This Election May Give China a New Latin America Friend at Taiwan's Expense

As China doubles down on its efforts to displace the last remnants of formal international ties with the disputed island of Taiwan, Latin America has proven especially fertile ground for lucrative inroads paved by Beijing.

In fact, just one nation left in South America maintains official diplomatic relations with Taipei. This could change later this month when Paraguay holds presidential elections with the leading candidate promising to break off the decades-long relationship with Taiwan in favor of a new era of ties with the People's Republic.

Efraín Alegre, leader of the centrist Authentic Radical Liberal Party (PLRA) and Concertación coalition, is currently ahead in the polls against three other contenders, including Santiago Peña, the candidate of the ruling right-wing Colorado Party, whose leader, Mario Abdo Benítez, has reached his term limit.

The Colorado Party has dominated Paraguayan politics for more than seven decades, interrupted only by the presidency of Fernando Lugo, which ended early with an impeachment that critics consider a parliamentary coup. Alegre served as public works and communications minister for much of Lugo's term.

As senior members of the Colorado Party now face allegations of corruption, with former Paraguayan President Horacio Manuel Cartes Jara and current Vice President Hugo Velázques Moreno slapped with U.S. sanctions in January, another issue on the ballot for the April 30 election will be Paraguay's ties with Taiwan, a longstanding legacy of the Colorado Party's rule.

Margaret Myers, a scholar at the Woodrow Wilson Center, explains why the issue is gaining ground within Paraguay's political sphere.

"The rationale for cutting ties with Taiwan is mostly based on the expected benefits of direct agricultural and other trade with China, since Paraguay's exports to China currently flow through neighboring countries," Myers told Newsweek.

"Paraguay also wants more direct investment from Taiwan, and is indeed demanding it at this point," she added, "having noted that other non-Taiwan allies in Latin America are striking high-value deals with Taiwan."

Taiwan's allies have dwindled significantly in recent decades. Honduras' decision last month to sever ties with Taipei in favor of Beijing has left Taiwan with only a dozen U.N. member states and the Vatican retaining diplomatic relations.

Taiwan President Tsai Ing-wen visited two of these remaining allies in the Western Hemisphere last week, Guatemala and Belize, between stops in New York and Los Angeles. While the United States shifted ties from Taiwan to China in 1979, three decades after Communists took the mainland in a civil war that forced Nationalists to form a government-in-exile in Taipei, Washington has expanded political and military support to the island still claimed by Beijing.

Meanwhile, under Tsai and her ruling Democratic Progress Party (DPP), Taiwan has increasingly distanced itself from the mainland, which, under President Xi Jinping, has emphasized that China would reunify by force if a diplomatic path did not pan out. But Tsai, who faces elections in January against a party whose former leader just traveled to the mainland in a historic message for peace, has also overseen a series of diplomatic losses.

"China has made major diplomatic advances in Latin America and the Caribbean, really since the election of Tsai Ing-wen in Taiwan, whose Democratic Progressive Party has tended to uphold Taiwan's position as a de facto independent state (if not a de jure one)," Myers said.

"China's efforts to convert Taiwan's allies have tended to surge when Taiwan is governed by the DPP," she added. "China put direct pressure on Taiwan allies during the pandemic, for example, encouraging them to cut ties in exchange for vaccines."

This campaign was particularly potent in Paraguay. Two years ago, in April 2021, Taiwan accused China of pressuring Paraguay into establishing diplomatic ties on the basis of offering COVID-19 vaccines, a charge denied by Beijing.

But signs of disappointment by the current value of trade with Taiwan appear to run deeper. By September of last year, even the incumbent Abdo Benítez said Taipei would need to invest up to $1 billion in the Latin American nation in order to ensure the alliance was still mutually beneficial, though he reaffirmed the value of these ties as recently as February, when he visited Taipei.

But China, as the world's second-largest economy, has plenty to offer the few, smaller countries still holding out on recognizing the People's Republic.

"Of course, China's sales pitch also increasingly resonates with many governments and interest groups in the region, including agricultural producers in Paraguay, for instance," Myers said. "Taiwan's Latin American and Caribbean allies often view China as a promising economic and even political ally."

This could prove especially damaging for Taiwan, for which Myers said "the Latin American and Caribbean region has long been a diplomatic stronghold." As such, she argued, "any attrition is hugely problematic for Taiwan and its efforts to maintain an international diplomatic presence."

These countries often hold benefits for Beijing as well, including in the case of Paraguay, a landlocked nation of less than 7 million people thousands of miles away with one of the lowest GDP's in South America.

"For China, Paraguay certainly factors as a supplier of much-needed soy and livestock, though less so than some of its neighbors," Myers said. "Of course, establishing ties with Taiwan's only South American diplomatic ally is also of critical importance to China. Efforts are already underway there to forge ties with would-be political and business partners."

Isabel Bernhard, assistant director of the Atlantic Council's Latin America Center, also explained how "China's efforts to court Taiwanese diplomatic allies are often a two-way street in the sense that there's interest from China, but there's also interest from the regional country itself."

In the case of Paraguay, she identified two main factors driving this interest.

"The first is greater trade and investment opportunities, and the second is greater domestic political visibility for the people who are proposing it," Bernhard told Newsweek. "So, for example, Alegre wants to open up Paraguay's soy and beef markets to China."

"What's left unsaid is that Paraguay would be competing to a certain extent with Brazil, Argentina and Uruguay, all of those who are also exporting the exact same or very similar products to China," she added. "But then domestic political visibility for the pro-China factions also plays a role in this rhetoric, as elections are a time for candidates to distinguish themselves, and the China-Taiwan diplomatic fault line is definitely one of the issues that can help a candidate stand out."

