Honduras’ diplomatic switch from Taiwan to China reflects many Latin American countries’ pressing economic need for trade and infrastructure.
While Honduras was not a top priority for Taiwan, Taipei’s loss of Latin American countries signifies further diplomatic isolation.
In March 2023, China signed a joint communique with the Honduran Foreign Ministry declaring that “Taiwan is an inalienable part of Chinese territory,” breaking relations with Taiwan after over eighty years of Honduran-Taiwanese relations. A few months later, in June 2023, Honduras became the newest Latin American-Caribbean country to join Beijing’s Belt and Road Initiative. In August 2023, Honduras, as part of the Central American Parliament (Parlacen), formally voted to oust Taiwan as a permanent observer and replaced it with China, deeming Taiwan a “province of mainland China, which disqualifies it from participating as an independent country.” President Tsai Ing-wen described the turnover as China’s “meaningless contest of dollar diplomacy.”
Honduras’ decision to cut ties with Taiwan is not unique given the precedent set by other Latin American nations, but it is the latest example of a trend of more countries absconding from Taiwan relations in favor of China. In 2007, Costa Rica was the early bird in Latin America to switch relations to China, with President Oscar Arias citing the decision as “an act of elemental realism” due to China’s growing economic power. Panama in 2017, the Dominican Republic and El Salvador in 2018, and Nicaragua in 2021 all followed suit, citing economic and industrial opportunities as their primary motivation. The new Sino-Honduran relationship signifies Latin America’s economic orientation turning away from the United States towards China, China’s tactics to isolate Taiwan, and the growth of China’s diplomatic grand strategy.
China and Taiwan have historically fought over diplomatic allies since the 1950s. The “Chinese-Taiwanese split” can be traced back to the Chinese Civil War, in which the Chinese Communist Party gained control of mainland China while the Kuomintang retreated to the island of Taiwan. From 1949 onward, both countries have claimed to be the one, true China, using diplomacy to compete for global legitimacy. Over the course of the late 20th and early 21st centuries, however, China’s rapid rise has led to most countries and organizations officially recognizing Beijing as the legitimate “China”, thereby jeopardizing Taiwan’s sovereignty. For the Chinese Communist Party, “reunifying” with Taiwan is a top priority.
Honduras’ Search for Capital
Honduras, a country with some of the highest rates of economic disparity in Latin America, is rich in natural resources but struggles with poverty, systemic corruption, and high crime rates. The country was deeply affected by the COVID-19 crisis and Hurricanes Eta and Iota in 2020. As such, the Honduran government is keen on improving the country’s financial situation and standard of living, particularly through infrastructure. By the end of 2022, Taiwan’s International Cooperation and Development Fund loaned approximately $2.6 million to Honduras for infrastructure, paling in comparison to the $200.1 million provided by the United States in 2022. On the other hand, El Salvador, Honduras’ neighbor with similar demographics and GDP, is promised up to $500 million from Beijing for development projects—a possibility too tempting for Honduras to pass up.
According to Honduran Foreign Minister Eduardo Enrique Reina, Honduras asked Taipei to increase its yearly aid to $100 million dollars and renegotiate its $600 million debt, but claims their plea went unanswered. “We need investment…it’s about pragmatism, not ideology,” Reina emphasized. Taiwanese Foreign Minister Joseph Wu contradicted the claim, stating Taiwan had dismissed Honduras’ request for $2.45 billion in aid for infrastructure projects and to eliminate its debts. Regardless of the exact number, Honduran officials likely made a request, knowing Taipei would refuse, as a strategic pretext to ally with China.
Honduras has much to gain from China economically, namely infrastructure funding and smoother international trade. According to Honduran Minister of Economic Development Fredis Cerrato, prior to diplomacy with Beijing, Taiwan was an unavoidable transit point for exports to the Chinese mainland. Honduran exports mainly consist of coffee, shrimp, melons, and metals, with approximately $1.62 billion in trade by the end of 2021. Chinese state-owned subsidiary Sinohydro finished construction of the 104MW Patuca III dam in eastern Honduras in December 2020 with $298 million in Chinese government funding. Sinohydro also completed the 60MW El Arenal dam in northern Honduras in April 2022. A prominent factor motivating the Honduran government’s allegiance to China is its hopes for additional infrastructure projects such as the Patuca II dam and a proposal for a $20 billion rail line.
China in Latin America
Honduras is a prime example of Beijing’s economic strategy to appeal to the Global South and extract Latin America’s surplus of raw materials. In the past two decades, Chinese companies have invested over $160 billion in the region, replacing the U.S. as many Latin American countries’ top trading partners. Unlike the United States, China’s diplomatic engagement with Latin America does not discriminate among various political stances of countries across the region. Beijing has freely engaged with both democratic presidencies and authoritarian human rights offenders. Latin America’s decent levels of institutionality, abundant raw materials, and large middle-class consumer base make it a viable partner for Chinese investment.
