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The Strategic Value of Taiwan and Stability in Asia for Latin America

R. Evan Ellis
R. Evan Ellis IndraStra

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This article is derived from a Spanish-language work published by InfoBAE on June 11, 2024

On June 7, 2024, I had the privilege of participating as a speaker in an event in Miami, Florida organized by the Presidential Mission of Latin America, bringing together three former Latin American Presidents, current senior Latin American government officials and diplomats, and over 100 others from both the U.S. and the region.  The focus of the event was the strategic relationship between Latin America and Asia, the specific role of Taiwan and other individual Asian partners in that relationship, as well as technical issues such as the green energy transition.  The following work is based on my address to that event, and the interactions I had there with its distinguished participants.

At the popular level, the image of Asia in Latin America is dominated by hopes of benefitting from access to the markets of the People’s Republic of China (PRC) and partnering with its companies.  Most in the region seek to distance themselves from what happens in the region in the name of staying out of “Great Power Competition.”  Yet Latin America has an enormous, if largely unrecognized, stake in the economic and political dynamics of Asia. $3.4 trillion in global trade passes through the region, including 70% of global maritime trade.  Latin America’s trade with Asia in 2022 according to the International Monetary Fund was $819 billion, of which only a bit more than half ($488 billion) was with the PRC.  The region hosts a number of critical industries critical to the functioning of the Latin American and global economy, such as semiconductor chips; the Taiwan-based company TSMC produces 60% of such chips globally, and 90% of the most advanced chips used in applications such as artificial intelligence. 

Beyond the role of the PRC and its state-owned enterprises in Latin America, companies from Taiwan, Japan, and Korea, including Hyundai, Posco, Samsung, SK, LG, Mitsubishi, Toyota, and Mitsui, among others, have operated in the region for more than three decades, employing significant numbers of Latin Americans, and with generally good records of Corporate Social Responsibility.  In the development arena, the Japan International Cooperation Agency (JICA) the Korean Overseas Investment Cooperation Agency (KOICA), the Japan Development Bank (JDB), and the Investment Cooperation Development Fund of Taiwan (ICDF) have made important contributions to the region’s advance, including helping to provide skills and opportunities for, and  advance the position of marginalized groups there.

In the context of the extensiveness of such ties through commerce, investment and development support, the large-scale disruptions that a major war in Asia would cause, would adversely impact Latin America not only through the global economy and financial system, but also directly through the disruption of commercial logistics, and numerous supply chains and business operations that connect Latin America to the region. 

Particularly given what is at stake, Latin America cannot afford to dismiss as “distant concerns” the increasing risks of military conflict that the increasingly aggressive posture of the PRC toward Taiwan and its Asian neighbors create.  Two days after the inauguration of the Republic of China (ROC)’s democratically elected President Lai Ching-te, the People’s Liberation Army conducted a major military exercise “Joint Sword 2024A” surrounding Taiwan, in the style of a rehearsal, and a message about, its invasion of Taiwan.  It has conducted such large-scale exercises with increasing frequency in recent years, including after the visit to the ROC of U.S. Speaker of the House Nancy Pelosi in August 2022, and again in April 2023 as a repraisal to a trip to the U.S. by Taiwanese Vice-President William Lai.  The PRC “naming” of the current exercise, and the designation “2024A” seemed to indicate its intent to regularize such acts of intimidation, and perhaps to conduct more than one per year.

Such PRC actions compliments its increasingly aggressive activity in the South and East China sea, including its establishment of large-scale military facilities on disputed reefs and shoals in the South China Sea, its assertion of maritime claims virtually up to the shores of its neighbors in the region through its “10-dashed line” in violation of international court rulings on the United Nations Convention on the Law of the Sea (UNCLOS), plus the PRC deployment of the “China Coast Guard” and maritime militia to harass government and commercial vessels operating in those waters, including striking Philippine Naval ships attempting to resupply their position in the 2nd Thomas Shoal with water cannons bursts of potentially lethal, structurally-damaging force, as well as the conduct of dangerous maneuvers against U.S. and allied ships and aircraft conducting freedom-of-navigation operations (FONOPS) in the area. 

