25 Mar The Growing Influence of China in Guatemala: A Repeat of the Panama Playbook?

By,

Jesús Daniel Romero, Co-Founder and Senior Fellow, MSI2

As China’s economic and political presence expands in Latin America, its strategic maneuvers in Guatemala mirror the playbook it employed in Panama, where economic leverage, infrastructure investments, and diplomatic pressure ultimately led to a shift in diplomatic recognition away from Taiwan.

Today, Beijing appears to be using similar tactics in Guatemala, raising serious concerns about Taiwan’s ability to retain one of its last allies in the region. This pattern is not limited to Guatemala; parallels can also be observed with Paraguay, another of Taiwan’s few remaining allies in Latin America, suggesting that China is pursuing a broader strategy to isolate Taipei. Moreover, endemic corruption in the region acts as a catalyst, opening doors to Beijing by facilitating opaque deals and undermining local resistance. If history is any indication, Guatemala and potentially Paraguay could soon face the same fate as Panama unless decisive measures are taken to counter China’s growing influence.

The Panama Precedent: How China Gained Control

China’s influence in Panama did not emerge overnight. For years, Beijing heavily invested in key sectors, particularly infrastructure and trade, before leveraging its economic dominance to pressure the Panamanian government into severing ties with Taiwan. The most significant moves included:

• Port Acquisitions: Chinese state-owned companies gained operational control of critical Panamanian ports, such as Balboa and Colón, both strategically located near the Panama Canal. This allowed China to dominate key maritime trade routes and exert influence over regional commerce (Ellis, 2020).
• Belt and Road Initiative Investments: Panama became the first Latin American country to officially join China’s Belt and Road Initiative (BRI), a global infrastructure strategy aimed at expanding Beijing’s influence through massive investment projects (Chao, 2018).
• Economic Leverage: By deepening trade relations and direct investments, China became Panama’s second-largest trading partner. As China tightened its economic grip, political leaders gradually shifted their stance, culminating in formal recognition of Beijing over Taipei in 2017.

Through this economic leverage, China solidified its influence until reaching a tipping point where cutting ties with Taiwan became the logical economic choice for Panama’s leadership (Chao, 2018). Having been assigned to Panama with the Defense Intelligence Agency between 1996 and 1999, I had firsthand experience analyzing regional security dynamics and foreign influence efforts. Even then, China was quietly laying the groundwork for deeper economic and political ties with Panama—ties that would eventually culminate in the diplomatic shift two decades later.

Guatemala: A Familiar Pattern Emerging

Much like in Panama, China is employing a multifaceted approach to expand its presence in Guatemala, despite the country’s official diplomatic ties with Taiwan. Several key developments echo China’s earlier moves in Panama:

• Influence in Strategic Infrastructure: Reports indicate that the Chinese government has been actively seeking access to Guatemala’s ports and commercial hubs. Recently, allegations have surfaced that Guatemala’s Defense Minister, Henry Sáenz, may have been involved in secret negotiations to sell government properties at a key port to China. If confirmed, this would grant Beijing a critical foothold in the country’s logistics and trade infrastructure, as it did in Panama (Ellis, 2020).
• Economic Pressure Through Trade: China has already begun rejecting Guatemalan exports, such as coffee and macadamia nuts, using economic pressure as leverage, as it did with other Latin American countries before they switched recognition. This tactic forces local businesses and political leaders to reconsider ties with Taiwan, prioritizing economic pragmatism over longstanding diplomatic relations (Lazarus & Berg, 2024).
• Political and Diplomatic Maneuvering: Chinese officials have been working behind the scenes to build relationships with influential Guatemalan political and business leaders, just as they did in Panama. By offering lucrative trade deals, infrastructure investments, and financial incentives, Beijing is positioning itself as Guatemala’s economic alternative to Taiwan.

