THE OPPENHEIMER REPORT

WASHINGTON -- Guess who is the new bad boy in the U.S. war on drugs? Paraguay.

The Clinton administration is considering giving Paraguay its worst
anti-drug rating, is debating whether to give Mexico a less than full
endorsement, and may improve Colombia's standing in its upcoming annual
review of countries' cooperation in the war on drugs, well-placed U.S.
officials say.

Paraguay, a country rarely mentioned as a player in the world of drug
trafficking, is likely to make headlines by the end of February, when
President Clinton is to announce his annual ratings of countries'
counternarcotics efforts.

By law, Clinton must notify Congress which countries should be "certified"
as allies in the war on drugs, and which ones not. Those who are
"decertified" can be subject to trade sanctions.

The annual certification process has drawn virtually unanimous criticism in
Latin America, where most see it as a symbol of U.S. political arrogance
and hypocrisy by the world's largest drug-consuming country.

U.S. officials familiar with the discussions say there is virtual agreement
to decertify Paraguay, which is increasingly being used as a transit
country for Bolivian-grown cocaine to the United States and Europe.
Paraguay's shaky government is run by Raul Cubas, a civilian close to
former coup plotter and retired Gen. Lino Oviedo.

Paraguay was decertified along with Colombia last year, but received a
"national interest waiver" that, in effect, barred economic sanctions. This
year, officials are discussing whether to make Paraguay the first Latin
American country to join Afghanistan, Burma, Iran and Nigeria on the list
of nations that were fully decertified and subject to economic sanctions
last year.

Asked about it in an interview this week, Peter Romero, the State
Department's acting chief of hemispheric affairs, would only say that
"certification of Paraguay will be very difficult . . . The Paraguayan
government doesn't seem to get the message that they need to do a better
job of controlling the flow of drugs."

On the other hand, officials say they are likely to improve the ratings of
Colombia, Bolivia and Peru, the world's largest cocaine trafficking and
producing countries. On Colombia, Romero said, the issue is "under review,
but I'm optimistic about Colombia."

But the biggest internal debate is over Mexico, because of the potential
implications of a negative rating. Until now Mexico has always been fully
certified, although the debate over its rating has become more intense each
year.

Supporters of Mexico's certification -- said to include the White House's
anti-drug czar Barry McCaffrey and the State Department -- say a vote
against Mexico could snarl U.S. trade, immigration and drug cooperation
ties with its southern neighbor.

But those arguing for Mexico's decertification -- said to include the
Customs Service and Drug Enforcement Administration -- argue that Mexico
will not step up anti-drug efforts unless the U.S. government flexes its
muscle.

Law enforcement agents cite the U.S. Operation Casablanca, unveiled last
year, in which several Mexican banks were charged with tolerating drug
money laundering. Instead of cooperating with U.S. authorities, Mexico
criticized the operation for alleged violations of Mexico's national
sovereignty, hard-liners say.

Asked about Mexico, Romero would only say, "it's under review." Get ready
for a big fight over Mexico's drug cooperation over the next three weeks.