When Elvira Cortez, a dairy farmer in Central Boyaca province, tried to stand up to the systematic extortion campaign of Colombia's Marxist rebels, they extracted their revenge with a ghoulish device that has shocked even veteran soldiers hardened by three decades of civil war.

After her refusal to supply any more cash hand-outs, four thwarted guerrillas from the Colombian Revolutionary Armed Forces (FARC) returned to Esperanza farmhouse at sun-up on Monday, with a three-inch-thick collar stuffed with pressure-sensitive explosives. They superglued this device around the woman's throat as she lay in bed.

In case the mother of four could not cobble together the equivalent of £5,000 by that afternoon, they informed her, they had rigged the necklace to blow.

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The men lurked near by as a team of army demolition experts and police attempted to free Mrs Cortez. While the rest of her family looked on, hardly daring to breathe, the deadly collar suddenly exploded.

The wilful woman was beheaded instantantly and the nearest policeman was also killed in the blast. Three army bomb squad members fell to the ground in a heap of severed limbs and seared flesh. Two lost their arms.

An army statement said FARC rebels made Mrs Cortez the unwilling guinea pig for an "atrocious experiment" that epitomised the "degradation of war". General Fabio Bedoya, a regional army commander, said: "This has no precedent in the war of this country or any other country in the world. It's the first time in the history of the war that we've seen such a macabre act."

Across Colombia, radio listeners followed the doomed rescue attempt on a live broadcast, which ended with the ominous bang.

An official statement said Mrs Cortez was executed because she had stopped paying the FARC rebels their extortion demands. Yesterday, officials continued to condemn the methods of her murder.

President Andres Pastrana has suspended peace negotiations until the rebels rethink their strategy. "The men of violence have placed a necklace of dynamite ... around the hope of all Colombians," he announced.

Now recognised as Latin America's biggest insurgent army, the FARC routinely reaps funds for its weapons purchases through kidnapping, blackmail and kickbacks from co-operation with drug traffickers. The guerrillas, who retreat to a safe haven in the south granted to them by the government of President Pastrana as an olive branch for peace talks, recently launched a recruitment drive to double their numbers. Towards this end, they also inaugurated a new political branch along the lines of Sinn Fein. The FARC leaders also vowed to increase ransoms by preying on wealthier Colombians, a move that set off a boom in prestigious bodyguards.

When the government announced that a similar demilitarised zone in the north would be allotted to a second rebel group - the ELN or National Liberation - ordinary citizens who would be forced to live in the area under revolutionary justice took to the streets to protest.

At least 35,000 Colombians have died in the conflict between government troops, leftist separatists, and right-wing paramilitaries during the past 10 years. On average, eight people a day are abducted, the world's highest kidnap rate.