Jose Natividad Cortez Balcazar nicknamed "The Teacher", a suspected leader of the Michoacan cartel "La Familia" (The Family), attends a news conference at the federal police center in Mexico's state of Guanajuato. (REUTERS)

Aided by technology and intelligence from the United States, including overflights by drone aircraft and sophisticated software to eavesdrop on cellphone calls, Mexican forces have hit the La Familia drug cartel harder than any other criminal organization in Mexico.

Now, for the first time, Mexican officials are declaring that a major cartel is on the brink of collapse.

But if the government sees victory at hand, the reality in the hot farmlands and mountain hamlets in the western state of Michoacan feels very different.

Wary locals say that little has changed. Their state continues to resemble an occupied zone. Three municipal police chiefs have been executed in Michoacan this year, the most recent three weeks ago. Military units and gunmen lighted up the night with a firefight at an isolated village Tuesday, leaving four dead. On Wednesday, the naked, tortured bodies of four people were found dumped along a roadside.

With just 18 months left in his six-year term, President Felipe Calderon is desperate to show that his U.S.-backed strategy of sending thousands of soldiers and police to fight the traffickers is working and that his government can calm the storm of gruesome violence that has killed more than 35,000 people and threatens the nation’s stability.

In December, when Mexican and U.S. agents heard on their wiretaps that bosses of the La Familia drug cartel and hundreds of their followers were gathering to party at a ranch south of this busy farm town, authorities gave the order: Capture or kill.

What followed was the most aggressive assault seen in four years of Mexico’s drug war. Over two days, 800 federal agents in helicopters and armored vehicles battled cartel gunmen through lemon groves and along rural roads, as residents barricaded themselves indoors.

By the end, government forces said they had shot dead La Familia’s founder, Nazario Moreno Gonzalez, a messianic folk hero known as “El Mas Loco” (the Craziest One) who had become the largest supplier of methamphetamine to the United States.

“We gave La Familia the biggest blow in their history,” a triumphant Calderon declared.

A month after the December raids against La Familia, banners hung from highway overpasses announcing the cartel was disbanding.

It was a lie. La Familia is still very much here.

‘Nothing has changed’

At the fire station here in Apatzingan, where La Familia was born, supervisor David Olivera described how he still must call ahead to ask La Familia representatives for permission to send ambulances to gather the sick and injured.

Olivera is also the managing editor of a local newspaper, La Voz de Michoacan, and said his reporters cannot cross the river to cartel-controlled towns without a military escort.

According to Calderon’s security officials, Moreno’s death and the killing or arrest of top crime bosses of other cartels in the past year is proof that they are finally winning the war against the cartels. Their evidence: Twenty of the 37 most-wanted drug lords in Mexico are dead or behind bars.

But the list was assembled in April 2009, an eternity in the abbreviated lives of drug traffickers, and those removed in the past two years have been quickly replaced by new leaders.

With few options and less time, Calderon’s government has emphasized a strategy of killing or capturing cartel bosses. But they have been slow to fulfill earlier promises to reform the judicial system, clean up state and local police, pursue money-launderers, build better prisons, and find ways to redirect poor and poorly educated young people away from a life of crime.

At a storefront drug treatment center here filled with toothless, tattooed men lounging on bunk beds, director Ulises Silva said that in the three months after Moreno’s killing, “nothing has changed” in Apatzingan.

“The narcos will never go away,” he said. “The truth is that the people like the narcos more than the government.”

Compared with more powerful Mexican crime syndicates such as the Sinaloa cartel and Los Zetas, La Familia is a regional franchise, characterized by a penchant for anti-government propaganda and a peculiar brand of evangelical Christianity, forbidding drug use in local communities while reaping millions from narcotics sales and lopping the heads off rivals.

La Familia recruited heavily at rehab centers, and here the men offered visitors signed copies of the book written by El Mas Loco himself, titled “Thoughts.” It was sprinkled with aphorisms such as “if you can dream it, you can do it.”

Along the southwest border, seizures of methamphetamine — La Familia’s signature export — nearly doubled last year, even as the Mexican government poured tens of thousands of troops and federal police into Michoacan.

Whether production at the meth labs in Michoacan has fallen since the December raids “nobody knows,” one U.S. law enforcement official said, speaking on the condition of anonymity, citing security protocols.

Genaro Guizar, the mayor of Apatzingan, and others here said people don’t even believe the La Familia leader is really dead.

The government never recovered a body; federal forces said that fleeing La Familia gunmen took their dead with them after the battle, in which five police officers and three bystanders, including a teenage girl and a baby, were also killed.

“They say the raid was a big show,” said Guizar, who was one of 10 mayors in Michoacan arrested in 2009 on suspicion of collaborating with La Familia.

Guizar, who lived most of his adult life in California where he was a successful restaurateur, served 11 months in jail before being released without any charges in a case that became an embarrassment to the Mexican government.

“Who have they really caught, really killed?” he asked. “People here say they are more afraid of the police than La Familia. They’re never going to win the war this way.”

Worsening violence

More than 35,000 Mexicans have been killed since Calderon first sent his military to battle in late 2006, and last year’s total of 15,273 drug-related killings was the highest toll yet. Homicides rose last year in nine of Mexico’s 10 most violent states, according to government data. Only here in Michoacan did drug killings dip, from 590 to 520. In the first three months of 2011, there have been 123 violent deaths.

Mexican and U.S. officials say that worsening violence is a sign they are winning, forcing the cartels into more desperate acts. The removal of crime bosses increases violence, they say, as competing ascendants initiate new horrors to establish dominance.

Facundo Rosas, the federal police commissioner, said that four of the seven founders of La Familia are dead or detained, and that three are on the run. “The fugitives do not want to lead, and so the group is falling apart,” he said.

But George Grayson, a U.S. scholar who has written a book about La Familia, said the organization has regrouped, forming new alliances with the Sinaloa cartel and other gangs. Moreno, La Familia’s spiritual leader, may be dead, Grayson said, but the organization’s operational chief, Jesus “El Chango” Mendez, is still in charge.

Said Steven Dudley, founder of InSight, which researches organized crime in the Americas: “You remove a powerful head, and it creates multiple sectors competing for control and power. You create not weakness, but chaos.”

On March 9, Michoacan residents awoke to find banners strung up from street lamps announcing the arrival of a new group calling itself the Knights Templar, after the holy warriors from the era of the Crusades.

“From now on, we’ll be working to carry out the acts of altruism that La Familia Michoacana used to perform,” the signs read.

A week later, two men were found hanging from highway overpasses with signs lashed to their corpses. “We killed him because he was a bandit and a kidnapper,” the messages read. “Sincerely, the Knights Templar.”