China engages with the organization the Community of Latin America and Caribbean States (CELAC), which includes thirty-three member states. The China-CELAC Forum, founded in 2015, holds meetings every three years to discuss cooperation opportunities, infrastructure loans, and co-financing funds. Notably, the China-CELAC excludes the United States and Canada.
Although China has frequently used its large market access and economic ties for diplomacy, its recent emphasis on the One China Policy has grown since the 2016 election of the pro-independence Democratic Progressive Party in Taiwan. In response, the Chinese Communist Party’s United Front deliberately targeted Taiwanese-allied countries with financial incentives to switch their recognition. Honduras, upon its establishment of ties, declared that Beijing “is the only legitimate government that represents all of China.” In a symbolic move, Beijing also had all Honduran students studying abroad in Taiwan transferred to the Chinese mainland.
Taiwan in Latin America
Taipei’s main engine of international diplomacy is foreign aid to impoverished governments. In the 1950s and 60s, the majority of Latin America and Caribbean countries—fairly anti-communist at the time—recognized Taiwan, with the exception of Cuba. Taiwan engaged in small-scale subsistence-based aid during the 1960s, mostly through surplus American products. However, after the Chinese United Nations seat was changed from Taipei to Beijing in 1971, many of the larger Latin America and Caribbean countries, such as Chile and Brazil, also switched their recognition. After its economic boom in the 1980s, Taiwan engaged in larger-scale financial aid, such as depositing $150 million into the Central American Bank for Economic Integration in 1993. Smaller, more impoverished states such as Honduras remained with Taipei until recently.
Economically, Honduras’ departure will have little effect on the Taiwanese economy. In 2007, Taiwan signed a trilateral Free Trade Agreement with Honduras and El Salvador; although El Salvador has since suspended its agreement and Honduras’ participation is set to expire by the end of 2023. In 2022, Honduras’ exports to Taiwan amounted to $128.85 million, around 0.03 percent of Taiwan’s international imports, while Taiwanese exports to Honduras were $63.16 million, only amounting to 0.01 percent of Taiwan’s total global exports. In comparison, China and Hong Kong comprised 20 percent of Taiwanese imports, while the United States was 10.7 percent.
The significance of Honduras to Taiwan does not lie in its bilateral relationship but in Honduras’ presence in a dwindling coalition of allies. Honduras was part of the Central American bloc that held official diplomatic relations with Taiwan, including Guatemala, Belize, Nicaragua, El Salvador, Costa Rica, and Panama. The current thirteen official Taiwanese allies are lacking in global influence. Countries such as Belize and Guatemala have reaffirmed their “unchangeable” relationship with Taiwan diplomats. Unfortunately for Taipei, China is winning the diplomatic battle based on economic resources.
Implications for US Foreign Policy
The Biden administration’s concerns regarding China’s involvement in Latin America have been primarily security-based due to the region’s proximity to the United States. In May 2023, Sen. Marco Rubio re-introduced a bipartisan bill titled the “Western Hemisphere Security Strategy Act of 2023”, calling for expanded engagement in Latin America and Caribbean countries against “the harmful and malign influence” from China and Russia. For example, China sells surveillance systems to Latin American countries that may lead to greater political and human rights repression, thus exacerbating the migration crisis at America’s southern border. Moreover, China could surveil the United States via Latin America, such as its intelligence-gathering base in Cuba, built in 2019. Additionally, Latin America possesses large quantities of the world’s critical minerals—up to 40 percent of the world’s share of both copper and lithium—that are crucial to renewable energy supply chains.
Honduras, an economically weaker country, is not a priority in US foreign policy. Nonetheless, the recent severance of Honduras-Taiwan ties should raise alarms in Washington as a sign of China’s stronger foothold in the Western Hemisphere, an area traditionally aligned with the United States. Former Taiwan allies like Honduras have been strongly US-aligned since they are mostly agrarian and dependent on American trade. After Panama, El Salvador, and the Dominican Republic switched to China, the Trump administration expressed its displeasure by pulling its top diplomats in 2018. This disregard of the United States and Taiwan in favor of Beijing is a sign of shifting power in the region.
Honduras’ switch to China is an ongoing trend that reflects the growth of Beijing’s diplomacy and the financial needs of Latin America. China’s ongoing mission to become a leading force of the Global South manifests in its finance-based diplomacy, particularly through the Belt and Road Initiative. Countries such as Honduras, seeking to address infrastructural needs and losses from COVID-19, are enthusiastic for deeper engagement with Beijing. Despite Taipei’s efforts to deploy investment and aid for diplomacy, it cannot measure up to China’s economic behemoth. Thus, China’s economic domination directly led to Taiwan’s diplomatic isolation. The United States should be aware of China’s growing economic influence south of its border and its slipping political foothold in the region.
The views expressed in this article are those of the author alone and do not necessarily reflect the position of the Foreign Policy Research Institute, a non-partisan organization that seeks to publish well-argued, policy-oriented articles on American foreign policy and national security priorities.