Between 2017 and 2022, I was assigned to Guatemala as the agency chief for the Joint Interagency Task Force South at the U.S. Embassy. During this time, I witnessed firsthand how China strategically expanded its influence in the country. While Taiwan maintained strong diplomatic ties with Guatemala, Beijing worked steadily to undermine them, using economic pressure and investment deals to shift political sentiment in its favor. The slow but methodical nature of China’s efforts in Guatemala closely resembles its prior moves in Panama, raising serious concerns about the future of Taiwan’s presence in the region (Lazarus & Berg, 2024).

Parallels with Paraguay: Another Taiwan Ally Under Pressure

China’s playbook is not limited to Guatemala; parallels can also be seen with Paraguay, another of Taiwan’s few remaining allies in Latin America. Although Paraguay lacks formal diplomatic relations with Beijing, China’s influence follows a similar pattern to that in Guatemala and Panama:

• Economic Pressure: Paraguay, an agricultural powerhouse with the world’s third-largest soybean production, faces barriers to accessing the Chinese market due to its loyalty to Taiwan. This exclusion generates internal pressure, particularly among agricultural producers, to reconsider the country’s diplomatic stance, echoing the trade tactics used in Guatemala and Panama.
• Elite Engagement: In Paraguay, political figures like Efraín Alegre have advocated recognizing Beijing to boost exports, mirroring divisions in Guatemala between those who see China as an economic opportunity amid U.S. pressure or Taiwan’s limitations.
• Competition with Taiwan: Taipei has sought to counter China in both countries—through intelligence and rural development in Guatemala, and projects like an industrial park in Paraguay—but its economic capacity pales in comparison to Beijing’s offerings.

Unlike Guatemala, where proximity to the United States and its Central American position intensify Washington’s response, Paraguay relies more on its Mercosur integration and has a less direct relationship with the U.S. Nevertheless, the economic incentive of accessing the Chinese market could eventually outweigh historical loyalty to Taiwan, especially if agricultural exports remain restricted.

Endemic Corruption in Latin America: An Open Door for China

A critical factor amplifying China’s influence in Guatemala, Paraguay, and the Panama precedent is the endemic corruption that characterizes many Latin American countries. This structural weakness facilitates Beijing’s entry by enabling opaque deals, bribes, and secret negotiations that undermine resistance to its advances:

• In Panama: The acquisition of ports and integration into the BRI were facilitated by a lack of transparency in negotiations between political elites and Chinese firms. Subsequent reports suggested that Panamanian officials may have received personal incentives, accelerating the 2017 diplomatic shift (Ellis, 2020).
• In Guatemala: Allegations of secret negotiations involving Defense Minister Henry Sáenz to sell port properties to China highlight how corruption can unlock strategic assets. Guatemala’s history of bribery and influence peddling—evident in scandals like the CICIG—creates fertile ground for Beijing to exploit these vulnerabilities with targeted financial offers to key officials (Lazarus & Berg, 2024).
• In Paraguay: Corruption in the political and agricultural sectors has fostered an environment where elites can be easily swayed by promises of Chinese investment. The lack of oversight in trade negotiations and pressure from soybean producers to access the Chinese market could be exploited by Beijing through non-transparent deals.

Corruption not only weakens these countries’ ability to negotiate on equal terms but also erodes trust in institutions that could resist external pressure. China, with its pragmatic approach and willingness to operate in weak governance environments, capitalizes on this reality by offering short-term benefits—cash, projects, or favors—that often outstrip the more limited and transparent proposals from Taiwan or the United States. Sullivan and Kaplan (2023) emphasize how China has exploited corruption in Latin America to advance its strategic interests, noting that Beijing’s loans and investments are often directed at countries with fragile institutions to maximize leverage. This pattern suggests that without structural reforms to tackle corruption, Guatemala and Paraguay will remain vulnerable to Beijing’s tactics.

