“An Eternal Brother”—Strengthening the Taiwan-Paraguay Relationship

“An Eternal Brother”—Strengthening the Taiwan-Paraguay Relationship

TW Paraguay Masthead
“An Eternal Brother”—Strengthening the Taiwan-Paraguay Relationship

Since President Santiago Pena was elected in August 2023, Paraguay’s struggle to balance its agricultural trade with the People’s Republic of China (PRC) with its diplomatic relationship with Taiwan has been in the spotlight. As of May 2024, only 11 countries have official diplomatic relations with Taiwan. In the wake of an ever-shrinking list of diplomatic allies, it is worthwhile to examine Taiwan’s relationship with one of its longest-held and largest diplomatic partners, Paraguay.

During President Tsai Ing-wen’s (蔡英文) tenure in office (2016-2024), Taiwan lost five official diplomatic allies in Latin America: Panama, the Dominican Republic, El Salvador, Nicaragua and Honduras. As a result, there were renewed concerns in 2024 about the longevity of Taiwan’s diplomatic relationship with Guatemala, one of Taiwan’s three remaining diplomatic partners in Latin America (Paraguay, Belize and Guatemala). In an environment of such turmoil, Taiwan should look critically at its relationships with remaining diplomatic partners—particularly Paraguay, which President Tsai Ing-wen referred to in 2018 as “an eternal brother”—to find further areas of unique and meaningful cooperation that can strengthen bilateral ties. 

Historical Background of Taiwan-Paraguay Relations

When official diplomatic relations were formed in 1957, the governments of Taiwan and Paraguay had significant areas of overlap. Both nations were ruled by anti-communist, authoritarian regimes, and as a result Taiwan and Paraguay quite naturally formed a strong relationship built upon these commonalities. In addition to both nations being ruled by dictators with military backgrounds, both authoritarian leaders were also heads of right-wing parties that still exist in their respective nations today—in Paraguay, this would be the Colorado Party, and in Taiwan, the Kuomintang (KMT, 國民黨). Moreover, both nations were previously colonized by European powers, suffered through post-World War II civil wars, and are home to indigenous populations. In their respective transitions to democracy, each country faced stumbling blocks, but eventually achieved free and fair elections in the 1990s. 

In an era of established and secure democracy in the 21st century, the two nations have moved towards opposite sides of the political spectrum. While the conservative Colorado Party dominates elections in Paraguay, Taiwan’s Democratic People’s Party (DPP, 民進黨), a progressive party, has significantly risen in political strength, even securing an unprecedented continuation of DPP power in the 2024 presidential elections. Taiwan and Paraguay’s enduring diplomatic relationship, while seemingly akin to that of unlikely bedfellows, has “transcended any one political and diplomatic moment” and has remained steadfast. [1] 

Current State of Affairs

Currently, Taiwan’s relationship with Paraguay is built upon state visits, bilateral agreements, people-to people exchanges, and targeted aid. In terms of aid, the Taiwanese government has strived to provide an average of USD $150 million every 5 years to Paraguay for projects in target areas such as public health, agriculture and education. [2] However, Taiwan backed projects are small compared to Paraguay’s USD $27 billion economy, which is still bound to the PRC through its agro-exports. In the period between 2005-2014, Taiwanese foreign direct investment (FDI) into Paraguay was around USD $4 million a year. While Taiwanese aid to Paraguay grew in 2019, it still did not—and cannot—match the scale of PRC aid and investment in Paraguay’s neighboring countries. Likely aware of the growing temptation of PRC investments, the United States has recognized the strategic benefits of cooperating with Taiwan in Latin America, signing a memorandum of understanding (MOU) and two cooperation agreements in 2022 aimed at advancing cooperation on development in Latin America.

At the governmental level, the relationship between Paraguay’s ruling Colorado Party, currently led by President Santiago Pena, and Taiwan is strong. Under various leaders, Taipei has successfully outmaneuvered the PRC’s attempts to poach Paraguay through its dedication to providing aid and facilitating people-to-people exchanges. While President Santiago Pena’s desire to deepen trade with the PRC caused some uncertainty at the beginning of his presidential term, there has since been a steady stream of positive statements about Taiwan from the Paraguayan government, particularly in international fora

Still, rifts between Taiwan and Paraguay occasionally appear. A recent example of instability occurred in September 2022, when former Colorado Party President Mario Abdo Benitez (2018-2023) asked Taiwan for an investment of USD $1 billion to ensure that Paraguay would resist PRC poaching attempts. Taiwan’s Ministry of Foreign Affairs (MOFA) adamantly pushed back on the quid pro quo nature of this request, but did reiterate that Taiwan would continue to encourage Taiwanese businesses to invest in Paraguay. Arguably, President Benitez’s demand stemmed from envy over Taiwan’s relationships with countries such as the United States and EU countries, whose relationships are prized by Taiwan, despite not having official diplomatic relations. As a result, increased public engagement between the United States, Taiwan, and Paraguay seems to have put the issue to rest. In addition to the aforementioned MOU, in February, Senator Marco Rubio made an official visit to Paraguay and met with President Benitez and Taiwan’s ambassador to Paraguay. During the meeting, he praised Paraguay’s diplomatic commitment to Taiwan, further cementing the United States’ support for Taiwan-Paraguay relations. While this has helped Paraguay’s position with Taiwan remain secure for now, a series of long term joint cooperation deals in underdeveloped sectors, such as its digital economy, would help to reinforce the economic worth of the relationship with Taiwan.  

Image: Taiwan’s then-Vice President Lai Ching-te speaking with his counterpart, Paraguayan Vice-President Pedro Alliana, during a visit to Paraguay in August 2023.

