 Prosper is the first time in human history that a group of people have said there's a way to deliver governing services privatized for profit in a completely free market way. We are skeptical. We are afraid. They just will come in and say, you like it, hey, it's what we gave you for your land and we can't do anything. And I'm against expropriation as a matter of principle. Every millimeter of the country that was used in the name of the holy freedom of the market, seeds and other regimes of privilege were irrigated with the blood of the original peoples. Is this radical libertarianism? Is this anarcho-capitalism in action? In some ways, yes. Here in Honduras, about half the population lives in extreme poverty and GDP per capita is 25 times higher in the United States. And yet the country has abundant natural resources and is close to major shipping lanes. The problem here is governance. Nobody wants to invest in Honduras because the country has a long history of political instability, expropriating private land and legal agreements that aren't particularly binding. Honduras is ranked 154th out of 190 countries in contract enforcement on the World Bank's ease of doing business index and 133rd overall. Narco gangs once made Honduras the murder capital of the world. And although crime has dropped in the last 12 years, life here is still extremely dangerous in comparison to the U.S., which is one reason why so many Hondurans make the risky journey through Central America to the border. So far this year, U.S. Customs and Border Protection has reported more than 73,000 encounters with Hondurans at the U.S.-Mexico border. Recently, the country's politics have been especially turbulent. A president was ousted by the military in 2009, and another was extradited to the U.S. for drug trafficking. Amid the tumult, the nation got its first Democratic Socialist president, Xiomara Castro, who was called for a refounding. She wants to rewrite the Constitution to recognize that, quote, the capitalist system doesn't work for the majority of people. She's calling for electricity to become a public good and a human right, and is laying the groundwork for the outright nationalization of the entire energy sector. And she's spending billions on cash transfers. Meanwhile, a group of foreign investors has embarked on its own refounding of sorts. They've started a radical experiment in private governance, which they hope will become a model for how to create prosperity in poor countries all over the world. The concept of free private cities and charter cities, specifically what Prosper is trying to do, is the most transformative project in the world. Joel Baumgar is a Mississippi State Representative and President of Prosper Inc. There's not a big financial hub in Central America. There's not a sort of Singapore of Central America right now. And so that's what we're trying to create. Here on the Honduran island of Roatan, a tourist hub with a land mass similar to Hong Kong, a group of libertarian entrepreneurs, including Baumgar, are trying to build a country within a country that's free of the dysfunction that hobbles the national government. And they're starting with a clean slate. Prosper is based on the principle of true voluntarism, they say. All who live and work here have opted into the rules that govern this land. And they can change their minds and opt out at any time. The first location being developed as part of this privately run charter city is called Prosper Village. But the project's co-founder and CEO, Eric Bremen, says that this particular plot of land doesn't matter as much as the rules governing it. Prosper is not a location. Prosper is a platform that delivers governance as a service in partnership with host governments that create a legal framework that allows that public-private partnership to emerge. In 2017, the company began acquiring these 58 acres, which at the time were mostly a jungle. Today, Prosper Village is occupied by an office building, a schoolhouse, a factory for prefabricated building materials that's under construction, and a shared workspace for remote office workers. A 14-story luxury condo tower is also going up. Development is happening here at a pace unheard of in a country where it can take years and several well-placed bribes to obtain a permit to put up a building this size. Prosper has so much autonomy thanks to a 2013 law authorizing Zones for Economic Development and Employment, or ZEDES. ZEDES don't merely have favorable business and labor regulations like China's Shenzhen. They make their own laws and regulations. Prosper created its own zoning code and levies its own taxes. Only the country's criminal laws still apply. So essentially, we're making a free market system out of the one thing that humans have never been able to make a free market system out of, which is human governance itself. To become a full-time resident of Prosper, you just fill out an online application and pay a $1,300 fee, though Honduran nationals get an 80% discount. In lieu of a court system, they have access to Prosper Arbitration Center to resolve any civil disputes or they can opt for a different arbiter. Companies can select their own regulation from a menu of options. Like Japan's biotech regulation? Use that. Singapore's banking laws? Use those. Or mix and match. Depending on what industry they're in, some companies can opt out of regulation altogether, though at a cost. Then you're under common law legal liabilities, which can be very harsh, so you do have