ANTI-DRUG COOPERATION IN JEOPARDY, MEXICO TELLS U.S.

Diplomacy: Money-laundering sting by Americans angers officials. Probe has
damaged nation's trust, they say.

MEXICO CITY--Operation Casablanca, the biggest money-laundering
investigation in U.S. history, has so incensed Mexican officials that they
are now warning it will damage vital anti-drug cooperation with the American
government. The diplomatic row has cast a pall over an operation that the
Clinton administration hailed as a success earlier this month.

The investigation, based in the Los Angeles suburb of Santa Fe Springs, has
led to more than 150 arrests and the indictment of three Mexican and four
Venezuelan banks accused of laundering drug money. But Mexican officials
have been infuriated by the discovery that U.S. Customs operatives
apparently carried out part of the sting investigation here without their
knowledge.

The Mexicans are so upset that some officials have even threatened to
formally charge the American operatives and seek their extradition. "Our
mutual confidence has been damaged.

Our cooperation has been damaged," Foreign Minister Rosario Green told
reporters Thursday. "Therefore we must now sit down to talk and reestablish
the terms of our cooperation." Green said Mexico will demand that the U.S.
government sign a "code of conduct" that would prohibit any more such covert
cross-border operations. Mexico's cooperation in the anti-drug fight is
considered vital because the country is not only an important source of
other drugs but also the biggest conduit for cocaine entering the United
States.

After Mexico filed a protest with the U.S. government last week, President
Clinton expressed regret that Mexican officials were not informed in advance
about Operation Casablanca. But his apology was clearly not enough to put
the matter to rest. The Mexican irritation stems from two factors.

The most serious is that U.S. Customs agents or informants were apparently
secretly working in Mexico as part of their sting operation, which led to
the indictment of 26 Mexican bankers. Such an operation not only could
violate Mexican laws but also touches deep-seated fears in a country that
lost half its territory to the U.S. in the last century and remains wary of
its powerful neighbor. One senior Mexican official offered this argument to
substantiate their anger: What would American officials do if they
discovered Mexican police in Los Angeles carrying a shipment of cocaine to
use in a Mexican sting operation there?

"The Americans would say: 'Wait a minute, who authorized this operation in
the U.S.? You are committing a crime,' " said the official, speaking on
condition of anonymity.

Sting operations are legal in Mexico only if authorized by the attorney
general. Mexican officials are also angry that they were left in the dark
about the U.S. investigation until it was announced in Washington.
Authorities here have come under fierce attack from opposition party members
who claim that officials meekly allowed a violation of Mexican sovereignty.

In Washington, Justice Department officials said privately that the
operation had to be secret to protect the lives of U.S. agents. Asked about
Green's remarks on cooperation, U.S. Atty. Gen. Janet Reno said the two
governments have worked well together.

"I think we must all do everything that we can to focus on drug trafficking
and the damage it is doing to both nations and to take the appropriate
steps, based on our laws, that will bring these people to justice," she said.

An official at the Treasury Department, which oversees Customs, responding
to claims that agents may have violated Mexican laws, said: "We understand
their concerns, and we're looking at the situation."

Checked-by: Melodi Cornett