CIUDAD DEL ESTE, at the triple border of Brazil, Argentina and Paraguay – This is the way savage globalization ends – at least 20,000 shops, stalls, tin shacks and mini-malls crammed into 15 blocks selling everything under the (tropical) sun. There’s Little Asia – thousands of Taiwanese, mainland Chinese and Koreans. But above all there are some 20,000 Arabs of Syrian and mostly Lebanese descent (another 12,000 live in the Brazilian resort of Foz do Iguacu, across the Friendship Bridge).

Welcome to Ciudad del Este, Paraguay, population 200,000, free-trade cesspit and World Trade Organization wet dream, realm of sacoleiros (bag carriers) crossing the bridge every day and dreaming of the ultimate knockoff, but mostly realm of money changers, prehistoric armored cars, gun-and-coke dealers, dodgy pharmacists and stolen Mercedes with tinted windows.

The border is virtually nonexistent, as Paraguay is a Mercosur member (along with Brazil, Argentina, Uruguay and Venezuela). Airspace is free – virtually no radar. Cocaine comes by plane or truck from the Bolivian Andes. Brazilian weapons are everywhere – not to mention real and fake Kalashnikovs. Tons of laundered money whirl in free flow. The whole thing is a dizzying black void of billions of dollars in contraband, narco-trafficking, weapons smuggling, money laundering, car theft, piracy and corruption of public officials.

And it gets worse: it’s crammed with terrorists.

Stand and deliver

The head of the US Southcom (Southern Command), the vociferous General Brantz Craddock, is absolutely convinced the Triple Border is the abode of “the “transnational terrorist, the narco-terrorist, the Islamic radical fundraiser and recruiter, the illicit trafficker, the money launderer, the kidnapper and the gang member.” The emphasis is on “terrorist” and “Islamic.” Southcom – US$800 million annual budget, more than the State, Treasury, Commerce and Agriculture departments combined – is the eyes and ears of the Pentagon over Latin America.

In essence, this is how it works. Armchair gurus in Washington and New York theorize on the so-called five wars of globalization – terrorism, trafficking, money laundering, piracy and migration – and the Pentagon sends the Special Forces posing as cleaners to make it all proper for the “free” world. The underlying assumption is that Hezbollah, Hamas, al-Qaeda – “in sum, terror” – are profiting like mad from the so-called five wars.

The “new threats of the 21st century recognize no borders,” according to the Pentagon. Ergo, everyone may be a terrorist, at least a potential one. Not accidentally, General Craddock hates “anti-globalization and anti-free-trade demagogues.” Sunni or Shi’ite, Marxist or anarchist, ruralist or existentialist, the Russian mafia, the Hong Kong triads, the Nigerian mafia, the Ukrainian mafia – they are all in cahoots. And for the Pentagon, Hezbollah is selling pirate video discs of Christina Aguilera to finance more Katyusha rockets.

At the real Triple Border, though, everyone may be a spy, or a would-be spy, because everyone is there: the Russian mafia, the Mossad, the Nigerian mafia, the US Central Intelligence Agency (CIA), the Hong Kong triads. A rule of gold in the underworld is that Brazil is neutral territory and not subject to turf wars; everyone is entitled to join the fun (technically Ciudad del Este is in Paraguay, but it does business as a Brazilian annex via the Friendship Bridge). There’s no chance of catching one of Ayman al-Zawahiri’s lieutenants slipping $100 bills into the G-string of dancer Harlem Roux at the Casino Parana. He – and his al-Qaeda affiliation – would be spotted in minutes.

General Craddock grudgingly had to admit that the Pentagon has “not detected Islamic terrorist cells” at the Triple Border, nor anywhere else in South America, for that matter. But he’ll keep trying. If he dropped by Ciudad del Este’s mean streets, Craddock would hear a lot of Mandarin – but not Arabic. He would see every cheap plasma set in every audio-video shop tuned to Lebanese TV – or Al-Jazeera, hardly a terror ID. In his search for preemptive strikes, he could try the Condominio Mesquita – which, as the name attests, is a condo in the shape of a gold-painted mosque (they would love it in Peshawar). But he would see no Hezbollahs in fake Nikes chowing an empanada and sipping mate with Jet Li lookalikes.

Hezbollah’s electronic casino

Anyway, the latest annual State Department terrorism report explicitly regards the Triple Border as a main source of financing for both Hamas and Hezbollah, even though it admits “there’s no confirmed information” either Hamas or Hezbollah has “an operational presence” on the ground.

The US government keeps accusing the Brazilian government of regarding Hezbollah as a legitimate political party. The Treasury Department also said it has detected money transfers from Foz do Iguacu – home of the famous Iguacu (Iguazu in Spanish) Falls, on the Brazilian side – to “terrorist groups” including Hezbollah. In a report on drugs released in March, the US once again was explicit: Brazil must fight “terrorism financing” in the Triple Border area.

It doesn’t matter that the State Department has found no evidence of “terrorist financing” from Paraguay and was forced to admit that between 1961 and 2003, only 1.2% of worldwide terror took place in Argentina, Brazil, Paraguay, Uruguay and Chile combined. An International Monetary Fund report on money laundering also revealed the obvious: the Triple Border is awash in cash smuggling, but no sight of “terrorist financing.”

In 2001 CNN dubbed the Triple Border “a terrorist paradise” – based on dodgy documents obtained by US embassies in both Paraguay and Argentina. An article in The New Yorker in late 2002 defined the Triple Border as “the center of Middle Eastern terrorism in South America” and “a community under the influence of extreme Islamic beliefs” – with Hamas, Hezbollah and al-Qaeda all training on the spot.

