[Senate Hearing 119-52]
[From the U.S. Government Publishing Office]
S. Hrg. 119-52
PRC INFLUENCE AND THE STATUS OF
TAIWAN'S DIPLOMATIC ALLIES IN
THE WESTERN HEMISPHERE
=======================================================================
HEARING
BEFORE THE
SUBCOMMITTEE ON WESTERN
HEMISPHERE, TRANSNATIONAL
CRIME, CIVILIAN SECURITY,
DEMOCRACY, HUMAN RIGHTS,
AND GLOBAL WOMEN'S ISSUES
OF THE
COMMITTEE ON FOREIGN RELATIONS
UNITED STATES SENATE
ONE HUNDRED NINETEENTH CONGRESS
FIRST SESSION
__________
MARCH 26, 2025
__________
Printed for the use of the Committee on Foreign Relations
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
Available via http://www.govinfo.gov
_______
U.S. GOVERNMENT PUBLISHING OFFICE
60-060 PDF WASHINGTON : 2025
COMMITTEE ON FOREIGN RELATIONS
JAMES E. RISCH, Idaho, Chairman
PETE RICKETTS, Nebraska JEANNE SHAHEEN, New Hampshire
DAVID MCCORMICK, Pennsylvania CHRISTOPHER A. COONS, Delaware
STEVE DAINES, Montana CHRISTOPHER MURPHY, Connecticut
BILL HAGERTY, Tennessee TIM KAINE, Virginia
JOHN BARRASSO, Wyoming JEFF MERKLEY, Oregon
MIKE LEE, Utah CORY A. BOOKER, New Jersey
RAND PAUL, Kentucky BRIAN SCHATZ, Hawaii
TED CRUZ, Texas CHRIS VAN HOLLEN, Maryland
RICK SCOTT, Florida TAMMY DUCKWORTH, Illinois
JOHN R. CURTIS, Utah JACKY ROSEN, Nevada
JOHN CORNYN, Texas
Christopher M. Socha, Republican Staff Director
Damian Murphy, Staff Director
John Dutton, Chief Clerk
SUBCOMMITTEE ON WESTERN HEMISPHERE,
TRANSNATIONAL CRIME, CIVILIAN SECURITY, DEMOCRACY,
HUMAN RIGHTS, AND GLOBAL WOMEN'S ISSUES
JOHN R. CURTIS, Utah, Chairman
JOHN CORNYN, Texas TIM KAINE, Virginia
BILL HAGERTY, Tennessee JEFF MERKLEY, Oregon
RICK SCOTT, Florida JACKY ROSEN, Nevada
TED CRUZ, Texas CHRISTOPHER MURPHY, Connecticut
(ii)
C O N T E N T S
----------
Page
Curtis, Hon. John R., U.S. Senator From Utah..................... 1
Kaine, Hon. Tim, U.S. Senator From Virginia...................... 3
Ellis, Dr. Evan, Senior Associate (Non-resident), Americas
Program Center for Strategic and International Studies,
Washington, DC................................................. 5
Prepared Statement........................................... 7
Custer, Samantha, Director of Policy Analysis, AidData Global
Research
Institute, The College of William & Mary, Williamsburg, VA..... 15
Prepared Statement........................................... 17
(iii)
PRC INFLUENCE AND THE STATUS OF
TAIWAN'S DIPLOMATIC ALLIES IN
THE WESTERN HEMISPHERE
----------
WEDNESDAY, MARCH 26, 2025
U.S. Senate,
Subcommittee on Western Hemisphere,
Transnational Crime, Civilian Security,
Democracy, Human Rights, and
Global Women's Issues;
Committee on Foreign Relations,
Washington, DC.
The subcommittee met, pursuant to notice, at 2:33 p.m., in
room SD-419, Dirksen Senate Office Building, Hon. John Curtis
(Chairman of the Subcommittee) presiding.
Present: Senator Curtis [presiding], Kaine, Merkley, and
Scott of Florida.
OPENING STATEMENT OF HON. JOHN CURTIS,
U.S. SENATOR FROM UTAH
Senator Curtis. Welcome. I am delighted to open this
hearing on the Western Hemisphere Committee, and we will now
come to order.
Before I begin my remarks, I just want to give a shout out
to the good Senator from Virginia to my right, and tell him how
much I appreciate the opportunity to work together with him on
this, we had a chance to meet a little earlier in this week,
and there are a lot of really good bipartisan issues for this
committee to delve into and delighted to and honored to sit
next to you here, Senator. Thank you.
I used to be a Virginian, and we were talking, he was
serving on the city council in the city where I lived when I
lived in Virginia, and it's interesting how things turn out.
Today marks 5 years since my bill, the Taiwan Allies
International Protection and Enhancement Act, TAIPEI Act was
signed into law. This bipartisan act that I sponsored in the
house, which passed unanimously through Congress, has been
pivotal in protecting Taiwan's remaining diplomatic allies from
Beijing's coercion.
The TAIPEI Act strengthens Taiwan's position in the world
by promoting deeper trade with Taiwan, supporting Taiwan's
participation in international organizations, and most
importantly, protecting Taiwan's relations with its allies. In
short, it sends a loud message of U.S. support for Taiwan,
making clear that we stand with our democratic partners and
will not tolerate attempts to isolate Taiwan.
I'm proud of the TAIPEI Act's legacy and hope this
subcommittee hearing serves as reaffirmation of this 5-year
anniversary. The TAIPEI Act came as a response to Beijing's
intensified campaign in the Western hemisphere and the Pacific
aimed at prying away Taiwan's allies. In Latin America in the
Caribbean, this pressure is increasing.
Specifically, the TAIPEI came as a response to Panama, the
Dominican Republic and El Salvador switching diplomatic
recognition. Not only did they switch diplomatic recognition,
but they adopted China's One China's principle, or China's
claim that Taiwan is part of China. Honduras became the latest
to switch recognition in 2023, severing its 82-year alliance
with Taiwan after making exorbitant demand for billions in aid
that Taiwan wasn't able to fill, but Beijing did, for a price.
Even regional institutions have not been spared. The
Central American parliament was pressured to expel Taiwan's
observer and replace it with China, underscoring the breadth of
China's influence campaign in our backyard. Beijing's tactics
in our hemisphere are increasingly blatant. State department
officials have rightfully likened China's approach in our
region to the 19th century imperialism, bribing local leaders
with investments in ways that lead to debt dependency.
Make no mistake, China's goal is to isolate Taiwan
completely with the goal of silencing international descent if
China forces unification on Taiwan, and it is deploying every
tool in its disposal to achieve that end in our very own
hemisphere. It is squarely in the United States national
interest, to push back against Beijing's encroachment in our
own backyard and to support those nations that continue to
stand with Taiwan.
China's influence efforts in the Western Hemisphere
threaten not only Taiwan's position in the world, but also
global stability and U.S. interest. We must respond with equal
resolve. That means redoubling our engagement with Taiwan's
remaining allies to ensure they have strong economic and
security incentives to stick with Taiwan.
The TAIPEI Act charts that course. The U.S. should
prioritize support and diplomatic engagement with countries
that maintain ties with Taiwan and consider downgrading
relations with those who bow to Beijing. This aligns with the
Trump administration goal of ensuring our dollars spent abroad
are making America more safe, secure, and prosperous.
That is why I'll join a bipartisan group of House and
Senate colleagues next week, to introduce the Taiwan Allies
Fund Act, which I view as a natural follow up to the TAIPEI
Act. This bill sets aside a portion of the already appropriated
countering PRC Malign Influence Fund, to focus on helping
countries that stand strong in the face of PRC pressure and
maintain our strength and ties with Taiwan.
We cannot allow the Chinese Communist Party to buy out
Taiwan's friends in our own backyard. We will continue to stand
shoulder-to-shoulder with Taiwan and help it shore its allies
countering Beijing's coercion at every turn. Taiwan's allies in
this hemisphere have shown courage and loyalty in the face of
intense pressure. United States will not abandon them, on the
contrary, we will strengthen our alliances with these partners,
rejecting authoritarian influence.
Together, we send a clear message. Taiwan is not alone and
the Western hemisphere will not become a playground for the
PRC. With that, I'd like to yield to the distinguished Ranking
Member for his comments.
Senator Kaine.
STATEMENT OF HON. TIM KAINE,
U.S. SENATOR FROM VIRGINIA
Senator Kaine. Thank you, Mr. Chair and I am very happy to
be holding this hearing on a really important topic. I want to
congratulate Senator Curtis on his chairmanship of this
subcommittee and on this first hearing. As he indicated, we
talked and we feel like there's much good work that we can do
together.
I want everybody to know that the title of this
subcommittee might be the longest of any subcommittee in the
United States Senate. This is the subcommittee on Western
Hemisphere, Transnational Crime, Civilian Security, Democracy,
Human Rights, and Global Women's Issues.
By tradition, while most of our hearings will likely be
focused on the Western Hemisphere, we feel like we've got a
pretty broad latitude to do human rights, democracy, promotion,
other important issues, and I relish that opportunity.
The chairman and I have some similarities----
As he mentioned, he lived in Richmond when I was starting
my career in public life as a city councilman there. We also
were both missionaries. He did his missionary work in Taiwan. I
did my missionary work in Honduras, and so my passion for the
Americas is driven by that, but that's something that we share.
The hearing today is very much driven by Senator Curtis's
work as a legislator, but also his personal experience.
Congratulations on the 5-year anniversary of the TAIPEI Act. I
actually remember it well. This was a house bill, but the SFRC
had a similar bill and we worked on it in 2019 over what was a
landmark bill, but also a bipartisan one. We can do good work
together and we need to keep doing it.
We've got a great panel this morning. I want to thank you
Mr. Ellis. It's always good to have you here and to see you
again, but I have to admit a particular pride in welcoming
Samantha Custer of William and Mary's AidData Center
initiative, which is a program that was founded in
collaboration between William and Mary BYU, in Senator Curtis's
home state of Utah, and also UT Austin.
You need to know Samantha, that sitting behind you is one
of the best talent pools that anybody with a college should be
interested in. This is Thomas Jefferson High School's day on
the hill. These are all TJ seniors, one of the best public high
schools in the United States. Do really well and you might
convince some of these guys that William and Mary is where they
should go.
We've got an opportunity today to deepen our discussion on
the important topic that is bipartisan: the clear national
security interest to ensure that the U.S. in its diplomatic,
economic, and security partner of choice in the region, and
that China's efforts to influence folks in the region to pull
away from the U.S. and support policies counter to the U.S. are
not successful.
The U.S. and the 34 neighbors that we share in this
hemisphere, share deep ties, economy, family ties, cultural,
historical ties, and we need to make sure that we're building
off that foundation and off that history, rather than taking
steps that push our allies away from us or letting them drift
away from us without paying sufficient attention.
U.S. assistance and engagement are vital to countering
threats to national security. We have an essential role to play
in bolstering the stability of the region. When we do that, we
help the regional economies and regional political stability,
we not only benefit these neighbors that are our friends, but
we also reduce issues like narcotrafficking or migration flows
to the United States. We're very, very tied together.
Every crisis in the region that affects people in the
region affects our homeland too. There are two reasons why
China is moving so aggressively into the region, why we have to
be equally strategic in our response. Not only is the PRC
trying to box us into a corner in our own neighborhood, they're
also really coming hard after Taiwan's diplomatic partners,
often at the cost of prosperity and good governance. The PRC's
tactics in the region bring significant corruption, economic
degradation, environmental challenges. We've seen that again
and again and again in the region.
The area where I think it's been most manifest to me is in
the relationship that the PRC has had over many years with
Ecuador, that has left Ecuador victimized by illegal fishing
around the Galapagos, environmental despoilation around
drilling or substandard infrastructure projects. That has put
Ecuador in a real jam, and Ecuador in recent years has been
more open to interacting with the U.S. because they've seen the
cost of deep engagement with China.
The PRC is very, very focused on the issue of Taiwan and
the fact that in this region and the Americas have been some of
the most longstanding ties between nations and Taiwan. Now, our
U.S. joint assistance programs with Taiwan have bolstered
Taiwan's diplomatic partnerships in the area.
The Chair mentioned some of the areas where we have
partners in the region drifting away from Taiwan or changing
their policy, but as an example, in February, 2024, the U.S.
International Development Finance Corporation, signed an
agreement with its counterpart in Taiwan to advance private
sector investments around the world. The landmark program is
focused on the Western Hemisphere in the Indo Pacific's
direction.
U.S. foreign assistance is one of the several important
tools for countering PRC advances in the region, but the status
of some of these foreign assistance programs is very much in
question right now in the early months of the Trump
administration.
We want to try to make sure that we're using tools at our
disposal to do what I know the Trump administration very much
wants, to counter Chinese dominance, they very much want to do
that. You see that in military investments, et cetera, but one
of the ways we counter Chinese dominance is also in the
humanitarian aid diplomatic space, and I'm sure we're going to
be talking about that today.
Trade and leveraging private sector partnership is another
one of the great tools we have. The PRC is disrupting
commercial exchanges with countries such as Guatemala, and
they're exerting pressure on other countries like Paraguay as a
means of coercing them into compliance with Taiwan policies.
There can be short-term gains for some nations in doing this,
but often at the cost of long-term stability and prosperity.
Shared values of democracy, freedom of expression, rule of
law, need to remain at the core of our engagement. In this way,
too, supporting democratic Taiwan's ties throughout the region
is in our collective interest. I'll turn it back over to the
chair so we can begin the hearing.
There is a vote occurring during this hearing, so you'll
probably see us leave at different times. You may see other
colleagues joining and leaving as votes are underway, just to
explain that. With that, I yield back to you, Mr. Chair.
Senator Curtis. Thank you. We'll just deal with that as it
comes at us. I think you all are familiar with the drill here
in Washington. Thank you, Senator.
Dr. Evan Ellis is a research professor of Latin American
Studies at the U.S. Army War College Strategic Studies
Institute, with a focus on the region's relationships with
China and other non-Western hemisphere actors.
As well as transnational organized crime and populism in
the region, Dr. Ellis is the leading expert on the China Latin
American relations and has published hundreds of works on the
subject. Dr. Ellis has also served on the Secretary of State's
policy planning staff at the office responsible for Latin
America and the Caribbean, as well as international narcotics
and law enforcement issues.
Dr. Ellis, the floor is yours. I think you understand the
5-minute limits in the lights. You're welcome to begin.
STATEMENT OF DR. EVAN ELLIS, SENIOR ASSOCIATE (NON-RESIDENT),
AMERICAS PROGRAM CENTER FOR STRATEGIC AND INTERNATIONAL
STUDIES, WASHINGTON, DC
Dr. Ellis. Chairman Curtis, Ranking Member Kaine, thank you
very much for the opportunity to share my work and thoughts
with you here today.
Since 2005, PRC-based companies have invested $203 billion
in Latin America and its bilateral trade with the region has
reached $500 billion. China has also built significant people-
to-people networks in the region, including 44 Confucius
centers. It provides paid trips for numerous academics,
politicians, police and military, and even judges.
It similarly pays for trips for journalists to the region,
including Leo Rubin and Kike Gamarra of Paraguay, as well as
Juan Canel Cabrera, and Claudia Mendez of Guatemala among many.
It supplies free media content reflecting PRC narratives, it
curries favor with chambers of commerce in the region, as well
as friendship caucuses in their legislatures. It does all of
this to buy goodwill, access and intelligence.
The PRC's dominant position in the region's digital
infrastructure includes Huawei in telecommunications and cloud
services, including the Mexican Government and other
governments in the region, as well as Hikvision and
surveillance systems and nuke tech custom scanners. These
create risks both of espionage and also intellectual property
theft.
China also props up authoritarian regimes such as
Venezuela, not only through loans, but also through systems
that support repression, including riot control vehicles and
facial recognition cameras for tracking down protestors. If the
PRC starts a war with the U.S., its surveillance facilities in
Cuba and its commercial operations close to the U.S., could be
used as launch points to disrupt U.S. force deployment and
sustainment.
In Panama, beyond Hutchinson's, ``not yet sold'' two ports,
the operations of COSCO, CCCC, and numerous other Chinese
companies give it the combination of physical presence,
technical knowledge, and relationships that could allow it to
shut down the canal. The China friendly firm, Notarc, has
assets from the defunct China Land bridge venture, which it may
use in a new bid for the Panama Colon container port.
In Peru, COSCO's exclusive control over the port of
Chancay, could allow it to resupply PLA naval forces in the
Eastern Pacific in time of war.
PRC access to space from the Western Hemisphere, not only
the PLA operated facility in Neuquen, Argentina, but also
others in Venezuela, Bolivia, and Chile, including Ventarrones,
could also be used and allow it to target U.S. satellites and
also to attack the U.S. from space during time of war.
With respect to Taiwan, for me our partner's survival as an
autonomous democratic entity, is crucial for peace in Asia and
to limiting PRC projection in the Pacific as well as in the
Americas. As the number of states recognizing Taiwan dwindles,
CCP confidence that it can end Taiwan's autonomy at an
acceptable cost grows, increasing the risk for all of us of a
major war.
In the last 7 years, as you noted, 5 of the 12 nations in
this hemisphere that recognize Taiwan have abandoned it for the
PRC. The results for those who switched have been largely
negative. Indeed, none of those who switched meaningfully
increased either exports or actual Chinese investment from that
move.
