* Violence on the rise in Mexico, including Michoacan state
* Vigilante groups say they have no option but self-defense
* President says vigilantes should disarm
By Lizbeth Diaz
SANTA MARIA OSTULA, Mexico, Sept 13 (Reuters) - Surrounded by armed men, Commander “Toro” said Mexicans taking the law into their own hands in the western state of Michoacan will not heed government calls to lay down arms because it would leave them at the mercy of violent gangs.
Toro - real name German Ramirez - was once a school teacher in Santa Maria Ostula, an impoverished, largely indigenous village in the municipality of Aquila in western Michoacan.
But he says that after suspected cartel hitmen kidnapped and shot dead his father six years ago, he found a new vocation training neighbors to resist brutal gangs fighting for control of the market for synthetic drugs and other narcotics.
“Every time they kill someone there are more angry families,” said Ramirez, 31. “That’s how people take up arms and our strength increases. This is what’s happening.”
The re-emergence of dozens of so-called self-defense groups that rose to prominence under the previous administration has exposed shortcomings in President Andres Manuel Lopez Obrador’s strategy to bring down record levels of violence.
Some 17,614 homicides were registered between January and July this year, putting the death toll on track to surpass last year’s record. Of those, 809 were in Michoacan, 13% more than in the same period the previous year, official data show.
Ramirez says he has more than 200 armed civilians under him patrolling highways and roads in the area, throwing out - but not killing, he says - unwanted intruders from marauding gangs.
He says local police rarely enter parts of rural Michoacan, let the self-defense groups operate and at times even provide weapons.
The ministry for public security did not reply to requests for comment.
Lopez Obrador took office in December vowing to pursue an amnesty with criminal gangs, saying it was time to take a less confrontational approach to curbing the violence. However, he never clearly spelled out how the scheme would work.
Since then, his government has sent mixed messages about how it will deal with the vigilante groups, which are not always clearly distinguishable from criminal organizations.
“The government is only worried about disarming us,” said Hector Zepeda, alias “Commander Tetos”, another self-defense group leader from Coahuayana, about 50 kilometers (30 miles) from Aquila.
In August, Lopez Obrador said the vigilante groups were outside the law and should disarm.
However, other officials have suggested that the government is negotiating with them. Interior Minister Olga Sanchez told reporters last month the government was talking to “various groups” before stepping back from her comments.
The president says his newly-created National Guard, a militarized police force, will restore order.
Security experts interviewed by Reuters say vigilante forces have helped contain violence in crime-stricken areas like Michoacan. But some of them have also struck alliances with criminal gangs in exchange for weapons and protection, they add.
“I don’t think the current government is proposing to change the situation,” said Erubiel Tirado, a security expert at the Iberoamerican University in Mexico City.
Ramirez, “El Toro”, acknowledges that some self-defense members deviated from their original path. Some, he said, had joined criminal gangs the vigilantes are fighting.
The groups began emerging after former President Felipe Calderon launched a military-led crackdown on cartels in Michoacan, his home state, shortly after taking office in December 2006.
Gangs fragmented, and the violence kept rising.
But it was not until Calderon’s successor Enrique Pena Nieto took power in 2012 that self-defense groups began fighting major battles with the cartels, making national headlines.
By early 2014, the government had reached an uneasy accommodation in Michoacan with vigilante groups whose aggressive campaigns beat down the Knights Templar, a cartel that was then the most prominent threat to the government’s authority.
In conjunction with the Sinaloa Cartel of captured kingpin Joaquin “El Chapo” Guzman, the Knights Templar once dominated the main trafficking routes on the Pacific coast.
The Templars’ displacement opened the door to incursions by rival outfit the Jalisco New Generation Cartel (CJNG) from the neighboring state of Jalisco, deemed one of the most dangerous transnational groups in the world by the U.S. government.
Offensives by the CJNG to secure smuggling routes for drugs like fentanyl and illegally-mined minerals have spilled into the sparsely-populated coast of Michoacan, which is sandwiched by two major ports - Lazaro Cardenas in the south of the state, and Manzanillo, a few kilometers north into neighboring Colima state.
“Everything enters through (Manzanillo), it’s no secret, even things that shouldn’t,” said Griselda Martinez, the mayor of Manzanillo, who survived a murder attempt last month.
Attempts to extort businesses in the iron-ore rich area that supplies steelmakers such as Ternium have added to headaches for villages caught in the middle like Santa Maria Ostula.
“Now we don’t just have to deal with the criminal gangs trying to control ports like Manzanillo and Lazaro Cardenas,” Ramirez said, “now they’re coming after us.”
Last week, social media erupted with images of vigilante groups fighting against suspected CJNG forces trying to enter nearby Tepalcatepec, Michoacan. Photos and video footage showed the bloody corpses of cartel footsoldiers slumped in trucks and the sound of gunfire ringing out in remote villages.
“If we turn in our weapons, they will kill us,” Ramirez said from his perch on a grassy hill in his village, guarded by dozens of men while women cooked and children played nearby.
The vigilantes say the president’s pledges are falling flat.
Zepeda, “Commander Teto,” who lost a brother to cartel violence six years ago, said he had no hope the government will bring peace to Mexico.
Even residents of Colima state have turned to him for help as they lose family members in the bloodshed, he said.
“They know that the government doesn’t care about us,” Zepeda said. “So they want to know how to take up arms.” (Reporting by Lizbeth Diaz Writing by Rebekah F Ward Editing by Frances Kerry)