Mexican army kills four in drug gang shootout

APATZINGAN, Mexico, May 8 (Reuters) Mexican soldiers lobbing grenades stormed a house and killed four drug gang members in a battle in a town at the heart of President Felipe Calderon's war on narcotics smugglers.

Terrified neighbors fled the streets in the town of Apatzingan as more than 300 soldiers and police fanned out across a neighborhood and attacked gunmen holed up in a home.

Masked cartel members killed five soldiers in a shootout in the region last week, one of the heaviest blows to the military since Calderon sent thousands of troops to tackle drug gangs across Mexico last December.

Yesterday, soldiers, some manning machine guns mounted on Humvee army vehicles, surrounded the home and responded to shots and explosives fired from inside with their own heavy gunfire and grenades.

Soldiers storming the shrapnel-riddled residence found four dead and detained two men and a woman, the army said in a statement.

Three soldiers were wounded in the fight, which lasted nearly two hours.

Apatzingan, an unusually affluent farming town, is at the crossroad of drug-smuggling routes and is in a region riddled with methamphetamine labs.

One of the dead yesterday was a woman, Michoacan state authorities said.

Despite Calderon's campaign, execution-style killings and other grisly murders have gone on unabated.

Drug-related killings in Mexico number more than 700 so far this year, compared with 2,000 in 2006. Michoacan, a mountainous avocado-growing area, is one of the states worst hit.

The Gulf Cartel based in northeastern Mexico is fighting an alliance of smugglers from Sinaloa state, headed by Mexico's most-wanted man, Joaquin ''Shorty'' Guzman.

A local group, the Valencia gang, is strong in Michoacan.

On Saturday, gunmen killed a police chief in the southern state of Chiapas, while a police chief in the Caribbean resort of Cancun survived an attempt on his life earlier last week.

Reuters JK SBA VP0740