Former Paraguayan President Horacio Cartes

Since the inception of Operation Car Wash in 2014, it was a matter of time before Brazil’s sweeping corruption investigation into wrongdoings within construction firms, state-owned companies, government, and a variety of facets of Brazilian society would spread to neighboring countries. Governments in Peru, Venezuela, Chile, and Bolivia have been mentioned or directly implicated in Car Wash testimony, but now the probe has reached Paraguay, ordering the arrest of the country’s biggest powerbroker: former President Horacio Cartes.

</p> <p>On Tuesday morning, judges of the Operation Car Wash cases in Rio de Janeiro issued an arrest warrant for Mr. Cartes and another 16 individuals, among them Brazilians and Paraguayans. He also now has an Interpol red notice against his name.</p> <p>The investigation into Mr. Cartes began in July of last year, while he was still President of Paraguay, leaving office one month later.</p> <p>Tuesday&#8217;s arrest warrant is a part of Operation Patron, an offshoot of Car Wash pursuing notorious dollar smuggler Dario Messer and those linked to him.</p> <h2>The smugglers&#8217; smuggler</h2> <p>Dario Messer, born in Brazil and naturalized Paraguayan, has been called the &#8220;<a href="https://brazilian.report/power/2018/05/04/operation-car-wash-devastating/">dollar smuggler&#8217;s dollar smuggler</a>,&#8221; intermediating countless illegal foreign exchange operations across the continent. Operating as something of a &#8220;bank&#8221; for illegal dollar exchangers, Mr. Messer provided guarantees for smaller smugglers, meaning he had a hand in all of the major money-laundering scandals in recent years, including the Banestado scandal and the Mensalão, as well as appearing on the leaked spreadsheets from HSBC in the Swiss Leaks case.</p> <p>Mr. Messer was the subject of an arrest warrant back in 2018, after former collaborators of his Vinicius Claret and Cláudio Barboza turned state&#8217;s evidence during an Operation Car Wash case in Rio de Janeiro. The dollar-smuggling kingpin went on the run for 13 months, before being arrested by Federal Police in São Paulo in July of this year.</p> <h2><em>Hermanos de alma</em></h2> <figure class="wp-block-image"><img src="https://brazilian.report/wp-content/uploads/2019/11/Dario-Messer-and-Horacio-Cartes.jpeg" alt="Dario Messer and Horacio Cartes" class="wp-image-27853" srcset="https://brazilian.report/wp-content/uploads/2019/11/Dario-Messer-and-Horacio-Cartes.jpeg 715w, https://brazilian.report/wp-content/uploads/2019/11/Dario-Messer-and-Horacio-Cartes-300x180.jpeg 300w, https://brazilian.report/wp-content/uploads/2019/11/Dario-Messer-and-Horacio-Cartes-610x366.jpeg 610w" sizes="(max-width: 715px) 100vw, 715px" /><figcaption>Horacio Cartes (L) and Dario Messer</figcaption></figure> <p>The links between Dario Messer and Horacio Cartes go back decades, after Mordko Messer, Dário&#8217;s late father, reportedly sheltered Mr. Cartes from a previous spot of legal trouble in Rio de Janeiro. In 1990, a scheme to smuggle gold across the border was uncovered by Federal Police in Foz do Iguaçu. Five Paraguayan citizens were arrested—all of them employees of Mr. Cartes&#8217; bureau de change, Amambay. Each one of the detained foreigners claimed they were acting on the orders of their boss, and an arrest warrant was issued for Horacio Cartes.</p> <p>Mordko Messer, one of the pioneers of money laundering and illegal dollar exchange in South America, protected Mr. Cartes and he escaped jail. In separate public speaking events, Horacio Cartes has called Mordko his &#8220;second father,&#8221; and Dario Messer his &#8220;<em>hermano de alma</em>,&#8221; or soul brother.</p> <p>This week&#8217;s arrest warrant concerns allegations that Mr. Cartes protected Dario Messer in Paraguay, giving him an &#8220;initial&#8221; USD 500,000 to help pay for legal fees. Brazil&#8217;s federal prosecutors produced a letter, allegedly written by Mr. Messer to Mr. Cartes—president of Paraguay at the time—in which he refers to him as &#8220;boss&#8221; and requests the financial help.</p> <p>Furthermore, intercepted conversations between Mr. Messer and Brazilian businessman Roque Silveira showed that the two were in talks with Horacio Cartes about turning themselves into Paraguayan authorities and gaining advantageous conditions after doing so.&nbsp;</p> <h2>The cigarette empire</h2> <p>Much of Horacio Cartes&#8217; wealth comes from the tobacco industry, owning Paraguay&#8217;s top cigarette factory, <a href="https://www.worldfinance.com/markets/the-underground-economy-of-paraguay">Tabesa</a>, located just south of the contraband haven of Ciudad del Este. Tabesa brands such as Eight and Gift—which until recently were only manufactured in Paraguay and not legally exported outside the country—are found everywhere in Brazil&#8217;s biggest cities.</p> <p>Over the years, Mr. Cartes amassed a web of companies in his name and those of his family members. He acted as president of Asunción football club Libertad for over ten years, and now indirectly owns a huge share of the Paraguayan media, by way of members of his family.</p> <p>The Car Wash investigation estimates that Mr. Cartes has around USD 20 million of concealed funds, located in offshores and around Paraguay.</p> <script src="https://www.buzzsprout.com/299876/1958731-83-latin-america-s-veins-are-wide-open.js?player=small" type="text/javascript" charset="utf-8"></script> <h2>Political questions</h2> <p>What happens now is anyone&#8217;s guess—and there is plenty at play. As the arrest warrant came from Brazil, Paraguayan authorities technically have no obligation to extradite Mr. Cartes. However, current president Mário Abdo Benitez was elected on an anti-corruption ticket and may feel pressured to greenlight the former president&#8217;s extradition. On Tuesday afternoon, Mr. Abdo stated that &#8220;no-one in Paraguay is untouchable.&#8221;</p> <p>The chances of him doing this, however, are slim. Horacio Cartes remains one of the richest men in Paraguay and owns a large portion of the country&#8217;s media companies—and he still has a big say in the country&#8217;s politics.</p> <p>&#8220;President Abdo only really governs thanks to the tacit support of Mr. Cartes, who controls a rival faction of the ruling Colorado party,&#8221; says Laurence Blair, a freelance journalist who has covered Paraguay for <em>The Guardian</em><strong><em> </em></strong>and <em>The Economist</em>. &#8220;If he approves Mr. Cartes&#8217; capture and extradition, that could unleash a lot of political difficulties.&#8221;</p> <p>Brazil&#8217;s Jair Bolsonaro will also be looking at the situation with care. In South America, Mr. Abdo is his closest ally in ideological terms, and the two have been involved in negotiations on the renewal of the <a href="https://brazilian.report/power/2019/08/15/itaipu-paraguay-brazil-tension-mario-benitez-impeachment/">Itaipu hydroelectric dam contract</a>.&nbsp;

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BY Euan Marshall

Euan Marshall is a Scottish journalist living in São Paulo. He is co-author of A to Zico: An Alphabet of Brazilian Football.