At times the effort to promote prosperity and peace feels like a dance—one step forward and two steps back. Honduras had been in reliable, stable and responsible hands for over a decade. The country saw economic growth and stability as a result. One of the more forwarded thinking programs implemented in Honduras was an economic zone that encouraged foreign investment on the condition that the Rule of Law would be adhered to, contracts would be enforced in a reliable and predictable manner, and in exchange the companies that located in that economic zone would hire Hondurans at above market rate. This was called Próspera ZEDE and it was enshrined in law.
As a result of this law, over $100 million in U.S. investment gravitated to Honduras and the economic zone was beginning to bear fruit. Ultimately, once the zone was fully operational, tens of thousands of Hondurans would have had good jobs and products made in Honduras would be exported to the United States (deemed near-shoring) Central America and South America. A secondary benefit to this is that economic migration to the U.S. and elsewhere by tens of thousands of Hondurans would have decreased.
Recently Honduras elected a new communist regime. As with most communist regimes, their intrinsic hatred of private property and enterprise, no matter how beneficial to the people and the country, leads them to appropriate such resources. After that, true to Cuban, Soviet, Chinese and Venezuelan history, it is just a matter of time before the country falls into disarray, social and economic chaos results, and the communist leaders get run out the country it wrecked. That process can take a decade (less in Venezuela) or so, but the result will not be in doubt.
The newly elected Honduran communist regime is going by the historically failed Marxist playbook and seeking to nationalize the U.S. investments in Honduras and to repeal the economic zone Próspera ZEDE.
I recently introduced legislation to address this injustice and violation of international norms. My “Protect U.S. Investments Act” would seek to force the Honduran government to fully compensate the private investors for all damages, and would impose sanctions on the Honduran regime leaders. It would deny all U.S. foreign aid to Honduras. There is information establishing that the new Marxist regime has been coordinating violent political mobs known as “colectivos” to threaten opposition parties in the Honduran National Congress, when it convenes on January 25th. They hope to coerce the Honduran National Congress to ratify the repeal of an investment framework relied upon for nearly $100 million in U.S. investment and to pack the Honduran Supreme Court with hard leftist ideologues to bless any resulting expropriations.
These actions matter to the U.S. As the failed Marxist regimes in Cuba and Venezuela prove, what happens to our South matters. The economic deprivation that these countries suffer result in large scale illegal immigration to other countries because their own countries are complete failures and inept and corrupt. We need other countries to be prosperous and safe. That in turns makes our country safer.
It further matters that we take some action here in Congress. A weak and fickle economic foreign policy, of the type we saw daily under Obama, causes more instability and serves as an invitation to the Chinese to step in where our absence has left a void. We need consequences for bad behaviors, and the world needs to know that U.S. investors, as well as U.S. citizens, will be protected by the shield of our government. It is not open season on U.S. companies and U.S. soft power.
U.S. companies raised and invested nearly $100 million in reliance upon the ZEDE investment framework in Honduras that the proper governments guaranteed for 50 years of legal stability and policy autonomy under a regional agreement called CAFTA-DR. Indeed, the Rule of Law was critical to this zone, and an arbitration system was approved there that would apply contract law and tort law provisions, to be overseen by retired State of Arizona Supreme Court, Appellate Court and Trial Court judges John Pelander, John Gemmill, and Ken Mangum help administer the zone’s dispute resolution system.
In short, the Próspera model is a showcase of U.S.-style governance at its best, a deterrent to CCP belt-and-road initiatives by filling the void of economic development projects with U.S. private capital (at no taxpayer cost), and a powerful way to strike at the failed government root cause of unrestricted, unregulated migration from Honduras and other Central America countries.
U.S. Lawmakers must now show leadership. Former legal counsel to Sen. Rand Paul, Brian Darling, wrote an article about this, and stated:
“…the expropriation gambit against the ZEDEs in general, and Próspera in particular, fits neatly into a systematic effort to diminish U.S. hard and soft influence in favor of China. By threatening Próspera and other ZEDEs, Honduras is kicking sand into the world’s most innovative regulatory and tax policy innovation sandbox…”
My bill is a necessary and measured approach to encourage the new government to act honorably, to adhere to legal agreements, and fairly address the matter. It builds on the venerable Hickenlooper Amendment, 22 U.S.C. §2370(e), which mandates that the executive branch discontinue aid to foreign governments that expropriate U.S. investment. The “Protect U.S. Investments Act” makes the Hickenlooper Amendment more effective by, for example, expanding sanctions for expropriative conduct by foreign public officials to include the denial of visas to the U.S.
After all, if the loss of U.S. aid is not motivating enough to do the right thing, then at least no foreign government official should be allowed into our country for any purpose and any property owned by these officials should be sold at auction with the proceeds used to compensate any losses by U.S. investors.
Now’s the time to take action, to head off the seeds of yet another economic disaster south of the border that will send waves of unregulated immigration to Arizona and beyond.