an incentive to be under regulation and you need to have liability insurance that covers you. Nicholas Anzinger runs Infinita VC, a venture capital fund based in Prosper. So this way you have insurances looking at what you're doing in your regulation and like, ah, yeah, this has been done multiple times before, multiple jurisdictions, it's cheap and this one, ah, it's quite new, right, it's not been really tested, so there's going to be a higher premium because we have to pay experts to assess the risk of what you're doing. So this way you have an open process to improve and develop and find the rights kind of regulations for different businesses. When we visited, Anzinger was hosting a seminar for companies that operate or are interested in operating here, including a biotech firm, which found it easier to run gene therapy trials in Prosper than in the U.S. Prosper has quite a specific legal framework that encourages businesses to thrive. President Castro has vowed to repeal the ZEDE law, calling it criminal legislation and an attempt to steal our sovereignty. Bremen says that even if a repeal vote is ratified by Congress, Prosper is protected by international treaties and the government will risk paying damages of over $10 billion if it violates them. It's not just the cash cost to us, but it's the message that the Honduran government is expropriating a U.S. investment. I mean, that has got to have a multiple of $10 billion of negative effect. So on the one hand, you have this very bad outcome. And on the other, which I think they're starting to realize begrudgingly to some extent, you have not $10 billion, but a multiple of that of upside benefits in not just direct investment, but of jobs, positive externalities. And what would you do? It's like if I had $500 million or $1,000 million to the U.S. who asked me to buy the central bank in Nueva York, to create a state within another state. Fernando Garcia is a former economic minister, whom Castro appointed as presidential commissioner against the ZEDES. She knew how to take that people's commitment to defend their constitution, their territory, their government, their sovereignty, and not allow colonies to become independent states and states. Is this a threat to the Honduran national government? No. To the Honduran sovereignty, it is not. Okay. Why not? It's the opposite. It's an exercise of sovereignty. Yeah, you know, one has to more fully understand what sovereignty is to begin with. Sovereignty is about self-determination, correct? And the power to be self-determined properly rests upon the people, not upon some institution that rules them. Jorge Calendres is the technical secretary of Prospera, roughly the equivalent of its mayor. What concrete problems does Prospera solve that are not being solved in the rest of Honduras? Let me give you one of the most important ones for me, and that is freedom from corruption. I'm an attorney. I have my legal firm in San Pedro. I've seen corruption at almost every governmental institution. I've seen it at the municipalities. I've seen it at the prosecutor, at the judges, at the environmental agency, at the health care agencies, essentially all over. So it takes ages to get your business running. And on top of that, you have people demanding bribes and payments. So what about the structure of Prospera insulates it from corruption? We have to bring investments. And investment is not going to come if we run a crony, crooked government. Unlike other governments, we don't have the ability, a monopoly of the use of force and coercion. So we live by the principles of the non-aggression principle, self-ownership in the rule of law and property rights. And unique to Prospera is the right to join, but also the right to exit. So if you own property within Prospera and you don't feel like the legal system is doing what you want or if the rules are fair, you can take your property out of Prospera just like it got into Prospera. So it's called voice and exit. Voice matters here at Prospera. Residents will be allowed to elect five of the nine members of the city council once the population surpasses 10,000. But political power mostly derives from exit or voting with your feet. The basis of the legitimacy of government is consent of the people. We do have consent of 100% of our residents. And that's where our powers stem from. One of the examples is if you have a 10-story building, you know, you can have floor seven into Prospera City. You can have floor six into the general freesome regime of Honduras. And then you have the other floors under the national regime. This opt-in arrangement has allowed Prospera to expand from five acres to 58. And then during the height of the pandemic, the project expanded to more than a thousand acres of a nearby resort in Villa called Pristine Bay. The hotel at the center of this development remains outside Prospera's jurisdiction. And individual homeowners in the villas will be able to opt in or out. Another major problem that many South and Central American countries have faced is runaway inflation. In the 90s, Honduras' inflation peaked around 34%. It currently sits at about 9%. Prospera also hosts a Bitcoin cafe and education center devoted to promoting its use on Roatan. We provide them education, help, support, technical support, POS setting. And currently, we have around 50 merchants that already accept Bitcoin. And they range from tattoo girl to coffee shops, restaurants, currentals, a dentist, an eye doctor. I think Prospera's main payment