Simply, We're More Efficient
Simply, We're More Efficient
Regional tariffs on China, Caribbean and Paraguayan leaders in Taipei, BYD postpones factory in Chile, and PRC-Venezuela investment agreement
Welcome to Chaufa, a China-Western Hemisphere Newsletter by CPSI.
Today’s Edition covers May 14 to May 27.
The Top 5 Stories:
After United States imposed steep tariffs on Chinese goods, including EVs, medical supplies, and minerals, Canadian officials said that they were looking into similarly imposing tariffs on Chinese EVs. U.S. Trade Representative Tai hinted there could be penalties for Chinese EV firms investing in Mexico to circumvent U.S. protectionism.
The Economist and Bloomberg also reported that Brazil and Mexico are looking to following in Washington’s footsteps to stem the tide of Chinese exports, which has apparently prompted BYD and its counterparts to rush their vehicles to the countries in anticipation of new tariffs.
In an interview, China’s ambassador in Chile pushed-back against accusations that the country was dumping, which Chilean trade unions strongly rejected.
In a show of support for Taiwan, leaders from Belize, St. Lucia, St. Kitts and Nevis, and St. Vincent and the Grenadines, and Paraguay traveled to Taipei for President Lai’s inauguration.
During the Belizean PM’s trip, Briceño met with local industry, discussed how Taiwan could help improve Belize’s trade balance and overall economy, and signed a sister-city agreement.
Several regional countries that didn’t send their leaders still showed support for Taiwan during the inauguration, namely Guatemala, Haiti, Canada, and the United States.
Peru’s President, Dina Boluarte, will travel to Beijing for a state visit in June to meet with Xi and discuss potential beef exports.
Xi is expected to return the favor in November for his first post-pandemic trip to the region during the APEC leaders’ summit.
BYD postponed $290 million investment to manufacture lithium cathodes for electric vehicle (EV) batteries in Chile, citing unspecified “uncertainty and complications around the project.”
The project was previously announced in 2023. Other Chinese companies, namely Tsingshan, have also planned major investments in more advanced lithium manufacturing and processing in Chile.
The PRC and Venezuela signed an investment promotion and protection agreement in Caracas, which came just as Maduro welcomed the CCP party secretary from Tai’an China and greeted the PRC’s vice minister of commerce.
The investment promotion and protection agreement stems from Maduro’s trip last fall to the PRC. It follows several other recent agreements on science, seafood exports, and civil aviation.
Core Brief
Continuity and Change: What Taiwan’s New Leader Means for LAC
On May 20, William Lai (賴清德) was inaugurated as the Republic of China’s (ROC) 8th president, marking both an era of continuity and change in Taiwan’s foreign policy. His administration is unlikely to upset Taiwan’s current foreign policy orientation to the world, but his administration’s diplomatic position may accelerate Taiwan’s loss of diplomatic allies and greater reliance on unofficial ties.
In terms of continuity, Lai comes from the ruling Democratic Progressive Party (DPP). Before his election, he served first as Premier, and then as Vice President, in former president Tsai Ing-wen’s (蔡英文) administration. That said, Lai comes from a much more radical part of the DPP than Tsai. Given his stronger relationship to the Taiwanese independence movement (he notably once called himself a “pragmatic worker for Taiwan independence”), some have questioned1 his ability to maintain Tsai’s delicate juggling act that kept the peace in the Taiwan Strait the last eight years.2
For the seven Caribbean and Latin American countries that still recognize the ROC, expect continued engagement but a continuation of Tsai’s refusal to throw large sums of money just to keep an embassy open.
This isn’t to say that the new administration doesn’t respect or appreciate Taipei’s formal diplomatic allies.3 Lai has previously acknowledged that formal “diplomatic relations are very important, and the number is important.” Yet he and his key advisors like National Security Advisor (and former Foreign Minister) Wu have recognized that “Taiwan cannot rely on the only remaining diplomatic allies, because the number is small, and Taiwan must cultivate friendship and partnership with [other] important democratic countries.”
The lack of references to Taiwan’s formal diplomatic allies during Lai’s inauguration address further underscores how Lai won’t fight to the last drop just to maintain diplomatic allies. The sole mention of the ROC’s formal diplomatic relations came when Lai thanked “esteemed heads of state and guests from our allies” for attending the ceremony. Otherwise, Lai refrained from mentioning his administration’s plans to engage with diplomatic allies, possibly indicating how they won’t be the administration’s top foreign policy priority.
