DRUG GANGS TURNING ACAPULCO INTO WAR ZONE

Increase in Killings; Fighting to Control Lucrative Smuggling
Routes

Violent drug gangs are terrorizing Mexico's famed Acapulco beach
resort, with hitmen shooting at rivals on the hotel strip and dumping
beheaded bodies in a battle for control.

Bloodshed has jumped in the area, a flashpoint in President Felipe
Calderon's war on drugs, since troops killed cartel kingpin Arturo
Beltran Leyva in December, triggering a power struggle within his
organization.

Hitmen have been deployed in Acapulco, a playground for Hollywood
stars in the 1950s, as two would-be leaders of the Beltran Leyva gang
vie for control of smuggling routes from the Pacific coast to Mexico
City and the U.S. border, federal police and analysts say.

A shootout in broad daylight on Acapulco's main strip this month
killed six people, including three bystanders, forcing cars to swerve
out of control and causing tourists to dive for cover along a
palm-tree lined boulevard.

"It was like we were in the middle of a war on the main tourist strip.
That's just not right," said Celso Sanchez, director of a private
school that saw two of its students shot dead in the crossfire.

Surging violence, also visible in the colonial getaway town of
Cuernavaca on the road from Mexico City to Acapulco, has pressured the
tourism industry across Mexico as well as adding to the worries of
foreign investors.

Acapulco's older hotels, once exclusive getaways for millionaires and
stars like Frank Sinatra, John Wayne and Rita Hayworth, have struggled
to compete with newer and flashier all-inclusive rivals in the
Caribbean and Baja California.

Since a highway was built in the 1990s to connect the town to Mexico
City, Acapulco has seen a boom in Mexican tourists. But they spend
much less than foreigners who now tend to prefer beach resorts like
Los Cabos or Puerto Vallarta.

The number of tourists flying into Acapulco fell by almost 20% in the
first three months of 2010, according to airport operator OMA.

Mexico is a top tourist destination, with more than 20 million annual
visitors. Tourism makes up 8% of its economy.

Acapulco business owners are desperate to assure visitors their city
of more than one million people is safe.

"Obviously we can't lie and say nothing is happening when you can see
the number of dead on the news," said Pedro Falcon, a representative
of local travel agencies. "But we have to keep working despite the
crisis, not let fear or panic take over."

Mr. Calderon has staked his presidency on crushing drug gangs, whose
turf wars and clashes with security forces have killed 23,000 people
since he took power in 2006. His deployment of 70,000 troops and
police has led to more violence.

The killings in Acapulco and Cuernavaca result from a leadership
battle between Hector Beltran Leyva, Arturo's brother, and Edgar "La
Barbie" Valdez.