Disastrous consequences of declaring the ZEDE Law unconstitutional with retroactive effect
By Próspera Team2 min read
Roatán, Honduras, September 19, 2024 - The possible decision of the Supreme Court of Justice to declare the Employment and Economic Development Zones Law (ZEDE) unconstitutional and even worse with retroactive effect would have serious repercussions for the country, undermining its democratic and economic stability.
The vast majority of Honduran jurists believe that the retroactive application of unconstitutional rulings to eliminate jobs and investments is against Honduran law. Such a ruling would not only create a climate of insecurity and uncertainty for investors and employees, but would also open the door to widespread persecution of opposition parties for the alleged “crime” of voting in favor of a law that has created over 8,000 well-paying jobs in Honduras and has attracted over $300 million in investments to the country.
There is nothing to be gained from such a ruling. A decision retroactively invalidating the ZEDE investments would undoubtedly give rise to claims of expropriation and weaken the defenses raised by the State of Honduras in international arbitration claims. A ruling that departs from decades of unbroken precedent in Honduras would have no legitimacy.
More than 100 U.S. investors have committed capital in these projects. Citizens from more than 20 countries are doing business in Prospera and other ZEDEs. Internationally, such a decision would severely damage relations with the United States and many other countries, leading to sanctions that could include cancellation of visas, suspension of aid, and even disruption of remittances. In fact, dozens of congressmen from both parties in the United States have already expressed their concern about the possible expropriation of investments in the ZEDE.
The stability of the domestic financial system would also be at risk, as Honduran banks have active loans linked to projects in the ZEDE. The economic impact of a retroactive decision could increase the country's risk profile, raising financing costs for Honduras and hindering long-term economic growth.
In short, an unprecedented decision of this magnitude would jeopardize the progress and opportunities Honduras needs. We urge that solutions be sought to ensure stability, investment and the well-being of all Hondurans.
For more information, please contact: