Government plans to withdraw a subsidy on natural gas prices drew an angry response from residents of Chile's southernmost Magallanes region. The rioting left two dead, women in a barricade run over by a truck, and led to about 200 arrests.

Much of the residents' fury was fanned by the fact that the region produces and supplies nearly all of Chile's natural gas resource.

After several days of a standoff between government officials and representatives of Magallanes residents, during which ministers vowed not to bow to pressure and cancel the subsidy cuts, negotiators finally patched up a compromise.

In the meantime, however, outraged protesters trashed parts of Punta Arenas, the second southernmost city on Earth after Ushuaia in Argentina, blockaded roads and brought business activity to a halt. A general strike ordered by the community leaders was effective and sobered officials in Santiago, the Chilean capital, who sent out senior representatives to cobble together a deal.

Magallanes is one of the poorest areas in Chile but more expensive to live in than other regions because of high transportation costs for essential goods and fuel consumption in cold weather.

Chilean officials reached agreements with the Citizens Assembly of Magallanes that would reduce the subsidy cuts and lead to price rationalization later in the year.

Mining and Energy Minister Laurence Golborne reached a deal with the leaders of the assembly, which organized the protests after the government announced withdrawal of a subsidy and a resulting 16.8 percent hike in gas prices.

The compromise calls for a 3 percent increase in gas prices through August, followed by a comprehensive restructuring of prices.

About 15,000 low-income households in Magallanes will continue to receive subsidies to cope with the region's low temperatures.

Both the central government and regional administration have been trying to bring Magallanes into the 21st century, through tourism promotion, industrialization and urban renewal.

Punta Arenas, the capital city, overlooks the Straits of Magellan, and saw better days during the California Gold Rush, when it served great clipper ships. The port lost out to the Panama Canal when that waterway opened, then staged a comeback as the center of Chile's international wool trade.

Punta Arenas is promoting itself as the starting point for excursions to spectacular scenic sites, including penguin settlements and Chilean Antarctica.

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