Cut in ties with El Salvador to have little financial impact

Chinese Vice President Wang Qishan, center right, Medardo Gonzalez, center left, a Salvadoran politician, Secretary General of the ruling party of El Salvador, and El Salvador Foreign Minister Carlos Castaneda, second left, meet at the Zhongnanhai Leadership Compound in Beijing Tuesday, Aug. 21, 2018. Taiwan broke off diplomatic ties with El Salvador on Tuesday as the Central American country defected to rival Beijing in the latest blow to the self-ruled island China has been trying to isolate on the global stage. (Roman Pilipey/Pool Photo via AP)

Taipei, Aug. 22 (CNA)-El Salvador’s severing of diplomatic ties with Taiwan will not affect Taiwan’s financial sector because of its minimal exposure to the Central American country, according to the Financial Supervisory Commission (FSC).

The FSC, Taiwan’s top financial regulator, said no banks in either country have presences in the other’s territory, and there are few financial exchanges between the two countries, meaning the impact of the cut in ties should be minimal.

According to the FSC, Taiwan’s banking sector had only NT$19.59 million (US$638,111) in outstanding loans to El Salvador as of the end of July, Taiwanese securities firms and insurance companies do not have any exposure to the Central American country.

Local investors have injected NT$221 million and NT$3.924 billion into Taiwan-based mutual funds and overseas mutual funds with assets in El Salvador, respectively, accounting for only 0.0087 percent and 0.11 percent of the funds’ net worth, another sign of the limited affect of the breaking of ties.

The Ministry of Economic Affairs (MOEA), meanwhile, has concluded after a preliminary assessment that the rupture in ties will not have much of an effect on Taiwan’s economy.

El Salvador ranks as Taiwan’s 73rd largest trading partner, and it accounted for only 0.03 percent of Taiwan’s total exports in 2017.

The Taiwan External Trade Development Council (TAITRA), a government-sponsored trade promotion group, said it will suspend all activities, including trade shows and trade conferences, targeting El Salvador scheduled for this year.

The group said it will consult with companies and evaluate business conditions before deciding whether these activities will resume.