On 24 May, President Bernardo Arevalo announced that China had blocked the import of Guatemalan coffee and macadamia due to the Central American nation’s diplomatic relationship with Taiwan. Arevalo claimed the import ban was likely triggered by Guatemala’s attendance at the inauguration ceremony of Taiwan’s new President. Guatemala has the largest economy of the 11 remaining nations that still have diplomatic relations with Taiwan. Since 2017, Taiwan’s allies in Central America have been eroded with four nations in the region having cut diplomatic ties in favour of China. In March 2023, China incentivised Honduras to cut diplomatic ties with Taiwan by offering financial aid for large-scale infrastructure projects. 

In this context, Guatemala’s new left-wing Arevalo government announced in February they desired closer trade ties with China. However, China’s recent export ban has strongly indicated to Averlo that over the next 12 months Guatemala must make the binary choice between Taiwan or China. For Taiwan, the loss of Guatemala as an ally would be yet another major blow as China seeks to isolate the island nation and undermine its international legitimacy.

Key Judgement 1. It is unlikely China will expand trade talks with Guatemala in the next 12 months unless Guatemala drops recognition of Taiwan.

Key Judgement 2. It is highly unlikely Guatemala’s Arevalo government will abandon recognition of Taiwan in the next 12 months.

Key Judgement 3. It is likely Guatemala’s Arevalo government will expand trade agreements with Taiwan over the next 12 months to compensate for lost trade with China.