DRUG INQUIRY INTO A GOVERNOR TESTS MEXICO'S NEW POLITICS

CANCUN, Mexico -- When federal drug agents swept past puzzled tourists this
month to seize three luxury hotels that line the powdery beaches of this
Caribbean resort, it perhaps came as little surprise that the police had
found evidence linking such properties to the biggest drug mafia in Mexico.

What was more startling were the questions that agents kept posing about
the man they suspected of being the mafia's silent partner in the hotels.
Over and over, they asked employees about Mario Villanueva Madrid, the
state governor and a member of President Ernesto Zedillo's governing party.

"They're practically accusing me of being a trafficker!" Villanueva
protested, recounting how he immediately boarded a private jet and flew to
Mexico City to deny any financial ties to the hotels and complain to some
of Zedillo's senior aides.

Despite those complaints, Mexican officials say Villanueva continues to
figure in a sweeping investigation of drug operations in his state of
Quintana Roo. But while one Mexican intelligence report describes
Villanueva as being "implicated in the criminal organization" that has
turned the state into one of the most important conduits for cocaine being
shipped to the United States, the federal government has neither filed
criminal charges against him nor been able to contain his political
counterattack.

In a blunt challenge to federal officials, Villanueva has demanded that
they show what evidence they might have against him. He has even fought
publicly with leaders of Mexico's governing party, presidential loyalists
whom he and other hard-line governors are challenging for control

Indeed, because of Villanueva's allegiance to the old guard, the police
investigation is now much more than that: It has become an electrifying
test of Zedillo's ability to deal with challenges of crime and politics
that are multiplying in the governing Institutional Revolutionary Party as
the once-absolute authority of the president erodes.

The confrontation underscores both the rapid pace and contradictory nature
of Mexico's political evolution.

Until recently, most Mexican governors served at the president's will.
Messy problems in the provinces were often solved by their dismissals, and
Zedillo's predecessor, Carlos Salinas de Gortari, forced the resignations
of almost a dozen governors and governors-elect after they ran into
accusations ranging from embezzlement to ballot theft.

Zedillo has slowly committed himself to more modern rules of greater
autonomy for the elected leaders of the 31 states. But good government has
not necessarily followed from greater democracy. As in Quintana Roo, the
president's powers often still rest on a criminal justice system that is
deeply in crisis, and on a political system that is still being born.

For the time being, the federal authorities seem to be pursuing their
investigations in Quintana Roo with unusual vigor.

They have seized several hotels worth $200 million that they traced to the
traffickers. They also shut down a private security company at the Cancun
airport that officials say the traffickers used to safeguard drugs and even
film the movements of visiting federal agents.

A senior Mexican official said the odds were better than even that
Villanueva would be indicted on conspiracy or other charges after his term
concludes in April. Under Mexico's constitution, a governor cannot be
prosecuted unless he is first impeached by the federal Congress.

"Just because he comes and says, 'Look, I'm not guilty,' does not mean that
the thing ends there," the Mexican attorney general, Jorge Madrazo, said in
an interview. "What I can't tell you is whether I am going to indict Mario
Villanueva."

For his part, the governor insists that he is a modern leader whose blunt
speech is misunderstood in the mannerly world of Mexico City politics. "I
am one of the few people in this country who openly speak the truth," he
said in an interview.

To the governor's political opponents in Quintana Roo (pronounced
"kin-tah-nah ROW") Villanueva is an authoritarian masquerading as a
reformer, a man who -- whatever his possible ties to the drug trade -- has
tossed political enemies in jail, set unofficial records for corruption and
fully earned the nickname El Chueco, or "The Crooked One."

As his jet banked over a stretch of rain forest to land on a recent
afternoon at Chetumal, the quiet state capital where he grew up on the
southern end of the Yucatan Peninsula, Villanueva compared himself to
another embattled politician, President Clinton.

"In the United States, if they want to drag you down, they accuse you of
illicit sex," he said. "Whoever is not liked in Mexico today gets accused
of being a trafficker."

Later, as he drove through town in a Chevrolet Suburban, Villanueva
described his tenure as a period of growth that in some ways mirrors his
own rise from a poor peasant family up through the ranks of the governing
party, known as the PRI for its initials in Spanish.

