The joint land and air training exercise simulated an attempt by Chinese forces to attack a Taiwanese air base in the north of the island.
Defense Ministry spokesman Chen Chong-chi said inviting Paraguayan President Mario Abdo Benitez to view the exercise alongside Tsai would "help strengthen the friendship between the two countries" and boost future civilian and military exchanges.
Last month, the United States recalled its envoys to the Dominican Republic, El Salvador and Panama after decisions by those nations to cut ties with Taiwan in favor of diplomatic relations with China.
China cut off contacts with Tsai's government shortly after her 2016 inauguration and has repeatedly demanded that she endorse the "one-China" principle that designates Taiwan as a part of China.
Along with poaching diplomatic allies, China has blocked Taiwan's participation in international meetings such as the World Health Assembly and has pressured multinational companies ranging from fashion brands to airlines to describe Taiwan as part of China.
Xi has declared that the issue of bringing Taiwan under Chinese control cannot be postponed indefinitely and some analysts believe he is determined to accomplish that feat during his time in office.
(This story has not been edited by Business Standard staff and is auto-generated from a syndicated feed.)