Moreover, their PRC imports grew rapidly, harming local
businesses. Those diplomatic switches also allowed the PRC to
rapidly expand its presence and influence through MOUs, free
trade agreements, training programs for government officials,
Confucius Institutes, infrastructure projects, and paid trips
to the PRC.
Of Taiwan's remaining friends, Paraguay's President
Santiago Pena, remains steadfast. Still, the PRC is constantly
wooing Paraguay's elites. I note, for example, the case of PRC
agent Xu Wei, who entered the country under false pretenses to
lobby the Paraguayan Congress. In the Caribbean, the March 12
election victory of the incumbent People's United Party
decreases the risk of change there. Still, small governments
including Saint Kitts and Nevis, including also Saint Vincents
and the Grenadines, and Saint Lucia, are tempted by the money
of Chinese investors.
In Haiti, frankly, I worry about Viv Ansanm and a possible
takeover leading to a lawless criminal government, who would be
tempted to turn to the PRC for financing.
My recommendations to the committee include: Number one,
supporting programs to build partner institutional capacity to
limit PRC advance, including the evaluation of contracts and
investments, fighting corruption, and overseeing Chinese
commercial and other activities.
Two, an expanded and less constrained Development Finance
Corporation to leverage private sector good U.S. investment.
Three, leveraging democratic partners in Asia and Europe in
order to finance and win projects to deny that space to the
PRC.
Four, DoD, DHS and intelligence community preparation for
likely PRC actions, not only in the Indo Pacific, but also in
the Western Hemisphere in time of war.
Five, strengthened messaging on the U.S. commitment to
Taiwan, including, and I believe this is very important, CODELs
and STAFFDELs there, as well as defense and technology
assistance supported by this Congress.
Finally, greater State Department and other U.S. Government
coordination with Taiwan, including in my judgment, privileged
treatment for those states, recognizing it, both in terms of
economic matters and also in international organizations.
Thank you for the opportunity to testify.
[The prepared statement of Dr. Ellis follows:]
Prepared Statement of Dr. Evan Ellis
Chairman Curtis, Ranking Member Kaine, and distinguished Members of
the Committee, I am honored to share my analysis with you today. The
views I express here today are mine, and do not represent those of the
Center for Strategic and International Studies (CSIS), the U.S. Army
War College, or the U.S. Government.
I am testifying in my capacity as an academic who has followed and
written on Chinese activities in Latin America and the eroding position
of Taiwan there for over 20 years, both while in government and in the
private sector. I believe both China's advance and Taiwan's eroding
position profoundly impact U.S. strategic interests, the interests of
the Western Hemisphere that we share and issues of peace and stability
in the Indo-Pacific and the global strategic environment more broadly.
Per the title of the hearing, my remarks today focus on two
interrelated topics: PRC influence in Latin America and the Caribbean,
and Taiwan's eroding position there, including the implications of
both.
the influence of the prc in the western hemisphere
and its strategic importance
The influence of the People's Republic of China (PRC), and its
impact on U.S. equities goes far beyond the approximately $203.4
billion Chinese companies have invested in the region, recorded in at
least 678 public transactions,\1\ and its $499.6 billion of bilateral
trade.\2\
PRC physical presence as an employer, taxpayer, business partner,
and purchaser of the region's goods, and the expectations of commercial
and personal benefit that come with that commerce has tempered the
willingness of elites to pursue their national interests in ways that
resist the PRC advance, or to speak critically of PRC authoritarian
behavior, whether in Hong Kong, the repression of Uighur Muslims and
other elements of its own population, its aggression against Taiwan, or
its construction and militarization of artificial ``islands'' in the
South China seas and its maritime claims against its neighbors there.
The PRC has also used its commercial and other engagement to build
significant ``people-to-people'' networks in the region. These include
44 Confucius Centers that serve as gateways for recruiting students to
study in China on scholarships directly from the Chinese Government,\3\
as well as numerous state-affiliated PRC-based universities, and
private institutions like Huawei's ``Seeds for the Future''
program.\4\It also includes luxurious paid trips to China for thousands
of journalists, academics, political party elites,\5\ and even judges,
military personnel and police officers.\6\ PRC outreach further
includes providing free stories and images, and lucrative paid
advertisements to Latin American media, from La Jornada in Mexico to La
Tercera in Chile. It includes outreach to parties in the region with
interests in China through the International Liaison Department of the
Chinese Communist Party.\7\ These include Chambers of Commerce and
``China friendship'' caucuses, such as that headed by leftist Workers'
Party (PT) member Yeidckol Polevnsky in Mexico,\8\ and that headed by
radical Citizen Revolution party member Silvia Nunez Ramos in
Ecuador.\9\
In the digital domain, significant participation by PRC-based
companies in the region's digital infrastructure and services puts at
risk sovereign decision-making and the protection of intellectual
property by both companies and political leaders. The 2017 PRC National
Security Law and the 2019 Cybersecurity law, both oblige PRC-based
companies to turn over data in their possession if the CCP government
determines that it is of national security value for the Chinese
Government.\10\ In this context, it is of note that the PRC-based firm
Huawei, among others, has supplied devices and components to the
region's telecommunications architectures since the late 1990s. Today,
such Chinese companies contribute up to 60 percent of the region's
telecommunications infrastructure. Huawei's advantageous position in
5G, whose architectures are being rolled out now across much of the
region, suggest that Chinese dominance in the sector will only grow
larger. In Mexico, Huawei is a significant provider of cloud services
to countless companies operating there, many of whom would never dream
of locating their core intellectual property in the PRC. Through Telmex
and its local partner the Carso Group, Huawei is also a leading
provider of digital hardware and services to leading ministries of the
Mexican Government, including possibly the Office of the Presidency and
the Communications and Transportation Secretariat (SCT).\11\
In pursuing its economic and other interests, the PRC has also
played a key role in propping up authoritarian regimes across the
region. The PRC provided over $60 billion in loans to the Maduro and
Chavez regimes in Venezuela, and $13 billion to the leftist Rafael
Correa regime in Ecuador, repaid by the commodities of those nations,
as authoritarian governments in each consolidated their power. Beyond
Chinese extraction of the resources of such authoritarian regimes in
exchange for products and work projects by PRC-based companies, the PRC
has also provided a myriad of information technology and security
equipment that has extended the life of these regimes and bolstered
their ability to repress their own people. In Venezuela, for example,
the PRC sold the ``Fatherland Identity Card'' system to that nation's
authoritarian government to help it monitor and distribute scarce food
and resources to pro-government groups. They also sold Venezuela the
VN-1 and other armored vehicles used by the Chavista government to
repress the populations,\12\ as well as the facial recognition cameras
used to target protesters to later track them down in their homes. In
Cuba, the Communist governments successful repression of protests in
July 2021 was facilitated by it having contracted with PRC-based
companies for its telecommunications technologies, allowing the Cuban
Communist government to shut down protesters' ability to coordinate
with each other, and with the outside world.\13\
In security affairs, the growing PRC commercial presence and
security relationships with nations in Latin America and the Caribbean
create numerous options that China's Communist Party could exploit in
the region, impacting U.S. forces and the defense of the U.S. homeland,
if the PRC found itself in a war with the U.S. over its actions against
Taiwan, or other issues in the Indo-Pacific. Indeed, these are options
the PRC could exploit without formal military alliances or basing
agreements in this hemisphere. In Cuba, the PRC presence in at least
one signals intelligence facility in Bejucal, Cuba, and possibly as
many as four such facilities,\14\ could be used to collect electronic
data on U.S. installations and force movements in the region. Numerous
PRC commercial operations in Mexico, Central America, and the Caribbean
create options for its intelligence and special forces to observe, and
potentially disrupt U.S. deployment and sustainment flows, many of
which would likely travel from U.S. installations through the Caribbean
in proximity to those commercial facilities.\15\
It is also likely that the People's Liberation Army (PLA) has used
undocumented immigration into the United States to position agents to
conduct attacks against infrastructure and other targets during
wartime. To be clear, Chinese youth unemployment is high, thanks in
part to the lingering effect of the sustained ``COVID lockdown'' and
other problems. Thus, the vast majority of the more than 30,000 Chinese
nationals that were estimated to have entered the United States without
proper documentation in 2024 \16\ are probably mostly economic
migrants, yet it is difficult to imagine our capable, innovative
adversaries in the PLA not taking advantage of such massive flows to
inject at least a limited number of operatives who could be used to
collect intelligence or act against certain U.S. targets during time of
war.
With respect to Panama, both U.S. warships, and also U.S. logistics
ships carrying supplies and heavy equipment through the Panama Canal to
the Indo-Pacific, would be part of the ``race'' to reinforce Taiwan in
any war, attempting to prevent an invading PLA from consolidating its
victory. Thus, the closure of the Canal, even for days, could seriously
impact the outcome of such a conflict. In wartime, the PLA thus has a
strong, logical military imperative to shut down the canal, likely in
superficially deniable ways, during such a conflict. Its ability to do
this, particularly in a non-attributable way, is a function not only of
Hong Kong-based Hutchison's operation of two of the five Panama Canal
Zone ports, but also from its combination of physical access, technical
knowledge, and relationships the Chinese have through its myriad of
other operations in Panama, including those of the Chinese logistics
giant COSCO, one of the biggest users of the Canal, China Construction
Communications Corporation (CCCC) and its subsidiary China Harbour,
which is currently building a new bridge in the Canal Zone,\17\ and
countless smaller Chinese commercial entities that operate in the Colon
and Panama Pacifico free trade zones, among others.\18\
In the domain of space, the PLA has access to Western Hemisphere
skies through facilities they have built and personnel they have
trained for politically sympathetic governments in Venezuela and
Bolivia, as well as through multiple, PRC-operated space radar and
telescope facilities in Argentina and Chile. In time of war, this
access could help it to locate U.S. and allied satellites and other
space assets to blind, jam, or destroy them, with potentially
devastating impact on communications and operations of U.S. forces that
depend on such assets.\19\ In a similar manner, if the PRC were to
employ an orbital weapon launching hypersonic missiles against
strategic targets in the U.S., such as the vehicle it successfully
tested in 2021,\20\ facilities such as the PLA-operated deep space
radar in Neuquen, Argentina, could be used to pass and receive data
supporting such an attack.\21\
Finally, in the context of a war between the United States and the
PRC, the exclusive operation of the Port of Chancay, granted by the
Peruvian Port Authority (APN) to COSCO, raises concern because of the
risk the Chinese could use control of the port, and a possible lack of
adequate Peruvian Government supervision regarding what is in ships and
containers that come into and out of it, to resupply PLA forces
operating against the U.S. in the Eastern Pacific, even if all parts of
the Peruvian Government did not knowingly approve of such support.\22\
Yet the risk does not come from Chancay alone. PRC port and
transportation infrastructure being built or contemplated in Nicaragua
and Honduras,\23\ with non-transparent, relatively anti-U.S.
Governments in each, could similarly be used to support the PLA in time
of conflict, including the movement of war material between the
Atlantic and Pacific coasts through rail and highway corridors,\24\
particularly if the Honduran Government of Xiomara Castro acts on its
threat to expel the U.S. military from its forward operating location
(FOL) for Joint Task Force Bravo (JTF-B) in Soto Cano Air Base.\25\
In light of such possibilities, it is not surprising that the PRC
has sought to stop the announced divestiture by Hutchison of port
operations in its announced $23 billion deal with Blackrock. The deal
would cede to Blackrock not only Hutchison's port operations in Panama,
but also those in the Bahamas, Mexico and 20 other countries.\26\ Yet
even if the deal goes through, it would not fully address the risk,
insofar as China has other port options throughout the region,
including those of COSCO in Peru, China Merchants Port stake in the
port of Kingston Jamaica, and its March 2025 agreement to acquire a
deepwater port for Very Large Container Ships (VLCCs) in the port of
Acu, Brazil,\27\ among others.
As I have noted, the PRC also has numerous non-port options for
supporting military operations in time of conflict. Moreover, insofar
as Blackrock itself has numerous holdings in the PRC,\28\
infrastructure operated by the company could still be subject to PRC
leverage.
As I have noted, the PRC also has numerous non-port options for
supporting military operations in time of conflict. Moreover, insofar
as Blackrock itself has numerous holdings in the PRC,\28\
infrastructure operated by the company could still be subject to PRC
leverage.
the status and strategic importance of taiwan's continuing autonomy
Turning to the matter of the Republic of China (Taiwan) and its
future, in my professional opinion as a strategic and defense analyst,
Taiwan's survival as an autonomous, democratic entity is critical to
peace and stability in Asia, and for U.S. resistance to the strategic
projection of the PRC both in the Indo-Pacific and in our own
hemisphere.
Twelve nations continue to maintain formal diplomatic relations
with Taiwan, of which seven are in this hemisphere: Paraguay,
Guatemala, Belize, Haiti, St. Kitts and Nevis, St. Lucia, and St.
Vincents and the Grenadines. Seven years ago, the number was roughly
twice that, with the government of Juan Carlos Varela in Panama
abandoning Taiwan in 2017 due to PRC promises, lobbying and pressure;
El Salvador and the Dominican Republic cutting relations in in 2018;
Nicaragua doing so in December 2021; and Honduras in March 2023.
As the number of states recognizing Taiwan dwindles, the confidence
of PRC ruler Xi Jinping that the PRC can successfully end Taiwanese
autonomy at acceptable cost grow, just as it has ended democracy and
autonomy in Hong Kong in violation of its own treaty commitments
without an unacceptably costly international reaction.\29\ Such a move
against Taiwan might involve a traditional invasion, but could also
begin with a blockade or other form of coercion.\30\ Such a move would
confront the U.S. and our allies with the imperative to militarily
defend Taiwan at the risk of a catastrophic global war with the PLA,
including risk of nuclear escalation. Not doing so, or failing in that
effort, would remove the PRC's greatest geographic constraint to
projecting its power across the Pacific, ultimately threatening Hawaii
and the West Coast of the United States,\31\ and at the very least,
risking the strategic reorientation and possible collapse of the
democratic order in East Asia.\32\
In Latin America and the Caribbean, diplomatic flips from Taiwan to
the PRC have been the latter's fastest vehicle for expanding its
presence and influence in individual countries.\33\ Such flips are
almost invariably accompanied by the signing of numerous non-
transparent MOUs that open up local markets to penetration by PRC-based
telecommunications, electricity, construction, and other companies and
products. These are often facilitated by the negotiation of free trade
agreements by partners hoping to secure access to PRC markets, but who
rarely succeed, due to PRC non-tariff barriers, limited export market
size and experience of national trade promotion organizations, and the
economic non-competitiveness of sending their traditional products such
as shrimp, coffee, bananas, or fruit half-way around the world in
refrigerated containers.
Providing empirical support to this logic, data from the respected
International Monetary Fund Direction of Trade Statistics shows that,
in every single case where partners have abandoned Taiwan for the PRC
in Latin America since 2007, exports to Taiwan and the PRC 2 years
after abandoning Taiwan fails to significantly rise, and often drops,
while PRC penetration of the local market by Chinese producers, at the
expense of local jobs, takes off.\34\ El Salvador's combined exports to
Taiwan and the PRC fell from $114.6 million in 2018, the year it
abandoned Taiwan, to a mere $74.9 million 2 years later. Costa Rica's
combined exports fell from $933.2 million in 2007, the year it
abandoned Taiwan, to $809.1 million 2 years later, and by 2023, was
only $457.6 billion.\35\ Meanwhile Costa Rican imports of PRC goods
exploded during the same period, prejudicing local producers, from
$763.3 million in 2007 to $3.21 billion by 2023.\36\
By February 2025, more than 3 years after Nicaragua's change from
Taiwan to the PRC, despite, and in part because of its negotiation of a
Free Trade Agreement with the PRC, the government of Daniel Ortega and
Rosario Murillo there had made little headway exporting to the PRC,\37\
while Chinese products had flooded the Nicaraguan market, facilitated
by the spread of new Chinese retail establishments such as Bazar Chino,
China Mall, Supermercado Chino, La Estrella, Mundo Nica, and Nicaragua
Electronica, displacing local merchants.\38\ By 2024, while Nicaragua
still exported only $51 million to the PRC it was importing $1.02
billion in products and services from it.\39\
In a similar fashion, after abandoning Taiwan for the PRC and
initiating Free Trade Agreement negotiations, Hondurans discovered too
late that the prices the PRC pays for its shrimp was far lower than the
prices its Taiwanese partners paid, owing to the fact that the PRC can
get the same shrimp much more easily from neighboring Vietnam, or from
Ecuador.\40\ In the Dominican Republic, few of the PRC investments
promised during the country's 2018 abandonment of Taiwan have been
realized,\41\ yet the country is now plagued by Chinese shops accused
of not paying taxes or respecting Dominican labor laws.\42\
As a complement to such negative experiences, in the countries
abandoning Taiwan for the PRC, the later's Communist government has set
up training programs in the name of ``teaching'' their partners how to
do business with China, but which really facilitate their ability to
import more Chinese goods. The PRC has also set up Confucius
Institutes, brought local journalists to the PRC on luxurious paid
trips, including 30 from Honduras,\43\ and 25 from Nicaragua,\44\ and
otherwise woven webs of influence capturing local elites and paralyzing
their ability to pursue their national interests in resisting Chinese
penetration.