"Mario is an extraordinary politician," said Francisco Lopez Mena, a notary
who has represented him. "He is very seductive in his talk. He never says no."

As governor he has ruled with a heavy hand. After taking office in 1993, he
briefly imprisoned on corruption charges three PRI politicians who had not
cooperated fully with his election campaign, and many other acts of petty
repression have followed.

Last December, the state police jailed an anti-government organizer on
defamation charges because he had distributed copies of a Mexico City
newspaper that carried a report about Villanueva's purported drug ties. In
July, a PRI politician had formally complained to the federal government
that the governor had ordered gunmen to beat him.

The governor denied that he had committed abuses. "They want to portray me
as a man who lives outside the law, or that I am a person that does not
respect the rights of others, and it's just not true," he said.

Baldemar Dzul Noh, an opposition legislator in the Mexican Congress said:
"He's very aggressive with anybody who disagrees with him. He runs our
state like a feudal plantation."

He and his closest friends control the state's main newspapers, the state
congress, the courts and the police. Several of his political adversaries
complained in interviews their phones are tapped.

By the standards of the old PRI, that kind of power was unexceptional. But
in 1995, stirrings of trouble began to attract outside attention.

In one case, a union leader in Cancun reported to federal administrators
that thousands of gallons of kerosene were being diverted from the Cancun
airport to refuel drug planes at clandestine airstrips.

A secret investigation followed, but before it could be completed, the
whistle-blower was killed in his Cancun garage. State prosecutors
eventually concluded that airport managers had hired the assassin,
according to newspaper reports that quoted the state investigative file.
But Villanueva's prosecutors never filed charges.

"There was never any serious attempt to punish the guilty," said the union
leader's widow, Dulce Maria Bustamante.

Until the mid-1990s, Cancun had served Mexico's traffickers much as other
coastal resorts. It was a place to relax, to launder profits and to take
delivery of the occasional load of South American cocaine.

But after the police seized a tractor-trailer laden with cocaine near
Chetumal in 1995, a group of drug-enforcement agents, including several
military officers, traveled to Quintana Roo to investigate further.

In a secret July 1997 report to federal prosecutors, the director of
Mexico's anti-drug police, Lt. Col. Edgardo Cedillo Gonzalez, outlined some
explosive findings.

"Allow us to inform you that great quantities of drugs, including cocaine,
are being smuggled through Quintana Roo, approximately four tons a week,"
states the report, a copy of which was given to The New York Times by an
opponent of the governor. "Among those implicated in the criminal
organization is the state governor, Mario Villanueva, alias 'El Chueco."'

Police commanders were coordinating the drug shipments, the report says,
while the staff chemist at the local office of the federal attorney general
was employed by the traffickers to analyze the purity of cocaine shipments.
One Chetumal merchant was routinely carrying cash bribes from the drug
mafia directly to Villanueva, the report says.

The officer's report identifies the smuggler in charge in the state as
Ramon Alcides Magana. Mexican and U.S. officials say Magana is a former
army lieutenant and federal police officer who went to work for the
powerful trafficker, Amado Carrillo Fuentes, as a bodyguard. He was
promoted to manage Carrillo Fuentes' operations in Cancun, shortly before
pressure on the traffickers' air routes prompted them to ship cocaine in
speed boats into the coastal marshes of Quintana Roo from Central America.

Villanueva vigorously denied the accusations in the 1997 report,
emphasizing that enforcement of drug laws is a responsibility of the
federal government. "We don't know what they do or where they are," he said
of the traffickers.

When he first learned of the report, Villanueva said he flew immediately to
Mexico City to protest his innocence.

"I demand that you show me the files," he said he told Madrazo, the
attorney general. "If I have something to do with this, well, then
investigate me!"

Madrazo took the governor up on his offer. He had the special prosecutor,
Mariano Herran Salvatti, question Villanueva in detail under oath for
several hours.

After that appearance, Villanueva told Mexican newspapers that both Madrazo
and Herran assured him that he had been cleared. "They told me I was
clean," he recalled, "that there was nothing on me."

But Herran told a different story.

"There's no way that we could say Villanueva has been exonerated, because
only our investigation can determine that," he said.

"To say he has nothing to do with drug trafficking just doesn't correspond
with what's happening." Herran continued, "An investigation with many lines
of inquiry is under way, and at the right moment the result will be made
public."

