UNWELCOME GROWTH

DRUG TRAFFICKING DRAINS OPTIMISM CREATED BY BOOMING BORDER ECONOMY

Second of three parts

SAN LUIS RIO COLORADO, Mexico - Reputed gangsters with such names as Cheese
Face and Scorpion saunter along the same streets as factory workers and
plant managers in this bustling yet troubled border town.

San Luis, sprinkled with opulent mansions and wobbly cardboard shacks, is a
place of good tidings and bad, of prosperity and plentiful jobs, of
gangland hits and tragic deaths.

Amid the silence and fear, Mexicans in San Luis and many other communities
along the U.S.-Mexico border are struggling to adjust to harsh new
realities. The border economy is booming as the North American Free Trade
Agreement approaches its fifth anniversary. But business also is good for
the crooks, hit men and drug traffickers.

As the millennium nears, leaders of this wind-swept town south of Yuma,
Ariz., face tough

choices. They can stand up to the local drug barons and try to turn San
Luis into a free-trade haven. Or they can surrender to organized crime's
corrupting powers. Or they can do a little of both.

"Life is more difficult and complicated than ever," said Petra Santos, a
leader of the left-leaning Party of the Democratic Revolution in San Luis.
"Corruption's a problem, but you can't go around saying some guy's a
criminal. That will cost you your life. So people keep quiet."

Crime is rising despite an unprecedented police and military buildup.
Traffickers are shelling out millions of dollars to buy off local
politicians, U.S. drug agents say. And they're also snapping up legitimate
companies to shield their sprawling smuggling operations, according to a
recent report by Operation Alliance, a task force of experts from the U.S.
Customs Service and other agencies.

According to the confidential report, "Opportunities for traffickers are
significantly greater with NAFTA."

Before long, some U.S. agents fear, legitimate businesses will become
hopelessly intertwined with illegal enterprises. Sorting out the clean
money from the dirty and the honest citizens from the thugs will be next to
impossible, they say.

"I hate to say it, but traffickers have become bigger and more
sophisticated than any one town can deal with," said Richard Gorman,
special agent-in-charge of the Drug Enforcement Administration office in
Phoenix. "It's not just San Luis. Tremendous amounts of money are being
dumped into a lot of border towns.

"Vast amounts of wealth and money are involved," he said. "This isn't some
street-corner trade we're dealing with. Drug-trafficking organizations
today are made up of the best people money can buy."

Town boosters in San Luis (population 198,780) wince at that kind of talk.

"We are peaceful people who want to work," said Francisco Olea, president
of the economic development committee.

Violent surge

What few deny is that narcotics traffickers are vying for power and
influence all along the border. And to further their cause, they hand out
tens of millions of dollars in bribes every year, swaying police and
politicians in San Luis, Ciudad Juarez, Agua Prieta and other towns, U.S.
agents say.

In one case, the late drug lord Amado Carrillo Fuentes is suspected of
giving $4 million to the mayor of a Mexican town along the Texas border, a
1997 U.S. intelligence report said.

Mr. Carrillo, known as "Lord of the Heavens" for his pioneering use of
aircraft in smuggling, died unexpectedly last July after extensive plastic
surgery at a Mexico City clinic.

Ciudad Juarez was his traditional base, but he had been expanding eastward,
taking over territory that once belonged to convicted trafficker Juan
García Abrego, U.S. drug agents say.

His death triggered a flurry of gangland-style hits in Ciudad Juarez and
other towns as rivals battled for his turf, according to the DEA.

Drug-related violence has become increasingly common along the border. In
San Luis alone, dozens of people, including a prominent journalist, have
been murdered during the last two years, police say. Alarmed, some
residents are calling for a strict curfew and federal intervention.

"We should cry like a baby needing his mother," said Gregorio Vargas, a San
Luis writer. "The violence has to stop. We've paid our quota of blood."

Mixed blessing

When San Luis was founded in 1907, it was a very different place. Neither
drug gangs nor a controlled border existed, and the main enemies were the
scorching heat and lack of rain.

The town's curse - and blessing with NAFTA - has always been its location
on the flatlands of Sonora state. It's a natural gateway for northbound
trade. For traffickers looking for a discreet spot to land a plane, the
possibilities are endless.

"We have the largest airport in the world: the desert," grumbled Carlos
Guzmán, head of the San Luis branch of the National Chamber of
Manufacturing Industries.

The first trafficker to see the town's potential was Pedro Aviles, who
smuggled thousands of pounds of drugs in the 1970s, U.S. agents say.

"The seeds for narco-political corruption as it exists today were planted
and cultivated by Aviles," said Phil Jordan, a former DEA special agent.

As an undercover agent, Mr. Jordan once struck a deal to buy more than 20
pounds of heroin from Mr. Aviles. Back then, the former agent said, Mr.
Aviles paraded around San Luis as if he owned it.

Wearing his trademark leather sandals, Mr. Aviles gave wads of cash to
police and flaunted his wealth, sometimes lighting cigarettes with $100 bills.

"In those days, money flowed through the streets," said Luis Navarro, a
former Aviles lieutenant who now runs three drug-rehabilitation centers.

