TAIPEI (Taiwan News) — Paraguay's President Mario Abdo Benitez arrived in Taiwan on Tuesday (Feb. 14) for an official state visit and immediately reaffirmed his steadfast commitment to Taiwan, while the Paraguayan Ambassador to Taiwan said the trip would “reaffirm the shared democratic values such as free expression, justice, and democracy.”

"Nobody is going to dare to go ahead with a process of diplomatic rupture with the Republic of China, Taiwan," Abdo told reporters on Saturday Feb. 18.

In contrast with Abdo’s clear commitment to Taiwan, his party's main opponent Efrain Alegre said he will sever diplomatic ties with Taiwan and switch to recognizing China if he wins Paraguay’s presidential election in April.

In light of this, what can we expect for the future of bi-lateral relations between the two countries?

Two countries a world apart

Paraguay is a landlocked country in South America with a population of about 7 million, and shares borders with Argentina, Brazil, and Bolivia. It is classed as a developing country, with a nominal GDP that is just under 15% of Taiwan’s at US$5,616 (NT$170,660).

The Paraguayan economy is based largely on soy, maize, and beef production, having overcome the issue of having a mostly black-market economy based on drugs, weapons, and illicit electronics products in the early 2000s.

Taiwan and Paraguay are about as physically far away from one another on the globe as two countries could be. Despite that, Taiwan has provided significant development assistance to the South American nation since it established bi-lateral relations in 1957 in the form of loans, technical assistance, and funding for various development projects.

Paraguay’s presidential election

Despite Paraguay’s repeated commitments to its relationship with Taiwan, there may be trouble on the horizon.

As the only South American country to formally conduct formal diplomatic relations with Taiwan, Paraguay-Taiwan relations are constantly threatened by the prospect of the former switching recognition to China.

One key factor in this is Paraguay’s upcoming presidential election and the ruling Colorado Party’s main opposition candidate, Efrain Alegre. Alegre has stated that he will sever ties with Taiwan and switch to recognition of China if he wins the election in April this year.

While historical trends would indicate this is unlikely (the Colorado Party has been in power for all but five of the past 77 years) his government has recently been plagued by allegations of corruption and complaints from the soy and beef industries about lack of access to the Chinese market.

Santiago Pena, presidential candidate for the ruling Colorado Party, and Efrain Alegre, his party's opponent, who said he will cut ties with Taiwan if elected in April this year. (Reuters photo)

"We make a sacrifice for the political support given to Taiwan and on balance, we consider that we receive very little in compensation," Pedro Galli, president of the Rural Association of Paraguay, told Reuters.

These issues are part of an ongoing discussion in Paraguay about the opportunity cost of maintaining relations with Taiwan at the expense of a relationship with China. A 2021 study estimated the opportunity cost of recognizing Taiwan for Paraguay is about 1% of the country’s total GDP in aid funding alone.

Alegre has stood in the past two presidential elections and was beaten by the incumbent Abdo in 2018 by less than 4% of the vote. That was, however, before the majority of the corruption allegations against the ruling party surfaced.

In addition to the upcoming election, in September last year the Financial Times reported that Abdo requested US$1 billion in Taiwanese investment to maintain diplomatic relations, though Abdo later denied that there was any “quid pro quo” for the Paraguay-Taiwan relationship,

US interest in status quo

Even as U.S. domestic politics becomes increasingly polarized, support for Taiwan maintains healthy bi-partisan support, and helping to maintain Taiwan’s remaining diplomatic relationships is a key method for Washington to protect its strategic interests.

In 2019, Mike Pompeo made the first visit to Paraguay of any sitting U.S. secretary of state in more than 50 years, and cited the country’s relationship with Taiwan as evidence that South American countries are pushing back against “external meddling”.

“Countries like Paraguay, meanwhile, are (standing) up for their own interests and beliefs by supporting a democratic Taiwan,” he said.