It is called a war, but there is no frontline or thunder of battle in this scorched wilderness. There is only a no man's land where the dead pile up in silence and the living have nothing to say.

Twenty-seven farm labourers were decapitated and had their heads strewn across a field one recent night, but ask neighbours and they reply with blank looks and apologetic shrugs, as if it happened in a distant land.

Two well-known peasant leaders were killed in separate incidents as if by phantoms. Broad daylight, but no witnesses. Months later, some in the community profess ignorance it even happened. "Ricardo Estrada and Jorge Gutiérrez are dead?"

Yes, they are dead. As are three Mexicans shot in a house last week, according to neighbourhood whispers. A pick-up spirited away the bodies and the home owner scrubbed the blood before police arrived. They decided nothing happened.

Welcome to El Naranjo, a sun-blistered one-street town on Guatemala's northern frontier, once in the middle of nowhere, now in the middle of Latin America's drug war. Mexico's narco-fuelled bloodshed, with 36,000 dead in four years, is dripping here and across much of central America.

The isthmus has been a transit point for Andean cocaine for decades, but its importance to cartels has multiplied since the US coastguard shut down alternative Caribbean routes. Competition has sharpened since Mexico's crackdown flushed some narcos south, notably the Zetas, a particularly brutal bunch who seek to annihilate rivals.

The region can ill afford such visitors. Guatemala, Honduras and El Salvador are already world murder capitals because of poverty, youth gangs and dysfunctional, feeble states. Hurricanes and climate change, which disrupt agriculture, do not help. The massacre of the peasants – targeted allegedly because the ranch owner stole Zeta cocaine – has filled the region with foreboding. "This is a war without quarter," Guatemala's president, Álvaro Colom, told the Guardian. "There is a lot of infiltration, a lot of corruption. We need a Nato-type force to fight back."

Alarm bells are ringing across the region. General Douglas Fraser, head of US Southern Command, called organised crime Central America's gravest threat. Last week, Hillary Clinton pledged $300m in US anti-narcotics aid to the region, an increase of more than 10% from 2010. The International Commission Against Impunity in Guatemala, a UN-mandated body, said the country risked becoming a narco-state.

That has already happened on a local level in Petén, a vast, 2m hectare (5m acre) nature reserve on the border with Mexico that contains rainforest, Mayan ruins – and the marks of interlopers. From the air you see dozens of long, thin gashes in the jungle canopy: airstrips for cocaine-laden planes. The aircraft, worth a small fraction of the cargo's US street value, are so often abandoned there is a cemetery for them.

On the ground you can travel for days without seeing another soul, but when the forest gives way to pasture and bony cattle it means a town is close. El Naranjo is a few hours' bumpy drive from where the peasants were slaughtered. It reeks of fear.

Don't mention this to anyone here, please," begged one shopkeeper, after casually mentioning that los pesados (literally "the heavy ones"), favoured his $130 snakeskin boots. He had inadvertently broken a rule: don't talk about narcos, not even in euphemism.A community leader who requested anonymity said Zetas were forcing people to choose sides, breeding a paralysing suspicion. "There are eyes and ears everywhere." He shook his head. "One of the least populated places on the planet and it's claustrophobic."

Community leaders were too nervous to meet UN officials in a nearby municipality. El Naranjo's only journalist, Carlos Jiménez, a one-man radio station, has made a video to be aired if he is murdered. "It names names, says things I can't say in this life."

Nobody trusts phones. "They are tapped so we speak to our people up there in codes," said Ramón Cadena, who is based in Guatemala City as Central America director of the International Commission of Jurists. "Terror is multiplied when people know they can be killed and nothing happens afterwards."

A music store reflects El Naranjo's mood: instead of ballads it was playing the sellout CD of an evangelical preacher's hell and damnation sermon: "Pray now, because judgment is upon us!"

The town's mayor, José Alfredo Morales, 52, was one of the few to go on the record. Over roast chicken in a deserted diner he detailed how settlers had carved farms out of the jungle 40 years earlier, how guerrillas and government troops spread mayhem in the 1980s, and how criminality exploded after the 1997 peace accords.

As conversation turned to recent events, the restaurant owner stationed himself within earshot but gazed at the street, seemingly oblivious. The mayor started tailoring his answers to the volume of passing traffic. During lulls he talked about the weather and cattle. While pick-ups rumbled past, sabotaging the eavesdropping, he rattled through more sensitive topics.

The state neglected the region, he said, so los pesados traditionally supported the community with infrastructure – roads, churches, clinics – and handouts. Rival groups coexisted more or less in peace until a new group arrived "looking for space" – the mayor extended his elbows in demonstration. "Now they all hate each other. It's got very complicated."