As the investigations have broadened, the traffickers in Quintana Roo have
grown more brazen.

Three times in the last year, officials said, Magana's gunmen have
kidnapped federal drug investigators. But when they made the mistake of
abducting an army lieutenant in a secret narcotics-intelligence unit, they
provoked a blow-torch response.

Word of the kidnapping reached the defense minister, Gen. Enrique
Cervantes, just as the traffickers were starting to torture the officer for
information. According to officials familiar with the incident, Cervantes
flew into a fury. He sent one group of soldiers, backed by armored
personnel carriers, to surround Magana's Mexico City home, trapping the
trafficker's wife inside. Then he sent three more planeloads of troops to
Cancun, where they started breaking down the doors of the traffickers'
mansions.

The raids turned up a trove of documents, Mexican and U.S. officials said,
including messages and notes that suggested that state police officials had
been alerting the traffickers about drug agents' movements in Quintana Roo.
The soldiers also found papers to a car driven in Magana's escort convoy.
It was registered with the Quintana Roo police and assigned to Oscar Garcia
Davila, whom investigators identified as the leader of the lieutenant's
kidnappers.

A year earlier, Garcia had been hired to command police operations in
Cancun and the northern part of the state only months after he had been
purged from the federal police for corruption.

After the army's June raids in Cancun, federal investigators announced that
they had identified Garcia as Magana's security chief, and said they had
discovered a state police credential indicating that he was still on active
duty. He is now a fugitive.

Villanueva, who still refers to Garcia by his first name, says he knew
nothing of his ties to the traffickers.

"I did not know that Oscar was involved in that kind of situation," he said.

In the twilight of his six-year term, when most governors are quietly
preparing to retire or positioning themselves for another job, Villanueva
has been unusually busy.

Last year, he became embroiled in a contretemps with U.S. diplomats after
the U.S. consul in Cancun complained that he had been threatened by one of
the governor's aides for complaining about official foot-dragging in the
investigation of the death of a U.S. tourist.

In June, Villanueva sent the state congress a package of constitutional
reforms, one of which sought to reduce the period in which a public servant
could be held accountable for crimes committed during their time in office.

Opposition deputies quickly dubbed it "the impunity law." Faced with the
prospect of an embarrassing debate that would focus on his own political
troubles, the governor quietly withdrew the bill.

Another attempt to safeguard his future ended in a noisy confrontation --
this time with the leaders of his own party.

When Villanueva encouraged several of his closest associates to seek the
PRI's nomination to succeed him as governor, the party's national
leadership blocked their candidacies. After weeks of infighting, the
nomination was finally won in a September primary by Joaquin Hendricks
Diaz, a former army officer who had been seen as a dark horse.

The prospect of his governorship does not bode well for Villanueva.
Relations between the two have been cool since 1995, when Hendricks, as the
PRI's state president, displayed an independent streak that enraged the
governor, several members of the party said.

Soon, Hendricks noticed plainclothes police officers outside his home. Then
a friend reported that the governor had ordered his arrest.

Panicked, Hendricks crawled into the trunk of a car and fled Chetumal with
one of his relatives at the wheel.

Two years later, the two men reconciled. And after Hendricks won the PRI
nomination this fall, the governor expressed support for his candidacy. But
Villanueva's frustrations with Mexico City boiled over soon afterward.

In a rambling, late-night speech last month to Quintana Roo's PRI leaders,
he accused both the party's national president, Mariano Palacios, and its
secretary general, Carlos Rojas, for meddling in the state's affairs. In
remarks that made headlines around the country, he demanded an apology from
Palacios and a resignation from the leader's deputy.

Rojas shot right back. Noting that Villanueva had garbled Hendricks' name
in the speech, he insinuated that the governor was drunk when he delivered
it. "He was not in the best of conditions," Rojas told reporters.
Villanueva denied the accusation.

Were prosecutors to recommend bringing charges against Villanueva, it would
pose an agonizing choice for Zedillo.

Dropping the case could weaken his authority. But pursuing it aggressively
might create new turmoil in the PRI just a year before crucial national
elections.

Villanueva said he was not worried about the future.

"I abide by the law, and if something wrong has been done in my
administration, I'll take responsibility," he said. "If they want to put me
on trial, there are lawyers who can manage things in courts."

Checked-by: Pat Dolan