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Hunkered down behind the low seawall sheltering him from downtown traffic, Julio, 43, raises the slim glass vial to his lips. Sucking hard at a lighter flame, he drifts into a one-buck burst of euphoria that he says "keeps the world at bay for half an hour."

Crack, a smokable and potent mix of cocaine cooked up with baking soda, is more often linked to the devastation of U.S. and European inner cities. But drug-war insiders say that a growing wave of crack consumption is sweeping Central America's poverty-stricken capital cities and sunbaked Caribbean coastal towns.

In Panama, the first stage on an established trail from Andean cocaine producers to northern markets, crime related to drug possession and trafficking has almost doubled from 986 reported cases in 1995 to 1,885 in 1999.

"It's a lamentable situation. Countries that are not traditionally drug consumers are now drawn into this problem . . . it's causing serious problems . . . that prejudice social and economic development," Health Minister Jose Teran said.

Highly placed sources connected to the fight against international drug trafficking attribute the rise in domestic use in Panama to a change in payment by international cartels that use the region as a land bridge to the United States.

"Consumption has gone up because narcotics traffickers now pay locals for services in kind, whether it be working as a mule or warehousing drugs," said a source who declined to be identified for reasons of operational security. "If you look after 100 kilos of cocaine you'll be given one kilo, which you can then cook up and sell on as crack."

Throughout Central America, from Panama to El Salvador, law-enforcement agencies recognize the switch to payment in drugs, and the concomitant strengthening of local criminal networks.

Honduran police say they have no records of the quantity of cocaine headed for local markets, only that it is rising.

"Consumption, especially of cocaine and crack, is stimulated by local traffickers who act as mules for South American [cartels] . . . [The mules]sell the cocaine they receive in payment . . . which then ends up in the cities," deputy police commissioner Hector Mejia said.

Police in El Salvador, a small player in the region's drug economy, also say cocaine enters local markets as payment for services to the cartels.

"Large-scale drug traffickers contract people to carry [cocaine]to Guatemala [and]they pay in kind," deputy narcotics chief Gerson Perez said.

Colombian, Mexican and Guatemalan cartels are increasingly using Nicaragua to store drugs, U.S. Ambassador to Nicaragua, Oliver Garza, said recently, adding that "crack cocaine is a growing problem . . . especially in the Atlantic coast."

Famed for its cobalt seas and palm-fringed beaches, Central America's Caribbean coast, stretching north from the Colombian frontier with Panama to Belize, has been hardest hit by Andean cocaine sweeping up to the United States.

With more than 2,400 kilometres of sparsely populated coastline, made up of remote island archipelagoes and vast labyrinths of hidden mangrove inlets, the area has provided a refuge for international drug cartels.