Beyond the largely negative experiences of the countries which
have'' flipped'' to China in recent years, each of the Taiwan-
recognizing governments in Latin America is being tempted and pressured
by the PRC in different ways to abandon its ally.
In Paraguay, Taiwan's geographically largest global partner, in my
own interactions with the current President Santiago Pena and those
close to him, I was convinced of the depth of his commitment to Taiwan
as a matter of conviction.\45\ Unfortunately, PRC agents are constantly
lobbying Paraguay's elites, from PRC agent Xu Wei meeting with
Paraguayan Congress members on false diplomatic pretenses,\46\ to
whispering in the ears of Paraguay's agricultural lobby about how more
beef they could sell if only they switched recognition to the PRC.
In Guatemala, the left-oriented government of Bernardo Arevalo
faces a profound political as well as economic crisis. While
ideological conservatives in Guatemala are deeply fearful of the PRC,
there are those who, for pragmatic and financial reasons, might abandon
Taiwan and go with the PRC if the Arevalo government falls.\47\
In the Caribbean, Belize, and the often overlooked ``citizenship
for investment'' governments of Saint Kitts and Nevis, Saint Vincent
and the Grenadines, and Saint Lucia, are tempted by the money of
Chinese investors. While more Chinese investors in the Caribbean are
trying to escape from the PRC with their money rather than support it,
the leverage the PRC has over their businesses, families and other
items of value in or reachable from Mainland China, subjects these
Chinese to blackmail in support of the PRC agenda. Inclusion of St.
Kitts and Nevis and St. Lucia on the Administration's new travel ban
``yellow list'' \48\ could further add to pressures in those countries
to recognize the PRC.
In Haiti, the escalation of violence with the collapse of the
governing council, questions of future multinational funding, and the
evaporating hope that the Kenya-led multinational coalition will
maintain security \49\ increases the risk of a new criminal coalition
that could impose authoritarian order, financed by the PRC in exchange
for abandoning Taiwan.
recommendations
Responding effectively to the challenge of China's advance and the
associated defense of Taiwan's autonomy is arguably the defining
challenge for the U.S. strategic position globally, as well as its
long-term national interest. That response is arguably an even greater
challenge than prevailing against the former Soviet Union during the
Cold War and will require fully leveraging all dimensions of U.S.
national power. Naturally success will require U.S. military,
technological and economic might. It will also require preserving and
nurturing the ``soft power'' inherent in U.S. alliances and
partnerships around the world. This soft power, that must be nurtured,
also includes perceptions of the reliability of U.S. commitments and
the shared principles that the United States. represents. Among these
are democracy, free markets, and the protection of the individual.
Continued U.S. engagement in international institutions will also be
important. Beyond preparing for war with the PRC, U.S. success in
responding to the advance of the PRC and defending the autonomy of
Taiwan requires ``shaping the battlespace,'' in order to limit and
channel the PRC advance. Doing so is vital to ensure that the United
States does not have to fight a war against the PRC, and if so, does
not have to fight it alone in conditions of strategic disadvantage.
In pursuit of an effective national strategy necessarily and fully
leveraging U.S. national power, I respectfully offer to the committee
the following recommendations:
Continue to use leadership engagements, including those of
Congress, the State Department, Defense Department and others,
as well as the pressures, incentives, and other levers
available through State Department programs, visa policy, and
sanctions through the Treasury Department Office of Foreign
Assets and Control, to press partners to conduct their dealings
with the PRC in a framework of transparency, and on a level-
playing field. Doing so will limit the ability of the PRC and
its companies to engage in predatory deals that ultimately
create webs of personal benefit and other leverage over Latin
American and Caribbean elites. It will also limit the ability
to secure deals which disproportionately benefit the Chinese
partner, creating economic damage, and ultimately resulting in
flows of refugees and drugs to the United States, among other
issues.
Work through State Department, Commerce, Defense, Justice
Department, and other programs, including a possible
restructuring or replacement of USAID, to build partner nation
institutional capabilities. These should focus on effective
evaluation of contracts, acquisition decisions, other financial
transactions, and the monitoring of the implementation of each
of these. It should also focus on our partners' ability to
fight corruption more broadly. Doing so will limit the most
predatory aspect of China's advance, while avoiding damage to
Latin American economies that impact the United States via
migration and other harms, while also strengthening the
perceived role of the United States in the region as a valued
and trusted partner.
Better leverage the U.S. private sector as an alternative to
predatory PRC investment. The most promising, but not only
candidate for doing so is a revitalized Development Finance
Corporation or its equivalent, less restricted by imperatives
regarding national income, or constraints involving the
preferred beneficiaries of such investments.
Better leverage cooperation from democratic partners of the
United States around the globe with their own interest in the
region, its business opportunities, and conditions. These
include not only Taiwan, but also South Korea, Japan,
Australia, New Zealand, the European Union, and possibly India,
to the degree that its strategic interests are not too closely
tied to Russia. Leveraging such democratic partners recognizes
that in the short term, funding from their banks and
development agencies, or award of a contract to their
companies, even if not going to a ``U.S.-based company,'' may
be preferable to a contract won by a PRC-based company and the
webs of problematic economic leverage, dependency, harm, and
the ``people-to-people network'' influences it may bring.
Fund the generation of better data about the relative
performance of Chinese companies and the PRC Government, vis-a-
vis alternatives from democratic companies. Doing so will help
partners in the region make more informed, sovereign choices.
This should include funding the generation of data and
processes for accessing and delivering it, in order to support
the talking points of U.S. senior leaders in their engagements
with global partners about the PRC. It should also include
funding of academic and other studies, previously done through
the State Department and USAID, so that credible, trusted
information on problematic Chinese practices and firm
performance, can get into the public domain, complementing
official U.S. messaging.
Better leverage U.S. advocacy for the value of democracy,
protection of the individual, reliability, and anti-corruption
practices, as factors which increase the attractiveness of the
long-term value proposition persuading partners to give
priority to the United States over the PRC as a partner. The
U.S. can better leverage the way in which such ``brand appeal''
complements its pursuit of deals and other goals through the
use of pits markets, and threats.
Within the Defense Department, the Department of Homeland
Security, the intelligence community and other agencies, give
heightened attention to the risks associated with actions the
PRC might take, in in conjunction with partners such as Russia,
Iran, Venezuela, Cuba, and others, in the Western Hemisphere in
time of war. The focus of such attention should include, but
not be limited to:
Anticipation, and preparations for response to PLA
attempts to interrupt U.S. force deployment and sustainment
flows from the Continental United States during such a
conflict;
Closure of the Panama Canal and denial of passage through
alternatives such as the Straits of Magellan, the Drake
Passage and the Arctic;
Attacks on U.S. strategic infrastructure and other targets
by PRC and other agents having previously, surreptitiously
entered the United States;
Exploitation of PRC space access in the Western
Hemisphere, in order to locate and target U.S. space
assets, and/or to exploit their own offensive space system
for strategic attacks on the U.S., and;
PRC use of ports and other facilities in the region under
their control, to support forces conducting military
operations against the United States.
U.S. Northern Command (NORTHCOM) and U.S. Southern Command
(SOUTHCOM) should expand their contingency planning for such
possibilities, including conversations with U.S. partners as
appropriate. Beyond NORTHCOM and SOUTHCOM, the U.S. Indo-
Pacific Command (INDOPACOM) should prepare for the possibility
for such PRC actions in the Western Hemisphere as it continues
to refine its own campaign plan and contingencies, with
partners, for a fight against the PRC in the Indo-Pacific.
Increase U.S. verbal, textual and symbolic messaging from
all branches of government, including the United States
Congress that it continues to fully support Taiwanese autonomy,
and its defense if attacked by the PRC, including if such
aggression is done in manners ``short of major war'' through
the use of ``strangulation'' measures such as a full or partial
blockade. Such U.S. messaging and support should arguably
include more regular Congressional Delegations (CODELs and
STAFFDELs) to Taiwan, as well as expanded U.S. assistance and
the authorization of defense sales and transfers for Taiwan's
own defense preparations. Such support, and future warfare
planning, should be done, insofar as possible, in coordination
with allies such as Japan with a shared strategic interest in
Taiwan's survival.
In Latin America, the U.S. Government can and should also do
more to support partners maintaining diplomatic relations with
Taiwan. The State Department should expand programs to promote
and coordinate with Taiwan in embassies of countries in the
region that recognize it, as well as coordinating with
countries that recognize Taiwan in the U.S. American Institute
in Taiwan (AIT) in Taipei. The U.S. Government should further
strengthen favorable economic and other support to Taiwan-
recognizing partners, such as Paraguay, Guatemala, as well as
others with economic incentives and support for leadership
positions in multilateral institutions such as the United
Nations, over other partners who have abandoned Taiwan. In this
regard, I recommend that the United States not include Taiwan-
recognizing countries such as St. Kitts and Nevis and St.
Lucia, among those it excludes from travel access to the United
States.
In my judgment, the Taiwan Allies International Protection and
Enhancement Initiative (TAIPEI) Act of 2019 \50\ was an important
statement and U.S. material commitment to Taiwan. As Taiwan's
international allies dwindles, as China's President Xi approaches the
end of his third term, demonstrations of U.S. resolve and associated
actions are critical for deterring PRC action that could ultimately
lead to a catastrophic war, or the loss of Taiwan autonomy, are more
important for U.S. interests than ever. The United States is at a
tipping point moment in facing the challenge of China and the U.S.
reorientation of its approach toward the world. The choices that we
make in this historical moment, or chose to ignore, regarding the China
challenge and Taiwan as a bastion of democracy in Asia, will mark
whether this moment marks an accelerated U.S. decent into dismantling
its economic and institutional capabilities, alliances, and
international reputation, or in contrast, marks the beginning our of a
promising new era for the United States, Taiwan, and what both
represent in the World.
----------------
Notes
\1\ Enrique Dussel Peters, ``Monitor of Chinese OFDI in Latin
America and the Caribbean 2025,'' Red China-ALC, March 17, 2025,
https://docs.redalc-china.org/monitor/images/pdfs/menuprincipal/
DusselPeters_MonitorOFDI_2025_Eng.pdf.
\2\ Based on imports and exports reported by mainland China, Hong
Kong and Macao to the Western Hemisphere, from 2022, the most recent
year in which both import and export data are published. ``Direction of
Trade Statistics,'' International Monetary Fund, Accessed March 19,
2025, https://data.imf.org/regular.aspx?key=61013712.
\3\ ``Confucius Institutes Around the World--2024,'' Dig Mandarin,
October 12, 2024, https://www.digmandarin.com/confucius-institutes-
around-the-world.html.
\4\ ``Semillas para el Futuro de HUAWEI: sembrando conocimiento de
valor en los futuros lideres deLatinoamerica,'' Huawei, official
website, November 22, 2022, https://www.huawei.com/mx/news/mx/2022/
huawei-sembrando-conocimiento-de-valor-en-los-futuros-lideres-de-
latinoamerica.
\5\ Cesar Eduardo Santos, ``China's `People-to-People' Diplomacy
Targets the Global South,'' The Diplomat, November 20, 2024, https://
thediplomat.com/2024/11/chinas-people-to-people-diplomacy-targets-the-
global-south/.
\6\ R. Evan Ellis, China Engages Latin America: Distorting
Development and Democracy? (New York: Palgrave-Macmillan, 2022).
\7\ R. Evan Ellis, Kelly Senters Piazza, Adam Greer, and Daniel
Uribe, ``China's Use of Soft Power in Support of its Strategic
Engagement in Latin America,'' Journal of the Americas, Vol. 4, No. 2,
https://www.airuniversity.af.edu/Portals/10/JOTA/journals/Volume-
4_Issue-2/03-Ellis_eng.pdf, pp. 159-182.
\8\ ``Edited excerpts from Yeidckol Polevnsky's address at the
China-Mexico Cooperation and Development Forum,'' Beijing Review,
February 24, 2023, https://www.bjreview.com/Special_Reports/2023/
China_Mexico_Cooperation_and_Development_Forum/
Introduction_and_Opinions_of_the_Guests/202304/
t20230425_800329421.html.
\9\ ``Grupos Interparlamentarios de Amistad,'' National Assembly of
Ecuador, official website, accessed March 19, 2025, https://
www.asambleanacional.gob.ec/es/contenido/grupos-interparlamentarios-de-
amistad-0.
\10\ Jack Wagner, ``China's Cybersecurity Law: What You Need to
Know,'' The Diplomat, June 1, 2017, https://thediplomat.com/2017/06/
chinas-cybersecurity-law-what-you-need-to-know/.
\11\ R. Evan Ellis, ``The latest on China's Advance in Mexico,''
The Diplomat, March 21, 2025, https://thediplomat.com/2025/03/amid-
trump-tariffs-where-do-china-mexico-ties-stand/
\12\ Carlos E. Hernandez, ``Venezuela y su apuesta china, el
Norinco VN1,'' Infodefensa, August 17, 2018, https://
www.infodefensa.com/texto-diario/mostrar/3057796/venezuela-apuesta-
china-norinco-vn1.
\13\ ``How China Helps the Cuban Regime Stay Afloat and Shut Down
Protests,'' The Diplomat, August 3, 2021, https://thediplomat.com/2021/
08/how-china-helps-the-cuban-regime-stay-afloat-and-shut-down-protests/.
\14\ Matthew P. Funaiole, Aidan Powers-Riggs, Brian Hart, Henry
Ziemer, Joseph S. Bermudez Jr., Ryan C. Berg, and Christopher
Hernandez-Roy, ``China's Intelligence Footprint in Cuba: New Evidence
and Implications for U.S. Security,'' Center for Strategic and
International Studies, July 7, 2024, https://www.csis.org/analysis/
chinas-intelligence-footprint-cuba-new-evidence-and-implications-us-
security.
\15\ R. Evan Ellis, Toward a More Effective DoD Contribution to
Strategic Competition in the Western Hemisphere (Carlisle Barracks, PA:
U.S. Army War College Strategic Studies Institute, February 24, 2025),
https://press.armywarcollege.edu/monographs/975/.
\16\ ``Is China Sneaking Military Personnel into the U.S. Via
Border? What We Know,'' Newsweek, June 19, 2023, https://
www.newsweek.com/china-military-personnel-us-southern-border-national-
security-mark-green-1807287.
\17\ Julieta Pelcastre, ``China to Proceed with Fourth Bridge over
Panama Canal,'' Dialogo, June 15, 2023, https://dialogo-americas.com/
articles/china-to-proceed-with-fourth-bridge-over-panama-canal/.
\18\ R. Evan Ellis, ``Beyond the Canal: The Real Risks of China's
Engagement in Panama,'' The Diplomat, 4 February 2025, https://
thediplomat.com/2025/02/beyond-the-canal-the-real-risk-of-chinas-
engagement-in-panama/.
\19\ R. Evan Ellis, ``China-Latin America Space Cooperation--An
Update,'' Dialogo, February 21, 2024, https://dialogo-americas.com/
articles/china-latin-america-space-cooperation-an-update/.
\20\ Tyler Rogoway, ``China Tested A Fractional Orbital Bombardment
System That Uses A Hypersonic Glide Vehicle: Report,'' TWZ, October 18,
2021, https://www.twz.com/42772/china-tested-a-fractional-orbital-
bombardment-system-that-uses-a-hypersonic-glide-vehicle-report
#: :text=A%20report%20from%20Financial%20Times%E2%80%99%20Demetri%20Seva
stopulo
%20and,its%20run%20through%20the%20atmosphere%20toward%20its%20target.
\21\ R. Evan Ellis, ``China-Argentina Space Engagement: Reconciling
Science, Sovereignty, and Strategic Risk,'' RedCAEM, No. 40. May 23,
2024, https://chinayamericalatina.com/wp-content/uploads/2024/05/WP40-
May-2024-REDCAEM.pdf.
\22\ R. Evan Ellis, ``Strategic Implication of the Chinese-Operated
Port of Chancay.'' RedCAEM. No. 42, November 7, 2024. https://
chinayamericalatina.com/wp-content/uploads/2024/11/WP42-November-2024-
REDCAEM.pdf.
\23\ Kevin Mercado, ``China construira dos puentes en Cortes y
ampliara el canal seco,'' La Prensa, May 29, 2023, https://
www.laprensa.hn/honduras/china-construira-dos-puentes-cortes-ampliara-
canal-seco-honduras-HM13680733.
\24\ R. Evan Ellis, ``The New Nicaragua Canal: Chinese Strategic
Options Ever-Closer to U.S. Shores,'' Opidata, January 27, 2025,
https://legadoalasamericas.org/the-new-nicaragua
-canal/.
\25\ Ashleigh Fields, ``Honduras threatens to expel U.S. military
over Trump deportation threat,'' The Hill, January 4, 2025, https://
thehill.com/policy/international/5067113-honduras-xiomara-castro-
donald-trump-us-troops-immigration/.
\26\ ``Why China hates the Panama Canal deal, but still may not
block it,'' The Economist, March 20, 2025, https://www.economist.com/
china/2025/03/20/why-china-hates-the-panama-canal-deal-but-still-may-
not-block-it.
\27\ ``China Grows in South America by Buying Brazil's Only Private
VLCC Terminal,'' The Marine Executive, March 3, 2025, https://maritime-
executive.com/article/china-grows-in-south-america-by-buying-brazil-s-
only-private-vlcc-terminal.
