic devastation forced tens of thousands of Hondurans to flee northward, creating the migrant caravans that would dominate headlines in subsequent years.
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ZEDEs: The New Face of Corporate Colonialism
In 2013, during the narco-dictatorship that followed the coup, Honduras amended its constitution to create Zones for Employment and Economic Development (ZEDEs). This legislation allowed foreign corporations to establish semi-autonomous territories with their own laws, courts, police forces, and tax systems—essentially creating corporate city-states within Honduras. When the Supreme Court initially struck down the law as unconstitutional, Congress dismissed the opposing judges in what critics called a "technical coup" and pushed through the ZEDE framework.
The ZEDEs represented a new form of "corporate colonialism." Just as the United Fruit Company had once controlled Honduras’s railways, hospitals, and ports, turning the country into a "banana republic," the ZEDEs now threatened to carve up 35% of Honduran territory for foreign control. The legislation even granted the state power to expropriate land on behalf of the ZEDEs, giving citizens compensation but no legal recourse.
Próspera: Silicon Valley’s Libertarian Fantasy
The most notorious ZEDE was Próspera, established on the island of Roatán in 2017. Backed by Silicon Valley billionaires Peter Thiel and Marc Andreessen through Pronomos Capital, Próspera represented the ambitions of crypto-libertarians to create a "startup city" free from democratic constraints. The project was led by Venezuelan wealth fund manager Erick Brimen, who claimed it was a "poverty relief initiative" while building what critics called a "cryptocolonial" enclave.
Próspera operated as a privatized paradise where companies could choose regulations from 31 different countries or propose their own, pay only 1% business tax, and conduct transactions in Bitcoin. The development cleared forested hillsides to erect 14-story towers that violated local building codes, obtaining permits not from Honduran authorities but from its own private government. Most alarmingly for neighboring communities like Crawfish Rock, a historic Garífuna village, Próspera’s expansion plans appeared to include their lands, raising fears of displacement and environmental destruction.
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The Return of Democracy Under Xiomara Castro
In November 2021, Hondurans elected Xiomara Castro—wife of ousted president Zelaya—as their first female president, running on the LIBRE party platform with an explicit promise to abolish the ZEDEs. Her victory represented what her government called a project of "democratic refoundation" after twelve years of dictatorship. Castro moved swiftly to fulfill her campaign promise: in April 2022, the Honduran Congress voted unanimously to repeal the ZEDE law, declaring these zones a violation of national sovereignty.
The symbolism was powerful. As Deputy Foreign Minister Gerardo Torres Zelaya explained, "The Honduran people resisted the new colonialism of the ZEDEs. They voted to recover our sovereignty after 12 years of dictatorship—and we have honoured this popular mandate."
The Próspera Counterstrike: $11 Billion Weaponization of Trade Law
But Silicon Valley’s libertarians weren’t prepared to accept democratic defeat. In December 2022, Honduras Próspera Inc. filed an astounding $10.8 billion claim against Honduras through the World Bank’s International Centre for Settlement of Investment Disputes (ICSID). This sum represented two-thirds of Honduras’s annual budget—an unpayable amount designed to bankrupt the nation for exercising its democratic will.
The case exploited the investor-state dispute settlement (ISDS) provisions embedded in the Central America Free Trade Agreement (CAFTA-DR), which allow corporations to sue governments in secretive tribunals for policies that affect their profits. Since President Castro took office, investors filed ten ICSID cases against Honduras, making it the second-most sued country in Latin America.
Luisa Connor - Crawfish Rock"We were not consulted, as English-speaking black people in the community... At no time were we consulted, and we did not know how to fight it. We had to investigate pathways for ourselves, calling friends who do know about such struggles to guide us."
Building the Movement: From Grassroots to Global Solidarity
The resistance to ZEDEs didn’t emerge overnight—it was built through years of organizing by Honduras’s most marginalized communities. The Black Fraternal Organization of Honduras (OFRANEH), representing the Garífuna people whose ancestral lands were threatened by Próspera, joined with the Council of Popular and Indigenous Organizations of Honduras (COPINH)—the organization founded by murdered environmental leader Berta Cáceres—to sound the alarm about corporate land grabs. These groups, alongside the Committee of Relatives of the Detained and Disappeared in Honduras (COFADEH), had been documenting human rights violations since the 2009 coup.
Trade unions, understanding that ZEDEs would create zones where labor rights didn’t exist, mobilized their members against what they called "slave-like conditions." The National Autonomous University of Honduras (UNAH), whose monopoly on educational certification was threatened by ZEDE autonomy, joined forces with the Honduran lawyers’ association, which saw common-law ZEDEs undermining their civil law expertise. Small farmers, domestic business groups, and prominent academics united in what became the National Movement Against the ZEDEs and in Defense of Sovereignty—a broad coalition formed even before Castro’s election that included "unions, Indigenous groups, human rights organizations, and prominent academics."
