The loss of diplomatic ally El Salvador to Beijing will have little effect on Taiwan’s economy or financial stability due to the nation’s relatively low exposure, financial and economic officials said yesterday.
The Latin American nation is Taiwan’s 73th-largest trading partner, with bilateral trade totaling US$60.28 million last year, an increase of 12.14 percent from a year earlier, the officials said.
The figure accounted for only 0.03 percent of Taiwan’s GDP, they said.
The diplomatic setback might call a free-trade agreement into question, but the government has yet to receive a formal notice, they said.
Unilaterally terminating the agreement would require a notification period of 180 days, during which the agreement would remain in effect, the officials said.
Under the agreement, Taiwan exports 3,500 tax-free items to El Salvador, while allowing the import of 5,600 tax-free items from the Latin American nation, they said.
Local firms mainly sell plastic products, machinery equipment and auto parts to El Salvador, and import sugar cane, recycled paper and steel products, they added.
The two sides have also inked memorandums of understanding on intellectual property protection, exhibition cooperation as well as coffee and other business exchanges, the Bureau of Foreign Trade said.
Walter Yeh (葉明水), executive president of the Taiwan External Trade Development Council, said the trade promotion body would bypass El Salvador during an upcoming trip to Latin America and would call off a biannual trade show scheduled for November.
“We will need further assessments on trade events in the long term,” Yeh said.
Taiwan’s financial institutions have a mild exposure to El Salvador due to the absence of bank branches there, the Financial Supervisory Commission said.
As of last month, domestic banks had NT$19.59 million (US$637,488) in exposure to El Salvador and had set aside NT$135,000 as provision or impaired assets, the commission said.
Local investors have NT$4.15 billion in exposure to El Salvador through onshore and offshore trust funds, accounting for less than 1 percent of the funds’ net worth, the commission said.
Domestic life insurance, security and futures companies have zero exposure, it added.
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