Drug war shutters businesses on Mexico border

By Lizbeth Diaz

TIJUANA, Mexico (Reuters) - A decade ago, economists hailed Tijuana as a place where cheap Mexican labor and U.S. financing could meet, attracting Asian firms eager to set up manufacturing plants to export to the United States.

Now, that vision is slipping away, a victim of drug violence that has been exploding this side of the U.S.-Mexico border for the past three years.

Once a freewheeling city that has served Americans cheap tequila since the U.S. prohibition era, Tijuana is at the center of a three-way drug war between rival gangs and Mexico's military. Drug-related murders are a daily occurrence.

The violence is scaring away tourists who came for everything from prostitutes and dental work to medicine. A lively artistic community is also dwindling.

While most assembly-for-export businesses, or maquiladoras, continue to operate normally, drug violence is such that they risk losing new investment to competitors like China. Other businesses are seeing their livelihoods disappear.

Just a few years ago, downtown Tijuana was bustling and the main drag, Revolution Avenue, was a busy thoroughfare. But today, it is deserted, lined with "For Sale" and "For Rent" signs.

"Many big companies are pulling out and many small companies are going bankrupt. Business isn't enough to even pay the rent for the shops and factory space," said Manuel Cesena, 57, who owns a shoe shop on Revolution Avenue.

Cesena, who has seen his sales fall fivefold since 2005, said it is crucial for him to end his day before nightfall or face being robbed or kidnapped. After 30 years in the shoe business and exporting to the United States, Cesena is considering closing for good.

DEATH TOLL RISES

More than 1,000 people have died so far this year across Mexico in battles between drug gangs and security forces, the highest murder rate since bloodshed escalated in 2006.

Tijuana is one of the most violent cities in Mexico. A group of gangs from the Pacific state of Sinaloa have set out to destroy the Tijuana's Arellano Felix cartel and to take over lucrative smuggling routes into California.

The feud between the Sinaloans and the Arellano Felix gang has not only scared away tourist dollars.

Business people face daily telephone threats of extortion. Kidnappings to finance narco gangs have jumped this year, creating a climate of fear and scaring away new investment.

"Those of us who remain only stay because we have properties we don't want to leave. We are very afraid and have to be careful not to get kidnapped," said Andres Mendez, 46, who runs an arts and crafts business in downtown Tijuana.

In Tijuana this year, drug gangs have killed more than 200 people, with cartel hitmen and soldiers spraying bullets on busy city avenues, outside shops, schools and kindergartens.