Honduras is seriously considering breaking off relations with Taiwan and taking financial aid from China due to increasingly unbearable debt. A lot of this debt is owed to Taiwan ($600 million). The Taiwan ministry strongly advises that Honduras do not take any deals with China, and produced this sufficiently summarizing quote, “We remind the Honduran government that it should not quench its thirst with poison, even if fully parched by debt obligations.” There have been some discrepancies between the two in the reports of communications regarding the financial situations. According to Honduras, they had asked Taiwan to increase aid by $100 million but never received a response, and debt renegotiations have also been proven fruitless. Taiwan denies these claims and reports that all requests and communications from Honduras have been met with positive reinforcement. If Honduras does decide to take money from China, Taiwan will see this as competition and subsequently terminate diplomatic relations with Honduras. Naturally, Chinese financial agents have been emphasizing the economic growth of former Taiwan allies that are now fiscally indebted to China. The reason for potential tension upon Honduras taking aid from China stems from the “One China” concept alongside aid competition. Taiwan will not have diplomatic ties with a country who is being bribed to consider Taiwan a part of China. US officials also weighed in, concerned with China’s expansion into Latin America as well as its history of not following through on fiscal promises.
I think it’s important to consider the economic disparity of Honduras at the moment. Over half of the population lives in extreme poverty, 2.2 million cases of food insecurity, and a mistrust in state institutions that results in budget crises across the country. I think it is extremely likely that Honduras will switch alliances to China, even if out of desperation rather than moral alignment. If negotiations between Honduras and Taiwan have really seen no progress, I think it is reasonable for Honduras to bark up another tree. They don’t really have much time or motivation to sit around and wait for Taiwan to maybe give them more money. China made them a deal they can’t refuse… looks familiar.
With that being said, it’s also important to recognize the current situation of other countries who have taken similar deals with China. We talked about China’s debt diplomacy in class (and I’ve relied on it in past reports). China is one of the world’s largest single creditor nations, with loans to lower income countries increasing threefold in just the past decade. For example, Sri Lanka accepted financial aid from China in order to build infrastructure and improve their economy, but this resulted in increased debt. China was able to negotiate control of Sri Lanka’s main port because of this. Honduras could fall into a similar situation, or “trap” if you will.