(For more stories on the changing drug war, see http://www.reuters.com/news/globalcoverage/drugTrafficking)

By Catherine Bremer

VERACRUZ, Mexico, July 18 (Reuters) - A slow-paced port city where old men in tropical guayabera shirts linger in cafes and couples sway to romantic "danzon" music, Veracruz was always a world away from the crime-scarred cities of northern Mexico.

But a rash of broad-daylight killings as a local drug cartel fights off an invading gang from the north has sucked the port, and the surrounding state of Veracruz, into a brutal drug war that is spreading through Mexico.

In towns and cities across the country, drug hitmen who for years kept their tit-for-tat killings out of public view are now much bolder, settling their scores in busy streets, dumping severed heads and brazenly shooting soldiers and police.

The violence has spread to the affluent business city of Monterrey, the beach resort of Acapulco and beyond. In remote towns like Juchitan on the Pacific coast, wealthy local families have fled a wave of kidnappings by drug gangs.

President Felipe Calderon has deployed thousands of troops and police, but experts say it might not be enough to stop powerful networks of hitmen like the Gulf cartel's "Zetas", an elite and heavily armed militia of former soldiers.

"They are professionals. Their infrastructure is more powerful than the police. The authorities don't have the resources to face up to a phenomenon like this," said a drug expert within the Veracruz state government.

"This isn't finished, I think it's only just beginning," said the expert, who asked not to be named.

OUT OF CONTROL

The surge in violence began in 2005 and has steadily gathered pace with some 1,400 people killed so far this year, including scores of police and about 20 soldiers. One gun battle in Cananea, a northern mining town, left more than 20 people dead.

Mexico is the main trafficking route from South America to the United States. Even as they expand their operations across the Americas, half a dozen cartels here are fighting for control of the multi-billion dollar trade.

For years, traffickers kept a lower profile and made fortunes by cutting deals with corrupt police, judges and politicians of the long-ruling Institutional Revolutionary Party, or PRI.

But Vicente Fox's ouster of the PRI in a 2000 election and subsequent crackdowns by Fox and now Calderon shook up the cartels and led to turf wars.

Bloodshed once confined to northern border states moved south, becoming increasingly vicious and often bizarre.

Five severed heads were tossed onto a dance floor in a seedy club in Michoacan state, three men were murdered at an altar of a death cult known as Santa Muerte, and the corpse of a tortured person was found wrapped in Christmas paper.

The chaos has eased in the past month amid speculation of a temporary truce in some battleground states, but Mexican and U.S. officials say it is unlikely to last and the violence continues to rage in other areas.

In normally sleepy Veracruz, two Zetas were shot dead at a horse race. Another gunfight left three police and a bystander dead. And four bodyguards of State of Mexico Gov. Enrique Pena's family were wiped out while driving through Veracruz port.

"Veracruz has always been quiet but we've now had three months of bloodshed," said state traffic police chief Arturo Quintero, who can barely move his left arm after being shot in April in a drive-by attack that killed his driver.

CURFEWS

Soldiers sent to Veracruz were greeted at one army base with a severed head and a warning not to mess with cartels. Another head was left with a message warning the state public security chief not to protect Zetas.

The violence here is being linked to the extradition to the United States in January of Osiel Cardenas, head of the Gulf cartel that controls Mexico's east coast smuggling routes.

Drug experts say the cartel's Zeta fighters came down from bases in northeastern Tamaulipas state to fight hitmen calling themselves "Gente Nueva" (New People) and hired by the rival Sinaloa cartel to take over the area while Cardenas is away.

Led by Heriberto "The Executioner" Lazcano, the Zetas have grown in a few years from three dozen ex-soldiers to an elite force of up to 2,000 former troops, police or navy personnel.

"Hitmen used to be civilians. Now they have military training and the capacity to train recruits," said analyst Luis Astorga at Mexico City's UNAM University.

Polls show crime-weary Mexicans overwhelmingly back using the army against drug gangs, despite critics' warnings that trigger-happy troops have already killed innocent civilians and drug leaders will buy off military commanders the same way they have corrupted police chiefs over the years.

In Juchitan, where it became so dangerous with the arrival of cartel thugs that night-time curfews were imposed, some believe the army can help.

"They got here a while ago, the Zetas and the narcos. They started kidnapping people," said a young woman who fled to another city when her family was threatened.

"I could see the fear in people. The streets were empty. But when the army arrived, things calmed down a bit." (additional reporting by Frank Jack Daniel)

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