A private-public partnership to improve highway infrastructure in Honduras was supposed to be a boon for economic development. Instead, it quickly turned out to be a lose-lose agreement for an already impoverished population — and a grim warning about investment rules that give corporations too much power.

It began in 2016, when the government proposed to develop a highway along Honduras’s northern coast — complete with tolls that would have raised transportation costs and other prices for locals.

People quickly rose up to oppose the project that threatened to raise their cost of living, as well as drain the public purse. Those early protests turned into a 421-day camp against toll booths along the highway. In 2018, following these protests, the government cancelled the contract for the project with a company called Autopistas del Atlántico (ADASA).

But after five years of silence,  the investors returned with a vengeance. Now, an investor group including ADASA, J.P. Morgan Chase Bank, and a couple of Goldman Sachs funds, is bringing a multi-million dollar claim against the country in a Washington, D.C.-based tribunal for far more than it ever invested.

They’ve gone to the World Bank-based International Centre for Settlement of Investment Disputes (ICSID) to demand $179 million from Honduras, alleging a “breach of its contract for the suspension of the toll road in the face of community protest and cancellation of the contract in 2018,” according to The Corporate Assault on Honduras, a report published in September 2024.

Karen Spring, coordinator of the Honduras Solidarity Network, explained during a presentation of the report that the Investor-State Dispute Settlement (ISDS) system that ICSID is part of allows transnational corporations to file claims that squelch the voices of affected people.

“The 15 active claims against Honduras are an attack on struggles for dignity, justice, and democracy. These suits and the system that allows them are an attack on the sovereignty of Honduras and the self-determination of affected communities,” said Spring.

Citizen Outrage

As part of the “Angry Citizens’ Movement” (Mesa de Indignación Ciudadana), Suyapa Majano and Idalia Carballo say that neither the weather nor the state’s armed forces could intimidate the struggle against the toll booths, which people considered unconstitutional and a violation of their right to free movement.

Suyapa Majano recalls that in order to sustain the protest camp, they took shifts in which mostly women took part. They celebrated birthdays roadside and, during Holy Week, they made the Stations of the Cross, all in order to demonstrate their opposition to the toll booths.

“We never let up the struggle,” despite the fact that “several men and women were beaten,” routinely tear-gassed, and persecuted for their protest. “There are students who participated too, that I remember had to flee.” Those who remained in the country were profiled by repressive state armed forces.

Idalia Carballo questions the legality of using tolls on roads that had already been built and where there are no alternative routes to ensure free circulation for locals. “They put up the toll booths, but didn’t build anything themselves,” she said.

Carballo recalls that the government of then president Juan Orlando Hernández supported Autopistas del Atlántico by providing police and military personnel to repress the population who protested against the toll booths.

Hernández — who has since been convicted in New York state for conspiring to import cocaine into the U.S. — touted the tourist corridor contract as a step forward for the country’s infrastructure, supposedly to stimulate trade, tourism, job creation, and lower transportation costs.

Initially, the contract established that the toll booths could only start collecting after construction had been completed. However, in 2016 — after just 10 percent had been completed — the company received approval to start charging all vehicles that traveled on the road. This activated the minimum annual guaranteed income — the difference between the minimum anticipated revenue and revenue earned — provided for in the contract. As a result, Honduras now owes the company $110 million, instead of $42 million previously, due to the early cancellation of the project, as The Corporate Assault on Honduras explains.

The Failure of Public-Private Partnerships

The Autopistas del Atlántico claim is only one of 15 arbitration suits currently in process against Honduras, largely promoted by investors who benefited from decisions made following the 2009 coup d’état during the so-called narco-dictatorship period. Many of these claims have been brought under the terms of free trade agreements and investment protection treaties that enshrine extraordinary corporate privileges. In this case, the company is able to bring recourse via Investor-State Dispute Settlement Mechanisms (ISDS) under its Public-Private Partnership (PPP) contract.

“We see at least three lawsuits […] that correspond to Public-Private Partnership contracts, which were negotiated by [the former Commission for the Promotion of Public-Private Partnership] under conditions highly detrimental to the [public] purse ,” explains Jen Moore of the Institute for Policy Studies (IPS).

PPPs in Honduras were permitted through the 2010 Law for the Promotion of Public-Private Partnerships, which also created the now defunct Commission for the Promotion of Public-Private Partnerships (COALIANZA). COALIANZA’s role was to promote, enter into, and supervise PPP contracts between the public and private sector, involving both domestic and transnational corporations.

In 2019, COALIANZA was dismantled following the raid of its offices by the Technical Agency of Criminal Investigation (ATIC) under widespread accusations of corruption. Earlier, in 2014, part of COALIANZA’s activities were declared secret under the Law for the Classification of Public Documents Related to National Security and Defense or Secrecy Law. This led to serious questions about the limited auditing and oversight of its operations.

Two other claims involving a Public Private Partnership contract have been filed against Honduras by the Palmerola International Airport (PIA) for $10 million, very recently discontinued, and the Eléctricas de Medellín Ingeniería y Servicios S.A.S. for $500 million. Another pair of claims likely to correspond to a PPP contract were filed by International Container Terminal Services & Operadora Portuaria Centroamericana, but lack of transparency in their case meant the amount is unknown.

Moore remarks that although it is difficult to know the details of the arbitration claims against Honduras because the related documentation remains confidential, companies often act out of one of two aims: first, to pressure authorities to change the rules or to ensure business conditions remain in their interest; and second, to force the people to compensate investors for their losses, including future lost profits.

Luciana Ghiotto of the Transnational Institute states that the Investor-State Dispute Settlement system has been widely criticized beyond Honduras.

She remarks that Honduras’ decision to leave ICSID in August 2024 was “an important step, but not enough.” She explains, “ICSID is only one of various global arbitration centers available, whereas investment protection treaties […] enable investors to sue the State in any arbitration forum in the world.”

The ISDS system is set up to keep the rules of the game stacked in favor of corporations at great cost to people and the public interest. The report The Corporate Assault on Honduras urges the abolishment of these exclusive corporate privileges that have been granted through international treaties, as well as in national laws and contracts, including Public-Private Partnerships.