April 17, 2024


Unlimited Technology

The Sad Tale of a Silicon Valley-Funded, Libertarian ‘Startup City’

RestOfWorld.org tells the story of a libertarian ‘startup city’ in Honduras that was “supposed to be a privatized, Silicon Valley-funded paradise.”

Co-founded by 37-year-old Venezuelan Erick Brimen, “Próspera’s founders promised to enrich the local community, even supplying water to a nearby village. But relations with neighboring communities deteriorated. Then, Próspera turned off the taps…”

Próspera’s founders believe the future of government lies with privatized startup cities. They belong to a movement with deep roots in U.S. libertarian circles: one that wants to redefine citizenship and governance in tech-consumerist terms. It has gained momentum in recent years, as high-profile Silicon Valley figures, like PayPal co-founder Peter Thiel and venture capitalist Marc Andreessen, put their money behind startup city initiatives.

Some governments have been drawn to the idea, too, hoping it will attract foreign investment and spur economic growth. In 2013, Honduras passed a law allowing people like Brimen to set up semi-autonomous, privately run cities, “zonas de empleo y desarrollo económico” (zones for employment and economic development), or “ZEDEs” — pronounced “zeh-dehs.” These cities are to be governed by private investors, who can write their own laws and regulations, design their own court systems, and operate their own police forces. The Honduran government granted Próspera ZEDE status in late 2017. Subject to limited government oversight and few legal restrictions, a set of for-profit firms incorporated abroad by Brimen and his business partners will govern the city — with ambitions to expand across [its Honduran island] Roatán and onto the Honduran mainland…. This year, skeptical Hondurans organized weeks of anti-ZEDE protests across the country. They fear cities like Próspera will leave ordinary people no better off than they were before, while ceding to profit-driven investors the power to decide what’s in the public interest…

Applications for [Próspera] residency require a background check, a Honduran residency permit, and an annual fee — $260 per year for Hondurans and $1,300 for foreigners. Prospective residents will also have to sign something called an “agreement of coexistence,” which lays out all the rights and responsibilities of Próspera residents and Próspera’s obligations to them. Brimen characterized it as, “if you could make the social contract a real contract.” The agreement incorporates Próspera’s resident bill of rights, which is modeled on the U.S. Bill of Rights but with some decidedly libertarian twists. Government services will be centralized and automated through ePróspera, an online portal modeled on the much-praised e-Estonia system developed by the Baltic nation. From the comfort of their homes, Prósperans will be able to pay taxes, incorporate a company, transact business, and even buy real estate. They’ll be able to vote, too, but their franchise is limited. Residents elect only five of the council’s nine members. Landowners vote for two of the five, with voting power pegged to acreage. Buy more land, buy more votes. Próspera’s founders choose the four remaining council members, and a six-member supermajority is needed to alter policy…. Government services will be provided entirely by a contractor…

Effective tax rates will sit in the low single digits, and, in place of Honduran courts, there’s a private arbitration center. But where the business inducements enter unprecedented terrain is health and safety regulation. Próspera won’t impose rules so much as curate prix fixe and à la carte menus of rules. Companies will be able to opt into an existing regulatory regime — choosing from dozens of countries and U.S. states — or they can Frankenstein together an entirely novel code, mixing and matching rules from different jurisdictions and even inventing new ones. [The building code for one new construction site is a pastiche of Honduran and U.S. law.] The lone requirements: sign-off by Próspera’s governing council and a liability insurance policy, most likely underwritten, [Próspera co-founder] Delgado says, by offshore insurers.
RestOfWorld carefully chronicles how Próspera became unpopular with locals. In the summer of 2019, Próspera connected a nearby village to its own water supply. Then started billing them. (Though the water bills eventually stopped.) After protests over the fact that few construction jobs went to villagers — and how Próspera’s armed security guards began asking pedestrians for identification — several local groups issued a critical statement while villagers elected a new council empowered to speak for them.

It all came to a head when the council asked Brimen to cancel a public meeting (due to surging Covid cases), which Brimen insisted was a violation of his free speech. He held the meeting anyways, local police were sent to break it up, and one of Brimen’s bodyguards “scuffled” with one of the officers as his other bodyguards whisked him to safety. The incident made the local news and social media. Then the next month “Próspera Foundation” threatened to cut off the village’s water within 30 days if they didn’t formally request the foundation’s intervention in writing.

The village instead appealed to a local congressman/mayoral candidate, who by mid-January had fully restored the village’s water supply.

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