PROSPECTS DIM FOR COIOMBIA PEACE PUSH

Violence Could Mar Talks To End 35 Years Of Conflict

BOGOTA, Colombia - Almost every day, 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, are scheduled to begin formal peace negotiations
aimed at ending 35 years of civil conflict.

But a rapidly deteriorating political and economic situation has weakened
Pastrana's hand going into the talks, 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 the week before last, launched from a Switzerd-sized
demilitarized zone that Pastrana, handed over to the Revoutionary Armed
Forces last November as a gesture of good faith, forced the government to
impose a limited curfew in 10 of Colombia's 32 provinces.

Guerrillas Running Country?

"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."

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 few that
those bandits can invade* at any moment," said Jesus Rojas, a jeweler. "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 advisor. "You may
score a goal late in the second half, but that doesn't mean that the game
is tied."

New, Economic Crises

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 1980s and into the
1990s, 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 last
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.

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 36 percent in the last year, in large
part because of 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 on Thursday when he announced that Colombia had begun negotiating a
$3 billion credit from the International Monetary Fund.

A U.S. official with long experience here said, "There an 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.