Latvala takes early lead in Mexico

Fresh from taking his maiden win in Sweden, Latvala was fastest through SS1, where Loeb was only fourth quickest.

But the world champion - who started the rally concerned about his engine after problems during Thursday's shakedown - fought back by winning SS2 and SS3.

Loeb said he was driving flat-out to try and catch the Ford driver.

"I'm going very, very fast and I cannot push harder," he said. "I'm really fighting on the limit."

Latvala said he was also at the maximum trying to fend off the four-time champion.

"It has been a very good morning, but it hasn't been easy," said Latvala. "At the start of the second stage I had a couple of moments and I lost my rhythm for ten kilometres. Luckily I got it back."

Subaru's Chris Atkinson held second after the first stage, but was edged back to third as Loeb picked up speed.

"We haven't been able to do the same pace in the last two stages and we also lost time at the last two starts," Atkinson said after SS3. "So the engineers will have to figure that out."

Championship leader Mikko Hirvonen is currently in fourth place, 18.7 seconds off the lead. Running first on the dusty roads has cost him time this morning, but the Finn is looking forward to fighting back in the second run through the stages.

"It hasn't been too bad," said Hirvonen. "When we go through again it's going to be a little bit cleaner, I think.

"It's going to be difficult, Jari-Matti and Sebastien have been driving really fast. But I'll try. It's really fantastic - it's a real fight."

Several drivers have already suffered incidents in the rough Mexican stages.

Citroen number two Dani Sordo is the highest-profile casualty. He damaged his car in SS1 and has had to retire from the opening leg.

Stobart Ford driver Gigi Galli shone in the first two stages, running as high as third, before losing one-and-a-half minutes when he ran wide in the El Cubilete stage.

His regular teammate Henning Solberg, who has transferred to the Munchi's Ford team for this rally, has also been delayed after damaging his rear suspension on a rock in SS3.

Petter Solberg (Subaru) continues to run fifth despite striking a stray dog in the Alfaro stage and then developing a brake problem.

"It's just impossible," he said. "The braking is just so difficult. At least I'll have a good starting position for tomorrow."

The incidents ahead have allowed Suzuki's Per-Gunnar Andersson to hold an early sixth place, although his teammate Toni Gardemeister has tumbled down the leaderboard after throttle problems left him crawling through the stages. He is already 20 minutes off the pace.

Leading positions after SS3:

Pos  Driver     Car      Time
 1.  Latvala    Ford     40:20.9
 2.  Loeb       Citroen  +   4.4
 3.  Atkinson   Subaru   +  11.2
 4.  Hirvonen   Ford     +  18.7
 5.  P Solberg  Subaru   +  53.9
 6.  Andersson  Suzuki   +  55.5
 7.  Wilson     Ford     +1:41.1
 8.  Galli      Ford     +1:43.9
 9.  H Solberg  Ford     +2:12.8
10.  Trivino    Peugeot  +3:40.1