Paraguay and Taiwan strengthen their embrace, for now

When Taiwan’s new president, Lai Ching-te, took office in May, his first meeting was with Santiago Peña, the president of Paraguay. It is one of just 12 countries that recognise Taiwan as the legitimate China, rather than the larger People’s Republic of China.

China claims Taiwan as its territory. Formal links with other countries lend legitimacy to Taiwan’s claim to statehood. Paraguay, together with Guatemala, is one of Taiwan’s largest remaining friends. The country advocates for Taiwan at the United Nations, from which the Asian island is excluded.

The logic on Paraguay’s side is less obvious. Francisco Urdinez of ICLAC, a Chilean think-tank, says the relationship costs Paraguay more than 1% of its GDP a year in missed investment and credit from China. Taiwan does what it can, building social housing and donating to Paraguayan presidential campaigns, but Paraguay is still missing out. Between 2010 and 2019 Beijing invested an average of $14bn annually into Latin America. Hardly a cent went to Paraguay. Its trade with China is among the lowest in the region (see chart).

The relationship runs through Paraguay’s Colorado Party, which has ruled the country nearly continuously since 1948. Between 2019 and 2023 Taiwan pledged to provide Paraguay with $150m in aid. Its official purpose was to fund housing, education and transport. But people close to the government, speaking on the condition of anonymity, described those funds as discretionary. They go into what one called the government’s stash of “petty cash”. Its recipients feel little pressure to change course.

Prominence is another factor behind Paraguay’s support for Taiwan; it gets to play a role in one of the world’s most pressing geopolitical dilemmas. It also helps relations with the United States (as does Paraguay’s backing of Israel in its war against Hamas). Relations have been strained. In 2023 the US Department of the Treasury put sanctions on a former president, Horacio Cartes, Paraguay’s wealthiest person and leader of the Colorado Party, for alleged corruption.

The price of Paraguayan loyalty is rising. The last administration asked Taiwan for a billion dollars in investment, but did not receive it. Paraguay continues to support Taiwan. But as cross-strait tensions mount and its neighbours benefit from booming trade with China, that calculus could change.■

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