US embassy cable - 05TAIPEI3098

C O N F I D E N T I A L SECTION 01 OF 03 TAIPEI 003098 
 
SIPDIS 
 
STATE PASS AIT/WASHINGTON 
 
E.O. 12958: DECL: 07/21/2015 
TAGS: PREL, PGOV, ASEC, TW, Cross Strait Politics 
SUBJECT: BEIJING PRESSING TAIWAN IN CENTRAL AMERICA 
 
REF: TAIPEI 1575 
 
Classified By: AIT Deputy Director David Keegan, Reason 1.4 (b/d) 
 
1. (C) Summary. Central American Ambassadors in Taipei tell 
AIT that it is increasingly difficult for their countries to 
maintain diplomatic ties with Taiwan due to Beijing's 
campaign to exert economic and political pressure in the 
region.  The PRC is offering lucrative economic incentives, 
sponsoring trade delegations, and tapping Central American 
business leaders to lobby government officials to recognize 
Beijing.  Aid scandals have also tarnished Taiwan's image in 
Central America, and 2006 could be a crucial watershed for 
Taiwan as new governments assume power in Costa Rica, 
Nicaragua, and Honduras.  The Ambassadors say new governments 
in Costa Rica and Nicaragua could derecognize Taiwan, which 
could then influence other countries in Central America to 
follow suit and switch ties.  They suggest that if Taiwan 
were to lose its foothold in Central America, the 
consequences for its international standing and current 
international strategy would be devastating and could force 
Taipei to reevaluate its cross-Strait policies.  End summary. 
 
Beijing's Economic Campaign 
--------------------------- 
 
2. (C) Beijing has embarked on a focused economic campaign to 
encourage Central American political leaders to expand ties 
and eventually recognize the PRC.  Nicaraguan Ambassador Luis 
Wong told AIT that Beijing's strategy of building commercial 
ties and working with business groups to pressure Central 
American governments is having an affect.  He explained that 
since last year several PRC trade delegations have visited 
Nicaragua, and Managua is considering allowing Beijing to 
open a trade office there.  Wong noted that the PRC is 
pursuing a similar economic strategy all across Latin America 
but is particularly focused on Central America because of the 
region's extensive diplomatic ties with Taiwan.  According to 
Panamanian Ambassador Julio Mock, Panama has been enticed by 
Beijing's booming market and efforts to lure Panamanian 
businessmen to the PRC.  He noted that Panama City has 
already opened up trade offices in Beijing and Hong Kong and 
several PRC-sponsored trade fairs have been organized over 
the last year.  Mock also told AIT that the PRC is funding 
trade associations and Chinese friendship groups to lobby the 
Torrijos administration to cut ties with Taiwan. 
 
But Also Moving Beyond Trade 
---------------------------- 
 
3. (C) The Ambassadors noted that Beijing is moving beyond 
trade in its efforts to promote its interests in the region. 
Panama's Mock told AIT that the PRC is working to establish a 
strategic foothold in Central America and argued that 
Washington should take notice.  He said that Beijing is 
especially interested in Panama's Howard Air Force Base 
because of its multi-use facilities and strategic location. 
Mock surmised that Beijing is interested in controlling a 
megaport in the Canal zone, which he said would offer more 
than just economic benefits.  Nicaragua's Wong told AIT that 
Beijing has promised to build Managua its own isthmus canal 
and offered the government use of PRC engineers and experts 
from the Three Gorges Dam project.  Honduran Ambassador 
Marlene Talbott reported that Beijing is pressuring Central 
America via the UN's Latin America Group (GRULA), which 
consists of all nations in Latin America.  Beijing, she said, 
is taking advantage of South America's interest in luring PRC 
investment and promoting closer trades by using GRULA to 
pressure Central America to break ties with Taiwan. 
 
Aid Scandals Also Hurting Taiwan 
-------------------------------- 
 
4. (C) Taiwan's "check-book diplomacy" aid scandals have also 
hurt Taipei's standing in Central America.  In late 2004, 
press allegations surfaced that Taiwan gave USD $1.5 million 
to former Nicaraguan President Arnoldo Aleman and that USD 
$1.4 million was funneled to former Costa Rican President 
Miguel Angel Rodriquez as part of Taiwan's aid package. 
While Taipei denied that direct cash payments were made to 
either president, the details surrounding the payments to 
Rodriquez and Aleman remain muddled, and the allegations of 
Taiwan's "check-book diplomacy" have had an adverse impact on 
Taiwan's reputation throughout the region.  According to 
Costa Rica's Ambassador Dr. Oscar Alvarez, there has been 
much criticism in the press and by law makers in Costa Rica 
that Taiwan's "check book diplomacy" foreign policy strategy 
is harming San Jose's interests.  He added that such scandals 
have only put more pressure on the government in San Jose to 
derecognize Taiwan and support the PRC. 
 
