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Jungle Hub for World's Outlaws

Ciudad del Este, on Paraguay's border with Brazil and Argentina, has been a smugglers paradise for decades. But an influx of gangsters and terrorists now makes it a symbol of the globalization of crime.


CIUDAD DEL ESTE, Paraguay — 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.

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