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MEXICO CITY (Reuters) - At least 26 people were dead or hospitalized after a shootout in the northern Mexican border state of Chihuahua on Wednesday, the state attorney general's office said, as drug violence surges in one of Mexico's bloodiest years on record.

The shootout took place near the mountainous community of Las Varas, in the heart of one of Mexico's drug trafficking regions, and it involved two armed groups. It was unclear how many of the victims were dead and how many were alive at hospitals, spokesman Felix Gonzalez told Reuters.

President Enrique Pena Nieto came to office in 2012 vowing to end years of drug violence, and although the murder rate fell initially, it has been rising steadily and is on track to hit its highest level since recent government records began in 1997.

The shootout coincided with U.S. Secretary of Homeland Security John Kelly visiting Mexico to meet with Pena Nieto and to discuss cooperation in fighting organised crime.

More than 100,000 people have died in drug-related violence since 2007 when former President Felipe Calderon sent in the military to battle the cartels, and at least 30,000 people are missing.

Last Friday, 17 people died in a shootout with police in the neighbouring state of Sinaloa. Relatives of some of those people believe they may have been executed by the police, a charge officials deny.

(Reporting by Mexico City newsroom; Editing by Gabriella Borter and Grant McCool)

Reuters