* Mexico fails to emulate Brazil in battling poverty
* Rampant poverty has helped fill ranks of drug gangs
* Proposals from presidential candidates hard to achieve
By Rachel Uranga
MEXICO CITY, Dec 27 (Reuters) - When President Felipe Calderon came to power five years ago, he pledged to cut rampant poverty in Mexico. Instead, millions more have joined the ranks of the poor.
A battle over how to tackle poverty, which is blamed for stunting Mexico's economic development and fueling the rise of violent drug gangs, is already raging between candidates competing to succeed Calderon in a July presidential election.
From left to right, they have vowed to find a way of addressing chronically weak tax revenues, a failing education system, and the vast concentration of wealth in few hands.
But with more than a quarter of the economy off the books, the task facing the next president is huge.
Mexico is home to world's richest man, Carlos Slim. At the end of last year, he was worth around $74 billion, according to Forbes magazine. That's equivalent to roughly 6.6 percent of Mexico's annual economic output.
Just a few blocks from the Mexican stock exchange that Slim's companies dominate, Marcial Maya earns about 80 pesos ($5.80) a day selling nuts, gum and cigarettes at traffic lights. At that rate he would have to work for 35 million years, 365 days a year to match the tycoon's fortune - provided he spent no money.
"I have six children, and I want them to study but I am at the point of asking them to leave school," the 37-year-old Maya said. "I just can't afford it any more."
About half of Mexico's population lives below the poverty line and it has failed to match its big Latin American rival, Brazil, in making significant inroads against the problem.
A weak global environment has been part of the problem, with Mexico battered during the financial crisis, in large part because it is so dependent on U.S. demand for its exports.
But Calderon's government has drawn criticism for failing to strengthen the domestic economy. Mexico has had an average annual growth of 2.2 percent since 2003 -- about half the rate for Latin America and the Caribbean.
Between 2006 and last year, the number of Mexicans living on 2,100 pesos ($150) a month or less jumped from 45.5 million to almost 58 million, according to Coneval, the government body in charge of measuring poverty.
In 2008, the government's formal definition of poverty changed, stripping out millions from the official tally. But even using the new measure, the number of poor rose by more than 3 million to 52 million between 2008 and 2010.
Mexico's wealthiest 10 percent earn 27 times what the bottom tenth makes on average, according to figures from the Organization for Economic Cooperation and Development.
By contrast, in the United States, the top 10 percent are only 14 times better off than the bottom bracket.
Alberto Diaz-Cayeros, a poverty expert and director of the Center for U.S.-Mexican studies at the University of California, San Diego, said Calderon's approach to eliminating poverty had not been thought out properly.
"He never had a really cohesive or comprehensive strategy," he said. "We lost, in a way, six years."
After Mexico's 1994-95 economic crash, the government slowly managed to bring back poverty levels back to pre-crisis levels by the time Calderon took office. Then, that momentum ended.
Calderon's failure to stem the tide has eroded support for his conservative National Action Party (PAN) and has prompted presidential hopefuls to call for a broader welfare net and more investment in education - just as Calderon did himself.
OUT OF TOUCH
Known as Oportunidades, Mexico's chief anti-poverty scheme covers 5.8 million families living in mostly rural areas.
The program's funding has more than doubled since 2003, and coverage has expanded by more than 1 million people, providing healthcare and education to many of Mexico's neediest.
But Mexico still devotes far less to social spending than Latin America's biggest economy, Brazil.
In 2009, Mexico spent about 11.2 percent of its gross domestic product on social programs compared to 27 percent in Brazil, according to Cepal, the United Nations economic commission for Latin American and Caribbean.
While Mexico's government was struggling to contain the spread of deprivation, Brazil lifted some 40 million people out of poverty under former president Luiz Inacio Lula da Silva.
The favorite to succeed Calderon, Enrique Pena Nieto of the Institutional Revolutionary Party (PRI), says Mexico is not creating enough good jobs and he has proposed universal healthcare, social security and unemployment benefits for all.
However, Pena Nieto's proposals will be expensive and he may fail to find a majority in Congress.
"It costs a lot of money: four or five, maybe six percent of gross domestic product, and the only way you can finance it is with a major tax overhaul," said Jorge Castaneda, foreign minister under former president Vicente Fox, also of the PAN.
With the notable exception of leftist Andres Manuel Lopez Obrador, who ran for office on a "poor first" mantra in 2006 and is competing again in 2012, Mexican politicians have frequently appeared out of touch with the needs of the poor.
Pena Nieto slipped up this month when he was unable to say how much corn tortillas -- a staple of the Mexican diet - cost or what Mexico's minimum wage is: about 60 pesos a day. In February, one of his PAN presidential rivals, Ernesto Cordero, took a beating in the media when he said a monthly income of 6,000 pesos ($430) could cover a family home, a car and private education in Mexico.
Whoever wins will seek to reduce the size of the informal economy, a fertile recruiting ground for drug gangs.
Seeking an alternative to low paid work, thousands of Mexicans have drifted into organized crime - often ending up as just another statistic in Calderon's war on the cartels, which has claimed 45,000 lives in the past five years.
Beneath gleaming skyscrapers in Mexico City's business district, Cristian Ortiz, 30, said he made more money washing car windows than he could with many regular jobs. And he had little faith that things would change with a new government.
"Politicians have said they're going to fix poverty for hundreds of years, they always say the same thing," he said.