Reverend Sun Myung Moon, spiritual leader of the Unification Church, self-proclaimed Messiah, multimillionaire and a generous contributor to the US Republican Party, has been showing a strong interest over the last five years in little-known Paraguay at the centre of the South American continent.

Since 1999, Rev Moon has built his personal empire which begins on the marshy banks of the River Paraguay and stretches beyond the hazy, level horizon through 600,000 hectares of arid land - equivalent to more than two Luxembourgs - punctuated by solitary clusters of withered trees and sad bushes which struggle desperately for air.

The scorching sun beats relentlessly on one of Latin America's most desolate zones. It is here in the northern province of Chaco, directly above the GuaranI aquifer, the largest resource of fresh drinking water in the world, where Moon's associates claim he wishes to build an ecological paradise.

Nevertheless, national Senator Domingo Laino sees a different pattern in Moon's acquisitions. "There are two principal branches to Moon's interest in Paraguay," he said, "control of the largest fresh drinking water source in the world and control of the narcotics business", which is so prevalent in this area. "President Lula told me that Brazil took serious measures to curb Moon a few years back as it became evident that he was buying up the border between our two countries," said the senator.

Allegations from local law enforcement officials support this claim. The so-called Dr Montiel, Paraguay's drugs tsar from 1976-89, said: "The fact that they came and bought in Chaco and on both sides of the Brazilian border is very telling. It is an enormously strategic point in both the narcotics and arms trades and indeed the available intelligence clearly shows that the Moon sect is involved in both these enterprises."

Paraguay is the major drugs port through which virtually all the cocaine produced by Bolivia and Peru passes. In the world's second most corrupt country, "the ease of buying influence is second to none", said Montiel. "Corruption reaches dangerous levels and he who wants transparency in Paraguay is a dead man. Indeed the famous Iran contra affair was operated from Ciudad del Este" on the south-east Paraguayan border with Argentina and Brazil.

Not content with expanses of potentially invaluable land, Rev Moon has also taken over entire towns, including factories and homes. In Puerto Casado, tensions between Moon disciples and locals led to violent confrontation over the last year following the closure of the only source of work, a lumber factory, and the dismissal of 19 workers who tried to form a union in order to demand an eight-hour day and the national minimum wage of GBP80 sterling per month.

According to Senator Emilio Camacho: "The Moon sect is a mafia. They seek to subvert government control and are effectively building a state within a state. I believe they are hoping the local population will leave so they have unquestioned authority in the zone and are free to do whatever they want."