Outside the Jebay mall, a bustling hive of black market shops guarded by men with pistols and shotguns, a motorcycle taxista shouts from inside his helmet: "They want to control all this. They think terrorists are here."
"They" means the US military.
The recent arrival of US troops in this landlocked nation of 6 million is brewing fears of the repeat of cold-war intervention in the heart of South America. And in cabs, newspapers, courtyards, and restaurants throughout region, conspiracy theories about Washington's intentions are spreading like wildfire.
In May, Paraguay rankled neighbors by hosting 400 US troops for 13 joint military exercises that began this summer and will end in December 2006. Washington is paying $45,000 for each exercise, some of which are humanitarian, and Paraguay reportedly hopes to land $35 million in extra aid.
When President Bush arrived in Argentina for the Summit of the Americas last month, civic groups in Paraguay simultaneously announced a forum to address the US troop deployment in the country. Many here fear the troops are laying the groundwork for a permanent base similar to the Pentagon's Manta Base in Ecuador. But US and Paraguayan officials are vehement. "The United States has absolutely no intention of establishing a military base in Paraguay," said an official at the US Embassy in Asunción, Paraguay's capital.
Skeptics point out, however, that the US initially denied the Manta base would be permanent back in 1999.
"One day a Pentagon official came to our office to assure us that Manta would only be peripherally used, with no hardened structures or overnight facilities," recalls Larry Birns, executive director of the Council on Hemispheric Affairs in Washington. "A week later, he telephones us and says that things had dramatically changed and that Manta now was scheduled to be made into a 'multimillion-dollar' major US military facility. This is what worries us about Paraguay. What the Pentagon has in mind for Paraguay today may be different from what it may decide down the road."
Before and immediately after 9/11, US officials suspected that Al Qaeda was active in the so-called Triple Border area where Paraguay, Argentina, and Brazil meet. Those fears have dwindled to allegations that Arab businessmen in Ciudad del Este use profits from pirated goods to fund Middle East terrorist groups. The Brazilian government has estimated that $6 billion of illegal funds are wired out of Ciudad del Este annually.
State Department officials say they are concerned about terrorist-related activity in the area, but a July statement from the US Embassy in Asunción said the US had "no type of intervention" planned for Ciudad del Este, except for programs to boost employment in the city. Yet this hasn't stopped locals from speculating that the Pentagon wants to monitor people of Arab descent living in the area.
Others here voice a more radical theory: that the US wants to control strategic gas reserves in neighboring Bolivia. Many Paraguayans don't go that far, but do claim that Washington wants more of a presence nearby because it is worried leftist candidate Evo Morales would nationalize Bolivia's natural gas industry and decriminalize coca growing if he wins the presidential elections on Dec. 18.
"The US has a long and resented history of intervening in Bolivia's internal affairs," says Jim Shultz, executive director of The Democracy Center, a think tank based in Bolivia. "With the arrival of soldiers so close to Bolivia's border, people here are understandably worried that the US is cooking up something even more drastic."
The US official in Asunción firmly denies any links between the Paraguayan exercises and Bolivia.
Dr. Birns says that expansion of military ties with Paraguay could have "damaging regional geopolitical ramifications far beyond anything that Washington may have anticipated as of now. We would like to remove this temptation before it gets Washington into trouble."
Brazilian officials have complained publicly about the US military presence. Celso Amorim, Brazil's foreign minister, told media outlets that Paraguay's position within MERCOSUR, a four-nation trade bloc that also includes Argentina, Brazil, and Uruguay, could be jeopardized by its decision.
Officials in Asunción have complained that MERCOSUR, which is dominated by Brazil, unfairly hurts their country's exports, especially beef and textiles. It is reportedly seeking permission from MERCOSUR partners to pursue trade deals with the United States without having to leave the bloc, something Uruguay has done.
"This is all about trade," says Anderson Siglkicki, a restaurant manager in Foz de Iguaçu, Brazil, just across the Parana River from Paraguay. "Paraguay thinks MERCOSUR is unfair, so they want to make friends with the United States. Paraguay wants to join the Free Trade Agreement of the Americas."
But Milda Rivarola, a Paraguayan political analyst and historian, says officials will feel little domestic pressure to kick the US troops out of the country.
"Most Paraguayans are indifferent," she says. "Progressive sectors and leftist groups have protested, and the press made it an object of debate. But in the country, few people are going to complain, especially if they get free services and some money."