Honduras Undertakes New Experimental Tax-Free City

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Work is beginning this month on the great Honduran experiment.

The Honduran government has allowed a U.S. investment group, MKG Group, to build an experimental city in their country. In an effort to attract foreign investors and entrepreneurs, this new city will not impose tax, capital gains tax, or sales tax.

The initial US$14M phase of the project will launch this October. It is expected to create 5,000 jobs in the first six months and aims to generate 40 times that number in the future.

Specifics surrounding the arrangement remain vague. Three possible sites have been mentioned – Sula valley, Agalta valley, and the southern region of Honduras. Government officials claim the city will be based on the models of Singapore, Dubai, and, Hong Kong. However, it’s worth noting that none of those cities attempted to start urbanization from next-to-nothing.

This new experimental city will operate outside the laws of the rest of Honduras. Mike Strong, CEO of MKG Group, has stated that the default law to be enforced in the city will essentially be based on Texas state law, which has relatively few regulations on investment and business.

“It will be Texas law with more freedom of contract. Texas scores well on state economic freedom rankings,” Strong explained. “Texas law is also very familiar to American business people, and it is very familiar to Hondurans, because a lot of Hondurans have gone there or have family there.”

Honduras is a very underdeveloped country where the average income is US$4,400. The country’s leaders hope this new tax-free zone will help to change that. One hurdle will be addressing the concerns of the country’s indigenous Garifuna people, who worry that the city will be built on their land. Strong said that they need not worry. “The media reports are full of inaccuracies. We’re not even remotely close to [the Garifuna]. We’re literally hundreds of miles away,” he said.

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Denis Foynes

Denis Foynes was born in New York City to Irish parents in 1991. When he was 8, his family returned to Celtic Tiger Ireland. Denis has an International Politics degree from Aberystwyth University in Wales. After completing university, he decided to leave crisis Ireland and relocate to Panama.