This means that even in the event that Alegre does not win this month's race, the question of continued relations with Taiwan is likely to remain a matter of political debate.

"As long as Paraguay remains allied with Taiwan, it's certainly natural to ask what its alternative economic trajectory would have been if it were or is able to access the full Chinese market," Bernhard said. "I think that's a very useful political tool that whoever is in the federal wide opposition can continue to levy. It's not a platform that belongs to a single person."

Fundamentally, Paraguay's choice between Beijing and Taipei speaks to a broader trend of growing Chinese influence in Latin America, not only aimed at gaining further ground against Taiwan, but securing new partners and markets in the Western Hemisphere.

China has struck up strategic partnerships with a number of nations in Central and South America, as well as in the Caribbean. Many have also joined Chinese President Xi Jinping's Belt and Road Initiative (BRI), an intercontinental network of infrastructure projects.

And while Brazil, the largest economy south of the U.S. border, has so far declined participation in the BRI, the return of left-wing President Luiz Inácio Lula da Silva to power has already resulted in closer ties with Beijing, with whom he reportedly struck a deal last week to ditch the U.S. dollar in bilateral trade. Brazil is also founding member of the BRICS coalition alongside Russia, India, China and South Africa, and Argentina too has expressed interest in joining.

But, as Bernhard noted, existing wealth disparities in the region have had an impact on the calculus of countries engaging with either Beijing or Taipei.

"We see that large states in the Western Hemisphere, like Brazil or Argentina, really want to engage with China's economy and are well-positioned to do so," Bernhard said. "Whereas small states, like Guatemala, may want more customized development assistance from a fellow small state like Taiwan, and that has firsthand knowledge of these challenges."

She also noted "rising concerns over deindustrialization" in states that run the risk of being "outcompeted both in their home countries and third-party markets" by "cheaper Chinese imports." This "back and forth," she said, "is unique but potentially not limited to Latin America," while adding that "I'm sure U.S. authorities are aware of these as well."

The region and Paraguay itself have indeed drawn renewed attention by U.S. officials in recent weeks.

In her most recent testimony before lawmakers on March 24, U.S. Southern Command (SOUTHCOM) chief General Laura Richardson told the Senate Armed Services Committee that China "continues its relentless march to expand economic, diplomatic, technological, informational, and military influence in Latin America and the Caribbean and challenges U.S. influence in all these domains."

Richardson accused Beijing of exploiting natural resources, including lithium, and attempting to manipulate the economic framework and political discourse of the region. She also alleged that China was pursuing potential military measures, such as the construction of deep-water ports and cyber and space facilities, all of which Chinese officials have argued are strictly civil endeavors.

One day after Honduras announced it was severing ties with Taiwan, U.S. Secretary of State Antony Blinken met on March 27 with Foreign Minister Julio Arriola of Paraguay, which the top U.S. diplomat described as "a strategic partner and friend in the region," according to a State Department readout. Blinken also explicitly "expressed appreciation for Paraguay's principled commitment to Taiwan."

Two days later, on March 29, Abdo Benítez revealed via Twitter a visit by CIA Deputy Director David Cohen, with whom he "discussed strengthening cooperation between our countries in matters of national security." SOUTHCOM's Richardson also met with the Paraguayan president on March 31.

China, for its part, has hailed Honduras' decision to establish diplomatic ties with the People's Republic as demonstrating that "the one-China principle has the overwhelming support of the international community and represents the trend of the world," adding that "no force can hold back this trend," according to Foreign Ministry spokesperson Mao Ning.

"The separatists' pursuit of 'Taiwan independence' is against the will and interests of the Chinese nation and the trend of history. Their attempt is doomed to failure," Mao said during a press briefing Tuesday. "We hope that Latin American and Caribbean (LAC) countries can see the trend clearly, handle issues related to Taiwan in a prudent manner and join the family of China-LAC friendly cooperation at an early date."

With Paraguay now at the forefront of this divide, political scientist Liliana Rocío Duarte Recalde of the Catholic University of Asunción sees both opportunities and risks associated with the possible path toward becoming the 183rd country in the world to establish ties with China.

"Establishing links with Beijing could potentially lead to increased exports of agricultural products from Paraguay to China," Duarte Recalde told Newsweek. "However, Paraguay's preferential trade link with Taiwan could be jeopardized, along with the diplomatic support provided by Taiwan, such as cooperation in education, social policies in general, as well as infrastructure."

"The cost-benefit calculation must consider the potential loss from disrupting this trade and diplomatic link," she added.

At the same time, Duarte Recalde argued that this foreign policy challenge was only one of many issues facing Alegre, Peña and others vying for the presidency. Allegations of corruption, she said, are "currently dominating the political debate in Paraguay."

"However," she added, "this issue alone is not enough to mobilize the Paraguayan electorate unless its connection to the general well-being of the population is made evident."

While the Colorado Party has been the subject of some of the most serious allegations as of late, Duarte Recalde noted that the PLRA has also faced past claims of corruption, which she said "is perceived as an endemic problem in Paraguayan politics affecting all parties."

"However, Alegre's political coalition, which now comprises various political parties and movements, as well as notable individual figures, can appear to offer an institutional solution to the problem of corruption," Duarte Recalde said.

"The challenge that his coalition still faces is convincing the electorate that they are, in fact, capable of enacting the necessary policies to fight corruption," she added, "as well as tending to the numerous problems facing the country."

Newsweek has reached out to Efraín Alegre, the PLRA and the Paraguayan Foreign Ministry for comment.