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Viewing cable 08TAIPEI1434, TAIWAN-PARAGUAY TIES APPEAR STABLE, BUT UNDERSCORE

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Reference ID Created Released Classification Origin
08TAIPEI1434 2008-10-03 08:35 2011-08-30 01:44 CONFIDENTIAL American Institute Taiwan, Taipei
VZCZCXRO7684
PP RUEHCN RUEHGH RUEHROV
DE RUEHIN #1434/01 2770835
ZNY CCCCC ZZH
P 030835Z OCT 08
FM AIT TAIPEI
TO RUEHC/SECSTATE WASHDC PRIORITY 0066
INFO RUEHAC/AMEMBASSY ASUNCION 0084
RUEHBJ/AMEMBASSY BEIJING 8629
RUEHGT/AMEMBASSY GUATEMALA 0159
RUEHPU/AMEMBASSY PORT AU PRINCE 0091
RUEHUL/AMEMBASSY SEOUL 9812
RUEHTG/AMEMBASSY TEGUCIGALPA 0163
RUEHKO/AMEMBASSY TOKYO 0261
RUEHROV/AMEMBASSY VATICAN 0018
RUEHCN/AMCONSUL CHENGDU 2851
RUEHGZ/AMCONSUL GUANGZHOU 1439
RUEHHK/AMCONSUL HONG KONG 0079
RUEHGH/AMCONSUL SHANGHAI 2259
RUEHSH/AMCONSUL SHENYANG 6809
RHHJJAA/JICPAC HONOLULU HI
RUEAIIA/CIA WASHDC
RUEKJCS/SECDEF WASHINGTON DC
RHEFDIA/DIA WASHINGTON DC
RHHMUNA/USPACOM HONOLULU HI
C O N F I D E N T I A L SECTION 01 OF 03 TAIPEI 001434 
 
SIPDIS 
 
E.O. 12958: DECL: 10/03/2018 
TAGS: PGOV PREL TW CH
SUBJECT: TAIWAN-PARAGUAY TIES APPEAR STABLE, BUT UNDERSCORE 
FRAGILITY OF "DIPLOMATIC TRUCE" 
 
REF: TAIPEI 1429 
 
Classified By: AIT Director Stephen M. Young, Reasons: 1.4 (b/d) 
 
1. (C) Summary:  While the facts are murky, indications and 
perception in Taiwan are that the PRC has thus far 
discouraged Paraguay's efforts to establish diplomatic ties 
with China in the interest of reducing cross-Strait tensions. 
 More clear is that Paraguay is dissatisfied with strings 
currently attached to an aid package offered by Taiwan.  For 
now, Taiwan's Latin American alliances seem stable.  While 
Paraguay may not be the only Taiwan ally in the region 
contemplating switching diplomatic allegiance to China, the 
cold shoulder Asuncion appears to have received from Beijing 
may discourage other Taiwan allies from following the same 
path.  Nevertheless, the situation underscores the fragility 
of the unilateral "diplomatic truce" declared by Taiwan 
President Ma Ying-jeou.  With the Ma government facing 
plummeting approval ratings, a lagging economy and criticism 
even from within the ruling KMT party, the loss of a 
diplomatic ally would cast doubt on the President's ambitious 
plans to improve ties with the PRC.  Thus much is riding on 
China's responding positively to Ma's overtures on 
"international space" and the "diplomatic truce."  End 
summary. 
 
Paraguay: Deal or No Deal for $71 million 
----------------------------------------- 
 
2. (C) While Paraguay-Taiwan diplomatic ties are stable for 
the moment, there continues to be pressure within the 
governing coalition in Asuncion to recognize China instead of 
Taiwan, Paraguay's Ambassador to Taiwan Ramon Diaz Pereira 
told poloff during a September 17 meeting.  While campaigning 
for office, Paraguay President Lugo hinted publically of 
plans to establish diplomatic ties with China.  At his August 
inauguration, however, Lugo reassured visiting President Ma 
that his country would maintain relations with Taiwan.  While 
Lugo had, indeed, made this "promise,"  Pereira explained, 
the Paraguayan President remains interested in strengthening 
ties with China.  China now is Paraguay's second-largest 
trading partner, and Pereira suggested his country may set up 
a commercial office in China.  He expressed frustration with 
Taiwan's Ministry of Foreign Affairs (MOFA) comments to the 
press in early September, suggesting that Paraguay offered to 
recognize the PRC in exchange for USD 71 million in 
assistance.  Pereira lamented MOFA's press remarks and said 
its failure to respond to his requests to discuss the issue 
"did not help" Paraguay-Taiwan relations.  Pereira cautioned 
that he would "set the record straight publically" if he 
continued to get the cold shoulder from Foreign Minister 
Francisco Ou.  That he has not done so suggests FM Ou reached 
out to him and Paraguay-Taiwan ties are stable for now. 
 
