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As China seeks to further whittle down the list of seven countries in the Americas that still recognize Taiwan, U.S. officials increasingly believe Paraguay may be the island’s next diplomatic ally to flip loyalties to Beijing.

Taiwan President Tsai Ing-wen’s visit this week to Guatemala and Belize to shore up two remaining Central American partners underscored her government’s efforts to head off further defections after Honduras switched its recognition to China last month. read more

But some U.S. policymakers and independent analysts see Paraguay as the likeliest to ditch Taiwan in the near term, especially if the South American country’s opposition wins the April 30 elections and makes good on its promise to embrace China, as its agricultural lobby has demanded.

“Paraguay is clearly up for grabs,” said Benjamin Gedan, who advised former U.S. President Barack Obama and is now director of the Latin America program at the Wilson Center think tank in Washington.

Further erosion of the Taiwan camp would be another blow to the U.S., which has had little success stemming the tide of Taipei’s diplomatic losses, and a fresh sign of China’s growing footprint in Washington’s neighborhood.

Reuters spoke to three U.S. officials and several other sources close to the matter who see the Biden administration with limited options for halting the gradual drift toward China, with some saying Taiwan itself appeared resigned to losing more allies in the Americas.

It is a more pessimistic view than President Joe Biden’s aides have expressed publicly and, U.S. sources say, helps to explain Washington’s muted response to Honduras’ recent ditching of Taiwan, which was seen as a lost cause.

While acknowledging that countries have the right to their sovereign decisions, two U.S. officials told Reuters it may now be more important for Taiwan to expand its role in multilateral institutions such as the World Trade Organization than to focus on keeping diplomatic allies.

Taiwan itself has publicly signaled that it no longer wants to compete head-to-head in Latin America with a far-richer China on the basis of “checkbook diplomacy,” the dangling of aid and investment, to keep its remaining 13 allies worldwide from leaving the fold.

“We don’t have a large enough checkbook,” one Taiwan official said.

The White House did not immediately respond to Reuters' questions on the issue.

The Chinese Embassy in Washington called self-ruled Taiwan "an inalienable part of China" and said the one-China principle was an "overwhelming trend" internationally. "China is willing to develop relations with all countries in the spirit of equality and mutual respect," it said in a statement.

PARAGUAY NEARS TURNING POINT?

At the center of China’s approach is the claim by its Communist leadership that democratically ruled Taiwan belongs to the mainland despite the objections of the island's government.

Beijing has been angered by what it sees as stepped-up U.S. support for Taiwan, including Tsai’s stopovers in New York and California on her latest trip, and has vowed to bring the island under its control, by force if necessary. read more

Taiwan views its diplomatic partners as a way to bolster international legitimacy and facilitate economic engagement, while China aims to strip away any attributes of statehood from what it considers a renegade province.

With Paraguay’s elections looming and the China question high on the agenda, Taiwan officials are hoping that relations remain on track with the last nation in South America still aligned with it, according to a source familiar with Taipei’s thinking.

Paraguay’s vote could be a turning point on the issue for the landlocked, California-size country of 6.7 million – and a decision with significance far beyond its borders.

Opposition candidate Efrain Alegre, a centrist lawyer, told Reuters in January he would cut ties with Taiwan and open relations with China if he wins the presidency, hoping to boost crucial soy and beef exports. {nL1N33P1RG}

But the ruling conservative Colorado Party candidate, Santiago Pena, has vowed to maintain recognition of Taiwan. A cross-party delegation visited the island in February seeking to calm Taiwanese jitters.

Polls suggest the contest will be close. Though the Colorado Party has dominated for decades, it has been plagued by corruption scandals and complaints from the agricultural sector about lack of access to the lucrative Chinese market. read more

Some analysts question whether Alegre would be able to muster legislative support to ditch Taiwan. If he does, it would mark a dramatic shift in a relationship that date backs to 1957 under two U.S.-backed autocrats, Taiwan’s Chiang Kai-shek and Paraguay’s Alfredo Stroessner.

Pressure has been building for years for Paraguay, a top-10 global beef exporter and fourth largest soybean exporter, to reconsider its ties with Taiwan, a small but robust democracy.

Around three years ago, Chinese diplomats made their economic case for a switch in a meeting with Paraguayan farmers and lawmakers near the Iguazu waterfalls on the border with Brazil, two Paraguayan participants told Reuters.

Paraguay’s trade volume with China has doubled over the last eight years and is far larger than with the United States, UN Comtrade data show, but this is driven by imports while exports to the world’s no. 2 economy remain tiny.

“Having trade relations with China is going to be favorable for producers and for the country,” said Eno Michels, president of Paraguay's Soybean Producers Association.

He acknowledged, however, that either of the candidates may still change his stance once sworn into office in August.

Even if the ruling party retains power, some analysts believe resentment within its ranks over January U.S. sanctions on Colorado politicians could drive Paraguay into China’s arms.

“No matter which candidate from which party wins, our government will continue to work with the new government of Paraguay to deepen cooperation and exchanges,” Taiwan’s Foreign Ministry said.

In Washington, the Chinese Embassy said Beijing "does not interfere in other countries’ internal affairs" and declined comment on the Paraguay situation.

HONDURAS AS A WARNING SIGN

China’s poaching of Honduras may have been a harbinger.

When Taiwan temporarily averted a split with Honduras after President Xiomara Castro took office in January 2022, U.S. State Department officials remained wary. read more

In March, a U.S. assessment that Honduras’ left-leaning government had already made up its mind to switch to China, in a bid for more investment from the Asian giant, led to the restrained U.S. response, said one person with knowledge of U.S. thinking.

U.S. officials were reluctant to be seen forcefully backing a losing position. Still, Washington was quick to warn that China’s investment promises often go unfulfilled and create “debt traps” for developing nations.

The Biden administration is also keeping a close eye on tiny Belize for any cracks in its Taiwan relationship. Belize officials have privately complained that economic benefits from those ties have not met expectations, according to one person familiar with the matter.

Taiwan’s only other Central American ally is Guatemala, considered steadfast in its support. The four others in the region are Haiti, Saint Vincent and the Grenadines, Saint Kitts and Nevis, and Saint Lucia.

There is some skepticism among Washington policymakers that more diplomatic losses in the Americas would have significant impact, assuming Taipei maintains support from strategic countries closely linked to the U.S., such as the Marshall Islands in the Pacific.

Two U.S. officials said Washington was putting less stock in Taiwan maintaining its diplomatic allies in favor of efforts to increase its participation in international organizations.

While denied a seat in the United Nations, Taiwan is a member of the WTO and the Asia-Pacific Economic Cooperation forum. China, however, has blocked it from being upgraded from observer status in the World Health Organization.

Taiwan itself also appears more interested in enhancing unofficial ties with like-minded partners in Europe such as Lithuania and the Czech Republic than in competing to maintain scant diplomatic recognition, the U.S. officials said.

But some U.S. lawmakers are concerned about the trend, which includes five nations in the Americas switching allegiance in just over five years.

U.S. Representative Mike Gallagher, Republican chairman of the House Select Committee on the Chinese Communist Party, told Reuters that China was trying to isolate Taiwan, possibly as a prelude to invading the island, and was “taking advantage of our complacency.” (Reuters)