WHEN FEUDING BETWEEN drug traffickers was at its most brutal in Ciudad Juárez, a border city on the edge of the Chihuahua desert, the deadliest time to step into its mean streets was 4.45pm. The main television news bulletin is broadcast at 5pm, and Juárez’s gangsters, experts in public relations, would time their murders to lead the evening headlines. “They would kill in the streets, by the highways, on the main avenues. They wanted to send a message to the authorities,” says David García, head of the city’s forensic service. Five years ago his team dealt with about 400 homicides a year, giving the city of 1.3m a murder rate roughly equal to that of New York in the early 1990s. By 2010 the small mortuary had to accommodate 300 murdered bodies a month, making Juárez by some reckonings the most violent city in the world.

The explosion of killing in Juárez is only the most extreme example of an appalling national trend. Five years ago Mexico was one of Latin America’s gentlest countries, with a murder rate of nine per 100,000 people, not much higher than in the southern United States. But since then the numbers have more than doubled (see chart 4), in tandem with an increase in robbery, extortion and kidnapping. Sadistic killings have been beamed around the world over the internet.

Many parts of Mexico, including its gigantic capital, are relatively peaceful, so the country’s overall murder rate is still no higher than Brazil’s and much lower than much of Central America’s. Yucatán, the quietest state, is statistically as safe as Finland. But very few places are unscathed by the trend: nearly all states saw more killings last year than five years earlier. Polls show that insecurity is Mexicans’ biggest worry.

Now, for the first time since murders began to soar in 2008, the rate is subsiding. In the first nine months of this year killings were 7% down on the same period in 2011. Twenty of Mexico’s 31 states recorded a decline. In Juárez Mr García’s mortuary is back to handling about 40 bodies a month, little more than during what juarenses still know as the “pre-war” years. Mr Calderón describes the past year as a “turning point” for the country, but cautions that it took Colombia many years to bring its murder rate under control. In Juárez people once again drive with their windows rolled down and eat their burritos on the pavement, but achieving the same results elsewhere will not be easy.

After the Caribbean cocaine-smuggling route was shut down in the 1980s, Colombia’s drug lords turned to Mexico, whose 2,000-mile border with the United States, the world’s biggest drug market, made it a convenient stepping-stone. As the net closed around Colombian capos in the 1990s they ceded more of their operations to their Mexican partners, whom they began to pay in cocaine rather than cash. Shortly after the turn of the century Mexico’s gangs became more powerful than Colombia’s, reckons Antonio Mazzitelli, the regional head of the UN’s Office on Drugs and Crime.

A brief history of horror

The dates engraved in gold on the gaudy narco-tombs of cities such as Culiacán, in Sinaloa, show how gangsters have been blasting away at each other for decades. Some trace the recent spike in killing to 2003, when Osiel Cárdenas, the leader of the east-coast Gulf cartel, was captured by the army in the state of Tamaulipas and eventually sent to a Colorado “supermax” prison. This sparked a takeover bid by the Sinaloa mob, which terrorised the Gulf-controlled city of Nuevo Laredo. In 2006 La Familia, a gang thought to be allied to the Gulf clan, rolled five human heads onto a Michoacán dance floor.

When Mr Calderón donned the presidential sash a few months later he vowed to crush the cartels. “The moment would arrive when one day they were going to take control of the state itself,” he says. After he deployed thousands of troops, the cartels seemed to reach a truce of sorts in 2007. But then violence erupted in the north-west as the Sinaloans fell out with their allies in Juárez, Tijuana and Culiacán. Murders linked to organised crime, previously about 2,000 a year, more than tripled. In 2010, when the Gulf cartel fell out with the Zetas, its former enforcers, such killings rose to more than 15,000. The following year the government stopped counting. Newspapers’ tallies suggest that gang murders continued to rise.