\28\ Nicole Goodkind, ``Americans are `unwittingly funding'
blacklisted Chinese companies, Congressional panel says,'' CNN, August
20, 2023, https://www.cnn.com/2023/08/01/investing/china-congress-
blackrock-msci/index.html.
\29\ Zen Soo and Huizhong Wu, ``How democracy was dismantled in
Hong Kong in 2021,'' Associated Press, December 29, 2021, https://
apnews.com/article/china-hong-kong-beijing-democracy-national-security-
9e3c405923c24b6889c1bcf171f6def4.
\30\ R. Evan Ellis, ``The Strategic Value of Taiwan and Stability
in Asia for Latin America,'' Industra Global, June 14, 2024, https://
www.indrastra.com/2024/06/the-strategic-value-of-taiwan-
and.html#google_vignette.
\31\ Lami Kim, ``Should the United States Defend or Ditch Taiwan?''
The National Interest, June 3, 2022, https://nationalinterest.org/
feature/should-united-states-defend-or-ditch-taiwan-202772.
\32\ See David Santoro and Ralph Cossa, ``The world after Taiwan's
fall,'' Asia Times, March 2, 2023, https://asiatimes.com/2023/03/the-
world-after-taiwans-fall/#.
\33\ R. Evan Ellis, ``PRC Engagement with Central America--An
Update,'' Center for Strategic Studies of the Peruvian Army (CEEEP),
March 7, 2023, https://ceeep.mil.pe/wp-content/uploads/2023/03/PDF_PRC-
Engagement-with-Central-America-An-Update-R-Evan-Ellis_7mar.pdf.
\34\ Based on statistics compiled from the ``Direction of Trade
Statistics,'' International Monetary Fund, Accessed March 19, 2025,
https://data.imf.org/regular.aspx?key=61013712.
\35\ Based on statistics compiled from the ``Direction of Trade
Statistics,'' International Monetary Fund, Accessed March 19, 2025,
https://data.imf.org/regular.aspx?key=61013712.
\36\ Based on statistics compiled from the ``Direction of Trade
Statistics,'' International Monetary Fund, Accessed March 19, 2025,
https://data.imf.org/regular.aspx?key=61013712.
\37\ ``China siga con poco apetito por los productos nicaraguenses
en el 2025 mientras EEUU compra mas,''La Prensa, February 17, 2025,
https://www.laprensani.com/2025/02/17/economia/3435748-exportaciones-
empezaron-el-2025-con-dinamismo-pero-aun-no-seducen-al-mercado-chino.
\38\ ``La creciente asociacion de Nicaragua con China marcada por
deficits comerciales,'' Entorno, January 27, 2025, https://
entornodiario.com/es/articles/gc4/features/2025/01/27/feature-01.
\39\ ``La creciente asociacion de Nicaragua con China marcada por
deficits comerciales,'' Entorno, January 27, 2025, https://
entornodiario.com/es/articles/gc4/features/2025/01/27/feature-01.
\40\ ``Honduran shrimp industry faces crisis amid falling prices
and lost export markets,'' eFeedLink, October 25, 2024, https://
www.efeedlink.com/contents/10-25-2024/6cb39ff6-1434-465d-9a12-
a711dec4ea3c-0001.html#: :text=Honduras%27%20shrimp%20industry%20
is%20grappling%20with%20a%20severe,economy%2C%20is%20now%20seeking
%20new%20markets%20to%20recover.
\41\ R. Evan Ellis, ``La evolucion del compromiso chino con la
Republica Dominicana,'' Infobae, November 4, 2023, https://
www.infobae.com/america/mundo/2023/11/04/la-evolucion-del-compromiso-
chino-con-la-republica-dominicana/.
\42\ Sandy de Rosa, ``Evasion Fiscal en Tiendas Chinas: Un Problema
Persistente en Republica Dominicana,'' El Notificador RD, April 18,
2024, https://elnotificadorrd.com/evasion-fiscal-en-tiendas-chinas-un-
problema-persistente-en-republica-dominicana/#: :text=Las%20tiendas%20
chinas%20en%20Rep%C3%BAblica%20Dominicana%20han%20sido,pr%C3%A1cticas
%20que%20socavan%20el%20sistema%20tributario%20del%20pa%C3%ADs.
\43\ ``Honduran Journalists Visit Beijing to See Capital's
Development in New Era,'' The People's Governmentof Beijing
Municipality, May 8, 2023, https://wb.beijing.gov.cn/en/express/202308/
t20230830_3236719.html.
\44\ ``Nicaraguanjournalists visit Wuhan,'' China Daily, April 7,
2024, https://govt.chinadaily.com.cn/s/202404/07/
WS66613b1e498ed2d7b7eafc85/nicaraguan-journalists-visit-wuhan.html.
\45\ R. Evan Ellis, ``Paraguay's Security Challenges and the
Government Response,'' Center for Strategic Studies of the Peruvian
Army, September 12, 2024, https://ceeep.mil.pe/2024/09/12/los-desafios-
de-seguridad-de-paraguay-y-la-respuesta-del-gobierno/?lang=en.
\46\ ``Paraguay expulso del pais al diplomatico chino acusado de
socavar la relacion de Asuncion con Taiwan,'' Infobae,December 5, 2024,
https://www.infobae.com/america/america-latina/2024/12/05/paraguay-
expulso-del-pais-al-diplomatico-chino-acusado-de-socavar-la-relacion-
de-asuncion-con-taiwan/.
\47\ R. Evan Ellis, ``The PRC, Taiwan, and the Future of
Guatemala,'' The Diplomat, June 17, 2024, https://thediplomat.com/2024/
06/china-taiwan-and-the-future-of-guatemala/.
\48\ ``Five Caribbean nations face possible U.S. travel
restrictions under Trump,'' Jamaica Gleaner, March 16, 2025, https://
jamaica-gleaner.com/article/news/20250316/five-caribbean-nations-face-
possible-us-travel-restrictions-under-trump
\49\ ``IACHR condemns deteriorating security situation in Haiti,''
Interamerican Commission on Human Rights, March 16, 2025, https://
www.oas.org/en/IACHR/jsForm/?File=/en/iachr/media_center/PReleases/
2025/052.asp.
\50\ S.1678--Taiwan Allies International Protection and Enhancement
Initiative (TAIPEI) Act of 2019,'' 116th Congress (2019-2020), March
26, 2020, https://www.congress.gov/bill/116th-congress/senate-bill/
1678#: :text=Taiwan%20Allies%20International%20Protection%20and%20
Enhancement%20Initiative%20%28TAIPEI%29,Taiwan%27s%20diplomatic%20relati
onships
%20and%20partnerships%20around%20the%20world.
Senator Curtis. Thank you, Dr. Ellis. Samantha Custer is
the Director of Policy and Analysis for AidData. AidData was
formed in 2009 as a partnership between universities in the
states of both Senator Kaine and myself, William and Mary and
Brigham Young University and Development Gateway to provide
global development stakeholders with more granular and
comprehensive data on foreign assistance projects worldwide,
including efforts by China and other adversaries to leverage
their assistance programs into concrete policy gains.
She holds a dual master's in Public Foreign Service and
Public Policy from Georgetown University and has a 20-year
track record of leading teams and supporting evidence-based
decision making as an international relations scholar
practitioner. Ms. Custer, the floor is yours.
STATEMENT OF SAMANTHA CUSTER, DIRECTOR OF POLICY ANALYSIS,
AIDDATA GLOBAL RESEARCH INSTITUTE, THE COLLEGE OF WILLIAM &
MARY, WILLIAMSBURG, VIRGINIA
Ms. Custer. Chairman Curtis, Ranking Member Kaine, thank
you for the opportunity to share my thoughts on China's
influence and the status of Taiwan's diplomatic allies in the
Western Hemisphere. My remarks today are my own views. They
don't represent the official position of William and Mary,
AidData, our funders or our partners.
Beijing and Taipei are locked in a contest for influence in
the Western Hemisphere. One of PRC's stated aspirations is
reunification of Taiwan with the Chinese mainland. Latin
America is a strategically important battleground to advance
the same in two respects.
First, Beijing wants to peel away Taipei's support in a
region, home to over half of the countries that still
officially recognized Taiwan. Second, operating in America's
backyard is an opportunity for the PRC to deter Washington from
coming to Taipei's aid.
A decade ago, 22 countries worldwide maintained full
diplomatic relations with Taiwan, today this number is down to
12. Half of the ``defectors'' were from Latin America. Of
Taiwan's remaining allies, seven are in Latin America. These
``holdout'' countries are outliers, continuing to recognize
Taiwan and host its embassy even as their peer's defect. Seven
additional countries straddle a middle ground. They're what I
would call ``fence sitters.'' They tacitly engage with Taipei
on economic and cultural issues via a representative liaison
office, but stop short of official recognition.
Taiwan and its allies must work to prevent slippage of
additional countries moving down the recognition chain from
official to tacit recognition to no relations at all. Taipei's
economic statecraft has been outmatched in Latin America.
Beijing exploits economic asymmetry to pressure leaders to back
its preferred policies, including derecognition of Taiwan.
Over two decades, the PRC bank rolled nearly 2,500
development projects in Latin America worth 300 billion, but
this money is not without strings attached. For each dollar of
aid it's supplied, Beijing provided $28 of debt for projects
expected to generate commercial returns.
Hold-out countries that recognize Taiwan cannot access
these funds. Conversely, those who make the diplomatic pivot to
adopt the One China policy are handsomely rewarded. Taiwan is
well-regarded as a development partner, but it operates with
little scale and visibility. Its budget is in the hundreds of
millions per year, but financing is on more generous terms.
Cash-strapped economies have signaled that they may be
willing to stop recognizing Taiwan in exchange for assistance.
Announcements of new projects bankrolled by Beijing followed
quickly on the heels of a country changing its policy.
PRC development finance is deployed to crowd in Chinese
trade and FDI in similar sectors and geographies. Critical
minerals such as copper and lithium were priorities, as well as
investing in companies involved in power generation,
electricity distribution, and mineral extraction.
Latin America saw a 22-fold increase in trade with China
over nearly two decades and Chinese FDI to the region was worth
9 billion in 2023 alone. Prior to the derecognition, Latin
American countries saw sizeable drops in the share of exports
to China. Following a pivot, trade with the PRC rose, declined
with Taiwan, and several countries signed new trade and
investment agreements with Beijing.
Comparatively, Taipei's economic state craft is disjointed.
Despite its comparative advantage as a leading producer of
semiconductors, Taiwan's direct trade and investment with the
region is very modest, while its aid is focused mostly in the
social sectors. So rather than asking why Taiwan has lost some
of its diplomatic allies, we should consider why it has not yet
lost all of them.
Hold-out countries like Paraguay, Guatemala, and Haiti have
two reasons to recognize Taiwan. They might be concerned about
ideological affinity. They may also see alternative economic
opportunities, such as U.S. trade or humanitarian assistance
flows.
Fence sitters like Brazil or Chile, have a strategic
rationale for holding the middle ground. They may have a
foreign policy based on neutrality, or they may capture
economic or political gains from playing both sides. Doing just
enough to satiate Beijing, but still aiming to please the U.S.
Of course, hold out countries still face pressure from
their citizens in Beijing to change course, and the strategic
calculus for these fence sitters could shift with uncertainty
in U.S. trade policy.
To help Taiwan retain existing allies and attract new ones,
I want to talk about three lines of effort for the U.S.
Expanding co-financing and co-branding of U.S. development
cooperation efforts in the Western Hemisphere with Taiwan.
Prioritizing renewal of things like the generalized system
of preferences and strengthen aid for trade, that help Taiwan's
allies in the region utilize duty free access to U.S. markets.
Finally, promoting cooperation between American, Taiwanese and
Latin American firms to build resilient supply chains in
critical industries.
Thank you, and I look forward to your questions.
[The prepared statement of Ms. Custer follows:]
Prepared Statement of Ms. Samantha Custer
Chairman Curtis, Ranking Member Kaine, and distinguished
subcommittee members, thank you for the opportunity to share my
thoughts on China's influence and the status of Taiwan's diplomatic
allies in the Western Hemisphere.\1\
I'll use my remarks to address three questions briefly. How does
the People's Republic of China (PRC) influence the Western Hemisphere?
In what ways does the PRC's economic power constrain Taiwan's ability
to attract and retain diplomatic allies? What are the key battlegrounds
for influence, vulnerabilities, and opportunities for U.S. interests?
These remarks reflect my own views and not the official position of
my employer, AidData at William & Mary's Global Research Institute, or
any of the funders of our research.
how does the people's republic of china influence the western
hemisphere
The cornerstone of China's influence playbook in the Western
Hemisphere is economic, but information and relationships are the
megaphone. Politicians in the region see Beijing's infrastructure
lending as the gateway to growth. The private sector views the PRC as
improving economic prospects via investment, trade, and tourism.
Concerns about debt sustainability \2\ and dependence have yet to
temper this enthusiasm. The PRC's ability to inform, control, and co-
opt local narratives allows it to promote sympathetic voices, convert
undecideds, and weaken the opposition. These overtures aim to position
Beijing as a good neighbor and reliable partner interested in win-win
solutions rather than a threat to the region's interests.
The PRC's economic engagement in the region is driven by necessity
and opportunity. It wants access to raw materials, energy, and
transportation routes to fuel China's economy. Beijing must find a
productive use for its excess financing from three decades of trade
surpluses.\3\ It has an oversupply in its construction, steel, and
engineering industries relative to demand. Emerging markets present
attractive export outlets for the PRC's goods, services, and capital.
Beijing uses its economic power as leverage to advance other
geopolitical and security goals. Cozying up to the PRC enables
countries to diversify their partners and blunt the influence of the
U.S. or other powers. There is a quid pro quo for politicians to
exploit Beijing's economic assistance to advance personal agendas, win
votes, reward allies, or satiate constituents. At first, these
engagements seem like a win-win but ultimately create long-term
vulnerabilities.
Even the smallest countries hold strategic importance for Beijing:
they wield voting power in the UN and other international venues. Their
support helps inoculate the Chinese Communist Party (CCP) against
criticism over its policies that foment discontent at home.\4\ Their
``dual use'' ports allow Beijing to project naval power and mitigate
disruption to trade and supply chains.\5\ Strategic investments in the
region's 5G telecommunications,\6\ surveillance technologies,\7\ and
joint space observatories enhance the PRC's security capabilities.\8\
The PRC seeks synergies between its economic cooperation,
information operations, and public diplomacy as a force multiplier.\9\
Its extensive state-run media operation distributes local language
content in target countries and maintains satellite television channels
and short-wave radio to reach a global audience. Beijing's 29 content-
sharing partnerships with Latin American media infuse domestic coverage
with CCP propaganda.\10\ Exchanges and training amplify these efforts
by cultivating sympathetic relationships with journalists, officials,
and law enforcement.
While the above is also true in many other parts of the world,
there are two respects in which the Western Hemisphere is a uniquely
critical battleground for Beijing and Taipei to jockey for influence.
To achieve its stated aspiration of ``reunifying'' the Chinese mainland
with Taiwan,\11\ Beijing must peel away Taipei's diplomatic support in
Latin America and the Caribbean (hereafter Latin America), the region
with the most holdouts. Given its geographic proximity to the U.S.,
Latin America offers the best opportunity for Beijing to distract,
displace, or delay Washington from coming to Taipei's aid if the PRC
uses military force to invade or impose a blockade to compel
unification with Taiwan.\12\
This contest for influence is dynamic, not static. A decade ago, 22
countries maintained full diplomatic relations with Taiwan.\13\ This
number has dwindled to 12 by 2025. Ten countries have switched
positions since 2016, ceasing official recognition of Taiwan.\14\ Half
of these defectors were from Latin America, including Panama (2017),
the Dominican Republic (2018), El Salvador (2018), Nicaragua
(2021),\15\ and Honduras (2023).
Seven of Taiwan's 12 remaining diplomatic allies, who officially
recognize Taipei and host its embassy, are from the region.\16\
Although they stopped short of full official recognition, seven
additional countries in Latin America tacitly engaged with Taiwan by
hosting a representative liaison office for economic and cultural
ties.\17\ In the future, China's economic power may constrain Taiwan's
ability to retain these diplomatic allies and attract new ones.
in what ways does china's economic power constrain taiwan's ability to
attract and retain diplomatic allies
The PRC exploits economic asymmetry to encourage countries in the
region to give way to its foreign policy goals. China dwarfs the
region's smallest economies and overshadows even larger ones. Its gross
domestic product (GDP) was eight times larger than Brazil's, 10 times
larger than Mexico's, and 28 times larger than Argentina's in 2023.\18\
China's growing economic clout, in turn, creates obligations for
countries to back Beijing's preferred policies, avoid criticism of its
actions, and grant political or security concessions. Despite its high-
income status, Taiwan's economic footprint in GDP terms is more similar
to countries like Switzerland and Argentina than the PRC and trails
Latin American countries like Brazil and Mexico.\19\
Beijing is a prominent financier of overseas development. It
bankrolled nearly 2,500 projects in Latin America worth roughly U.S.
