Celso Rodrigues was walking by a river near his home in Mato Grosso do Sul, when he was ambushed by a gunman in a balaclava, shot with a pistol and then finished off with a rifle.

It might have been just another killing in Brazil, which has one of the world's highest murder rates. But Rodrigues's case has attracted international attention because he was a member of the Guarani ethnic group, which is at the heart of a fierce national dispute over indigenous rights.

In recent months, the national guard has been dispatched, a senior official has resigned and protests from both sides – tribes and landowners – have moved closer to the office of President Dilma Rousseff.

Police have arrested a farm manager, Ivonel Gabriel Vieira, in connection with the case. Survival International, which campaigns for indigenous people's rights, claims that the murder was carried out on the orders of landowners.

Two weeks earlier, another indigenous man was killed during a forced eviction by police of Terena Indians, who had occupied a cattle ranch on land previously recognised by the courts as a traditional indigenous area. To prevent further violence, the federal government dispatched the national guard to the area.

The killings add to a rising death toll. According to a report this month from the Missionary Indigenous Council, 452 indigenous people were murdered between 2002 and 2010, sharply up on the 167 killed during the previous eight years.

A Kaiowa Indian boy plays with a homemade bow and arrow on land near Antonio Joao in Mato Grosso do Sul. Photograph: Douglas Engle/AP

More people have died in Mato Grosso do Sul – a "wild west" border region that has been colonised by ranchers and soya growers – than in any other state.

Lawyers, anthropologists and indigenous rights campaigners have sent a letter to Rousseff, reminding her that the Indians are trying to take back land that was confiscated from them and distributed to powerful families during the dictatorship era.

The letter includes passages from a recently rediscovered 1967 report from the then public prosecutor, Jader de Figueiredo Correia, which detail some of the land grabs, including many by the organisation that was supposed to be supporting Indian rights. As a result of that report, the government disbanded the Indian Protection Service and created an indigenous affairs department, Funai.

With the end of dictatorship in 1985, subsequent governments have strengthened the rights of indigenous people. About 13% of Brazil has been recognised as indigenous territory. Yet farmers continue to expand their land holdings. According to the National Institute for Colonisation and Agrarian Reform, the 74 largest farms in Mato Grosso do Sul cover 2.4m hectares of land, while all the indigenous areas together, where 77,000 Indians live, add up to only a third of that area.

There are also growing fears that indigenous groups will be further marginalised because the government is reliant on ruralista (agriculture lobby) votes in Congress and is desperate to jumpstart an economy that slumped last year.

Conflicts have intensified in many other areas over land seizures for farms, mines and infrastructure projects. The Munduruku indigenous group in Para state has threatened to go to war over government plans to build a cascade of hydroelectric dams on the Tapajós river. Many tribes are opposing the construction of Brazil's biggest dam, the Belo Monte, on a site that has been occupied by protesters several times.

Last month, Marta Azevedo, the head of Funai, quit her post. Although she said she was resigning because of ill health, many speculate that she was frustrated by a lack of support within the government and growing efforts to undermine Funai.

A member of the Guarani ethnic group, which is at the heart of a fierce dispute over indigenous rights. Photograph: Buda Mendes/STF/Getty Images

Last month, civil servants from Funai wrote a letter to Rousseff noting that her government had designated less land to tribal groups than any other administration in 25 years.

They accused the state of failing to provide the minimum conditions necessary for Funai to fulfil its institutional role, largely owing to pressure from the ruralista lobby.

"We know that large landowners are influential in driving the policy of the country, and are precisely the actors who have been placed squarely against the territorial rights of indigenous people," they wrote.

The core concern is that Rousseff is shifting responsibility for land demarcation from Funai – which represents indigenous people – to other government bodies, such as congress and the agriculture ministry, which are closer to the landowners' interests.

The ruralista lobby – headed by the Parliamentary Farming Front – has threatened protests if the government gives in to the demands of indigenous groups.

One of its leaders, congressman Nilson Leitão, said: "If 100,000 producers invade Brasilia, there will be a civil war … The government does not have the right to transform Brazil into an indigenous nation, it cannot be at the same time an Indian reserve and an agricultural power."

Additional reporting by Jan Rocha