SIM Report: Honduras’ new leftist administration to determine future of ties with Taipei, Beijing

SIM REPORT: LATIN AMERICA AND THE CARIBBEAN, ISSUE 14

In a general election held on 28 November, presidential candidate Xiomara Castro of the leftist LIBRE party secured a convincing victory, garnering over 50 per cent of votes cast in a field of more than a dozen candidates. Castro, who will become Honduras’ first female president upon her inauguration on 27 January 2022, has pledged to address rampant corruption and sign a new debt agreement with the International Monetary Fund (IMF), among other policies. Internationally, however, Castro’s manifesto commitment to establishing diplomatic relations with China and ending Tegucigalpa’s recognition of Taiwan has boosted outside interest in her election.

Since election day, however, Castro’s pledge to recognise Beijing has begun to appear less than solid. In an interview with Reuters, Salvador Nasralla, a former presidential candidate who is one of three incoming vice presidents, denied that Castro’s government would recognise China. Explaining his comments, Nasralla said that the new government does not ‘want to fight’ with the US, which maintains close ties with Taiwan and has an intensifying rivalry with China, as it is Honduras primary commercial partner. An unnamed figure in the incoming government also cited by Reuters said that the ‘conditions’ for establishing relations with China did not exist, while Castro herself took to Twitter to thank Taiwanese President Tsai Ing-wen for congratulating her on the election outcome.

Castro’s incoming administration, therefore, must navigate a complex geopolitical dispute which has important implications for Honduras’s internal affairs. Any move to recognise China, which would align Honduras with the majority of the world’s countries, would likely be driven by major financial incentives from Beijing. In particular, China is likely to pledge significant investment in Honduras’ economy, such as large infrastructure projects and increased commercial flows, in exchange for Tegucigalpa’s diplomatic recognition. For Castro, strengthening Honduras’ economy and reducing its reliance on the export of commodities and apparel would contribute to reducing poverty, one of the major drivers of outward migratory flows. Strengthening relations with China would also partially offset Honduras’ commercial reliance on the US, the destination for around half of all Honduran exports. In ceasing to recognise Taiwan, however, Honduras would lose a close diplomatic ally and a source of trade and investment with whom it shares a free trade pact, alongside El Salvador.

More broadly, the developments in Honduras come amid increasing international recognition of Beijing at Taipei’s expense, driven largely by China’s growing economic clout. On 10 December, for example, Honduras’ neighbour Nicaragua formally ended its diplomatic links with Taiwan and re-established ties with China, amid worsening relations with Western countries following a widely criticised election. Nicaragua’s move followed similar decisions by El Salvador, Panama and the Dominican Republic in the past five years. In total, the number of countries recognising Taiwan has shrunk from 22 to 14 since Tsai took office in 2016, a reflection of Beijing’s growing economic power and incentives for switching recognition. Of the countries which continue to recognise Taiwan, however, more than half are in the Americas. Preventing more of the region’s countries from recognising Beijing is in both Washington and Taipei’s interests, and the US and Taiwan are likely to lobby Castro’s administration hard to maintain its recognition of Taiwan.

Companies operating in Honduras will be affected by the Castro administration’s decision, with any move to recognise China likely fuelling notable investments in Honduras’ economy. If Castro, however, decides to retain Honduras’ recognition of Taiwan, it will also likely secure pledges from Washington and Taipei, potentially including large investments. Organisations operating in Honduras should monitor recognition policy updates and the implications for their interests.

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