The Chinese civil war continues... in Central America (2)

In my previous post, I outlined the historical relationship between the People’s Republic of China (PRC), Taiwan (ROC), and Latin America. Zooming in on Central America, I stated that four factors contributed to its position as a bulwark of support for Taipei in the PRC–ROC recognition rivalry, which picked up steam during the late Cold War. These factors were (1) domestic political context, (2) regional political context, i.e., the Cuba factor, (3) diplomatic aptitude of PRC and ROC, and (4) state size.

In this post, I want to follow up on this historical analysis by explaining what happened after the period that I examined: how did the recognition rivalry continue in the post-Cold War era? That Central American support for Taipei eventually did drop, with Honduras (2023) as the latest state to switch its recognition from Taipei to Beijing, is already known, yet focus here lays on the reason behind this drop. Moreover, I will introduce the question what the future may hold for both Chinas’ relationships with Central America, and if Taipei’s last remaining bulwark of support may soon disappear, too.

Relations in the Cold War era: ideology is most important

The recognition rivalry, which picked up steam in the 1970s when the People’s Republic of China joined the international community more explicitly and even replaced the Republic of China (i.e., Taiwan) in international organizations like the United Nations, can arguably be divided in two phases. These phases may well reflect PR China’s own attitude towards the outside world, too. They are (i) a phase of ideology, and (ii) a phase of pragmatism. Although this distinction certainly is very black-and-white (of course, there is still ideology distinguishable in the post-Cold War recognition rivalry), it does make for an easy starting point to examine how the rivalry developed over time.

In the recognition rivalry between the PRC and ROC in Latin America, the first phase (roughly 1970–1990) was characterized by ideology. This is not surprising: this was the Cold War era, when international relations were extremely ideologically charged. As discussed in the previous post, this hurt Beijing and benefited Taipei in their battle for diplomatic ties in the region. Central America was home to many right-wing militarist governments in the 1970s and 1980s; these governments often were heavily influenced by American notions of capitalism and liberalism; and their ideological conflict with the ‘red threat’ in their region, Cuba, shaped their perception of PR China as a similar threat. Furthermore, Central American governments had not forgotten how Mao Zedong’s foreign policy in the early Cold War had led to the dissemination of Maoist propaganda throughout the region, and how Mao had supported his ideological counterparts in the region—leftist militant rebellions. All in all, the ideological nature of these international relations impacted the recognition rivalry severely, and they did not benefit the PRC.

Although to a lower degree, pragmatism still did play a role in this period. For example, the rapprochement between the United States and the PR China was a perfect example of pure pragmatism: ‘the enemy of my enemy is my friend’ hardly qualifies as an ideological approach to diplomacy. Moreover, from the perspective of Central American states, although their ideology did bring them closer to the ROC anyway, Taipei’s diplomatic aptitude by attending to these governments’ material needs—for example by assisting authoritarians in their military suppression of leftist rebels—was very pragmatic indeed.

Costa Rican students attend a ceremony during Xi Jinping's state visit (2013)

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Relations in the post-Cold War era: pragmatism trumps ideology

In the decades following the Cold War (i.e., from the 1990s onwards), ideology did not disappear from the relationship between Latin America and the Chinas. Still, anti-Communist sentiments persisted in some parts of the region. (Not too long ago, the U.S. government under President Trump did not shy away from hyping up this anti-Communist sentiment against China, glancing over the fact that little in Chinese society today resembles Communist thought.)

Yet pragmatism became more important; not only because the ideologically charged Cold War was over, but also because Chinese foreign policy maintained its course of more pragmatism and less revolutionary ideology. This coincided with other developments in Chinese society in the 1980s and 1990s, most importantly including the transition to a market economy. The Chinese economy globalized at a relentless pace, which culminated in the early 2000s in PR China’s entry into the World Trade Organization (WTO). It meant that international trade became more important for the Chinese economy, which consequently meant a further necessity to strengthen ties with places all over the world. For the Chinese, it was clear that to develop its position as a reliable and attractive trade partner, a more pragmatic foreign policy was required.

