Ravaged by an escalating armed conflict between its army and five powerful drug gangs, Mexico is at risk of becoming a ‘failed state,’ U.S. officials say. Can the chaos at our border be contained?

How violent is Mexico?
Parts of the country have become a war zone, with murders, kidnappings, and armed robberies occurring daily, often in broad daylight. Some 6,000 Mexicans were killed in drug-related violence in 2008—double the previous year’s death toll. Already this year, more than 1,000 people have been murdered, mostly in the northern cities near the U.S. border. Authorities say nine of 10 victims are connected to the drug trade, but innocent bystanders are also dying, as are police and other officials who dare to stand up to the cartels. A Pentagon report in November concluded that the two countries most at risk of “collapse” are Pakistan and Mexico. Few were surprised that Pakistan is considered so precarious, but Mexico boasts the world’s 12th largest economy and shares a 2,000-mile border with the U.S. “We cannot afford to have a narco-state as a neighbor,” says retired U.S. Gen. Barry McCaffrey, a former U.S. drug czar. Indeed, the Mexican cartels already have begun moving into the U.S., growing marijuana in rural areas and national parks, sending gang members to U.S. cities, and selling drugs directly to Americans.

What’s behind the mounting bloodshed?

Five rival cartels are battling to control production of heroin, cocaine, methamphetamines, and marijuana—along with the drug routes into the United States. President Felipe Calderón assumed office in December 2006 vowing to take on organized crime, and since then, several cartel leaders have been killed or arrested. That triggered a full-fledged war between the government and the cartels. The results have been gruesome. Just before Christmas, the severed heads of eight soldiers were dumped near a shopping center in Chilpancingo, the capital of the state of Guerrero. In February, a newly retired general and two bodyguards were tortured, killed, and their bodies dumped near the resort city of Cancún. Police in Tijuana recently detained a man who confessed to having dissolved in acid the bodies of more than 300 people, on the orders of a drug lord. Newspapers dubbed him “the Soupmaker.”

Who’s winning the war?
The government has made inroads, but the cartels still rake in tens of billions of dollars a year. Gangs have amassed huge arsenals and have branched into other ventures, including extortion and protection rackets. It’s not unusual for troops to engage in pitched battles with gangs armed with rocket launchers, machine guns, and armor-piercing sniper rifles. Corruption is rampant. The prosecutor in charge of the federal organized-crime unit was recently charged with taking $450,000 a month in bribes to pass information to the Sinaloa drug cartel. Last month, drug traffickers threatened to kill one police officer in Juarez every 48 hours unless Police Chief Roberto Orduña Cruz stepped down. When he refused, his deputy turned up mutilated and dead, followed by another officer and a jail guard. Cruz finally resigned his post and fled the city.

Can the gangs get away with that?
Indeed they can. More than 450,000 Mexicans work in the drug trade, and in some places, the gangs are the dominant authority. In Villa Ahumada, about 80 miles south of El Paso, Texas, the entire police force quit last spring after 70 cartel hit men rampaged through town, killing the police chief, two officers, and three residents. Today, store owners and local officials are expected to pay a kind of tax to the gunslingers, who “protect” the town from rival gangs while taking their cut of the drug trade. “This was a mellow town where we would walk along Main Street at night,” says 14-year-old Zaida de Santiago. “But now we’re too scared to even go out.”

Is it hopeless?
President Calderón says he’s determined to restore order. He has taken the unprecedented step of deploying 45,000 federal troops and police to Juarez and other hot spots, and thousands of cartel “soldiers’’ have been arrrested. So have several major traffickers. The government has also rescued kidnap victims, seized caches of narcotics and weapons, and given crime-weary residents some relief by re-establishing order in some towns and villages. But the army has no authority to investigate drug trafficking itself—a task largely left to local police forces, most of which have a long track record of corruption and incompetence. Concerns have also been raised that poorly paid soldiers are no less vulnerable to bribery than local police. “The amount of money is huge,” says retired Gen. Luis Garfias. “You like women? You like alcohol? It’s free for you.”

What’s the U.S. doing?
Just last week, the Obama administration said it would send more federal agents and high-tech equipment to the U.S.-Mexican border—the goal being to slow the flow of drugs into this country as well as the flow of guns out. (See below.) The move reflects growing concern over the violence that has been spilling into the United States. Mexican drug gangs have extended their operations to at least 230 U.S. cities, according to the Justice Department, which calls the Mexican cartels “the biggest organized crime threat to the U.S.” In recent weeks, police in Atlanta and Phoenix have blamed a wave of kidnappings and home invasions on the cartels’ turf war. “The situation in Mexico is very, very dangerous for everyone, including the U.S.,” says former Justice Department official Philip Heymann. “The situation hasn’t registered in the mind-set of Americans, but it will.”

Supply and demand
As American officials grow more alarmed about the violence in Mexico, Mexican officials have been pointing the finger right back. They note that the U.S. not only serves as Mexico’s largest consumer market for illegal drugs, it also is the source of most of the cartels’ munitions. In fact, more than 90 percent of AK-47s and other guns seized at the border or after raids and shootings in Mexico have been traced to the U.S.—most of them apparently purchased openly and legally by “straw buyers” who then sell the weapons to the gangs. Mexican leaders have called on the U.S. to re-examine its punitive drug policies, to put more emphasis on treatment, and consider legalization of marijuana. “The main cause of the problems associated with organized crime,” said President Felipe Calderón, “is having the world’s biggest consumer next to us.” Mexican officials also have called for tighter gun control in the U.S.—an unlikely prospect.