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Mexican soldiers patrol an industrial area of the border city of Ciudad Juarez March 3, 2009.

CIUDAD JUAREZ, Mexico (Reuters) – Hundreds of heavily armed soldiers fanned out across Mexico’s bloodiest drug war city on Tuesday, trying to prevent a collapse in law and order just south of the U.S. border.

Sirens blared as the army staged one of its biggest troop build-ups in years in Ciudad Juarez, a desert city across the border from El Paso, Texas, where near-daily clashes between drug gangs and police have terrified residents.

Infamous in the 1990s for the unsolved murders of hundreds of women, Ciudad Juarez is now engulfed in the worst drug violence in Mexico as cartels in league with corrupt cops fight over one of the country’s most profitable smuggling routes.

More than 2,000 people have been murdered in the area over the past year and drug gang hitmen showed their power last month by forcing the city’s police chief to resign with a threat to keep killing police officers until he quit.

“We’ve got to show we can achieve security in Juarez, for Mexico’s sake, for its economy, for people’s lives, for our international reputation,” said Victor Valencia, the Chihuahua state governor’s representative in Ciudad Juarez.

Ciudad Juarez is prized for its location smack in the middle of the 2,000 mile border with road and rail links deep into the United States. The Pacific-coast Sinaloa gang, led by top fugitive Joaquin “Shorty” Guzman, is one of several fighting for control of the city.

Mexico’s police forces are tainted up to the highest levels by corruption and direct links to the drug cartels, and President Felipe Calderon has staked his reputation on a nationwide army-led crackdown on cartels.

Ciudad Juarez is now the most crucial battleground of a war that killed more than 6,000 people across Mexico last year and is scaring off investors in cities near the border.

“The solution is with the military. The federal, state and municipal police are infiltrated by organized crime,” Valencia told Reuters.

The army expects to have 7,500 soldiers and federal police stationed in Ciudad Juarez by the end of the week, with a further 2,000 troops in the rest of Chihuahua state. Six local bishops pleaded in newspaper ads this week for an end to the killings that are “staining the state with blood”.

Troops rolled past U.S.-style shopping malls in Ciudad Juarez on Tuesday to set up checkpoints at bridges running over the border and at the city’s international airport, briefly shut last week after bomb threats.

GANGS PILE IN

Calderon has about 45,000 soldiers across Mexico fighting cartels but has never before sent so many troops to one city.

At least four main cartels are fighting for control of Ciudad Juarez, and gangs of unemployed youths have joined the fray to extort businesses, kidnap residents, rob banks and work as hitmen.

Residents fear the city could go the way of Colombia’s Medellin at the height of the drug war there in the 1990s, when murder rates hit 6,000 deaths a year.

Mexican soldiers inspect vehicles at a checkpoint at the Paso del Norte international border crossing in Ciudad Juarez March 3, 2009.

“Juarez is prisoner to an infinity of groups fighting for the territory, and others who are making the most of the confusion for easy money,” said army spokesman Enrique Torres.

Guzman, Mexico’s most-wanted man, wants to seize Ciudad Juarez from local drug boss Vicente Carrillo Fuentes, and officials say the shadowy La Linea cartel from the western state of Michoacan and the feared Zeta hitmen from the Gulf of Mexico cartel are also at war here.  The jump in killings in the city to around 10 a day in February has put Calderon under intense pressure.  Some U.S. officials have publicly asked whether Mexico is becoming a failed state and voiced concern about a spillover of executions, kidnappings and extortions into the United States.

Last month, gunmen killed two city councilmen and forced out Ciudad Juarez’s police chief by killing his deputy and vowing to murder an officer every 48 hours until he stepped down.

A former soldier attacked a convoy carrying Chihuahua’s state governor in what many believe was an attack linked to drugs. Spooked by a series of death threats, the city’s mayor now lives over the border in El Paso.

Ciudad Juarez, which boomed in the U.S. Prohibition era and now bulges with factories making goods for export, has pockets of normality during the day. Cars cram its shabby streets, residents sit in parks or walk their children to school.

