WHAT WILL ONE BILLION AMERICAN DOLLARS BUY IN COLOMBIA?

Last week, in the small village of Pueblo Rico, Colombia, six children died
in a barrage of army bullets.

The victims, who were hiking, were apparently mistaken for a group of
guerrillas that the army had been tracking.

Witnesses said that some of the young soldiers wept openly when they
realized their error and repeatedly cried out, "They were all children we
killed; look, they were children." Other witnesses claim there were no
guerrillas in the area.

Colombian President Andres Pastrana has promised an investigation, but the
left has already seized on the tragedy, denouncing the killings as an
example of what they allege to be the army's human rights violations. The
implication, of course, is that the military should withdraw its patrols, a
decision that would be most convenient for the brutal guerrillas.

As it happens, Bill Clinton will visit Cartegena Wednesday to reinforce
U.S. support for Plan Colombia, Mr. Pastrana's latest proposal to right the
country from both civil war and severe recession.

But the U.S. aid package will neither beef up direct guerrilla-fighting
efforts nor support economic reform. Instead, $1 billion is targeted at
wiping out coca growing, with another $300 million going to other countries
in the region for similar purposes. Colombia will receive 60 helicopters
with a qualification that they may not be used to fight communist
insurgents. Other uses of the money include programs to foster crop
substitution and infrastructure development.

In the 20 years since the global cocaine business began to boom, this is
the most misguided idea that drug warriors have yet devised.

It ignores economic fundamentals and won't end the supply of cocaine to
U.S. users.

Moreover, its severe restrictions on helping institutionally fragile
Colombia build a strong, professional military mean U.S. aid will not
support restoration of a rule of law. Further, there is no requirement for
Colombia to radically liberalize its economy, the key first step toward
easing social unrest. Faster economic growth would enhance the popularity
of Mr. Pastrana, giving him greater power to make deep institutional reforms.

Washington could influence Colombia in reaching these economic goals.

An offer of open access to U.S. markets, for example, would go a long way
toward persuading the Colombian Congress to support its own trade
liberalization. To take a cynical view, the $1 billion would be better
spent buying off protectionist congressmen and the interests they represent
in both Colombia and the U.S.

Unfortunately, the driving force behind the bipartisan U.S. aid package and
Mr. Clinton's brief photo-op visit is an election year race in the U.S. to
claim high moral ground from which to denounce Colombian drugs in "our
children's schoolyards." The result is a plan to defoliate Andean peasant
lands. And when it comes to allegations of ulterior motives, it doesn't
help that some of the strongest pro-drug war lobbyists are U.S. defense
companies that build helicopters.

There may not be more politically appealing ways for Washington to spend
U.S. taxpayer money in an election year. But surely, in the interests of
Colombians, there are some more efficacious ways.

There was a time when Colombia saw drug consumption as a U.S. problem.

But local producers are now vertically integrated and highly efficient,
throwing off enormous cash flow and producing a powerful Colombian
underworld. Left-wing guerrillas seeking to destabilize the government --
most notably the National Liberation Army (ELN) and the Colombian
Revolutionary Armed Forces (FARC) -- get a large part of their funding by
taxing and protecting coca fields.

Mr. Pastrana's strategy is to cut off their funds, and thereby force them
into serious negotiations.

Mr. Pastrana is, by all accounts, an honest and modern president whose
biggest error so far seems to be dealing with the guerrillas as if they are
worthy of good faith.

But there is little reason to believe that a strategy of dumping herbicides
in rural areas will end guerrilla-induced terror or convert coca-growing
peasants to his side. Most experts expect that, should coca growing
actually drop off, the guerrillas will increase kidnapping, robbery and
extortion activities to replace lost income.

The guerrillas are also threatening to escalate the war.

While the drug trade is a destabilizing influence in Colombian politics it
is not the reason the Colombian economy is today flat on its back, nor the
reason that good cannot triumph over evil in Colombia's institutions. On
Tuesday, the newspaper El Tiempo reported that an official government
document showed a national monthly homicide rate of 2,118. Thirty percent
of the murders are committed by common criminals, 25% by organized crime,
25% in the equivalent of bar fights and 13% in guerrilla subversion. Such
widespread violence reflects the absolute breakdown of the country's
institutions, but it is not new. Courageous Colombians -- including
numerous judges and the country's famous former attorney general, Alfonso
Valdivieso, who investigated former President Ernesto Samper -- have fought
crime for years, at the cost, for some, of assassination.

The trouble is that no Colombian leader will be able to mobilize sufficient
popular support to defeat the vested interests blocking institutional
reform without strong economic growth, and this requires an overhaul of the
economy. Economic modernization is unpopular thanks to incomplete and
poorly implemented reforms attempted by President Cesar Gaviria from
1989-93, say UCLA economist Sebastian Edwards and University of Los Andes
economist Roberto Steiner in "The Political Economy of Structural Reforms
in Colombia," a paper to be published soon in Chile by Santiago's Catholic
University. They argue that "compensating mechanisms" Mr. Gaviria
distributed in order to win backing "played a critical role in producing a
dramatic deterioration in the fiscal accounts, which in turn brought about
unprecedented macroeconomic imbalances." They also cite inadequate labor
law reform and trade barrier reduction, plus generous transfer payments to
the provinces.

A majority of Colombians today blame hard times on this so-called
liberalization. This weakens the president -- who would like to open
markets -- and strengthens the statists in congress, who represent the
special interests of a rigid economy.

The results are incremental, gradualist provisions that fail to boost
investor confidence sufficiently.

If the country is to recover from the current crisis it will have to
implement structural economic reform and strengthen the rule of law. U.S.
aid would be useful if it was to help in meeting either of these
objectives. As of now it appears that Colombia may well have to sink to new
lows before the crisis prompts serious change.