Under this administration, Taiwan will likely continue its current aid efforts and close coordination with diplomatic allies. But given its recognition that the country gains little foreign policy leverage from throwing vast sums of money to keep an embassy open, Lai is likely to avoid competing in dollar diplomacy with the PRC. Without even trying to engage in this diplomatic tit-for-tat beyond Taiwan’s current aid efforts, expect Beijing to peel off at least a few more of Taiwan’s diplomatic partners (including from the Western Hemisphere).
If this is the Lai administration’s strategy, what will Taiwan do if its diplomatic allies shrink to just a handful of countries? More than likely, Lai will double-down on former president Tsai’s strategy of leaning-in to unofficial relationships.
Following in the footsteps of Tsai’s prior inaugural addresses, Lai’s speech mentioned Taiwan’s broad range of official and unofficial democratic partners rather just than its diplomatic allies. For example, the new president said his administration would be “standing side-by-side with other democratic countries” to “form a peaceful global community.” The reference to working with “democratic countries,” which includes much of Europe, the Americas, and other key partners like Japan and Australia, was a purposeful way for Lai to show that his country views foreign policy far beyond the few countries that send an ambassador to Taipei.
Considering that existing unofficial partners Mexico, Chile, and Peru are CPTPP members, Lai’s mention of Taiwan’s CPTPP application further indicates how Taiwan will lean heavily on unofficial ties through economic diplomacy. Though economic diplomacy may include limited foreign aid efforts, more than likely it really means leveraging Taiwan’s advanced and capital-rich business sector to gain favor with capitals across the world.
Much of Taiwan’s economic engagement has been with non-LAC unofficial partners like Lithuania, the United States, and Japan, but that doesn’t mean it can’t include those in the region. This past week alone, the Taiwanese private and public sectors sought to expand the ROC business presence in Mexico and Argentina, two countries with trade offices on both sides of the Pacific. These types of engagement show how, in Lai’s words, the Taiwanese “government is also committed to providing assistance so that [Taiwanese business] can expand [their] global presence.”
Boiling it all down, William Lai’s administration will simultaneously continue existing aid and engagement that prioritizes diplomatic allies, but he won’t dramatically increase this assistance just to keep a few formal ties. Rather, Lai and his foreign policy team will seek new avenues of engagement in their new and existing unofficial relationships. This provides an opportunity for all LAC countries to seek Taiwanese trade, investment, and people-to-people ties.
The Roundup
Politics and Society
Deputy head of the CCP’s International Department, Chen Zhou, met with President Diaz-Canel to discuss political relations and China’s financial support for Cuba.
A high-level PRC delegation led by Chinese People's Political Consultative Conference member Zhang Yijiong traveled to Costa Rica and met with Foreign Minister André to discuss cultural, educational, and “ethnic and religious” matters.
China’s embassy in El Salvador is expecting a new Defense Attaché who will be focused largely on trainings and military-to-military cooperation, rather than arm sales.
The PRC re-established its Taiwan-focused United Front group in Nicaragua in an inauguration ceremony for the “China-Nicaragua Association for Peaceful Reunification.”
Xi Jinping congratulated the Dominican Republic’s recently re-elected president, Luis Abinader, on his re-election with a fairly boiler-plate statement.
Beijing and the Barbados celebrated 47 years of diplomatic relations in late May, with the PRC ambassador highlighting Mottley’s Beijing visit, the Sam Lord’s Castle Hotel, and the Scotland District Road Rehabilitation Project at a symposium celebrating the relationship.
Barbados also recently signed the implementation agreement for the new 20,000 seat national stadium.
Investment, infrastructure, and finance
Argentina’s central bank revealed that $5 billion of its currency swap would be due in June and July this year, prompting Milei’s government to seek to reschedule these payments.
However, Infobae reported that these rescheduled payments may complicate existing debt renegotiations with the Paris Club.
China’s ambassador to Panama City held a press conference to discuss how his country wanted to assist in building Panama’s in-development Panamá-David train line. Huawei’s representative to the Central American country also announced that his company would be opening its regional transparency and cybersecurity in Panama.
He also used the opportunity to smear Taiwan and argue that the Panama Canal should remain permanently “neutral.”
