In October 1987 Paraguayan residents were surprised to read in La Tarde, Asuncion’s afternoon newspaper, that plans were afoot to open a huge section of the Paraguayan Chaco to 500 Muslim families. Paraguayans with some knowledge of the isolated Chaco, and the difficulty the settlers would encounter there, felt certain that the proposed Nueva Andalucia settlement in Boqueron Department had to be a bogus operation. It was the sort of land scam that had been customary during the more than three-decade reign of dictator Adolfo Stroessner.

This time, however, the report elicited more than the usual share of criticism. There seemed no logic to the undertaking, especially since the project was reportedly underwritten by the shadowy World Islamic Council (WIC) and would involve settlers from an unnamed country or countries. Only Mennonite settlements had successfully tamed the central Chaco, and the phlegmatic Paraguayans were aware that they had done so because they were unbelievably industrious. They had persisted in an environment that had defeated every group that had preceded them.

Acting as spokesman for the WIC was Elio Massagrande, the Italian-born resident in Paraguay who was himself under investigation in Italy. It was reported that he had been granted usufruct right to 100,000 hectares (1,000 sq. kilometers) of Chaco land. Massagrande was said to be financing the construction of a large fertilizer plant within the WIC colony. In Asuncion, citizens aware of Massagrande’s vile history, and his barely disguised belief that most Paraguayans were moronic country bumpkins, were left to wonder what the Italian really had in mind.  (SEE MAP:link added by RSN)

A month later, the anti-Stroessner Paraguay monthly journal Patria Libre informed the public that in the nineteen seventies Massagrande had acquired in northern Italy the reputation of a brutal fixer, train bomber, and terrorist. The journal tied Massagrande to Licio Gelli, infamous leader of Italy’s P-2 Masonic Lodge — and it noted both men traveled on a Paraguayan passport. The two reportedly were also involved in the purchase of a bank and finance company in Asuncion, a large percentage of which was owned by Stroessner insiders. Once that article was published, for many Paraguayans the smell of narcotics trafficking was in the air.

Economists estimated that by 1988 the Government of Paraguay had run up a total current account deficit of $2 billion. How that deficit was being financed could not be explained — unless one took into account the growth of narcotics trafficking. Paraguayan contraband agents (transitistas) purchased cocaine in Santa Cruz, Bolivia, and transported it to airstrips in the Chaco. From there were a myriad ways to move the commodity, a favorite being the use of Paraguayan merchant vessels (which were subsidized by the Government and ran at an annual loss). As much as 1,000 kilos a month was transiting Paraguay en route to Latin America, Europe and the United States. In addition, a small amount was shipped to the Middle East where Bolivian cocaine had already made an appearance in Beirut circles. It was estimated that Paraguay was then earning as much as $300 million per-annum from cocaine, in addition to which the annual sale of its marijuana crop exceeded $50 million.

The Paraguay police were convinced that Massagrande and his Arab friends planned to use the WIC cover to transport cheap processed coca paste from Bolivia to Massagrande’s fertilizer plant in the isolated Nueva Andalucia settlement. There it would be refined into Cocaine HCl. The mark-up from paste to powder was terrific and everyone involved could get rich. And when it came to narcotics trafficking, Gustavo Stroessner, the President’s son, was already aboard.

Massagrande was nearly forgotten until the following year, and interest in his Nueva Andalucia was not revived until June 1988 when newspapers reported that six Lebanese Shiites had just been expelled from Paraguay. They were among a group of forty Lebanese Shiites that had arrived in April and were all expelled after it was found they held illegitimate visas.

paraguay-mapThe police were soon forced to admit, however, that the media was in error and the papers had been legitimate. It was then rumored that they were a minuscule percentage of an estimated 3,500 visas that had been issued by the Paraguay Honorary Consul in Beirut since the start of the year. Hundreds of young men with Lebanese passports had been transiting Brazil and were appearing en masse in the Argentina-Brazil-Paraguay tri-border region. Most simply disappeared after arriving in Paraguay’s Ciudad Stroessner, the kleptocrat’s paradise located on the Parana River just south of the dam at Foz de Iguacu. If there was an eminence gris who took charge of the Lebanese Shiites once they arrived in the tri-border region, no one could name him. If the Paraguayan police seemed baffled, Argentine public safety officials looked the other way. And Brazilian police could be bought even more cheaply than the Paraguayan police on the take in Puerto Stroessner.

