October 2, 2006: Protesters throw explosives at banks in southern Mexican city

Protesters threw explosives at two banks in Oaxaca on Monday, shattering windows and further raising tensions in this once-charming colonial city.

The attacks on the banks by the previously unknown group called the Armed Revolutionary Organization for the People of Oaxaca follow months of violence in Oaxaca city, where protesters have set up street barricades and taken the city center. The explosions damaged the banks' facades, but caused little other damage, city official Eliodoro Diaz said.

Protesters and news media speculated that federal forces were planning to retake the city after navy helicopters flew over the area this weekend. But Interior Secretary Carlos Abascal insisted the helicopters and military planes were on routine supply runs that had nothing to do with the more than four months of unrest.

In response to the flyovers, protesters reinforced barricades with bags of cement and tree trunks. They have vowed to beat back any police and soldiers who moved on the city.

President Vicente Fox said Monday that "as long as there is the possibility of reaching an agreement we're going to insist on it ... that things be resolved in this manner."

But if an agreement is not possible, "breaking the law must always be impeded and should be punished," Fox said.

"This government is ready to fulfill its responsibility in both ways."

Fearing violence, tourists have shunned the city, which is normally popular for its exotic cuisine, colorful culture and nearby pre-Hispanic ruins. Local business associations estimate the protests have cost the city more than US$300 million (euro235 million).

The unrest began in May, when tens of thousands of teachers seized the capital's leafy central plaza to demand wage increases.

The following month, Gov. Ulises Ruiz sent police to attempt to retake the heart of the city. Since then, thousands of leftists, students and anarchists have joined striking teachers, building street barricades, burning buses and taking over radio and television stations.

They demand that Ruiz resign, alleging that he rigged the 2004 election and has used paramilitary gangs to attack dissidents.

At least two people have been shot to death and dozens more injured in clashes between protesters and police. On Saturday, a motorcyclist was decapitated when he ran into a wire strung across a street as part of a blockade.

Late Sunday, nearby residents and authorities clashed with protesters who had seized a tractor-trailer and were unloading its cargo.

Abascal has overseen negotiations to end the standoff, but the federal government has said it will not force Ruiz to resign. Protesters maintain their demand that he leave office.