By Dave Graham
NEZAHUALCOYOTL, Mexico (Reuters) - Mexico's leftist Party of the Democratic Revolution was so sure of winning the last presidential election in 2006 that supporters took to the streets for months when it lost.
Now the party may have to join forces with the very rival it accused of stealing that election -- the ruling conservative National Action Party, or PAN -- to even compete next year.
President Felipe Calderon's party faces an uphill struggle to cling to power, tainted by a bloody war with drug gangs that he launched shortly after taking office at the end of 2006.
As the death toll in the war has risen beyond 40,000, Calderon's ratings have slumped, though his old rivals in the leftist party known as PRD have failed to take advantage.
Seen in 2006 as a force for change, the PRD has lately made more headlines for infighting, opening the door for the return to power of a once-reviled party that dominated Mexico for most of the 20th century.
Fernando Velazquez, a PRD organizer in Nezahualcoyotl, a longstanding party bastion where it this month suffered a severe electoral reverse, said an alliance with the PAN would give the left a realistic hope of winning the 2012 election.
"I think we'd make a good team," the 55-year-old said. "The outlook for the PRD is not good at the moment."
Feeding off the left's weakness, the Institutional Revolutionary Party (PRI) that ruled Mexico for 71 years has regrouped and is now in a position to retake power.
Cuauhtemoc Cardenas, a founder of the leftist party who lost the presidency to the PRI in a disputed 1988 vote, said his party had squandered much of its earlier potential.
"The leadership of the party has failed to give priority to its policies and to recovering the popular basis it used to have in many states of the country," he told Reuters.
Only by setting out a clear plan for how to tackle rampant poverty and restore stability could it recover, he said.
Led by fiery orator Andres Manuel Lopez Obrador, the PRD took half the states in the republic in its 2006 contest with conservative party candidate Felipe Calderon, securing well over 50 percent of the vote in working-class municipalities like Nezahualcoyotl.
Since then, support for the PRD in the urban sprawl of over a million people on the capital's eastern flank has nearly halved, mirroring a decline in many other former strongholds.
LOSING ITS WAY
When the final 2006 vote count fell in the PAN's favor, brawls erupted in Congress, the PRD held huge street protests, and Lopez Obrador declared himself the rightful winner.
But new president Calderon stood firm as demonstrations brought large swathes of the capital to a standstill and support for the protests began to wane, undermining the PRD.
Lopez Obrador's persistent agitation over the loss drove voters away from the party and divided the PRD between its leftist base and moderates seeking to move to the center.
By the time of state elections on July 3, the PRD was routed in all districts of Nezahualcoyotl by a resurgent PRI.
"Between 2006 and 2009 we lost our way here," said activist Velazquez. "The people in charge became like the PRI."
Polls give the PRI's likely candidate for July 2012's presidential vote, Enrique Pena Nieto, a big lead over rivals like Lopez Obrador, whose credibility has suffered. Calderon himself is barred from seeking a second term by law.
To secure the PRD's candidacy for 2012, Lopez Obrador faces a battle with his former protege, Mexico City Mayor Marcelo Ebrard, who has hinted a tie-up with the PAN might be needed to stop the return of the PRI, which ruled Mexico until 2000.
PRD moderates say the urbane Ebrard stands a better chance of winning over centrist voters than Lopez Obrador, whom the PAN demonized as a radical threat to Mexico's middle class.
"It's been very difficult to stay united," said Manuel Camacho, a senior PRD official who once belonged to the PRI.
The PAN's leadership has not ruled out an alliance, but as the hard left of the PRD is still smarting from 2006, many in the party doubt that a tie-up is possible.
"I've been against tie-ups with the PAN," said PRD founder Cardenas. "But if you tell me the PAN will support the PRD's candidate and their manifesto, that's another matter."
Outside the phone stores, hairdressers, mini-markets and auto workshops that line Nezahualcoyotl's long boulevards, voters talk time and again of how the PRI out-campaigned, out-thought and outspent rivals to win the July election in the State of Mexico, where more than 15 million people live.
In 2006, the PRD won 44 percent of the presidential vote in the state and 54 percent of the local vote in Nezahualcoyotl. The PRI limped home on 18 percent and 26 percent respectively.
Despite a huge drop in support for the PAN on July 3, the PRD suffered heavy losses, winning a just fifth of votes in the state and under a third in the municipality it once dominated.
The PRI, whose record made the party a byword for corruption in Mexico, won 63 percent of votes in the state.
"The PRI put themselves about like it mattered," said Victoria Gutierrez, 62, who switched her vote from PRD to PRI.
Other ex-PRD voters like Jaime Masa, a 54-year-old overseer at a building maintenance firm, simply stayed home.
"The PRD weren't doing anything around here," he said.
Though still undecided on whom to support next year, Masa's views show why some think a PRD-PAN tie-up is feasible.
"It can't be the PRI, whatever," he said. "It was robbery with them in power. If they return, we're going back in time."
(Editing by Doina Chiacu)