By Robin Emmott MACHU PICCHU PUEBLO, Peru, Nov 26 (Reuters) - High amid the towering peaks of the Andes mountains, the grating shriek of pneumatic drills fill the air. New streets are being laid out, while hotels are going up fast in the dormitory town of Machu Picchu Pueblo, the starting point for the 450,000 tourists who every year flock to Peru's most famous Inca site, the mystic citadel of Machu Picchu. For many, the noisy chaos of the unplanned town, which has mushroomed from 500 inhabitants to over 4,000 in the past decade due to the tourist boom, embodies the reckless way in which the Machu Picchu tourist experience is run. Unbridled growth in tourism is irrevocably damaging the United Nations World Heritage Site and its surrounding attractions, destroying one of the world's premier archeological sites, some planners say. The United Nations Educational, Scientific and Cultural Organization (UNESCO) will issue a report in January recommending Peru make major changes to its management of Machu Picchu and the Inca trail, regulating visits to the site. If not, UNESCO says it will place Machu Picchu on its list of endangered sites -- a "moral sanction" against the Peruvian government's handling of the monuments. "Just look at the Inca trail that leads to Machu Picchu. It is being worn out, eroded away," said Jorge Pacheco, head of Machu Picchu Management, an umbrella agency coordinating the various agencies running the ancient stone citadel. Some 1,500 travelers walk the 500-year-old, 40-mile (64 km) Inca trail every day, marveling at the long stone staircases and granite terraces at 8,500 feet (2,700 m) above sea level. The trail, made of large stones, was used as a communication route through the Cusco region in Inca times. Studies by Machu Picchu Management say the number of visitors should be cut to 300 a day if the trail is to survive. Machu Picchu itself -- the ruins of an entire city including temples -- has taken various knocks over the years, from damage by helicopters landing on the site in the 1970s to the chipping of a stone sun clock during the filming of a beer commercial in 2000. A proposed cable car project up from Machu Picchu Pueblo, now frozen but not ruled out, would scar the ancient site, critics say. HOW MANY TOURISTS? Up to 2,000 people visit the Machu Picchu citadel every day, with visitor numbers growing at 6 percent a year. UNESCO says that number should be cut to 800 visitors, and says they should wear soft shoes to reduce pressure on the ruins. Japanese geologists underlined the emblematic city's fragility in 2001, asserting the earth was shifting and Machu Picchu could gradually slip off its mountain saddle, perched 8,400 feet (2,500 m) above sea level. But Peru's National Institute of Culture, which oversees the day-to-day running of Machu Picchu and the Inca trail, says the site can receive many more visitors. "Today there is no threat to Machu Picchu. The site can cope with 3,000 tourists every day," said Fernando Astete, Machu Picchu's administrator. Peru's President Alejandro Toledo sees Machu Picchu at the center of his plans to boost tourism in Peru, holding his swearing in ceremony at the site in July 2001 and recently inviting U.N. Secretary General Kofi Annan to the citadel. At $20 an entrance ticket, Machu Picchu generates $6 million a year for Peru, while the Inca trail brings in another $3 million, according to Machu Picchu Management. Critics say the strong focus on Machu Picchu does little to encourage travelers to visit some of Peru's 15,000 other Inca sites in the area, while tourists say the numbers of visitors to the citadel are taking the pleasure out of their trip. "I can just imagine they want more people to visit. Machu Picchu is a tourist trap," said tourist Adam Shamet, 30, from the United Kingdom. HIDDEN CITY THAT NEVER FELL Machu Picchu was probably the sanctuary of the great Inca emperor Pachacutec at the heart of the Inca empire, explosively created in less than 100 years at the beginning of the 15th century and stretching from Colombia to northern Argentina. In just five years, the Inca empire collapsed at the hands of Spanish conquistadors. But Machu Picchu never fell to the European invaders and, hidden under the thick cover of jungle for hundreds of years, was rediscovered by U.S. explorer Hiram Bingham in 1911. Machu Picchu Pueblo's Mayor Oscar Valencia admits things have reached a low point in the Inca city's management, as well as in his own town, which pumps untreated human waste into the Urubamba River for lack of water treatment plants. "But things will change. After a year of protests, we'll now receive 10 percent of ticket receipts from Machu Picchu," Valencia said. "We can make a dignified town for tourists." Peru's National Institute of Culture says it is drawing up a master plan to oversee Machu Picchu's management, but it is not clear whether it will take in UNESCO's recommendations.