Latin America Advisor

A Daily Publication of The Dialogue

What Will Honduras Gain By Establishing Ties With China?

Photo of Wang Wenbin Honduras is seeking diplomatic relations with China, which would mean breaking them with Taiwan. Chinese Foreign Ministry spokesman Wang Wenbin said Beijing welcomed Tegucigalpa’s attitude toward building ties. // File Photo: Chinese Government.

Honduran President Xiomara Castro on March 14 announced that she would seek to establish diplomatic relationships with China, implying that Honduras will break its ties with Taiwan. China views Taiwan as part of its territory–a position Taiwan strongly contests–and refuses most contact with countries that maintain formal ties with the island’s government. The move would leave Taiwan with only 13 diplomatic allies around the world, most of which are in Latin America and the Caribbean, including Guatemala and Paraguay. What is Honduras seeking to gain from China? What are the geopolitical implications of Honduras’ shift in alignment, and how might it influence the rest of the region? How significant is Honduras’ rapprochement with China to Taiwan?

Margaret Myers, director of the Asia & Latin America Program at the Inter-American Dialogue: “Honduran President Xiomara Castro has noted that the decision to cut ties to Taiwan was economically motivated, and that would indeed appear to be the case. Chinese trade with the Central American nation has grown markedly over the past few years, and Honduras is looking for support for yet another hydroelectric dam project. The Industrial and Commercial Bank of China financed the Patuca III dam a number of years ago. Honduras is now hoping that China will also back the Patuca II project. In general, things aren’t looking great for Taiwan in the Latin American and Caribbean (LAC) region. In Paraguay, relations with Taiwan have been the focus of heated debate in the lead-up to the country’s presidential election. Indeed, China has been increasingly successful in isolating Taiwan since Taiwan’s Democratic Progressive Party, which is more independence-minded, assumed the presidency in 2016. Of course, Honduras can’t necessarily count on China to dramatically improve the economic landscape there. Decisions in LAC to cut ties with Taiwan have produced dramatically different outcomes, with some countries, such as Panama, striking more than a dozen, sometimes sizable, deals. In other cases, there is relatively little to show for having made the switch. It’s also not at all guaranteed that China’s continued and successful efforts to diplomatically isolate Taiwan will preclude an eventual military contingency in the Taiwan Strait. The Strait is far away from Latin America, of course, but the effects of a Taiwan invasion would reverberate across global supply chains, with profound economic impacts on Latin America.”

Jiang Shixue, professor and director of the Center for Latin American Studies at Shanghai University: “The island of Taiwan has been an inseparable part of China’s territory for 1,800 years. It’s crystal clear that the two sides of the Taiwan Straits belong to one China, and the government of the People’s Republic of China (PRC) is the only legitimate government representing the whole of China. This one-China principle represents the universal consensus of the international community. That is why, to date, 181 countries, including the United States and 25 countries across Latin America and the Caribbean, have accepted this principle. If Honduras can do the same, Taiwan’s efforts to seek independence would suffer one more setback. At the same time, Honduras’ diplomatic relations with the PRC will develop more rapidly than ever before. In particular, bilateral economic relations in the field of investment and trade will help push forward the growth of the Central American country’s economy. Furthermore, a prosperous Honduras is beneficial not only to the Central American region, but also to the United States, as there would be fewer Honduran emigrants moving north. Hopefully, the remaining eight countries in the Western Hemisphere that still maintain ‘diplomatic relations’ with the Chinese Province of Taiwan, including Belize, Guatemala, Haiti, Paraguay, Saint Kitts and Nevis, Saint Lucia, and Saint Vincent and the Grenadines, will soon respect the one-China principle. But it is anybody’s guess whether the United States would allow them to pursue an independent foreign policy.”

Ray Walser, professor of practice at Seton Hall University’s School of Diplomacy and International Relations, and retired U.S. Foreign Service officer: “One supposes that President Castro believes poor Honduras will benefit substantially from China’s economic and developmental largesse. Press reports indicate that the Hondurans have in mind various infrastructure projects which the Chinese may be willing to finance. Readiness to bankroll infrastructure development remains a hallmark of China’s Belt and Road inducements. The well-known caveat is China’s propensity for ‘debt trap diplomacy.’ From a regional standpoint, Honduras falls belatedly in line with other Central American nations–Panama, Costa Rica, El Salvador and Nicaragua–which have already switched diplomatic relations from the Republic of China to the People’s Republic of China. Hence the decision will likely have no significant impact on the region’s readiness to respond to Beijing’s siren song. In fact, Honduras is a late comer. With Vladimir Putin and Xi Jinping currently working hand-in-glove to crash the liberal international order and throw Ukraine under the bus, the Honduran decision hardly registers on the geopolitical Richter scale. One assumes that the architects of Honduran foreign policy see their country marching with the uncommitted of ‘the Global South’ and savoring a chance to administer in the name of a more multipolar world a rebuke to Tio Sam. Given the Biden administration’s extensive support and the fact that the announcement came just as the U.S. special presidential advisor for the Americas, former Senator Chris Dodd, visited Tegucigalpa, the decision sends a signal that things are far from well in Central America. President Castro is opting in the name of economic gain and self-interest to align with authoritarianism as opposed to democracy. The logic is simple. Let the United States deal with the migrants and trade we send your way while we bask in China’s fraternal embrace. Very sad.” 