$300 billion over two decades.\20\ For each dollar of aid it supplied,
Beijing provided 28 dollars of debt.\21\ Chinese leaders financed
infrastructure projects with market-rate loans and export credits
(debt) to generate commercial returns.\22\ Examples include energy
plants in Ecuador and Honduras,\23\ resort construction and industrial
manufacturing in the Caribbean,\24\ and critical minerals mining in
Chile and Argentina.\25\ The PRC also supported small-dollar health,
education, and governance projects with grants and no- or low-interest
loans (aid) to build goodwill across the region.
Countries need not be members of the Belt and Road Initiative (BRI)
to access Beijing's development finance.\26\ However, Beijing generally
makes financing contingent on recipients ending official diplomatic
relations with Taiwan. Countries that recognized Taiwan and hosted its
embassy received minimal to no development finance over two
decades.\27\ Haiti, Saint Lucia, and Paraguay received a few token
goodwill projects.\28\ On the other hand, Beijing rewarded early
adopters of the One China policy (e.g., Panama, Costa Rica, El
Salvador) with a notable uptick in financing for their diplomatic
pivot.\29\
In contrast to the PRC, Taiwan supplies development finance and
technical assistance more generously on a smaller scale. Market-rate
loans and export credits buoy the PRC's bottom line. Taiwan provides
grants, concessional loans, and technical assistance.\30\ In its bid to
work with diplomatic allies first, Latin America is a priority for
Taiwan, with some estimates suggesting Taipei channels 30-50 percent of
its development cooperation resources to the region.\31\
Taiwan's development cooperation activities have won admiration in
many quarters. Its use of grants and concessional loans presents a low
risk of debt distress for its partner countries. Its ``Taiwan Model''
emphasizes leveraging local expertise in counterpart countries,\32\ in
contrast to a common critique of Beijing's penchant for using Chinese
suppliers, laborers, and experts.\33\ Not unlike Beijing, Taiwan is a
successful example of an economy that transitioned from once being a
recipient (in the 1960s) to a supplier of development assistance to
others.\34\ In contrast to the PRC, Taiwan has found a way to stand for
both development and democracy.
Nevertheless, Taipei is ill-positioned to compete with Beijing's
formidable development finance operations. Whereas Beijing's budget
runs in the billions per year globally, Taipei's operates in the
hundreds of millions.\35\ Similarly sized economies to Taiwan, like
Switzerland and the Netherlands, have comparatively larger foreign
assistance budgets.\36\ Chinese leaders harness the power of the PRC's
state-run media apparatus to trumpet the benefits of its high-
visibility infrastructure projects and promote Beijing as a benevolent
partner.\37\ Taiwan's projects are lower profile and less
publicized.\38\ Example projects focus on the social sectors--climate
resilient agriculture in Saint Lucia and Honduras,\39\ public health in
Guatemala and Haiti,\40\ along with disaster prevention and emergency
response in Belize and Saint Vincent and the Grenadines.\41\
Previously, Taiwan's diplomatic allies in Central America could
count on an average of ``U.S. $50 million annually in declared non-
reimbursable cooperation'' funds from Taipei.\42\ Taiwanese leaders
have recently expressed a limited appetite for ``checkbook diplomacy,''
recognizing they cannot compete with the PRC dollar-for-dollar.\43\
Beijing outspent Taipei 332 to 1 in its overall global development
finance between 2015 and 2021.\44\ The gap was less pronounced (31 to
1) if limited to conventional aid alone, though still in Beijing's
favor. That said, Taipei may be feeling pressure to provide at least
some financial support to its few remaining diplomatic allies, as it
channeled U.S. $7.17 million in development finance to Belize and
Paraguay.\45\
Cash-strapped economies in the region have signaled that a change
in their policy on Taiwan can be bought in exchange for assistance.\46\
After Taiwanese leaders rejected a request to fund a re-election
campaign and port development project, El Salvador ended diplomatic
relations with Taipei.\47\ A few months later, Beijing reportedly
pledged U.S. $150 million to support 13 new cooperation projects in the
country.\48\ Chinese leaders allegedly promised another defector,
Nicaragua, U.S. $430 million in projects to construct an airport and
LNG terminal.\49\ Paraguay sent a warning signal in 2022 when its
President announced it wanted U.S. $1 billion in foreign assistance in
return for its continued recognition of Taipei before subsequently
backing down.\50\
The dynamic is more complex with trade and foreign direct
investment (FDI). Latin America saw a 22-fold increase in trade with
China between 2001 and 2020.\51\ By 2023, the PRC was the largest
export destination for six Latin American economies and the largest
import source for six countries in the region.\52\ It has historically
had an advantage in South America over Central America,\53\ except for
Panama, where the PRC has made sizable gains in recent years.\54\ FDI
from China to the region also increased, worth nearly U.S. $9 billion
in 2023 alone.\55\
A unique feature of the PRC's approach is that it systematically
orients its development finance to attract Chinese trade and FDI in
similar sectors and geographies. Like Beijing's development finance,
Chinese trade and FDI flows favor the energy and mining sectors. Copper
and lithium are among the region's major exports to China.\56\ Chinese
FDI has prioritized energy projects, from full acquisitions to
investment stakes in mineral extraction and electricity
distribution.\57\
The PRC can heavily influence, if not entirely control, trade and
investment incentives through regulation, agreements, and involvement
of state-owned firms and banks. Panama, Nicaragua, and Honduras each
saw sizeable drops (50-70 percent) in their share of exports to China
just before ending diplomatic relations with Taipei.\58\ In the years
following, Panama saw a U.S. $1.15 billion jump in copper ore exports
to the PRC,\59\ Chile ramped up imports and exports with China, while
both saw trade with Taiwan decline.\60\ These gains may be fleeting: El
Salvador initially saw a jump in exports after it stopped recognizing
Taipei, only to return to being a net importer of goods from the PRC
just a year later.\61\
The PRC granted other sweeteners to countries upon ending
diplomatic relations with Taiwan. After de-recognition, Ecuador and
Nicaragua inked free trade agreements (FTAs) with Beijing.\62\ Honduras
won a U.S. $276 million cooperative agreement for education
infrastructure projects.\63\ The PRC's first Luban workshop for
vocational training in Latin America is set to be based in
Nicaragua.\64\ When Panama recognized Beijing in 2017, Beijing agreed
to build a fourth bridge over the Panama Canal.
Taipei may have a global comparative advantage as the leading
producer of semiconductors,\65\ but Latin America's direct trade with
Taiwan is relatively modest. Taiwan was the destination for roughly 2
percent of exports from Paraguay and Chile in 2023 and the source for
2-4 percent of imports for Dominica and Mexico--its best-performing
markets. The scale contrast is stark with a player like the PRC, which
hungrily consumes much larger shares of regional agricultural
commodities and critical mineral exports to fuel its economy.\66\ As a
case in point, in 2023, the PRC's share of exports from four of the
region's countries was above 30 percent, with three more not far behind
at 20 percent or more.\67\ Latin America also increasingly looks to
China as a source destination, which accounted for 20 percent or more
of imports in 8 countries.\68\
Despite its smaller stature, Taiwan maintains a Central American
Trade Office to promote bilateral trade, investment, tourism, and
culture.\69\ Bilateral FTAs with Honduras, El Salvador, and Panama
remain active, even as diplomatic ties lapsed, but its agreement with
Nicaragua was terminated.\70\ Taipei also has economic cooperation
agreements with diplomatic allies Paraguay and Belize, as well as an
FTA with Guatemala.
Nevertheless, the strategic linkage between how Taiwan deploys its
development finance, trade, and investment is unclear. Nor were its
diplomatic allies substantially more economically integrated with
Taiwan than other countries in the region. Paraguay, Belize, and its
small Caribbean partners counted on Taiwan for 1 percent or less of
their imports in 2023. Taiwan accounted for a similarly small share of
these countries' exports that year.
what are the key battlegrounds for influence, vulnerabilities, and
opportunities for u.s. interests
In the last decade, Taipei's economic statecraft--including
development finance, trade, and investment--has been handily outmatched
by Beijing in the Western Hemisphere. The PRC has the political will
and financial means to direct its formidable information operations and
expansive public diplomacy efforts to reinforce preferred narratives
that it is an indispensable economic partner and cast itself as a
development model to which others should aspire.
This state of play raises a critical question. Rather than asking
why Taiwan has lost some of its diplomatic allies, it may be more
important to grapple with why it has not yet lost all of them. The
answer to this question illuminates where the battlegrounds for
influence lie in the future and how we might respond in the face of
vulnerabilities and opportunities for U.S. interests.
Vulnerability #1: Preventing slippage from official to tacit
recognition among the `hold-outs'
On one end of the continuum, seven ``hold-out'' countries \71\ are
outliers in maintaining official diplomatic recognition of Taiwan even
as peers defect. One defensive strategy is to keep hold-out countries
such as Paraguay, Guatemala, or Haiti from slippage: downgrading their
relationship with Taiwan from official diplomatic ties to tacit or
informal engagement. More than pawns in a chess game, these players
have the agency to determine whether and when it is worth giving up on
Taipei if Beijing presents better opportunities for their countries.
So, why do they persist? Two reasons could be in play. The first is
ideological affinity, such as a shared origin story of anti-communist
policies in Paraguay that have factored into the decision of political
elites to recognize Taiwan since 1957.\72\ The second is greater access
to alternative economic opportunities like the U.S. or Europe.
Guatemala has benefited from increased exports and incomes via
participation in the Dominican Republic-Central America-United States
Free Trade Agreement (CAFTA-DR).\73\ The U.S. and its European allies
have traditionally been leading suppliers of humanitarian assistance,
on which Haiti heavily depends.\74\
Of course, ideology and alternative economic opportunities have not
stopped others from changing their policies. Governments in hold-out
countries face ample pressure from their citizens and Beijing's
coercive diplomacy. During the COVID-19 pandemic, Chinese leaders
unsuccessfully attempted to use vaccine access as a ``poaching
strategy'' to lure Paraguay into defecting.\75\ President Santiago Pena
and his government in Paraguay are also under pressure from private
sector elites to demonstrate why it is worth privileging political
beliefs above the economic opportunities that could be on offer from
Beijing.\76\ In Guatemala, the government of President Bernardo Arevalo
is contending with political opposition at home and seeking closer ties
with both the PRC and the U.S.\77\ As the U.S. reassesses its bilateral
assistance and European countries announce aid cuts, this may prompt
Haiti to reconsider its recognition of Taiwan to ramp up alternative
support from Beijing.
Vulnerability #2: Preventing slippage from tacit to no recognition
among the ``fence sitters''
Seven ``fence sitters'' straddle the middle ground, tacitly
engaging with Taipei on economic and cultural issues via a
representative liaison office.\78\ Though they stopped short of
official diplomatic recognition, these countries still bolstered
Taiwan's position globally. A second defensive strategy would be to
keep fence-sitters like Chile or Brazil from slippage, downgrading
their relationship with Taiwan from tacit to no engagement. The fence
sitters tend to be somewhat larger economies in the region. Some have
GDPs that surpass Taiwan. Four have joined Beijing's BRI.\79\ Brazil
was a founding member of the BRICS.
So, why bother holding the middle ground? Two reasons could be in
play. The first is a foreign policy based on neutrality, such as that
professed by Brazil, related to extra-regional conflicts.\80\ The
second is that the player can gain more economically or politically by
playing both sides: placating Beijing by not fully recognizing Taipei
while informally cooperating to maintain positive relations with the
U.S., its tacit patron. For example, Chile might be more reluctant to
change its position on Taiwan--even in the face of growing
interdependence with the PRC--if it expects to continue to benefit from
high levels of economic engagement with the U.S. via its existing free
trade agreement.
However, the strategic calculus for these fence-sitters could
change in the face of uncertainty over U.S. trade policy, prospective
tariffs, and continued commitment to existing agreements.\81\ Although
a downgrade of their relationship with Taiwan is implausible, it is not
impossible, especially in a world where Western Hemisphere economies
feel they need to hedge their bets and expand ties with alternative
economic partners to the United States.
I conclude by highlighting eight opportunities worth considering to
help Taiwan retain existing allies and attract new ones:
Expand co-financing and co-branding of development
cooperation efforts between the U.S. and Taiwan focused on the
Western Hemisphere to increase resources Taipei can bring to
bear and maximize its visibility as an indispensable economic
partner \82\
Advocate for Taiwan's participation in leading international
development cooperation venues relevant to the Western
Hemisphere, such as the Inter-American Development Bank and the
OECD's Development Assistance Committee, to enhance its
prominence \83\
Help Taiwan document and diffuse its story as a development
and democratic success to provide an alternative model for
countries in the Western Hemisphere to aspire and build
Taipei's soft power appeal \84\
Prioritize renewal of the Generalized System of Preferences
for developing countries in Latin America to gain duty-free
access to the U.S. export market as a means to help holdout
countries identify alternative opportunities to grow their
economies \85\
Provide advisory services and aid-for-trade capacity
building to help Latin American countries better utilize
existing free trade agreements and tariff preference programs
\86\
Help Latin American countries strengthen inbound investment
screening mechanisms and public financial management (PFM)
capacity to mitigate risks from opaque FDI and blunt China's
economic influence
Promote cooperation between Taipei's Liaison Offices and
U.S. Embassies in the Western Hemisphere to identify
opportunities for joint bids or investments between U.S. and
Taiwanese companies with Latin American partners
Capitalize on the momentum of changing relationships in
places like Panama to incentivize counterpart governments to
move up the recognition chain from no to tacit or full
diplomatic engagement with Taipei \87\
Promote industrial co-production to support resilient supply
chains through trilateral U.S.-Taiwan-Latin America Special
Economic Zones and industrial parks in critical industries
----------------
Notes
\1\ My colleague Bryan Burgess (AidData) provided invaluable
background research and data work in support of this testimony. My
remarks also benefited from an unpublished analysis of the PRC in Latin
America from Jonathan Solis and Rodney Knight (AidData).
\2\ For example, growing inflation, GDP fluctuation, indebtedness,
and a shift from being a net exporter to the PRC to a net importer
prompted Argentina to turn to the PRC for emergency rescue loans (World
Bank, 2023; WITS, 2023).
\3\ China's foreign exchange reserves were at U.S. $3.22 trillion
as of February 2025, published via Trading Economics (2025).
\4\ Custer, S. (2025). How does Beijing use information and public
diplomacy to win the narrative? January 23, 2025. Williamsburg, VA:
AidData at William & Mary.
\5\ For example, the PRC has shown interest in building multi-use
ports in Argentina's Tierra del Fuego province (in Rio Grande and
Ushahia) which would provide Beijing with a strategic positioning near
the Strait of Magellan as a staging area for Chinese fishing fleets,
facilitate passage of PRC naval vessels, and monitor activities of the
U.S. and its allies (Pelcastre, Aug. 2023; Saavedra, 2023; Kubney,
2023; Intelligence Online, 2023). It also attempted to bolster the port
facilities in Argentina's Bahia Blanca with a floating liquefied
natural gas (LNG) terminal. Financed by the Bank of China with a U.S.
$200 million loan, the project operated from 2019 to May 2020, before
COVID-19 forced the project to end.
\6\ For example, the PRC via Huawei provided 2000 km of fiber optic
cable to give 350 schools in Argentina access to the Internet
(Government of Jujuy, 2023, Nov. 10).
\7\ For example, a 2019 agreement with ZTE provided security
equipment for enhancing security surveillance in Jujuy, Argentina. This
poses a risk of these technologies giving Beijing access to
surveillance footage from these devices (Reuters, 2019, Jul. 5).
\8\ For example, the PRC signed agreements with Chile's Universidad
Catolica del Norte (UCN) to jointly develop a scientific research base
for observational astronomy in the Ventarrones (NAOC-UCN, 2016; UCN,
2023; UCN, 2024; CASSACA, 2024a). However, Chile is reportedly
reviewing such agreements following a Newsweek investigation of the
deal (Tatlow, 2025).
\9\ Custer, S., Baehr, A., Burgess, B., Dumont, E., Mathew, D., and
Hutchinson, A. (2022). Winning the Narrative: How China and Russia
Wield Strategic Communications to Advance Their Goals. Williamsburg,
VA: AidData at William & Mary.
\10\ These content-sharing partnerships allow domestic media
outlets in counterpart countries to reprint, share, and co-create
content with Chinese state-run media content. https://china-
dashboard.aiddata.org/
\11\ Reuters. (2024). Xi says no one can stop China's reunification
with Taiwan. December 31, 2024.
\12\ Wang, J. and A. Ramzy. (2025). China is Ready to Blockade
Taiwan. Here's How. Wall Street Journal. March 23, 2025.
\13\ Gardner and Khrestin. (2024). The TAIPEI Act: Origins, Tools,
Results, and Remedies. Global Taiwan Institute. Global Taiwan Brief.
Vol. 9. Issue 16.
\14\ Bock, J. and H. Parilla. (2024). Why Countries Abandon Taiwan:
Indicators for a Diplomatic Switch. Global Taiwan Institute.
\15\ Nicaragua initially recognized the PRC in 1985 and withdrew
that recognition in 1990, before reverting back in 2021.
\16\ Taiwan MOFA (2025). Diplomatic Allies. ROC Taiwan. (2025). ROC
Embassies and Missions Abroad. These official diplomatic allies include
Belize, Guatemala, Haiti, Paraguay, Saint Kitts and Nevis, Saint Lucia,
and Saint Vincent and the Grenadines.
