Economists support Honduras’ decision to withdraw from World Bank arbitration

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By LatAm Reports Editorial Team

More than 80 economists from around the world supported Honduras’ decision on Tuesday to withdraw from the International Centre for Settlement of Investment Disputes (CIADI), the arbitral entity of the World Bank (WB), considering it an important step towards its sustainable development.

We, economists from institutions around the world, welcome the Honduran Government’s decision to withdraw from the International Centre for Settlement of Investment Disputes (ICSID). We consider withdrawal as a fundamental defence of Honduran democracy and an important step towards its sustainable development, said the signatories of an open letter, published by the Progressive International.

Specialists considered that international arbitration tribunals such as ICSID have for decades allowed companies to sue the states and to restrict their freedom to regulate in favor of consumers, workers and the environment.

Since 1996, only Latin American governments have been forced to compensate foreign corporations with more than $30 billion, preventing regulators from raising minimum wages, protecting vulnerable ecosystems and introducing climate protections, among other national policy priorities. We found little economic evidence that mechanisms such as ICSID stimulate meaningful foreign direct investment in return, they added.

They considered Honduras to be a “strong case of business abuse,” and assured that since 2021, with the election of President Xiomara Castro, the companies filed a total of 10 lawsuits with the ICSID against them.

The largest of them, filed by the U.S. company Próspera Inc, claims more than $10 billion – two thirds of the country’s annual budget – as compensation for the country’s decision to repeal the disastrous ZEDEs law (employment and economic development zones), which confiscated Honduran territory from foreign companies such as Prospera to found private cities that operate almost without taking into account labor, environmental or health regulations, economists said.

For the signatories, the “era of business supremacy in the international trading system” is coming to an end.

Now, the government of President Xiomara Castro has taken another important step to give priority to sustainable development over business gains. As economists, we praise President Castro and the people of Honduras, and we hope that countries around the world will follow their example towards a fairer and more democratic trading system, the letter adds.

On February 24, Honduras announced its withdrawal from the ICSID agreement, arguing that it displaces the role of the courts of the Republic and limits compliance with the decisions of the democratic Government.

This article has been translated from the original which first appeared in El Pais