* Thousands of Indians with spears block roads
* Around 60 dead in worst unrest of Garcia's term
* Search on for 2 missing police after hostage drama (Updates with fresh tribal leader quotes)
By Marco Aquino
BAGUA GRANDE, Peru, June 7 Peruvian troops patrolled Amazon towns searching for missing policemen on Sunday after 60 people died in clashes with native tribes opposed to plans to drill for oil and mine resources in the jungle.
Troops controlled the town of Bagua Grande, 870 miles (1,400 km) north of the capital Lima, after an overnight curfew was enforced to defuse the worst violence faced by President Alan Garcia's government.
An indigenous leader said 40 protesters were killed and the government said 23 members of the security forces perished in two days of battles over Garcia's push to open up the rainforest to billions of dollars in foreign investment.
Thousands of Indians armed with wooden spears vowed to dig in at blockades on remote Amazon highways to defend their ancestral lands from outside developers. (To see a map click here)
"We are looking for the missing police and the weapons the Indians stole from them," said Major Jose Luis Santillan, police chief in nearby Bagua Chica, close to the stretch of highway known as "Devil's Curve," where 11 police died when they moved to break up a roadblock on Friday.
Dozens of police were held hostage by protesters, but most were freed hours later. On Sunday, two were still missing.
Hundreds of natives who sought refuge at a Catholic mission in Bagua Grande drew up a list of dozens of missing people and sought guarantees to search for bodies of the slain.
"We have been told that many of our dead brothers have been thrown into the Maranon river to cover up the killing," said Carlos Anchanchi, one of the group's leaders.
Garcia has accused protesters of acting like terrorists and said the unrest had been fomented from abroad. Garcia, who is a fierce critic of Latin America's leftist leaders, did not specify who he meant.
But in the past, members of the Peruvian government have accused the leftist governments of Venezuelan President Hugo Chavez and Bolivian leader Evo Morales of links to Garcia's ultranationalist rival, Ollanta Humala.
"There is a conspiracy aimed at stopping us from using our natural resources for the good, growth and quality of life of our people," Garcia said on Sunday, blaming foreign interests that would benefit if Peru did not tap its gas and oil.
RED TUNICS AND WOODEN SPEARS
Champion Nonimgo from AIDESEP, Peru's leading indigenous rights group, said more than 40 protesters had been killed in the violence and ruled out dialogue with the government.
Protesters include women and children from the surrounding subsistence farming region, some dressed in long red tunics and headbands and holding traditional wooden spears. Families have set up tents of plastic sheeting along the roadside.
"We are dealing with a government that massacres Indians from helicopters. We are not going to hold talks under these conditions," Nonimgo said.
Analysts say Garcia -- whose approval rating is just 30 percent -- will likely have to fire senior cabinet members, including the prime minister, and roll back investment laws to end the stand-off.
Indigenous tribes, worried they will lose control over natural resources, have protested since April seeking to force Congress to repeal laws that encourage foreign mining and energy companies to invest billions of dollars in rainforest projects. [ID:nN06294730]
The violence has highlighted deep divisions between elites in Lima and the rural poor, and threatened to derail the government's push to further open Peru to foreign investors. [ID:nN06311130] (Additional reporting by Dana Ford and Carlos Alberto Quiroga in Lima, writing by Simon Gardner, editing by Anthony Boadle)