MEXICO GUNBATTLE SPURS U.S. WARNING

MEXICO CITY-The U.S. consulate in Monterrey warned local U.S. citizens
that Friday's shootout in front of the prestigious American School
Foundation stemmed from a failed kidnapping, and advised personnel to
keep their children out of school-stoking fears authorities have lost
control of the city to drug traffickers, kidnappers and other criminals.

"At this point it appears that [the gunfight] was an attempted
kidnapping targeting the relatives of a local business executive," the
consulate said in a message posted on its website Sunday night. The
investigation into the shooting incident was continuing, it said.

While U.S. families didn't appear to be targeted, the consulate urged
Americans in Monterrey-Mexico's business capital and home to many
divisions of U.S.-based companies-to increase security measures.

"The sharp increase in kidnapping incidents in the Monterrey area, and
this event in particular, present a very high risk to the families of
U.S. citizens who might become incidental victims," the message said.
U.S. Ambassador Carlos Pascual urged consulate employees to keep
children at home "while we assess the risks and what measures can be
taken to reduce it," the message said. The American School is attended
by the children of many leading Mexican businessmen and U.S.
executives who work in the city.

On Monday, a Mexican official whose children attend the American
School said the school appeared normal except for the absence of
children of U.S. consular staff. The American School didn't answer an
email seeking comment.

Monterrey isn't Mexico's only wealthy city now stalked by barbaric
drug violence. On Sunday, the mutilated and decapitated bodies of four
men were found hanging from a bridge in Cuernavaca, a city about 50
miles south of Mexico City where many affluent Mexicans have weekend
homes, and Americans come to learn Spanish. After drug lord Arturo
Beltran Leyva was killed by Mexican marines in December, Cuernavaca
became a battleground for cartels fighting to take over his
organization.

In Monterrey, the U.S. warning was a reaction to a 20-minute gun
battle Friday between bodyguards working for Mexican beverage company
Femsa SAB de CV and alleged drug-cartel gunmen in front of the
American School, In the shootout, which sent children dashing for
shelter into the school's cafeteria, two Femsa security guards were
killed and four others were taken by the gunmen, presumed to be
members of one of the drug cartels that is fighting to control the
city. They were released in front of a Femsa installation early Saturday.

Mexican authorities and Femsa deny that there was any kidnap attempt.
Both say the gun battle erupted when Femsa security guards patrolling
the area around the school, which is attended by children of the
company's executives, got into a verbal dispute with a group of armed
men who were driving in front of the school. The dispute turned into a
firefight. where the Femsa guards were outnumbered by the gunmen, who
killed two and captured the other four."It wasn't a kidnapping
attempt," said a high ranking Nuevo Leon state official. "It was a
confrontation."

Mexico is one of the world's kidnapping centers. In 2009, there were
1,128 cases of kidnapping reported to Mexican authorities. But the
real number of kidnappings is estimated to be many times higher by
analysts. In May, Mexico was shocked when kidnappers grabbed Diego
Fernandez de Ceballos, a lawyer and former presidential candidate who
is considered to be the grand old man of President Felipe Calderon's
PAN party. The whereabouts of Mr. Fernandez de Ceballos remain unknown.

Last week's violence has put many affluent residents of Monterrey on
edge. Many are thinking of either sending their children to study in
the U.S., or moving the whole family abroad. "The big topic is whether
to move to the U.S. altogether," emailed a Mexican executive with
children at the American School. "I don't know the actual numbers, but
there's a feeling of "diaspora" from families moving to San Antonio,
or Austin or Houston. I personally have two friends who have done so."

The violence pushing the migration is the result of a turf war by
violent drug cartels for control of Monterrey's drug markets and drug
routes to the U.S. that run by the city.

Speaking at a recent conference in El Paso, Mr. Pascual, the U.S.
ambassador, said the city's security environment had deteriorated in a
few months from "seeming benevolence to extreme violence." According
to the newspaper Reforma, which tracks killings in Nuevo Leon, where
it also runs a newspaper in the state capital of Monterrey, says
drug-related murders have shot up in the state from 56 in 2009 to 420
so far in 2010.

Just last week, the mayor of a tourist town where many businessmen
from Monterrey keep weekend houses, was kidnapped and killed. So far,
seven police officers, apparently in the pay of drug traffickers, have
been arrested in the case. In Mexico, some 28,000 people have died
since 2006 when President Calderon sent out thousands of soldiers and
federal police to reclaim the country from powerful drug
traffickers.

A year ago when Monterrey residents chatted about security, no one
could offer a first-hand anecdote about a friend or relative who had
suffered a violent crime, the American School parent, who is an
investment banker, wrote in his email. "Today it's different," he
added. "My dentist's son was kidnapped two weeks ago, the brother of a
friend was kidnapped two months ago, the best friend of the
entrepreneur where my fund was invested was kidnapped in December, and
never returned, and this past Wednesday, a close acquaintance was
kidnapped."