How Taiwan Become a Key Issue in Paraguay’s Presidential Election

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How Taiwan Become a Key Issue in Paraguay’s Presidential Election

With economic pressure building for a change, Paraguay’s presidential race could determine the future of Taiwan’s presence in South America.

How Taiwan Become a Key Issue in Paraguay’s Presidential Election

People hold ROC or Paraguay flags to welcome Taiwan’s President Tsai Ing-wen in Paraguay, Aug. 14, 2018.

Credit: Office of the President, ROC (Taiwan)

With the presidential elections just around the corner, Paraguay’s current president, Mario Abdo Benitez of the Colorado Party, visited Taiwan. It was an act of important support for relations between the two countries at a time when the relationship is in dispute following statements by opposition forces in Asunción.

The candidate for the Concertacion coalition and president of the Partido Liberal Radical Autentico (PLRA), Efrain Alegre, publicly announced his intentions to reconsider relations with Taiwan and analyze the possibilities offered by the People’s Republic of China if elected.

On the contrary, Santiago Pena, presidential candidate for the ruling Colorado Party, advocates standing firm by Taiwan. “I see the geopolitical triangle of Washington, Jerusalem and Taipei as something very important for Paraguay,” said Pena.

Candidate Positions on Taiwan

The April 30, 2023, elections have put Paraguay’s relationship with Taiwan back on the table for discussion. Under Colorado Party governments the debate tended to remain closed and the recognition of Taiwan was not in doubt. However, elections allow the emergence of new candidates who diverge from this logic and show that there are other options on the table.

Increasingly, there are timid hints about the possibility of establishing trade relations with China, although without affecting Paraguay’s recognition of Taiwan, as was proposed at the beginning of Abdo Benitez’s term in office.

The ideal sought by Paraguay would be to promote trade relations with China while maintaining political relations with Taiwan in order to obtain the best of both worlds. On the one hand, Paraguay would not be left out of the profits from the export trade of raw materials so desired by agricultural and livestock producers, which is truncated by the lack of sanitary agreements between the two countries. On the other hand, Paraguay would continue to count on Taiwanese cooperation and the benefits of international status, which differentiates it from a large part of the community of states.

However, this ideal solution to Paraguay’s current conflict is a very difficult scenario to achieve, especially with regard to trade objectives with China. Beijing has no specific need to formalize trade relations with Paraguay, with which it has a positive trade balance and from which it receives a constant influx of products through trade triangulation. For the Chinese government, the urgent desire of Paraguayan productive sectors to enter its market is a card in its favor, which Beijing can use to negotiate a diplomatic switch without great effort. The Chinese gamble of waiting for internal pressures to benefit them may work if the April election scenario turns out to be favorable.

From certain economic sectors, the push to advance ties with China is strong. In November 2022, the head of the Paraguayan Rural Association (ARP), Pedro Galli, stated in an interview with the Paraguayan media ABC Cardinal that China is the largest meat buyer and that the sector was sacrificing a large market at great cost due to the geopolitical dispute. Likewise, the Paraguayan Meat Chamber (CPC) and meat packing plants have maintained a similar position on numerous occasions, requesting the Ministry of Agriculture and Livestock (MAG) the possibility of entering into negotiations with China.

A few months ago, in December 2022, Paraguayan political parties defined the candidates that will represent them in the next elections. The disputed campaigns in those internal elections allowed a first glimpse of a first approach to their positions regarding the relations between Paraguay and Taiwan.

This situation became evident mainly within the Colorado Party, when a primary candidate for the ruling party, Arnoldo Wiens, accused his opponent, Santiago Pena, of showing a weak position regarding the alliance with Taiwan. Pena had first raised the possibility of establishing ties with China in order to obtain commercial benefits, but then retracted his position in favor of maintaining unchanged Paraguay’s historical position with respect to Taiwan. From that moment until now, Pena, who finally won his party’s primary election, has maintained his firm position in favor of prioritizing relations with the island within the framework of his administration’s foreign policy.

