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ALTAMIRA, Brazil, (Reuters) - Brazilians call it "grilagem", the grabbing of land by fraud and violence. In the Amazon jungles of huge, wild Para state, it is carried out by an informal alliance of "grileiros", loggers, ranchers and businessmen backed by private militias and gunmen.

A Brazilian walks through a patch of Amazon jungle that was recently burned to plant corn, near the town of Anapu, Para State, where American nun Dorothy Stang, defender of peasants’ rights and sustainable development, was killed. The February 12th killing of Stang, well-known defender of sustainable development and peasant’s rights in the Amazon, and the ensuing investigation have highlighted the battle between small farmers and illegal large-scale loggers backed by companies trying to exploit the Amazon’s resources. REUTERS

The riches earned from exports of timber and other resources in cleared areas of the rain forest are helping to fuel economic growth and make Brazil an emerging power.

The cost, activists say, is the destruction of the Amazon at an almost unbelievable rate - and sometimes death or destitution for the small farmers, peasants, migrant workers and activists who stand in their way.

Most recently, 73-year-old American nun Dorothy Stang, who had worked in Brazil for decades defending the rights of rural workers, was killed on Feb. 12.

"They are insatiable", said Father Federico, a 65-year-old Austrian priest who has worked since 1958 in this bustling commercial and fishing town on the banks on the River Xingu, a tributary of the Amazon.

"Under the mask of progress they are exploiting the riches of the land. Wood is money," he said in his office across the square from the city cathedral.

Legal timber companies and agribusiness disagree, but the issue has nonetheless been thrust into the limelight after Stang, who had lobbied against large owners and loggers, was shot dead by hired gunmen near the town of Anapu.

Police say the incident was a contract killing ordered by a local rancher. Three suspects are being held by police.

The killing showed the lawlessness that is endemic in Para state, where roads and communications are often abysmal and the police and government presence are thin. Stang was one of about 1,400 people killed in the conflict since 1985, according to the Catholic Church's Pastoral Land Commission.

At least three more rural workers have been killed since Stang's death and activists say death squads are keeping hit lists.

"What we are seeing in Brazil in the 21st century is what happened in the United States in the 19th century," said Paulo Adario, Amazon coordinator for the Greenpeace environmental group. "The loggers open the doors. When they have exploited what they need, they move on."

Behind them come ranchers, farmers and settlers, and now soy growers, the stars of Brazil's agricultural export drive.

It is big business. More than 30 million cubic yards (22.9 million cubic metres) of wood was felled in the Amazon last year, according to Greenpeace, most of it illegally.

Between 15 percent and 20 percent of it was exported to lucrative overseas markets, principally the United States but also Europe, China and Japan. About 60 percent of the exported timber was felled in Para, a state twice the size of France, earning it $212 million.

Thousands of land-grabbers have moved in. Tracts of federal land have been occupied and sold using illegal papers.

In fact, the word "grileiro" reputedly comes from the Portuguese word for cricket - grilo. Land-grabbers would stuff false documents into a drawer with crickets and the insect droppings would make the papers look aged.

True or not, it is no longer clear what is state or private land. Violence and corruption, such as the bribing of local officials, are used to ensure ownership, activists say.

"You have a few small farmers with a piece of land and they grow enough to live on. The grileiros come with the police, drive them out, burn their houses. They have false documents. The workers have nowhere to go," Father Federico said.

Opening up the Amazon has long been a dream of certain Brazilian nation-builders.

The 1964-85 military dictatorship built the Trans-Amazon highway and gave people land. Environmental groups estimate the Amazon has lost a much as 20 percent of its 1.6 million square miles (4.1 million square km) to logging, farming and development.

Since 1970 an area the size of France has disappeared and record clearing has taken place in recent years. The previous government in 2001 unveiled the Avanca Brasil programme, a $40 billion project for a network of highways, dams, power lines, ports, mines, oil fields and gas concessions which Greenpeace estimates could take away a third of what remains.

President Luiz Inacio Lula da Silva rose to power from a humble background and carried with him the aspirations of Brazil's legions of poor and exploited. He was also closely associated with global activist movements.

In power, however, he has disappointed his grassroots support and concentrated his efforts on strengthening Brazil's economy, partly by boosting exports. His programme to resettle 240,000 landless families has been slow to take off.

Shortly before Stang's murder, loggers and ranchers blocked roads in Para state to protest restrictions on logging. The government lifted a suspension of logging permits, a move seen by critics as caving in.

But then facing an outcry over the killing, it acted swiftly. It announced measures including the creation of an Amazon conservation area of 32,000 square miles (82,870 square km) spanning Para and Mato Grosso states.

The army is to build forts and increase its presence in the area. It also plans to order land holders to re-register their claims. Lula said he would not allow "timber mafias" to threaten his government.

However, an analysis by the U.S.-based Strategic Forecasting Inc. said Lula was unlikely to change his policies aimed at boosting growth.

"If Da Silva scales back agriculture expansion into the Amazon, Brazilian exports likely would slow, affecting foreign exchange earnings and hampering both economic growth and his own re-election chances," the firm said.