3. (C) The details of the aid package at the heart of the 
episode are sketchy.  According to Pereira, Paraguay's and 
Taiwan's former leaders reached a deal last fall in which 
Taiwan would provide Paraguay with USD 71 million in aid, a 
proposal subsequently confirmed in writing last December by 
Taiwan's Ambassador to Paraguay.  After the Paraguayan Senate 
recently approved the deal, Taiwan's MOFA denied its 
existence, saying it would not allocate foreign aid without a 
detailed proposal on how funds would be used.  Pereira 
suggested such a proposal was never provided, noting that 
Paraguay was a poor country that needed money for "various 
projects."  He also appeared frustrated with reports 
suggesting Paraguay attempted to play diplomatic roulette 
with both China and Taiwan and would not confirm that 
Paraguay tried to establish ties with the PRC. 
 
4. (C) In a September 24 meeting with poloffs, Tamkung 
University Professor Kung Kuo-wei reaffirmed the outlines of 
diplomatic intrigues and said it was clear that Paraguay had, 
 
TAIPEI 00001434  002 OF 003 
 
 
indeed, made an offer to China.  While the timing of 
Paraguay's overture to China is uncertain (it could have 
occurred anytime after Paraguay President Lugo was elected 
last April), China rejected Paraguay's bid.  China would not 
reap much benefit from winning over small allies such as 
Paraguay and would, for now, continue to fend off such offers 
in recognition of President Ma's efforts to reduce 
cross-Strait tensions.  Like Pereira, Kung deemed 
Paraguay-Taiwan ties stable for the time being - a question 
in which he has a strong personal stake.  Kung, one of a 
small fraternity of scholars who specialize in 
Taiwan-Paraguay relations, plans to take a break from 
academia and serve a three-year stint in Taiwan's Embassy in 
Asuncion.  When the Taiwan government asked him to move to 
Paraguay earlier this year, he demurred, uncertain that ties 
would remain intact.  Now, though, he was confident that 
Taiwan's embassy would remain open. 
 
What About The Rest of Latin America? 
------------------------------------- 
 
5. (C) Paraguay probably is not the only Latin American ally 
of Taiwan considering switching sides, Kung surmised.  While 
Panama was likely safely in Taipei's camp, Kung pointed to 
Haiti's and Honduras' strong interests in China and suggested 
they would be keen on switching ties.  For now, though, he 
predicted, China would give these efforts the cold shoulder. 
MOFA Deputy Director General for Latin America and the 
Carribean Diego Chou was more upbeat, telling POL Chief 
September 23 he was optimistic Taiwan would not lose any of 
its Latin American allies.  Asked if a possible switch by the 
Vatican would encourage catholic Latin American countries to 
follow suit, Chou said religion would not necessarily play a 
decisive role in Latin American countries' decisions.  In any 
event, in a farewell call by Taiwan's departing Ambassador to 
the Holy See, Pope Benedict XVI had said Vatican-Taiwan 
relations were solid.  The new Vatican charge to Taipei 
echoed these sentiments to the Director in September, 
indicating a breakthrough with Beijing on bishop appointments 
seems far away. 
 
Comment: Stakes are High for Cross-Strait Ties 
--------------------------------------------- - 
 
6. (C) Speculation about Paraguay shifting diplomatic 
allegiance illustrates the risks involved in Taiwan President 
Ma Ying-jeou's effort to seize the initiative in relations 
with China and reduce cross-Strait tensions.  His unilateral 
call for a "diplomatic truce" - in which Taiwan and China 
would end their efforts to poach each other's diplomatic 
allies - offers the prospect of ending the two sides' 
zero-sum competition throughout the world.  Because Ma did 
not vet this proposal with Beijing and has been vague about 
its exact meaning, success requires China - not to mention 
the countries in question, who undoubtedly feel they ought to 
have a say in the matter - to continue to play a game whose 
rules are not entirely clear.  For now, Ma is counting on 
China understanding the need to support his approach, 
including by fending off would-be diplomatic suitors, to 
prevent a return to the more confrontational approach of his 
predecessor.  Meanwhile, the Taiwan MOFA's press comments may 
have been aimed at warning Taipei's allies against attempts 
to switch ties but, in the long run, irritating allies is not 
the best way to maintain ties.  As with Taiwan's bid for WHO 
observership (reftel), a setback for Ma could, indeed, make 
it politically impossible to continue to pursue 
rapprochement.  If Taiwan and China cannot institutionalize 
progress on cross-Strait political issues, the two sides may 
find themselves on increasingly shaky ground.  It is unclear 
to interlocutors here whether Beijing fully understands the 
pressure Ma is under in democractic Taiwan politics to 
demonstrate real results in his cross-Strait gambit.  These 
sources say failure to obtain an adequate response from Cbina 
 
TAIPEI 00001434  003 OF 003 
 
 
could play into domestic politics and force Ma to adopt a 
less accommodating stance on issues like sovereignty and his 
current unilateral "diplomatic truce." 
YOUNG