NEW INFORMATION: Full Measure first reported on a little-known connection between designated terror group Hezbollah – based in Lebanon – and a ‘lawless’ area of South America. Police recently arrested Ahmad Barakat. US officials believe he's a key figure in Hezbollah's financial operation in South America. He's accused of using his business operations as a front for Hezbollah fundraising, as well as coercing other business owners into giving money to the organization. Scott Thuman traveled to that Tri-Border area to investigate its connection to terror funding.
From a distance, it is peaceful, even picturesque, this spot along South America's Parana river in Paraguay. Closer, you see and hear one of the busiest business centers in the world. This is Ciudad del Este, a chaotic combination of traffic, police, and customers streaming into the country, outnumbered only by the goods coming and going. To boost sales, Paraguay long ago set Ciudad del Este's taxes and duties abnormally low. Situated next to Brazil and Argentina, South America's two biggest economies, the tri-border area has become a shopper's dream. But cloaked in that commerce may be terrorism. US intelligence agencies say millions of dollars made here, end up some 7 thousand miles away in Lebanon, to fund Hezbollah, where it's a political party, and internationally recognized terrorist organization.
Scott: How important is the tri-border area to Hezbollah?
Emanuele Ottolenghi: I think that, if the scale of one to 10 refers to overseas operations, the tri-border is between 8 and 10.
Scott: It's big.
Emanuele Ottolenghi: It's big.
Emanuele Ottolenghi is a political scientist who monitors Hezbollah's fundraising in South America. Hezbollah first became a threat in the early 1980s. They were linked to the bombing of the US marine barracks in Beirut in 1983, that killed 220 marines and 21 other US personnel. Ottolenghi has testified in Congress that Hezbollah raises 10 to 20 million dollars a year in Paraguay from money laundering, drugs, counterfeit goods and black market cigarettes smuggled across borders for massive profits.
Emanuele Ottolenghi: The frontier is lawless. And it is lawless because you have fairly weak institutions on all sides of the border. Weak judiciary, weak policing, weak customs.
We went to see for ourselves, landing at the same airport where law enforcement says plane-loads of counterfeit goods, from knock-off nikes to designer bags and cell phones, have been flying in, from overseas for decades. Luis Rojas was head of the country's drug enforcement team for years. He helped track the flow of money to Hezbollah.
Luis Rojas: Its face here may be “political”, but it is actually a strong terrorist organization and the Tri-Border Area is probably, possibly its second largest global base, in terms of logistics and financing.
Much of what goes to Paraguay, doesn't stay in Paraguay, and we followed their trail into Brazil. Maybe nothing illustrates the problem better than this: a mountain of seized contraband, enough that this 65-thousand square foot warehouse is constantly bursting at the seams and it isn’t the only one. Outside, cars, boats and buses seized in smuggling operations grow by 3 to 4 thousand a year. The top Brazilian customs official admits it's hard to keep up.
Scott: You seized 80 million dollars in contraband last year. How much do you think you're missing?
Rafael Dolzan: We don’t have an official statistic but overall the value of trade in goods from Paraguay to Brazil is around 4 billion dollars.
Armando Rivarola is editor of one of the largest news organizations in Paraguay. He says corruption and bribing of local law enforcement has only made it worse.
Scott: Do you believe there's an appetite to stop that criminal activity?
Armando Rivarola: Not from Paraguay. Not from Paraguay.
Scott: In 2016, for example, I read that no one was prosecuted under those laws.
Armando Rivarola: No, no one.
Scott: How is that possible?
Armando Rivarola: Our justice system is very weak. Scott: 65 percent of stores here are Arabic owned and run. What is not known is how much of their money goes to feed Hezbollah. None of the Lebanese people we met would talk on camera but Juan Santamaria, President of a local of Chamber of Commerce, did.
Juan Santamaria: I refuse the existence of terrorists, and I don't know what percentage we launder money. I cannot say yes or no, I don't know. But we refuse that. We refuse that we are criminal that many people say in the past.
But US intelligence points to examples, like recent prosecution of Ali Issa Chamas, a man of Lebanese descent, extradited from Ciudad del Este and sentenced to prison for smuggling massive amounts of cocaine into the United States to raise money for Hezbollah.
Scott: Couldn't this money just being going back to help with families, help with communities, charities?
Emanuele Ottolenghi: The Nazis ran hospitals too. So yes, some of this money may go to fund hospitals, infrastructure and so on but the bottom line is that it goes into one big pot.
Hector Balmaceda leads the department tasked with intercepting the fake goods that are turned into cash.
Scott: Over 5 years, you've confiscated 300 million dollars in counterfeit goods in that area?
Hector Balmaceda: Yeah. That's true.
Scott: Do you think that's just the tip of the iceberg?
Hector Balmaceda: Yes. There's a lot more. I'm sure.
So in this country where contraband and money flow as freely as the river and a porous border serves a terror organization operating south of our border, Paraguayan officials admit it may be up to America, to help clean it up.
For Full Measure, I'm Scott Thuman in Paraguay