At the end of the interview he raised his voice: "So basically what I'm saying is people are very happy here. It's all very quiet Todo tranquilo."

El Naranjo is quiet, for now. After the massacre the government declared a temporary "state of siege" in the region, enabling the army to impose a curfew, chase suspects and support the feeble police force. Dozens of vehicles and weapons, including assault rifles and grenades, have been impounded. About two dozen Zeta suspects have been arrested and paraded before cameras. Well-fed narcos who used to strut around town with pistols on their hips have melted away.

It added up, said President Colom, seated in his palace in Guatemala City, to a crackdown that showed the state could defeat narco-trafficking. "Our resources are limited but we are responding to this very serious threat."

On a laptop he showed air routes, depicted as red lines, shut down with US help, forcing traffickers to use land routes. Authorities were purging corrupt police, bolstering the judicial system and deploying military units to narco hotspots. He suggested the region form "a type of Nato" to fight organised crime.

Colom, at times so softly spoken as to be barely audible, asked Europe and the US for more counter-narcotic aid and to rein in cocaine consumption. He lamented rampant money laundering and said Guatemalan elites ducked taxes needed to strengthen governance. "But we are not a failed state. We have a strategy."

In an office overlooking a parade ground with clipped lawns, the defence minister, General Juan José Ruiz, was even more bullish. Two thousand soldiers and 1,000 police were reclaiming Petén from the drug lords, he said. "We are sorting it out. We've caught senior people, seized armed caches."

It would be a similar "success story" to the army's retaking of Alta Verapaz, a region overrun by narcos late last year. That was, to say the least, a bold claim. Days earlier, the remains of Allan Stowlinsky, a kidnapped assistant public prosecutor, were dumped in five black plastic bags around the justice ministry in Cobán, the capital of Alta Verapaz.

Guatemala was reaping the legacy of chronic lawlessness which left state institutions weak and powerless, said Sebastián Elgueta, a researcher on Central America at Amnesty International. "The current violence has not occurred in a vacuum. Massive human rights violations, war crimes and genocide have gone unpunished. In Guatemala impunity is the norm, justice the exception."

Few in Petén expect the relative calm to last. Mexico's Gulf and Sinaloa cartels still have their proxies in the area and the Zetas are busy recruiting, said an army colonel in the region. "They are offering very good wages, higher than the competition."

A resident of El Naranjo who served in the army in the 1980s said a former comrade had joined the Zetas and was tasked with recruiting five men. "He offered me 15,000 quetzals (£1,205) per month"– a fortune by local standards. The former conscript said he declined. "Once you're in, you can't get out."

The army has imposed a curfew but the teenage conscripts in khaki who patrol on foot and in pick-ups have no chance of uprooting a narco-trade rooted in the town's very existence, said one community leader. "It's theatre. Everyone knows los pesados are still here."

In contrast to "traditional" narcos, who garnered local support by offering basic services and amenities, the Zetas, many of them former members of the Mexican and Guatemalan special forces, prefer to gain control through terror.

They allowed one female labourer to survive the farm massacre so she could bear testimony as a warning to others. The workers were rounded up, she told reporters, and surgically stabbed so they remained alive but could not run. Then one by one, over eight hours, they were interrogated and beheaded.

An atrocity worthy of Apocalypse Now's Colonel Kurtz, but there is no madness in this tropical realm, just a ruthless, relentless, calculating quest for market share.

Fifty years of war and bloodshed

Guatemala was a sleepy backwater until the CIA orchestrated a coup in 1954 to oust the leftwing government and protect US economic interests. A series of military governments, backed by US aid, battled leftwing guerrillas for decades in what became Latin America's bloodiest civil war.

More than 200,000 people died, mostly impoverished Mayan villagers targeted in a genocidal campaign by government troops and militias. Special forces known as Kaibiles, whose training included biting the heads off chickens, committed numerous atrocities, notably the slaughter of civilians in Dos Erres in 1982.

Peace accords were signed in 1996, Bill Clinton apologised for US complicity in the war, and democracy took hold. But Guatemala failed to escape the gun. A feeble state, a corrupt ruling elite, and impunity for criminal gangs, many linked to security forces, produced murder rates that exceed the war-era casualty toll.

Poverty and unemployment are rife. Almost half of children suffer chronic malnutrition, one of the world's highest rates, stunting their growth and mental development.

Areas once ravaged by war are suffering a new wave of violence: Mexico's Zetas, a drugs cartel formed by former Mexican special forces, have recruited former Kaibiles and other Guatemalans to wrest control of narco-trafficking routes from established rival cartels.