Lin Hua, associate researcher at the Institute of Latin American Studies, Chinese Academy of Social Sciences (CASS): “Honduras seeking to establish diplomatic relations with China is not a new idea. This intention was already raised as early as last year when President Xiomara Castro was running for office. In fact, the one-China principle is already a recognized basic norm of international relations and a general consensus of the international community. Recognizing this norm is an autonomous choice in line with Honduras’ own national interests. China is currently the second-largest economy in the world. It has launched public goods that are conducive to economic cooperation and development of developing countries and it has been supported, as well as recognized, by a majority of developing countries. Therefore, from the perspective of economic and trade cooperation, establishing diplomatic relations with China can bring more development opportunities to Honduras and help Honduras develop its economy and improve people’s livelihood. Honduras’ diplomatic shift is likely to have a model effect on other countries that do not have diplomatic relations with China, driving more countries to respect and abide by the one-China principle. Fewer countries are now willing to maintain so-called official relations with Taiwan while ignoring China’s presence. If Honduras chooses to establish diplomatic relations with China, it will have at least three impacts on Taiwan. First, it would be a powerful blow against the forces of ‘Taiwan independence.’ Second, it would make Taiwan’s position in the international community even more isolated. Third, it is a good indication that the ‘dollar diplomacy’ long practiced by the Taiwan authorities is failing.” 

Mitch Hayes, founder of The China Signal publication and a director at Veracity Worldwide: “President Xiomara Castro’s decision is pragmatic, driven by internal pressure to improve the Honduran economy and a longer-term geopolitical hedge as the U.S.-China rivalry intensifies. The move may bring economic benefits, but the diplomatic, political and economic tradeoffs will become more complicated over time. Honduras faces endemic poverty, inequality and a growing debt burden; Beijing’s promises of infrastructure investment, lending and market access are material incentives for Castro’s government to align with China over Taiwan. Geopolitically, deteriorating U.S.-China relations have pushed Castro to bargain with both sides for the best diplomatic deal for Honduras. This is a rational strategy that has proliferated since the pandemic, as Beijing has made economic overtures to weak Latin American economies and the U.S.-China rivalry has intensified. Given current macroeconomic uncertainties, Beijing may have an edge over Washington, as Chinese interests, less constrained by market volatility and short-term profit goals, expand into emerging markets, while the U.S. government and foreign investors take a more cautious approach. However, Castro’s choice could present long-term risks for the Honduran economy and business environment. Companies will have to compete against or partner with Chinese firms, and this will require heightened due diligence and deft management of ESG issues. Corruption scandals, environmental damage, violations of Indigenous people’s rights and supply chain challenges are live issues with Chinese actors in Latin America. Balancing Beijing’s economic promises against these issues are novel to most Latin American governments and companies. Castro’s bargain, therefore, may sacrifice long-term sovereignty for short-term political gain.” 

Alicia García-Herrero, chief economist for Asia Pacific at Natixis: “Honduras’ decision to abandon its diplomatic ties with Taiwan in favor of the People’s Republic of China is important because it continues Taiwan’s diminishing diplomatic relations at a time when reunification is very high on China’s agenda as exemplified by Xi Jinping’s closing speech at the recently finalized Two Sessions. Honduras is surely keen to maximize the benefits to be obtained from such move, but it is also unclear what those benefits might be and how they may affect the population as a whole. One would imagine that the other Central American country that has still kept its diplomatic relations with Taiwan, Guatemala, but also Paraguay, will surely be watching the situation in Honduras after the diplomatic switch, to better assess what it could imply for them. Finally, Honduras’ decision also needs to be put in the context of China’s evolving economic relations with the rest of the world. Since 1918, China’s cross-border investment and lending overseas have clearly stalled while the narrative of new alliances, presented as an alternative to the West, has done nothing but increase during the past couple of years, from the Global Development Initiative to the Global Security Initiative. In other words, Honduras should expect to deal with a much more security-oriented China in its relations with the Global South, including Honduras. Infrastructure and economic ties are much less at the center than before.” 


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