In the vast Peten jungle in northern Guatemala, drug gangs operate with impunity, laying clandestine landing strips for planes loaded with South American cocaine which is then trucked over the porous border with Mexico and up to the United States.

Soldiers patrol a scattering of basic security posts in the rainforest like one near the Mayan archeological site of El Peru, an hour's drive from the Mexican border, where a small band of 15 unkempt soldiers mans a cluster of wooden huts.

Drug smugglers, by contrast, have the cash to buy private planes and powerful weapons, build roads through the jungle and recruit ex-soldiers to their side with generous wages.

The gangs have come in from Mexico, where a multi billion dollar army crackdown has interfered with smuggling routes.

In the Laguna del Tigre national park which makes up roughly a quarter of Peten, traffickers have some 50 small planes in operation, according to park director Rudy Quezada. "There are illegal airstrips everywhere you look," he said.

Last year President Alvaro Colom vowed to expand Guatemala's armed forces by 60 percent to 25,000 troops and send thousands to the border region with Mexico to crack down on smuggling.

But the increase has not materialized as an economic slowdown has eaten into government coffers. A slump in key industries like textiles has knocked down tax revenues by hundreds of millions of dollars. Spending cuts have left the army short on recruits, equipment and even food.

"The army doesn't have the hardware to fight drug trafficking nor the expertise to gather intelligence on the cartels," said ex-colonel and security analyst Mario Merida.

DRUGS THREAT OVERSHADOWS WAR PAST

Some $18 million had been earmarked to renovate two army bases in San Marcos and Quiche departments, near Mexico. The bases have been dormant for a decade following army cutbacks mandated in peace accords after a brutal 1960-96 civil war that killed more than a quarter of a million people.

The money would have paid for 1,000 recruits for each base, uniforms, transport, fuel and food, but the sum was cut to $6 million as the government pruned back its budget.

"We lack equipment and personnel," army spokesman Byron Gutierrez said. "The economic crisis means the finance ministry hasn't had the necessary funds to pass on to us."

Guatemala has been allocated $16 million under a U.S. drug war aid package, but none of it has gone to the army. The first funds are going on police helicopters and radar systems.

Colom wants to buy six army planes from Brazilian maker Embraer (EMBR3.SA)(ERJ.N), but the $99 million purchase requires a loan that has yet to be approved by Congress.

After the civil war, Guatemala slashed its army to 15,500 troops, a third of the size it was at the end of the 36-year conflict. The military is still struggling to overcome its dark past after a U.N. report found the army responsible for 85 percent of wartime atrocities.

Some human rights groups oppose increasing the army.

But Colom, a leftist whose politician uncle was murdered by the army during the conflict, says the drug threat is a bigger concern, as Mexican cartels lay down roots in Guatemala.

The U.S. Drug Enforcement Administration reckons three-quarters of South American cocaine smuggled north goes via Central America. Much passes through Guatemala's Peten region and the cartels buy off army officers, police, judges and politicians to protect their interests.