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Calderon’s Mexican cauldron
Bloomberg Specials
Written by Thomas Black & Andres R. Martinez / Bloomberg News
Tuesday, 12 May 2009 16:59

While the Mexican president deploys troops to quell drug violence, investors are looking beyond the chaos to his $43-billion spending plan and the country’s $78 billion in currency reserves.

As the sun sets on Ciudad Juarez, the Mexican border city’s citizens flee to the safety of their homes. The vendors who crowd Avenida Juarez to sell tacos and ice cream during the day pack up their carts and disappear. Hawkers who hand out leaflets for a local mall are gone, too—and the mall itself is a ghost town. The 1.3 million residents of Juarez, just across the Rio Grande from El Paso, Texas, give way to 5,000 soldiers in body armor and helmets. Armed with assault rifles, the soldiers stop and search the few passersby who venture into the streets, where bars and restaurants crowded earlier in the day now sit empty.

In Juarez and a dozen other northern Mexico towns, the night belongs to the drug traffickers—and to the troops trying to put a halt to the worst outbreak of narcotics-related violence in the country’s history. This year’s death toll from the drug war in Juarez was more than 200 as of mid-April. Nationwide, about 6,200 died from drug violence in 2008, twice the number killed the year before.

Most of the victims were members of drug gangs murdered—sometimes in wild shootouts—by competitors for their cocaine, heroin and marijuana businesses.

Every hundred years, in the decade following the passage to a new century, Mexico has been rocked by social, political and economic upheaval that has profoundly altered the country. In 1810, a priest named Miguel Hidalgo whipped up a peasant mob to overthrow the Spanish crown’s rule.

In 1910, the landless poor, initially led by Francisco I. Madero, rose to oust a 30-year dictatorship in a bloody revolution that went on for a decade and left a million people dead.

As Mexico approaches 2010, the rise of drug violence is just one of a cluster of crises clouding its future. The country has also been hit hard by the global recession, with its US-dependent economy losing hundreds of thousands of jobs. The economic damage has been aggravated by the outbreak of swine flu. Then there’s the political fight between President Felipe Calderon and Andres Manuel Lopez Obrador, the populist former Mexico City mayor he defeated by less than a percentage point in 2006.

Lopez Obrador, who declares that Calderon won his office through fraud, can still gather crowds of as many as 50,000 people to demand Calderon’s ouster.

“There are serious problems of governability in Mexico,â€