The China Signal - March 29
Honduras breaks with Taiwan for China, The China Signal featured in NYT
G’day, and welcome to The China Signal. This week, Honduras breaks ties with Taiwan for China, Uruguay tries to back out of a naval ship contract with state owned CSTC, Argentina’s ambassador to China tries to revive a possible fighter jet deal, Sinochem’s Colombia subsidiary Emerald Energy contends with disruptions and violence from local activists, plus more.
It was a pleasure to have The China Signal’s analysis on Honduras and Taiwan featured in The New York Times and the Latin America Advisor this week. You can read the analysis below. These quotes may have my name on them, but they’re backed by the great work of The China Signal’s researchers Richard Puppin (RP), Nohelia Rivera Matias (NRM), and Victoria Vogrincic (VV).
Taiwan Diplomacy 🇹🇼🕊️
Honduras 🇭🇳
China opens ties with Honduras, Taiwan decries monetary demands | Reuters - March 26, 2023
China established diplomatic ties with Honduras on Sunday after the Central American country ended its decades-long relationship with Taiwan, while Taiwan's foreign minister accused Honduras of demanding exorbitant sums before being lured away by Beijing.
The ending of ties with Taiwan had been expected after the Honduran foreign minister travelled to China last week to open relations and President Xiomara Castro said her government would start ties with Beijing.
"The foreign ministry and embassy grasped the relevant information and handled it carefully. However, the Castro government also asked us for billions of dollars in huge economic assistance and compared prices for assistance programmes provided by Taiwan and China," Wu said.
Taiwan President Tsai Ing-wen said in a video statement that Taiwan will not compete with China in "meaningless" dollar diplomacy.
Qin told Reina Honduran companies were invited to come to China to discuss trade and investment, while Reina said Honduras was willing to strengthen cooperation with China in finance, trade and infrastructure, China's Foreign Ministry said in a statement.
Reina wrote to Taiwan this month asking for almost $2.5 billion in aid, including a loan of $2 billion to help write off debt as well as funds for the construction of a hospital and a dam, according to copy of the letter seen by Reuters. The letter addressed Wu as "a friend".
"It felt like what they wanted was money, not a hospital," Wu told reporters.
The China Signal’s analysis was featured in The New York Times and the Latin America Advisor:
Honduras Switches Relations to China, a Blow to Taiwan - The New York Times - March 25, 2023
“It’s easy for Washington to become upset when countries like Honduras switch their alliance from Taiwan to Beijing,” said Mitch Hayes, an expert on China’s relations with Latin America and director of Veracity Worldwide, a political risk consulting firm in New York. “But they really need to understand that it is quite a rational strategy for a small country and emergent economies to engage with. We can expect to see more of this in the coming years.”
What Will Honduras Gain By Establishing Ties With China? - The Dialogue - March 24, 2023
Mitch Hayes, founder of The China Signal publication and a director at Veracity Worldwide:
“President Xiomara Castro’s decision is pragmatic, driven by internal pressure to improve the Honduran economy and a longer-term geopolitical hedge as the U.S.-China rivalry intensifies. The move may bring economic benefits, but the diplomatic, political and economic trade offs will become more complicated over time.
Honduras faces endemic poverty, inequality and a growing debt burden; Beijing’s promises of infrastructure investment, lending and market access are material incentives for Castro’s government to align with China over Taiwan.
Geopolitically, deteriorating U.S.-China relations have pushed Castro to bargain with both sides for the best diplomatic deal for Honduras. This is a rational strategy that has proliferated since the pandemic, as Beijing has made economic overtures to weak Latin American economies and the U.S.-China rivalry has intensified. Given current macroeconomic uncertainties, Beijing may have an edge over Washington, as Chinese interests, less constrained by market volatility and short-term profit goals, expand into emerging markets, while the U.S. government and foreign investors take a more cautious approach.
However, Castro’s choice could present long-term risks for the Honduran economy and business environment. Companies will have to compete against or partner with Chinese firms, and this will require heightened due diligence and deft management of ESG issues. Corruption scandals, environmental damage, violations of Indigenous people’s rights and supply chain challenges are live issues with Chinese actors in Latin America. Balancing Beijing’s economic promises against these issues are novel to most Latin American governments and companies. Castro’s bargain, therefore, may sacrifice long-term sovereignty for short-term political gain.”
