THE BODIES, all 24 of them, were laid out neatly, each bound and gagged, with signs of torture and a bullet in the head, in woods on the hills that surround this huge capital city of 20 million inhabitants.

Beside the macabre discovery, trees bore roughly painted signs pointing to Chalma, a nearby place of pilgrimage for the poor and oppressed since before the Spanish Conquistadors arrived more than five centuries ago. The dead were poor, that much was clear from their shabby clothing. Young, too - one was a boy only 14 years old - but they were no pilgrims in search of solace.

All 24 were kidnapped - "lifted", in the jargon of the narcos, as the drug gangs are known - a couple of days earlier from the slummy rooming house on the outskirts of Mexico City where they lived, taken by heavily armed men dressed in the black uniforms of the federal police.

Real uniforms or disguises? The police are so heavily infiltrated by organised crime that it's impossible to know.

The victims were, say their impoverished families in the provinces, itinerant building workers. The authorities suspect that some had become petty drug dealers who crossed swords with powerful drug barons. But nobody really knows, and their neighbours never reported their absence, out of fear that the same could happen to them.

Now they are mere numbers, to add to more than 3500 others who have died so far this year as violence among drug gangs and the gunmen who do their dirty work reaches a new crescendo throughout an increasingly beleaguered nation.

Less than a fortnight before the killings on the road to Chalma, 11 headless bodies were dumped on the outskirts of Merida, a beautiful colonial city on the southeastern Yucatan Peninsula. Another headless body was found 50 miles away. Forensic studies showed that all 12 had been beheaded alive.

Bloodshed also came to another beauty spot, the isolated village of Creel, a traditional vantage point for visitors to Chihuahua's magnificent Copper Canyon - a complex of canyons four times as large as Arizona's. Gangsters armed with AK-47s killed a dozen bystanders, including a baby, as they sought out two rivals in the village. The police? Nowhere to be seen.

But worse was to come - not in the numbers of the dead, but in the nature of the crime. September 15 is the night when "El Grito", the cry that launched Mexico's independence struggle almost two centuries ago, is celebrated all over the country. A Hogmanay-like atmosphere prevails as crowds throng main squares of towns throughout the nation, with fireworks, flags and balloons.

The climax comes at 11 pm, when the mayor, the state governor or, in the case of Mexico City, the president, comes on to the balcony, rings a bell and cries out "Vivas!" to the nation's heroes. The crowds - often fired by tequila - respond with deafening cheers.

This year, President Felipe Calderon had no sooner given the Grito in Mexico City's main square, when an assistant tapped his arm. As the cheers rang out below, a grim-faced Calderon was told that at least six people had been killed in a grenade attack on the ceremony in Morelia, capital of the west-central state of Michoacan.

For Calderon, a native of Michoacan who came to the presidency almost two years ago pledging to lead the army on an all-out war on the drug gangs, the news could hardly have been worse. Though several innocent people have been killed in the drug war, this appeared to be the first indiscriminate attack on the public at large, the first incident of outright narco-terrorism. The final death toll was eight, including a young boy; dozens more were wounded, many of them maimed.

"These cowards pursue dastardly goals," Calderon said during a visit to the scene of the atrocity. "Under the cloak of night, hidden from view, they attacked innocent lives.

"They were not just looking to harm those that they killed or injured. They were looking to attack and harm all of us, wanting to bring us down."

But Calderon and his government have themselves come in for criticism.

Edgardo Buscaglia is a visiting professor at a leading Mexican university and a senior adviser to the United Nations and World Bank.

He said that the fabulous wealth that the drug gangs command has corrupted Mexican politics, business, unions, non-governmental organisations and the police.

"When you attack them with the army, these gangs are not going to take it lying down," Buscaglia said. "The criminals - and this is one of the shortcomings of Calderon - have hundreds of millions of dollars and the government is not destroying their financial support. The more the government attacks them, the more they corrupt ever-higher echelons of the state apparatus."

Buscaglia added that more than half of the nation's municipal governments are infiltrated by the narcos, and some are totally controlled by them. Once a problem of northern Mexico, the scourge has spread to the south "where whole regions respond to the narcos' interests - the narcos don't just have impunity, they also have a visible criminal infrastructure for their operations".

Meanwhile, ranchers and businessmen are forced to pay thousands of dollars in protection - a "criminal fiscal burden" - that swells the gangsters' finances, according to Buscaglia.