\17\ Ibid. Countries hosting a liaison office include Argentina,
Brazil, Chile, Colombia, Ecuador, Mexico, and Peru. Nineteen countries
in the region host neither an embassy (official recognition) nor
liaison office (tacit recognition) for Taiwan.
\18\ https://data.worldbank.org/indicator/NY.GDP.MKTP.CD
\19\ Taiwan's GDP in 2023 was roughly U.S. $756.59 billion,
slightly ahead of Argentina's U.S. $646.08 billion and behind
Switzerland's (884.94 billion). The PRC's GDP that same year was
comparatively U.S. $17,704.8 billion. https://tradingeconomics.com/
taiwan/gdp
\20\ AidData's Global China Development Finance data verified 2,428
projects worth U.S. $286.14 billion between 2000 and 2021.
\21\ This included USD $264 billion in other official flows (debt),
USD $10 billion in official development assistance (aid), and USD $12
billion in flows for which there was insufficient documentation to
classify the terms.
\22\ Thirty-nine percent of Beijing's development finance is
focused on industry, mining, construction, and energy projects.
\23\ Burgess, B., Custer, S., Knight, R., and J. A. Solis. (2025).
Spotlight on PRC Engagement in Honduras Relative to Central America /
Enfoque en la participacion de la Republica Popular China en Honduras
en relacion con America Central. Williamsburg, VA: AidData at William &
Mary. Preliminary data from desk research conducted on prospective PRC
development finance investments in 2023 suggests that Honduras may reap
a similar reward for its de-recognition of Taiwan that year. For
example, Beijing invested in Ecuador's Coca Codo Sinclair hydroelectric
plant, along with Honduras' state-owned electricity company (Empresa
Nacional de Energia Electrica, ENEE), and the Patuca III hydroelectric
plant.
\24\ A China Eximbank loan of U.S. $2.45 billion supported the Baha
Mar Resort Construction Project in the Bahamas but quickly faced
construction delays, local pushback, and lawsuits. The state-owned
policy bank also bankrolled Trinidad and Tobago's Phoenix Park
Industrial Estate development for U.S. $112.63 million.
\25\ In Chile, the PRC's development finance focus has been lithium
for electric cars and batteries (U.S. $3.2 billion) and copper mining
(U.S. $4.4 billion). In Argentina, gold and lithium have attracted
Beijing's attention.
\26\ 21 of 33 Latin American countries are BRI members. As of 2025,
11 countries had not signed on to the BRI (Bahamas, Belize, Brazil,
Colombia, Guatemala, Haiti, Mexico, Paraguay, Saint Kitts and Nevis,
Saint Vincent and the Grenadines, and Saint Lucia). Panama previously
joined the BRI in 2017 but announced its exit in 2025. Despite not
committing to BRI membership, Brazil, Mexico, and the Bahamas were
among the top 10 recipients of Beijing's development finance dollars
over the decade.
\27\ There were no recorded instances of development projects for
Guatemala, Belize, and St. Vincent and the Grenadines. Honduras was an
exception: the largest project funded was a $356 million loan in 2013,
before Tegucigalpa's flip to de-recognizing Taiwan.
\28\ Haiti received U.S. $23.4 million, mostly prior to 2010, in
small-scale emergency response, peacekeeping support, and in-kind
donations of scholarships and equipment. Beijing co-financed four small
SME and rural road projects in Paraguay (mostly in 2015, one in 2018)
worth U.S. $76.2 million with the Inter-American Development Bank.
Saint Lucia initially had some minor investments (14 projects worth
55.71 million) prior to 2003, the largest of which was related to a
Stadium Construction project in 2000.
\29\ Burgess, B., Custer, S., Knight, R., and J. A. Solis. (2025).
Spotlight on PRC Engagement in Honduras Relative to Central America /
Enfoque en la participacion de la Republica Popular China en Honduras
en relacion con America Central. Williamsburg, VA: AidData at William &
Mary. Preliminary data from desk research conducted on prospective PRC
development finance investments in 2023 suggests that Honduras may reap
a similar reward for its de-recognition of Taiwan that year.
\30\ Taiwan MOFA. (2023). White Paper on International Cooperation
and Development Policies. Striving for a World of Freedom and Democracy
for Common Good. November 2023.
\31\ Maggiorelli, L. (2019). Taiwan's Development Aid to Latin
America and the Caribbean and the One China Policy. Razon Critica, 7,
177-208.
\32\ Taiwan MOFA. (2023). White Paper on International Cooperation
and Development Policies. Striving for a World of Freedom and Democracy
for Common Good. November 2023.
\33\ Custer, S., Horigoshi, A., and K. Marshall. (2024). BRI from
the Ground Up: Leaders from 129 countries evaluate a decade of
Beijing's signature initiative. Williamsburg, VA: AidData at William &
Mary.
\34\ Glick, B. (2022). A Revamped Taiwanese Approach to Foreign
Assistance. Global Taiwan Institute. Hsiang, T. (2022). A conversation
with Timothy Hsiang. FRS Taiwan Program on Security and Diplomacy.
September 2022.
\35\ Kot, O. (2025). From Recipient to Donor: Taiwan's
International Assistance. February 11, 2025. In 2023, Taiwan's
development budget was U.S. $468 million. Maggiorelli, L. (2019).
Taiwan's Development Aid to Latin America and the Caribbean and the One
China Policy. Razon Critica, 7, 177-208.
\36\ Runde, D. (2022). Soft power essential to self-defense. Taipei
Times. November 13, 2022.
\37\ Custer, S., Baehr, A., Burgess, B., Dumont, E., Mathew, D.,
and Hutchinson, A. (2022). Winning the Narrative: How China and Russia
Wield Strategic Communications to Advance Their Goals. Williamsburg,
VA: AidData at William & Mary.
\38\ Glick, B. (2022). A Revamped Taiwanese Approach to Foreign
Assistance. Global Taiwan Institute.
\39\ Taiwan emphasizes helping counterpart governments address
local priorities such as Saint Lucia's concern over banana leaf spot
disease which threatened its economy and Honduras' desire to promote
development of the domestic avocado industry. Hsiang, T. (2022). A
conversation with Timothy Hsiang. FRS Taiwan Program on Security and
Diplomacy. September 2022.
\40\ Ibid. Taiwan worked with the Government of Guatemala to
promote medical technology for maternal-child health, restored food
production and clean water in Haiti following a series of natural
disasters.
\41\ Ibid. Taiwan supported a pilot project for emergency
management and disaster response with the government in Saint Vincent
and the Grenadines and developed flood early warning systems for
disaster prevention and rescue with Belize.
\42\ Moreno, B.A. (n.d.). Taipei pays Central America for its
recognition with imports. Universidad de Navarra.
\43\ Fabro, R. and R. Gramerr. (2023). Taiwan Isn't Playing
Checkbook Diplomacy Anymore. Foreign Policy. April 24, 2023.
\44\ Between 2015 and 2021, Taipei gave U.S. $1.8 billion in grants
and concessional loans worldwide, according to the OECD Creditor
Reporting System. Beijing's overall state-directed aid and debt during
that same 7-year period was U.S. $597.68 billion.
\45\ Most of Taiwan's development finance allocations are
unspecified but it did report financing to Belize (U.S. $4.33 million
from 2017 to 2020) and Paraguay (U.S. $2.84 million in 2021). OECD CRS.
\46\ Bock, J. and H. Parilla. (2024). Why Countries Abandon Taiwan:
Indicators for a Diplomatic Switch. Global Taiwan Institute.
\47\ Coonan, C. (2018). Beijing scores win as El Salvador cuts ties
with Taiwan. Irish Times. August 21, 2018. AP. (2018). El Salvador,
Taiwan break ties as China isolates island foe. Associated Press.
August 21, 2018.
\48\ Reuters. (2018). China pledges U.S. $150 million in aid to El
Salvador as relationship deepens. November 8, 2018. AidData tracked
U.S. $145 million in pledges from Beijing across 15 aid projects. It is
unclear whether all these projects have been delivered.
\49\ AFP. (2023). Nicaragua shutters associations with links to
Taiwan. January 10, 2024. Barrons.
\50\ Glick. B. (2022). A Revamped Approach to Taiwanese Foreign
Assistance. November 30, 2022. Global Taiwan Institute.
\51\ Wintgens, S. (2023). China's Growing Footprint in Latin
America. FDI Intelligence. March 10, 2023.
\52\ Countries with the PRC as the top export destination in 2023
included Panama, Chile, Cuba, Peru, Brazil, and Uruguay. It was the top
import source for Paraguay, Chile, Venezuela, Peru, Bolivia, and
Brazil.
\53\ Ellis, E. (2023). PRC Engagement with Central America: An
Update. CEEEP. March 7, 2023. Traditionally, the U.S. has been a larger
market for trade in goods with Central America, facilitated by the
Central America and Dominican Republic (CAFTA-DR) free trade agreement.
\54\ As of 2023, the PRC's share of exports had reached 25 percent
for Panama. This represented a 20 percentage point increase since 2019.
\55\ Wintgens, S. (2023). China's Growing Footprint in Latin
America. FDI Intelligence. March 10, 2023.
\56\ For example, copper and lithium accounted for 64 percent and
15 percent respectively of product exports from Chile to China in 2022
(OEC, 2024). Beijing is actively buying up other key minerals like
molybdenum (Treagold, 2021). It has a stream of planned investments in
lithium projects in Argentina's Salta, Jujuy, and Catamarca regions
(Pelcastre, Jul. 2023; NS Energy, 2023; Bnamericas, 2023; Mining
Technology, 2022, Jul. 29).
\57\ For example, Pacific Hydro, originally an Australian
corporation, and its affiliate Pacific Hydro Chile were purchased by
China's State Power Investment Corporation in 2016 (Harry, 2023). In
2018, Chinese banks lent Tianqi Lithium over U.S. $3 billion for the
purchase of a 24 percent share in SQM, which operates mines to extract
lithium for electric cars and other industries requiring batteries. In
the energy sector, China Southern Power Grid International and State
Grid Corporation of China mobilized U.S. $6.5 billion in foreign direct
investment to secure a 57 percent stake in Chile's electric
distribution network (Ellis, 2021; Myers, 2024).
\58\ Bock, J. and H. Parilla. (2024). Why Countries Abandon Taiwan:
Indicators for a Diplomatic Switch. Global Taiwan Institute. Panama's
share of exports to China dropped by 70 percent between 2015 and 2017
before it changed its position on Taiwan. Nicaragua (-50 percent
between 2015 and 2020) and Honduras (-60 percent between 2020 and 2022)
experienced similar drops before ending diplomatic relations with
Taipei in 2021 and 2023, respectively.
\59\ The total value of Panama's imports from China between 2019
and 2023 declined, however.
\60\ Between 2019 and 2023, Chile ramped up both imports
(broadcasting equipment) and exports (copper-related) with China. For
Panama and Chile, the total value of bilateral trade (sum of import and
export values) with Taiwan declined in this period.
\61\ Ellis, E. (2021). China and El Salvador: An Update. CSIS.
March 22, 2021.
\62\ Ecuador and Nicaragua signed FTA agreement with China in 2023
(Ellias, 2023).
\63\ Reuters (2024). The two countries are also actively
negotiating a free trade pact (Cruz, 2024; La Tribuna, 2024).
\64\ Luban workshops typically involve cooperation between a
Chinese higher education institution, a Chinese state-owned or private
sector company, and a host institution in a counterpart company to
train local workforces to become familiar with Chinese technical
standards, systems, and software (Custer et al., 2021; Prensa INATEC,
2024).
\65\ Saldias, N. (2024). China-Taiwan Tension, the Unseen Risk for
Latin America. Americas Quarterly. April 29, 2024.
\66\ Saldias, N. (2024). China-Taiwan Tension, the Unseen Risk for
Latin America. Americas Quarterly. April 29, 2024.
\67\ Chile, Cuba, Peru, and Brazil were above 30 percent. Panama,
Ecuador, and Uruguay were not far behind at 20 percent or more.
\68\ Venezuela and Paraguay were above 30 percent, while Chile,
Brazil, Colombia, Bolivia, and Ecuador were 20 percent or more.
\69\ https://www.cato.com.tw/en/about_cato_office_info.php
\70\ U.S. International Trade Administration. (2024). Taiwan
Country Commercial Guide. Trade Agreements. Updated January 10, 2024.
\71\ Belize, Guatemala, Haiti, Paraguay, Saint Kitts and Nevis,
Saint Lucia, and Saint Vincent and the Grenadines.
\72\ Tsai, H. (2023). Taiwan in Latin America. December 6, 2023.
StoryMaps.
\73\ Rodriguez, J.R.R. and X. Matschke. The CAFTA-DR Free Trade
Agreement--Analyzing its effects in a modern gravity framework.
December 1, 2022. International Economics and Economic Policy. Vo. 20,
pgs 27-93.
\74\ Horigoshi, A. and Custer, S. 2023. Humanitarian-Development-
Peace Nexus: Successes, Failures, and Lessons from U.S. Assistance in
Crisis and Conflict. Williamsburg, VA: AidData at William & Mary.
\75\ Tsai, H. (2023). Taiwan in Latin America. December 6, 2023.
StoryMaps.
\76\ Carafano, J.J. (2024). U.S. influence challenged in the
Southern Cone. June 10, 2024. GIS Reports Online. Quintana-Lovett, A.R.
(2024). Latin America's role in Taiwans existential struggle. September
16, 2024. Tsai, H. (2023). Taiwan in Latin America. December 6, 2023.
StoryMaps.
\77\ Quintana-Lovett, A.R. (2024). Latin America's role in Taiwans
existential struggle. September 16, 2024.
\78\ Argentina, Brazil, Chile, Colombia, Ecuador, Mexico, and Peru.
\79\ Argentina, Chile, Ecuador, and Peru
\80\ Mingey, M., Gormley, L., and L. Wright. (2024). Avoiding
entanglement: G20 responses in a Taiwan crisis.
\81\ Gerbaud, G. and C. Harrison. (2025). Tracking Trump and Latin
America: Trade--Tariffs on Aluminum and Steel Go into Effect. March 12,
2025. Americas Society/Council of the Americas.
\82\ Glick, B. (2022). A Revamped Taiwanese Approach to Foreign
Assistance. Global Taiwan Institute.
\83\ Runde, D. (2022). Soft power essential to self-defense. Taipei
Times. November 13, 2022.
\84\ Glick, B. (2022). A Revamped Taiwanese Approach to Foreign
Assistance. Global Taiwan Institute.
\85\ Custer, S. 2023. (Re)invigorating U.S. Development Assistance:
Alternative Models and Options. Williamsburg, VA: AidData at William &
Mary. https://www.congress.gov/crs-product/IF11232
\86\ Ibid.
\87\ As President Mulino is revisiting its engagement with Beijing
(withdrawing from the BRI, awarding contracts to American firms,
reducing Chinese ownership stakes in key companies.
Senator Curtis. Thank you, Ms. Custer. We're going to
choose the Ranking Member for just a moment, and then we'll
switch roles and vote. He's demonstrated a lot of confidence in
me to leave me here by myself.
[Laughter.]
Senator Curtis. I want to start--I go off script just a
little bit because I think it's really important for anybody
watching this today to understand why this matters. Dr. Evans
and then Ms. Custer, if you would start, why does this matter?
Why does hanging onto these countries matter for the United
States?
Dr. Ellis. Senator, it's an excellent point, and I think
one that's very important for us to be clear on. First of all,
from the perspective of the conflict or the rivalry with the
PRC, as the number of allies that the Taiwan has goes towards
zero, in the context of increasing military in other
superiority in Asia by the PRC, that tempts the PRC to act and
brings us closer to a war in Asia.
The extent to which Taiwan is seen as not isolated, I think
at least, is one of the factors that keeps us farther away from
such a war.
In addition, if Taiwan is lost as an autonomous democratic
ally in Asia, that geographically allows the PLA and PLA Navy
to project itself out beyond Guam, into Pacific, to Hawaii, to
the U.S. West Coast.
In addition, looking just at Latin America and the PRC
economic, military and political advance in Latin America, as
I've shown time and time again in my own research, the most
rapid way for the PRC to advance in military and economic terms
is when you have a flip, because that flip is associated with
non-transparent MOUs with the PRC. It is often associated with
free trade agreements with the PRC, which open up markets to
PRC companies in sectors like electricity and
telecommunications and others.
Such flips are also typically associated with the
establishment of Confucius Institutes, PRC training programs
for government officials, and a range of other things.
Moreover, frankly, if we look at which states still continue to
recognize Taiwan, they are states geographically close to the
United States. They're in the Caribbean, in the U.S. maritime
approaches there, as well as in Central America, in particular,
Guatemala and Belize, in other words, those states staying with
Taiwan becomes a national security imperative. Really, helping
that to happen is one of the best ways to push back against the
PRC.
Finally, frankly, at the end of the day, for both the
region itself and also for the United States, Taiwan is an
excellent democratic ally. It's a partner with very good
development projects, even if on a smaller scale. It's a good
partner for us to coordinate with to push forward democracy and
help to address and promote the conditions in the region of the
types of regimes that we in the U.S. would like to have.
Senator Curtis. Thank you.
