TOLUCA, Mexico (Reuters) ? Few people had heard of the 'Hand with Eyes' before the drug gang dumped a severed head in a working class neighborhood outside Mexico City.
A crudely scrawled message at the crime scene in March said, "'The Hand with Eyes' takes its time but never forgets. Last chance to get the hell out of the Valle de Mexico."
The upstart gang formed just last year is already believed to be responsible for hundreds of murders, taking the kind of brutal bloodshed common in cities on the U.S. border closer to the Mexican capital, so far largely untouched by the mayhem.
Prosecutors say it is one of several new, hyper-violent groups splintering off from major drug cartels and earning a reputation for gratuitous violence.
"Before (the cartels) killed when it was necessary. Not like now. Now they kill as if it were sport," said Alfredo Castillo, a state prosecutor in the industrial town of Toluca, about an hour outside of the capital.
A breakaway group in Toluca formed from the largely dismantled Beltran Leyva cartel, the 'Hand with Eyes" -- or "Mano con ojos" in Spanish -- is fighting with a local rival, the 'Cartel del Centro' to control street-level drug dealing.
When President Felipe Calderon took office there were only around four major criminal organizations operating in Mexico.
Now, almost five years after he sent the military to try to crush the cartels, some security analysts say there are at least a dozen competing for survival.
They prove themselves with escalating acts of violence and earn extra cash by branching into parallel criminal enterprises like kidnapping and extortion.
"It seems like every day we hear of a new group. There are more than I can count," said a U.S. official in Mexico.
The changing cartel landscape is a liability for Calderon heading into presidential elections next year. He cannot run again and his ruling party is struggling to overcome poor approval ratings due in part to the violence.
Security will present a major challenge for the next president since the violence that has killed 42,000 people since late 2006 is unlikely to stop after the election.
THE GODFATHER
In a victory for the government last week, police arrested the leader of the 'Hand with Eyes' gang, Oscar Garcia, one of more than 20 top capos to be killed or captured by Calderon's government. A former marine, Garcia admitted to killing 300 people and ordering the murders of 300 more.
Calderon and U.S. officials working with Mexico to help combat drug violence say they are systematically weakening the cartels by attacking the command structure.
But the strategy of going after top cartel brass may be backfiring as others step into the void and assume control.
"As you pull out the leadership of the organization it creates confusion, nobody knows who is in charge," said the U.S. official, asking not to be named.
The expansion of Mexico's drug trade -- which rakes in an estimated $40 billion per year -- can also fan internal rivalries and divisions. Poppy cultivation in Mexico jumped 500 percent between 2003 and 2009 while marijuana growing tripled, the U.S. government says.
"When an organization gets too big, the No. 2s also get very ambitious and they think they are not getting a fair share of profits so you start to get break-away groups," said Mexican security analyst Alberto Islas. "It's like a divorce."
Many trace Mexico's drug trade back to a single figure, Miguel Angel Felix Gallardo, a former policeman dubbed "The Godfather," who built a national cocaine smuggling network in the 1980s by linking up with Colombian traffickers.
After Gallardo's 1989 arrest, four major criminal organizations grew out of his empire. More splits followed.
The Beltran Leyva brothers, who worked for Joaquin "Shorty" Guzman, the head of the Sinaloa cartel and Mexico's most wanted man, broke away and forged their own cartel in 2008.
One of the brothers was killed in a shootout with marines a year later, prompting a further split into at least three new gangs, including 'Mano con ojos.'
The smaller groups do not control major cross-border trafficking networks like their larger rivals so they often drum up extra cash with kidnappings, extortion rackets, people-smuggling, carjacking, audio and video piracy and oil and cargo theft, analysts say.
One of Mexico's most brutal gangs, the Zetas, was once the paramilitary wing of the Gulf cartel but now fights its former employer in Tamaulipas and the business city of Monterrey.
Among new groups to emerge in recent months are the Knights Templar, a group espousing pseudo-religious beliefs that split from "the Family" in Michoacan state after its leader was killed.
Vanda Felbab-Brown, a researcher at Washington's Brookings Institution, said the split made little difference to locals.
"Where the state presence is minimum, it doesn't matter if its a bigger group or a smaller group, their lives are still dominated by crime gangs," she said.
(Additional reporting by Tim Gaynor; Editing by Kieran Murray)
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