Paraguay asks Taiwan for S$1.4 billion investment to retain diplomatic ties

The money Beijing has to offer remains a huge temptation.

Kayla Wong | September 29, 2022, 04:15 PM

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One of Taiwan's last remaining diplomatic allies, Paraguay, has requested Taiwan to pump in US$1 billion (S$1.4 billion) worth of investments as a condition for them to retain diplomatic ties.

Paraguayan President Mario Abdo Benítez told Financial Times (FT) that the investment would help him resist "enormous" pressure to shift allegiance to China.

He added that the country is working with Taiwan so that the Paraguayan people "feel the real benefits of the strategic alliance".

Abdo said that what Paraguay wants is US$1 billion, citing the sum of US$6 billion that Taiwan has invested in countries which are not its allies.

"This will help us to build the argument about the importance of this strategic alliance with Taiwan."

"Diplomatic money game"

China has been proactively "poaching" the last remaining allies that Taiwan still has, using attractive offers of loans and aid.

The number of countries that still recognise the government in Taipei is down to just 14. They are mostly small, cash-strapped countries in the Pacific, Caribbean and Latin America.

Taiwan has called this strategy by China a "diplomatic money game", according to the BBC.

Paraguay is the largest country by area that still recognises the government in Taipei. Its defection, should it happen, would deal a heavy blow to Taipei.

While Paraguay has consistently expressed their determination to stay allied with Taiwan, they might not be able to hold out for long, given the powerful farming lobbies that want greater access to the massive Chinese market.

"Provocation" from Beijing

In addition, Paraguay is missing out on Beijing's enticing offers of investments and loans, according to FT.

"A study published in the journal Foreign Policy Analysis last year estimated Paraguay’s alliance with Taiwan had cost it the equivalent of 1 per cent of gross domestic product per year in lost aid and investment between 2005-14."

This lost amount that Paraguay could have received from China was "not offset by flows from Taiwan".

Taiwanese President Tsai Ing-wen has spoken against what she called "provocation" from Beijing.

Commenting in 2017 after Panama, one of Taiwan's oldest allies, defected, Tsai said that Taiwan's determination of "not engaging in competition for money diplomacy will not change", and reiterated that Taiwan is "a sovereign country".

She added that the self-ruled island's values and status in the international society "will not be shattered".

Top image by Norberto Duarte/AFP/Getty Images