An investor’s ‘prosperity’ vision for Honduras

When Erick Brimen first began trying to work out what would make poor, unequal countries thrive, “it dawned on me that we were asking the wrong question”, he says.

As a student in development economics at Babson College in the US, the Venezuelan native decided to focus on the drivers of prosperity — institutions that enable investment to flow and jobs to be created — rather than the broad idea of eradicating poverty.

Now, after stints in fintech and private banking, the 37-year-old chief executive of investment group NeWay Capital has partnered with Honduras to launch the first of what he sees as a network of “prosperity hubs” in the Central American country — the culmination of his vision and a long-held goal of the Honduran government.

“One thing that has justified ourselves up front with investors is that we are investing in a platform that others can leverage . . . it’s like a franchise,” he says. “A lot of people ask: ‘Why Honduras?’ It’s the last place people think of doing something innovative . . . but you’ve got to do it where it’s needed most.”

Honduras has been trying to harness private investment to create special zones for employment and economic development, known as ZEDEs, for the best part of a decade, and even with a legal framework in place, Mr Brimen says it “wasn’t easy at all” to win approval. When he finally launched in May, Covid promptly forced an eleventh hour strategic rethink.

The project, on the Caribbean tourist island of Roatán off Honduras’ northern coast, initially planned to focus on medical tourism but hospital groups involved were “overwhelmed by Covid . . . and investors were very distracted”, says Mr Brimen. He was forced to quickly shift gears to targeting remote employment. But unlike typical outsourcing jobs, these are skilled positions, including architects, engineers, accountants and lawyers, designed “to reverse brain drain and keep the best talent at home”.

For a “stubborn”, goal-oriented, micromanager, who once quit as chief executive of an online insurance company in Colombia rather than compromise his vision, “the lesson I’ve been learning is to let go of the ‘how to get there’ and to focus on ‘where we are going’ . . . it’s been hard for me.”

While chief financial officer for a prominent Spanish family office in Panama, he was forced into a similar shift when failure to get a concession without paying a bribe forced a sudden investment rethink that turned out surprisingly lucrative. That helped instil in him the need to “be transparent and share bad news fast” with investors to preserve trust.  

This is a commodity many would consider to be in short supply in Honduras with its reputation for ingrained corruption, poverty, weak institutions, falling foreign investment and an exodus of migrants.

Nevertheless, the country was identified more than a decade ago as an ideal destination for the world’s first “charter city” by Paul Romer, who went on to serve as the World Bank’s chief economist and to receive the co-recipient award of the Nobel Memorial Prize in Economic Sciences.

Recruited by Honduras under a scheme to develop special economic regions after delivering a TED talk on the subject, Mr Romer ultimately backed out, citing a lack of government co-operation.

But Honduras continued with the idea, passing a law in 2013 establishing a legal framework for ZEDEs. Mr Brimen, who took his project to the government in 2016, says the original idea of a foreign government managing a city in the developing world “looked too close to colonialism” in a country once effectively run by US banana companies.

Allowing investors to write some of their own rules and enjoy autonomy in safe enclaves was billed as a fast-track to creating mini Hong Kongs in dysfunctional Honduras.

But the grand ideas soon got bogged down in legal challenges. Potential locations never got off the ground and despite early enthusiasm from South Korea, no such investment ever surfaced.

Gang-plagued Honduras’ reputation, meanwhile, plummeted. President Juan Orlando Hernández is widely believed to have stolen the election in 2017 and was accused in a US trial last year of accepting $1m in bribes from Mexican drug lord Joaquín “El Chapo” Guzmán. At the trial, his brother Tony Hernández was convicted of drug trafficking.

Mr Brimen was undeterred. He believed ZEDEs could get rid of significant hurdles to investing by putting the private sector in charge of rule of law, dispute resolution, security and a property register.

The first problem, however, was getting approval — something which ended up taking nearly two years. “I was a little surprised — we were proposing making a very significant project come to reality. They wanted the project but were not willing to just approve it easily,” he says.

No one asked for bribes overtly, and Mr Brimen says he set the tone by being “obnoxiously excessive” in his insistence on full compliance with the US Foreign Corrupt Practices Act.

While blind faith in a government in a region that is no stranger to abrupt political and policy changes might be a “stretch”, he says he trusted in the combination of the ZEDE legal framework, incentives and support from the US embassy — “without being naive”.

As well as an innovation centre and high-tech hospital, Roatán Próspera is set to include a residential development designed by the UK’s Zaha Hadid Architects. Some 30 investors to date include Bedrock Capital and Alpha Bridge Ventures.

Success will be measured in “jobs, jobs, jobs” paying, he says, 10 per cent above minimum wages, plus benefits, helping deter migration in a country where the economy is set to shrink 6 per cent this year.

With the status of a small municipality, Roatán Próspera will be able to collect taxes. Mr Brimen expects investment of $500m in the first five years, with his NeWay Capital putting up $50m. Supporters include Ernst & Young and Germany’s Technical University of Munich.

But some are sceptical of such a neoliberal experiment. “It’s difficult for me to see how any arrangement like this can thrive with the level of corruption and impunity you have in Honduras,” says Christine Wade, a ZEDE expert at Washington College.

“You don’t need a big footprint to make a big difference,” insists Mr Brimen, who plans a second hub, focusing on coffee, bananas and possibly auto parts, in La Ceiba in northern Honduras, in early 2021.

“The vision is to see best practices being replicated by the national government too,” he says. “Clearly I am an optimist or I wouldn’t be attempting this.”