The government put its forces on maximum alert Saturday to counter a renewed drug war threatened by traffickers after a hostage rescue by police went awry, leaving one captive dead.

The developments dealt an apparently fatal blow to the government's peace plan that allowed traffickers to surrender in exchange for a pledge they would not be sent to the United States for trial."This torpedoes the entire peace process that the country is trying to carry out," said Guillermo Sepulveda, attorney general for the Medellin region.

Within hours of the government raid Friday, the powerful Medellin drug cartel issued a statement declaring war on the government in retaliation for "torturings, murders, disappearances and massacres" by police. The cartel vowed to kill two of its remaining hostages.

The military and police were placed on their highest alert Saturday in response to the cartel's threat to renew terrorist attacks.

Authorities say the hostage, Diana Turbay, a prominent magazine publisher and daughter of a former president, was fatally wounded by the traffickers when 130 policemen backed by helicopters attacked the hideaway 10 miles north of Medellin. Turbay had been kidnapped five months earlier.

The government's account of her death was confirmed by Richard Becerra, a television cameraman who been held hostage as well. He was freed unharmed during the raid.

The shootout also left three kidnappers dead and two policemen wounded, police said.

A funeral attended by President Cesar Gaviria and other top officials was held Saturday for Turbay. The 38-year-old publisher was the daughter of Julio Cesar Turbay, president from 1978-1982.

The drug bosses had waged war on the government in 1989 through July 1990. They killed at least 550 people in bombings and assassinations.