By Mica Rosenberg
MEXICO CITY, June 28 (Reuters) - An opposition candidate pegged to win a July 4 gubernatorial election in the northern Mexican state of Tamaulipas was killed by suspected drug hitmen on Monday in the worst sign so far of political intimidation by drug cartels who are threatening Mexico's image as a stable emerging market. [ID:nN28512369]
* The murder of Rodolfo Torre of the Institutional Revolutionary Party, or PRI, along with four campaign aides in an ambush, signals a worrying escalation in Mexico's drug violence. Some 25,500 people, mainly traffickers and police, have been killed since late 2006 when President Felipe Calderon deployed thousands of troops and federal police to curb the cartels' power. Torre is the highest-level candidate to be attacked ahead of local elections in a dozen states this weekend and the highest-profile Mexican politician assassinated in 16 years. The shooting will cast a pall over polls especially along the violence-plagued U.S.-Mexico border, intimidating voters and candidates alike.
* News of the killing spooked investors who are closely watching the rising level of violence for signs Calderon's government is losing control. Mexico's peso MXN=MEX01 weakened by as much as half a percent. The United States is heavily involved in Calderon's strategy with a pledge of more than a billion dollars in drug-war aid to Mexico. Some foreign companies have closed some of their operations in dangerous cities along the U.S.-Mexico border and some tourists have been scared away by the violence. "This development seems harder to dismiss even from a strictly market standpoint than previous episodes of violence. This is because it represents an attack on the political process," said analyst Jimena Zuniga at Barclays Capital in New York. Torre's killing follows another murder of a mayoral candidate in Tamaulipas state last month.
* Torre's death is likely linked to the boiling turf war in Tamaulipas, across the border from Texas, between the powerful Gulf cartel and its former armed wing, the Zetas. Black-clad Gulf enforcers are attacking the Zetas, who split away to try to form their own cartel earlier this year. Made up of elite former soldiers who switched sides to join the Gulf gang in the 1990s, the Zetas are charging their old bosses taxes to use their routes, provoking almost daily shootouts as the two gangs face off along the border. "Torre's death is due to a power struggle between two rival organized crime groups," a government source in Tamaulipas told Reuters.
* Calderon gave no indication in a televised speech on Monday that local elections would be canceled. Politicians and analysts said they expect voting to go ahead as planned to avoid sending drug cartels the message that they have the power to disrupt the electoral process. "If the elections don't go forward than the people that committed this terrorist act will have won," independent Mexican security analyst Alberto Islas told Reuters. PRI leaders said on Monday that Mexicans should not be scared to vote this weekend and must turn out to show their support for candidates who repudiate the violence.
* Calderon slammed what he called a "cowardly" attack on the country's democratic institutions and vowed to keep up his fight on organized crime with the full force of his government. He called an emergency meeting of his security cabinet and offered the PRI government in Tamaulipas his full support, saying political parties should join forces against drug crime.
Yet Calderon could pay a high political price for the spiraling violence as opposition parties, especially the PRI, are expected to sweep Sunday's elections. Opinion polls show most Mexicans think the cartels are winning the drug war and there is increasing outrage over the deaths of civilians caught in the cross-fire between rival cartels and traffickers battling security forces. "The political cost will be for the government's party," Javier Oliva, a national security specialist at Mexico's National Autonomous University told Reuters. "The public security policies are not showing results," he said. (Additional reporting by Cyntia Barrera; Editing by Cynthia Osterman)