U.S.-MEXICO ALLIANCE AGAINST DRUGS STALLS

Blacklisting Of Baja Hotel, Other Conflicts Stalling Cooperation

ROSARITO, Mexico - It was supposed to be an example of how well the United
States and Mexico were waging the war together on illegal drugs.

Instead, Rosarito's Oasis Hotel and Convention Center, on a wide swath of
smooth beach 15 miles south of Tijuana, represents one of the cracks that
have emerged on the unified front against traffickers.

Last winter, the Oasis and seven other Baja California companies allegedly
run by the Tijuana-based Arellano Felix drug organization were blacklisted.
American officials - led by the U.S. Drug Enforcement Administration and
the U.S. Treasury Department's Office of Foreign Assets - were so convinced
that the hotel laundered drug money that they openly warned Americans
against visiting or investing in the hotel.

Nine months later, no further legal action has been taken by American
authorities. And Mexican officials still have no charges pending against
the hotel.

The unilateral U.S. action is allowed under the so-called Kingpin Act of
1998. It calls for economic sanctions against firms that U.S. investigators
believe to be fronts for traffickers. Americans are threatened with fines
for doing business with companies on the kingpin list.

But the Oasis action has galled many Mexicans who believe the U.S.
government is unfairly branding foreign companies without publicly stating
evidence of criminal wrongdoing.

The Oasis' California-based lawyers called it an alarming lack of due process.

FRED GREAVES / SPECIAL TO DMN

Jeanne Maxwell watches her grandchildren play in the pool at the Baja's
Oasis Hotel. Some Americans have said they're ignoring the threat of fines
for visiting the blacklisted hotel.

Some American visitors to the hotel railed against what they called an
arbitrary action and said they would ignore the threat of fines. (U.S.
officials said that it is not practical to fine everyone who stays at the
hotel and that kingpin designation is meant to prevent Americans from
investing in the hotel or extending it credit.)

Even some American law enforcement officials - while convinced that the
hotel is indeed a drug-money laundering front - said privately that action
against the Oasis was perhaps premature since it was not followed by quick
criminal indictments.

Calls to officials in the U.S. Treasury Department's Office of Foreign
Assets were not returned.

The binational disconnect over the Oasis is one of several recent
disagreements that have stalled U.S.-Mexico law enforcement cooperation.
Mexican officials are still smarting over recent comments from the DEA that
Mexico has not done enough and is vulnerable to narco-terrorism, despite an
impressive string of drug arrests and knocking the Arellano Felix family
from the trafficking pinnacle.

Hotel crippled

The net result of this dispute is that the Oasis is crippled.

The hotel, with its white Taj Mahal-like domes and arches, has been a
fixture here for 15 years. Although many considered it too loud a structure
- - misplaced on a rustic Mexican beach - the Oasis was a player in a
thriving tourism industry in Rosarito, a busy beach resort dominated by
weekend tourists from California, and Fox Studios' Baja. Titanic is among
the Hollywood blockbusters that have been filmed here.

But right after the U.S. government's kingpin action, Fox Studios stopped
housing visiting employees at the Oasis. Hotel operators said they had to
return $450,000 in deposits from dozens of American companies that withdrew
convention reservations. At last count, 70 people - almost half the
full-time staff - have been laid off.

American individuals still come for the ample, tidy pools and a prized
stretch of beachfront. But Oasis managers said business is down by half
from a year ago. Upkeep on the grounds is slipping; paint is chipping and
bathroom fixtures are leaking; and lights throughout the complex flicker
with increasing frequency.

No formal charges

Despite the public words against the hotel, no formal drug money-laundering
charges have been filed against the Oasis. U.S. law enforcement officials
said they're gathering more evidence against the owners.

The Oasis appears to have received the kingpin tag because of Miguel
Aguirre Galindo, who is the son of the principal owner and who was indicted
two decades ago in California on drug charges, a DEA official said. U.S.
drug agents say he is a ranking operative in the Arellano Felix organization.

