BOLIVIAN GOV'T BLAMES NARCOTRAFFICKERS FOR PROTESTS

LA PAZ (Reuters) - Bolivia's government on Monday blamed drug
traffickers in the cocaine trade for financing violent protests over a
hike in water prices that resulted in five deaths.

At least 40 people were injured and some 20 labor union and civic
leaders were arrested in nationwide demonstrations sparked by a
planned $200 million waterworks project in central city Cochabamba and
a water bill in Congress.

Both threatened to hike drinking water prices.

After a week of violent protests and roadblocks erected on major
highways across the landlocked Andean nation of 8 million people, the
government of President Hugo Banzer Saturday decreed a 90-day state of
siege granting the chief executive special powers to deploy police and
soldiers.

``As the spokesman of the government I want to denounce the subversive
attitude absolutely politically financed by narcotraffickers, who aim
to destabilize the constitutional democratically elected government,''
Information Minister Ronald MacLean told reporters at the government
palace after meeting with Banzer and Vice President Jorge Quiroga.

Bolivia, Latin America's poorest nation, is the world's third-largest
coca leaf cultivator after Peru and Colombia. Coca leaf is the raw
material used to produce cocaine.

On Monday Aguas de Tunari, a consortium led by London-based
International Water Limited (IWL), pulled out of a slated
multi-million dollar electricity and drinking water network in
Cochabamba, Bolivia's third-largest city.

IWL is joint owned by Italian utility Edison (SIL.MI) and U.S. company
Bechtel Enterprise Holdings. Other members of the consortium include
Spanish engineering and construction firm Abengoa (ABG.MC) and
Bolivian companies ICE Ingenieros and cement maker SOBOCE.

The 40-year concession was forecast to hike the price of drinking
water by 35 percent in Cochabamba, where some of the most violent and
persistent manifestations took place.

Protests by peasant unions also erupted over a water bill being
debated in Congress that promises to force them to pay for water they
currently tap for free.

Their roadblocks on highways in five of nine Bolivian provinces have
largely been cleared away by police and soldiers.

By Monday afternoon the major hot spots centered on Cochabamba and the
Bolivian high plateau town of Achacachi, where a soldier was beaten to
death by protesters Sunday and two civilians were shot and killed.