Impact International / January 1, 1996
By Larry Luxner
ASUNCION, Paraguay -- Merchants in Paraguay's Ciudad del Este, who make their living largely from smuggling whisky, cigarettes and other contraband, worry that a huge free-trade zone being built just across the Río Paraná in Foz do Iguaçu, Brazil, will have "disastrous consequences" for local businesses.
The sprawling free zone will be constructed by mainland Chinese entrepreneurs in direct competition with a Taiwan-backed project planned for Ciudad del Este, says Chen Lipi, economic adviser at the Chinese Embassy in Brasília.
The Asunción newspaper ABC Color reports that municipal authorities in Foz do Iguaçu offer much better incentives than do their Paraguayan counterparts: paved roads, electricity, piped water, ample telephone lines and generous tax breaks. "The Taiwanese [in Paraguay] face enormous bureaucratic obstacles, and many other difficulties including telephone lines," the paper says. "In addition, Chinese mafia groups operating in the area have threatened them in several ways."
Taiwan's proposed 40-hectare industrial park outside Ciudad del Este -- touted as a center for the assembly of textile, toys and electronic appliances -- involves 7,000 jobs, 70 factories and investments of $100-150 million. Its supposed purpose is to replace the area's dependence on smuggling, so pervasive that Ciudad del Este is nicknamed "the contraband capital of Latin America."
That dependence was underscored earlier this year when the international bridge between Ciudad del Este and Foz do Iguaçu was shut down for several weeks by protesters from both countries. They were upset over a new Brazilian law allowing its citizens to purchase only $150 in duty-free goods every three months. The protests have since died down, but the area's reputation as Mercosur's "black hole" persists -- largely because of all the smuggling, drug trafficking and even terrorism associated with Ciudad del Este.
To combat that reputation, Argentina, Brazil and Paraguay have signed an agreement to combat such activities in the region where the three countries meet. The Mar. 18 pact followed allegations of Hezbollah activity in Ciudad del Este, Foz do Iguaçu and Argentina's Puerto Iguazu. According to Argentine Interior Minister Carlos Corach, "our countries have decided to eliminate the physical and legal sanctuaries where crimes such as terrorism and drug trafficking could find a haven."