Ms. Custer. I would add to that, three things. First, it
matters economically. Taiwan is the leading supplier and
producer of semiconductors in the world that the U.S. economy
relies upon. Not only would it disrupt our economy, but some
estimates indicate that if Taiwan were to fold, that would have
probably about a 10 percent disruption to the global economy.
That's big.
Senator Curtis. That's a big deal.
Ms. Custer. Geopolitically, the U.S. is actively trying to
advance its interest with the PRC across the globe. If we fold
on Taiwan, if we see diplomatic allies being hemorrhaged away
from Taiwan, that gives China essentially a major victory in
this competitive battle.
Then finally, from a security perspective, I think the more
that countries in the region tip into China's camp away from
Taiwan, that increases exposure for the U.S. to things like
these dual-use ports, space observatories, and other related
installations that strengthen China's hand.
Senator Curtis. Just a point on that, you mentioned the 10
percent hit, I think that's toward GDP, to put that in
comparison, the Great depression was 7 percent. You understand
what type of an impact it is; that's dramatic. Thank you.
I also want to use this opportunity to point out,
oftentimes we have these conversations it feels like we're
talking about the Chinese people, and I want to be really
clear. I think Americans love the Chinese people, love the
Chinese culture. That's not where our problem is, it's an
authoritarian government that's more oppressive on its own
people than anyone else. I just think that's really important
to designate for our conversation.
Dr. Ellis, let's go to the Panama Canal. You mentioned that
just briefly, and I think you rightly said that these two ports
were not yet transferred, but we've got some hope here that
these are moving out of those hands. After Secretary Rubio's
visit, Panama announced it was pulling out the Belt and Road
initiative, which it joined when it switched diplomatic
recognition.
Given these developments, is there a pathway to get Panama
at least to upgrade their relationships with Taiwan, and
perhaps give some type of representation, even if it's a
representative's office or something like that? How do you see
that playing out there in Panama?
Dr. Ellis. Senator, I think it's a great and important
question. I would address three different pieces. Number one, I
think Panama's renouncing of the Belt and Road was important,
but it's also important to recognize that it was symbolic. It
contractually doesn't necessarily get the United States at any
greater security, but again, I think it's a move in the right
direction and we should continue to press for that option with
other states in the region as well.
With respect to a representative office, a TECRO-type
office, again, I think that's a possibility, but I think both
the Administration, Secretary Rubio at State and this Congress
should be ready to fully defend it.
I remember when our friends in Guyana, the Irfaan Ali
government, a couple years back tried to allow Taiwan to open
up a representative office there. The PRC pressure was so
strong that within I think 3 hours they were forced to double
back on that. Thus I think we should absolutely press for that
as a doable thing, but we should be ready to defend it.
The other thing I think is we have some opportunities to
move in the right direction with respect to the Blackrock deal,
but we should also be attentive to the fact that Chinese actors
of the PRC are trying to reverse that deal, including with
their delegation that came just days ago.
Also, there are risks from other operators beyond
Hutchison, such as COSCO, and such as the possibility of a new
Panama Colon Container Port, in which the China-friendly
company, Notarc, could operate there. There are also risks from
as actors such as Huawei and others. I think we need to
continue to be vigilant in that area and certainly be prepared
to not only press forward, but also follow through in things
like TECRO offices.
Senator Curtis. Thank you.
Ms. Custer. Adding to that, I think there is a momentum
that we're seeing in Panama right now. You think about the fact
that Panama is one of only two countries in the world that has
announced that it's backing out of China's Belt and Road
initiative. That's significant.
In terms of this recognition chain that I talked about
before, from no relations to tacit acceptance via a liaison
office to the full status of an embassy, I think the risks for
countries in the region or the pain that they feel is highest
when they go all the way to full recognition. That middle
ground--the fence sitters don't seem to be paying as much of a
cost to do that. I think with the right economic incentives,
the right support from the U.S., there definitely could be an
opportunity to get a liaison office in Panama.
Senator Curtis. Thank you. Alright. I'm told I need to go
vote. Will our good witnesses tolerate just to pause here and I
will be back. If Senator Kaine returns before I do, he's
authorized to start again and then I'll be back as quick as I
can. Thank you for understanding.
Senator Kaine. Okay, that's the end of the short recess.
[Laughter].
Senator Kaine. I'm going to ask some questions, and I know
that the chair will come back and we'll probably have a bit of
a dialogue.
Dr. Ellis, I wanted to ask you just elaborate a little bit
more on what you said about what China's doing right now in
Guatemala and Paraguay. Paraguay has been very, very solid in
support of Taiwan and resisting PRC influence. The new Arevalo
government, slightly over a year old in Guatemala, I think has
been a real breath of fresh air in that country domestically
trying to push back against a culture of corruption.
They had to kind of work through their own version of
January 6 on the day that President Arevalo was inaugurated in
January 2024, but talk a little bit about what the PRC is doing
in both of those countries to kind of break them away from
their support for Taiwan.
Dr. Ellis. Senator Kaine, thank you for the question. First
of all, to put it in general context, as you know very well, in
all of the countries there is a constant process of lobbying by
the PRC. That lobbying often involves the courting of local
elites. Sometimes this includes bringing them over to the PRC,
whether through business opportunities or through consulting
opportunities, or paid trips. That also includes bringing
journalists to the PRC to try to frame the debate.
As a compliment, you also see a number of different
activities with respect to what I would call economic
blackmail; the promise of ``how much more one could export . .
. ''--usually a false promise--``if one only changed relations
. . . '' Then there is also the pressure from saying, ``well,
if you don't change, then you're not going to get even what
you're getting today.''
This pattern applies in both countries. In Paraguay,
because it is a very important meat exporter, as you know,
there is a lot of China working especially through Nidera and
Noble, that China bought about 10 years ago, with some of the
agro-logistics firms, there is a lot of China whispering in the
ear of the Paraguayan agriculturalists, that ``if only you
change relations, you could sell so much more . . . .''
On top of that, you also see what I would call
surreptitious lobbying. I mentioned the Chinese agent Xu, who
basically entered Paraguay supposedly to give a talk, but
instead, tried to lobby in the Paraguayan Congress.
On top of that you also have, I think, some PRC threats to
make Paraguayan exports difficult.
I have had the fortune of being able to engage with
Paraguayan Government, including with President Pena. I know
that because of his background with the Colorado Party, there's
at least a principled determination there to continue with
Taiwan, but again, the threats are always there.
With respect to Guatemala, of course, there is a slightly
different challenge with the Arevalo government, but again,
there is the same PRC promises of agricultural exports, the
same type of lobbying.
I mentioned in my initial testimony the number of different
Guatemalan and Paraguayan reporters that are brought over to
the PRC. There is, for example, the one woman that I mentioned
with her Program ``Con Criterio,'' which is a very influential
Guatemalan program, she was brought over for 3 months for an
orientation trip to the PRC. Those type of things are common,
so you have that.
Indeed, when President Arevalo first came in and he was
trying to walk that delicate balance that so many of our
friends are, trying to say ``well, we want to have the economic
benefits of the PRC. And at the same time continue politically
with our Taiwanese friends . . . '' There was a moment when
they cut off critical exports of, I believe it was, a type of
Guatemala nuts, essentially to send a warning that, if you
don't switch over even what you're getting now could be lost.
Again, I think the principled stance of President Arevalo
in sticking with Taiwan as allies has continued apace. Again,
those PRC pressures are there for those who do.
Senator Kaine. Do you have something, Ms. Custer, you want
to add in?
Ms. Custer. Yes, please. In my written testimony, I talked
about how with Beijing's approach in Latin America, economics
is the cornerstone, but the information operations and the
public diplomacy that Dr. Ellis was talking about is exactly
the megaphone that amplifies these things.
I very much agree with Dr. Ellis's observations. I would
add a little bit more to say that, China is playing this out in
two dimensions. One is that it is trying to engage indirectly
by tapping into this fear of missing out. It's really
interesting when you look at the post-2016 defectors in Central
America, Panama (2017), the Dominican Republic (2018), El
Salvador (2018), Nicaragua (2021), and Honduras (2023).
Countries are looking at each other. They're seeing what their
neighbors are getting for partnering with China. That is a
very, very powerful story.
Interestingly enough, too, in addition to the Paraguay
example you provided Dr. Ellis, I would also add, there was an
interesting anecdote about China's interactions with Paraguay
during the COVID-19 pandemic, and essentially using access to
vaccines as a stick and a carrot, I guess you could say, to try
to pull Paraguay away from Taiwan.
Senator Kaine. I have many questions, but here's one. Is
the Chinese sort of MO in interacting with countries in the
Americas different in any significant way from their theory of
the case when they're interacting with African countries or
other Asian countries? If so, describe a little bit how it's
different.
Ms. Custer. Maybe I'll speak to that first. I'm a
comparativist by nature, so I look at this across different
regions. I had a starting point when I looked at China and
Latin America, and there is a remarkable similarity in how
China engages. Economics, again, is the cornerstone. Beijing
leverages the interplay very well of development finance trade,
and investment, and then uses all of these public diplomacy
information strategies to boost its voice.
I think there are two unique and interesting things about
the Latin America case specifically. One is the stronger
emphasis on the derecognition of Taiwan. You see quite a
significant difference. It's a two-track system. Those that
play ball with China on Taiwan get all of the goodies, and
those that do not are locked out. That comes out in starker
relief here.
Then I think there's also some unique concerns regarding
the dual-use ports and some of the other investments that it's
making in strategic industries in Latin America, just because
of the geographic proximity to the U.S.
Senator Kaine. Dr. Ellis.
Dr. Ellis. I also, as a comparativist fully agree with and
appreciate that. For me, what's interesting is that we do find
lessons looking at what the PRC has done in Africa, what the
PRC has done in Central and Eastern Europe, corresponding to a
study that I did not too long ago. That's not surprising given
that these policies come from the same Chinese culture, that
they come from the same organizations, both on the commercial
side and on the governmental side in Beijing and in Shanghai.
There are differences that reflect the geographical
imperatives, the composition of governments, and the different
cultural legacies. There is, for example, China's involvement
with the legacy of decolonialization in Africa and some of its
relationships there. When we talk about geography certainly
what you see is that, 7 of the 12 nations in the world that
continue to recognize Taiwan are found in this area.
By the way, if you look at it from the perspective of the
military, and I've worked in support of DoD my entire career,
you can't help but noticing that the vast majority of these
states, with the exception of Paraguay, are dramatically close
to strategic United States facilities, from Central America, to
the Caribbean. The opportunity for China for a ``flip'' is as
much strategic in terms of its advance, as it is for the
isolation of Taiwan.
One of the other things that I want to point out is the
role of Chinese companies. While typically the promise of
selling things comes later, it is of note that there are
certain PRC-based companies that do operate even in countries
that recognize Taiwan. Specifically, Huawei comes to mind. What
one finds is that oftentimes Huawei acts as the unofficial
representative in trying to curry favor.
Again, there are absolutely lessons to be learned from what
the PRC is doing elsewhere, to how it is approaching Taiwan in
the Americas.
Senator Kaine. I'm going to make a critical comment and ask
some questions that are critical of Trump administration
activities in the Americas, but I'm always duty-bound to say
something good if there's something good to say,. and there is.
I think the announcement that the President made around the
time of the State of the Union, about the acquisition of the
Panamanian ports by BlackRock from the Hong Kong Syndicate,
Hutchinson, that was real positive. It could have gone in a
much worse direction for the United States.
I know the Administration was strongly behind that,
encouraging it. That's a plus. I know from being on the Armed
Services Committee and looking at investments that are being
made, even as the White House and the Secretary of Defense are
looking for cuts at Pentagon, they're exempting things like
Indo-Pacific, they clearly are recognizing the pacing threat is
China.
I'm really worried about things like the decision to
deescalate or shutter the Inter-American Foundation, some of
the pausing of USAID contracts, because I think that sends a
message that the U.S. is retreating from some of these areas,
and China's not going to retreat.
In fact, they see anything that looks like a retreat, they
want to flood the zone and put more resources in. As I'm
interacting with heads of state in the Americas and warning
them about, beware of the apple presented by China because it
might have a razor blade in it. They say, we're pretty
sophisticated in recognizing the challenges of Chinese offers,
but you have to have something on the table.
It can't just be we're going to turn down interaction with
the Chinese unless you have something on the table, and they
frankly view what we have had on the table for quite some time
as is being woefully inadequate. Now, I think they're partially
correct and then there's partially a messaging problem on our
side, because they don't give us credit for everything the
American companies are doing in their area. They kind of set
that aside. They're looking at what the U.S. Government has on
the table, and they find that to be significantly less than
what the Chinese Government or Chinese industries run by
government have on the table.
We need to do a better job through things like the DFC and
others, to really package what the U.S. is doing, but how much
does it hurt us when soft power levers like the Inter-American
Foundation or USAID or other investments are being kind of put
into question right now?
Ms. Custer. Thank you, Senator Kaine. I think I would start
by saying that when you're talking about how the U.S. engages
in Latin America now and moving forward, one of the key things
that we need to be thinking about is demonstrating that we have
a Latin America strategy, not just a countering China strategy,
and that that Latin America strategy needs to be about shared
prosperity, shared security.
Then the question is, okay, that's nice rhetoric. That's
nice language. What are you going to do to show, not just tell,
that this is happening? I think here, this is where I would say
our economic statecraft levers of development, finance, trade,
and investment are critical. All of them are critical.
I think that there's nervousness about what some of the
changes that the Trump administration are enacting with regard
to foreign assistance, development assistance. It is provoking
questions about, is this lever going away? Is this tool of
statecraft going away?
I think I'd be the first to say that there is a lot about
U.S. development assistance that is in need of reform, and that
benefits from reform, but I think the abruptness of how those
changes were made created questions rather than answers for
people.
Of course, we still have muscular tools like the Millennium
Challenge Corporation, the Development Finance Corporation,
that can be used to continue to engage on this lever.
Then there's a question about packaging, I think you also
said Senator Kaine. That is one of the unique things, I think,
about living in a democracy and a robust market economy like
the United States that's different than our competitor in
China. That is the private sector, civil society, private
philanthropies, so many different actors engage American
companies, engage in Latin America, but you're right, it's very
difficult to pinpoint who they are, what they're doing.
For that reason, I think we do need to be talking about a
whole-of-society contribution. One of the things that I've been
working on with the State Department in other regions of the
world that would be beneficial to do in Latin America, is
trying to quantify what is the value economically of engaging
with the U.S.? What does that look like in terms of private
sector, trade, and investment? What does that look like in
terms of development, finance? Our ambassadors and diplomats
don't have easy answers to those questions.
Senator Kaine. Dr. Ellis.
Dr. Ellis. Thank you very much, Senator. An excellent
question. First of all, my understanding is coming from an
academic standpoint, but also recalling some of the same
answers that I gave during a previous hearing I believe, in
front of yourself and the Foreign Relations Committee, not too
long ago.
I think there's a range of different things, as you pointed
out. Number one, recognizing the appropriate use of national
power, and again, I think that's something that Secretary Rubio
and others understand, to make our adversaries know that we
care and make our partners know that we care.
To me, as I mentioned with Senator Curtis, the importance
of having this at least momentary victory with BlackRock, with
Hutchison, but also it is important to have follow-through to
make sure that that deal is not foiled.
Also, I think one thing that's important and for me hopeful
with the President Trump's administration, is the renewed focus
on the private sector, making sure that the private sector is
leveraged to provide alternatives to China and is not overly
constrained in terms of the way and where we can help.
Also, there is a question I believe, which is fundamental,
and this goes back to your point about institutions. For me,
we're never, as a free market society, going to be able to out-
transactionalize the Chinese. In many ways, the question is how
do we limit some of the more predatory aspects of their
advance?
To me, one of the things that is critical for that, is
working with partners to help strengthen their institutions in
terms of anti-corruption work, in terms of pushing for
transparency, in terms of their ability to evaluate contracts.
There are things that are equivalent to what we have in the
U.S.--basically help them to get it right, and operate with a
level playing field.
My hope is that we continue as we try to figure out, which
is wheat and which is chaff for throwing out, on some of these
programs, that some of those things working with our partners,
we will continue in that direction. I think at the end of the
day, another thing which becomes very important is to give our
partners reasons why they want to work with us. I think, again,
this is a balance that I see Secretary Rubio also working to do
very well, to show that we care, and to apply pressure and to
pursue the U.S. interest where it is appropriate, but at the
same time, to still give them reason to believe that there is
an inherent reason to work with us as a dependable partner.
Senator Kaine. As I cede back, having gone way over my
time, but this has been great. I do want to just underline what
Ms. Custer said, about we need a Latin America policy, not a
countering China in Latin America policy. Latin American
nations, that a critique that they would have of us, is the
U.S. policy toward Latin America is always really about
somebody else.
The Monroe Doctrine, that was really about Europe. It was
telling Europe that they couldn't be involved in Latin America,
and they worry that we're only interested in them to counter
somebody else rather than interested in them. Then even that
interest can be episodic. We're worried if there's an
immigration crisis, and as soon as it abates a little bit,
okay, we're not worried anymore. We're worried if the Soviet
Union is doing things in Latin America, then Soviet Union
collapsed, we're not worried anymore.
I think the notion of a Latin America policy that's really
about Latin American prosperity and stability is good work that
can be done, that needs to be done in a bipartisan way between
Article I and Article II branches. With that, I yield back.
