There does not appear to be a working link to the Library of Congress report. It may be found here (it is a 90-page PDF):
http://lcweb.loc.gov/rr/frd/pdf-file...gCrime_TBA.pdf
Here is also an article in Spanish from the July-August 2002 edition of Military Review:
La Triple Frontera: Principal Foco de Inseguridad en el Cono Sur Americano.
Both the FrontPage piece and the Library of Congress piece have some holes that cause me to be skeptical that there is large-scale terrorist infiltration going on. First, they routinely conflate Arab and Muslim. My understanding is that most Arabs in South and Central America are Christians, mainly from Lebanon, while most of the region's Muslims are originally from British India.
The TBA itself has a population of about 700,000, of whom about 240,000 live in Ciudad del Este, Paraguay and up to 300,000 in Foz do IguaƧu, Brazil. According to the LoC study, the Arab population in the TBA is 20,000 to 30,000, of whom it is estimated that 90% are Lebanese. The LoC study then goes on to talk about how "tightly knit" the Arab community is, especially in Foz do IguaƧu, "making outside penetration very difficult." From there, it concludes that "[t]he cultural and social demographics of Ciudad del Este and Foz do IguaƧu make an ideal operations base for Arabic-speaking terrorist or criminal groups." From there it goes to talking about the general Muslim population in Argentina and Brazil.
But there are two gaping logical holes here. First, if the Arab community in the TBA is, like most Lebanese in South America, overwhelmingly Christian, and not welcoming to outsiders, it is not an ideal environment for "Arabic-speaking terrorist ... groups" who are Islamist (though it may be an ideal place for "Arabic-speaking ... criminal groups" such as Lebanese mafias).
Second, if the Muslim population of South America is mainly from the Indian subcontinent, Arabic speakers are not going to be at home there either. They can operate better there, of course, as has been the case in other non-Arab Muslim communities such as Pakistan's NWFP and Afghanistan, but they are still fish out of water, not swimming in a Maoist sea.
There is a Muslim Arab community in the TBA of course, and one that, to judge by Foz do IguaƧu's mosque, is not poor. The mosque was built in 1983, reportedly from locally raised funds, but I would not be surprised to find a connection to Saudi-funded mosque building as we have seen elsewhere. However, one other thing jumps out to me. The Muslim community is of Syrian-Lebanese extraction, which would make it mainly Shi'ite (hence some links to Lebanon's Hizbullah). This mosque appears to be Sunni. If, as other sources have stated, Muslims make up about 10% of Brazils Arabs, and there are about 20,000 Arabs in Foz do IguaƧu, there are roughly 2,000 Muslim Arabs. Of these, less than half are Sunni. This may explain why in a November 2001 piece in The Economist, Ali Said Rahal, president of the Islamic Centre in Foz do IguaƧu, said only about 200 people attend Friday prayers at the mosque (he estimated the total Muslim population in the Foz area at 10,000).
So, absent better facts, while the relative lawlessness of the region means it may be a region where criminal groups and terrorists may move in and out of, I find it hard to credit the notion that the region is comparable to the Bekaa Valley or Afghanistan as a flourishing site for terrorist training camps and major-league infiltration.