In the convoluted way that politics was carried out under Stroessner, the U.S. Drug Enforcement Agency had long contended that the President and his circle of friends were aware and personally benefitted from the narcotics activity of certain Arab businessmen in Puerto Stroessner. Stroessner’s political opponents were certain that the police had orders not to interfere in the trafficking that was known to occur in various Arab hotspots, including the Casa Mona Lisa, La Casa de Ali, and the Allstar Sports Shop. But just who was profiting from the arrival of Arabs was discerned only much later when a number of foreign intelligence agencies discovered Hizbollah’s financial involvement.

As for the flow of Arabs, after Stroessner was deposed it was learned that Paraguayan consuls and honorary consuls living abroad had participated in the sale of untold thousands of Paraguayan passports, visas and travel documents. Senior Colorado Party officials had been involved in traffic worth millions. Also involved included was a former Stroessner mistress who headed the Paraguay’s Foreign Ministry consular section in Asuncion. Paraguay Consuls and Honorary Consuls generally purchased their commissions from the Minister of Interior, and they would take their percentage from the sale of documents that ranged from residence visas to a diplomatic passport. The latter, cherished by everyone from traffickers to Arab sheikhs, was available to foreigners if they were willing to pay the price.

In the late nineteen eighties Beirut and Hong Kong were the two factories where representatives of Paraguay pumped out most of the bogus paper. Most Chinese hoped to use Paraguayan documents as a trampoline to enter the United States. But Beirut was different. No one outside of the participants and the Minister of Foreign Affairs seemed to comprehend the vast extent of the passport racket and the papers issued in the honorary consul’s office in Beirut. That racket was controlled by Cristina, the daughter of Paraguay’s Minister of Foreign Affairs Sabino Montanaro. She served as First Secretary at the Paraguayan embassy in London and supervised the Beirut operation where documents were almost universally delivered either to Lebanese Shiites or Palestinian Arabs.

The Beirut racket only surfaced after a number of angry cables Cristina sent her father complaining that their man in Beirut was skimming more than his share of proceeds on the sale of Paraguayan paper were leaked by Stroessner’s enemies. After that, the Paraguay police learned that the Beirut consular office had sold as many as 5,000 visas between 1986 and 1988. Their analysts were convinced that Iran was bankrolling a Hizbollah operation, but they could not prove it.

By the Fall of 1988 the Stroessner’s kleptocracy was falling apart. The Arab settlement plan for the Chaco had disappeared like a puff of smoke, taking Massagrande along with it. The Asuncion office of the Bank of Credit and Commerce International, that planetary Ponzi scheme which devoured $9.5 billion dollars in deposits from more than sixty countries was nearing its end. Stroessner himself was sick and would have to undergo a prostate operation that he had long postponed. The ‘old man’ had learned of his son’s involvement in various narcotics arrangements, including a scheme involving the transport of cocaine concealed in electronics to Brazil and Argentina from two airstrips located on the outskirts of Ciudad Presidente Stroessner. It didn’t seem to matter. Gustavo was forced to lay low while his father laid plans to promote him to senior General in the Air Force and retire certain senior military officials who would oppose the move. Indeed, retirement was in the cards for a number of Stroessner war-horses including his old ally General Andres Rodriguez.

The Army was demoralized but Rodriquez was ready to act. Stroessner could not be allowed to pass the Presidency to his utterly corrupt son. Rodriguez informed the U.S. embassy that Paraguay could not continue along its present path. Aware that the DEA El Paso Intelligence Center had a thick folder with his name on it, the General swore that he was not involved in narcotics, and offered to tell the Embassy everything he knew on trafficking in Paraguay.

In August 1988 Stroessner underwent prostate surgery. Shortly after that, a list circulated of senior military officials to be retired. It was clear that Stroessner was clearing the way to promote his son to full Colonel, and then to the eventual command of the military itself. Aware that Stroesser wanted to force his retirement, General Rodriguez led the coup d’etat that was carried out on the night of February 1, 1989. Stroessner and his son were sent off to exile in Brazil. Rodriguez assumed the Presidency, but then surprised nearly everyone when he began the planning that would return Paraguay to civilian government. After 34 years and nine months the Stronato was over, and after nearly forty years of military rule the government would be returned to civilian control.

The illegal sale of Paraguayan “paper” was shut down, and Foreign Minister Sabino Montanaro was placed under arrest. By then, however, it was a case of too little, too late. No one really knew for sure how many Muslim Arabs had landed in the tri-border region. One report issued in 2005 could only generalize that there were anywhere from 12,000 to 40,000 Arabs (Hugh Smith, Terrorism in the Iguazu Falls Region, Army Command and General Staff College, Fort Leavenworth, Kansas, 31 August 2005.) By then one detail was certain: In conjunction with the Arab immigrants the Hizbollah had created a toehold in South America.

SOURCE: Ameican Center for Democracy

J. Millard Burr, a Senior Fellow at ACD, is author of Alms for Jihad