Jungle Hub for World’s Outlaws

The gangsters came a long way to die.

Wong Chun Shan was a boss in the Tai Chen, the Cantonese mafia. Yan Wu was his soldier. They migrated a few years ago to this riverfront outpost of frontier capitalism in the jungle where the borders of Paraguay, Brazil and Argentina converge: Ciudad del Este. City of the East.

The triple border was a global village of outlaws: Lebanese terrorists, Colombian drug smugglers, yakuza hoodlums from Japan, Nigerian con artists. The Tai Chen ruled by fear in the trash-strewn downtown, a Latin American casbah seething with smugglers, merchants and shoppers haggling in Spanish, Portuguese, Arabic, Asian languages and indigenous Guarani.

But then the gangsters tried to extort $200,000 from Roberto Shih, a Taiwanese immigrant building an industrial park here. He resisted, even when an investor was killed. On Oct. 13, Wong and Yan stormed into Shih’s office and forced him to accompany them to the gravel parking lot.

“They showed me their guns and told me I had to go with them to see their ‘brothers,’ ” Shih recalls. “I accepted. But finally I asked them if I could bring my cellular phone with me. They accepted.”

Instead of a phone, Shih pulled a 9-millimeter pistol from the glove compartment of his car. He killed both Wong and Yan in the ensuing shootout, which authorities ruled self-defense. He has lived a hunted, heavily guarded existence ever since.

The bloodshed revealed a beachhead of Asian mafias in South America. And it contributed to a realization in the region--and as far away as the United States, Taiwan and Israel--that the triple border has become an alarming enclave of lawlessness. The polyglot mix of thugs epitomizes a foremost menace of the post-Cold War world: the globalization of organized crime.

“The triple border is a magnet for organized crime,” says Mario Baizan, an Argentine presidential advisor. “It is a danger to the entire continent.”

During a recent South American visit, FBI Director Louis J. Freeh announced a multinational crackdown here, an initiative seen as the seed of a hemispheric police alliance. Freeh called the border region “a free zone for significant criminal activity, including people who are organized to commit acts of terrorism.”

Mafias, primarily drug cartels, have replaced restive militaries as the top threat to democratic stability on the continent. Paraguay, one of the hemisphere’s poorest, most fragile democracies, has become “a prototypical laboratory for developing a base for bad guys,” a U.S. diplomat says.

Despite the remoteness of the triple border, its geography, history and economics have attracted a billion-dollar criminal industry--the dark side of the foreign investment that has poured into South America in the 1990s.

Brazil has the world’s eighth-largest economy, and Argentina has one of Latin America’s highest standards of living. Starting in the 1950s, a rapacious dictatorship made Ciudad del Este a capital of institutionalized smuggling that today flows back and forth to other Latin nations, Europe, the United States, Asia and the Middle East.

And until a recent slump, the city’s retail economy ranked third worldwide behind Hong Kong and Miami in volume of cash transactions, peaking at $12 billion in 1994. As at the U.S.-Mexico line, legal and illegal trade overlap. Opportunities that lure foreign merchants also foment extortion and money laundering: Brazilian police are investigating bankers who reportedly laundered at least $7 billion here.

Mafias Benefit From Blurring of Borders

Worldwide, mafias have benefited from the interconnected economies, blurring of borders and decline of East-West power blocs that followed the Iron Curtain’s fall. In this region, the mafias threaten to overwhelm governments weakened by corruption and jurisdictional obstacles, and demonstrate remarkable power and reach:

* Middle Eastern terrorists find refuge in the influential Arab communities of Ciudad del Este and Foz do Iguacu, the Brazilian city across the border. The terrorist presence is linked to deadly anti-Jewish bombings in Argentina.

* The region is increasingly a hub for the drug trade, primarily cocaine and heroin bound for Europe and the United States. Washington this year conditionally “decertified” Paraguay’s anti-drug fight, citing pervasive corruption and “no successful investigations of significant traffickers.”

* U.S. industries lost an estimated $150 million last year due to the assembly and sale of pirated CDs, videos and software in the area, according to corporate watchdog groups. Asian-dominated piracy has sparked a threat of trade sanctions and withdrawal of Disney Co. products from Paraguay.

