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]Reuters - Mexicans will elect mayors and governors in a dozen states on Sunday amid drug gang intimidation and murders of several candidates, which highlight the government's struggle to curb the escalating drug war.

The Institutional Revolutionary Party, or PRI, is expected to sweep the elections in part because the ruling conservatives of the National Action Party, or PAN, have been criticized for their handling of the economic downturn and raging drug violence. The PRI hopes its gains in Sunday's election will lay the groundwork for a victory in the 2012 presidential election.

A big win for the PRI will test support for President Felipe Calderon, whose popularity is flagging, and could help launch a presidential bid for Enrique Pena Nieto, the fresh-faced new star of the PRI who has a wide lead in polls.

"Calderon's policies are a total failure," said Jorge Garcia, a restaurant owner in the central state of Puebla where the PRI holds power and is pegged to win on Sunday.

Opinion polls show support for PAN's Calderon has slumped in recent months as Mexicans tire of a sputtering economy and a steady surge in killings since the president launched his army-led drug war in late 2006.

More than 26,000 people have been slain since then, mostly traffickers and police but also some bystanders and children. Campaigning for Sunday's elections has been marred by a spurt in violence, including the murders of two candidates.

The ambush and shooting of a gubernatorial candidate in the increasingly lawless northeastern state of Tamaulipas prompted RBS Capital Markets to write that stakes had risen for investors in elections that would normally be a minor event.

Twelve governors will be chosen along with mayors and local congressmen in 14 states, including dangerous regions along the drug gang-plagued northern border.

Gubernatorial polls show the PRI -- which ruled Mexico with a firm grip for seven decades before being ousted in 2000 -- keeping power in most of the nine states it controls and pushing out rivals in some of the other states up for grabs.

Surveys show Mexicans' top concern is the economy, which is limping back from recession. But the bloodshed and weak courts that brings few criminals to justice are increasingly a worry.

"The government's fight against organized crime (is turning) into the single most important political liability of the Calderon administration," Eurasia Group analyst Allyson Benton said.

PESO HIT BY MURDER

States going to the polls include Sinaloa, home of top drug fugitive Joaquin "Shorty" Guzman, and Nuevo Leon, which has one of the highest murder rates in the world due to feuding drug cartels.

Earlier this week, Rodolfo Torre, the PRI front-runner for Tamaulipas governor, and four aides were killed by gunmen as they went to a campaign event. A mayoral candidate for the ruling PAN in a small Tamaulipas town was also murdered by likely drug hitmen.

Torre's killing was the most high-profile political murder in Mexico since 1994, when presidential candidate Luis Colosio was gunned down on the campaign trail. It is the clearest sign so far of drug gangs trying to disrupt the political process. The attack spooked investors and hit the Mexican peso.

Days after Torre's murder, a severed head was dumped outside the house of Hector Murguia, the leading candidate for Ciudad Juarez mayor. Murguia is accused by rival politicians and rights groups of working for the feared Juarez drug cartel.

In Sinaloa on Saturday, small homemade explosive devices were thrown at the campaign headquarters of PRI gubernatorial candidate Jesus Vizcarra. It was the fourth such attack since last month on different political parties in the state. The blasts caused no injuries or significant damages.

Mexican media recently published photos of Vizcarra attending a party years ago with drug trafficker Ismael "el Mayo" Zambada, Guzman's right-hand man in the Sinaloa cartel.


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