BEIJING PRESSING TAIWAN IN CENTRAL AMERICA

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
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
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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
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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
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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?
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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
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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