* Amazon thought to have substantial oil, mineral reserves
* Indian population for long neglected by government
* Both sides blame the other for recent violence
By Marco Aquino
BAGUA GRANDE, Peru, June 9 Potentially lucrative oil and mineral reserves lie in Peru's vast Amazon region, but its Indian inhabitants are furious at being left out of plans to profit from the jungle.
Weeks of tribal protests against government plans to open up communal lands to oil drilling, mining and logging boiled over last week into violent clashes with police that killed more than 60 people.
For angry subsistence farmers, President Alan Garcia's efforts to break up the land into parcels of private property to lure foreign investment is the latest slight in a long history of official neglect.
"We live in misery while others come in and take our natural resources and we don't get anything in return," said Sirilo Awachi, a 42-year-old farmer who lives near the poor Amazon town of Bagua Grande.
Brandishing homemade wooden spears and wearing red face paint, thousands of demonstrators battled police to demand that the government repeal new laws that open up Peru's Amazon region to foreign mining and energy companies.
Indian leaders said 40 demonstrators were killed and accused police of opening fire from helicopters, The government said 24 police officers died, some with their throats split. Both sides have accused the other of launching brutal attacks.
The tensions are testing Garcia's drive to tap Peru's natural resource wealth to stoke economic growth. The South American country is a leading producer of silver, copper, zinc and gold, and is home to sizable oil and natural gas reserves.
The unrest also reflects growing frustration among the poor that the benefits of a recent economic boom, fueled by the mining industry, has failed to trickle down in a country where one out of three Peruvians live in poverty.
WOODEN SHACKS, NO WATER OR POWER
The Amazon area is Peru's most underdeveloped region, where Indians tend to their own crops living in wooden shacks with no access to running water or electricity.
"We Indians don't have a future. We don't have schools, we don't have hospitals. We are marginalized," said one protester, Juan Tineo, 30.
Political commentator Cesar Hildebrandt said the conflict is rooted in a history of governments overlooking jungle areas, where just over 10 percent of Peru's nearly 30 million people live.
"In Peru, the jungle has always been seen as a source to be raided for timber, oil and gas. It's never been seriously considered a territory where people actually live," he said, adding that the neglect has hardened Indian groups now building political movements.
Facing the most serious political crisis since he took office in 2006, Garcia lashed out at the protesters, calling them "terrorists" and casting them as obstacles to economic development.
Garcia initially faced calls to sack ministers but they have died down, partly because the deaths were far from urban centers and because he portrayed the police action as an anti-terrorist effort.
Peru was torn apart by a civil war between the army and indigenous "Shining Path" rebels in the late 1980s and early 1990s, and many urban residents are scared of Indian groups.
Some of Garcia's aides have suggested the Amazon protests are backed by left-wing opposition leader Ollanta Humala, who has ties to Venezuela's socialist president, Hugo Chavez.
Garcia is one of the most pro-Washington leaders in Latin America and has frequently traded accusations with Chavez, a strident anti-American.
But Manuel Saavedra, director of the Lima-based polling group CPI, said Garcia failed to consult indigenous groups about the government plan.
"There was never any dialogue. He didn't talk to the communities enough to sell them on the idea," he said.
Some of the controversial laws that have upset indigenous groups were passed last year as Garcia moved to bring Peru's regulatory framework into compliance with a free-trade agreement with the United States.
The total area being granted to multinational companies covers more than 70 percent of the Peruvian Amazon, according to a study by scientists at Duke University. At least 58 of the 64 areas are on lands titled to indigenous peoples, it said.
The government has restored order in Bagua Grande, the focal point of last week's protests, and indigenous groups manning roadblocks in another Amazon town, Yurimaguas, have signaled they will ease their protest.
But there has been no final solution to the conflict and neither side shows signs of giving up. "We are seeing two sides with extreme positions," said Hildebrandt. (Writing and additional reporting by Kevin Gray in Lima; Editing by Kieran Murray)