Times are tough in this riverside village nestled deep in the jungles of a forgotten corner of southern Colombia, far from the control of the central government and firmly in the grip of powerful rebels.

Coca leaf, the raw material for cocaine, has long been the economic mainstay along the Caguan River in Caqueta province, one of Colombia's leading drug-producing areas. Local peasants harvest coca leaves on small plots hacked from the virgin rain forest and mix them with cement, gasoline and sulphuric acid to produce semi-processed cocaine called cocaine base.

But for the last three months no drug traffickers have come down the Caguan in search of the bitter-smelling white powder that locals call "merchandise," and the resulting cash shortage has fuelled a drug-based barter system.

"At the moment we're receiving cocaine base in exchange for basic products at 2,000 pesos ($1) a gram," said Armando Lozano, who runs a pharmacy in the village of Penas Coloradas. On US streets a gram of refined cocaine changes hands for anywhere between $30 and $200.

"There's no money in the village because the narcos have not come to buy the cocaine," added Lozano, a spokesman for store owners in this community of 500 inhabitants.

Narcos to pay more

Nobody seems quite sure why drug dealers are staying away. Some blame a massive police operation in mid-October when 30 alleged drug traffickers were captured in Bogota and Medellin. But others believe the buyers were irked when Revolutionary Armed Forces of Colombia (FARC) rebels ordered them to pay higher prices to the peasants.

The price of a kilo of cocaine base has risen sharply to around $1,000. A kilo of refined cocaine in the United States costs up to $36,000 wholesale or up to $200,000 on the street.

The peasants grumble at the lack of cash but none are strangers to hardship. Most came in waves to the Caguan region from other parts of the country over the last 20 years, fleeing the cross-fire of the long-running guerrilla war that has claimed some 35,000 lives in the last 10 years alone.

The Caguan River is the only route in and out of the area and transport costs are high. Legal produce such as plantain and yucca costs more to ship to market than it is worth, driving peasants to plant coca leaf - until now the only viable cash crop - starting in the early 1980s.

"They told me coca was profitable ... but in practice it's not like that," said peasant farmer Nicolas Echavarria, 43, as he surveyed his 15-acre (six-hectare) plot near the hamlet of Las Animas, down river from Penas Coloradas.

Once labour and raw materials are paid for, he said he earned between $500 and $750 a month producing coca, just enough to maintain himself, his wife and four children.

Precarious life

"It's been precarious. There's no solid economy. We have no market apart from coca," he added, complaining of a total lack of schools and health care.

The US Drug Enforcement Administration says Colombia supplies 80 per cent of the world's cocaine. Despite an intense US-backed drug crop eradication programme, cocaine output has doubled over the last four years to about 165 tons annually.

The National Police estimated more than 87,500 hectares were planted with coca leaf or opium poppies by the end of 1999, up almost 11 per cent from 1998. US and Colombian officials accuse the FARC, Latin America's largest surviving 1960s rebel army, of reaping huge profits from the drug trade to finance their 30-year-old uprising.

The rebels deny protecting illegal plantations or jungle drug laboratories where the cocaine base is refined into pure cocaine, but they admit to imposing a "war tax" on buyers that hovers around 15 per cent on every kilo.

In an effort to shake the "narco-guerrilla" tag, the FARC has called on the Colombian and foreign governments to finance a rebel-devised crop substitution scheme.

In a jungle clearing, surrounded by a handful of his most trusted fighters, rebel warlord Fabian Ramirez, second-in-command of the FARC's feared Southern Bloc fighting division, detailed the four-year plan. But before it can begin, the FARC demands the government pull its security forces out of Cartagena del Chaira, the 13,000-sq-km municipality that covers this part of the Caguan.

(Agencies via Xinhua)