President Donald Trump’s pardon of former Honduran president Juan Orlando Hernández—who was serving a sentence in the United States for drug-trafficking—triggered predictable political debate. Yet more consequential than the pardon itself is how it intersects with a rapidly evolving trend in the Western Hemisphere. Honduras has become a focal point in a larger contest over the role of private, tech-aligned governance ventures in Latin America. Trump’s announcement also came days before Hondurans headed to the polls. The results of the election—which will shift the country to the right—could shape the role of the private sector in the Central American nation and set the stage for a new era of corporate governance in the region.
In the years leading into and during Hernández’s presidency, Honduras enacted and aggressively promoted the Zones for Employment and Economic Development (ZEDEs), a legal framework that allowed private developers to establish semi-autonomous jurisdictions with their own regulatory, tax, and dispute-resolution systems. This framework drew U.S. and international investors, including Silicon Valley-linked, tech-libertarian, and crypto-oriented groups. Among them were Pronomos Capital—backed by figures such as Balaji Srinivasan, Peter Thiel, and Marc Andreessen—and a wider network of charter-city advocates connected to the Seasteading Institute and the Charter Cities Institute.
No project attracted more attention than Próspera, the ZEDE enclave on the island of Roatán. Supporters promoted it as an innovation ecosystem with streamlined regulations and digital-first governance while critics questioned its democratic legitimacy and warned that its sweeping autonomy weakened community oversight and national sovereignty. The ZEDE law itself became one of the most contentious policies of the Hernández administration.
When Xiomara Castro won the presidency in 2021, her administration moved quickly to roll back the ZEDE framework. Congress repealed the enabling laws, and the government aimed to reassert full national jurisdiction over the affected territories. In response, Próspera’s developers initiated arbitration proceedings under international investment agreements. Reports indicate these claims reach into the billions of dollars. ZEDEs have re-entered the electoral conversation as a subtle but meaningful dividing line. While Castro’s left-leaning party LIBRE and its allies have portrayed the repeal and court ruling as necessary steps to restore sovereignty, some opposition figures describe the arbitration case as evidence of undermined investor confidence. This divergence ensures that governance zones remain part of the electoral backdrop.
Próspera’s turn to international arbitration also echoes a wider pattern in global economic governance. Around the world, corporations increasingly use investor-state dispute settlement mechanisms to challenge national regulatory decisions, often arguing that policy changes violate investment protections. Although the ZEDE framework is distinct, the underlying logic is similar: private actors seek legal authority to constrain or overturn sovereign decisions. Leaders such as Donald Trump and Argentina’s Javier Milei have embraced deregulatory models that give corporate actors greater leverage in shaping public policy, placing Próspera’s dispute within a broader rise of private rule in the hemisphere.
In this context, Trump’s announcement carries real significance at a moment when Honduras is navigating the political, legal, and economic fallout of undoing its special-zone regime. Although none of this suggests any link between the pardon and those disputes, the point for policy analysis is different: the pardon lands within an increasingly complex governance environment shaped by U.S. political signals, Honduran domestic realignment, and transnational investor networks who see Central America as a proving ground for alternative governance models.
This broader environment reflects a notable shift in the hemisphere. For decades, discussions about external influence in Latin America revolved around state actors—Washington, Beijing, Moscow, and regional governments. But the rise of tech-libertarian visions of “network states,” charter cities, and crypto-anchored jurisdictions introduces a new category of actor: private groups seeking to manage quasi-autonomous spaces inside nations. These projects typically emphasize economic freedom, light regulation, and contractual governance. In practice, they often operate where institutions are strained. Although the terminology is new, the region has long been home to foreign-run agricultural enclaves and company towns, where corporations exercised quasi-governmental authority—legacies that continue to inform political narratives today.
Honduras offers a clear illustration of the tensions these ventures create. Hernández’s government championed the ZEDE framework as a tool for investment and modernization. Castro’s government cast the ZEDEs as unconstitutional and incompatible with democratic control. Próspera’s leaders argue that their project adheres to internationally valid investment protections. Civil society groups in Honduras describe the model as an erosion of sovereignty enacted without meaningful public consultation.
Against this backdrop, Trump’s public commitment to pardon Hernández carries implications for Honduran corporate governance. Hernández’s leadership is inseparable from ZEDE’s creation, while Castro’s leadership is inseparable from the effort to dismantle them. Foreign investors’ arbitration claims operate within this evolving context. Any major U.S. action—legal, diplomatic, or rhetorical—inevitably interacts with an already-delicate balance.
The hemisphere is witnessing the emergence of a new kind of political-economic frontier, where private governance experiments meet the realities of democratic transitions, sovereignty, and state capacity. These experiments carry historical resonance. The legacy of Central America’s experience with foreign-run plantation enclaves still shape public perceptions of foreign involvement. Charter-city ventures such as Próspera do not fit neatly into the familiar categories of foreign direct investment, special economic zones, or development projects. They blend ideological objectives, digital-era governance concepts, and long-term corporate control. When elections reshape the national environment, the tension between private governance and democratic authority becomes acute.
Understanding this landscape requires more than a checklist. Honduras’s experience demonstrates that private governance systems are highly sensitive to democratic change. A new administration can reverse enabling laws, initiate legal challenges, or reassert state jurisdiction. Investors can respond with arbitration, public campaigns, or appeals to international bodies. That recalibration affects how ZEDE-related disputes are perceived, especially as questions of sovereignty, regulatory authority, and investor claims gain new salience.
This interaction raises important considerations for U.S. foreign policy. Even as Washington’s current posture reflects a more transactional approach—prioritizing migration, security cooperation, and targeted economic projects—the United States must account for the fact that private investors can shape bilateral relationships in unpredictable ways. Likewise, when Washington weighs decisions—such as public positions on high-profile legal cases—those decisions reverberate through contexts already strained by legal disputes and contested governance.
Policymakers must remember that the geopolitical environment now includes private actors seeking to build jurisdictions parallel to the state, and that these efforts create political and legal friction points that can interact with foreign policy decisions in unexpected ways. Honduras stands as a case where private governance ventures, national democratic transitions, and U.S. political actions all converge—with implications for the future of governance in the hemisphere.