Former foreign policy maverick Paraguay emerges from obscurity
Close to the wide reaches of the Paraguay river in Asunción, and within sight of the congress building and presidential palace, stands a slender silver metallic mirror-clad model tower. At its base, a plaque in Spanish and Chinese marks 60 years of diplomatic relations between the landlocked South American republic of Paraguay and one of its key global allies: Taiwan.
Paraguay’s geography, not least its precarious location sandwiched between Argentina and Brazil — two big regional powers with whom it fought a bitter and disastrous war in the 19th century — have led it in recent decades to seek unconventional alliances well beyond South America.
For decades after the 1865-70 War of the Triple Alliance, in which Paraguay lost 140,000 sq km of territory and up to 90 per cent of its male population, it remained unstable and largely cut off from the world. Another war in the 1930s, this time with Bolivia over the arid Chaco region, set it back further.
Its close ties with Taiwan date to the period when both nations were ruled by fiercely anti-communist generals. Paraguay’s Alfredo Stroessner felt a close affinity with Taiwan’s Chiang Kai-shek, even though the two never met in person. They decided in 1957 to establish diplomatic relations.
Luis Fernando Castiglioni, today’s Paraguayan foreign minister, is seeking allies, too. Visits to Japan, Turkey, and Qatar have figured in a diplomatic offensive to attract foreign investors. Asunción is also opening embassies for the first time in eastern Europe.
“They are non-traditional locations” for Paraguay, says Mr Castiglioni. But they are looking “with great interest at the firm possibility of opening operations of their companies”.
Another feather in the minister’s cap was April’s visit by Mike Pompeo — the first to Paraguay by a US secretary of state in 53 years. Japan’s prime minister Shinzo Abe has made a maiden visit to Asunción by a Japanese leader and the emir of Qatar has also stopped by.
“Paraguay’s agricultural boom has made it a surprisingly powerful country,” says Christopher Sabatini, a Columbia University lecturer who knows Paraguay well. “It is now able to punch above its weight in the region.”
The US, a staunch friend from the Stroessner days, remains Paraguay’s chief foreign investor. The conservative government in Asunción has been on the right side of a broad shift away from left-liberal policies across the Americas. Brazil’s President Jair Bolsonaro, with his emphasis on traditional religious and family values, and a willingness to open more rainforest to ranching, is a natural ally.
Asunción has sought to draw closer to the Trump administration in Washington by denouncing the regime of Nicolás Maduro in Venezuela. Mr Pompeo’s visit was intended to underline approval for Asunción moving in the right direction on international and domestic issues, US officials say, in contrast to leftist Venezuela, Cuba and Nicaragua.
Washington wants more action from Asunción, however, in cracking down on corruption, money laundering and drug trafficking. It is especially concerned about the increasing influence of Brazilian drug gangs, who ferry cocaine from Bolivia and Peru across Paraguay.
Legal trade with Brazil and Argentina has been growing, helped by the Mercosur regional customs union. Brazilian car parts companies are among those opening assembly plants in Paraguay to take advantage of low costs and taxes.
“Mercosur has been very beneficial for Paraguay,” says Mr Castiglioni. He hopes to see further expansion of investment in assembly plants serving factories in Mercosur countries.
A looming challenge for Asunción will be the renegotiation, due to begin this year, of the treaty with Brazil covering the giant Itaipú dam. Paraguay is seeking a much larger share of the dam’s revenues.
Asunción’s more aggressive push of late into the international arena has not been without its problems. A rushed move by the strongly pro-Israel administration of the previous president, Horacio Cartes, to move Paraguay’s embassy in Israel from Tel Aviv to Jerusalem, in alignment with the US position on the matter, was reversed by today’s administration of President Mario Abdo Benítez. Diplomats say this was not signalled in advance to either Washington or Israel, causing a sharp reaction from both. Israel withdrew its ambassador from Paraguay in protest and is yet to reopen its embassy in Asunción.
The country’s strong pro-Taiwan stance puts it off-limits for Beijing. Hence Paraguay has no hope of qualifying for China’s soft loans and Belt and Road infrastructure projects. Paraguay’s cattle ranchers and soya farmers, meanwhile, are frustrated at having to funnel their agricultural exports to China via third countries.
Mr Castiglioni says Paraguay and China could benefit from having bilateral trade and investment but rejects any notion of “political” conditions: “As a free and sovereign nation, we cannot accept impositions.”