In the 1990s, especially, Beijing gained the upper hand in its presence in Central America. Several factors favoured this development. First, put simply, its interest in the region increased as Central America began to stand out as a pro-ROC base. Second, PR China’s hard power increased rapidly, which gave it more tools to achieve its goals even in far-away regions like Central America. Third, from an isolated, underdeveloped state in the 1970s, the PRC began to slowly transition into the geopolitical powerhouse it is today, which was accompanied by a growing incentive to project influence in other regions than Asia. Fourth, Taiwan underwent a democratic transition, which meant it no longer had a political system similar to many in Central America. And fifth, interest of the United States in Central America deflated sharply, even in Cuba, as they shifted attention to the Middle East.

These factors put the PRC in a favourable position to gain momentum in the recognition rivalry with the ROC in the region. Amidst these developments, in the 1990s, there was still work to be done: North and South America already recognized the PRC, but Central America virtually entirely maintained diplomatic relations with the ROC.

The successes of dollar diplomacy

The factors above describe why the PRC gained momentum in the 1990s—but how did it manage to gain more support in Central America? It comes down to two explanations: one that is a natural result of PR China’s rise—namely, its growing hard power and, perhaps to some extent, soft power—and one that was deliberate policy: dollar diplomacy.

Dollar diplomacy in the context of the Chinese recognition rivalry refers to the tactic of both Chinas to pay off any states that may be persuaded to switch their diplomatic relations from the one to the other. Timothy Rich has argued that nowadays, dollar diplomacy is a crucial aspect of diplomatic relations of both PRC and ROC with small states that might change their recognition from one to the other. Elizabeth Larus writes that the practice of buying diplomatic allies is rather explicit, even leading to the smaller states’ practice “to hold out for the highest bidder”. It is a global phenomenon: PRC and ROC have used dollar diplomacy in Oceania, Africa, Asia—and Latin America.

What does this look like more concretely? Often, it takes the form of financial aid (or FDI, foreign direct investment): Beijing or Taipei presents an amount to the recipient country under the guise of foreign aid or even humanitarian aid (of course, it is up to the recipients to decide how they actually spend this money; not that the Chinese are too worried). For example, in 2008, Malawi severed ties with the ROC in favour of establishing ties with the PRC after the latter “offered several billions of dollars in aid”, as the BBC reported at the time. Another African country, Burkina Faso, switched from the ROC to the PRC after Beijing offered substantial healthcare assistance during a 1970s epidemic. It maintained its ties with the PRC as Beijing kept supporting the Burkinabè agricultural and healthcare sectors in the next decades—until a seemingly random switch back to the ROC in the mid-1990s. The reason? Taipei donated tens of millions of dollars to the Ouagadougou government. (In 2018, Burkina Faso returned to the PRC’s side when it was promised significant development assistance.)

One cannot blame either side in this diplomatic rivalry when considering the benefits of dollar diplomacy. Taipei and Beijing both have the financial resources to allocate money to third countries, either in foreign direct investment or in diverse forms of humanitarian aid (or even, who knows, direct bribes); the recipient countries, those still not fully on either side in the choice between the PRC and ROC, are virtually all poor countries that can seriously benefit from these foreign donations. When considering the position of the leader of Malawi, Burkina Faso, or any other of these states, it is fully understandable that they would attempt to take advantage from this dispute between two large economies. As all these recipient states are located far away from both PRC and ROC, any outcome of the recognition rivalry will barely impact them. Moreover, no longer do ideological imperatives fully guide diplomatic relations; in a globalized world, the ideology of money is what counts.

The same goes for those states in Central America and the Caribbean that still supported the ROC after the end of the Cold War. Not surprisingly, these states are generally poor and in need of foreign assistance. For example, the most recent three states in the region that made the recognition switch from ROC to PRC are listed dangerously low on the list of countries by nominal GDP per capita (Nicaragua, Dominican Republic, and El Salvador).

The situation was similar in the early post-Cold War era. As mentioned, PR China transitioned into a free market economy that increasingly sought opportunities for expanding trade outside its region. Interest in Latin America and especially Central America was historically limited, which meant there was ample room for growth. Whereas Taipei had decades-long diplomatic connections in the region and its trade volume was limited yet fair, Beijing from this time onwards really could begin to lay the foundation for an economic—and subsequent diplomatic—foothold in Central America.

A traditional Chinese dance is performed in Costa Rica's national theatre in San José (2012). Although not as important as trade, cultural exchanges form part of PR China's newly established ties with nations like Costa Rica.