On the opposition side, Efrain Alegre, leader of the Partido Liberal Radical Autentico (PLRA) and presidential candidate for the Concertacion, has expressed a critical position, more in line with the agro-exporting sectors, regarding the need to evaluate the commercial possibilities offered by the relationship with China. The opposition candidate has stated that the Taiwanese government is not “doing enough” to justify Paraguay’s support.

Although in his latest statements Alegre has not openly stated his intentions to modify Paraguay’s historical guidelines toward Taiwan, his position is tied to the results of future negotiations between the two countries and the changes that Taiwan may make to improve the benefits Paraguay receives from its relationship.

Background on Paraguay-Taiwan Relations

Paraguay has maintained diplomatic relations with Taiwan continuously since 1957, and is currently the only country in South America that maintains such ties with Taipei. The list of countries that maintain this link is becoming smaller and smaller: today Taiwan has just 14 allied states, eight of which are in Latin America and the Caribbean.

In the beginning, the ideological affinity between the Paraguayan regime led by General Alfredo Stroessner and the Taiwanese leader, General Chiang Kai-shek, favored the signing of the Agreement for the Establishment of Diplomatic Relations, opening new avenues of cooperation between the two states.

With the passing of the different governments, the countries sought to consolidate their relationship through economic cooperation, cultural exchange, and the promotion of science and technology, prioritizing in turn a focus on trade and investment. At the same time, the exchange of diplomatic visits remained constant and Paraguay’s support for Taiwan became visible at the international level through the defense of Taiwan’s accession to the United Nations and its organizations.

At the beginning of the 21st century, the growing presence and influence of China in the Americas was also reflected in increased pressure from Beijing toward Paraguay, both internally, from economic sectors, and externally, from China’s relations with its neighbors. Since 2017, four states in Latin America and the Caribbean have switched recognition from Taiwan to China, placing increasing pressure on Taiwan’s remaining allies in the region.

For Paraguay, the fact that it is the only Mercosur member state that diplomatically recognizes Taiwan and not the People’s Republic of China has been an obstacle when it comes to proposing new forms of trade links between the bloc and China.

Taiwan’s Support in Latin America

The Taiwan issue has been at the center of Beijing’s strategy in Latin America. By dint of investments and promises, China has managed to reduce Taiwan’s support in the region.

In 2007, China had its first victory in Latin America when it managed to close a deal with Costa Rica and turn its foreign policy toward Beijing. At that time, James Huang, Taiwan’s foreign minister, said that “Costa Rica was an isolated case.”

Huang could not have been more wrong, although it took nearly decade to make that clear – thanks mostly to an unofficial “diplomatic truce” that prevailed between China and Taiwan during a period of friendly cross-strait relations from 2008 to 2016. In five just years since then, Taiwan lost four allies in Central America: Panama (2017), El Salvador (2018), the Dominican Republic (2018), and Nicaragua (2021).

In all cases, the severing of relations with Taiwan came hand in hand with major announcements of investments and loans from Chinese banks for these small countries, something Beijing has been able to offer easily, considering the gigantic asymmetries and pressing financial needs in the region.

Of the Central American countries, three still maintain a formal relationship with Taiwan. Honduras is one, although one cannot say for how much longer. It has already flirted with breaking off ties with Taiwan in favor of China. In fact Honduran Minister of Foreign Affairs Eduardo Enrique Reina and Chinese Vice Minister of Foreign Affairs Xie Feng had a meeting in early January, something that angered the Taiwanese.

Guatemala, by contrast, seems determined to remain close to Taipei. This was stated by Foreign Minister Mario Bucaro after his visit to Taiwan in August 2022: “This trip serves as the strongest example of the commitment of the Republic of Guatemala to continue our support to Taiwan despite any challenge or threat.” English-speaking Belize seems similarly content to remain allied with Taiwan.