Latin America should take note of such PRC behaviors, despite the peaceful and deferential rhetoric accompanying China’s courtship of its own region, as evidence of how the PRC behaves when it is operating from a position of strength pursuing its national interest, and how it could operate as its position of commercial, political, and military strength continues to expand in Latin America.

The risk of a war between the PRC and the West does not arise merely from the prospect of a PRC invasion of Taiwan, but also from miscalculation, involving a possible PRC attempt to blockade Taiwan, or incidents in which its actions lead to incidents such as the downing of Western aircraft or the sinking of its ships during such aggressive maneuvers.

Beyond the economic disruptions, war with the PRC would involve Latin America, despite its desire to not take a position in the name of “staying out of, or taking advantage of, great power competition.”  It would be unthinkable for capable planners in the People’s Liberation Army (PLA) not to consider every way it could use its growing commercial position and military relationships in Latin America against the U.S. Such exploitation could include taking advantage of the proximity of its commercial ports and other facilities to disrupt facilities on both the U.S. East and West coasts, used for the deployment and sustainment of forces in the Indopacific.  This includes both facilities such as Bejucal, Cuba, where it already has a military presence, ports that it operates close to these areas, and islands close to the U.S. such as Antigua and Barbuda where it has significant commercial presence and associated political leverage.

The PLA could further exploit its commercial knowledge of and presence in the Panama Canal zone, in superficially deniable ways to shut down the Canal during a conflict.  It could similarly use planned facilities in the south of Argentina to put at risk shipping through the Straits of Magellan and the Drake Passage, exploit its access to Western Hemisphere space facilities to target US satellites and communicate with its own space assets used to observe or attack the U.S., plus use of ports that it controls, such as its new 15-berth deepwater port in Chancay, Peru, or a future logistics complex spanning from El Salvador to Honduras and Nicaragua in the Gulf of Fonseca, to refuel and resupply its warships to project military force against the US from the Eastern Pacific.

In the PRC calculation of whether, and when, to move against Taiwan, successes in “flipping” states recognizing Taiwan, to recognize the PRC instead, could embolden it.  The Santiago Peña administration in Paraguay, the geographically largest state recognizing Taiwan, is committed to maintain those relations.  Yet in Guatemala, the other last Spanish speaking state in the hemisphere to recognize Taiwan, the diplomatic position is arguably at risk, despite assurances by President Bernardo Arevalo of his continuing commitment to Taiwan.  The risk comes from both leftists within Arevalo’s Semilla party, and conservatives, resentful of what they regard as excessive US pressure against Guatemalan institutions to prevent the blocking of Arevalo’s election and inauguration, who are now looking toward the PRC, as a hedge against future US legal actions against them, should they return to power.

Within Latin America, flips from Taiwan to the PRC empirically have produced rapid advances in the influence and presence of the PRC in the country that changes.  That rapid advance is facilitated by the signing of numerous memorandums of understanding, and negotiation of free trade agreements, opening up local markets to PRC-based companies in sectors from construction, to electricity, to telecommunications, plus agreements to train government personnel how to relate to China, trips by large numbers of journalists to the PRC hosted by the Chinese Communist Party, and in the case of Nicaragua, even the training of military and police personnel.

In Central America in particular, the PRC advance in infrastructure projects, activities of a strategic nature in countries geographically close to the US and exposed to work with the PRC through weak institutions is particularly concerning.  In Honduras, the training of journalists and government officials is complimented by proposed work on the CA4 “dry canal” corridor, connecting the port of San Lorenzo in the Gulf of Fonseca, to be improved by the Chinese, to facilities in the Atlantic, to be connected by the Chinese to the mainland through improved bridges.  Such infrastructure would complement PRC projects like the new Punta Huete airport in the Northwest of Nicaragua, and an eventual rail link from Corinto on the Pacific Coast, to Bluefields on the Atlantic, and give new life to Chinese development of the port of La Union, on the northern side of the Gulf of Fonseca, creating a cluster of PRC-dominated regimes geographically close to the US, operating strategic ports and other infrastructure that would allow PRC forces and other assets to move from the Atlantic to the Pacific in time of war.  A flip from Taiwan to the PRC by Guatemala, as noted previously, would complicate this situation even further.

