The intellectual roots trace to Paul Romer, a Nobel-winning economist and former World Bank chief economist who proposed charter cities as early as 2009 -- new urban areas with governance structures designed to attract investment through rule of law and regulatory efficiency. Honduras took the concept further than Romer intended. In 2013, under President Porfirio Lobo, the Honduran constitution was amended to allow Zones for Employment and Economic Development, or ZEDEs -- subnational territories with their own administrative systems and laws. Venezuelan wealth fund manager Erick Brimen saw an opportunity. He formally applied for a charter city in 2017, and Prospera began to take shape on Roatan's coastline. Brimen described it as a "poverty relief initiative." Romer, whose idea inspired it, has rejected the result, calling it a "libertarian fantasy" disconnected from the reality of governance.

Prospera functions as something between a special economic zone and a private municipality. Honduras Prospera Inc., funded by venture capitalists, holds a veto vote on the governing council. Tax rates are a fraction of Honduras's standard levies. Dispute resolution happens through private arbitration rather than Honduran courts. A Committee of Best Practices, whose members are appointed by the Honduran government, is tasked with approving regulations and providing policy guidance, but the real authority flows from the corporate structure. In January 2025, Coinbase CEO Brian Armstrong announced his company's venture capital arm would invest in Prospera to promote financial inclusion. By that time, robots at a facility called the Circular Factory were reportedly converting wooden blocks into construction materials. The project's ambitions are large; its physical footprint, for now, remains small.

Directly abutting Prospera sits the village of Crawfish Rock, where residents watched with alarm as a drawing on the project's website appeared to include parts of their community in future expansion plans. Roads in Crawfish Rock remain unpaved. Promised development funds have not materialized. Residents have raised concerns about groundwater rights, sewage problems, and the fact that Prospera relies on Roatan's garbage dump, electricity, and airports while operating under its own tax regime. The broader Garifuna and local communities see an entity that extracts shared resources while contributing to a separate treasury. Prospera's charter disallows land expropriation, but proximity alone creates pressure -- when a private city with armed guards and its own laws sits next door, the informal power dynamics shift even without a formal seizure.

President Xiomara Castro made repealing the ZEDE law a centerpiece of her 2021 campaign. In April 2022, she signed legislation revoking the zones, calling Prospera a creation of a "narco-regime" -- a reference to her predecessor Juan Orlando Hernandez, who championed the ZEDEs and was later convicted of drug trafficking charges in the United States. In September 2024, Honduras's Supreme Court declared the ZEDEs unconstitutional with retroactive effect. Prospera's response was to file a $10.7 billion claim before the International Centre for Settlement of Investment Disputes. ICSID rejected Honduras's attempt to dismiss the case, and the dispute became a major factor in Honduras's decision to withdraw from ICSID entirely in August 2024. Meanwhile, Brimen spent hundreds of thousands of dollars lobbying U.S. legislators to sanction Honduras if it shut Prospera down. The charter city built to escape government now depends on the intervention of foreign governments to survive.