Between late 2001 and early 2002, this whole thing was fine-combed by US and Brazilian investigators. There was no chance Sheikh Nasrallah would be uncovered operating an electronic casino in Ciudad del Este under an alias. Commercial and banking ties between the Arabs in the Triple Border and their relatives in the Middle East were perfectly legal – just like the ones between resident Arabs in the US and their relatives.

But the heat was on – relentless, humiliating, brutal.

Thus US Immigration and Customs agents, financed to the tune of $2.25 million, will soon be parachuting into the Triple Border to help the locals fight money laundering, contraband and terrorism financing. The Americans will establish “units of commercial transparency.” Up to now the only country in the world boasting a “unit of commercial transparency” was Colombia. The Brazilian Federal Police and the Ministry of Foreign Relations prefer not to comment. American diplomats insist a permanent group representing the US, Brazil, Argentina and Paraguay has agreed on the matter.

Common wisdom rules that at least $20 million annually is sent from the Triple Border to finance Hezbollah, linking South American banks to banks in Texas and New York in the US, plus banks in Panama, France, Germany, Hong Kong, Egypt and Lebanon. That would be 20% of total worldwide financing for Hezbollah’s military wing. There’s no independent confirmation. “This figure was arrived at by the Mossad. They always have plenty of people snooping around here,” said a Lebanese-Brazilian businessman who owns a bustling audio-video shop. Hezbollah receives donations from sympathizers worldwide. There’s no evidence it is being financed by pirate video discs or cocaine dollars from the Triple Border.

But the pressure is non-stop. Thus the US Congress has approved a motion enabling President George W Bush to ask for a task force to act against “terrorism in the Western Hemisphere,” especially on the Triple Border. Bush is also supposed to demand from Brazil and other Latin American countries the branding of both Hamas and Hezbollah as terrorist organizations.

The Brazilian Embassy in Washington was furious – reminding the Americans that even the White House admits there’s no terror operating on the Triple Border. Carlos Alvarez, head of the Commission of Permanent Representatives of Mercosur, worries that the Americans “want to convert the Triple Border into part of the war on terror.” Diplomats from Mercosur countries say they have enough of an institutional base to fight crime – as that is the real issue. Brazil has set up a new police unit and has reinforced air and fluvial patrols at the Triple Border – fighting above all the trafficking of drugs and weapons. Starting in two weeks – to the dismay of the business community in Ciudad del Este – they will even start inspecting all the sacoleiros crossing the Friendship Bridge.

Arab businessmen in both Foz do Iguacu and Ciudad del Este dismiss US paranoia as, well, paranoia. They have more tangible things to worry about – like two Lebanese businessmen robbed of $250,000 cash in downtown Ciudad del Este just as they had left a bank. The robbers – carrying machine-guns – were disguised as Paraguayan investigative police. The Sunday headline in the Paraguayan daily Ultima Hora also told another popular story: “It’s easier to leave Lebanon than to arrive in Paraguay.” It referred to a Lebanese-Paraguayan family who managed to leave Lebanon in a Brazilian rescue plane, arrived in Sao Paulo but then could find no flights home. No one wants to fly to Paraguay: airspace is totally unprotected, with no security systems and no radar.

The locals claim they don’t need Americans to arrest one of the top Brazilian narco-traffickers, Marcelinho Niteroi, as they did last week. Niteroi carried fake Paraguayan identification, which he obtained posing as a “farmer.” On the other hand, businessmen on both sides of the border focus on made-in-USA missiles used by Israel that killed Lebanese-Brazilian kids, who were born in Brazil. “Maybe these kids were dangerous terrorists,” said a real-estate developer.

Where is Osama’s hotel?

Irrespective of the facts on the ground, as far as the Pentagon is concerned the Triple Border remains a nest of subversive activity to be preempted as fast as Syria and Iran.

Take what happened last year when the Foz do Iguacu municipality ran a full-page ad in leading newspapers with a photo of Osama bin Laden. The caption read: “When he’s not busy blowing up the world, bin Laden spends his time relaxing at Iguacu.” Craddock might have taken it literally – and blown the place apart.

Craddock would have had a heart attack with the recent subversion calendar. Last month the Mercosur chiefs of state got together in Cordoba, Argentina – officially welcoming Venezuela as a new member. Fidel Castro stole the show. Venezuela’s news network Telesur – very popular via satellite in Ciudad del Este – provided extensive coverage of “anti-imperialist” speeches by both Castro and Hugo Chavez.

Meanwhile civil society – in the form of social, political, cultural, environmental, student, religious and human-rights organizations – was engaged in the second Triple Border Social Forum in Ciudad del Este, discussing the region’s security, a controversial military agreement between the US and Paraguay, and the preservation of the Guarani Aquifer. The slogan went straight to the point: “Out Yankee troops and the World Bank.”

The “Yankee troops” are holding “training exercises” in Paraguay (more on that in Part 2 of this report). And the World Bank is developing a program toward mapping the Guarani Aquifer – which is the first step toward commercial exploration of its precious waters. The Guarani Aquifer is arguably the biggest reservoir of fresh, potable water in the world – right under Triple Border soil. The majority (71%) of its 1.2 million square kilometers lies in Brazil. According to the United Nations, by 2025 worldwide demand for potable water will be 56% higher than what will be on offer.

When you combine a huge Arab community and lots of non-commercialized water in a Pentagon-defined “lawless area,” no wonder bells start ringing. Watching the non-stop coverage on the Arabic channels of Lebanese civilians dying under Israeli bombs, a Lebanese-Brazilian businessman offered the preferred local version of the “war on terror”: “In Iraq they said there were WMD [weapons of mass destruction]. They wanted the oil. Here they say that we are terrorists. But what they want is our water.”

Next: Lost paraguayos: The Yankees are coming