Many leading mafiosi have been captured or killed. Of 37 kingpins named in a wanted list in 2009, only 12 remain at large. On October 7th marines shot dead Heriberto “the Executioner” Lazcano, supposedly the leader of one branch of the Zetas. Three weeks earlier they had nabbed the head of the Gulf clan, Jorge Eduardo Costilla. Such captures have altered the borders of Mexico’s underworld (see map). But they have sometimes made things worse as fallen capos’underlings fight for the throne. In cities such as Acapulco, powerful but relatively peaceful criminal monopolies have been replaced by volatile small gangs.

Explore our interactive mapof Mexico's drug traffic routes, "cartel" areas and crime-related homicides

The local police are not up to dealing with them. Mexico has more officers per head of population than many rich countries, but most are members of ill-paid municipal forces. Seven out of ten Mexicans say they paid a bribe last time they dealt with a traffic policeman. Several of the baddies on the most-wanted list are themselves former officers. The federal police is more widely trusted but remains too small to do the job on its own. Mr Peña has promised to draft 40,000 soldiers into the police and increase spending on security from 1.5% of GDP now to nearer Colombian levels of 5%. Plans to bring the disparate local forces under a single command, as in Colombia, have faltered in the face of opposition from mayors who do not want to lose control of their local muscle.

Small businesses are at their wits’ end. In downtown Juárez, on an avenue leading to El Paso, the windows of discos and shops are smashed and boarded up. Arnulfo Gómez, sporting a Stetson and a wispy silver ponytail, has run the Don Félix bar for 38 years. His neighbours used to include more than 100 souvenir shops; now there are fewer than five, he reckons. One nearby business says that the going rate for extortion is about $100 a week. Dotted around the city are the burnt shells of shops that refused to pay. Big multinationals, which have their own security forces and keep their managers and cash off-site, seem unfazed, which may explain why overall economic growth has weathered the storm.

Some citizens have taken matters into their own hands. In an apartment in Mexico City where she works as a cleaner, a tiny round 70-year-old great-grandmother explains why she is saving up to hire a contract killer. Three men and a woman are terrorising her village. They recently robbed her granddaughter and broke her husband’s arm with an axe-handle to stop him from snitching. The neighbours dragged one of the robbers to the police but he paid his way out. “So we have to do something ourselves, the pueblo united,” explains the old lady. She knows of a former soldier with a gun in nearby Pachuca who carries out what she calls “revenges”. “If the authorities don’t do anything, what are we left with?” she asks.

In a tough neighbourhood of breezeblock homes on the sandy south-eastern edge of Juárez, two groups of teenagers are squaring off for a fight. It may not look like it, but the scene helps to explain the turnaround in Juárez’s murder rate. The teenagers are taking part in a taekwondo lesson in the Manuel Valdez Community Centre, a tidy new facility for sport, arts and education. Every month nearly 100,000 people drop in to the network of 42 centres, built mostly in the poor neighbourhoods where gangs flourish. Next door to the taekwondo session a computer course is under way; on a roof terrace children dance to Rock Around the Clock, belted out on an electric keyboard.

To turn the failing city around, the federal government spent 5 billion pesos ($390m) on security and social development in Juárez in 2010 and 2011. Héctor “Teto” Murguía, the mayor, says this has resulted in a remarkable drop in murders. “In cities like Medellín, Palermo, Chicago or New York it took them ten years to reduce their indices in this way,” he notes. October saw 30 murders, barely a tenth of the number during the worst months of 2010. Murders across the state of Chihuahua halved over the same period. Mr Murguía says jobs are the key. “A young man recently said to me: ‘Teto, young people would rather die on their feet in a year than spend 50 years on their knees.’ That is pathetic. We have to offer young people a future.”

Track the fate of Mexico's drug bosses with our “most-wanted” interactive timeline gallery

Juárez is now held up as a model by the federal government. Alejandro Poiré, the interior minister, says that the city has “undoubtedly” got through the worst of it. Enforcement has helped. Last year federal police arrested José Antonio “El Diego” Acosta, the head of the “executions” department of the Juárez cartel. He has confessed to organising more than 1,500 murders, including those of three people linked to the American consulate who were shot dead in 2010 for reasons that remain murky. His fall has not yet sparked the kind of instability seen in Acapulco. “Weakening criminal structures begins with removing the contract-killing capacity that they have,” says Óscar Naranjo, a former head of the Colombian police who recently moved to Mexico to advise Mr Peña.

