By MARY BETH SHERIDAN, Times Staff Writer

                   MATAMOROS, Mexico--Osiel Cardenas was a cop with dreams.
                   He was a lowly police communications specialist who wanted the fame and fortune won by
              other law enforcement officials in this city bordering Texas. So, say authorities, he followed
              their path: He became a drug trafficker.
                   Cardenas is now a top target of U.S. authorities, not only for drug charges but for allegedly
              threatening two American agents at gunpoint in Matamoros--then throwing a party to
              celebrate.
                   Cardenas is hardly unique in going from officer to outlaw. In fact, Mexico's police forces
              have produced so many traffickers that they have become a sort of Miss Porter's for the
              dope-and-murder set. The link "has become institutionalized," says a former U.S. anti-drug
              official.
                   The police are a dramatic example of a major challenge facing President-elect Vicente Fox
              as he takes office Friday: the creation of strong democratic institutions.
                   During the seven decades of single-party rule now ending, many Mexican institutions--ranging from the police to the courts, from
              comptrollers' offices to environmental inspection departments--were underfunded, underequipped and underhanded. And that, say
              analysts, is exactly how the government wanted them.
                   "The institutions protected the political regime," said Ernesto Lopez Portillo, an organized-crime expert at the National Institute of
              Penal Studies. "That's why our institutions are so weak. . . . The authorities bent the institutional structure in favor of their private
              interests."
                   But as the near-imperial Mexican presidency has weakened, so has its control over institutions such as the police. That has fed an
              explosion of crime and corruption that is bedeviling both U.S. and Mexican authorities.
                   Fox's challenge will be nothing less than creating a modern Mexican government, complete with a civil service and internal controls.
              As he tries to build a new system, however, he will be handicapped by institutions that respond neither to him nor to the public.
                   "Fox will press a button and nothing will happen. He will pick up the phone and say, 'Do this,' and nothing will happen--especially on
              the law enforcement side," said Delal Baer, a Mexico expert at the Washington-based Center for Strategic and International Studies.
                   Osiel Cardenas offers a glimpse into the institutional nightmare facing Fox.
                   Cardenas was a police officer in Matamoros as recently as 1996, according to the Mexican attorney general's office, which has
              fragmentary information about his career. The city was home to the powerful Gulf cartel of drug smugglers, which had many police on
              its payroll. Both the current cartel boss, allegedly Cardenas, and his predecessor came from the ranks of the state police, according to
              the attorney general's office.