* Contraband fuels an underground economy that rivals Paraguay’s gross national product of $10 billion. Brazil last year confiscated $1.5 billion in contraband arriving from Paraguay, where more than 100 clandestine airstrips have been detected by Argentine intelligence services.

Argentina has led the way in toughening controls. In June, the Brazilian army cracked down on tens of thousands of small-time smugglers who make the odyssey by bus to buy goods for resale on Brazil’s huge black market. The operation ended after angry Paraguayan vendors and taxi drivers shut down the border bridge.

Although Paraguayan officials insist that they are changing their notoriously lax ways, political turmoil hampers reform. And even Interior Minister Jorge Garcete defends Paraguay’s role in the time-honored contraband business.

“It’s not really contraband--it is commerce of all types,” Garcete says. “If the buyers sneak their purchases into another nation without paying taxes, that’s the problem of the buyer, not the seller here.”

A Tijuana Without Beaches or Factories

The anarchic energy of Ciudad del Este recalls Tijuana. But imagine a Tijuana without nightclubs, beaches, factories or big hotels, a small and especially grim Tijuana stripped of almost everything except bare-knuckled border commerce.

“We need to clean up this country,” says Julia, a vendor who sells pistol-shaped cigarette lighters in a warren of outdoor stalls. “This is the United Nations of crime.”

The view from Julia’s corner stand recalls a term used by U.S. sociologists to describe urban mayhem: a slow-motion riot.

Everyone is loading, unloading, counting money, chattering into cell phones and walkie-talkies. Security men with shotguns guard doorways and armored cars. Women in Islamic head scarves and Buddhist monks in robes and sandals add splashes of surrealism to the crowds.

The 20-block downtown contains about 5,000 stores. The salespeople and shoppers are mostly Brazilian, the vendors mostly Paraguayan. A tapestry of merchandise smothers the landscape of red dust: watches, cassettes, leather jackets, flowers, onions, diapers, pornographic videos.

Just about everything that is not biodegradable is fake. Billboards assault the senses, displaying a roguish humor: A store is named “Ali Baba.” A sign warns, “Watch out for piracy!”

At rows of cigarette stands, vendors wrap boxes in waterproof plastic and strap them onto smugglers’ backs. Backpackers hurry toward Brazil on the crowded two-lane bridge over the Parana River, as brazen and numerous as illegal crossers at the U.S. border.

Hunched beneath a bale of cigarette boxes, sweating in a T-shirt and shorts, a Brazilian named Junior edges along the bridge past predatory street kids and youthful Paraguayan police officers in oversized camouflage uniforms. The sinewy Junior, 23, makes about $15 a day. He is angry about Brazil’s offensive against contraband.

“It’s an injustice,” the smuggler says. “They should let us work. The army treats us very badly.”

Upon a signal from a lookout, Junior heaves his package through a hole in the bridge’s fence. It plummets to the water. Accomplices below wade out to retrieve it and join backpackers hiking unmolested on the Brazilian riverbank--a few hundred yards from the customs station.

Cigarettes Imported, Then Spirited to Brazil

The same pack of cigarettes costs $1 in Paraguay and $1.80 in Brazil. Paraguay imports enough cigarettes a year for every man, woman and child in the population of 5.5 million to smoke a carton a week. To avoid taxes, all manner of goods are exported to Paraguay and spirited back into Brazil. A Brazilian police chief was fired for allegedly protecting soybean smugglers.

More than 1,500 freight containers passed through the region without scrutiny last year, according to an Argentine intelligence report. Most of the 40,000 people crossing the bridge each day are not checked. A blitz by Brazilian police caught 200 illegal immigrants within two hours.

The father of this border bazaar was Gen. Alfredo Stroessner. During his 1954-89 rule, the Paraguayan dictator provided a haven for fugitive Nazis such as Josef Mengele. And Stroessner built a jungle hamlet into a city named Puerto Stroessner, where generals and politicians got rich on smuggling. The city’s name changed, but officially protected rackets survived.