The international dimension proved crucial. In November 2023, for example, the Progressive International convened the Tegucigalpa Forum, bringing a 24-person high-level delegation including diplomats, parliamentarians, and experts from across the world. As Luisa Connor from Crawfish Rock testified to the delegation: "We were not consulted, as English-speaking black people in the community... At no time were we consulted, and we did not know how to fight it. We had to investigate pathways for ourselves, calling friends who do know about such struggles to guide us."
The Honduran experience thus showed how international solidarity crystallized into concrete support. Experts from the Columbia Center on Sustainable Investment, the Center for Economic and Policy Research, and organizations from across Latin America provided technical assistance on challenging ICSID. Former officials who had navigated similar battles—like Guillaume Long, Ecuador’s former foreign minister, and Andrés Arauz, Ecuador’s former minister—shared lessons from their countries’ experiences with corporate tribunals. The result was the formation of the "International Movement for Honduras in Resistance," explicitly linking Honduras’s struggle to the global fight against corporate colonialism.
Honduras Resiste: The Campaign to Exit ICSID
Faced with this corporate assault on sovereignty, President Castro took a bold step: in February 2024, Honduras formally notified its withdrawal from ICSID, becoming only the fourth country to do so after Bolivia (2007), Ecuador (2009), and Venezuela (2012). The withdrawal, which took effect on August 25, 2024, represented what 85 leading economists praised as "a critical defence of Honduran democracy and an important step toward its sustainable development."
Thus was born "Honduras Resiste", mobilizing solidarity against the ZEDEs and the ICSID courts that protected them. A high-level delegation visited Honduras in November 2023, establishing the "International Movement for Honduras in Resistance." The campaign connected Honduras’s struggle to the broader fight against corporate capture, noting that since 1996, Latin American governments alone had been forced to pay foreign corporations over $30 billion through ISDS mechanisms.
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The Battle Continues: Próspera’s Persistence
Despite Honduras’s withdrawal from ICSID and the Supreme Court’s September 2024 ruling that ZEDEs were retroactively unconstitutional, Próspera continues operating and pressing its case. The company argues that legal stability guarantees protect its investment, while Honduras maintains that no corporation can stand above the democratic will of its people. The standoff represents a fundamental clash between two visions: corporate sovereignty backed by international arbitration versus popular sovereignty expressed through democratic institutions.
The local resistance has been fierce. Communities formed the National Movement Against the ZEDEs and in Defense of Sovereignty. Even local authorities joined the fight—the mayor of Roatán temporarily shut down Próspera’s offices for non-payment of municipal taxes. As one resident of Crawfish Rock put it: "Pay your tax like everybody else; go and get your permits like everybody else; and abide by Honduran law and regulation like everybody else."
The Global Movement Against Corporate Colonialism
Honduras’s struggle has inspired a broader reckoning with the ISDS system. Bolivia, Ecuador, and Venezuela had already withdrawn from ICSID, while other nations are reconsidering their participation. The European Union has begun withdrawing from the Energy Charter Treaty, which contains similar investor protection mechanisms. Progressive lawmakers in the United States, including Senator Elizabeth Warren and Rep. Lloyd Doggett, have called for eliminating ISDS provisions from trade agreements.
The movement recognizes that leaving ICSID alone isn’t enough. Honduras remains bound by bilateral investment treaties and free trade agreements that provide alternative arbitration venues. The next phase requires comprehensive reform: renegotiating trade treaties, revising investment laws, and building coalitions across the Global South to dismantle what critics call the "mafia-style investment protection system."
The Future of the Fight
Far from a narrow struggle over the country’s Caribbean territories, Honduras’s courageous decision to exit from ICSID will help determine whether democratic governments can regulate in the public interest without facing bankruptcy from corporate lawsuits. The country has become, in the words of supporters, "the first trench" in a worldwide battle against corporate colonialism.
If Próspera succeeds in its $11 billion claim, it would establish a precedent that any attempt to reverse privatization or assert sovereignty can be punished through international arbitration. But if Honduras prevails—rallying enough international support to force Próspera to drop its case and inspiring other nations to exit ICSID—it could mark the beginning of the end for a system that has granted investors power over states.
As Honduras continues to resist despite enormous pressure, the question becomes whether the peoples of the world can build from this courageous example. The path forward requires not just individual countries leaving ICSID, but a mass exodus that destroys the system’s legitimacy. It demands new frameworks for international investment that respect sovereignty and democracy rather than subordinating them to corporate profit.
