On March 25, 2023, the Foreign Ministry of Honduras announced cutting ties with Taiwan, then announced establishing diplomatic relations with China through a joint communique. Although this switch was the campaign pledge by the newly elect President Xiomara Castro of the Libre party, the business community concerned about relations with the U.S., the largest trading partner, and the Savior Party of Honduras, which cooperated with the Libre party in the election, voiced objections. One reason is the U.S. Southern Command, stationed in the Soto Cano Air Base in Honduras. The Joint Task Force-Bravo, which supports the U.S. Drug Enforcement Administration from this base, is the flagship unit for the crackdown on Latin America’s drug smuggling. Although the situation differs from the Cold War era, China’s expansion and presence in the region could pose a security concern for the U.S. There were speculations that Castro was hinting to break off relations as a tit for tat, since Taiwan refused to grant asylum to a member of the family when her husband, former president Manuel Zelaya, was ousted in a coup d’état in 2009. Some guessed she was just trying to use it as a diplomatic bargaining chip with the U.S. and Taiwan. Yet, the switch became a reality.

One after Another Cuts Diplomatic Ties with Taiwan

Under the Tsai Ing-wen administration (from 2016), Honduras is the ninth country to switch diplomatic relations from Taiwan to China. Most notable were the successive moves by Central American and Caribbean nations, where Taiwan’s friendly nations were clustered. One after another, Panama (June 2017), Dominican Republic (May 2018), El Salvador (June 2018), Nicaragua (December 2021), and Honduras (March 2023) switched sides just like flipped Othello disks. As a result, there are now only 13 countries that recognize Taiwan as a state. Excluding the three countries of Guatemala, Paraguay, and Haiti, they are all small countries with populations of less than 500,000, and there is no denying Taiwan is losing reliable friends.

The Factors Behind Breaking Ties with Taiwan

Would the other countries follow suit in the future? This article aims to present food for thought for this question. On several important factors, such as China’s expanding economic power, and whether the Kuomintang (KMT) or the Democratic Progressive Party (DPP) becomes the ruling party (during the DPP administration with a strong orientation for independence from China, Beijing tries to break off countries that have relations with Taiwan and pull them into their own camp), existing studies have made appropriate analysis. Therefore, this article will shed light on the two perspectives of (1) declining regionalism and (2) retreat from democracy in Central America.

During the 17 years since Nicaragua regained ties in 1990 and Costa Rica cut ties with Taiwan in 2007, the six Central American countries (Guatemala, El Salvador, Honduras, Nicaragua, Costa Rica, and Panama) and the Dominican Republic, which shares a common history, recognized Taiwan in solidarity. This was when democracy in politics and neoliberalism in the economy spread in the region, as Central American countries aimed to adapt to global competition while boosting competitiveness as a region through transnational infrastructure projects and socioeconomic development. As their supporter, Taiwan provided technical assistance, scholarships, and educational cooperation with the Central American Integration System (SICA) as the counterpart, and conducted joint development projects with international organizations such as the Inter-American Development Bank (IDB), as the main donor to the Secretariat for Economic Integration of Central America (SIECA), SICA’s subordinate organization, and as an external member of the Central American Bank for Economic Integration (CABEI). One achievement of these efforts was the bilateral Free Trade Agreements (FTAs) Taiwan signed with five Central American countries, excluding Costa Rica, from 2004 to 2008.

But, with the subsequent decline in regionalism and regional integration initiatives in Central America, Taiwan lost the ground for drawing leverage effects with low resources. Yet, it is the same for China, and situations such as the neighboring countries persuading Guatemala to realize a regional-level FTA with China is unlikely. Meanwhile, China could easily lure the countries, one at a time, by using massive economic aid and promising export market as bait.