Apart from their effects in increasing the likelihood of a war in the Indopacific, and advancing PRC influence in Latin America, changes in recognition from Taiwan to the PRC have historically provided little, if any benefit to the Latin American countries making the change.  Empirically, when the loss of sales through Taiwan is considered, virtually all of the countries that have changed have lost more exports than they have gained in the years following recognition, even while imports of PRC products have swelled, prejudicing local producers.  Figure 1, below, using data from the International Monetary Fund, shows the trajectory of exports to the PRC plus Taiwan, from the year before, to two years after the change in recognition.  In most cases, trade growth is negligible.  In the case of the Dominican Republic and El Salvador, net exports actually falls.

Figure 1

The reasons behind such an outcome is particularly understandable for small Central American and Caribbean states whose principal export products are coffee and other perishable agricultural goods.  Those producers cannot compete against suppliers of similar goods closer to China, such as the Philippines or Vietnam, when Latin American producers have to send their products halfway around the world in aircraft or refrigerated containers.  Compounding the disadvantage of Latin American producers in accessing the PRC market, the size of their production capability traditionally only allows exports of small batches of goods of limited attraction for the needs o the PRC market.  In addition, The national export promotion agencies of small Central American and Caribbean states naturally lack experience in doing business in the culturally and geographically distant, complex PRC market.

As a compliment to the challenges facing exporters of countries “flipping” relations, the infrastructure projects provided by the PRC to the newly recognizing governments typically provides little benefit to the local economy, due to PRC insistence on using primarily Chinese, rather than local workers and equipment for such projects, the often one-sided contracts the Chinese sign with Latin American partners whose bureaucracies lack the technical sophistication and bargaining position to negotiate a better deal for themselves. 

Difficulties for the nation changing relations also include frequent problems and collateral environmental effects associated with Chinese execution.  Examples include Chinese work on the Route 32 highway in Costa Rica, mired in legal battles and still not completed more than 17 years after Costa Rica switched recognition to the PRC, the Recope refinery, cancelled by Costa Rica after China National Petroleum Corporation attempted three times to use its own subsidiary for the technical study justifying Costa Rican spending on the project, the El Salvador library, whose annual cost to operate the mammoth facility, is almost more than the $50 million Chinese cost to build it, imposing a burden on the stressed Salvadoran fiscal situation, and the two water treatment plants, in which the Chinese sought to increase the price after offering the initial project, publicly represented as a “donation.”

By contrast to problems of Latin American partners in realizing the hoped-for benefits from the PRC, states abandoning Taiwan lose the value of its contribution as a partner.  Traditionally these have included development projects engineered to advance the situation of the local partner.  The culture of Taiwan as a democracy is also particularly important, particularly when it provides assistance in sensitive matters such as training police forces, journalists and government officials.  Allowing the PRC, with its authoritarian culture, to conduct such training instead, arguably would impart examples and lessons to police in how to deal with civilian protesters, or journalists in how to relate to the government, inconsistent with the norms of democracies under pressure in the region.The patterns illustrated in this section suggest the importance of greater Latin American attention to the dynamics of Asia, including the impact of PRC aggression in the region, and how it could ultimately impact Latin America and the Caribbean.  It also suggests that the position of Taiwan in Latin America should be safeguarded, both for the impact on the stability of Asia, and for its benefit as a partner to those who recognize it.  Latin America has had a complex history in its relationship with the United States during the Cold War and before.  It should not confuse the imperatives of today’s interdependent world, and the realities of the PRC, with that experience.  Abdicating the imperatives of its own material and moral interests under the slogan of not “involving itself in great power competition” is not an option.  It is in Latin America’s own self-interest to be attentive to what happens in Asia, the realities of working with the PRC, and the strategic importance of the survival of Taiwan as an autonomous democratic state and partner.