Gang-related bus murders rattle Guatemala capital

* Dozens of bus employees attacked so far this year

* Extortions said to generate nearly $10,000 a day

* Guatemala president points to international traffickers

GUATEMALA CITY, April 17 (Reuters) - Guatemalan police have arrested a street gang leader on suspicion of organizing the murders of dozens of bus drivers, part of a wave of attacks on the capital's public transport system.

Police say 21-year-old Axel Ramirez, alias "El Smaily" ("Smiley"), belongs to the "Mara 18" gang and ordered more than 20 shootings of bus drivers and fare collectors for not paying extortionists.

Ramirez, arrested on Thursday after a shootout, had been released from prison in December after serving about four years for murdering a rival gang member.

"He was doing a lot of harm, not just extorting our country but organizing murders and generating terror wherever he lived," Interior Minister Salvador Gandara told local radio.

Gangs have attacked more than 40 bus employees this year. Usually the killers pull up to rickety city buses on motorcycles and open fire, or climb aboard and shoot the drivers.

Some 135 bus drivers were slain last year, 50 percent more than in 2007 and more than twice the number murdered in 2006.

Buses often crash after the shootings and passengers are killed or injured in the mayhem. Some bus companies have staged transit strikes in protest.

A 2-month-old baby recently was killed by a stray bullet when gunmen boarded a bus and shot the driver. The same week, an 85-year-old man died in a similar incident.

With more than 6,000 murders last year in a country of 13 million people, Guatemala is one of Latin America's most violent countries. Still scarred from a 1960-96 civil war, it is struggling to contain youth gangs and drug cartels.

Gangs like the "Mara 18" and the rival "Mara Salvatrucha" have thousands of members in vast criminal networks spanning Los Angeles to Central America. They live off extortion, armed assault and drug dealing. Many are adolescents.

Bus extortions in Guatemala City now generate close to $10,000 a day, according to the head of the bus owner's association, and murders of drivers have exploded.

The government is phasing in a $35 million program to replace cash fares with prepaid plastic cards on buses.

This week President Alvaro Colom linked the murders with increased drug smuggling into Guatemala as Mexican cartels move south to avoid an army crackdown at home and seek new trafficking routes.

"The violence is planned and managed by those with political and economic interests who participate in organized crime and international narco-trafficking," Colom said. (Editing by Xavier Briand)