                    A Stunning Taste of Official Collusion
                   Although Cardenas has left the police, the police haven't left him. U.S. anti-drug agents got a stunning taste of the official collusion
              in their confrontation with Cardenas on Nov. 9, 1999. Current and former U.S. officials, speaking on condition of anonymity, give this
              account:
                   An FBI agent and an agent of the U.S. Drug Enforcement Administration were driving through downtown Matamoros that
              afternoon in a car with diplomatic license plates. With them was an informant who pointed out Cardenas' house, guarded by local
              police.
                                                Suddenly, state police blocked the road near the U.S. agents. Their car was surrounded by
                                           Cardenas and heavily armed bodyguards--who appeared to include police.
                                                They demanded that the U.S. agents turn over the informant. When the Americans refused,
                                           one gunman fingered his gold-plated Kalashnikov rifle.
                                                "Kill them! Kill them!" he screamed, as the other gunmen prepared to fire. Desperate, the
                                           Americans warned that the U.S. government would retaliate. In the end, Cardenas simply
                                           ordered the agents and their informant out of Matamoros. He celebrated the showdown with a
                                           raucous lunch at a local taco restaurant.
                                                "The fact he held the party the following day showed he knew he could live and operate
                                           there with total impunity," said a former U.S. official.
                                                The federal prosecutor who oversees the anti-drug fight in Matamoros, Alfonso Navarrete,
                                           acknowledged that Cardenas is helped by local police officers.
                                                "One of the characteristics of organized crime is that it needs some type of protection from
              a police force," he said. Still, he added, the federal government is taking steps to combat such corruption, such as sending in
              better-trained federal anti-drug officers.
                   Cardenas represents a different kind of corruption from the scandals that periodically tarnish the Los Angeles Police Department.
              Cardenas is not just a bad apple. Rather, he is a product of an institution long financed by illegal activities--with the tacit permission of
              authorities.
                   Analysts note that Mexico has never had a democratic, professional police force. Its first federal police corps, the Rurales, was
              made up of bandits in the mid-1800s, said Lopez Portillo, the organized-crime expert. In exchange for doing the dirty work of politicians,
              the police were permitted to engage in crime themselves.
                   That trade-off continued through the 71-year rule of the Institutional Revolutionary Party, or PRI, which lost the presidency in July.
              Authorities used the police to do political espionage or repress demonstrators or opposition politicians, analysts say. As a reward, the
              police enjoyed impunity. For decades, little effort was made to train, pay or equip them well.
                   "There was no political necessity to do it," said Lopez Portillo. "It wasn't thought that the police had to be professional to carry out
              their function."
                   The end result: The Mexican police became brokers of criminal activity. As U.S.-bound drug traffic exploded in Mexico during the
              past 20 years, police became a vital part of it, in effect imposing a private tax on traffickers.
                   And the spoils were shared, from the beat cop to top state and even national police officials.
                   One former U.S. anti-drug official points to the classic case: Mexican police officers would routinely pay huge sums to be named
              commander in a city bordering the vast U.S. drug market. Budgets were paltry; commanders often had to pay expenses such as
              salaries out of their own pockets. But the commanders would leave the job years later as multimillionaires, thanks to drug bribes.
                   "It's like buying a McDonald's franchise. You pay for everything. It's just an archaic colonial system," said the former official,
              speaking on condition of anonymity.
                   U.S. and Mexican authorities have spent hundreds of millions of dollars on screening, training and equipment in recent years to fight
              such systemic corruption. But the police culture has changed little, U.S. authorities say.
                   President-elect Fox says reforming the police will be a priority. He plans to remove all law enforcement functions from the Interior
              Ministry--the political affairs arm of the president--in order to cut the unholy alliance between police and political favors. Plans are
              being drawn up for an FBI-style force to replace the federal anti-drug police. Fox also wants a national system to produce
              better-trained local cops.
                   U.S. anti-drug officials worry that this could be yet another police reform plan that goes nowhere.
                   Still, not everyone thinks the problem is intractable.
                   At an airy, plant-filled building in a residential Mexico City neighborhood, Jose Luis Perez Canchola thinks he has broken the link
              between cops and criminality.
                   "My concept is that the police in this country under the PRI governments were formed to serve political and economic power. Now
              we're forming a police in Mexico City to serve citizens and the community," said Perez Canchola, director of the training academy for
              the capital's judicial police, who handle major crimes.
                   Perez Canchola might seem an odd choice for such a job. He was a leading human rights advocate in the state of Baja California
              for years and a harsh critic of police abuse there.
                   But the soft-spoken, stoop-shouldered accountant is shaking up the hard-boiled world of the police.
                   The city government, in the hands of the left-wing Democratic Revolution Party, has doubled the pay for new judicial police to about
              $1,000 a month--a middle-class salary by Mexican standards. That has attracted a flood of applicants. And Perez Canchola is picking
              the best and the brightest.
                   People such as Aaron Perez Castro. "The salaries are good, and it's a civil service career," the clean-cut 29-year-old student told a
              visitor to his classroom. "You can move ahead on the basis of talent, not friendships."

                    Looking More Like Boy Scouts Than Cops
                   His fellow students nodded. One by one, they stood and described their university studies: Psychology. Law. Journalism. Industrial
              engineering. In their starched white shirts, red ties and blue slacks, they looked more like eager Boy Scouts than cops.
                   Perez Canchola has strict rules for entry: two years of college, an extensive background check and absolutely no prior police
              experience. He offers his bright young recruits benefits police have rarely enjoyed, such as scholarships to train abroad.
                   Nearly half the city's 3,200 judicial police are now products of the new system, Perez Canchola said. "You will begin to see a
              change that no one can stop."
                   Judging from opinion polls, city residents have not yet noticed the change. And crime has declined only marginally in recent years,
              after soaring in the mid-1990s.
                   But Miguel Chao, a neighborhood activist who recently attended a crime-prevention forum at the academy, said some local people
              are noting a difference.
                   "Before, if we heard 'judicial police,' we were afraid," he said. "The image of the judicial police is changing."