The 1996 presidential elections demonstrated the country's increasing lack of faith in the electoral process, which had failed to bring any real change since the return to civilian rule in 1986. Some 63 percent of registered voters stayed at home and it was only a strong showing in Guatemala City, where Álvaro Arzú had previously served as mayor, that ensured his election. Arzú represented Guatemala's so-called modernizing right, and his party - PAN the National Advancement Party - has strong oligarchic roots and is committed to private-sector-led growth and the free market. Nevertheless, many were surprised as he quickly adopted a relatively progressive stance, shaking up the armed forces in bold early manoeuvres that left seasoned political observers holding their breath in anticipation.

Arzú moved quickly to bring an end to the 36-year civil war, meeting the URNG guerrilla leaders and working towards a final settlement. The peace accords , signed on December 29, 1996, concluded almost a decade of talks and terminated a conflict that had claimed 150,000 lives and resulted in the "disappearance" of another 50,000. The core purpose of the peace accords was to investigate previous human rights violations through a Truth Commission overseen by MINUGUA (the UN mission to Guatemala), to recognize the identity of indigenous people, and to eliminate discrimination and promote socio-economic development for all Guatemalans. Though the aims of the peace accords were undeniably ambitious, progress was laboriously slow during the Arzú years. In one of the biggest set-backs, the electorate narrowly turned down a proposal to amend the constitution to allow for greater Maya rights in May 1999. Turnout was woeful - around 18 per cent - with most of the indigenous community failing to vote, a collective rejection that underlined the deep-rooted animosity felt by most Maya towards a political system that had exploited them for centuries.

Though Arzú presided over a token reduction in armed forces numbers, their influence and position as the nation's real power brokers remained unchallenged throughout his term. Blamed for 80 percent of the atrocities of the civil war, army officers implicated in orchestrating massacres successfully avoided prosecution - Arzú simply dared not touch them. Then, in April 1998, two days after publishing a long-awaited investigation into wartime slaughters, Bishop Juan Geradi was bludgeoned to death in his own garage in Guatemala City, an event which stunned the nation. Though Guatemalans had long been accustomed to horrific levels of political violence, most thought the days of disappearances and death squads were over - as one newspaper put it, "This wasn't supposed to happen. Not any more."

The acute fragility of the nascent Guatemalan democracy was revealed - most observers immediately recognizing Geradi's assassination as the work of a vengeful military intent on preserving its power base. Despite international and domestic outrage - hundreds of thousands attended a silent protest in the capital days after the killing - the Arzú government seemed paralysed, and incapable of bringing the real perpetrators of the murder to justice. The investigation descended at times to near-farcical levels (including, at one stage, the implication of a priest's dog which had bitten the body), as terrified judges, prosecutors and key witnesses fled abroad following death threats. As Arzú departed the presidential palace in December 1999, Geradi's murderers remained at large and the investigation unsolved.

Despite this horrific killing, levels of political violence fell in the Arzú years, though there was an alarming upsurge in the crime rate , with soaring incidences of petty theft, muggings, robberies, drug- and gang-related incidents and murders. In 1997, despite its relatively small population, Guatemala had the fourth-highest incidence of kidnapping in the world, with over 1000 people being abducted. A new police force, the PNC, was retrained by experts from Spain, Chile and the USA, but quickly gained a reputation for corruption and ineffectualness as bad as its predecessor. Not surprisingly, law and order became the key issue of the 1999 election campaign.