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In a broad way, the main intention of this study is an attempt to analyze the changes the diplomatic competition between China and Taiwan in Latin America has brought to all the involved parties. How this competition have concentrated in just a few countries serving as Taiwan last stand hold against Chinese attempts to isolate it in the international community during the last three decades. The aim is to understand the whole evolution and dynamics of this great Asian issue elucidated in Latin America, and the way both China and Taiwan have behave to attract the favor of those small Latin American countries while those Latin American countries have also came to profit from this situation. Both, China and Taiwan have an almost symbiotic relationship with Latin America, relationship to become more and more important if current geopolitical and economic conditions were to continue. One side, Both China and Taiwan demand a great amount of Latin American natural resources to fuel their global industry. On the other side, Latin America demands more and more of the finished goods produced in China and Taiwan. The main research question the author will attempt to solve here is: “Why are Latin American states shifting or considering shifting to China?” complementary questions intended to shed some light on the author’s original assumptions are that Chinese economic growth is not the only explanation for Latin America’s support of China. These questions are as follow: “Does Latin American States perceive China as a threat? Has US double standard contributed to Taiwan losing its Latin American partners? Has Taiwanese implementation of Dollar diplomacy methods in some Latin American states something to do with its losing of supporters? A throughout analysis of both, the Chinese economic and geopolitical reach as well as Latin American’s own search for economic, political and ideological independence from US are the main explanatory for the changes observed in this triangular relationship. Nevertheless, a series of unorthodox foreign policy methods such as ‘Dollar Diplomacy’ conditioned foreign aid, have also contributed to these changes.

Table of Contents
List of Tables ix
List of Figures x
1. Introduction 1
2. Research Design 2
2.1 Aim and Purpose of the Study 2
2.2 Background Motivation to the Study 3
2.3 Clarifications regarding the Empirical Case – Geographical scope and Time Period 5
2.4 Defining Foreign aid and Dollar diplomacy 6
2.4.1 Foreign Aid 6
2.4.1.1 Origins of Foreign aid in the international community 6
2.4.1.2 Actual Facts of Foreign Aid 9
2.4.1.3 Is Foreign Aid Helping to Create Development? 13
2.4.1.4 What does Foreign Aid stands for China and Taiwan? 15
2.4.2 Dollar Diplomacy 18
3. Theoretical Framework 23
3.1 Brief Explanation About the Constructivist Approach of International Relations and Material 23
3.2 Methodology and Material 24
3.3 Disposition 26
4. Guidelines of China and Taiwan Foreign Policy 27
4.1 Introduction - Analyzing China and Taiwan foreign policy in general, and in Latin America in particular 27
4.1.1 Guidelines of China’s Foreign Policy 27
4.1. 2 Guidelines of China Foreign Policy in Latin America 31
4.2 Guidelines of Taiwan’s foreign policy 49
4.2.1 Brief Political History of Taiwan 49
4.2.2 Guidelines of Taiwan Foreign Policy 52
4.2.3 ROC: Diplomatic setbacks all along. Could the future of ROC have been different? 54
5. Foreign aid and Dollar diplomacy 60
5.1 Foreign Aid 60
5.2 China and Taiwan: From foreign aid receivers to big donors and from borrowers to lenders 64
5.3 Dollar Diplomacy 72
5.4 Use of foreign aid and dollar diplomacy by China and Taiwan 73
5.5 Evaluating the results of Dollar Diplomacy in Latin America 75
5.6 Signs of Corruption in Central America Directly Linked to Dollar Diplomacy 81
5.7 Competition over Nicaragua 84
6. Latin American Perception of China 86
6.1 How much do ideology and political regime weight in the Sino- Latin American Relation? 95
6.2 Does Latin America perceive China as a military threat? 101
6.3 Chinese Military Relations with Latin American States 105
6.4 Changes in Latin American economies might better explain China smooth expansion in the region 108
7. Conclusion 114

Appendices 118
Appendix A: Note on Transit Diplomacy 119
Appendix B: Acronyms in this work 121
References 124
Vita…………. 145

List of Tables
Table n:1 CODELCO (Corporacion Nacional del Cobre, Chile), Figures from 2003 to 2007 40
Table n:2 List of the states recognizing the PRC or the ROC as to 1960 56
Table n:3 List of the 52 states recognizing the PRC from 1960 to 1980 59
Table n:4 Countries in South America and Caribbean where Taiwan ICDF has assistance programs up to 2007 68
Table n:5 Contries in Africa and Asia where Taiwan ICDF has assistance programs up to 2007 69
Table n:6 Latin American views of China in comparison with their views of the United States 88
Table n:7 Asian people perception of the Chinese leadership in comparison to the American leadership 97
Table n:8 Foreign Direct Investment in China by source Country or Region from 1979 to 1997 101
Table n:9 Trade increase between Latin America and the European Union from 1995 to 2000 113



List of Figures
Figure n:1 Who is the Biggest Donor? Official Development Assistance in Absolute Terms, 2004 9
Figure n:2 Where Does the Money Go? Official Development Assistance by Region, 2003 9
Figure n:3 World views of China, 2007 87
Figure n:4 Global Perception of China, from 1980 to 2008 89

Figure n:5 Catching up: Forecast of the Chinese economic growth for the next two decades 105
Figure n:6 Increase in Chinese imports from Latin America and Africa: China Buys More from Africa and Latin America 108
Figure n:7 Chinese share of the international trade from 1980 to 2002 111

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