Our weekly explainer series, China Ties, looks at China’s relationship with different countries of the world.
In March, Honduran President Xiomara Castro announced the fulfillment of one of her 2021 election campaign promises: to sever diplomatic ties with Taiwan. Castro has since visited Beijing, from June 9 to 14, meeting all the biggest cheeses, and signing Honduras up for the Belt and Road Initiative.
It’s another score for P.R.C. diplomacy; Taiwan’s number of official allies is now down to 13. “With this new arrangement, the P.R.C. further erodes Taiwan’s political ties to the Latin American and Caribbean region, which is still a relative diplomatic stronghold for Taipei,” says Margaret Myers, the director of the Asia and Latin America Program at the Inter-American Dialogue. Perhaps to save face, the Taiwanese government broke off relations themselves, with the Taiwanese foreign minister claiming the new Castro government had asked for over $2 billion in aid.
Thus ended a diplomatic relationship that stretched back to 1941, the Taiwanese having frequently led projects in Honduras as part of its foreign aid program. A little awkwardly, Honduras is still spending non-refundable aid sent by Taiwan despite nixing relations — like this $8 million rural electrification program.
Republic of Honduras
Founded: September 15, 1821
Population: 10.6 million
Government: Constitutional Democracy
Capital: Tegucigalpa
Largest City: Tegucigalpa
Established relations with the P.R.C.: March 26, 2023
The P.R.C. had slowly been making inroads into Honduras over the past decade — some were goodwill projects, like a joint excavation program of Honduras’s Mayan ruins, or a vaccine drive during the pandemic. Others were more hard-hitting. In 2013, ICBC provided a $297 million loan for the Patuca III hydroelectric dam, finally completed in 2021 and providing power to 1 million people.
Meanwhile, Chinese social media points to the benefits Honduran businesses can now reap by accessing the P.R.C.’s gargantuan market — indeed, imports to China increased 229% year-on-year in the past four months alone, and will likely skyrocket in the future. “Even a small boost in trade with China could mean big things for Honduran agriculture,” notes Myers.
But the P.R.C. didn’t seek out diplomatic ties just for access to Honduran coffee, bananas, and seafood. “China already imports these same goods from wide-ranging other countries,” says Myers. Current trade between the two, although set to increase rapidly, is still only 3.9 billion yuan ($544 million), small fry on the P.R.C. trading-partner league tables.
The new alliance was only ever “about reducing the number of diplomatic relations for Taiwan,” says Alicia Garcia-Herrero, the chief economist for Asia Pacific at Natixis and a senior fellow at Bruegel, believing China now prioritizes alliances for geopolitical gains over business opportunities. It was perhaps notable that the only promise made on either side in the joint communiqué that opened relations was Honduras’s pledge to recognize that “there is only one China in the world.”
For Castro, it’s just business, nothing personal. “I have received a country in ruins, mired in poverty, drug trafficking, and violence,” she bluntly put it in a speech to CELAC delegates in February this year. Castro succeeded an administration that was riddled with corruption, while in April, the Norwegian Refugee Council declared Honduras was facing “war-like levels of violence,” with criminal gangs forcibly displacing thousands across the country.
Castro had declared a national state of emergency in November 2022, limiting some civic freedoms so Honduran police could crack down on cartels. She has declared her administration a “re-foundation” for Honduras, a fresh start for the country (even launching a new national holiday to commemorate the event). New P.R.C. ties fit neatly into this spin — a country starting from scratch needs fresh horizons.
Infrastructure may be a good long-term solution, with Castro’s government aiming to set up enough hydroelectric dams in the country’s mountainous and river-filled landscape to generate 600MW of electricity. Numerous reports indicate Honduras is hoping the P.R.C. will help fund Patuca II, another hydroelectric dam on the Patuca River. Meanwhile, Honduran port company ENP has signed an agreement with China Harbor Engineering Company for $269 million to upgrade the Pacific port of San Lorenzo and its surrounding bridges and roads. ENP’s head claimed the money would come from either zero-interest loans or donations.
It’s hard to say where things will go from here, but Garcia-Herrero is skeptical that many of Honduras’s grand designs will work out. “China is now engaged in a lot of debt restructure” with its BRI partners, so is “now very careful when lending,” she says.
Although Chinese commentators have trumpeted the switch as proof of how successful Chinese BRI schemes have been in Central American countries, Garcia-Herrero notes these same countries are actually becoming more cautious about the projects they pledge with China — on a recent trip to Panama, for example, she found Japanese investment is being brought into a venture to build a fourth bridge across the Panama Canal, originally a solo Chinese venture. Honduras may “think twice” when China only pays out loans in yuan and then brings Chinese companies to build on local land, as Sinohydro did with Patuca III.
Plus, Garcia-Herrero adds, “I doubt Honduras can actually afford all of this.”
