Debts and investment spur Honduran change of allegiance to China

By Isabel Woodford, Gustavo Palencia and Sarah Kinosian

TEGUCIGALPA (Reuters) – Desire for new investment and less debt helped drive Honduras’ decision to establish formal ties with Beijing at Taiwan’s expense, the government said on Wednesday, potentially opening the door to more spending on flagship infrastructure projects.

Foreign Minister Eduardo Enrique Reina said the decision by Honduras to switch allegiance was partly because the Central American country was “up to its neck” in financial challenges and debt – including $600 million it owes Taiwan.

“We need investment, we need cooperation,” he told local television, insisting it was about “pragmatism, not ideology.”

“Honduras’ needs are enormous, and we haven’t seen that answer from Taiwan,” Reina said.

Reina said Honduras had asked Taiwan to double its annual aid to $100 million but never received an answer. Honduras also tried to renegotiate the debt, but it came to nothing, he said.

Taiwan’s Foreign Ministry said in a statement that since Honduran President Xiomara Castro took office last year Taiwan had “actively and continuously” negotiated bilateral cooperation plans with Honduras in accordance with its priorities.

Taiwan “expressed to Honduras many times that our country is willing, within its capabilities, to assist Honduras to promote construction and development, and at the same time, we repeatedly reminded Honduras to pay attention to China’s false promises,” it said, without mentioning the debt issue.

Taiwan is “trying its best to maintain the friendship” with Honduras, the ministry added.

The news puts pressure on Taiwan President Tsai Ing-wen ahead of an April visit to the U.S. and Central America, and comes after Honduras said it was negotiating with China to build a hydroelectric dam, Patuca II – part of a plan for three dams.

China had already invested $298 million in a first dam in eastern Honduras inaugurated in January 2021.

Since 2016, when Tsai took power, China has made notable investments in Latin American countries that in the ensuing years would desert Taiwan for Beijing, including the Dominican Republic, El Salvador, and Nicaragua.

China does not allow countries to hold diplomatic ties with both itself and Taiwan, regarding the island as its territory. Beijing regards Tsai as a separatist. She says Taiwan’s people must determine their own future.

The sums China has spent in the region are not necessarily beyond the reach of Taiwan, but tend to prioritize more eye-catching projects, analysts say.

“The amounts are not substantially more than what Taiwan could have offered, but the projects are different than what Taiwan usually offers,” said Margaret Myers, director of the Asia and Latin America Program at the Inter-American Dialogue, a U.S.-based think tank.

Taiwan’s foreign development money often ends up in areas like technology and education, while China is more willing to support infrastructure projects, said Meyers, observing: “If you want a project with your name on it, you go to China.”

The government of Honduras, which had external debts of some $8 billion in the third quarter of 2022, was likely to formalize its Beijing ties in the coming days, and had already contacted the Chinese ambassador in Costa Rica to begin talks, Reina said.

Although Reina said the China move came after conversations with the U.S. and Asian allies, it risks harming relations with the U.S., Honduras’ top trade partner, Honduran opposition lawmaker Tomas Zambrano told local television.

Neither the U.S. Senate or House Foreign Relations Committees knew the change was coming, but it was not surprising, according to two Republican congressional aides, who spoke to Reuters on condition of anonymity.

“The U.S. hasn’t had a positive offer on the table to actually help these countries,” said the Senate GOP aide.

Honduran President Castro had floated switching allegiance to China during her presidential campaign, but said last year she hoped to maintain ties with Taiwan.

The U.S. State Department said the Honduran government should be aware that China makes many promises that are unfulfilled, and that it would monitor the situation closely.

“We encourage all countries to expand engagement with Taiwan and continue to stand on the side of good governance, transparency, and the rule of law,” a spokesperson said.

Washington only has formal ties with China, but it is Taiwan’s most important international backer and arms supplier.

In a separate radio interview, Reina said that Honduras aims to have a “top-level” relationship with China.

His country’s move will leave Taiwan with just 13 diplomatic allies, including Belize and Guatemala.

Guatemala’s embassy in Washington told Reuters on Wednesday it was working with Taiwan to protect Taipei’s assets and diplomats in Honduras.

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