• Peña is maintaining diplomatic ties with Taiwan despite domestic economic concerns, opposition pressure and China’s efforts to shift Paraguay towards Beijing.
• His policy balances values and pragmatism, maintaining a pro-Western alignment with Taiwan while keeping economic engagement with China open.
• Paraguay reflects a wider trend, as smaller states navigate US-China competition while balancing strategic partnerships with economic opportunities.

Why is Peña’s heat level HOT?

Answer: Peña is consistently renewing his commitment to maintaining diplomatic relations with Taiwan.

Peña has upheld his campaign pledge despite domestic and Chinese pressure, reaffirming it during his May 2026 Taiwan visit. Peña also called for Taiwan’s full participation in the United Nations system in his UN address in September 2026 and described Taiwan’s exclusion as a ‘stain’ on the United Nations.

Notably, neither side mentioned China publicly during the May 2026 visit, suggesting commitment without provocation towards an important trading partner.

The relationship has brought Taiwanese investment, technology cooperation, cybersecurity agreements, exchanges and university funding. Taiwan has cut or eliminated tariffs on 19 Paraguayan products and absorbs 90% of Paraguay’s pork production. In May, the two governments signed a Memorandum of Understanding, with a focus on AI, cybersecurity and judicial cooperation, which Taiwan’s foreign ministry said demonstrates ‘their shared commitment to promoting technological development and strengthening governance’.

What is changing Peña’s heat level?

Answer: Although Peña has maintained control over the Taiwan policy, domestic economic concerns and opposition pressure continue to challenge it.

While his Colorado Party supports the policy, the opposition advocates ties with Beijing, with at least 19 lawmakers and a rising opposition presidential contender making Chinese-sponsored trips to China since late 2023.

Domestic public opinion is mixed. Peña’s position appeals to conservatives, pro-US sectors and those valuing democratic partnerships, yet a 2026 Latinobarómetro survey found that 61% of Paraguayans view China’s influence positively, slightly more than the US (57%). Soybean and beef exporters see the Chinese market as transformative and are increasingly concerned that Paraguay is sacrificing this opportunity. Overall, this remains an ongoing domestic debate rather than overwhelming opposition to the policy, which has neither significantly boosted nor seriously damaged Peña’s domestic standing.

At the same time, whether diplomatic ties with Beijing would truly increase access to the Chinese market is debatable. Paraguay already maintains a solid trade relationship with China, which remains its largest source of imports. 

External actors have also contributed to this heat level. Chinese Foreign Ministry spokesperson Lin Jian said that the Paraguayan government should ‘stand on the right side of history’. Washington, by contrast, has backed Paraguay’s stance: the 2020 TAIPEI Act commits the US to supporting Taiwan’s remaining diplomatic allies, and Marco Rubio, now Secretary of State, praised Paraguay’s ties with Taiwan during a visit in 2024. This demonstrates that the issue is not just a bilateral matter, but part of wider US-China competition.

What is driving Peña?

Answer: Peña is driven by both an ideological vision of Paraguay’s international positioning and a cost-benefit calculation about China.

The policy aligns with Peña’s personal vision of Paraguay as pro-Western, democratic and closely linked to the US, Taiwan and Israel. He described the alliance as ‘values-based’, language that is more moral than purely economic.

Peña has also sought to project this position beyond Paraguay. Since 2021, Latin American countries such as Honduras and Nicaragua have switched diplomatic recognition from Taiwan to China. When Peña met Honduran President Nasry Asfura, who has openly pledged to restore relations with Taiwan, he emphasised the strength of Paraguay’s relationship with Taiwan. He has also pointed to Costa Rica, Honduras and Nicaragua and argued they are now worse off than Paraguay. 

Honduras, for example, lost its free trade agreement with Taiwan in 2023. Shrimp exports to Taiwan then fell by 67%, over 60 companies closed and 14,000 jobs were lost. Peña also warned that switching could see Chinese products displace local producers, threaten Paraguay’s democratic system and fuel Chinese mafia activity.

As an economist and former Finance Minister, Peña also frames the decision in cost-benefit terms. He insists that Paraguay’s position with China is ‘one of total openness’ and emphasises that maintaining relations with Taiwan does not mean closing Paraguay off from China. Peña has also identified China’s refusal to accept Paraguay’s recognition of Taiwan as the obstacle to increased trade. Geopolitically, the alliance also gives Paraguay diplomatic visibility and relevance beyond what its economic weight would normally command.

Ultimately, Peña’s policy reflects an attempt to reconcile geopolitical alignment with economic pragmatism. By maintaining diplomatic ties with Taiwan, while keeping the door open to greater economic engagement with China, he has avoided treating the two relationships as entirely mutually exclusive.

What does this mean for you?

Answer: Paraguay’s balancing act shows how smaller states are increasingly forced to navigate the competing political and economic interests of the US and China.

Paraguay is not an isolated case. Taiwan now has only 12 formal diplomatic allies worldwide, as many countries have shifted their diplomatic recognition towards Beijing in recent years. Honduras is particularly interesting because its current government has considered restoring relations with Taiwan after switching to China in 2023, demonstrating how changes in domestic politics can reopen questions that once appeared settled.

However, Guatemala shows that the choice is not necessarily a simple ‘Taiwan or China’ binary. Despite Guatemala maintaining diplomatic relations with Taiwan, Chinese trade and commercial presence have continued to grow there. Countries can therefore maintain formal diplomatic ties with Taipei while still developing substantial economic relations with Beijing, separating diplomatic alignment from economic pragmatism as they navigate great-power competition.

The issue is ultimately not simply whether Paraguay supports Taiwan or China. Peña’s balancing act illustrates the broader challenge facing smaller states as US-China competition increasingly shapes their foreign-policy choices: maintaining strategic partnerships while preserving access to the economic opportunities offered by competing powers. With Peña’s term ending in 2028, the Taiwan question could become part of a broader debate over how Paraguay positions itself in an increasingly competitive international system.