Abundant corruption

Mexican federal police killed Mr. Aviles in 1978, Mr. Jordan said. The
motive: A federal grand jury in Phoenix had indicted Mr. Aviles, and his
capture could have exposed his contacts. "What Aviles knew was very
embarrassing to the Mexican government," Mr. Jordan said.

Corruption remains a problem, U.S. agents say. Texas native Kent Alexander
said he discovered that last summer when he went to San Luis to train
drug-sniffing dogs. Hours after he arrived, his Belgian sheepdog found 2
tons of marijuana in a truck at a highway checkpoint at 2:33 a.m.

After that, he said, authorities steered him and the dog away from busy
trafficking routes so they wouldn't stumble across any more shipments.

On Aug. 14, 1997, Mr. Alexander said he fled the country, fearing he'd be
killed for speaking up about corruption. Now in the United States, he said
the Mexican government's latest strategy - using the military in the
anti-drug fight - is failing.

"Soldiers trade their green uniforms for blue ones, but that doesn't make
them honest. Hiding corruption is a shell game," he said, moving around
bags of Big Grab Doritos to make his point. "It all boils down to money. It
doesn't make any difference if it's widgets, Barbie dolls or Camel
cigarettes."

Gerardo Carranza, the former federal prosecutor in San Luis, denied Mr.
Alexander's accusations.

"That señor is wrong. He doesn't know the system," Mr. Carranza said.

Before leaving Mexico, Mr. Alexander met with Benjamin Flores, then editor
of La Prensa newspaper in San Luis. Someone had just stolen nearly a half
ton of confiscated cocaine from the federal attorney general's office in
San Luis.

Mr. Alexander said informants told him that soldiers - some assigned to the
attorney general's office - were responsible. Mr. Flores said poking into
such affairs was dangerous, but it was the 29-year-old editor who was in
peril.

Gunmen killed him the next day outside the newspaper's offices. Authorities
blamed a local trafficker who was angry because La Prensa said he got
special treatment in jail.

The journalist's friends say he had many enemies and was once sued over a
story alleging that a top city politician built airstrips for traffickers.

Reminders

The Flores murder triggered much soul-searching. Townspeople named a street
after him. Children organized anti-violence marches. And journalists began
saying a prayer before hitting the streets, asking God to "allow my words
to defend the noble causes of the people."

But before long, residents say, it was business as usual. The killings
continued. One night, someone fired a shotgun blast into a 31-year-old,
then stabbed him with an ice pick. His body was found in a pickup parked on
the street named for Mr. Flores.

These reminders of the drug trade riddle a landscape stained with blood.
Farmers turn up bodies while plowing fields, and marijuana wrappings litter
the border where some smugglers cross on foot.

In the case of the stolen cocaine, authorities eventually arrested more
than a dozen people, most of them anti-drug agents and soldiers. It was a
glaring corruption case: Honest soldiers had seized the coke only to have
it snatched back by crooked agents.

Despite such episodes, authorities are undeterred, and the Americans are
helping to fund the fight with a record $16 billion for counternarcotics
measures in the fiscal year starting in October.

In Mexico, officials are training elite new counternarcotics squads for
deployment in San Luis and other towns.

Already, military Humvees are a common sight on dusty San Luis streets. The
town is the most violent per capita in Sonora, the state's judicial police
chief says.

Longtime residents call that a smear.

"We're people who obey the law," ex-police Chief Conrado Flores said. Most
traffickers come from Sinaloa and other states, he said.

"Before, we were like a family," added José Luis Rangel, 51, who moved to
Arizona to get away from San Luis crime. "Then these outsiders came and
made us the minority."

Other San Luis natives are drawn to traffickers' money. Merchants sell silk
shirts for $260 and jackets made of crocodile and ostrich-belly leather for
$1,560. And bars play folk songs glorifying the slain drug trafficker Pedro
Aviles. "They shot him in the back because they could never face him," goes
one tune.

Business strategy

Government officials want the drug culture to disappear. Industry, assembly
plants and jobs are what they envision. And San Luis, closer to Los Angeles
than to the state capital of Hermosillo, is an ideal spot for exports, they
say.

If not, they ask, why would Daewoo Electronics sink $100 million into San
Luis? The company's local plant will soon be exporting 2 million TV sets,
1.8 million VCRs and 800,000 computer monitors per year.

"The future of San Luis Rio Colorado is promising," said Gustavo Montalvo,
the state economic development director. "Expectations are very high."

Mr. Montalvo said the clamor for safe streets isn't just in "San Luis or
Mexico. If you were to go to the United States, you'd see there are crime
problems there, too."

Other business leaders agree.

"Crime isn't out of control, but everything that happens gets more
attention now," said Enrique Orozco, a San Luis developer who is building
an 8,000-acre industrial park, expected to be among the biggest in the
Americas.

"Officially, drug trafficking doesn't exist in San Luis," Ms. Santos, the
political party leader, countered. "But you can't deny it's here. You see
all these people with three new cars every year and a nice modern house;
you can't say they bought all that legitimately.

"It just isn't possible."

Checked-by: Richard Lake