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Edition: U.S. Article Comments (0) Slideshow Save Email Print Reprints Most Popular Most Shared Democratic senator's lead shrinks in California: poll 9:02am EDT Tired Gay succumbs to Dix in 200 meters 03 Jul 2010 Netanyahu bodyguards' guns go missing on U.S. visit | Video 07 Jul 2010 UPDATE 1-US 30-yr mortgage rate drops to new record low 11:24am EDT Viagra-popping seniors lead the pack for STDs 06 Jul 2010 Aircraft completes first solar-powered night flight | Video 2:22pm EDT Germans shell-shocked by oracle octopus 06 Jul 2010 New U.S. oil drill ban depends on court decision | Video 4:36pm EDT China may take action on stocks if slide worsens 1:21am EDT BP aims to fix leaking oil well by July 27: report 1:29am EDT Tired Gay succumbs to Dix in 200 meters 03 Jul 2010 Democratic senator's lead shrinks in California: poll 9:02am EDT Aircraft completes first solar-powered night flight | Video 2:22pm EDT Netanyahu bodyguards' guns go missing on U.S. visit | Video 07 Jul 2010 Viagra-popping seniors lead the pack for STDs 06 Jul 2010 UPDATE 1-US 30-yr mortgage rate drops to new record low 11:24am EDT Germans shell-shocked by oracle octopus 06 Jul 2010 CNN fires veteran editor for Mideast over Tweet 4:09am EDT German fans want revenge grilling of oracle octopus 11:49am EDT Study finds bank bailouts profitable for U.S. 07 Jul 2010 Drug war hits Mexico's richest city Digg This Tweet This Share on LinkedIn Share on Facebook Factbox Factbox - Mexico's richest city hit by drug violence 2:50pm EDT Related Topics World » 1 / 5 Soldiers patrol a street where two men were gunned down by hit men in Monterrey, June 16, 2010. Credit: Reuters/Kristian Lopez By Robin Emmott MONTERREY | Thu Jul 8, 2010 4:03pm EDT MONTERREY Mexico (Reuters) - Mexico's richest city, once a poster child for development with its high-rise office blocks and flourishing industries, is being gripped by drug war terror with rising violence forcing dozens of its factories to freeze investment. The battle between the powerful Gulf cartel and its brutal former armed wing, the Zetas, has killed some 290 people in Monterrey and surrounding areas since the start of the year. While dangerous border cities like Ciudad Juarez suffer worse violence, the surge in killings in Monterrey, where income per head is double Mexico's average, is a major worry for President Felipe Calderon as foreign companies question the safety of doing business there. Zeta hitmen have dumped bodies in Z-shaped formations in the Texan-style city and pulled people out of smart hotels to execute them, while both gangs sporadically block off dozens of major roads with trucks and cars to derail security forces' anti-drug operations. Even as Hurricane Alex drenched Monterrey this month, armed hitmen chased rivals down busy avenues. In one gunfight, an injured police officer fled into a McDonald's restaurant and people threw themselves to the ground in panic. Authorities in the city once lauded as having the best police in Mexico seem unable to stop the violence despite sending soldiers to storm quiet suburbs and raid cartel safe houses as military helicopters fly overhead. The local government is preparing teachers and children for the now frequent gunfights that stray into schools. "People are starting to think that this kind of thing is normal because it is happening so often. It isn't normal," said a Monterrey businessman who last month was held at gunpoint by Gulf cartel hitmen in his office. They stole his SUV, phone and his ID documents, possibly to extort money from him later on. Monterrey, 140 miles from the border with Texas, long considered itself as apart from the rest of Mexico, where corruption and crime is part of daily life. With its private universities, good water supply and sleek U.S.-style highways, the city was chosen to host a United Nations conference on development in 2002 and was lauded by U.S. President George W. Bush as a model for poor countries. But as bloodshed soared across Mexico since Calderon came to power in 2006 and launched his drug war, the violence has spread to the city that is home to global cement maker Cemex and General Electric plants. HURRICANE HEADACHE More than 26,000 people, mainly traffickers and police, have been killed in Mexico's drug war since December 2006, worrying U.S. officials about the political stability of their oil-producing neighbor. A quarter of the more than 100 assembly-for-export factories, or maquiladoras, in and around Monterrey have frozen investment this year as killings, extortions and abductions have surged, according to the city's maquiladora association. "That is obviously is having a big impact on job creation," said Emilio Cadena, the association's president. U.S. business visa applications allowing Mexicans to set up a company in the United States have jumped 63 percent in Monterrey in the 2006-10 period compared to the 2001-05 period, as wealthy residents flee to cities such as Houston. Monterrey's stability is vital to Mexico's success as an emerging market as the city's economy generates 8 percent of Mexico's gross domestic product. The city lost around 70,000 factory jobs last year as Mexico's economy went into its deepest recession since the 1932. Output is now rising again but businesses say the number of jobs created across Monterrey could be double if it were not for the insecurity. "We would undoubtedly be seeing a bigger recovery in economic activity, but people are not going out to restaurants, cinemas and other places out of security fears. Many businesses prefer to close," Marcelo Canales Clariond, head of the city's main business group, told reporters recently. In a sign of the drop in visits by executives from abroad and elsewhere in Mexico, hotel occupancy rates were down almost 10 percent in the first quarter to below 50 percent. In daily speeches on TV and radio, local officials vow to battle the cartels in Monterrey, flush out corrupt cops and possibly merge city police into a more powerful state force. "Organized crime has great firepower and we have to strengthen ours," Nuevo Leon Governor Rodrigo Medina said last month. But some residents feel local authorities are not taking the situation seriously, especially after Mayor Fernando Larrazabal took a vacation to go to the World Cup in South Africa days after hitmen kidnapped two of his city government ministers. The $700 million clean-up from Alex, which destroyed city highways and bridges, could distract overstretched officials in the coming weeks. Monterrey-based businesses are also being hit by violence in the neighboring state of Tamaulipas, where drug hitmen last week killed an election candidate for governor, the highest level political killing in Mexico in 16 years. "My sales in Tamaulipas are down 70 percent this year because it's just too dangerous to visit clients," said a major plastics distributor who declined to be named. (Additional reporting by Gabriela Lopez; Editing by Catherine Bremer and Kieran Murray) World Add a Comment *We welcome comments that advance the story directly or with relevant tangential information. We try to block comments that use offensive language or appear to be spam and review comments frequently to ensure they meet our standards. If you see a comment that you believe is irrelevant or inappropriate, you can flag it to our editors by using the report abuse links. Views expressed in the comments do not represent those of Reuters. © Copyright 2010 Thomson Reuters Editorial Editions: Africa Arabic Argentina Brazil Canada China France Germany India Italy Japan Latin America Mexico Russia Spain United Kingdom United States Reuters Contact Us Advertise With Us Help Journalism Handbook Archive Site Index Video Index Reader Feedback Analyst Research Mobile Newsletters RSS Podcasts Widgets Your View Labs Thomson Reuters Copyright Disclaimer Privacy Professional Products Professional Products Support Financial Products About Thomson Reuters Careers Online Products Acquisitions Monthly Buyouts Venture Capital Journal International Financing Review Project Finance International PEhub.com PE Week FindLaw Thomson Reuters is the world's largest international multimedia news agency, providing investing news, world news, business news, technology news, headline news, small business news, news alerts, personal finance, stock market, and mutual funds information available on Reuters.com, video, mobile, and interactive television platforms. 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