The other countries in the Americas that recognize Taiwan are Caribbean islands: Haiti, St. Vincent and the Grenadines, St. Kitts and Nevis, and St. Lucia.

The Relationship Between Paraguay and Taiwan Under Abdo Benitez

At the beginning of Abdo Benitez’s term in office in 2018, he had raised the possibility of promoting a policy of greater rapprochement with China in search of a more favorable trade relationship, a greater influx of capital, and more facilities for the movement of people between the two countries. Despite that, relations between Taiwan and Paraguay developed without major changes for much of his administration.

However, in the last year his government showed certain signs of dissatisfaction with the relationship, which forced Taiwan to pay greater attention to its only South American ally. First, the difficulties faced by the Paraguayan livestock sector in dealing with the sanctions imposed by the international community on its second largest meat export market, Russia, forced Taiwan to increase imports of this product in order to mitigate the frustration of Paraguayan stakeholders.

Then, in September 2022, Abdo Benitez hinted in an interview with the British media Financial Times that there was dissatisfaction due to the insufficient direct investments made by Taiwan in Paraguay. Abdo Benitez in particularly called out Taiwan’s preference for other business destinations with which it does not have diplomatic relations. The Paraguayan president called for his country to receive an influx of close to $1 billion in investment, almost 10 times more than what it currently receives, evidencing the dissatisfaction on the economic and commercial front on the part of the Paraguayan government.

The problem of Taiwanese investment in Paraguay has been high on the agenda in recent years. Therefore, it is not surprising to see that Luis Alberto Castiglioni, Paraguay’s minister of industry and trade, has been one of the most active officials in strengthening the relationship.

Castiglioni repeatedly participated in bilateral meetings focused on economic cooperation, which led him to hold meetings in Taipei with Taiwan’s President Tsai Ing-wen, Foreign Minister Joseph Wu, and Minister of Economic Affairs Wang Mei-hua, who praised Paraguay for being “an unwavering ally of Taiwan.”

At the same time, groups of businesspeople, mainly in sectors such as transportation, energy, and telecommunications, exchanged visits as well. In this regard, the formation of the Industry Cooperation Delegation, which brings together representatives of the government of Taiwan and businesspeople, is not insignificant.

The Paraguay-Taiwan-United States Triangular Relationship

On the eve of the April elections, the hemispheric power cannot be ignored as an influential actor in Paraguay’s decisions regarding Taiwan. Indeed, the United States is playing a crucial role in Paraguay’s internal politics With significant administrative and economic sanctions against key politicians such as Vice President Hugo Velazquez and former President Horacio Cartes, the United States is at the top of the electoral agenda, with both presidential candidates referring to Washington as a strategic ally.

In the context of a long period of aggressive Chinese economic and diplomatic projection into the Latin American region, relations with Taiwan have become an increasingly strategic element in Paraguay’s bilateral agenda with the United States, as evidenced by the U.S. State Department’s 2022 Integrated Country Strategy for Paraguay.

This strategy establishes as a priority the strengthening of support mechanisms for Paraguay to prevent the incursion of foreign non-liberal actors such as China through actions helping to counter corruption, deficiencies in certain democratic practices, and criminal activities at the borders and money laundering. According to the strategy announced in the report, the most immediate U.S. objectives in Paraguay would seek to prevent the influence of transnational and illiberal actors who would be actively seeking to take over Taiwan’s last diplomatic ally in South America.

With just under two months to go before the elections, the presidential candidates could decide the future of Paraguay-Taiwan relations in a contest between Santiago Pena’s attempt to maintain the status quo and Concertacion candidate Efrain Alegre’s more critical eye.

Nevertheless, this time the presidential aspirants will have to keep their eyes not only on the domestic level, but also on the international level, visualizing more clearly the important role played by Paraguay within the power struggle in the international scenario. The cards are already on the table, but the final decision will come in August 2023, when, after a long journey, one of the two candidates will finally be sworn into the presidential office.

This article was first published in Spanish by ReporteAsia.