The Ortega regime advanced several new Chinese-backed infrastructure projects, including the proposals to turn the Punta Huete military airbase into an international airport and the $600 million Bluefields deepwater port. Nicaragua also received 250 buses from the PRC.
Trinidad and Tobago Trade Minister Gopee-Scoon sat down with the China Building Material Market Association (CBMMA) to discuss existing and future Chinese investments in the food, beverage, printing, packaging and construction materials sectors.
The $1 million Dominica-China Agriculture Science Complex Building, which was built with the PRC’s support and will support agriculture innovation, education, research and knowledge exchange, recently opened its doors.
Trade and Technology
Chinese customs officials banned the import of Guatemalan macadamia nuts and coffee, which President Arevalo attributed to his country’s diplomatic relations with Taiwan.
The PRC and Honduras completed the fifth round of FTA negotiations on May 23. The two sides agreed to texts on sanitary and phytosanitary requirements, customs procedures, financial services, and intellectual property.
Just before China’s FTA with Ecuador came into effect this May, the Andean country’s shrimp exports (which in the past made up a majority of the value of Ecuadorian exports to China) dropped about 50% y/y in March.
The Chinese embassy donated a range of equipment, including two Aurora 950 amphibious vehicles and four mercury outboard engines, to Guyana for flood disaster relief efforts, while China Media Group (CMG) donated media equipment to Antigua and Barbuda Broadcasting Services (ABS).
Chinese companies donated $1.7 million to Rio Grande do Sul in Brazil after its recent flood natural disaster.
Taiwan
When asked by Taiwan’s legislature whether Taiwan’s diplomatic allies, namely Guatemala and Haiti, were at risk of breaking off ties, Deputy Foreign Minister Tien said that he did not think there was any imminent trouble.
Taiwan’s new economic minister said that his government plans to set up a new science park in Mexicofor Taiwanese businesses. These remarks came just after a senior Baja California economic official metwith Taiwanese electronic manufacturing businesses looking to invest in manufacturing “components for zero-emission vehicles.”
Belize’s health minister welcomed a donation of $25,000 worth in medical equipment from the Taiwanese embassy.
China’s ambassador to Ecuador spoke extensively to that country’s legislature on the Taiwan and One China Issues, saying that “Ecuadorian citizens can do business or cultural cooperation with the part of Taiwan but there can be no official or state contact, in any way.”
In the midst of Taiwan’s presidential inauguration, several countries in the region, including Honduras,Nicaragua, Cuba, Bolivia, affirmed their commitment to Beijing’s One China Principle.
The Taiwanese and Argentine tourism associations signed a cooperation agreement to increase exchanges between the two countries.
Analysis and Opinion
James Bosworth argued in World Politics Review that “China’s embrace of Nicaragua’s Ortega could backfire.”
Summarizing recent think tank and news reports, Diego Mendoza reports for Semaphor that Mexican, Brazilian, and Chilean (as well as potential Colombian) tariffs on Chinese steel “won’t push China away.”
Writing for Foreign Policy, Elisabeth Braw explained how Peruvian negotiators mistakenly gave Chinese firm COSCO exclusive rights in the new Port of Chancay megaproject.
That’s it for now, see you again in two weeks!
Make sure you don’t miss the next issue of Chaufa 👇
For a good counterpoint on Lai’s political orientation and moderation to the hyperlinked Financial Times op-ed, I’d suggest this piece by Jenny Li and Peng-Hsuan Chen.
Personally, I think this is a tade overstated. Unless a new Taiwan president repeated the PRC’s talking points on the Taiwan strait issue, Beijing was likely to try to further destabilize the Taiwan Strait to achieve Xi’s vision of “national reunification.”
Furthermore, during his inaugural address, Lai more or less used Tsai’s prior language that Taiwan doesn’t need to declare independence [Beijing’s red line] because, as Lai said, the “Republic of China, Taiwan [already] is a sovereign, independent nation.”
That said, Xi and his underlings really, really do not like or trust Lai, likely inhibiting any de-escalation between the two sides of the Taiwan Strait for the foreseeable future.
The Western Hemisphere allies are especially important. Taiwanese officials (include the president and vice president) use travel to these countries as an excuse to “layover” in the United States. These stop-throughs have been an essential part of Taiwanese diplomacy in the 21st century.