NEW PARAGUAYAN PRESIDENT VOWS TO FIGHT CORRUPTION

CIUDAD DEL ESTE, Paraguay - The Bush administration hopes Nicanor Duarte
Frutos will keep his promise to crack down on contraband smuggling and
money laundering when he becomes president of Paraguay on Friday.

Authorities in both countries believe that organized crime, especially
along Paraguay's eastern border with Brazil and Argentina, is helping to
finance Middle Eastern terrorist groups. That's where Duarte's vow to crack
down on corruption and President Bush's war on terror will intersect.

The so-called Tri-Border Region, home to an Arab community of about 50,000,
one of Latin America's largest, is under close watch by the CIA and by
Israel's Mossad foreign intelligence agency. In 1995, before most Americans
could spell Osama bin Laden, his chief of operations, Khalid Shaikh
Mohammed, was hiding out there.

Local merchants send millions of dollars back to Lebanon, Syria and
elsewhere, much of it laundered from proceeds of counterfeiting and
smuggling contraband across Paraguay's porous borders, according to U.S.
and Paraguayan authorities. Among the alleged beneficiaries of money sent
offshore are Hezbollah and Hamas, militant Islamic organizations that are
on the State Department's list of terrorist groups.

Both groups continue to launch attacks against Israel and Jewish targets;
Hezbollah bombed the U.S. Embassy and Marine headquarters in Beirut 20
years ago and was responsible for taking Americans and other Westerners
hostage in Lebanon.

There's no solid evidence that al-Qaida is still present in the region, a
Bush administration anti-terrorism official said recently, but "we want to
do the work of prevention and reduce the flows of money to Hezbollah and
Hamas."

The official added: "As terrorists flee the hotspots in the world, we don't
want them to see places like the Tri-Border area as potential safe havens."
The official asked not to be identified.

In a March speech in Miami, Gen. James Hill, the commander of the U.S.
Southern Command, warned that Paraguay's illicit activities help finance
global terror.

"Simply put, (Paraguay's) drug sales and money laundering fund worldwide
terrorist operations. That is fact, not speculation," Hill said.

The Bush administration wants Duarte to respond with new anti-terrorism
measures that would distinguish terrorist acts from common crimes, give
terrorism investigations higher priority and punish terrorists more
harshly. The administration also wants the country's investigators to have
better ways to combat money laundering, kidnapping and financial fraud.

"These tools include use of informants, undercover agents and wiretaps to
penetrate well-organized criminal organizations," said Karen Williams,
spokeswoman for the U.S. Embassy in Asuncion, Paraguay's capital.

Duarte, 46, is the first Paraguayan leader in six decades to take office
without apparent taint. He succeeds President Luis Gonzalez Macchi, who
traveled in a BMW limousine stolen from a Johnson & Johnson subsidiary in
Brazil. Paraguay's congress appointed Gonzalez Macchi president after his
predecessor, Raul Cuba, fled to exile in March 1999 after being implicated
in the assassination of his vice president.

Dictator Gen. Alfredo Stroessner ruled Paraguay from 1954 until 1989, when
a soldier who was accused of smuggling cocaine and marijuana, among other
things, toppled him. Two disastrous presidents followed, both of whose
family fortunes had been made under Stroessner.

Duarte entered the government in the early 1990's and soon soared to the
top of the Colorado Party, the world's longest continuously ruling
political party after China's communist party.

Born dirt-poor, spoke Guarani, the native tongue, before he spoke Spanish.
His up-by-the bootstraps image is a big plus with Paraguay's masses and he
plays up the theme, often recalling his years as a newspaper reporter and
his struggle to earn a law degree at night.

Duarte's cabinet reflects younger, foreign-educated ministers, and, in a
nod to Washington, he's named Leila Rachid, Paraguay's former ambassador to
Washington, as his foreign secretary. She worked closely with the U.S.
State Department on concerns such as Paraguay's sale of passports and visas
to potential terrorists.

It won't be easy to crack down on corruption, which is a way of life in
Paraguay. An estimated 70 percent of its cars - many stolen from
neighboring countries - lack official ownership documents. Paraguay's
military is known to participate in smuggling of arms, weapons and
ammunition to drug traffickers in Brazil.

Duarte can count on help from the U.S. recording industry, which claims to
lose tens of millions annually to Chinese and Arab gangs in Ciudad del Este
that illegally copy tens of millions of U.S., Latin and Brazilian CDs
annually. In Brazil, these pirated CDs and cassettes account for 50 to 70
percent of all music sales.

A small country of just 5.2 million inhabitants, Paraguay last year
imported almost 110 million blank CDs. Anti-piracy groups estimate
Paraguay's legal demand at around 5 million CDs a year.

"There are more than 100 million left over. They sell like hotcakes," said
Alejandro Camino, Paraguay's representative to the International Federation
of the Phonographic Industry, a trade association.

Until now, the Paraguayan government has been content to collect import
duties on the blank CDs and conduct occasional nuisance raids on CD warehouses.

While supporting Duarte's vow to fight government corruption, many
Paraguayans hope he'll spare illicit activities such as smuggling that are
their livelihoods.

"Sure it's illegal, but how else are we to eat?" asked a young man who said
his name was Aldo, as he carried cases of smuggled cigarettes through
bustling downtown traffic in Ciudad del Este. "What's democracy?" he asked.
"What good is it if we have freedom of expression but we can't afford to
eat what we want?"