Taipei could lose its last diplomatic ally in South America, with most polls showing a narrow lead for Paraguay’s opposition candidate Efrain Alegre in this month’s presidential elections.
Alegre, leader of the Authentic Radical Liberal Party, pledged in January that he would forge relations with Beijing if he wins the presidency on April 30. His main opponent, the ruling Colorado Party’s Santiago Pena, intends to maintain the long-held status quo.
In Alegre’s view, ties with Taipei bring little benefit, while barring Paraguayan soy and beef exports from the Chinese mainland. “Paraguay must have relations with China,” he said in an interview with Reuters in January.
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While Alegre and Pena are locked in a neck-and-neck race, many analysts believe the pro-Beijing candidate stands a good chance, especially with the ruling party mired in corruption allegations.
Beijing views Taiwan as a breakaway province with no right to build official ties with other governments. Most countries, including the US, do not recognise the island as an independent state.
Paraguay, which established diplomatic relations with Taiwan in 1957, is one of 13 nations that maintains ties with Taipei.
In March, Honduras became the latest to switch recognition to Beijing, which has notched up nine diplomatic victories since Taiwanese President Tsai Ing-wen took office in 2016, raising tensions in the Taiwan Strait.
At the same time, the US is increasingly on the alert to China’s expanding geopolitical footprint in Latin America.
Responding to Alegre’s January statement, Chinese foreign ministry spokesman Wang Wenbin said standing up for the one-China principle was “the right thing to do”.
“We believe relevant countries will eventually recognise this trend and make the right decision that is consistent with where the trend is heading,” he said.
Latin America specialist Tom Long from the University of Warwick’s department of politics and international studies, said Taipei’s relationship had been mostly with figures associated with the Colorado Party’s seven decades in office.
“Opposition parties have received fewer benefits [from Taiwan], whether material or in terms of prestige,” said Long, who attributed multiple reasons to Alegre’s proposal to reassess Paraguay’s relations with Taipei.
Many important Paraguayan economic sectors – especially agricultural exports – feel they are “missing out on full access to the largest market for their goods,” he said.
There are hopes that massive Chinese investment could restart Paraguay’s economy, which is “still struggling from the pandemic, the war in Ukraine, higher interest rates, and inflation”.
“Many big economic players want markets and investments, and they assume that China’s tremendous size will provide both.”
Long said Taipei had made great efforts to strengthen its bonds, increasing purchases with Paraguay in recent years, but could not match the size of the Chinese market.
Trade between Taiwan and Paraguay hit a record US$196 million in 2021 but represented less than one per cent of the South American nation’s total exchanges that year. Paraguay’s main trading partners are Brazil, Argentina, China and the US.
In a co-authored paper published in 2021 by the journal Foreign Policy Analysis, Long estimated that diplomatic relations with Taipei may have cost Paraguay the equivalent of one per cent of its GDP in Chinese aid and investment between 2005 and 2014.
If Alegre wins, Long expects him to open negotiations with Taipei and Beijing to see what is on offer. “If he did change relations, it would probably be a boost to direct exports to China, relatively quickly. “It will also depend on how Taiwan responds, given that they are a major importer for Paraguay, too.”
The Taiwanese foreign ministry on Thursday said Alegre’s questioning of the benefits of keeping relations with Taipei has “caused some perplexity”.
“Paraguay has had a long-standing relationship with us, and this relationship is also very stable. We will do our best to maintain diplomatic relations with Paraguay,” the ministry said.
Zhang Jiazhe, a researcher at the Shanghai Academy of Social Sciences, said a move by Taipei’s largest remaining ally by land area to build ties with Beijing would definitely be good for the Asian giant.
“Once China builds formal ties with Paraguay, Taiwan’s other remaining small allies – some of which can hardly be found on the world map – won’t be a big issue any more,” Zhang said.
But a diplomatic switch would come with its own economic challenges. “There is no way to deal with Latin American countries without money,” said Zhang, adding that China has recently offered large sums in investments, aid and loans to Brazil and Honduras.
Long warned that Paraguayan politicians might not find the level of investments they are hoping for.
“Chinese investment in Latin America largely disappeared during the pandemic, and is not returning to the same levels or of the same nature as before 2019. There has been a shift away from mega-investments in infrastructure and huge state-backed loans in the region,” he said.
According to Zhang, if Pena beats his rival for the presidency, the ruling party will not switch ties to Beijing merely because of economic pressures.
If the economy was a top priority, Paraguay would have caved in years ago, during free trade discussions between China and the Southern Common Market (Mercosur), he said.
Mercosur prohibits member states – including Argentina, Brazil, Uruguay and Paraguay – from making trade deals with other countries without its consent, while Paraguayan recognition of Taipei is a long-standing hurdle to the bloc’s efforts to consolidate a free-trade agreement with Beijing.
Long argues that while Pena is much more favourably disposed to Taiwan, his election would not mean there will be no change to the status quo.
“[Pena] would face pressure from rural associations and agricultural producers for market access, and there are great expectations – perhaps unrealistic expectations – for billions of dollars in investment per year,” he said.
According to Long, intense scrutiny from the US over corruption might also prompt the party to search for new partners. “But most of all, Pena will have to manage the domestic political expectations of economic actors and provide other alternatives.”
This article originally appeared in the South China Morning Post (SCMP), the most authoritative voice reporting on China and Asia for more than a century. For more SCMP stories, please explore the SCMP app or visit the SCMP’s Facebook and Twitter pages. Copyright © 2023 South China Morning Post Publishers Ltd. All rights reserved.
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