Senator Curtis. Thank you, Mr. Ranking Member. With a
little footnote that I'd still like to come back to some of my
questions, I will yield to the good senator from Oregon.
Senator Merkley. Thank you very much Chair Curtis. Good to
see you in the chair seat. You have so much power now.
[Laughter.]
Senator Merkley. I wanted to go back to a journey of
December 2023 when a group of us led by Senator Kaine, went
down to Guatemala, President-elect Arevalo had been here. A
couple of us had met with him, and he said, ``I may never
actually become President either because they will invalidate
the election, or I'll be assassinated.''
I asked him, would it be helpful if a group of us come down
before the installation to show American support for the
integrity of the election and the integrity of the democratic
process? He said that's the single best thing you could do. So,
we went.
While we were there, the Attorney General of the country
invalidated the elections, and we immediately did a press
conference and stood up for the integrity of the elections,
integrity of democracy. Some European delegations did the same,
the same day. By the end of the day, the then President, the
outgoing President said he would stand by the elections and the
installation. I was very, very pleased to see America standing
up for democracy, standing up for integrity of the process.
President Arevalo ran on economic development for the whole
nation, and that really made a huge impact on the indigenous
population, recognizing they had a champion in him, which they
often didn't have in a President in Guatemala. His effort to
take on corruption, and you just mentioned corruption a moment
ago.
Now we are cutting programs that support anti-corruption
and support economic development. What impact will those cuts
have on the stability or success of Arevalo's effort to improve
living and stability and take on corruption and establish a
better democracy?
Dr. Ellis. Senator, thank you very much for the question.
First for me, in framing to be perfectly clear, my
understanding is that the Administration is in the process of
evaluating the wheat with the chaff, which things make sense to
continue in some new form versus what things don't make sense
to.
For me, and also, frankly, to dovetail off what Senator
Kaine said, for me there is no other region in the world in
which what happens whether for good or bad, most directly
impacts the United States through ties of immigration or
commerce or security. Understanding that connectedness, I think
that probably the entire committee shares. Understanding that
one of the biggest impacts for opening up the doors for China,
as we see with, for example, Venezuela, when frustrations with
corruption opened the door for first Hugo Chavez and then
Nicholas Maduro, or for example, in Ecuador, how Rafael Correa
came to power, or in Bolivia, how Evo Morales first came to
power.
That frustration with corruption, oftentimes in the sense
that governments are not performing, opens up the door for
radical left that hijack democracy. Often they are who buys the
most Chinese arms, who buys the most Chinese security systems,
who engages with the Chinese in the most problematic ways. What
you see is that when there's a loss of faith in democracy, that
often opens up those doors.
I certainly would concur that helping our partners to
succeed with democratic governance in the fights against
corruption and other things is important, and at the same
time----
Senator Merkley. You've kind of leapt forward to my second
and third questions, but I'll just acknowledge that. I do think
that cutting, the terminations of foreign aid programs that
have included supporting democracy programs and good governance
will have an impact. Maybe some of those will be restored, as
you say, maybe there's the chaff that can be set aside.
I think it's very important to carefully defend the
programs that support his efforts in economic development and
strengthening the institutions of democracy, but then this has
broader impacts. What you have leapt forward to, and certainly
if we have a weaker relationship with Guatemala and terminate
these programs, it creates a more open door for China.
I wanted to ask about one specific aspect, maybe it's been
asked about, but I wasn't here for the rest of the hearing, so
I apologize, and that is, whether undermining programs in
Guatemala might also undermine the ability of President Arevalo
to continue to support Taiwan. He's under tremendous pressure
to abandon the recognition of Taiwan. We've encouraged him to
sustain that. If we're doing less on economic development,
China has the opportunity to say, well we'll do more--recognize
us.
Ms. Custer. Thank you very much for the questions. I wanted
to go back first to your earlier comment about democracy. I
think when you talk about democracy erosion, there's really
three things that we need to be looking at with that. One is
public apathy. Globally, you're seeing citizen surveys that are
uncertain about whether democracy is delivering economic
growth. That is a major challenge for democracy.
I think secondly is that you do have wealth maximizing,
power maximizing politicians that are looking for opportunities
to accumulate power, but then you also have motivated external
salesmen. I think that kind of brings us to the point of this
hearing. China and Russia and other authoritarian allies are
very happy to find ways to demonstrate that their models of
development, their models of governance are more attractive and
that they will deliver economic growth.
I think there's an opportunity for the U.S. to counter that
in two respects. One is bolstering Taiwan, who actually has
made an effort to demonstrate that you can have development and
democracy to be successful. It's not very good about telling
its story as a successful democracy, so that's certainly one
thing to think about.
Two, in terms of the U.S., there is a whole society
approach that we need to be thinking about here, our civil
society, our private sector, our government, engaging in places
like Guatemala to shore up democracies. To do that, you're
thinking about investing in watchdog capacity of civil society
journalists and whatnot.
You're thinking about increasing the technocratic
competence of officials in these governments as a
counterbalance to politicians. Then, investing in
accountability. I would like to see the U.S. continue to be a
voice and put resources behind doing these things, from a
government perspective. At minimum, we should also be working
with our private sector and civil society actors to shore that
up further.
Senator Merkley. I'm over my time, but I just want a kind
of a yes or no, if possible. Does canceling programs that we
support in Guatemala on economic development and democracy
building make it harder for Guatemala to maintain its current
relationship with Taiwan?
Dr. Ellis. I think we need to get the programs that we
support, right, sir, and make every program dollar that we
spent count.
Senator Merkley. That wasn't exactly an answer. Okay.
You're going to not answer that one, but how about for you, Ms.
Custer?
Ms. Custer. I am similarly going to give you a non-answer,
but I will say that when it comes to fighting economic pressure
from China, we've removed an important stick and lever at our
disposal and it makes it easier for Guatemala to say it's not
worth it to continue to recognize Taiwan.
Senator Merkley. You're the experts and you don't want
answer the question. I want to tell you how I think the right
answer is--absolutely, if we undermine our programs with
Guatemala, it creates economic pressures that China will see as
an opportunity, and that opportunity will go with a requirement
that Guatemala abandon its relationship with Taiwan. I think
that's the right answer. If we had further time, I'd ask you if
you disagree with that, but--we're--thanks.
Senator Curtis. On that note, I'll turn to a few questions
of my own. Ms. Custer, you talked about Taiwan telling a story,
and I want to just point out in 1979, I actually lived in
Taiwan, and Taiwan was under martial law at the time. The
United States put a lot of time and energy into our
relationship with Taiwan, and to some degree, we pulled back,
well, not to some degree, we pulled back our diplomatic
relationships with Taiwan.
Now you let that time pass between 1979 and now, and you
have a full force democracy, prospering, doing well, freedom
for their people. You have, of course China has gone the
opposite direction. I think that is a fabulous story to tell
when we really should be shouting from the housetops here in
Washington, DC.
Dr. Ellis, let me have you put on your former state policy
planning staff hat. Did you see evidence of Chinese
interference in local electoral processes or overt efforts to
sway political leaders to sever the relationships with Taiwan?
Dr. Ellis. Yes, sir. First of all, I think it's important
to understand it is multifaceted. I'm going to speak in terms
of having followed this for about 20 plus years as an academic
and certainly the unclassified portion of what I saw while I
was at the State Department.
What you see is this weaving of a tapestry at all levels.
It's the economic blackmail selectively applied that we saw
before. It's the whispering in the ears of business lobbies in
agricultural and in other sectors. It is the bringing people
over to the PRC, in terms of journalists or others to try to
get favorable coverage and access.
It is sometimes inappropriate things. I'll mention one
specific case that I haven't mentioned yet, which was Panama's
flip from Taiwan. Now, I've spoken with President Varela, and I
know that he would deny that there was a quid pro quo, but it
did not go unnoticed among people that you know, right after he
flipped to the PRC in 2017, that the family rum business that
was in his brother's name suddenly got a really big contract
from the PRC.
Similarly, it was not unnoticed that his Vice Minister
Nicole Wong, again, who I know, and is a wonderful person, a
very, very bright person, but after she played a critical role,
in that flip--literally just months later, she got a very cushy
job representing China Harbor Engineering Corporation.
I think there's this sense of both these offers and that
China plays dirty, including some of the more indirect
electoral things. If I may, just one more thing, and Ms. Custer
also alluded to this, but really to emphasize the promise of
benefit is often an unrealized promise.
I have done several studies which have been published
looking at IMF data in which you actually see that if you look
at the
2-3 years after recognition, when you include both what is lost
from Taiwan and what has been gained from the PRC, in almost
every single case, at least, the exports are flat, or they
fall.
In part that's because, with some of the traditional
products such as coffee and fruit, there's no real reason for
the PRC to bring them in refrigerated containers halfway around
the world when they can get the same product from Vietnam or
the Philippines, that's oftentimes just a symbolic thing.
At the same time, their export promotion agencies
oftentimes don't have the expertise that they need. Indeed,
when you look at the actual PRC investment projects, there's a
certain amount of work that is done, paid for by those
countries, but not actual investment, neither in Panama, nor in
Costa Rica with the disastrous Route 32 project, not in the
Dominican Republic, where something like $600 million of
electricity projects were promised that never happened.
Not even in El Salvador, where there's talk about China
building the port of La Union. In almost every single case,
those promises have been empty, but it's those hopes that often
are sold. Whereas I think that the benefits that Taiwan
provides are often right-sized for our partners, and are
something that's much more tangible to their benefit.
Senator Curtis. Thank you. Ms. Custer, did you want to
comment on that?
Ms. Custer. Yes, please, sir. First, picking up on what Dr.
Ellis said, we call that buyer's remorse. You asked me earlier,
Senator Kaine, about how we see things differently in Latin
America than in other parts of the world.
One is the newness of a lot of these relationships. I field
surveys of private, public, and civil society leaders in 141
low- and middle-income countries, including many in Latin
America. What you see are differences in how leaders think
about what they've gotten in the relationship with China. You
see a lot more skepticism and doubts starting to flood in
places like East Asian Pacific, for example, where these
countries have a longer history with a lot of these projects,
where you're starting to see not only the promises, but the
delays, the disruptions, the challenges environmentally,
challenges with governance and corruption.
This has soured things a little bit. Other studies have
shown that China gets a public perception bump when it
announces a new project, but it actually has a decline at the
end of these projects. Those are the stories that actually
aren't really being told yet in Latin America, but there's an
opportunity there for learning. Then, to the point----
Senator Curtis. Before you leave that, can I ask this, can
you bifurcate the difference between that reaction from people
on the ground and the leaders? Does that make sense?
Ms. Custer. Yes, that's a great question. When I talk about
leaders, it's a fairly broad way of defining it. Mid to senior
government officials, civil society leaders, private sector
leaders. Typically, these leaders are thinking about a slightly
different set of agenda items than citizens. Citizens are often
historically undecided when it comes to China, but you do see a
souring of public opinion mostly in terms of reaction to news
media, but also a souring when it comes to what's happening in
particular communities that are affected by these projects.
When it comes to leaders, what is a more compelling case
is, where am I going to get financing for infrastructure
projects? I'm looking to China. There is a little bit of a
difference there, but even in places like the East Asian
Pacific region, you're seeing a souring on both counts.
Senator Curtis. Very good. I'm going to still put my
bookmark down, but yield to the Senator from Florida. Welcome.
Senator Scott of Florida. Thank you, chairman. Thank you
all for being here. First off, do you think China's our friend?
Either of you think their government has decided they want to
do whatever's in the--act in the best interest of America?
Either of you?
Ms. Custer. Do I think that China is our friend? I'm not
sure that friend is necessarily the vocabulary choice that they
would choose. I think they view the U.S. as a superpower. It is
someone that they can't ignore. It's somebody they have to
accept and find ways to work with. The question is more about
managed competition. In what areas are we going to compete? In
what areas are we going to cooperate? That's not quite the same
thing as a friend, but it is someone you have to live with.
Dr. Ellis. For me, Senator, thank you for the question. The
Chinese people are our friends. The Chinese people are human
beings living in an oppressive communist system, which
fundamentally, through the dominance of government crushes the
initiative that they have and the freedom that they have.
Now looking at China as a system, what I'd certainly say is
that for me the objectives of the Chinese Communist Party and
the leadership of the Chinese state, it's all about China. It's
about capturing as much value added for the Chinese as
possible. It's about the restoration of the military and other
power of the Chinese state after what they see as 150 years of
humiliation.
What that implies is the question of, whose security is
taken away? Whose democratic system is taken away? For whose
interest do international organizations and institutions
operate? Whose liberty is lost? Whose territorial claims are
lost, looking for example at the advance of the PRC in the
South and East China Sea with the militarization of reefs and
shoals and what they've done with the Philippines and the
Vietnamese and others.
At the end of the day that creates a dilemma for us that if
we have to work, if we have to, someday fight against the PRC
because of Taiwan or something else, it is going to be a
horrific challenge.
Senator Scott of Florida. Let me interrupt you for a second
and make it easier. Do you think a friend would give your kids
fentanyl? Do you think a friend would do that? No. Answer is
pretty simple; they wouldn't do that. Do you think your friend
would sign a document that they are going to comply with some
organization or some trade deal and completely lie? I don't
think so.
Do you think a friend would try to steal your job? Eh,
probably not. Do you think your friend would try to take the
property of your next-door neighbor? Eh, probably not. That's
the party, the communist party, right? Okay. How do you think
that when you see the Communist Party do what they're doing,
how are we supposed to try to be helpful to Taiwan? What would
be the biggest reason, biggest ways we can be helpful to
Taiwan?
Dr. Ellis. Sir, first of all, to ensure Taiwan's survival
as a democratic autonomous entity, to make sure that as
happened with Hong Kong in violation of the PRC commitments to
Hong Kong, that Taiwan's autonomy is not crushed. In part
because it is in our security interest to do so--
Senator Scott of Florida. What would you do? What would you
do that we're not doing?
Dr. Ellis. A range of different things, sir, but number one
is to make sure----
Senator Scott of Florida. Just give me the top three.
Dr. Ellis. To make a clear commitment, backed by military
and other capabilities, to be able to defend the autonomy of
Taiwan. That is fundamental to U.S. long-term security
interests in Asia. As part of that, also to resist encroachment
on Taiwan and its group of friends in the Americas and other
places, in order both to help maintain the autonomy of, and
friends of Taiwan, but also as a vehicle to restrict China's
advance.
Senator Scott of Florida. How about you? What are your top
three things that we ought to do to help Taiwan? Or do you
think we should?
Ms. Custer. In terms of helping Taiwan directly, I think
there's a question as to how much does formal recognition
matter versus broadening the support base of actors that see
the value of an independent Taiwan. I think a lot of the
conversation earlier in this hearing had focused around how do
you actually claw back wins from a lot of these actors? How do
you push countries across the recognition chain?
Those that aren't recognizing Taiwan at all right now,
having a liaison office, how do you actually get the incentives
right for partners in the region to do this? For those that
maybe are opening up the door to full recognition, how do you
move up that chain?
I think a lot of the conversation that we've had thus far
has been about how do you get the economics right? How can the
U.S. actually be part of the solution together with Taiwan, to
broker economic opportunities for countries to stay on board?
Senator Scott of Florida. Do you think we should continue
to try to buy everything we can from China when they want to
demolish our way of life, kill our citizens, build a military
to defeat us, lie about every deal they ever did? Do you think
we ought to stop buying their crap?
Ms. Custer. I think I would answer the question by saying
it is in the interest of the U.S. to diversify its supply
chains, to diversify its trading partners, and Latin America is
a great place to do that. We could be doing more to build and
buttress our relationships from a trading perspective there.
That's a win for the U.S. That's a win for Taiwan, and it's a
win for the region.
Dr. Ellis. For me, I think there's a lot more that we can
do in terms of restricting PRC's ability to obtain technology,
especially the technology that helps in areas such as AI, and
also with other things that both represent military threats and
strengthen the Chinese state. Also, things that allow a PRC
dominance of certain industries that, in a global form,
undercut our ability to compete.
In addition to that, I think there's more that we can do
with financial sanctions. I think there are certain areas where
we need to make sure that we don't do more to undercut our own
strength, in trying to move away from working with the PRC.
I think there are some areas where we certainly can
cooperate and have economic cooperation, but we absolutely do,
I believe, need to understand, as you pointed out, Senator,
that we are in a very serious competition and we need to make
sure not only that we preserve the autonomy and democracy of
Taiwan, but also our own strategic space including being able
to compete against the PRC, and not find ourselves in a
position where we are technologically outmatched, militarily
outmatched, and in otherwise, by allowing certain economic
things.
I think there's a lot more that we can arguably do if we do
it intelligently in that space, sir.
Senator Scott of Florida. Thank you, chairman.
Senator Curtis. Thank you. The gentleman yields. Sincere
thank you to both of our witnesses. Thank you for dealing with
our little recess there. For information of the members, the
record will remain open until the close of business tomorrow,
March 27.
We ask that the witnesses respond as promptly as possible.
Your responses will also be made part of the record. With my
thanks to the Ranking Member and on both of us, we thank
everybody for being here. The hearing's adjourned.
[Whereupon, at 3:48 p.m., the hearing was adjourned.]
[all]