Nearly 8000 Mexicans have been murdered there by criminal gangs, mostly drug related, over the past two years with a dramatic jump of 117 percent last year over 2007. In the border city of Juarez, across the Rio Grande from El Paso, TX, more than 80 murders were clocked in the first three weeks of 2009. On one January day alone in Juarez:

• Authorities recovered the decapitated head of a police chief from a town just downriver. Three other heads stuffed into a cooler were left on the steps of a city hall in a neighboring village.
• Two state police detectives were shot to death in their patrol truck in a downtown Juarez parking lot.
• A Juarez traffic police commander was kidnapped by unknown assailants.

A city built largely on trade with the US, Juarez is now home to some 500 street gangs that count thousands of young men as members, according to police there. As the global economy sinks, export volumes and potential decrease, making the criminal life still more attractive, especially when compared to the $50 or less per week that factory workers in places like Juarez can earn.

So is the government itself really at risk? Maybe so.

“The drug cartels have penetrated every layer of the institution of the state in Mexico from the municipal through the state and into the federal levels. Thus, the drug war itself--the war between the various fighting cartels--is something that's replicated internally within the state,” says reporter John Gibler, author of the recent book Mexico Unconquered: Chronicles of Power and Revolt. “The warring cartels that are fighting out on the street are also fighting within the structure of the state. Hence you have the constant back-and-forth assassinations of police and military officers, civilians, and people involved in the various anti-drug agencies. One gang will find the "Deep Throat" of another gang inside a given institution and then have them killed,” he says.

US Ramping Up Support

In the face of these incredible challenges, the US this week said it is ramping up support for the Mexican state across several levels. Though short on specifics, concerns over regional stability on one hand and terrorism on the other are clearly upping the stakes for the U.S.

Officials say they foresee an enhanced U.S. role in the battle with powerful cartels and gangs, including joint operations that could involve use of private American contractors or U.S. military and intelligence personnel.

"Everything is on the table," one Mexican official said, including "joint operations."

Is Mexican Sourcing a Viable Strategy Right Now?

Many experts note that most of the violence and problems are centered on the cities which border the US. While these locations obviously have the greatest advantages in terms of logistics, moving further inland into Mexico is a night and day difference, for the most part, when it comes to violence, the rule of law, and something of a modern political infrastructure.

“Companies are continuing to operate, look, and expand in Mexico,” says Gene Tyndall of Tompkins Associates and an SCDigest Contributing Editor. “The drug-related violence is not heavy in some business locales, such as Monterrey and Cuernovaca, and Mexico City is still relatively safe if you follow the guidelines.”

Stlll, it is likely many companies will decide to sit tight before moving into Mexico for awhile to see if the federal government there, with US help, can bring these almost lawless regions back under control.

What’s your take on Mexico as a sourcing location right now? Do you have experience with the effects of the violence and gangs? Are areas like Monterrey and Mexico City safe to build supply operations? Let us know your thoughts at the Feedback button below.