The Price of Loyalty: How Taiwan Affects Paraguay's Relationship with China

Santiago Peña, President of Paraguay, made his first official state visit to Taiwan. He was received by Taiwan's Minister of Foreign Affairs, Lin Chia-lung, and designated the island as "a fundamental partner of Paraguay", an unusual stance for a Latin American country, given the expansion of Chinese influence over the Caribbean and South American region and the pressure Beijing exerts on Paraguay to sever its diplomatic, economic, and political ties with Taiwan. In Taipei, Peña met with President Lai Ching-te and Foreign Minister Lin Chia-lung, signed cooperation documents in trade, education, technology, and smart transportation, and reaffirmed that the bilateral partnership is grounded in "democracy, freedom, and trust." Beijing's reaction was immediate: Chinese Foreign Ministry spokesman Guo Jiakun declared that the government "strongly condemns" the visit and urged Paraguay to make the "correct political decision" of recognizing the one-China principle. It was the latest round of a dispute that has lasted nearly seven decades, and that reveals, in the Paraguayan case, something broader about how small powers navigate between great rivals when the cost of choosing is too high to ignore.

Since 1957, under the anti-communist dictatorship of Alfredo Stroessner, Paraguay has maintained relations with Taiwan. In 2026, the two countries celebrate 66 years of this bilateral alliance, which involves significant incentives for the historical maintenance of the partnership. One of the most important is privileged access to the Taiwanese market, where the island purchases Paraguayan products – especially beef – in exchange for economic cooperation, investment, and technical assistance. For a country with a relatively small economy that is heavily dependent on agribusiness, this support carries concrete weight. Furthermore, the relationship with Taiwan brings Paraguay closer to the United States, as Washington diplomatically supports Taipei in the face of Chinese advances. For Paraguay, then, maintaining relations with Taiwan also serves as a way of preserving good ties with Washington and remaining aligned with the Western political bloc.

On the other hand, the costs of this position have been growing steadily. The greatest of these is the economic weight of China, which has become an indispensable trading power for South America and Mercosur member countries. Since Beijing demands that countries recognize the "One China" principle, Paraguay finds itself unable to develop full diplomatic and commercial relations with the Chinese market. This generates pressure on the Paraguayan government, driven especially by domestic economic sectors – such as rural producers and export-oriented businesspeople – who see in China far greater opportunities than those offered by Taiwan.

Paraguay imports more than five billion dollars' worth of Chinese products per year, making China its largest supplier, yet maintains no formal diplomatic relations with it. This is the contradiction that has defined Asunción's foreign policy for decades, and that no other Latin American country still needs to manage, since all of Paraguay's neighbors have already made the choice it refuses: since 1988, when Uruguay was the last to shift toward Beijing, Asunción has remained alone on the continent as the only government that recognizes Taiwan.

There is also growing regional pressure. The other Mercosur countries – especially Brazil and Argentina – maintain intensive relations with Beijing. Paraguay increasingly appears isolated within its own regional bloc, which intensifies the debate over whether its foreign policy may be limiting its national economic potential. South American economic integration makes it ever harder to ignore China's centrality.

To understand why Paraguay remains where it does, one must go back to 1971, when, following United Nations General Assembly Resolution 2758, China's seat on the Security Council and other UN bodies was transferred from the Republic of China – present-day Taiwan – to the People's Republic of China, inaugurating a process of progressive diplomatic erosion of the island. The decision had effects across virtually all of South America: Chile and Peru recognized Beijing in 1970 and 1971; Argentina and Brazil did the same in 1972 and 1974; Venezuela shortly thereafter; Colombia and Ecuador in 1980; Bolivia in 1985; and Uruguay in 1988. One by one, Paraguay's neighbors migrated to the Chinese camp, leaving Asunción in growing isolation within the region.