Chihuahua is one of four states to have brought in oral trials, which are due to replace the old written justice system across the country by 2016. The new trials rely more on evidence than on confessions, which police sometimes used to obtain with the help of car batteries and wet towels. Now “a case is very weak if it relies only on witnesses,” says Mr García, whose forensic scientists routinely give evidence. They are also speedier, taking an average of 160 days, down from 560 under the old system. This will help to free up space in prisons, where four out of ten inmates are awaiting trial. But the jails may soon fill up again: Chihuahua has stiffened its penalties. For example, it now punishes extortionists with life imprisonment.

Miracles and mirages

Cities such as Juárez show that Mexico’s violence could subside as quickly as it erupted. The speed of improvement has made some people wonder if a deal has been struck within the criminal underworld. Stratfor, an American consultancy, says that Sinaloa has battered the Juárez cartel into submission and done something similar to the Tijuana cartel, a few hundred miles west in Baja California. There, murders are about a third down on 2010. “There was an informal agreement [among the cartels] to reduce violence, because it attracts the attention of the media, the military and the [US] Drug Enforcement Agency,” says Víctor Clark Alfaro, who runs the Binational Centre for Human Rights, a Tijuana NGO.

The government rejects talk of negotiation, but there are legitimate ways of pushing the villains into less destructive types of business. Mr Poiré acknowledges that the drop in violence “has a lot to do with business dynamics and competition between the cartels…To the extent that you cannot make the demand for drugs disappear, what you can do is significantly increase the costs of some of the crimes that hurt society the most.” The priority is to reduce murder, extortion and kidnapping, he says. The next government is likely to take the same line. “Security policy can become an end in itself. The most important thing is the life of the citizens,” says Mr Naranjo.

Compare the murder rate and body count of each Mexican state against entire countries on our interactive equivalents map

Mr Calderón is convinced that it is “impossible” to end drug trafficking. Instead, Mexico’s target should be to end “the caprice and freedom of these criminals, strolling around the streets with their SUVs and weapons and no one saying a word to them,” he says. Some parts of Mexico are getting closer to that. Juárez’s kingpins now live in hiding rather than in narco-mansions. Carlos Bustamante, the mayor of Tijuana, says that thanks to government pressure criminals are “being more selective about whom they deal with,” by which he means whom they murder. In Tijuana the dismemberments have stopped and convoys of black SUVs no longer rumble through town in broad daylight. This does not mean that crime has gone away. “We have a new generation of traffickers in Tijuana, with a very entrepreneurial vision of the business,” says Mr Clark.

The next government must prevent those entrepreneurs from getting too big for their cowboy boots and corrupting the institutions of the state. At the same time it must try to avoid the all-out warfare that Mr Calderón’s crackdown seems to have provoked. It is a delicate and dangerous balancing act. As long as America imports billions of dollars-worth of drugs that it simultaneously insists must remain illegal, Mexico’s gigantic criminal economy is unlikely to disappear.

IN PINK COWBOY boots and a bright red Disney hat, Ángeles Zermeño is surely one of Mexico City’s most stylish three-year-olds. Her parents, Ricardo and Blanca, are thinking of having another child, perhaps in a year or so. But they have already decided that two will be enough. “The small family lives better,” says Mr Zermeño, a mechanic. The couple know this all too well: in rural Hidalgo they grew up with 29 aunts and uncles between them.

The changing shape of families such as the Zermeños has created a dramatic baby bust. Fifty years ago Mexico was one of the world’s great producers of people. In the 1960s Mexican women had an average of seven children each; now they have only 2.4, and before 2020 the number is expected to drop below two (see chart 6). That would give Mexico a lower fertility rate than the United States, which is expected to maintain its current rate of about 2.1.

