Politics, Business & Culture in the Americas

Guatemala Nears a Pivotal Moment on Taiwan

The next administration will face strong incentives from China to ditch Taiwan. The U.S. has an opportunity to step in.
Guatemala's President-elect Bernardo Arévalo (center) meets Honduran officials in Tegucigalpa on Jan 4.Orlando Sierra/AFP via Getty Images
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After months of political drama, Guatemala’s President-elect Bernardo Arévalo still faces an entrenched political elite intent on derailing him. If he takes office on January 14, another political battle with outsized geopolitical consequences looms—Guatemala’s diplomatic ties with Taiwan.

Arévalo has said he does not intend to cut Guatemala’s longstanding ties with Taiwan, and his choice of Carlos Ramírez Martínez as foreign minister signals continuity. But Arévalo has also said he wants to increase trade with mainland China, and he is likely to discover that Beijing will acquiesce only on the condition of a break with Taiwan. China will dangle lucrative incentives, but the U.S. and Taiwan can also offer attractive incentives of their own as Guatemala weighs its future at a key moment.

Guatemala is the most populous country to maintain formal diplomatic ties with Taiwan—not in the region, but in the world—and China is likely to push Arévalo especially hard. Most of Central America turned away from Taiwan under leftist presidents, and Arévalo is Guatemala’s first leftist president in decades. China also has momentum: Costa Rica, El Salvador, Nicaragua, Panama, and most recently, Honduras cut official ties with Taiwan—switches executed, except Costa Rica, in the last six years.

On the other side of the Pacific, China is struggling with the prospect of long-term economic malaise, and Xi Jinping may need to bolster his political legitimacy by peeling off a key Taiwan ally to signal that “reunification” is inevitable. Moreover, Lai Ching-te and his incumbent Democratic Progressive Party will likely win Taiwan’s election on Sunday. This would probably engender a more aggressive stance from Beijing, as Lai supports the current status quo on Taiwan.

For his part, Arévalo may be tempted by what China can offer. After Honduras cut ties in March 2023, negotiations began on a new free trade agreement (FTA), and Chinese state-owned enterprises agreed to build key infrastructure projects, such as the Patuca III hydroelectric dam. Chinese state-owned companies have supported flashy projects in El Salvador, like a new stadium and national library. And Nicaragua finalized an FTA with China and announced dozens of new projects at the most recent Belt and Road Forum.

Guatemala’s political landscape may also lead Arévalo to lean toward China. If he takes office, the opposition-controlled Congress will severely limit his power. Already, Congress has passed a law circumscribing the president’s ability to use the 2024 budget on education and health care—Arévalo’s main priorities beyond combating corruption. With so many domestic strictures, Arévalo will seek quick wins to deliver for his supporters. Switching allegiance from Taipei to Beijing could attract a rapid infusion of much-needed infrastructure funding and other investment. The Chinese carmaker Geely recently established a manufacturing plant in Guatemala, providing a taste of what could come.

Two nations’ role

The U.S. and Taiwan will have to act immediately to make the case that Guatemala should maintain diplomatic recognition. Fortunately for them, U.S. officials have spent the last six months laser-focused on supporting Guatemala’s democratic transition, deploying targeted sanctions and restricting visas on hundreds of public sector officials and members of Congress who allegedly sought to prevent Arévalo’s inauguration. The Biden administration can leverage this goodwill, as well as the fact that 35% of Guatemala’s trade is with the United States.

The U.S. and Taiwan can also pool resources to fund the large-scale infrastructure projects Guatemala needs. The U.S. Development Finance Corporation could work with Taiwanese private companies to underwrite the risk for such projects, and development agencies in both countries can leverage their global memorandum of understanding to expand education and health care initiatives in Guatemala jointly. Other like-minded partners, like Japan, South Korea, and the European Union, could also be convinced to contribute funding. Taiwan could additionally leverage its reputation as a world leader in artificial intelligence, semiconductor supply chains, and other emerging technologies by helping to train Guatemala’s young workforce in these crucial fields of the future.

These measures would not only boost Guatemala’s productivity but also provide incentives for Guatemalans to stay in place rather than migrate to the U.S. All this aligns with the U.S.-led Americas Partnership for Economic Prosperity, of which digital workforce development is a key pillar, and Taiwan’s effort to sell its global narrative of human capital development. Its stance is strengthened when it meets partners on their terms and funds projects with high environmental, social, and governance standards—and weakened when it plays China’s game of comparing the overall dollar total of development assistance.

Together, Taiwan and the U.S. could also support investigative organizations that expose the poor records of Chinese companies on corruption, environmental damage, local labor violations and undue delays in Central America. Florida International University’s dashboard tracking malign Chinese business practices and organizations like the Andrés Bello Foundation and Expediente Público are essential partners in this endeavor.

If such projects don’t materialize and Guatemala switches diplomatic recognition, it should be urged to maintain and capitalize on trade with Taiwan. Taipei maintains meaningful trade ties with various countries around the world that recognize China; it has a robust commercial relationship with non-diplomatic partners like Mexico, for example. Taiwan maintains economic and cultural offices in nine non-diplomatic partners in the region.

If Arévalo is inaugurated on January 14, China will doubtless make attractive offers. The U.S. and Taiwan will need to roll out a proactive strategy to keep Guatemala in Taiwan’s camp.

Lazarus is the associate director for national security at the Florida International University Jack D. Gordon Institute of Public Policy. He is a former U.S. Foreign Service officer.

Berg is director of the Americas Program and head of the Future of Venezuela Initiative at the Center for Strategic and International Studies.

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Tags: Bernardo Arevalo, China, Guatemala, Taiwan
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