Beijing's attempt to persuade those Caribbean and Central American nations which have full diplomatic relations with Taiwan to switch to recognize the People's Republic of China is gathering pace. In March Dominica became the latest country to sever relations with Taipei, and in June it formally acknowledged the "one China principle" by granting diplomatic recognition to Beijing. This leaves Taiwan with only 26 full diplomatic partners, the most prominent in the Latin American region being Paraguay and Panama.

Taiwan's economic strength, and promises of investment, financial aid, and enhanced trade cooperation, meant that poorer Caribbean and Central American nations have in the past been able to reap the rewards of granting Taipei diplomatic recognition - even if this automatically meant putting themselves on mainland China's blacklist. Taiwan has been a major investor in the Latin American region, invariably in free-trade zones. Its stock of FDI stood at US$404m at the end of 2002, up 36% from the end of 1998.

In the last decade, however, China's rapid economic growth means it has increasingly been able to trump Taiwan's largesse. In the case of Dominica, for example, China has promised to help with four major projects, including the construction of a national stadium, the renovation of the country's main hospital, the construction of a new secondary school in the capital city, and the building of a new west coast road.

Beijing's latest target for 'conversion' is Paraguay, and here it is also using its economic strength to gain diplomatic allies. For example, during the visit of Brazil's President Luiz Inacio Lula da Silva to China in May, Lula reportedly agreed to try to persuade countries such as Paraguay - which is a member of the Mercosur trading bloc, along with Brazil - to drop its support for Taiwan. There has been talk of Paraguay signing a bilateral FTA with Taiwan, which could have an adverse impact on China's willingness to sign up to a similar deal with Mercosur as a whole. 

Taiwan has not been idle, however, and the recent and forthcoming diplomatic schedules show Taipei is eager to maintain its high profile in the region. On 26 July, for example, the president of Taiwan's Legislative Yuan (parliament), Wang Jin-pyng, led a bipartisan delegation to Guatemala to attend a meeting of congressional leaders of Central American and Caribbean nations. And on 6 August, Taiwan's Minister for Economic Affairs, Ho Mei-yueh, led a trade delegation to Paraguay (see also the Special Feature on page 2). Ho is due to join Premier Yu Shyi-kun on official visits to the Dominican Republic, Honduras, and Nicaragua later this month.

The highest-profile exhanges due in the next month include the visit to Taiwan of El Salvador's president, Antonio Saca, on 11 August, and Taiwan's President Chen Shui-bian's attendance at the inauguration of his Panamanian counterpart, Martin Torrijos, on 1 September. Chen also visited Panama in November last year, for the country's centennial celebrations, and signed Taiwan's first and only bilateral free-trade agreement with Panama. In June the PRC's vice foreign-affairs minister, Zhou Wenzhong, who is in charge of America, Oceania, and Latin America affairs, visited Panama. However, Zhou did not meet many senior Panamanian officials, and Taipei insisted that its alliance with Panama remained solid.

There are signs that Taiwan is also attempting to cultivate support in countries where it does not have diplomatic recognition. For example, in early August the leader of the opposition People's National Congress/Reform (PNCR) party in Guyana, Robert Corbin, visited Taiwan. The visit, ahead of local elections, drew strong criticism from the government, which recognizes the PRC. According to the ruling People's Progressive Party, Taiwan has adopted a policy 'to bribe nations and certain political operatives to give it diplomatic recognition' and asked Corbin to 'come clean and say to the nation who paid for [his] visit and how much cash he and his party received'. The PRC's embassy in Georgetown also asked the PNCR to 'diminish the negative impact' of Corbin's visit.