COLOMBIA IS REELING, HURT BY REBELS AND ECONOMY

BOGOTA, Colombia -- Almost every day now, it seems there is some piece of
bad news to lower spirits and raise fears here. If it isn't one guerrilla
group attacking on the outskirts of the capital, it is another hijacking a
plane or blowing up the country's main oil pipeline. If it isn't
unemployment rising to an all-time high, it is the peso plunging to a
record low against the dollar.

On Monday, the Government of President Andres Pastrana and the
Revolutionary Armed Forces of Colombia, the Marxist guerrilla group known
to Colombians as FARC, were scheduled to begin formal peace negotiations
aimed at ending 35 years of civil conflict, but late Saturday night the
government announced a postponement when the sides disagreed on the role of
international observers.

A rapidly deteriorating political and economic situation had weakened
Pastrana's hand, undermining prospects for peace and emboldening the rebels.

Thanks to huge profits from the drug trade and kidnappings, the country's
two main guerrilla groups, as well as the right-wing paramilitary death
squads that combat them, are better armed than ever, and control nearly
half the territory of a country larger than Texas. A rebel offensive last
week, launched from a demilitarized zone that Pastrana handed over to the
Revolutionary Armed Forces last November as a good faith gesture, forced
the Government to impose a limited curfew in 10 of Colombia's 32 provinces.

"It's the guerrillas who have taken the reins and are running the country,
not the Government," complained Ana de Alvarez, a 65-year-old widow living
on a pension. "The President is a Boy Scout, too much a nice guy for his
own good and ours. I hate to say this, because I voted for him and am a
staunch Conservative, but we need someone with a firm hand to impose order
and put an end to this horrible insecurity."

A bitter joke making the rounds has two voters trying to remember why they
did not vote for Pastrana's Liberal Party opponent in last year's election.
"It was because we were afraid that he would run the economy into the
ground and hand the country over to the guerrillas," one remarks to the other.

In Bogota, home to 7 million of the country's nearly 40 million people,
residents are especially shaken by last weekend's offensive by the rebels,
which demonstrated that the group has the ability to strike, if only
briefly, uncomfortably close to the city. Though FARC controls much of
southeastern Colombia, that area is sparsely populated, and the group has
traditionally avoided campaigns against urban areas.

"On top of everything else, now we have to live with the constant fear that
those bandits can invade at any moment," Jesus Rojas, a jeweler, said. "We
have lost the tranquillity that we had before as residents of Bogota."

After sounding the alarm about rebel gains, the armed forces reversed
course, with Gen. Fernando Tapias, the Commander in Chief, boasting that
his troops inflicted a "resounding defeat" on the rebels, who, he said,
lost nearly 300 fighters. But the popular impression is still that momentum
remains with the guerrillas, who have enjoyed a string of military
successes over the last four years.

"It's like a soccer game in which you are losing 4 to 0," said Alfredo
Rangel Suarez, a former Government national security adviser. "You may
score a goal late in the second half, but that doesn't mean that the game
is tied."

In the past, even when the battles against guerrillas and cocaine cartels
were going badly, Colombians could brag about an economic performance
remarkable by Latin American standards. Through the 1980's and into the
1990's, as countries like Brazil and Mexico struggled with debt
negotiations and austerity, the economy here was growing at an average of
4.5 percent a year.

But Colombia is now experiencing what officials describe as its most severe
economic crisis in 70 years, a result of low prices for exports, high
domestic interest rates and drastic budgets cuts. Figures announced this
week show that the economy contracted by nearly 6 percent in the first
quarter of 1999, the largest decline in history, and that unemployment has
risen to just under 20 percent, another unenviable record.

"It is hard to get a strong position politically when you are in the midst
of an unprecedented recession," said Michael Shifter, a professor of Latin
American politics at Georgetown University and author of an article on the
crisis here in the current issue of Foreign Affairs. "Colombians are used
to dealing with violence and drugs, but a bad economy has thrown a whole
new element into the situation and accelerated the downward spiral."

Since taking office, Pastrana has twice had to devalue the peso. But the
Colombian currency continues to slide, reaching a record low of 1,925 to
the dollar on Monday, down more than 35 percent in the last year, due in
large part to market nervousness about guerrilla advances.

What is worse, the economy does not yet appear to have hit bottom, and
political uncertainty is keeping away the foreign investment that might
help ease the crisis.

"Very difficult days lie ahead in which it will be necessary to act with
realism and without fantasies," Minister of Finance Juan Camilo Restrepo
warned Thursday when he announced that Colombia had begun negotiating a $3
billion credit from the International Monetary Fund.

An American official with long experience here said, "There are no jobs
anywhere for people with skills and education, and so now you're seeing
people, not just capital, trying to leave the country."

Every sector of the Colombian economy is suffering, but analysts are most
concerned with the decline of agriculture, weakened by an earthquake in the
heart of the coffee-growing zone in January and low prices for crops.

"The worse that things are for the peasants, the more they are at the mercy
of the guerrillas and the more the guerrillas grow," said Maria Jimena
Duzan, a journalist and author who specializes in military and drug issues.

The deterioration is also souring Colombia's relations with its neighbors.
President Alberto K. Fujimori of Peru, for instance, ordered troops to the
Peru-Colombia border after the rebels began their latest offensive, and has
been anything but diplomatic in criticizing Pastrana's carrot-and-stick
approach.

"If all of this process of terrorist advances continues, I do not have the
slightest doubt" that Colombia "can constitute a threat to the continent,"
the Peruvian leader said in an interview with the Bogota daily El
Espectador. His Government's policy, he added, is that "we do not give in
to blackmail, we're not willing to have any kind of contact or dialogue
with terrorists."

Though the United States has publicly expressed support for Pastrana and
his peace efforts, there is growing concern in Washington that, as an
American official put it, Pastrana "is giving away the store." A report on
Colombia by the Government Accounting Office last month quoted the American
Embassy here as complaining that the Pastrana Administration "lacks a
clearly defined negotiating strategy."

As polls here clearly indicate, most Colombians agree. They excoriate
Pastrana for failing to demand a cease-fire as a condition for peace talks,
and the vast majority, nearly 90 percent in one recent survey, say that
because the rebel group is more concerned with maintaining its economic and
military power, any negotiations are doomed to failure.

"It's not that Colombians don't want peace, because they do, desperately,"
Ms. Duzan said. "But everyone is confused. No one can tell if we are at war
or at peace right now, and so the President can't get the support he needs
to sell his peace project, and the country is getting more and more
polarized."