But at night, the city once famed for its sex and tequila-fueled party life is ghostlike and residents adopt a self-imposed curfew from dusk till dawn.

“The drug hitmen are in control here. Things are out of control, there’s so much death,” said textile salesman Valente Salazar in Ciudad Juarez’s main square as troops swept past in Humvees. “At six o’clock I go home and I don’t go out at all after that. There are so many killings.”

Members of the Mexican federal police and organise cocaine packages to be destroyed in Manzanillo port, Mexico.

If you asked Americans what countries posed a danger to the United States, most would probably point to an emboldened Iran, the militant havens of Afghanistan and Pakistan, or resurgent China and Russia.

But there is a growing fear in security circles that a nation at America’s doorstep may descend swiftly into chaos and prove an immediate threat. That country is Mexico, which is locked in an increasingly violent struggle with drug cartels.  “In terms of worst-case scenarios … two large and important states bear consideration for a rapid and sudden collapse: Pakistan and Mexico,” says a major study by the United States Joint Forces Command that came out at the end of 2008.

The military planners go on to say that Mexico’s “government, its politicians, police, and judicial infrastructure are all under sustained assault and pressure by criminal gangs and drug cartels.”

An increasing number of Mexicans have been forced to live with the daily effects of murder, kidnapping and general lawlessness, but the violence is also spilling across the 2,000-mile border into the United States, which is the world’s largest consumer of illegal drugs as well as a major source of weapons used by the gangs that traffic them.

More than 5,300 Mexicans are thought to have been slain in 2008, double the number in 2007.

The conflict terrorizes communities throughout Mexico but Ciudad Juarez, a city with a population of about 1.3 million across the border from El Paso, Texas, is arguably suffering more than most.

Members of the Mexican Navy stand guard beside seven tons of cocaine siezed earlier this month in Mexico's escalating efforts against drug cartels.

MEXICO CITY — Mexican President Felipe Calderon has issued a series of ultimatums in the past few days to tell drug cartels he’s not backing down from a fight, and to prepare the public for an increasingly bloody battle.

Casualties from Mexico’s war on drugs already have been mounting, and the bloodshed has prompted waves of concern in Washington and elsewhere. “Mexico right now has issues of violence that are a different degree and level than we’ve ever seen before,” Homeland Security Secretary Janet Napolitano told Congress this week, saying it has become one of her top priorities.

Worries about Mexico are starting to affect investors’ perception of the country, too. On Friday, the peso hit a record low, breaking through the psychologically important 15 per dollar barrier, closing at 15.23. Though the principal reason is concern over the effect of the U.S. economic downturn, violence “has definitely raised Mexico’s profile in a negative fashion with investors,” says Gray Newman, chief economist for Latin America with Morgan Stanley.

In unusually bellicose language for a Mexican president, Mr. Calderon is making clear he plans to ramp the fight up further. “It’s either the narcos, or the state,” he said in an interview published on Friday by Mexican newspaper El Universal.

Since taking power in late 2006, the conservative politician has sent more than 40,000 army troops to several Mexican states to confront increasingly brazen and violent drug-trafficking gangs. So far, turf wars between rival cartels have grown bloodier, claiming an estimated 6,290 lives last year. So far this year, more than 1,000 people have died, officials say.

Mexican officials say that the rising violence is a sign that pressure from the government is forcing the cartels to battle each other for turf. And they stress that Mr. Calderon is the first president to tackle the issue head on after his predecessors let the problem slowly build.

“Taking on the cartels is parenting a child having a tantrum. When you start disciplining the child, the tantrum increases at first. But if you stay firm, it eventually works,” Mexican Interior Minister Fernando Gomez Mont said in an interview.

Mr. Gomez Mont said Mexico is taking important steps such as forcing law-enforcement agencies from different levels of government to share information, but needs to sharply raise spending on security-related issues.

The violence could get worse before it gets better. Drug cartels are adopting guerrilla-style tactics, ambushing security forces and assassinating high-level security officials and others. They are also smuggling entire arsenals of weapons from the U.S.

