BOGOTA (Reuters) - Colombians rejoiced at the killing of top FARC rebel leader Alfonso Cano and hoped the biggest blow yet against Latin America's longest insurgency could herald an end to nearly five decades of war.

In a triumph for President Juan Manuel Santos' government, forces bombed a FARC jungle hideout in southwestern Cauca region on Friday, killing several rebels, Defense Minister Juan Carlos Pinzon said.

Troops then rappelled down from helicopters to search the area, killing Cano in a gun battle a short time later.

Pictures of his dead body -- with his trademark beard shaven off -- were broadcast on television.

The death of the former student activist, who had a $3.7 million bounty on his head, is unlikely to spell a quick end to a war that has killed tens of thousands in the Andean nation.

But it will further damage the drug trade-funded rebels' ability to coordinate high profile bombings, ambushes and kidnappings that have brought it worldwide notoriety.

"It is the most devastating blow that this group has suffered in its history," Santos said in a brief televised address to the nation.

"I want to send a message to each and every member of that organization: 'demobilize' ... or otherwise you will end up in a prison or in a tomb. We will achieve peace."

In one road on the outskirts of Bogota lined with bars and restaurants, revelers spilled into the street, dancing and chanting with joy: "Cano is dead!"

Even prior to its decapitation, the FARC, or Revolutionary Armed Forces of Colombia, had been battered by a U.S.-backed military campaign that began in 2002. The waning insurgency has lost several other key commanders in the past four years.

"This brings us closer to victory and peace so that we can stop killing each other," said Jorge Cordero, a 19-year-old soldier on guard duty in the north of Bogota.

The death of Cano, 63, who took over leadership of the rebels after FARC's founder died in 2008, was a major strategic victory for Santos, who came to office last year promising to keep up a hard-line stance against the guerrillas.

It will ease the pressure he has been under over a recent upsurge in small-scale attacks, and will also reassure investors in the booming oil and mining sectors.

Cano's death followed the killing last year of one of his main henchmen, Mono Jojoy, in a bombing and raid of his camp.


"It's going to be more and more hard for them to get through the next years," said Alfredo Rangel, an independent security analyst.

"There's no leader with the intensity that Cano has and it will be hard to get someone to replace him. In the short term there will be a lack of leadership. The end won't be automatic or immediate, but we are coming to the end of the FARC."

Cano went from being a middle-class communist youth activist in Bogota to become the top FARC leader after taking part in peace talks in Venezuela and Mexico during the 1990s.

The strike that killed him underscored how Colombia's military can now attack rebel leaders deep in the country's mountains and jungles. Once a powerful force controlling large swaths of Colombia, the FARC is at its weakest in decades.

Violence, bombings and kidnappings from the conflict have eased sharply as Colombian troops use better intelligence, U.S. training and technology to take the fight to the rebels.

Foreign investment in Colombia has surged since the military crackdown began in 2002, especially in oil and mining. But the FARC and other armed groups have continued to pose a threat in rural areas where the state's presence is weak and cocaine trafficking lets the rebels finance their operations.

Security gains have helped Colombia recoup investment-grade credit ratings from three Wall Street agencies this year.

"The death of Alfonso Cano confirms that there has been a turning point in the war against the FARC," said Daniel Loza, an analyst at local brokerage Serfinco. "It is another factor that boosts investor confidence in Colombia."

Desertions and military operations have whittled down rebel ranks to about 7,000 fighters, but the FARC has survived for more than 40 years, and still has a cadre of experienced mid-level commanders. Rebels are relying increasingly on hit-and-run tactics and ambushes in rural areas.

The FARC, whose rebels have made incursions into Venezuela and Ecuador at times to elude Colombia's army, are on the U.S. list of terrorist organizations.

(Additional reporting by Nelson Bocanegra and Helen Murphy; Writing by Daniel Wallis; Editing by Andrew Cawthorne and Todd Eastham)

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