By the way, while breaking off diplomatic ties means the end of bilateral aid and financial support, the FTAs with Taiwan are not based on diplomatic relations. Therefore, unless there is a change in the situation of Taiwan’s WTO membership or tariff autonomy, or an official termination notice is made by political decision, the FTA could be deemed valid. El Salvador, which has the least trade with Taiwan among the five countries, posted a communique on the website of the economic ministry in November 2022 to end favorable tariffs on Taiwanese goods. In contrast, Honduras, with steadily growing exports to Taiwan, has shown an intent to continue trades with Taiwan while having diplomatic relations with China.

The Pitfalls of Policy Focusing on Continued Diplomatic Relations

Meanwhile, there are talks that Honduras dropped Taiwan because when it asked for increased aid in return for keeping diplomatic ties, to make up for the economic gains it would have earned if it chose China, Taiwan declined.

On this point, we could say that, besides the amount of money, recent signs of democratic retreat among Central American nations made it difficult for Taiwan to meet such demands. This is because with fewer allies, Taiwan was forced more than ever to place emphasis on substantial relations with like-minded-countries such as the U.S. and Japan. In other words, by sharing values such as human rights and democracy, Taiwan needs to further differentiate its diplomacy from that of China. If Taiwan turns a blind eye to the decline in the “rule of law” by government intervention in judiciary, and the related issues of corruption and impunity or disrespect for human rights, and provides economic aid merely to keep diplomatic ties, it may end up destabilizing its standing in the international community.

In fact, Taiwan has a bitter experience with Nicaragua. After losing in three presidential elections from 1990, the leftist candidate Daniel Ortega narrowly won the 2006 election by joining hands with a corrupt right-wing heavyweight politician. Since then, he continued to be reelected in dubious victories, through fraudulent elections, crackdown on opponents, and tighter control of anti-government speech and media. Then, when a mass anti-government protest broke out in April 2018, the police and militia forces fired on civilians, imprisoned and tortured them, resulting in 325 deaths and over 2,000 injured.

However, ignoring this grave incident, the Taiwan government provided $3 million in aid to the Nicaraguan police, which was being accused of human rights violations, while the police chief was sanctioned by the Magnitsky Act (U.S. human rights sanction act). The following year, in 2019, it was revealed the Taiwanese government had promised a loan of allegedly $100 million or even $280 million to the Nicaraguan dictatorship, causing criticism from the media and experts at home and abroad. Yet, the loan in question remained unfulfilled even in early 2020, leading some to believe there was pressure from Washington. In the end, Nicaragua cut ties with Taiwan in 2021, and Taiwan lost both international reputation and a friendly country.

How Will Guatemala Respond after Tsai’s Visit?

Going forward, the focus will be on Guatemala, with a general election scheduled on June 25, 2023 (with a runoff on August 20, if required). During a visit to Washington, D.C., in December 2021, shortly after Nicaragua cut diplomatic relations with Taiwan, incumbent Guatemala President Alejandro Giammattei commented in an interview with the foreign media that Taiwan is Guatemala’s only true ally, despite the pressure from China. When Tsai visited Guatemala (and Belize) in April 2023, he also emphasized the continuation of “solidarity with friendly countries” rather than economic benefits, saying that Guatemala established diplomatic relations with Taiwan in 1933, the earliest among Central American countries, and Taiwan was the first to deliver protective gear and ventilators during the COVID pandemic. However, Giammattei will not be running for the next presidential election and he will probably leave office without having to commit to his words. Diplomatic relations with Taiwan have not emerged as a big election issue, but since Guatemala’s change of government is roughly around the same time as Taiwan’s presidential election on January 13, 2024 , we need to keep an eye on how the combination of the election outcomes will affect the course of diplomatic relations.

This is a translation of the Japanese article published in vol. 79 (May/Jun. 2023) of the Gaiko (Diplomacy) magazine.

Chihiro Fueta is a lecturer at Komazawa University. She has earned a Ph.D. in area studies from the University of Tokyo. Her previous careers include an expert researcher at the Embassy of Japan in El Salvador, a K. Matsushita International Scholarship student in Guatemala, and an assistant researcher at the National Graduate Institute for Policy Studies (GRIPS).