Honduran President Xiomara Castro wrote on Twitter on Tuesday that she had instructed her foreign ministry to establish relations with Beijing, which would require severing ties with Taipei. Honduran Minister of Foreign Affairs Eduardo Enrique Reina said the decision was “pragmatic,” telling the Guardian it was driven by the country’s US$20 billion in external and internal debt. The newspaper said the announcement came shortly after Honduras said it was negotiating with Beijing over construction of a new dam.
Castro’s decision was criticized in Taiwan and Honduras, with Minister of Foreign Affairs Joseph Wu (吳釗燮) saying the move would harm a decades-long friendship, and urging Castro not to let Honduras fall into China’s debt trap.
Wu’s warning is not without merit. The Radio Free Europe/Radio Liberty news service in August last year said that China’s Belt and Road Initiative (BRI) “has left it with a list of risky debtors around the world including Argentina, Pakistan, Russia, Tajikistan, Venezuela, Zambia and Iran.” Pakistan now owes China US$77.3 billion in debt, it said.
When countries default on their BRI loans, China can take over ports, mines and infrastructure, which it has done on many occasions in other places. However, with so many non-performing loans piling up, China is facing a major debt crisis. It is facing a crucial inflection point after nearly 10 years of runaway lending under the guise of the BRI that has been exacerbated by rising inflation and other factors, and “Beijing could be looking to streamline and scale back its hallmark initiative,” the news service said.
On Jan. 16, a Forbes report said that China is facing its highest level of debt in the 27 years since Beijing first began to track such statistics. “China’s debt overhang far exceeds the burdens facing the United States. As of the middle of last year, China’s relative debt burden stood 40 percent higher than America’s,” it said.
It is understandable that Honduras — which the CIA World Factbook describes as the second-poorest country in Central America — would turn to China out of desperation. However, given China’s debt burden, it is unclear how much Beijing would be willing to lend Honduras in the long term. Even if Honduras secures more loans, it would likely be unable to repay them, which would threaten its sovereignty and put even more burden on its people.
Former Honduran ambassador to Taiwan Rafael Sierra on Tuesday wrote on Twitter that trade with Taiwan has been favorable to his country because of Taiwanese demand for melons, shrimp, coffee and other Honduran products. He also cited Costa Rica’s experience after it switched ties to Beijing, saying that China’s larger market does not necessarily result in more demand for Central American products.
Meanwhile, Honduran farmers who receive technical assistance with agriculture and aquaculture would face an uncertain future if the Taipei-run International Cooperation and Development Fund were to withdraw from the country, he said.
The loss of ties with Honduras could harm the Central American country more than Taiwan, and the heaviest impact would be felt by the common Honduran. This is one reason Taiwan should strive to salvage the diplomatic relationship, which Wu said it is committed to doing.
However, Taiwan must be cautious about throwing money at an economically struggling country in a bid to retain ties. It would be foolhardy to engage China in a bidding war over an ally. Such a hollow relationship would be of no benefit to anyone.
Even if Taiwan were not recognized by any country, it would continue to be self-governing. Its diplomatic relationships must be based on mutual respect and shared values. Taiwan’s focus should be on strengthening economic, military, educational and cultural exchanges with like-minded countries, whether they are allies or not.
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