Much of the business - legal and illegal - is controlled by a population of 30,000, mainly Shia Muslim Arabs who fled the Lebanese civil war. They run their enterprises from the shabby shopping malls and chaotic streets of Ciudad del Este but usually live in the more affluent Foz. Among them is a small but dedicated hardcore of militant Muslims. For years, often under the guise of charitable donations, millions of dollars have flowed from the Triple Frontier to Hizbollah, the Iranian-backed militant Lebanese Shi'ite faction. Money was also raised for Hamas, the Palestinian extremist group.
Despite a limited crackdown and handful of arrests by the Paraguayan authorities, David Aufhauser, the outgoing United States Treasury Department official on terrorist funding, last month described the Triple Frontier zone as home to a "rich marriage of drugs and terror". A senior US State Department official said: "In terms of terrorist financing, the area is a black hole."
The money trail is complex and difficult to trace but The Telegraph has learnt that American intelligence officials have electronically monitored cash transfers via banks in Sao Paulo and North America to a web of accounts in the Middle East linked to Hizbollah and Hamas. They also disclosed that the US has been using satellites to monitor telephone conversations in the area after learning that Middle East terror suspects were dialling so-called switching stations in Foz or Ciudad del Este and giving a password to have their calls re-routed to their destination.
The procedure made calls impossible to trace and avoided triggering interception mechanisms. More than a dozen switching stations have been found and closed down in recent months. To the frustration of the US, cracking down on the terror financing operations has been much more difficult, especially as Paraguay and Brazil want to resuscitate tourism at the falls and to avoid losing the Arabs' business acumen.
Corruption is rampant and financial controls have been lax for so long that they verge on the non-existent. Money-laundering is conducted through myriad front companies, under-invoicing is endemic and the plethora of foreign exchange offices, money-wiring companies and commercial banks offer ample scope for moving large sums unnoticed.
A recent Brazilian customs investigation indicated the scale of illicit financial movements through the Triple Frontier. It concluded that between 1996 and 2000, an estimated $35 billion (£22 billion) had been moved illegally from Brazilian accounts held in Foz via a Paraguayan bank in neighbouring Ciudad del Este to New York. "It is easy to understand Ciudad del Este," said a lawyer there. "All you need to know is that everyone here is a bandit."***
Like millions of poorly educated, impoverished Brazilians, dos Santos has always dreamed of a better life, a dream that invariably centers on owning a house and land.
Now he's closer to his dream than ever before.
An organizer for a Brazilian group called MST, the Portuguese acronym for "Landless Workers Movement," dos Santos joined about 300 other families last year in occupying a vacant, dusty tract about 20 miles north of Sao Paulo, Brazil's teeming industrial hub.
They are part of a growing wave of confrontational, sometimes violent land invasions by the poor across Brazil, a movement that has created a growing crisis for the new government of President Luis Inacio Lula da Silva -- himself a laborer who rose from poverty.
With his roots in the labor movement, da Silva raised great hopes among the landless, who gave him their solid support and ended their invasions for several months after his January inauguration in the belief he would quickly answer their demands.
But da Silva has moved cautiously on the landless issue, prompting a new round of land invasions that have sometimes turned bloody.
Outraged landowners have banded together and hired armed guards to protect their property, while dozens of landless protesters have been killed in clashes with police and guards.
With each side dug in, the crisis seems on the verge of exploding.
"The law allows us to defend our land," said Marcos Menezes Prochet, head of a landowners group called the Union of Democratic Ruralists in the southern state of Parana. "We are the ones being attacked, not the opposite. What creates violence is not our armed guards, but the invasion of our lands."
Prochet's farm was invaded six years ago by peasants armed with guns, knives and agricultural tools, he said. The men held him hostage for several hours, then occupied his ranch for several months before he could win a court order to have them removed.
"This movement, MST, is not a social movement," he said. "They are a political, ideological movement and their goal is socialism, the expropriation of land with no payments to the owners, just like in Communist Russia." ***