The Peace Corps said Tuesday it has suspended operations in Kenya after weeks of postelection violence, another blow to confidence as business leaders voiced concerns over the turmoil's effect on the economy.

Unrest has devastated the nation's once-impressive economy, decimating its vital tourism industry and prompting foreign companies to consider pulling out, business leaders said.

The Peace Corps said it was withdrawing its remaining 58 volunteers. After clashes first erupted, 86 volunteers were sent home in January.

There were fears that other organizations — aid groups and businesses alike — would also leave unless there is an end to the violence that has engulfed Kenya since a Dec. 27 election that local and foreign observers say was rigged.

"There are questions already being asked, why are you there? What gives you the advantage to stay in Kenya?" said Steven Smith, managing director of Kenya operations for U.S. battery maker Eveready.

Major foreign companies and aid groups have long used Kenya as a base in Africa, helping to make the country a regional economic powerhouse. But "let's face it, many firms don't have to manufacture here," Smith said.

More than 1,000 people have been killed and 300,000 forced from their homes in violence that has repeatedly degenerated into ethnic clashes. Much of the anger has been aimed at President Mwai Kibaki's Kikuyu tribe, long resented for dominating politics and the economy.

Smith was among the business leaders who met Tuesday with former U.N. Secretary-General Kofi Annan, who is mediating peace talks between Kibaki and his chief rival, Raila Odinga. The business leaders again urged the politicians to end the violence.

With many Kikuyu business leaders lying low, how much sway such appeals will have is an open question.

As the business leaders were meeting in Nairobi, fighting persisted in parts of western Kenya, epicenter of the violence. Thousands more people fled their homes in the region, leaving behind burned houses and rubble after days of fighting that killed seven people.

Last week, negotiators at the talks mediated by Annan agreed to take immediate action to end the violence. On Tuesday, they began discussing deeper political issues, talks they aim to complete within 15 days.

Annan said addressing the political issues would be difficult, but that progress was possible — "there are no hard-liners in the talks," he told reporters.

The talks have the backing of the international community. But U.S. Ambassador Michael Ranneberger, in an interview published Tuesday, expressed reservations about how much could be accomplished.

"There is serious concern whether leaders can come together to work out a solution acceptable to Kenyans," he was quoted as telling The Standard. "The postelection (situation) revealed deep underlying problems that must be addressed as well."

He reiterated the U.S. would deny visas to politicians seen to foment violence or who worked against peace.

Apart from the death toll, the crisis "has significantly damaged the domestic economy," said Global Insight, a U.S. consulting company, in a report released Tuesday, downgrading its growth prediction in 2008 to 4 percent from 6.1 percent.

Nearly every industry has been hit: farms that had made Kenya a leading exporter of cut flowers have been trashed, factories that rely on Kenya's deep water port have been cut off and, perhaps most alarmingly, the $1 billion a year tourism industry has been wiped out, at least for now.

"There used to be 34,000 people a week at the coast," a main destination for tourists, said Smith, who spoke to reporters after he and other business leaders briefed Annan. "Last week, we had 1,900."

Already, the job losses have begun.

Wendy Wanjalla, a single mother in the port city of Mombasa, was laid off from her job as a cook at the African Safari Club two weeks ago when it became apparent there were would be no new guests any time soon.

The $3.50 she earned a day "wasn't really enough," said Wanjalla, a 28-year-old who is raising a daughter on her own. But "it was money."

The Kenya Private Sector Alliance estimates that over the next six months, up to 400,000 Kenyans are likely to become unemployed. It also projects that businesses will lose up to $3.6 billion over the next six months, even if the crisis is resolved immediately.