Four police officers were among the dead as clashes erupted in the capital La Paz on Wednesday ahead of a national strike, called by Bolivia's main labor union, to protest his economic policies and demand his resignation.

Ambulances rushed through the streets carrying gunshot victims while mobs set fire to government offices, the headquarters of three leading political parties and at least one bank.

Soldiers fanned out across the city to prevent roving gangs from breaking into banks and looting stores. The government ordered schools, universities and banks to close yesterday.

Protesters were angered at the president's budget proposal for a 12.5 percent tax increase.

After five hours of violence, Sanchez de Lozada called off the tax hike he had announced on Monday and said he wanted "a new, sincere and fraternal dialogue between all Bolivians."

The unrest began with a peaceful protest by plainclothes police, who had launched a nationwide strike to protest a government decision to renege on a pay rise.

But the demonstration turned violent after soldiers lobbed tear gas at the protesters, apparently to stop teenagers from throwing stones at presidential and government headquarters.

The stand-off quickly escalated as police took up positions on the roof of the foreign ministry and exchanged fire with troops stationed at the presidential Quemado Palace.

Sanchez de Lozada was rushed from the palace under heavy guard just after noon, and shooting intensified in the downtown area.

By mid-afternoon, shops in a working-class area on the outskirts of the capital were being looted, while a crowd occupied the offices of the labor ministry, burning documents and furniture on a bonfire.

Taking advantage of the unrest, inmates at San Pedro prison in the centre of the capital set their building on fire and demanded their immediate release.

Soldiers reacted by shooting tear gas canisters into clusters of protesters and firing warning shots.

Evo Morales, a representative of the nation's cocoa farmers who narrowly lost the presidential election last year, urged growers to block key highways and called on Sanchez de Lozada to step down.

(China Daily February 14, 2003)