The quarter page ad claiming Maddy is in the South American city Areguá sparked a media storm which left local police confused

Tragic: Madeleine McCann vanished from her parent's apartment in Portugal in 2007

A bizarre advert published in a local paper sparked reports that Maddy McCann has been 'spotted' in Paraguay, it has emerged.

The quarter-page ad appeared in newspapers in the small city of Areguá yesterday, launching a media storm which has now crossed the Atlantic.

The advert used several pictures of Maddy from previous appeals, including the computer-generated image of how she might look as an older child.

Initial reports suggested Paraguayan police had launched a large-scale hunt for Maddy - but this has since been debunked. 

Here's how the mystery began. 

The advert, translated into English, read: 

"Citizens of Paraguay, Areguá 

"My name is Miraz Ali, a private investigator from London. We have been informed that Madeleine McCann has been found living in Areguá, possibly with a woman.
 

Local paper advert that sparked 'Maddy McCann in Paraguay' stories

"She was kidnapped from her hotel on the 3rd of May 2007 aged three at the Praia da Luz complex in the Algarve, Portugal. Please look at the photo above. 

"She is now 12 years old and a photograph has been produced of how she would look when she was nine-years-old. 

"We believe two men were involved and left the country using a boat."

Heartache: Maddy's parents Kate and Gerry McCann

"Madeleine has a distinctive characteristic in her right eye; a hole in the lower part of her eye. 

"Please, look at the photograph of the eye on the right in the rectangular square. Please, help return Madeleine to her mother. 

"She has suffered in an indescribable manner. 

"There is a reward of 2 million Euros for information leading to the safe return of Madeleine." 

The advert quickly generated frantic coverage in Paraguayan media. 

A news website based in nearby Argentina called BigBangNews.com appears to have been the first to get hold of police to inquire about the claims.

Confusing: Miraz Ullah Ali, who describes himself as a "private investigator from London"

The site quotes an Inspector Sanny Amarilla has having said: "We're investigating in suburbs where there are foreigners, in houses, condos, to see if there is anyone with a similar description as the newspaper cutting.

"This advert crosses the world, it is very important, so if they are in the area we have to recover this girl and return her to her family." 

He is also quoted as having that four police divisions of Areguá, Home Office Intelligence officers, the Anti-Kidnapping Division and the local division of Interpol are all involved in looking for Maddy. 

However, contrasting reports have since appeared in other media outlets. 

Television channel ABC Color said local police were "confused" by the reports.

Maddie 'spotted' in Paraguay

They pictured a different police inspector called Miguel Orué reading the advert in his local paper looking bemused.

He said he had prepared "a report" for his bosses, but added "I've let my bosses know that in this district, no private investigator has arrived, nor have we any information about the missing girl supposedly being here." 

And ABC Color also tracked down Mr Miraz Ullah Ali himself. 

He was quoted as saying he hasn't even spoken to police. 

"I was only in Aregua taking some photos, I didn't talk with any locals, nor the police. I'm surprised that the city is so small, I thought it would be bigger," he said.

Further muddying the water, Mr Ali is also quoted as saying: "We are not after the reward money. My team and I are carrying out this work because it is right, and so that everyone knows we are a serious business."

According to ABC, Mr Ali went on to clarify that he hadn't been in contact with any local police, and was working independently.

He claimed a month or two ago he was told Maddy was living with a woman in Areguá who was keeping her hidden.

He reportedly added: "My mission was to come and get to know the city of Areguá and publish an advert in the newspaper with the biggest circulation in the country."

The episode will cause further heartache for Maddy's parents Kate and Gerry McCann.

The tot, then three, vanished from a Portugal holiday apartment in 2007.

Last month, Kate McCann said she was convinced her daughter never went far from the Praia da Luz resort where she was snatched - despite thousands of reported sightings of her around the world.

She was speaking at the launch of two-week drive to get a million people in the UK to register for free Child Rescue Alerts (CRAs).