infrastructure will be Bitcoin over time. We can really build a full-fledged payment railway for small businesses, big businesses, residents, companies. Prospera is primarily a governance model, so its territory doesn't have to be contiguous. We took a ferry ride to the mainland city of Lesbos to visit another large territory that's participating in the project. Though everything about Prospera has been voluntary to date, it's no wonder that Hondurans are worried about foreign businessmen violating their national sovereignty. Laseba happens to also be a key battlefield in a successful 1911 coup backed by the American business magnate Sam Zemuri, who would later become the president of the United Fruit Company. Concerned that the president was hostile to his expansion plans, Zemuri used his wealth and influence to bring about regime change in a foreign country. We drove along an unpaved road once partly occupied by railroad tracks that used to carry banana harvests to the port. This land was eventually abandoned and now is part of Prospera, which hopes to develop it into a major manufacturing hub. Eric Paz manages the site, which is currently occupied by a tiny office building and a rundown schoolhouse. Historically, it has been a community that has had a lot of opportunities to be able to develop, to be able to study, to be able to have access to health, to be able to have access to a dignified job, or a more dignified home. The owner of this tract allows a woman named Maria Rosasosa and her daughter Olga Livia to live here in exchange for serving as caretakers. They welcome Prospera to the neighborhood. Paz says Prospera has letters of interest from three companies eyeing the site, a medical supplies manufacturer, a maker of prefabricated housing materials, and an aeroponic farmer. The ZEDE law made it through Congress on the grounds that it would attract investment and bring new opportunities. Garcia says that it hasn't made good on that promise. But Colindra says that it's absurd for the Castro regime that's hamstrung special economic zone, that it's not going to make good on that promise. But Colindra says that it's absurd for the Castro regime to hamstrung special economic zones and imposed economically destructive policies after several years of COVID pandemic stagnation to criticize the rate of job growth within ZEDEs. Frankly, the Honduran population, they're not happy with this new socialist regime. You know, in their first year, they butchered over 100,000 jobs, poverty is still high. And while we are seeing an economic and democratic deterioration at the national level, here in Prospera, we're still creating jobs. Back on the island of Roatan, some of those jobs have gone to locals from the island, like this carpenter, who repurposes excess construction material to make furniture, or Virginia Cecilia Mann, Prospera's head cook, who lives in the neighboring village of Crawfish Rock. Until Prospera came here, there are moms that never had a job in their lives. They don't have the educational level, or maybe they don't speak the language that they need, or just maybe other things like they have kids at home and there's no one to watch them. So they can't get a job where offer mother hours. All of those things Prospera were offering to them. They got the opportunity that they can have a job, get an income, be close to home, and just know that this place will make a difference for them. Cecilia Mann also spearheaded the creation of Prospera's on-site school, which teaches local kids using Khan Academy Virtual Learning. Victor Andino, who lives with his family in a house on the beach that directly abuts Prospera, sends his kids to the school. Well, Prospera's school, which has been made this year for the kids of Crawfish Rock, is good. It gives them English classes, computer classes, that not everyone will come and give you a computer so that you can trace it. You know you make expensive material. No one will give you a teacher who gives you English classes for free. It's a benefit. Andino is an electrician, and his wife works maintaining Prospera's many plants. The company fills many of the location's administrative security and construction jobs with workers from the mainland. This mason told us that the work dried up during the pandemic, and that outside of Prospera, new construction projects tend to get held up by red tape. The permits, the municipalities and everything, are very slow. Because no one can build anything, but the municipalities go to get permits, to keep everything in order. We have to pay, support, so that they can release something. I don't have any problems with Prospera. I think it's an opportunity for us. At a fork in the road at the top of a hill leading down into Prospera Village is a small convenience store, where construction workers congregate at the end of the workday. The owner, Lorna Webster, has lived here for 36 years. She's suspicious of her new neighbors. They used to come and eat with us and talk with us and talk about the development that they was going to bring in project to benefit the community in the future. So then we all was well happy because a lot of the place is going to grow, you know? Webster says members of the community changed their minds when they found out that the ZEDE law allows companies like Prospera to partner with the government to expropriate their land. Nunca más cargaremos con el estereotipo de República Vanadera. President Castro regularly compares ZEDES like Prospera to the United Fruit Company, which