The Justice Department, backing away from its earlier demands for extradition of major drug traffickers to the United States, has tentatively agreed to help Colombia prosecute leaders of the Medellin cocaine cartel under a controversial policy offering traffickers reduced sentences if they confess to their crimes, according to Colombian and U.S. officials.

A draft "memorandum of understanding," negotiated this week by Justice Department and Colombian officials, would provide for the exchange of information and in some cases evidence with the Colombian judiciary, according to a Colombian official familiar with the agreeemnt.

"I see this as a breakthrough in the fight against drug traffickers," said the official. "The object is to be able to build a system that allows for information, evidence and proof about the crimes committed by these people to flow regularly and efficiently {from the United States} to our judicial system."

But the proposed agreement, which still must be approved by Attorney General Dick Thornburgh and the State Department, may prove to be controversial, according to some U.S. anti-drug officials. Drug Enforcement Administration agents and some federal prosecutors have strongly opposed any exchange of evidence, fearing that it could be misused by the Colombians and could undercut later efforts to try traffickers in the United States because of potential "double jeopardy" problems.

In addition, they said, the decision to negotiate the memorandum represents an implicit concession on the part of the Justice Department to put extradition -- a longstanding goal of U.S. policy -- on the back burner while the Colombians try the traffickers in a judicial system that is considered more lenient than that of the United States. Since the cartels declared war on the Colombian government in August 1989, judges have been threatened routinely, and many have been killed.

A senior Justice Department official said yesterday that the department had no intention of "turning over" sensitive grand-jury testimony to Colombia and that the department would not formally drop any requests for extradition. Nevertheless, other officials conceded that the agreement was a "risk" that could backfire if leading Colombian traffickers, such as Medellin cartel leader Jorge Ochoa, escape with light sentences or are acquitted. "I think it's a significant concession on our part," said one high-ranking U.S. official.

The negotiation comes as leaders of the Medellin cartel continue their terrorist campaign aimed at pressuring the Colombian government to formally ban extradition and grant the traffickers an amnesty for their crimes. Colombian police reported yesterday that Fortunato Gaviria Botero, a cousin and close friend of President Cesar Gaviria, is in the hands of the cartel after being kidnapped from his farm Wednesday.

The traffickers denied holding Gaviria Botero. In a statement released in Medellin, a group of cartel leaders who call themselves the Extraditables said they were in a truce with the government and said the police "again lied to the president and the people of Colombia."

The traffickers took 10 people hostage last year in an effort to pressure the government into concessions. Six have been released, two -- both prominent journalists -- are still being held, and two were killed last month.

Intelligence have said they believe that Pablo Escobar, leader of the Extraditables, has decided not to surrender, spurning the government's promise of prosecution in Colombia and a reduced prison sentence. But Jorge Ochoa and his brother Fabio Ochoa, who has been indicted in the United States on charges of murdering a DEA informant, have turned themselves in under the offer and are said to be cooperating with Colombian authorities.

Officials say Escobar has decided to gamble that he will be able to avoid capture or death until he forces the government or an assembly now meeting to rewrite the constitution to outlaw extradition and grant him amnesty.

Escobar's hopes came closer to realization Thursday when a group in the constitutional assembly, led by former Medellin mayor Juan Gomez Martinez, a mediator with the Extraditables, formally proposed a ban on extradition.

The assembly had been expected to adopt an extradition ban, but most analysts thought it would not be proposed until much later. The assembly is scheduled to meet until July 5.

Farah reported from Bogota, Colombia, and Isikoff from Washington.