Oscar Arias Sánchez, who was president of Costa Rica in 2007, described his decision to recognise the People’s Republic of China (PRC) that year as an act of realism. Taiwan had seen itself as a figurehead of the fight against communism ever since 1949 when the Kuomintang (KMT) nationalists were defeated by the communists and went into exile in Taiwan ; from early on, it was able to count on the support of Latin American leaders whose foreign policies were aligned with the US, and forged close links with military regimes in the region. In Paraguay, an imposing statue of KMT leader Chiang Kai-shek, erected by President Alfredo Stroessner (1954-89) in the centre of the capital, Asunción, still witnesses the friendship between the two dictators. Both were active members of the World Anti-Communist League (now the World League for Freedom and Democracy) founded by Chiang Kai-shek in 1966. Paraguay is still a bridgehead for Taiwan in South America, and its only point of access to Mercosur, the South American common market.
In 1969 Cuba had been the only country in Latin America to recognise the PRC. But after China won a UN seat in 1971, displacing Taiwan as the sole representative of the Chinese people, and began its rapprochement with the US, it set about dismantling the diplomatic network its rival had established. Taiwan lost valuable potential allies : despite repeated requests, it remains excluded from international organisations, except for the WTO (World Trade Organisation), which it joined in 2001. The PRC also forced countries to make a choice : opening an embassy in Taipei automatically meant breaking off diplomatic relations with China — a non-negotiable rule intended to help China further isolate Taiwan.
China managed this more easily in South America than in Central America, which remained a bastion of support for Taiwan, even in the 2000s. So it was a surprise when Costa Rica changed sides in 2007 ; though its recognition of the PRC has not changed the balance of power between China and Taiwan in Central America , Arias Sánchez’s realism could spread to other countries — at a political level (Latin America’s anti-communists are well aware that the “red peril” has dissipated), and especially at an economic level.
According to Taiwan’s former, pro-independence president Chen Shui-bian, China “bought [Costa Rica’s] diplomatic support for $400-500m” as part of a strategy intended to make Taiwan “an orphan on the international scene” and orchestrate “its disappearance as a nation”  . China did not skimp on incentives : between 2004 and 2006, the value of Costa Rica’s exports to China grew from $163.3m to $558.3m, while its exports to Taiwan remained below $100m.
China has considerable resources despite its slowing economic growth : at the first China-Celac (Community of Latin American and Caribbean States) summit in Beijing in 2015, President Xi Jinping pledged to invest $250bn in “deepening cooperation between China and Latin America” . Though China’s main targets are still suppliers of primary goods such as Argentina, Brazil, Venezuela and Ecuador, it is well aware of the strategic importance of the smaller Central American countries.
The omens for China’s relations with Nicaragua were bad ; though Nicaragua was in theory ideologically closer to China than Taiwan, its Sandinista president, Daniel Ortega, was wary when he returned to power in 2007. During his first term in office (1985-90), he had banked on China’s support and broken off relations with Taiwan, giving its diplomats a month to pack their bags and hand over the embassy to the PRC. The results of this experiment were inconclusive : Carlos Fonseca Terán, then deputy secretary for international relations with the Sandinista National Liberation Front (FSLN), called it “an act of revolutionary romanticism” . China had offered only timid moral support to the Sandinista struggle.
In an attempt to win back influence in Nicaragua, China seems to have contributed to a proposal for the building of a new inter-oceanic canal, an idea once supported by Taiwan . But its completion is uncertain : the start of construction work has been postponed until later this year, and the Hong Kong businessman who undertook to finance it, Wang Jing, lost 85% of his wealth in the recent Chinese stock market crash.
Taiwan’s strategy in Central America has also led to many incidents of corruption, which have tarnished its image ; these include the disappearance of $10m intended to help reconstruction in El Salvador after the 2001 earthquake. The former Salvadorian president Francisco Flores, in an interview about allegations of his involvement in embezzlement, described Taiwan’s methods : “During my time in office, it was a unique form of cooperation ; the Taiwanese government transferred funds directly to politicians, governments, foundations and political organisations that were favourable to Taiwanese independence” .
Taiwan also has to deal with an embarrassing past. Fu Hsing Kang College, a military academy in northern Taiwan highly reputed for its training in anti-communist warfare, has among its former students Roberto d’Aubuisson, founder of El Salvador’s Nationalist Republican Alliance (Arena) and a leader of the death squads. Taiwan still has close links with rightwing parties in Central America. But since the peace agreements and return of democracy in the region, several countries, including El Salvador, Guatemala and Nicaragua, have had changes of government ; those now in power are the political wings of former guerrilla organisations — such as the Farabundo Martí National Liberation Front (FMLN) in El Salvador — with close ideological links to the communist ideas that Taiwan once helped to fight.
Taiwan’s close links with Central American countries have meanwhile allowed the US to maintain a discreet, indirect influence in what it still considers to be its backyard. In 2010 it sold 60 Black Hawk helicopters to Taiwan, and in 2015 Ma Ying-jeou gave four of them to Honduras, whose government, which had come to power through a coup in 2009, was facing a certain amount of popular resistance.