Taiwan’s president Tsai Ing-wen's is visiting Guatemala, Belize, and the United States this week. According to Taiwan Vice Foreign Minister Alexander Yui the trip’s goal is to "enhance the friendship between Guatemala and Belize, showcase bilateral cooperation's achievements, and explore the mutual benefits and common prosperity that have developed between the two countries." President Tsai is also expected to hold a meeting with current House Speaker Kevin McCarthy in California. China's foreign minister condemned President Tsai's planned trip. (NRM).
Defense ⛴️🛩️
Uruguay 🇺🇾
~ Article above is paraphrased from Spanish ~
On Tuesday March 7th, Wang Gang, Ambassador to Uruguay, expressed his "surprise" and “dissatisfaction” to Javier Garcia, Uruguay’s Minister of Defense, at the Uruguayan government's refusal to negotiate a cheaper offer proposed by state owned company China Shipbuilding Trading Co. (CSTC) to help develop the country’s navy.
Garcia announced in January the tender would be voided because the bids received by CSTC, French ship builder Kershep and Dutch maker Damen “significantly” exceeded the expected price. Instead, the minister signaled the government would consider purchasing used Norwegian ships.
CSTC argues that they have not been officially notified about the end of the tender, and has sought to activate a clause that lets it submit a lower bid. The company subsequently circulated a US$ 132 million bid, US$20 million lower than their original price.
Sources told El Observador that China’s ambassador plans to meet with Uruguayan Foreign Minister Francisco Bustillo and President Luis Lacalle Pou to discuss the deal’s future.
***
The China Signal reported Uruguay’s initial decision to award CSTC with the contract in May 2022. The US government criticised the decision at the time. (See TCS May 13, 2022.)
This news comes amidst bilateral FTA negotiations, where progress appears to have slowed. (VV)
Argentina 🇦🇷
Argentina is considering buying Chinese JF-17 fighters after a similar deal was halted last year… Sabino Vaca Narvaja, Argentina's ambassador to China, held a meeting with Argentine Defence Minister Jorge Taiana in Buenos Aires to discuss plans to cooperate with Beijing on defense… the plan could see Argentina procure JF-17 aircraft along with 8x8 armored vehicles made by China North Industries Corporation.
The announcement came months after Argentine President Alberto Fernandez said his country would not make any immediate military aircraft purchases..
Argentina has been looking to modernize its defenses for some time, but has been greatly limited by the UK’s ability to lobby Western countries against selling weapons to Argentina. The UK’s opposition stems from the Falklands/Malvinas Islands dispute. China has consistently supported Argentina’s claims of sovereignty over the islands. (For further background, see TCS December 17, 2022, TCS May 7, 2021, and TCS May 13, 2022 ). (VV).
Diplomacy 🕊️
Brazil 🇧🇷
President Lula’s much anticipated trip to China from March 27 to 31 has been postponed, after he fell ill.
China to decide new date for Brazil's Lula visit, agreements postponed | Reuters - March 26, 2023
Brazil's Agriculture Minister Carlos Favaro said on Sunday that the Chinese government would decide on a new date for Brazilian President Luiz Inacio Lula da Silva's visit to the country, adding that the signing of agreements between Beijing and Brasilia has been postponed.
"All government actions are postponed, including those of the Agriculture Ministry," Favaro, who arrived in China last week, said during a news conference in Beijing.
[Favaro] also emphasized that his trip to China had already secured an important gain, with Beijing approving the resumption of imports of Brazilian beef and authorizing new plants. Sales to China were voluntarily halted by Brazilian authorities on Feb. 23, following the discovery of an atypical case of mad cow disease.
Lula was expected to sign a series of agreements in the commercial, technology, and plant sectors within the framework of Brazil and China’s strategic cooperation alliance. Lula also affirmed that former Brazilian president Dilma Rousseff will be proposed as chair of the New Development Bank, formerly known as the BRICS Development Bank. (NRM).
Oil 🛢️
Colombia 🇨🇴
Emerald seeks suspension of Colombian E&P contract amid violence | BNAmericas | March 8, 2023
Emerald Energy has requested the suspension of its Ombú exploration and production contract in southern Colombia (Meta province) amid a wave of violence that has brought operations to a standstill.
Energy minister Irene Vélez said the subsidiary of China's Sinochem had asked Colombian hydrocarbons agency ANH to be freed of its contractual obligations due to force majeure.
…The request follows weeks of violent protests in Los Pozos, a remote community in the Amazonian department of Caquetá. and neighboring town of San Vicente del Caguán.
Indigenous groups and farmers are demanding greater investments in local infrastructure and compensation for environmental damage (see TCS March 8 for further background, including our backgrounder on Sinochem). (RP)