“Eighteen months ago we saw a spike in .50-caliber machine guns heading south,” says William D. Newell, special agent in charge of the Justice Department’s Bureau of Alcohol, Tobacco, Firearms and Explosives station in Arizona. “Six months ago we started seeing grenades. That’s a serious escalation of violence.”

Some agents fear more dramatic attacks such as car bombs are next. A memo distributed by the ATF’s Bomb Data Center, circulating among U.S. law-enforcement agencies, reports that this month a gang of gunmen, presumably linked to narcotics groups, stormed a mining site in the Mexican state of Durango and made off with over 250 pounds of explosives.

Medical marijuana advocates and users confront Los Angeles police during a Drug Enforcement Administration raid of a medicial marijuana dispensary on July 25, 2007.

Supporters of programs to provide legal marijuana to patients with painful medical conditions are celebrating Attorney General Eric Holder’s statement this week that the Drug Enforcement Administration would end its raids on state-approved marijuana dispensaries.

Federal raids on medical marijuana distributors continued at least into the second week of Barack Obama’s presidency, when federal agents shut down at least two dispensaries in California on Feb. 3.  Holder was asked about those raids Wednesday in Santa Ana, Calif., at a news conference that was called to announce the arrests of 755 people in a nationwide crackdown on the U.S. operations of Mexican drug cartels. He said such operations would no longer be conducted.

“What the president said during the campaign … will be consistent with what we will be doing here in law enforcement,” he said. “What (Obama) said during the campaign … is now American policy.”

Obama indicated during the presidential campaign that he supported the controlled use of marijuana for medical purposes, saying he saw no difference between medical marijuana and other pain-control drugs.

“My attitude is if the science and the doctors suggest that the best palliative care and the way to relieve pain and suffering is medical marijuana, then that’s something I’m open to,” Obama said in November 2007 at a campaign stop in Audubon, Iowa. “There’s no difference between that and morphine when it comes to just giving people relief from pain.”

White House spokesman Nick Shapiro hinted at the policy shift shortly after the California raids, telling The Washington Times that the dispensaries were legal in California and that the Obama administration’s stance was that “federal resources should not be used to circumvent state laws.”

Major shift in federal policy
The new policy represents a significant turnabout for the federal government. During the Bush administration, DEA agents shut down 30 to 40 marijuana dispensaries, the agency said.

The Web site of the White House Office of National Drug Control Policy had yet to catch up to the policy shift as of Friday afternoon, and was still prominently featuring a “ Medical Marijuana Reality Check” declaring that “marijuana is not considered modern medicine” and arguing that “no animal or human data support the safety or efficacy of smoked marijuana for general medical use.”

Holder’s comments received little notice Wednesday, overshadowed by the news of the drug arrests. But supporters of legalized marijuana seized on them as an important sign of progress in their campaign.

“Holder’s statement marks a dramatic shift in U.S. drug policy and is a major victory for the 72 million Americans who reside in states where the use of medical cannabis is legal,” said Paul Armentano, deputy director of the National Organization for the Reform of Marijuana Laws, said in a statement.

Thirteen states allow the cultivation, sale and use of medical marijuana.

Armentano said the shift would add momentum to campaigns in states that are considering their own medical marijuana laws. The New Jersey Senate approved such a bill Monday, and Gov. Jon Corzine said he would sign it if it cleared the state Assembly.

Charles Lynch, who operated a state-approved dispensary in Morro Bay, Calif., before it was raided in 2007, also welcomed the new policy.

“It’s a good thing for California. It’s a good thing for the other 12 states that have medical marijuana laws,” said Lynch, who was convicted in August of federal drug charges.

Lynch could face five years in prison when he is sentenced late next month, but in light of the new federal policy, he said he would appeal his conviction and seek a presidential pardon.  Lynch contended that dispensaries like his were vital for patients in the last stages of a painful illness.  “Having one in your community, wherever that may be, is a good thing because it helps these people that need relief,” he said.