Protectionist Brazil and Argentina tolerated the growth of a shopping mecca where their citizens could evade prohibitive tariffs on imports. The boom attracted part of the merchant diaspora from Lebanon and Asia. The Taiwanese community today numbers about 8,000.

Roberto Shih arrived in 1991. He acquired a business in Ciudad Del Este and a home in Foz, a trans-border commute reminiscent of the U.S.-Mexico line.

Shih prospered. In 1994, he began the most ambitious factory project in an industry-starved nation: a $135-million development that manufactures toys, ornaments and other plastics.

His timing was good. Globalization is drying up traditional commerce. Argentina’s economic modernization brought a flood of accessible imports that dampened the city’s appeal to Argentines. Brazil’s reforms have been slower, and its internal taxes are high, but it will drop tariff barriers in 2000 as part of the region’s Mercosur trade pact.

Because of the changes and tougher enforcement, sales here have fallen more than 70% in three years. The slump strengthens illegal alternatives. And the advent of democracy in 1993 opened up the action to international gangsters.

Mafias, mostly from mainland China, muscled in on sales of Asian imports. The names are familiar in the Chinatowns of California: Fuk Ching. Big Circle Boys. Flying Dragons. And Shih’s nemesis, Tai Chen.

“There are about 60 or 70 members of Tai Chen here,” Shih says. “Not all of them are that dangerous. There must be about 10 typical hard-core hit men. They don’t work. They smoke, drink, gamble, womanize. Even if the economy is bad, they keep asking for money.”

Asian Mobs Have Role in Immigrant Traffic

The concentration of Asian mobs is unique in Latin America, according to the FBI, which is interested in their role in U.S.-bound immigrant smuggling. The hoodlums come out at dusk as steel shutters roll down over storefronts and streets empty. They haunt a riverfront casino decorated with a giant roulette wheel on the roof. And the Tai Chen talk about revenge.

“Four people have called me telling me to be very careful because the mafia wants to liquidate me,” says Shih, a 50-year-old father of seven. “But I think it’s going to be difficult for them.”

Since the gunfight, Shih--who is revered by his employees--has lived in a fenced compound. He takes target practice with the pistol he learned to use during military service in Taiwan.

“I do not go outside too often, but that’s more because I have a lot of work than because of the mafias,” Shih says. “At first I only moved around with guards. Now when I have to go out, I go out alone. But armed.”

The mobsters also menace Taiwanese diplomats, according to Consul Jorge Ho, an ex-police officer who tracks the underworld from the hilltop consulate.

“The mafias historically had rules,” Ho says. “They stayed in their world; they didn’t bother the authorities. They even had their well-defined work hours, mainly at night. But these are young groups. They don’t respect the rules. So that’s why it’s dangerous.”

There have been at least two dozen murders of Asians--merchants as well as gangsters killed in turf wars. Police here formed an anti-mafia unit that received training in Taiwan and struck back when the mafias made a ritualistic New Year’s “gift”: About 80 merchants received bottles of whiskey, each representing an extortion demand of $25,000. Police arrested two gangsters and a Paraguayan woman as an accomplice.

Shih’s unfinished factory complex represents an alternative to the declining downtown marketplace. Leaders envision assembly plants similar to the maquiladoras of the Mexican border. But Shih’s barricaded existence explains why many Asians are leaving.

“Every day, the mafias are getting stronger,” Shih says.

The strength of mafias dominated by Arabs, meanwhile, alarms U.S., Israeli and Argentine law enforcement experts, who say the region has become a refuge for Middle Eastern terrorists. Terrorism interlocks with organized crime here, a global pattern that also occurs in locales such as Colombia.

FBI Looks at Ties With Argentina Bombings

The FBI is investigating connections between this suspected terrorist “haven,” Freeh says, and the bombings in Buenos Aires of the Israeli Embassy in 1992 and a Jewish community center in 1994. The attacks killed 115 people. A renegade Argentine police commander and other suspects frequented the triple border.

“Ciudad del Este has become one of the world’s biggest centers for financing of [the pro-Iranian militant group] Hezbollah,” says presidential advisor Baizan.