Taiwan’s Strategic Counteroffensive: A Historic Intelligence Delegation to Guatemala

Recognizing the urgency of the situation, Taiwan has taken an unprecedented step to bolster its alliance with Guatemala. In a historic move, the Special Service Command Center of Taiwan’s National Security Bureau sent its first-ever overseas delegation to Guatemala. This visit underscores Taiwan’s growing concern over China’s influence and signals an effort to deepen intelligence-sharing and security cooperation with its Latin American ally (Kim, 2022). In Paraguay, while no similar initiative has been reported, 

Taiwan has increased cooperation in development projects to maintain its foothold.

This visit reflects Taiwan’s commitment to safeguarding its dwindling diplomatic partners and comes at a critical moment as Beijing ramps up efforts to sway Guatemala’s leadership and, indirectly, Paraguay’s. By strengthening security and intelligence ties, Taiwan not only secures its own interests but also helps Guatemala resist Chinese pressure. This move also sends a message to Washington and other regional allies that Taiwan is willing to take proactive steps to protect its partnerships in Latin America.

Implications for Taiwan and Regional Geopolitics

The Panama case serves as a cautionary tale for Taiwan. If Guatemala or Paraguay follow a similar path, it would mark another significant diplomatic loss for Taipei, further isolating it on the global stage. Moreover, China’s expanded influence in these countries would carry broader geopolitical consequences:

• Increased Regional Control: China’s sway over key trade routes and infrastructure in Central America (Guatemala) or the Southern Cone (Paraguay) would strengthen its strategic position in the Western Hemisphere (Ellis, 2020).
• Weakened U.S. Influence: As China gains more allies in Latin America, Washington’s ability to counter Beijing’s expansion diminishes.
• Pressure on Taiwan’s Remaining Allies: If Guatemala or Paraguay shift recognition to China, other remaining Latin American allies, such as Belize or Haiti, could follow, hastening Taiwan’s diplomatic decline (Kim, 2022).

Corruption exacerbates these implications by facilitating China’s penetration, making the costs of resisting Beijing even higher for governments weakened by a lack of transparency and accountability.

A Call to the Trump Administration to Bolster Guatemala-Taiwan and Paraguay-Taiwan Relations

With Taiwan’s presence in Latin America at stake, the Trump administration must act decisively to ensure that Guatemala and Paraguay remain reliable allies for both Taiwan and the United States. Strengthening these alliances would not only help preserve Taiwan’s diplomatic standing but also serve the broader strategic interests of the U.S. by countering China’s growing presence in Latin America (Kim, 2022).

To achieve this, the administration should prioritize military cooperation through expanded security assistance, intelligence-sharing, and joint training exercises among Guatemalan, Paraguayan, and Taiwanese forces. Additionally, Washington must facilitate greater economic and trade incentives for both countries to reduce their reliance on Chinese markets, ensuring Taiwan remains a viable economic partner. This includes increased U.S. investment in Guatemala’s and Paraguay’s infrastructure and commercial sectors to provide alternatives to Chinese financing, as well as deeper integration into regional security initiatives that align these countries with U.S. and Taiwanese strategic interests (Lazarus & Berg, 2024).

Furthermore, diplomatic efforts must be intensified to reaffirm Guatemala’s and Paraguay’s commitment to Taiwan on the international stage while addressing the roots of corruption that facilitate Chinese influence. The United States should collaborate with regional allies—such as Brazil in Paraguay’s case—to highlight the risks of economic dependence on China, using Panama’s experience as a cautionary example. To specifically counter Beijing’s strategy and ensure it does not conquer Guatemala or Paraguay, the Trump administration could implement the following three concrete measures:

