Paraguay on Sunday announced that it was designating Hezbollah as an international terrorist organization, thereby creating a new legal basis for taking action against Hezbollah’s money laundering and terror-finance activities. Through this measure, Asunción can help reduce the group’s pervasive and destabilizing influence not only within Paraguay but also across Latin America.
Paraguay has for years been a key hub of Hezbollah’s illicit finance operations. Over the course of four decades, the terrorist organization built extensive infrastructure in the Tri-Border Area (TBA) of Argentina, Brazil, and Paraguay. The TBA is a vast metropolitan area home to almost a million residents and a well-developed tourism infrastructure, including three international airports and a high-quality service industry.
The TBA is also an ideal place for Hezbollah to establish roots and fundraise. Three countries, three languages, three currencies, weak border controls, and well-established smuggling routes have contributed to a thriving illicit economy, which Brazilian authorities have assessed to be worth $18 billion a year. Hezbollah has taken its share of that economy through a network of local residents; the area has one of the largest Shiite Lebanese communities in Latin America.
Until recently, Latin American governments were unwilling to label Hezbollah as a terrorist organization. In July, however, Argentina took the unprecedented step of doing so, noting Hezbollah’s responsibility for terror attacks against an Israeli embassy and a Jewish community center on Argentinian soil in 1992 and 1994, respectively. The designations followed Argentina’s creation of a public registry for terror entities and individuals.
Argentina’s actions clearly influenced Paraguay. Barely eight months earlier, Paraguay’s then-foreign minister, Luis Castiglioni, publicly denied that Hezbollah had engaged in illicit finance activities in Paraguay. The country’s intelligence minister echoed his claim, suggesting that the main challenge in the TBA was tax evasion, not money laundering. The interior minister also downplayed the issue. Even the Supreme Court’s then-president weighed in, saying he had no evidence that Hezbollah was financing terrorism.
The Trump administration urged Paraguay to reconsider. Multiple visits by senior officials – including one by Secretary of State Mike Pompeo last April – ultimately persuaded Paraguay’s government that it needed to get tougher on Hezbollah.
Even before the Hezbollah designation, Paraguay extradited a handful of suspected Hezbollah operatives to the United States. Asunción is also now undergoing a review of its anti-money laundering and anti-terror finance regime with the Financial Action Task Force of Latin America (GAFILAT), the regional affiliate of the global standard-setter in this arena. This move is particularly important in light of the pervasive corruption in Paraguay’s government, not to mention its weak and overburdened judicial system.
Whether countries in the region will take similar action remains unclear. All eyes should now be on Brazil, the TBA’s last hold-out. Brazil is particularly important because Hezbollah’s TBA operations rely heavily on Brazil’s financial system to move money in and out of the area. Washington should therefore pressure Brazil to follow its neighbors’ example by designating Hezbollah as a terrorist organization.
Emanuele Ottolenghi is a senior fellow at the Foundation for Defense of Democracies (FDD), where he also contributes to FDD’s Center on Economic and Financial Power (CEFP). Follow Emanuele on Twitter @eottolenghi. Follow FDD on Twitter @FDD and @FDD_CEFP. FDD is a Washington, DC-based, nonpartisan research institute focusing on foreign policy and national security.