In San Vicente del Caguan, the Revolutionary Armed Forces of Colombia has kept an eerie calm since government troops withdrew late last year. In the evenings, guerrillas in fatigues patrol the packed-mud streets as music blares from bars, pool halls, and discos. Elsewhere in Colombia, it's a lot harder to hear the harmony. On July 8, FARC rebels launched a wave of attacks on two dozen towns, beginning with a bloody run at a military post about 100 kilometers south of Bogota. But it is in the demilitarized zone around San Vicente, a dusty cattle town of 22,000 in Colombia's south, that President Andres Pastrana Arango now hopes to negotiate an accord bringing FARC's 35-year guerrilla war to a close.
Pastrana calls the demilitarized zone, a sparsely populated area the size of Switzerland, a "peace laboratory." Others dismiss it as rebel-held territory. Ceding control of it to FARC is the first move of the strategy Pastrana has adopted since his election last year: Acknowledge FARC's strength, and cut a deal on political and economic reforms. Pastrana hopes to succeed where many predecessors have broken their picks. The question is whether his unprecedented approach puts too much on the table with little prospect of a good return. "The demilitarized zone is a new experiment," Pastrana acknowledged in a BUSINESS WEEK interview (box). "And it's an experiment that has defects as well as virtues."
DEVALUATION. FARC's insurgency, the longest-running in Latin America, is costing the country dearly. Along with a smaller group, the National Liberation Army (ELN), it has taken 35,000 lives in the past decade and now traps Colombians in their cities. Bogota estimates that the war costs the nation two percentage points annually in economic growth. It has also worsened the drug trade--all sides tap into the profits, including right-wing paramilitary groups fighting FARC--and has displaced 1 million Colombians. As stalled talks reopen on July 20, Colombia is mired in its worst recession since the early 1930s, which forced a recent devaluation. When he took office last August, Pastrana says, "we inherited a crisis without precedent."
You might suspect none of this if you live in San Vicente. In their sparse offices, guerrillas concern themselves with paving roads, motivating the locals, and whether or not they might raise money through TV telethons. "The community can't wait for the government to send it everything," says Comandante Fernando, a FARC functionary, as he leans across the rifle on his desk. It's not very Marxist. But FARC's presence in San Vicente has been a give-and-take affair. When shopkeepers refused to close for Saturday "public education" sessions, FARC backed down. The guerrillas lifted a ban on nighttime motorbike cruising when it made them unpopular in schools.
DRUG MONEY. As far as local resistance to FARC goes, that's about it. FARC has brought peace to a town where people used to wake up to find bodies on the streets. The town's biggest fear is that the talks fail and the guerrillas abandon San Vicente to paramilitary extremists, who pursue suspected FARC sympathizers. According to a June report by the U.S. General Accounting Office, the rightists are almost as deep into the drug trade as any cartel in Cali.
FARC leaves many others feeling less protected--and skeptical of the talks. True, FARC has partly outgrown its outright socialist demands. It now advocates agrarian reform, social welfare programs, and a mixed economy with state control over such sectors as oil. But FARC finances its army of 15,000 by protecting drug traffickers and kidnapping civilians. It's bad PR--to say the least. A July 11 poll in El Espectador, the nation's No. 2 daily, found that 70% of respondents think FARC is a terrorist group with no agenda.
FARC's agenda is just what worries Colombia's economic elite. In May, Pastrana agreed with FARC for the talks to cover everything from the drug trade and democracy to land reform and income distribution. "Nobody knows what the rules of the game will be about property rights, new taxes, or even expropriation," says Armando Montenegro, president of the National Association of Financial Institutions, an industry group in Bogota.
The sky's not entirely gray. The agenda includes ways to stimulate domestic and foreign investment, and Pastrana is determined to draw an assortment of Colombians--unionists, legislators, executives, social activists--into the peace process. "We're going to have the government, the guerrillas, and civil society sit down to discuss the issues," he says. "I think anything broader, more democratic than that, is impossible."
Pastrana has been anything but shy in seeking international attention. In late June, he flew New York Stock Exchange Chairman Richard A. Grasso in for a jungle encounter with FARC. But generating support for the talks is proving tough. Moody's Investor Service and Standard & Poor's Corp. have both put Colombia on a credit watch, citing the weak economy. At home, the ELN recently launched a round of kidnappings, and FARC's recent attacks haven't helped, either. "We'll continue with the agenda exactly as it is," Pastrana insists. "This isn't new. El Salvador was the same before negotiations started."
Even in San Vicente, things seemed to tense up as the talks approached. Shopkeepers began getting phoned threats, apparently from the paramilitaries. Low-flying planes can cause townwide panics. "People are anxious," says Nestor Leon Ramirez, who heads a local peace commission. Adds Jaime Diaz Cadavid, a local priest: "What does FARC understand about civil society? What do they mean by social justice?" In the next few months, Colombians might just learn the answers to those questions.