BOLIVIAN GOVT BACKS OFF WATER HIKES

LA PAZ, Bolivia (AP) - The government agreed Monday to back off water
price hikes that sparked a weeklong spiral of violent protests by
thousands of farmers and workers, fueled by the economic crisis in
South America's poorest country.

The protests, which have virtually shut down Cochabamba, Bolivia's
third largest city and have left six dead, prompted a security
crackdown and a ``state of siege'' decree giving police and the
military a freer rein.

An end to the unrest was in sight Monday evening, after the government
reached an agreement with protest organizers, the Roman Catholic
Church and local officials over an expensive water project in
Cochabamba and a controversial new water law.

``We hope that this will end this conflict that has so divided our
people,'' Vice Minister of the Interior Guido Orias told a journalists
alongside the protest organizers.

Thousands of protesters who had gathered on the main square of
Cochabamba began disbanding Monday night.

The Cochabamba protests were prompted by a 20 percent increase in city
water rates needed to finance the badly needed expansion of water and
sewage systems in the central city, high in the Andes. Demonstrations
quickly spread to rural areas with thousands protesting a new water
law, unemployment, rising fuel prices and economic
difficulties.

On Monday, Information Minister Ronald MacLean accused drug
traffickers of backing the demonstrations in an attempt to stop a
government program to eradicate production of coca leaf, used to make
cocaine.

``These protests are a conspiracy financed by cocaine trafficking
looking for pretexts to carry out subversive activities,'' MacLean
said. ``It is impossible for so many peasants to spontaneously move on
their own.''

The destruction of coca leaf production has deprived thousands of
peasants of their sole means of income, particularly in the area
around Cochabamba.

Since protests began April 3, Cochabamba, a city of 500,000 located
350 miles east of La Paz, has been paralyzed and isolated by road
blocks, marches and clashes.

A so-called state of siege decree passed Saturday suspended many
constitutional guarantees, allowing police to detain protest leaders
without a warrant, restricting travel and political activity and
establishing a curfew.

Six people were killed and scores wounded in clashes around the
country as the government sent thousands of soldiers into the streets
of Cochabamba to try put down the protests. On Monday, protesters
manned roadblocks near the Andean towns of Achacachi and Batallas,
where one army officer and two peasants were killed and dozens injured
on Sunday.

At one point during the week of protests, police went on strike in the
capital, La Paz, and in Santa Cruz, the country's second-largest city,
demanding a pay increase and clashing with soldiers. They were quickly
granted the pay hikes.

Under Monday evening's agreement, Congress began considering changes
in the new sanitation law that had raised outrage by requiring
residents and farmers pay fees for digging wells.

The government also confirmed that the international water consortium
that was to finance the water project, Aguas del Tunari, was
withdrawing from the country. That meant the 20 percent hike in water
prices would not come into effect, although it also meant the project
now has no foreseeable financing.

The government also agreed to release some of the 20 protest leaders
arrested during the demonstrations.