By Adriana Barrera and Sofia Menchu

NUEVA CONCEPCION, Guatemala (Reuters) - The mayor of Nueva Concepcion, a town on the Pacific coast of Guatemala, stands accused by prosecutors of drug trafficking and money laundering for Mexican cartels that use the coastal route to transport cocaine to the United States.

Yet Otoniel Lima, who rides around his poor municipality of 130,000 people in an armoured SUV, has immunity from prosecution until his term ends in December. And until a few days ago, the 58-year-old planned to run for reelection on Sunday.

This week, Guatemala's highest electoral court, the TSE, revoked his candidacy, some six months after the charges were filed. He is among a handful of candidates blocked from Sunday's municipal, legislative and presidential polls for alleged links to drug trafficking.

Lima denies all the allegations against him.

"If I were a drug trafficker, I would admit it," he told Reuters in his office, gesturing indignantly. "I would have fled - I would have left the country - but I haven't."

In Guatemala, a transit route for much of the cocaine that flows into the United States, drug trafficking looms as a major issue in Sunday's elections – just as a U.N. anti-corruption body prepares to leave the Central American country.

Former first lady Sandra Torres, of the centre-left UNE party, leads the race to succeed President Jimmy Morales, a former television host. She has pledged to send troops onto the streets to fight violent crime and to tackle poverty by boosting social programs.

Torres, who has pledged zero tolerance for drug trafficking, has around 20% of voting intentions according to the latest polls, ahead of veteran right-wing candidate Alejandro Giammattei, with around 14%.

Pollsters predict neither candidate will win more than 50% of votes, which would result in a second round in August.

High levels of violence by gangs and drug traffickers, as well as a sense of impunity for criminals, have prompted rising numbers of Guatemalans to flee the country for the United States, sparking an angry response from U.S. President Donald Trump and threats to slash U.S. aid to Central America.

PRESIDENTIAL CANDIDATE BARRED

Alleged links between criminal groups and some politicians have become a hot topic. The U.N. commission tasked with fighting corruption and organised crime - the International Commission against Impunity in Guatemala (CICIG) - is preparing to leave in September after Morales refused to renew its mandate.

Highlighting the depth of the problem, presidential hopeful Mario Estrada and congressional candidate Julio Jose Rosales were arrested during the campaign on charges of links to Mexico's Sinaloa drug cartel. Traffickers allegedly financed their election campaigns in exchange for help transporting cocaine and heroin to the United States.

"Drug trafficking is contaminating our population," said Torres, who is running for the UNE, the same party that propelled her ex-husband Alvaro Colom to power in 2007.

"We have towns where, when ... planes land, the army and the police are not allowed to enter," Torres told Reuters in an interview. She has pledged to end the growing influence of drug cartels in the armed forces.

The Organization of American States (OAS), stated in a 2013 report that 80% of the cocaine destined for the United States passes through Central America and Mexico.

A rise in seizures suggests the problem may be getting worse. In 2018, cocaine seizures in Guatemala amounted to a record 17,897 kilos, up 31% from the previous year, official data shows.

Some action has been taken against politicians with alleged links to drug trafficking, but campaigners say it is barely the tip of the iceberg.

The list of candidates for Sunday's elections with a criminal record includes some who served prison sentences - including in the United States - for weapons possession and money laundering. There are also candidates with close relatives who are either imprisoned or have served prison sentences for drug trafficking.

Nine out of the 158 lawmakers elected for the current legislative period could not assume their seats due to legal proceedings ranging from corruption, money laundering and illicit enrichment, influence paddling and attempted homicide, according to a recent report by the CICIG.

Other criminal investigations are being carried out against "more than 10 legislators", it added.

"The Congress of the Republic has become a tribune of confluence and agreement between economic, political, military and criminal actors who have benefited with impunity from undue power and enrichment," said the CICIG report.

Former president Alfonso Portillo argues there is no easy solution to Guatemala's problems because drug trafficking networks place their candidates in municipalities that are key to facilitate the transit of drugs.

Dirty money is laundered through public works carried out by the municipality, he said, winning public backing for their candidates.

The problem could get worse in September following the departure of the CICIG. Founded in 2007, the CICIG has, working together with Guatemala's public prosecutors, uncovered cases of corruption.

One of these cases led to the resignation and imprisonment of former president Otto Perez Molina and his vice president Roxana Baldetti for corruption, association with a criminal group and conspiracy to traffic drugs.

The commission did not receive President Morales' backing to stay once its mandate ends in September.

Morales accused the CICIG of being a "threat to peace" in Guatemala after the agency requested in August 2018 a preliminary hearing against him for alleged illicit election financing.

Carmen Rosa De Leon, a director of the Institute for Teaching for Sustainable Development in Guatemala City, said that even though the UN body was not designed to target drug trafficking, its presence helped to police governance.

"Without the CICIG, we will see more links between officials and drug traffickers in illicit financing because there will be less vigilance and more penetration of organised crime involving officials, political parties and public administration," she said.

However, many in Guatemala's political elites are keen to see the U.N. body shuttered. Giammattei, the presidential candidate of right-wing Vamos, who ranks second in polls, said the time of the CICIG "is over" and the fight against corruption should be led by the president himself.

"We believe in binational agreements, not in multilateral agreements that impose condition upon us," he said in reference to the role of the CICIG.

Torres has said she will organise a referendum on whether to allow the U.N. body to remain.

(Reporting by Adriana Barrera and Sofia Menchu in Nueva Concepcion, Guatemala; editing by David Gregorio)

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