Mexican President Felipe Calderon tried Thursday to convince U.S. lawmakers in a joint session of Congress that his war on the Mexican drug cartels is working, but there are signs he is starting to lose the confidence of big business.
Despite a death toll of 23,000 in drug-related violence during Calderon's three-year effort to take on the cartels, the impact on big business has been relatively minimal and contained.
But recent developments have started to make U.S. businesses more nervous and some have begun to rethink their operations in Mexico, people familiar with the situation say.
The biggest concern is a flare-up of major violence in Monterrey, Mexico's wealthiest city and its industrial capital.
In April 50 masked gunmen stormed Monterrey's downtown Holiday Inn and kidnapped several guests.
In an e-mail message obtained by Forbes, a high-level staffer at the U.S. consulate in Monterrey recently wrote that U.S. and Mexican businesses are "feeling the bite."
One CFO was carjacked recently en route to Reynosa.
Another one has had several of their bodyguards 'picked up' over the last several months.
Nobody is immune, says the e-mail. Last fall on[e] U.S. company had 10-12 loads hijacked at various points between Guadalajara and here.
While your product may not be marketable, the vehicles carrying the goods are.
Also, the [drug trafficking organizations] might see your loads as a means to getting their loads across the borders.
According to a report put together by Altegrity Risk International, a corporate security firm based in New York City, the Mexican state-owned oil company Pemex is being targeted by organized crime.
A Mexican newspaper has reported that four Pemex executives have been kidnapped since March, including one who was abducted by gunmen outside a restaurant in Villahermosa and held for days before an undisclosed ransom payment secured his release.
The violence in Monterrey, the result of a turf war between several drug cartels, is causing particular alarm among U.S. businesses with operations in Mexico.
This is strategic and huge--a sea change, says an Altegrity consultant who asked that his name not be used because of security concerns.
In Monterrey the game has completely changed and it's a location for multiple international headquarters.
The Altegrity consultant says he has recently investigated the Mexican operations of U.S. companies that have been infiltrated by organized crime, finding cases of extortion and one payroll scheme.
Another U.S. client in the Reynosa area, the consultant says, has become concerned about firefights, limiting its hours of operations and building a safe room.
Some U.S. companies are reconsidering their presence in some locations, he says.
Calderon has sent 50,000 Mexican soldiers to battle the drug cartels with the full support of the U.S. government.
Part of the reason for Calderon's trip is to reassure U.S. lawmakers about the Merida Initiative, a $1.3 billion U.S.-funded project to support Mexican security forces.
The violence in Mexico has been brutal in its scope and nature.
Earlier this month a pregnant woman and two soccer coaches were murdered at a youth soccer game in Ciudad Juarez.
A drug cartel in May tried to hijack a semi-trailer truck near the border bridge to Laredo, Texas, sparking a massive gun battle with Mexican soldiers.
Mexican Interior Secretary Fernando Gomez-Mont warned recently that drug cartels are increasingly attacking government interests and not just focusing on rival groups.
Diego Fernandez de Cevallos, a lawyer and 1994 presidential candidate, disappeared this month under suspicious circumstances that have unnerved many in Mexico.
Monterrey businessman Marcelo Canales, part owner of the Mexican airline Aeromexico and aluminum-products maker Verzatec, was quoted by Bloomberg News Wednesday as saying Mexican executives are beefing up their security spending and reducing their activities.
A society that has fear for its physical well-being and that of its children doesn't function properly, he told Bloomberg.
In 2008 Forbes magazine warned big business about the deteriorating situation in Mexico, citing drug violence, the U.S. recession and issues the Mexican oil industry was facing.
Calderon criticized the article at the 2009 World Economic Forum in Davos and has argued in the past that the media is exalting drug cartels and campaigning against Mexico.
Mexican gross domestic product grew 4.3% in the first quarter compared to the same period in 2009, the first year-over-year expansion in more than a year.
Even as it raged in recent years, the drug war in Mexico was not a major topic of boardroom conversation.
Now business is probably watching as Calderon tries to galvanize and secure support in Washington for his effort to battle the drug cartels.