Paraguay’s China debate is about more than market size

Sept. 22 (UPI) — In early September, representatives of Taiwanese manufacturer Master Bus traveled to Paraguay to advance plans for a roughly $30 million electric-bus plant at the Taiwan-Paraguay Smart Technology Park in Minga Guazú. Paraguay’s Ministry of Industry and Commerce says the project could create 2,000 to 2,500 direct jobs.

The project comes at a time when Paraguay’s relationship with Taiwan is facing renewed scrutiny. Paraguay is Taiwan’s only diplomatic ally in South America, yet some argue that Asunción would benefit economically by recognizing Beijing instead. I recently debated a Paraguayan economist who makes precisely that case, and his argument deserves to be taken seriously.

At the heart of that argument is China’s sheer economic size. Advocates of a switch say Paraguay denies its producers direct access to a vast market while already importing heavily from China. Why recognize Taiwan, they ask, when nearly every major Latin American economy recognizes Beijing?

Market size alone, though, is not the answer.

Consider soybeans. China is the world’s largest importer, yet Paraguay has sold record volumes without diplomatic relations with Beijing. Through August, exports reached 7.4 million tons, 2 million more than a year earlier.

None of this makes the Chinese market irrelevant. The more useful question is what direct access would add and what Paraguay might surrender to obtain it. That second part receives far less attention.

Taiwan is a major buyer of Paraguayan meat. In 2025, it was the third-largest beef market and dominant pork destination. In the first half of 2026, it still took 12% of beef and 86% of pork exports, and opened to poultry in May.

There is also a question of size. The strongest argument for China is that it is enormous while Taiwan is small. But that asymmetry cuts both ways. Paraguay matters to Taiwan in a way it could never matter to China. For Taipei, Paraguay is its only formal diplomatic partner in South America. For Beijing, Paraguay would become one among many Latin American partners pursuing trade, investment and market access.

Countries that have already changed recognition offer useful evidence, although no two cases are identical. Costa Rica provides the longest-running example among countries that switched this century. It recognized Beijing in June 2007 and signed a free-trade agreement that took effect in 2011.

Costa Rican exports to China stood at roughly $835 million in 2007 but fell to about $300 million by 2021. Part of that decline reflected Intel’s relocation of manufacturing operations, so the figures cannot simply be attributed to the diplomatic switch. Still, the hoped-for transformation of the export relationship did not automatically follow recognition.

Other expectations also encountered difficulties. A proposed Chinese-backed oil refinery was abandoned, while the expansion of Route 32 accumulated years of delays. More recently, Costa Rica’s own minister of foreign trade said publicly in April that he was dissatisfied with the country’s export performance in China under the free-trade agreement. The lesson is not that relations with Beijing bring no benefits. It is that diplomatic recognition does not by itself guarantee transformative investment or market access.

Chinese state-backed finance in Latin America has also changed considerably. Lending by China’s two major policy banks fell dramatically from peaks in the previous decade, although it rebounded to $2.8 billion in 2024, its highest level in five years.

At the same time, Chinese commercial investment remains important and increasingly targets sectors such as electric vehicles, renewable energy and critical minerals. The picture, therefore, is not one of Chinese economic withdrawal but of a changing model of engagement.

The strategic dimension is equally important. At a forum I convened in San José last year on Latin America’s place in the changing global order, China specialist Evan Ellis placed Beijing’s growing regional presence in a broader geopolitical context.

The forum brought together former presidents, diplomats, and regional specialists to consider how Latin America should navigate intensifying competition among major powers.

Washington is watching that competition closely. Marco Rubio chose Latin America for his first overseas trip as U.S. Secretary of State in February 2025. Chinese influence was a significant theme, particularly in Panama over the canal and in Costa Rica over 5G technology.

Rubio publicly praised President Rodrigo Chaves’ government for restricting telecommunications procurement to trusted vendors, effectively excluding Chinese suppliers. Guatemala, another of Taiwan’s remaining diplomatic allies, was also on the itinerary.

For Washington, Paraguay’s relationship with Taiwan gives the country strategic importance beyond its size. A switch to Beijing would therefore be unlikely to be seen as a purely commercial decision, but rather as part of the wider competition over China’s political, technological and economic presence in the Western Hemisphere.

None of this means Paraguay has reason to be satisfied with the economic side of its relationship with Taiwan. Taipei has often delivered cooperation more readily than large-scale private investment, and Paraguayan producers are entitled to ask whether a partnership of such strategic importance is yielding enough in return. That question belongs in Taipei with the same seriousness that the China question is put to Asunción.

On May 8, Presidents Santiago Peña and Lai Ching-te signed seven agreements spanning technology, cybersecurity, trade, finance and other areas. Among them was a memorandum for a sovereign artificial-intelligence computing center intended to combine Taiwanese technological expertise with Paraguay’s abundant energy resources.

The Master Bus project adds an industrial component, while ongoing construction of the Taiwan-Paraguay Polytechnic University represents another substantial commitment to technology and human capital.

These remain works in progress. Their ultimate value will depend on implementation and the private investment they generate. That is precisely why Paraguay’s debate cannot be reduced to sentiment on one side and market size on the other.

China offers economic possibilities; Taiwan offers commercial ties, technological cooperation and strategic importance. The central question is not which economy is larger. That answer is obvious. The harder question is what each can actually deliver.

Thomas R. Field is Regional Representative for Latin America of the Global Peace Foundation and president of the Latin America and Caribbean Presidential Mission. He has lived and worked in Latin America for more than four decades, including almost 20 years in Paraguay. The views expressed are solely those of the author.