Ciudad Mier, a picturesque colonial village on the Texas border, was a sleepy tourist attraction until February, when two rival drug cartels turned it into a slaughterhouse.

Caravans of armored SUVs crammed with gunmen firing automatic rifles prowled the streets. Parents pulled terrified children from schools. The town of 6,000 went dark every time the combatants shot out the transformers. In May, a man was hung alive from a tree in the central plaza and dismembered while town folk heard the screaming from behind shuttered doors.

Then last week, after a new offensive by the Zetas, one of the two groups that have turned the town into a no-man's land, hundreds of residents packed what they could into their cars and fled, leaving eerily empty streets with burned out shells of cars and bullet-pocked walls.

"It's like we're in the Wild West," says Santos Moreno Pérez, a Pentecostal minister who is among the refugees here in neighboring Miguel Alemán. "We have no mayor, no police, no transit system. We have been left to fend for ourselves."

Two years ago, the U.S. military warned that the Mexican government was "weak and failing" and could lose control of the country to drug traffickers. Mexican officials quickly rejected the assertion, and in truth the most dire predictions now seem overblown. Mexico's economy is rebounding from the aftershocks of the U.S. recession, with gross domestic product growth expected to top 4 percent this year. Foreign companies not only haven't fled, they continue to make some investments along the country's northern manufacturing belt where much of the drug war is playing out. Mexico City and large parts of south so far have escaped the mayhem, and the country as a whole remains stable.

Still, some parts of Mexico are caught in the grip of violence so profound that government seems almost beside the point. This is especially true in northern places like Ciudad Mier and surrounding Tamaulipas state—a narrow, cleaver-shaped province that snakes along the Texas border and hugs Mexico's Gulf Coast.

Across Tamaulipas, gunmen run their own checkpoints on highways. The cartels have forced Mexico's national oil company to abandon several gas fields. Many farmers have given up on tons of soybeans and sorghum in fields controlled by criminals. Leading families, fleeing extortion and threats of kidnapping, have escaped to Texas—as have the mayors of the state's three largest cities.

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