Process
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Highlights
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The crypto crew is exploiting a dispute mechanism nested inside the World Bank, created by an obscure provision of the Central America Free Trade Agreement. Castro has deemed the forum, called the World Bank’s International Centre for Settlement of Investment Disputes, or ICSID, to be an illegitimate usurpation of Honduran sovereignty and has hit upon an elegant solution: She has taken steps to withdraw Honduras from ICSID. The crypto crowd is crying foul.
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The fight presents an almost-impossible-to-believe scenario: A group of libertarian investors teamed up with a former Honduran government — which was tied at the hip with narco-traffickers and came to power after a U.S.-backed military coup — in order to implement the world’s most radical libertarian policy, which turned over significant portions of the country to those investors through so-called special economic zones. The Honduran public, in a backlash, ousted the narco-backed regime, and the new government repealed the libertarian legislation. The crypto investors are now using the World Bank to force Honduras to honor the narco-government’s policies.
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the World Bank’s ICSID has seen investors bring no fewer than 10 cases targeting her government. The largest case, brought by U.S. corporation Próspera Inc., seeks more than $10 billion in compensation, which would equal roughly a third of the country’s GDP. Próspera, rooted in the world of crypto finance, describes itself as a “platform [that] powers the development of new cities in special economic zones that maximize generalized prosperity and wealth creation.
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“For decades, international arbitration courts like ICSID have allowed corporations to sue states and restrict their freedom to regulate in favour of consumers, workers and the environment. Since 1996, governments in Latin America alone have been forced to compensate foreign corporations over $30 billion, intimidating regulators away from raising minimum wages, protecting vulnerable ecosystems, and introducing climate protections, among other domestic policy priorities. We find scant economic evidence that mechanisms like ICSID stimulate meaningful foreign direct investment, in return.”
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The radical “free market” intervention was only jammed into law as the result of a military coup and the stacking of the Supreme Court. The ZEDEs were then enacted and implemented for the benefit of U.S. investors by two narco-governors.
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The U.S. had no evident problem with that freewheeling narco-state while Hernandez was in office and remained useful, yet once Castro took power in a backlash to the U.S.-fueled corruption, the United States suddenly rediscovered its respect for the rule of law and the sanctity of contracts with U.S. investors.