took advantage of politically weak Central American countries to boost its profits in banana cultivation. Forty-three years after financing a coup in Honduras, United Fruit CEO Sam Zamari helped orchestrate covert CIA operations in neighboring Guatemala, which led to the removal of another president he considered hostile to his company's business interests. This legacy of corrupt governments colluding with powerful private landowners has left many locals wary of the ZEDES. Maybe for the beginning it will benefit us because they may give us jobs, but in the future the laws give them probably to take our land. Has anyone approached you about taking this land? No. Any ZEDES? Definitely not. No. No interactions with them at all? No. In that way? No. They say no we won't, but does that guarantee that they won't? In the adjacent fishing village of Crawfish Rock, a store owner expressed the same fears. We live here, we're born here, we raise up here and this is what we have and for them to come in and definitely just take it away because that is their plan. Have they done anything so far that has made life worse here in Crawfish Rock? No, they haven't bothered us at all. Though Prospera prohibits expropriation in its charter, the ZEDE law does permit the zones to partner with the government to take private lands for public infrastructure development. Why shouldn't they be concerned that Prospera as it expands is going to start expropriating their lands? Prospera ZEDES specifically cannot receive expropriated land into its jurisdiction. Period and a story, it's in our charter, it's in our bylaws, the whole nine years. And if we did, the people involved are personally liable. So is that actually a reform to the ZEDE law that you would support is making it just impossible to do that? Yeah, and I advocated for that way before this new administration and I'm against expropriation as a matter of principle. Bremen is originally from Venezuela where socialist president Hugo Chavez became notorious for expropriating land and businesses, which eviscerated the economy. I think it was a very visceral experience of what otherwise would have been read on a book and not understood firsthand. Bremen says that when he enrolled in college, he wanted to study economic development and poverty to figure out why some countries get rich while others like Venezuela stay poor despite having abundant natural resources. I thought that what I wanted to do in my life was somehow expropriate land. Yet I realized that I was asking the wrong question, that it's not about how you end poverty, but rather how you catalyze prosperity. And when I started studying the challenge from that perspective, I was unavoidably led to the empirical evidence that shows that in order for there to be maximized human prosperity, you need freedom. You need economic freedom. And so the invention of prosperity is mostly around the business model. The public-private partnership approach to deploying an economic system with rule of law that is proven throughout history to unleash human potential. Will this ambitious experiment catalyze prosperity in Honduras? Can a properly designed private government thrive and avoid the corrupt and violent fates of poverty? Can a properly designed private government thrive and avoid the corrupt and violent fates of the 20th century banana republics? A lot rides on the success or failure of Prospera, the future of Zedes in Honduras, the promise or folly of separating governance and state. It's a bold test of the limits of the proposition that the private sector does everything better, that the profit motive is less corrupting than political processes for obtaining state power. Bremen and his team say they'll deliver on the promise of creating a bastion of freedom and prosperity just as long as the national government holds up its end of the deal. If you came two, three years ago, this was nothing but jungle, nothing but jungle. And now there's power, water, sewer, high-speed internet. The entire pristine bay resort is in the jurisdiction. So my vision for the next one to five years is you come back and say, as big a leap it was to go from nothing to a thousand acres, that's been the same leap, perhaps not in just sort of geographic size, but in vertical development in the next one to five years, our vertical development, building, you know, the city toward the sky. Is this radical libertarianism? Is this anarcho-capitalism in action? In some ways, yes, but not in the way in which those that are attacking us use the attack to try to make it seem as if there is no responsibility that there's going to be hazardous activities, that there's going to be no consequence for harm done. It could not be further from the truth. So from that perspective, they are absolutely wrong. From the perspective of radical libertarianism and anarcho-capitalism, my reading of it is that they want to see market players and market forces be the regulators. And so this idea of using, for example, insurance companies as a way to mediate, there's no system in the world that more powerfully injects market dynamics into dealing with human relationships and commercial activity. The vision for the platform in Honduras has been to catalyze multiple hubs throughout the country that attract foreign direct investment and generate massive amounts of well-paying jobs for Hondurans in different parts of the country. Ultimately, it's about economic freedom. The main wild card is how the Honduran government chooses to proceed.