1. Impose Targeted Sanctions on Corrupt Officials Negotiating with China: Using tools like the Global Magnitsky Act, the administration could sanction individuals such as Guatemala’s Defense Minister Henry Sáenz—if allegations of secret negotiations are confirmed—or Paraguayan elites facilitating opaque deals with Beijing. This would deter corruption that opens doors to China and send a clear message about the consequences of undermining U.S. and Taiwanese interests.
2. Establish an Alternative Investment Fund to Compete with the BRI: The Trump administration could spearhead a regional fund, backed by the U.S. and allies like Japan or the European Union, to finance transparent infrastructure projects in Guatemala (ports) and Paraguay (agricultural transport). This would reduce reliance on Chinese offers and bolster economic sovereignty, aligning with strategies proposed by Myers and Wu (2021) to counter China’s economic influence in vulnerable regions.
3. Launch a Public Campaign Against Chinese Influence: Leveraging Panama’s experience, the administration could fund information campaigns in Guatemala and Paraguay to expose the long-term risks of dependence on China—loss of sovereignty, unsustainable debt—and contrast them with the benefits of alliances with Taiwan and the U.S. This would counteract Beijing’s narrative and mobilize public opinion against secret deals.

By proactively supporting these relationships, promoting anti-corruption reforms, and executing these targeted measures, the United States can curb Beijing’s growing influence and reaffirm its commitment to safeguarding its allies in the region.

Conclusion

The parallels between China’s approach in Panama and its current strategy in Guatemala and Paraguay are undeniable. By leveraging economic pressure, infrastructure investments, and political influence, China is gradually laying the groundwork for another diplomatic shift (Ellis, 2020). In Guatemala, Beijing seeks to control ports and squeeze trade; in Paraguay, exclusion from the Chinese market tempts agricultural elites. Endemic corruption in the region amplifies this threat by allowing Beijing to exploit opaque deals and institutional weaknesses, as seen in Panama and suspected in Guatemala. Yet Taiwan is not standing idle. Its recent intelligence delegation to Guatemala marks a turning point in its efforts to counter Beijing’s influence, and its projects in Paraguay reflect a similar bid for resilience.

Having worked in Panama and Guatemala in key defense and intelligence roles, I see clear warning signs that China is executing a well-coordinated strategy to expand its influence at Taiwan’s expense, with corruption as a tacit ally. With China’s presence growing in Latin America, the time for decisive action is now. If Taiwan and its allies fail to counter Beijing’s moves in Guatemala and Paraguay—and fail to address the vulnerabilities created by corruption—history is likely to repeat itself, this time with even greater geopolitical consequences.

References

Sullivan, M., & Kaplan, S. B. (2023). China’s lending in the Americas: Debt, dependency, and the role of corruption. Journal of International Affairs, 75(2), 45-63. https://jia.sipa.columbia.edu/chinas-lending-americas

Chao, Y. (2018). China’s new diplomatic relations with Panama: Prospect of future economic cooperation and partnership in Latin America. ResearchGate. https://www.researchgate.net/publication/323596314_China’s_New_Diplomatic_Relations_with_Panama_Prospect_of_Future_Economic_Cooperation_and_Partnership_in_Latin_America

Ellis, R. E. (2020). China’s engagement with Latin America and the Caribbean: A geopolitical and economic assessment. Air University Press. https://www.airuniversity.af.edu/Portals/10/AUPress/Books/B-0169_Ellis_China_Latin_America.pdf

Kim, A. B. (2022, August 8). Why Guatemala’s commitment to diplomatic relations with Taiwan matters to the U.S.. The Heritage Foundation. https://www.heritage.org/asia/commentary/why-guatemalas-commitment-diplomatic-relations-taiwan-matters-us

Lazarus, R., & Berg, R. C. (2024, January 10). Guatemala nears a pivotal moment on Taiwan. Americas Quarterly. https://www.americasquarterly.org/article/guatemala-nears-a-pivotal-moment-on-taiwan/

Myers, M., & Wu, R. (2021). China’s sharp power in Latin America: How the PRC uses economic and political influence to reshape the region. The Wilson Center. https://www.wilsoncenter.org/publication/chinas-sharp-power-latin-america