Costa Rica becomes the trendsetter

In 2007, Costa Rica became the first state in Central America to establish diplomatic relations with the PRC. The decision of San José was lauded by then-President Hu Jintao, who noted the contribution of the decision to “not only Central America’s development, but even the development of the world.” Signaling the importance of Costa Rica’s decision, Hu subsequently went on a formal state visit to meet with the Costa Rican president.

It has been well-documented that before PR China’s rise, Taiwan was quite active in Costa Rica: trade relations were good, political visits were fairly frequent, a good system of mutual scholarships existed, and cooperation in the technological domain was substantial. In 2003, the ROC donated a Bridge of Friendship (Puente de La Amistad de Taiwán), which was constructed in the north of Costa Rica. (It was recently reported that the bridge suffers from a lack of maintenance and “the consequences of abandonment”.)

Yet while ROC-Costa Rican relations seemed good and beneficial to San José, Costa Rica’s president was simultaneously calculating whether the relations were sustainable. The Costa Rican economy was stagnating and dangerously narrow: it leans heavily on tourism and to a lesser extent on a few raw materials, most notably coffee. Moreover, the economy leans heavily on the United States, both for tourism and coffee. In other words, the president saw the need of tapping into a large new market.

Beijing was more than happy to accommodate Costa Rica’s president. Confidentially, the Chinese and Costa Rican governments began holding talks about future trade opportunities for both. Shortly after establishing diplomatic ties, Presidents Arias and Hu Jintao announced formal free trade negotiations, and in 2011, this culminated in the establishment of a binding free trade agreement.

Hu and Arias agreed on other economic deals, too. Most of these would not have been possible for the Taiwanese to make: the deals were of a significant magnitude. Moreover, the Chinese knew what could play well in Costa Rica. In 2011, a new football stadium was opened in football-crazy San José, with construction costs reaching at least 100 million dollars (though the construction was done by a company from Anhui). It is considered the most modern stadium in the entire region, which neatly fits in the pattern of Beijing generously offering the construction of buildings of significant importance and prestige. (Compare to the aforementioned abandoned Taiwanese bridge, located not even close to the nation’s capital.)

Thus, the tables had turned. Before the late 1990s, the ROC was significantly more present in Costa Rica than the PRC. Its economic ties with the Costa Ricans, as well as frequent state visits and other forms of cultural and scientific exchanges, made recognizing the ROC very worthwhile: why bother to even consider recognizing the PRC instead, when there is another state that regards you as a particularly special ally and is willing to spend serious money on it? Yet amidst PRC’s further integration in the world economy in the early 2000s, President Arias saw that establishing ties with Beijing was the necessary step in order to diversify Costa Rica’s international trade. Beijing was happy to throw some bones to help San José understand the advantages of making the recognition switch. Taipei could do little: it no longer provided enough opportunity.

The ROC's Bridge of Friendship in northern Costa Rica. Today, it merely serves as a metaphor for Taiwan's lost relationship with its former ally.

Beijing’s success grows, yet challenges rise

Costa Rica was the trendsetter, and as the most prosperous nation of Central America, it was a meaningful victory for the PRC. Later, it was followed by Panama, El Salvador, the Dominican Republic, and, in 2021, Nicaragua. These nations followed a similar trajectory: they enjoyed good bilateral ties with the ROC for decades, yet it became increasingly difficult to isolate themselves from the benefits formal ties with the PRC would bring. In Panama, the PRC began to invest heavily in the local economy within the framework of the Belt and Road Initiative (一路一带); in El Salvador, the PRC not only promised enormous infrastructure projects, but also delivered large amounts of rice; and in the Dominican Republic, alongside numerous trade agreements and investment proposals, Beijing guaranteed an aid package of three billion dollars, a staggering amount for a country the size of the Republic.

Yet these developments have not all been without any challenges: in several of these countries, most notably Panama, more recently elected governments have been critical of the growing presence of Beijing in their economies and infrastructures. Moreover, the lack of local involvement in Chinese construction projects and disappointing gains in important domestic sectors like tourism can lead to public dissatisfaction with their nations’ closer ties to the PRC. In a future post, I will assess to what extent this can be attributed to the so-called Pink Tide that has been enveloping Latin America over the past few years, and what this may mean for both future PRC–Central American relations and the recognition rivalry between Beijing and Taipei. For although the history of the post-Cold War recognition rivalry points to significant success for the PRC’s dollar diplomacy, money cannot buy everything: local support in Central America must be sustained, too.

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