Image: Taiwan’s then-Vice President Lai Ching-te speaking with his counterpart, Paraguayan Vice-President Pedro Alliana, during a visit to Paraguay in August 2023. (Image source: ROC Presidential Office / Wikimedia Commons).

Gaps in the Relationship

Within Paraguay, dissatisfaction with Paraguay’s relationship with Taiwan is a common recurrence that becomes especially prominent during election periods. Paraguay’s main opposition party, the Authentic Radical Liberal Party (PLRA, also known as the Liberal Party), is particularly critical of the relationship, with members of this opposition party often openly voicing their dissent. One sticking point is the perception that Taiwan makes significant effort to cultivate its relationship with the Colorado Party, but tends to ignore the Liberal Party and its members. Paraguayan politics place an emphasis on people-to-people relations, which Taiwanese government officials deeply understand. Accordingly, they have focused their efforts on cultivating people-to-people relationships with those in and affiliated with the politically dominant Colorado Party. However, this favoritism may have prompted some of the pro-PRC sentiment within Paraguay’s Liberal Party—who, having not received the same attention, have turned elsewhere. PLRA politicians have been members of the small fringe group, Paraguayan Association of Friends of the People’s Republic of China (APACHIN), while others introduced a failed bill into the Paraguayan Congress to re-evaluate Paraguay’s relationship with Taiwan. While the Colorado Party remains in power and has weathered significant periods of instability, there is significant risk that a change of leadership could alter Paraguay’s relationship with Taiwan, especially because Paraguayan presidents can only serve a single 5-year term. While the Taiwanese government has cultivated very close relationships with the Colorado Party, this blatant favoritism has had repercussions—and Taipei should be careful to build relationships with Paraguayan politicians from differing political backgrounds. 

A secondary issue stems from the agricultural sector in Paraguay, which is dominated by soybean and beef production. The PRC is Paraguay’s largest export market for its beef and soy products, with Taiwan’s export share of 2.2 percent seeming limited in comparison. Paraguay’s farmers have long been envious of their PRC-allied neighbors, whose agricultural sectors have greatly benefited from trade with the PRC, and benefits from direct agricultural trade with the PRC are obvious to Paraguay’s farmers and ruling political elites alike. Facing pressure from the agricultural lobby, President Santiago Pena expressed in July 2023 that he wished to increase trade with the PRC while still maintaining official diplomatic relations with Taiwan. 

Currently, Paraguayan agricultural exports travel along complicated trade routes that pass through secondary countries allied with the PRC. As a result, PRC-allied countries end up reaping the majority of the trade benefits since Paraguay has little negotiating room as an ally of Taiwan. It is important to note that because of these trade routes, the PRC claims that it does not import any of these goods from Paraguay, and continues to publicly browbeat them for their relationship with Taiwan. While there have been attempts to maneuver around these difficulties—particularly in the Southern Common Market (Mercosur), within which only Paraguay is allied with Taiwan—the PRC remains defiant in its refusal to negotiate economic and trade deals that would benefit Paraguay while it is allied with Taiwan, preferring to negotiate with Latin American countries individually so as to cut out Paraguay. This has only increased the tension between pro-PRC farmers in Paraguay and the government. 

With the agricultural lobby in Paraguay closely aligned with the Colorado Party, the party already faces a large amount of pressure to capitalize on Chinese markets. If those in the beef and soy agricultural sectors express even larger amounts of discontent, the Colorado Party would find itself in the difficult position of having to choose between bending to the demands of the agricultural sector or remaining diplomatically aligned with Taiwan. While the connections Taiwan has cultivated with a wide variety of Paraguayans in sectors from education to healthcare have allowed it to gain popularity with the Paraguayan electorate, a close eye must be kept on those in the beef and soybean industries who could very easily disrupt the pro-Taiwan status quo. 

As discussed earlier, the existing Taiwan-Paraguay partnership has been focused on providing aid for technical and agricultural programs. However, the former president’s demand for USD $1 billion to maintain the relationship with Taiwan reveals a wound in Taiwan-Paraguay relations which can easily be reopened if not mended. Furthermore, the desire for increased Taiwanese investment in areas of importance to Paraguay goes beyond technical programs. For instance, President Santiago Pena has emphasized the importance of digitalization to Paraguay’s development, viewing it as a natural next step since Paraguay has become a top exporter of sustainable energy. Pena is actively seeking to attract global technology enterprises to help transform Paraguay into a “regional tech hub.” Taiwan—a leader in the tech and communications industry as well as home to Asus, Foxconn, and Taiwan Semiconductor Manufacturing Company (TSMC, 台灣積體電路製造股份有限公司), among others—is placed in the prime position to help facilitate investment by Taiwanese tech enterprises into Paraguay, which will help to further solidify the relationship. 

In March 2024, Paraguay’s Minister of Information and Communication Technologies visited Taiwan to attract partnerships in this field. However, education and training, rather than investment, appeared to be top of the agenda, with official reports following the meeting only highlighting collaboration on the Taiwan-Paraguay Polytechnic University and its role as a conduit for educational exchange. Additionally, the US Department of Trade reported that foreign direct investment (FDI) in Paraguay was comparatively weaker than its neighbors, further demonstrating that the Taiwanese government has an ample opportunity to facilitate FDI from Taiwanese tech businesses to Paraguay. With Paraguayan politicians openly asking for Taiwanese assistance in garnering investment to help diversify their economy and develop its tech and communications sector, Taiwan must step up.

The main point: While the Paraguay-Taiwan relationship remains strong, shoring it up against potential pitfalls can only increase its stability. As the United States seeks to find ways to support Taiwan internationally, Paraguay is a worthy country for mutual cooperation. The importance of Paraguay to Taiwan, as its largest official diplomatic ally remaining in Latin America, cannot be understated and Taiwan should actively seek to pursue positive evolution of the relationship.