Riot police hold off offensive in Mexico's Oaxaca

OAXACA, Mexico, Oct 29 (Reuters) Riot police, bulldozers and army helicopters were poised to storm the Mexican tourist city of Oaxaca today, but after talks with leaders of a long-running protest, officials said an offensive was on hold.

Mexico sent the federal riot force to the pretty colonial city, where protesters are pushing to oust the state governor, after gunmen thought to be local police killed three people including a US journalist on Friday.

Hundreds of federal officers arrived in planes yesterday and prepared to retake numerous streets, squares and buildings occupied by leftist activists and striking teachers since May.

A Reuters photographer saw police bulldozers at the edge of the city ready to smash through blockades built by protesters from burnt-out vehicles, barbed wire and sand-bags.

But Deputy Interior Minister Arturo Chavez said federal police would not for now enter Oaxaca, popular with tourists for its architecture, cuisine and indigenous crafts.

''The forces are not contemplating any action tonight or in the early hours of the morning, unless the circumstances require it,'' Chavez said after talks with protest leaders.

The local teaching union agreed to return to classes tomorrow and other activist leaders said they were open to more talks but would not back down until Governor Ulises Ruiz resigned.

The protesters say Ruiz is behind recent shootings and accuse him of corruption and repression of dissenters, whose roadblocks have driven tourists from Oaxaca and hurt business.

Chavez said plans may change if violence flared up again.

At least three people, including US independent journalist Brad Will, were shot and killed on Friday when men in civilian clothes opened fire on the protesters.

A Mexican newspaper gave the names of the attackers and said they were local police. The US Embassy in Mexico said police may have been involved in the shootings.

Many stores in the city near Mexico's southern Pacific coast did not open yesterday. Residents edging past hundreds of barricades said they hoped the crisis would soon be over.

''I'm scared of the police coming, but it is time for the teachers to be moved from here,'' said Maria Fernandez, 22, who said she no longer walked in the streets with her 4-year-old son at night for fear of being hit by a stray bullet.

Earlier yesterday, the government ordered the activists in Oaxaca to immediately evacuate their blockades and hand-over occupied buildings, raising fears of an imminent police raid.

It is unusual for federal forces to be sent to conflicts in Mexican states, which are the jurisdiction of local police.

HEADACHE FOR FOX About a dozen people, mostly protesters, have been killed since May, when activists took to the streets in a bid to topple Governor Ruiz, who blames the protesters for the violence.

The crisis has escalated with frequent shootings against the barricades built by the activists and teachers.

Oaxaca is now a major headache for outgoing President Vicente Fox, keen to avoid bloodshed but under pressure from the governor and local businessmen to break the protests.

He has vowed to end the crisis before handing over to President-elect Felipe Calderon on December 1.

A Reuters photographer who witnessed the shootout that killed 36-year-old Will on Friday said violence began when protesters came under fire after blocking highways and burning vehicles.

He said a man may have been shot and killed in an argument with protesters. Most activists were armed only with powerful fireworks, rocks and Molotov cocktails.

At one entrance to the city, Indian activists brandishing sticks and machetes listened to a protester-run radio station that broadcast instructions to use heavy vehicles to reinforce barricades ahead of the possible police offensive.

Uniformed police have not entered the center of Oaxaca since being fought off by protesters during a failed attempt in June to break up a protest camp in the city's central square.

REUTERS SP MIR BST1212