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Honduras Draws Economic Experts' Support in Crypto Island Dispute

Honduras gains support from 85 economists in its legal battle with Próspera Inc. over the crypto island project, challenging the efficacy of international arbitration in protecting national sovereignty.

In a groundbreaking show of support, 85 economists have applauded Honduras' bold move to leave a key international arbitration institution, marking a significant development in the ongoing saga with Próspera Inc., a U.S.-based company embroiled in a high-stakes financial disagreement over a crypto-centric special economic zone.

A Defiant Stand for Sovereignty

Honduras recently made headlines by withdrawing from the International Centre for Settlement of Investment Disputes (ICSID), a decision propelled by a contentious battle with Próspera Inc. The dispute centers on the company's demand for $10.8 billion in damages following a legislative overhaul that revoked the special economic status of its project on Roatán Island. The economists' letter, dated March 19, heralds Honduras' exit from ICSID as a pivotal move to protect its democratic principles.

The Crux of the Conflict

Próspera's grievance with the Honduran government stems from the April 2022 repeal of laws ensuring the special economic zone's legal stability, which, according to the company, breached a "50-year legal stability guarantee." This has led to a high-profile case at ICSID, with the economists' group questioning the effectiveness of such arbitration bodies in fostering genuine foreign direct investment, suggesting they often favor corporate interests over sovereign rights and public welfare.

Since President Xiomara Castro's election in 2021, Honduras has faced multiple challenges at ICSID, with Próspera's claim being the most significant, equating to roughly a third of the nation's GDP. The controversy arises from the repeal of laws establishing Zones of Employment and Economic Development (ZEDEs), which were initially introduced to attract foreign investment but raised substantial human rights and sovereignty concerns.

Próspera's Ambitious Vision Clashes with Local Reality

Próspera, positioned on Roatán Island, envisioned a self-governed enclave, implementing its own legal and taxation systems, and embracing Bitcoin and blockchain technology to attract crypto enthusiasts. However, this ambitious project has faced resistance from local communities worried about displacement and the loss of their ancestral lands, despite the company's denials of any lack of consultation.

The Road Ahead

As Honduras prepares to exit ICSID by the end of August, the resolution of this dispute remains uncertain. The international community watches closely, as this case could set a precedent for the balance of power between sovereign nations and corporate interests in the era of globalized investment and digital currencies.