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In the streets of Oaxaca, a picturesque colonial city in southern Mexico, the paramilitary units usually start shooting at about 3am. So tonight some men in the city’s centre are taking additional precautions: they have stretched wire across the street in case the gunmen try to breach their barricades on motorcycles.

In normal times Oaxaca would be full of US and European tourists getting to know Mexico’s cultural and culinary delights. But today, thanks in large part to the local government’s inept handling of a teachers’ strike that began in May, it looks and feels increasingly like a war zone.

One US Iraq veteran travelling in the region to flush away the horrors of combat said: “The first thing I thought when I stepped off the bus was that I was back in Iraq.”

As tensions grow over last month’s disputed presidential election, some observers see events in Oaxaca as a trailer of what could happen in other parts of Mexico, including the capital.

Andrés Manuel López Obrador of the leftwing Democratic Revolution party (PRD), who narrowly lost to Felipe Calderón of the centre-right National Action party (PAN), is demanding a full recount of the votes cast on July 2, and his supporters are causing chaos in the capital by occupying a central avenue.

In Oaxaca things started going wrong when Ulises Ruiz, the state governor and a member of the Institutional Revolutionary party (PRI), left the annual negotiations over teachers’ salaries in the hands of one of his officials while he helped fight the presidential elections for Roberto Madrazo, the PRI candidate.

The talks quickly led to an impasse and, on June 14, Mr Ruiz’s government ordered local security forces to clear the teachers from the camps they had been occupying for the past month in the city centre.

The clearance failed and the excessive use of force took the protest to a new level.

“That was when everything changed,” says Roberto García Lucero, one of the leaders of the Popular People’s Assembly of Oaxaca (Appo), an umbrella group of hundreds of social and indigenous organisations that formed in solidarity with the teachers. “Our first demand now is not about pay: it is that Ruiz resigns,” says Mr García.

Heavy-handed tactics since then – official operations to clear street barricades have involved heavily armed plain-clothes police, and several people have been killed in incidents involving paramilitary units the protesters claim are sponsored by Mr Ruiz’s administration – have produced a tense and often frightening atmosphere.

At night, protesters fortify the barricades across the streets using anything they can find: boulders, barbed wire, wooden beams and sheets of aluminium and zinc. Burly men set fire to old bus tyres, sending choking black smoke into the air.

The protesters have taken over privately owned radio stations and the 24-hour broadcasts act as an invaluable communication tool to protect the population from the marauding paramilitary units, which shoot randomly from the rolled-down windows of their shiny new pick-ups.

On a quiet street corner in the historic centre, a group of protesters sprays graffiti demanding Mr Ruiz’s resignation while listening to frantic pleas from 109 FM, one of the captured stations. “We have just received an important alert from the residents of Reforma neighbourhood where groups of armed men have opened fire. Please, I urge everyone to take to the streets to help,” the announcer says.

The conflict has hit Oaxaca’s economy hard. Miguel Angel Concha, Mr Ruiz’s spokesman, estimates the economic damage so far is running at about 1bn pesos ($88.5m, €69.5m, £48m).

Mr Concha says the government still has control of the state. The problem, he insists, is only in the capital and even there “the situation is difficult but not ungovernable”.

With protesters occupying government offices, courts and even the local congress, most residents find it hard to agree. “It is like saying the patient is fine because he only has a problem with his heart,” says Porfirio Santibañez of the city’s autonomous university.

Yet even Mr Concha admits that both sides need to negotiate an exit. “It’s in everyone’s interests to solve this problem quickly,” he says. But for the protesters, talks must mean Mr Ruiz’s immediate departure, and Mr Concha says that that point is not negotiable.

Legally, he is right: only the federal Senate has the power to demand Mr Ruiz’s exit. Until Mr Ruiz does go, however, things in Oaxaca seem destined to get worse.

■Juan Sabines of the PRD won the governor’s race in Mexico’s volatile southernmost state of Chiapas on Sunday, edging out José Antonio Aguilar of the PRI by about 6,300 votes, electoral officials said, AP reports. PRI officials said they would challenge the results before the Federal Electoral Tribunal, the country’s highest election court.

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