It’s a game of big fish small fish. A smaller impoverished country falls on hard times and seeks bail from a larger friend. As the global division of wealth continues to grow, these instances become more prominent, shifting the global power landscape.
The most recent example is Honduras. The small Central American country has seen a 150 percent increase in public debt and now seeks aid from China. President Porfirio Lobo said that with China’s help, more mining revenues and oil exploration, Honduras can overcome its increasing public debt.
President Lobo became president in the wake of a 2009 coup and managed to boost local debt to 52 billion lempiras, which equates to $2.6 billion and marks a 31 billion increase since he took office. Despite its impressive coffee trade, the country suffered crippling losses after the majority of Latin America cut relations.
“Domestic debt levels are high and growing,” said Lobo during an interview last week at his home near Tegucigalpa. “When we entered the government, the economy had contracted 2.4 percent due to the political and economic crisis. We were completely isolated.”
Honduras is set to sign an accord with the Industrial & Commercial Bank of China for a loan of $295 million to fund the second stage of the Patuca 3 hydroelectric project. To secure ties, Lobo announced in June that his country plans to work with China to build an Atlantic-to-Pacific railroad to boost trade across Central America, which should help sway China into helping their newfound ally.
“Chinese financing is very important for us,” Lobo said. “It is historic for us because we do not have diplomatic relations with China.”
Although there are generous benefits for both parties, Honduras should be wary of asking too much. It’s dangerous to be in anyone’s pocket. No matter the immediate gratification, a cloud is cast on the horizon.