"So charge them, or get off their backs," said David Burriel, a visitor
from Northern California who recently stopped at the hotel for a break from
an overland tour of Baja, and said he had no idea there was such a stigma
on the hotel.

"If our country is so worried about drug money corrupting people, why
aren't we going after big banks in our country? Why worry about this modest
hotel, when we have corruption of Enron proportions that are far more
dangerous to our country?"

Oasis owners, through their lawyers, insist that no one from the U.S.
government has ever contacted them to discuss the kingpin designation.

Who is alleged kingpin?

"We don't even know who the alleged kingpin is here," said Charles
Goldberg, a San Diego-based lawyer for the Oasis. "We've requested
documentation and reports, but no one has explained the government's action
to us. ... All we know is that this has been a terrible burden for the
hotel and its employees."

Mr. Goldberg promised a lawsuit, soon, to get the hotel off the
government's dirty-money list.

While the case against the Oasis advances slowly, it has quickly opened up
other areas of discord between U.S. and Mexican soldiers in the drug war.

The two countries agree that cooperation in the fight against traffickers
is unprecedented and that anti-crime gains made by Mexican President
Vicente Fox are concrete.

But the DEA fears Mexico may be unjustifiably at rest after the death
earlier this year of drug baron Ramon Arellano Felix and the arrest of his
brother, Benjamin. The void, drug agents fear, may be filled by emerging
drug lords more willing to resort to Colombia-style narco-terrorism to keep
pushing drugs through Mexico.

Already one gang in Mexico City put local politicians on a hit list - and
assassinated some police officials - before federal authorities moved in to
arrest its leaders, including a middle-aged woman dubbed "Ma Baker."

Can't rest in drug war

"The war on drugs is not really a war. Wars eventually end. This is more
like a battle that never ends," said an American law enforcement official,
who asked not to be identified. "It's like taking out the garbage. You do
it one day, and by the next, the trash has built up and you have to take it
out again. ... Mexico can't rest."

Mexican authorities agreed the drug fight is not over, but they rejected
the notion that they face an imminent narco-terrorism threat.

The United States has every right to discuss narco-terrorism, said Patricia
Olamendi, the ranking anti-trafficking official in Mexico's Foreign
Ministry, in a recent talk with reporters. "But ... saying that
narco-terrorism is taking root here [is] to me adventuresome and worsens
the perception of a climate of insecurity."

Ms. Olamendi was reacting to recent comments by DEA chief Asa Hutchinson
that Mexico could be as vulnerable to narco-terrorism as Colombia. His
remarks came soon after U.S. drug czar John Walters had praised Mexico for
actually having done more of late to fight trafficking than the United States.

Amid the sharp Mexican reaction, Mr. Walters - whose official title is
director of the White House Office of National Drug Control Policy - met
privately with Mr. Hutchinson. Mr. Walters emerged saying that he and Mr.
Hutchinson were on the same page as their Mexican counterparts and that the
DEA chief had been misquoted.

"We all agree that the game is not over," Mr. Walters said in a recent
interview in Tijuana. "But what the Mexican government has done is put up a
tough, engaged effort."

Mexico "has gone after different organizations on as many levels as
possible and destabilized them," he said.

More DEA agents

Despite assurances that Mexico is battling traffickers, the DEA is moving
ahead with controversial plans to bolster its presence in Mexico. The
agency soon will assign 17 new agents to smaller U.S. consular offices in
Mexico, near the border, where there is no American law enforcement
presence. The justification is the unending fight against the thousands of
smugglers who, despite the Mexican crackdowns and U.S. vigilance, move tons
of drugs across the border and onto American streets.

The intensifying war on drugs was the last thing on the mind of Janel Noa
as she lounged by a large pool at the Oasis. While her children splashed
and screamed with delight in a baby pool, Ms. Noa said she was sad the
hotel was crumbling in the wake of the U.S. government's action. "It's been
a great place for the kids," Ms. Noa said. "The warning not to come here
doesn't bother me. Everyone here has been kind to us, and the rates are
good for a family. Besides, why are we so worried about this hotel? Wasn't
Las Vegas built by the Mafia? Look how well it's doing."