Paraguay resisted for reasons that combine ideology, history, and economic calculation. During the Stroessner dictatorship, anti-communism was a principle of foreign policy, and the alliance with Taiwan, then governed by the Kuomintang – the Nationalist Party that brought the Chinese government to the island after its defeat in the 1949 civil war – fit perfectly within that logic. The two regimes shared not only anti-communist rhetoric but concrete military cooperation, with Paraguayan army officers studying at the Fu Hsing Kang College in Taipei. This close relationship shaped generations of the country's military officers and left visible physical marks that endure to this day: in the center of Asunción, a statue of Chiang Kai-shek stands in a public square just a few meters from the futuristic headquarters of the Paraguayan Congress, built with the $20 million donated by Taiwan in 2003 – two monuments to an alliance that most passersby cross without recognizing.

The fall of Stroessner in 1989 did not alter Paraguay's stance, but it changed the nature of the argument: from ideological to economic. All subsequent governments maintained recognition of Taipei, even as internal pressure to reconsider grew alongside China's consolidation as the region's largest trading partner. When Fernando Lugo came to power in 2008, Beijing nurtured expectations of a rupture that never materialized. In 2023, opposition candidate Efraín Alegre explicitly promised to recognize China if elected, arguing that doing so would open the Chinese market to Paraguayan soybeans and beef. Santiago Peña won by a comfortable margin, and the issue returned to its state of latency, without disappearing.

China's strategy for isolating Taiwan has never operated through direct confrontation; instead, each layer of pressure is activated when the previous one fails to produce results, combining economic incentives, political interference, and, when necessary, intelligence tools. Paraguay has experienced all of them.

In April 2020, in the midst of the pandemic, a group of Paraguayan senators introduced a proposal to switch recognition from Taiwan to China, arguing that Beijing would provide the country with better medical resources. The proposal was defeated by a vote of 25 to 16, a margin that revealed both the resilience and the fragility of Paraguay's position simultaneously. The following year, according to Paraguay's Ministry of Foreign Affairs, intermediaries offered Chinese COVID-19 vaccines to the government in exchange for breaking with Taiwan. The offer was refused, making the episode one of the most emblematic of Beijing's systematic pressure on Asunción.

The pressure was not confined to the diplomatic sphere. In October 2023, a vehicle registered in Huawei's name was spotted parked outside the Taiwanese ambassador's residence in Asunción, with a man inside operating electronic equipment pointed at the building. The incident raised suspicions of data interception and was reported to local authorities, but ended without a public conclusion. The following month, according to cybersecurity reports, hackers associated with the Chinese group Flax Typhoon breached electronic systems of the Paraguayan government, including strategic diplomatic areas, reinforcing that Beijing's pressure operates on multiple fronts simultaneously. In December 2024, the Paraguayan government expelled Chinese envoy Xu Wei, who was declared persona non grata after directly pressuring legislators in the National Congress to break with Taiwan, an episode that signaled both how far Beijing is willing to go and how much Asunción is willing to tolerate.

The most revealing contradiction, however, remains an economic one. Paraguay imports, according to UN Comtrade data, $5.18 billion worth of Chinese products per year, meaning China is its largest source of external supplies – accounting for 32.8% of total import volume – without any formal diplomatic relationship existing between the two countries. Paraguayan exports to China amount to no more than $25 million annually, a 200-to-1 asymmetry that makes plain Asunción's structural dependence on Beijing, even without recognizing it. With Taiwan, the equation is different: the island absorbs 86% of Paraguay's pork exports and was the second largest destination for its beef in 2023, with $187 million in purchases. Furthermore, Taiwan has guaranteed Paraguay zero-tariff, quota-free access since 2020 – conditions the country has never negotiated with any other Asian partner – generating $370 million annually for the Paraguayan livestock sector. This sum is the result of decades of bilateral agreements that would be virtually impossible to replicate with China, where Paraguay would compete on equal footing with Brazil and Argentina, without any preferential advantage.

It is this calculation that has sustained, for now, seven decades of loyalty. The Paraguayan case is the clearest mirror of the choice the entire region will eventually need to face as the contest between Washington and Beijing deepens. The difference is that Asunción made its decision 67 years ago, and only time will tell whether China's economic weight and regional pressure will eventually outweigh the bilateral logic that has thus far sustained Paraguay's position, or whether Paraguay will continue to stand, on the South American diplomatic map, as the bastion that everyone watches and no one imitates.