Organisers of the famed off-road rally announced in March that Bolivia for the first time is on the itinerary for the 2014 race, albeit just for the motorbikes class.
Bolivia is set to become the fourth South American country (after Argentina, Chile and Peru) to be included on the Dakar route since the gruelling event was relocated from Africa in 2009.
But Penn, who has personally taken up the case of Jacob Ostreicher, said it would be a mistake to reward Bolivia with the rally if the American is not freed.
"It is still possible for the Dakar Rally to exclude Bolivia," Penn told a House Foreign Affairs subcommittee on human rights.
"The international pressure could very well be precisely what the Bolivian president needs to be able to finally expel the malignant cancer of corruption that is killing both the Bolivian justice system and the thousands of innocent people like Jacob Ostreicher."
Ostreicher was detained in 2011 on allegations of money laundering and associating with criminal groups, but was never charged.
His wife said the 54-year-old New York native lost more than 50 pounds while in prison and has developed symptoms of Parkinson's disease.
Ostreicher "is the victim of an elaborate, high-level government extortion ring that has fleeced approximately USD 27 million worth of assets from the rice operation that he had been managing," said Chris Smith, the panel's chairman, said.
"It's time Jacob came home to his wife and family and friends," he said, adding that lawmakers would craft a letter to Dakar Rally sponsors about possibly excluding Bolivia.
About two dozen Bolivian officials including judges have been arrested in connection with corruption in the case.
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