The indigenous inhabitants of Margaritas Copón, Guatemala, have survived for more than 100 years by cultivating the land along the Chixoy and Copán rivers with virtually no assistance from the state.

The isolated community, close to the Mexican border, has no health clinic, electricity or secondary school, and can only be reached via a three-hour drive on unpaved roads.

The 60 Q'eqchi Mayan families, of whom only a handful speak Spanish, feel fortunate that the fertile soil provides an abundance of maize, beans, yucca, potatoes, pineapples and tomatoes to eat, and plenty of cardamom to sell at local markets.

But this traditional way of life is being threatened by the construction of a gigantic hydroelectric dam, which would flood their ancestral land. These families are among thousands of Q'eqchi Mayans facing forced eviction and destruction of livelihoods to make way for the Xalalá project, which the government insists will bring development.

Emilia Xico, 37, a mother of seven and member of the Margaritas ancestral committee, said: "For us, development means respecting and protecting Mother Earth, so that our children will always have food and water. This dam is not development for us. We are conscious of the things we don't have and, of course, I want better education for my children – that is our right – but we won't trade our territory and sacred natural resources. That's all we have."

The £200m initiative is mired in allegations of contract irregularities and dirty tricks against local communities. But it retains the support of President Otto Pérez Molina, who has vowed to construct the dam "whatever it takes".

Community leaders said they feared a repeat of the nearby Chixoy-dam massacres of 1982, during which security forces murdered hundreds of Mayans who demanded the government fulfil promises to provide homes and land.

Despite widespread local opposition, the Xalalá project is proceeding as part of long-term energy plans to exploit hydroelectric potential, reduce reliance on oil, and establish itself as the region's principal electricity exporter.

The dam will flood the most fertile plains of 58 campesino (subsistence farming) communities, displacing up to 15,000 Q'eqchi Mayans. Thousands more will be affected by major changes to water flow and biodiversity, according to independent investigations.

When completed, Xalalá will be Guatemala's second-biggest dam. It is one of hundreds of major projects promoted as development by the government in rural, mainly indigenous regions, which are causing social strife across the country. Dozens of activists opposing dams and mines have been killed or jailed in the past two years.

Xalalá was proposed in 1970, but interrupted by the civil war. Since 2006, the government has twice failed to secure a contractor, partly because of 90% opposition in legally binding community referenda.

In 2012, the newly elected president, Otto Pérez Molino, a military commander during the country's civil war, made Xalalá a priority.

Official documents obtained by the Guardian reveal how the National Electrification Institute (Inde), a government quango, engaged in an intense programme to win over communities. Supported by central government, Inde would first identify and profile the most influential community leaders, who would then be offered much-needed services such as schools, electricity, new roads and health clinics.

The Association of Communities for Development and in Defence of Territory and Natural Resources (Acodet), which is made up of the communities threatened by Xalalá, says Inde, in conjunction with other government departments, has offered residents solar panels, sports facilities, equipment for processing cardamom, and new roads in exchange for publicly supporting the dam.

Federico Poob, 29, Acodet coordinator in Margaritas Copón, said: "We know Inde's underhand strategy because we've seen the documents, analysed their approach and we have learned from the experience of Chixoy. Xalalá offers us zero benefits – we would lose our land and homes."

Last November, Inde bypassed normal bidding procedures and awarded a £3m "emergency contract" to a Brazilian company for geological feasibility studies, without consulting or informing local communities.

Days before the study began, an army and police convoy arrived in the area, supposedly to deal with drug traffickers, a government minister claimed on the radio.

The militarisation and criminalisation of communities opposed to mega-projects has been condemned by Amnesty International and a UN special rapporteur (pdf). Amnesty called on investors to "recognise the impact on human rights" of such projects.

Last month, the congressional probity and transparency committee found legal and technical irregularities with the Brazilian contract. Criminal charges against 12 senior officials, including the energy and mines minister and the former director of Inde, who resigned amid the scandal, are being investigated.

Days later, Molina expressed his determination to complete the Xalalá project by publicly defending the development, insisting that Inde was exempt from the law it was accused of breaching. Inde said it was co-operating fully with the criminal investigation.

Cecilia Vázquez, head of Puente de Paz (Bridge of Peace), a local NGO, said: "Business interests are worth more than the rule of law, transparency and the rights of communities. Such impunity means the only way left open for communities is confrontation."

About 40% of Guatemalans are indigenous. Their right to free, prior and informed consent is enshrined in national law and legally binding treaties, including the International labour Organisation's tribal and indigenous people's convention. Since 2005, more than a million people voting in community consultations have rejected mega-projects on their territory. The results have been ignored.

Inde acknowledged the existence of widespread local opposition to Xalalá, but said the dam was essential to finance rural electrification plans and achieve energy security for Guatemala. The project was at an early stage, it said, and pledged to respect human rights. Inde denied trading basic services or any other involvement in dirty tricks to win community support.