His words ring true for many Mexicans - politicians from all the main parties have attended the funerals of drug lords, and although record numbers of narcos have been gunned down, arrested and in some cases deported to the United States, the deeds of others have become the stuff of legend, recounted in "narco ballads" by popular bands.

Joaquin "El Chapo" ("Shorty") Guzman, spent almost eight years in a top-security jail before escaping early in 2001. He used a technique not seen since the black-and-white movies of James Cagney and George Raft - El Chapo left by the main entrance, hidden in a laundry cart, having bought off prison guards.

Despite a $5 million reward offered by the US Drug Enforcement Administration and an attack by Mexican paratroopers in Black Hawk helicopters on one of his mountain hideouts, El Chapo remains at large. Not only that, he has regained control of the cartel he founded in the northern Pacific coast state of Sinaloa where he is rumoured to have hitched up with a local beauty queen.

Meanwhile, only one senior politician has been jailed for corruption by drug gangs. Mario Villanueva, former governor of Quintana Roo - the state that includes Cancun - is currently serving a 36-year sentence for drug trafficking. But seven years have passed since he was arrested, after two years on the run.

And certainly there are signs that the message is getting through to Calderon - last week he told his National Action Party leaders that the narcos had found political cover, "and this cover has to be rejected by all the nation's political organisations. This is a challenge for National Action because I'm convinced it's a challenge for the whole Mexican political system."

Calderon has many supporters. They include Carlos Slim Helu, by some counts the world's wealthiest individual, though he quipped last week that the stock market crash had cut his fortune by half. At a lunch with foreign correspondents, he said: "Calderon is doing what needs to be done."

What worried Slim more were US gun laws. "It's OK," he said, "for the law to allow you to have a .22 pistol or a shotgun for hunting, but American gunshops sell all kinds of weapons, and I believe there's about 12,000 gunshops right at the border. The kind of efforts that Mexico has launched to fight organised crime are simply not viable if the US is arming everyone, and with very sophisticated arms at that."

And Jorge Fernandez, author of several books on the Mexican drugs trade, believes that the growth in violence is a sign of the narcos' growing desperation, as the government makes ever-greater seizures of drugs, firearms, vehicles and aircraft, in addition to a 25% increase in the number of arrests.

"The incidence of violence is growing in tandem with the blows the drug gangs are receiving. It's not the other way about," said Fernandez.

But the narcos, he argues, are fighting to impose a perception of strength, based on terror boosted by acts including beheadings and the crudely drawn posters they put up in cities to threaten the authorities and their rivals.

"This is a kind of guerrilla warfare," said Fernandez, citing the example of the Vietnamese communists, "using terror tactics against the state and population at large.

"The key is to create divisions. And organised crime can win this war if it imposes its perception."

Where Fernandez and Buscaglia agree is that any attempt to negotiate with the narcos would be sure to backfire.

"You can negotiate peace and demobilisation with guerrillas," said Fernandez, "but what is there to negotiate with the narcos?" The narcos want to be free to operate and receive their money. "Or does anyone really think that anything other than money is what motivates the traffickers?"

And both experts agree that a solution lies with citizens at large, not just the government. "The initiative has to come from genuine citizens' organisations, not mere extensions of the government," said Buscaglia. In Italy's fight with the Mafia, "in some cases people stoned politicians who were known to be linked to crime".

So far there is no sign of that happening in Mexico, and Buscaglia believes it could take a decade for people's outrage and fear to be converted into action.

The problem runs deep in a nation of sharp social divisions. A severe shortage of jobs has forced half a million people a year to emigrate to the US, where most work illegally after a perilous border crossing that claims about 500 lives a year.

Of the nation's workforce, about half are employed by the euphemistically styled "informal economy", itself largely a product of political corruption and gangsterism that profits from the trade in counterfeit and stolen goods - a "Wal-Mart of the Mob", as political commentator Victor Cazares put it.

On Thursday night, thousands of Mexicans marched through the capital to mark the 40th anniversary of a student massacre on the eve of the 1968 Olympic Games in the city.

The massacre was a watershed in Mexican politics that led, by a painful process over more than three decades, to the nation's first free elections of modern times. Yet elections in themselves have so far failed to cure the nation's ills.

If the drug war is to mark a new watershed - and there are some who believe that one may be near - Mexico, and its northern neighbour, can ill afford to wait another three decades for a resolution.