2006 the Breaking Point? 
------------------------ 
 
5. (C) The Ambassadors speculated to AIT that Central 
American policy towards Taiwan could change in 2006 when 
Costa Rica, Honduras, and Nicaragua see new governments come 
to power.  Costa Rica's Alvarez opined that there is a good 
possibility that pro-PRC candidates will win in Costa Rica 
and possibly Nicaragua, and they would probably seek to 
switch diplomatic ties to Beijing.  Alvarez assessed that 
Costa Rican presidential candidate Oscar Arias Sanchez, who 
was President from 1986-1990, will win the February 2006 
presidential election.  According to Alvarez, one of 
Sanchez's top priorities after assuming office will be to 
expand ties with Beijing and invest in the PRC market. 
Alvarez noted that during a recent visit to Taipei Sanchez 
expressed his displeasure with San Jose's relationship with 
Taiwan. 
 
6. (C) Alvarez also admitted to AIT that two months ago Costa 
Rican Foreign Minister Roberto Tovar Faja told Alvarez in a 
confidential message that he believes Sanchez is already 
 
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secretly preparing the conditions to switch ties to Beijing. 
 
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Alvarez explained to AIT that the only thing that would slow 
Sanchez from recognizing the PRC is Costa Rican public 
opinion, which still supports San Jose's relationship with 
Taiwan.  However, Alvarez explained that over the last two 
years there has been a focused pro-PRC public relations 
campaign criticizing Taiwan, exposing Taipei's aid scandals, 
and trying to sway public opinion to support the PRC. 
Although Alvarez would not speculate if Beijing were funding 
the anti-Taiwan campaign, he called the circumstances 
surrounding the anti-Taiwan campaign "suspicious." 
 
7. (C) Meanwhile in Nicaragua, Ambassador Wong told AIT that 
the pro-PRC Sandinista party has been gaining clout and could 
very well win the November 2006 presidential election.  Wong 
noted that within the Sandinista party, there are influential 
businessmen with PRC ties encouraging the government to 
switch alliances to Beijing.  Wong argued that if the 
Sandinistas win in 2006, it is likely that they will switch 
ties to the PRC. (Note: The previous Sandinista government 
recognized Beijing from 1985 to 1990. End note).  While Wong 
was not ready to predict that if Managua switched and 
recognized Beijing the rest of Central America would follow, 
he did predict that the region will undergo significant 
political changes in the next two years. 
 
Switch Would Leave Taiwan Few Options 
------------------------------------- 
 
8. (C) Costa Rica's Alvarez suggested that a switch by Costa 
Rica or Nicaragua could be the beginning of the end for 
Taiwan's position in Central America, and would probably 
deeply damage its overall international standing.  He was 
almost certain that if Sanchez wins in Costa Rica or a 
Sandinista government is elected in Nicaragua, the new 
governments would shift ties to Beijing and the remaining 
Central American nations would eventually follow suit. 
Alvarez said this would have international and political 
ramifications for Taiwan since Central America is arguably 
Taipei's most important remaining diplomatic region.  He 
opined that such a diplomatic disaster could force Taipei to 
make concessions to Beijing since Taiwan would have little 
international legitimacy.  But he argued for the sake of 
stability and peace in the Taiwan Strait, a Central American 
switch would help temper Taiwan's international political 
rhetoric because it would be such a tremendous blow and force 
the government to reevaluate the island's entire diplomatic 
and foreign policy strategy. 
 
Comment: Few Options Left 
------------------------- 
 
9. (C) If Taiwan were to lose Central America, it would lose 
its most important diplomatic partners, and all that would 
remain would be a few token nations in Africa, the South 
Pacific, and the Caribbean.  Such a result would be 
diplomatically disastrous and could put significant political 
pressure on the government to reevaluate the viability of its 
current foreign policy strategy.  Although each of the 
Ambassadors AIT met with explained that at least until 2006, 
the region's Taiwan policy will remain unchanged, they noted 
that it is increasingly difficult to maintain ties with 
Taiwan because of Beijing's growing importance as well as 
rising domestic pressure from business groups and the public 
which expect their governments to improve economic standards. 
 Beyond the short term, there may be little Taiwan can do to 
convince its partners in Central America to stay.  As we 
noted (Reftel), there is little indication that Taiwan policy 
makers have begun thinking about how to respond to such an 
eventuality. 
PAAL