But... Mengele was barely in Paraguay - he spent some time in hiding in 1958, moved permanently in 1959, and then departed again in 1960 because he didn't consider the country a safe place to hide [1].

As for why Mossad didn't capture him: they didn't know where he was - they found his address in Argentina, but by the time they looked into it he had already fled [2].

[1] https://en.wikipedia.org/wiki/Josef_Mengele

[2] https://archive.org/details/houseongaribaldi00isse/page/250/