Trade agreements with China and their impact on Honduran shrimp

The shrimp sector in Honduras is facing a major challenge after diplomatic ties with Taiwan were severed in March 2023, coupled with unsuccessful trade negotiations with China. The choice made by President Xiomara Castro’s administration to cut relations with Taiwan, a long-standing ally since 1941, has significantly affected the country’s aquaculture industry. This development has resulted in substantial financial losses and the loss of vital shrimp export markets.

Financial and trade repercussions after the separation from Taiwan

The Honduran shrimp sector experienced significant financial setbacks after severing diplomatic ties with Taiwan, which previously served as the primary market for its exports. Prior to this disruption, Taiwan received as much as 80% of shrimp exports from Honduras. The halt in the Free Trade Agreement with Taiwan led to a 20% tariff imposition, adversely impacting the foreign currency earnings of this industry. As reported by the National Association of Aquaculture Producers of Honduras (Andah), in 2024, the industry faced losses nearing $47.7 million, along with a reduction of 6.2 million kilograms in shrimp exports, attributable to the closure of access to the Taiwanese market.

Honduras’ effort to form a trade deal with China hasn’t succeeded in compensating these deficits. Despite the announcement of an initial deal to ship out 250 containers of shrimp, merely two deliveries occurred. Furthermore, the rates proposed by Chinese traders, approximately $4 per kilogram, fall short of covering production expenses, which lie between $6.30 and $6.50 per kilogram. This scenario has resulted in an economic disparity that impacts the industry’s profitability and hampers its recovery potential.

Social consequences and diversification strategies

The collapse in the shrimp sector has severely affected society, resulting in the shutdown of multiple processing facilities and the elimination of numerous positions in areas like Choluteca and Valle. In response, the Honduran administration has initiated measures to broaden export destinations, investigating the potential to reinstate trade connections with Taiwan and launch new pathways to nations like South Korea. Taiwan’s Foreign Minister, Lin Chia-lung, has shown his country’s readiness to renew diplomatic ties with Honduras after the November presidential elections, recognizing the downturn of the shrimp sector after the rupture in 2023.

The current situation reflects the consequences of diplomatic and commercial decisions that have affected the economic stability of the aquaculture sector. Dependence on a single market and the lack of effective agreements with new partners have left the sector vulnerable, highlighting the need for more robust and diversified strategies to ensure its sustainability and contribute to the country’s economic development.