Such talk bothers the powerful Lebanese community. In verdant Foz, Brazil’s second-largest Arab population prays at a sumptuous mosque and watches two Arabic-language television channels. Many residents own stores in Ciudad del Este.

“Everybody works hard, and there are no terrorists here,” says Hussein Teiyen, head of Ciudad del Este’s Chamber of Commerce and owner of a general store. “We do not provide economic support to anyone, because we are suffering hard times.”

But as children played among shelves stocked with everything from dolls to whiskey, Teiyen compared Hezbollah to George Washington. He described the U.S. and Argentine governments as “dominated by international Zionism” and called Argentine President Carlos Menem, who is of Syrian descent, “a traitor.”

Evidence of a support network exists. Businesspeople are pressed for donations for terrorist groups, a kind of “war tax,” according to a U.S. official who knows the city well.

“A sheik comes by and says some brothers are coming from Lebanon, they need help,” the official says. “Most Arabs tell me that when you get that request, you have to say yes.”

Lebanese Drug Dealer Held in Embassy Plot

In an alarming 1996 case, U.S. agents arrested a Lebanese drug dealer in a plot to bomb the U.S. Embassy in Asuncion, the capital of Paraguay. Marwan Kadi came to the triple border after he was convicted in Canada of smuggling cocaine from Brazil, escaped from prison and obtained a U.S. passport under an alias. Brazilian police busted him for cocaine possession, but he promptly led another jailbreak and fled to Ciudad del Este.

Kadi then caught the attention of U.S. agents, who believe that he conducted surveillance of the embassy for terrorists preparing a bomb attack. When he was deported, however, U.S. prosecutors charged him only with passport fraud. He served a few months and was extradited to Canada, where he is in prison.

Although U.S. officials say the muddled denouement does not mean it was a false alarm, Brazilian and Paraguayan officials complain about the region’s sinister image.

“This border has great financial, commercial and touristic potential,” a Brazilian diplomat says, citing the much-visited Iguacu Falls on the Brazil-Argentina line.

The stigma pains Faisal Hammoud, the urbane owner of the incongruous Mona Lisa department store. Mona Lisa, a blue tower rising above the downtown maelstrom, seems a perfumed mirage. Sleek saleswomen tend mini-boutiques stocked with Lalique crystal and Cartier jewelry. Hammoud pays a silver-haired pianist to play the Steinways, the strains of “Hello, Dolly!” echoing off empty marble floors.

The show-tune medleys are rarely interrupted because no one has bought a piano in a long time. But Hammoud insists that a real cleanup could bring respectable commerce.

“All these illicit groups are tied together: pirates to mafias, mafias to drugs,” he says. “Everything is connected because all these groups think the same way. They look for places where the climate is easy for them.”

(BEGIN TEXT OF INFOBOX / INFOGRAPHIC)

Trouble Across Three Borders

* Cocaine from Bolivia and Colombia is smuggled from Paraguay into Argentina and Brazil, and often on to Europe and the United States. Colombian heroin moves through Paraguay into those countries bound for the U.S. Paraguay grows marijuana that is smuggled into Argentina and Brazil. Along with Ciudad del Este, Pedro Juan Caballero on the border with Brazil is a prime drug smuggling route. Chemicals used for refining cocaine enter Paraguay from Argentina.

* Pirated videos, CDs, cassettes and software are smuggled from Asia into Paraguay and then into the rest of South America, particularly Brazil. Increasingly, pirated products are assembled at clandestine workshops in Ciudad del Este.

* Guns from the United States and elsewhere are smuggled into Paraguay and then through Ciudad del Este to other nations. Their biggest customers are the violent and heavily armed Brazilian drug gangs in the favelas of Rio de Janeiro and Sao Paulo.

* Autos

Auto thieves steal cars in Argentina and Brazil and smuggle them into Paraguay, where the chief of the national police was fired last year for his alleged involvement in an international stolen car ring. Some stolen cars, especially sport utility vehicles, continue on to Bolivia and are exchanged for cocaine.

Even cars stolen in the U.S. have ended up in Paraguay, arriving via Chilean ports and across the Andes mountains through Argentina.