At the same time life expectancy has grown. In 1960 most Mexicans did not live beyond their 50s, and the average age was 17. Today the country has a wrinklier face. On average people live to 77, only a couple of years less than in the United States. Mexico’s shift from a big baby-producer to a fast-ageing nation will provide an enormous demographic dividend. It also harbours an almighty time-bomb.

Lie back and think of Mexico

The explosive population growth during much of the 20th century was encouraged by the government. Mexico lost nearly half its territory to the United States in 1848. It put this down partly to a failure to populate lonely wastelands such as California. Cranking out babies thus became a form of national security policy. “The idea was that to govern was to populate,” says Rodolfo Tuirán, a demographer who is now minister for higher education.

Everything changed in the 1970s. The nascent middle class noticed the opportunity cost of having large families, and as infant mortality dropped there was no longer a need to produce so many spares. The government made a U-turn: the right to a “free, responsible and informed” decision on how many children to have was enshrined in the constitution, and family-planning services were rolled out in spite of opposition from the Catholic church. Abortion remains illegal in most of the country, but contraception is widely accepted. Four out of ten married women are sterilised. On the desk of Salomón Chertorivski, the health secretary, is an enormous bowl of what look like business cards but turn out to be condoms, handed out to visitors with the compliments of the federal government.

The crash in the birth rate has brought a steady improvement in the dependency ratio. Forty years ago there was one dependent (usually a child) for every toiling worker. Now, and for the next 20 years, the ratio of workers to dependants will be more than two to one (see chart 5), easing the burden on the state in the same way that having fewer children has eased the burden on families. At the same time the large generation of workers getting ready to retire is expected to boost saving and investment.

Mexico’s dependency ratio will be further helped by the drastic cut in migration of young workers to the United States (see article). Moreover, the country is maintaining fairly strong population growth. By 2025 the number of inhabitants is projected to grow by about 15%; in Brazil it will expand by around 10%. The UN expects Mexico’s population in 2050 to be 65% of Brazil’s, up from 57% in 2000. That won’t make its citizens any richer, but it will make its economy bigger.

However, the demographic fillip needs to be worked at. “It’s a bonus if they prepare for it. It’s a problem if they don’t,” says Wendy Cunningham of the World Bank’s human-development department. “They must invest in education and training to make this big group of people more productive. If the assumption is that just having more labour will do it, it won’t work.”

Don’t squander it

So far Mexico has been worryingly complacent. The Asian tigers made the most of their demographic dividend by creating some of the world’s best schools. Mexico’s, by contrast, are pretty bad. In tests set by the OECD, nine out of ten South Korean teenagers meet basic requirements in maths but only half of Mexican ones do. Much poorer countries such as Azerbaijan and Thailand achieve better results on smaller budgets. Higher education also needs beefing up: only 22% of 25- to 34-year-olds in Mexico have a tertiary qualification, against 37% in Chile. “There is a risk that Mexico will squander its demographic bonus,” says Mr Tuirán. Financial crises in the 1980s meant that less was invested in education, he adds. As if to illustrate his point, students denied university places this summer staged a noisy demonstration outside his office on Mexico City’s Plaza de Santo Domingo.

Still, education spending has been growing and now amounts to 6.2% of GDP, the same as the OECD average. But the money is spent badly. In primary schools 83% of non-capital expenditure goes on teachers’ pay, a bigger proportion than in any other OECD country. Teachers’ salaries are set and paid by their union, which publishes no accounts. Some “teachers” are union officials who do no teaching. Others are imaginary. A rare audit in 2008 found that one, in Chihuahua, was being paid 700,000 pesos (then $66,000) a month. There is now some testing of teachers, but apparently no consequences for the many who fail those tests. Elba Esther Gordillo, the union’s leader since 1988, confirmed in a recent interview that teaching positions could be bought for 50,000-100,000 pesos, a practice she said she found outrageous.

For now, the increase in the number of pensioners is more than compensated for by the fall in the birth rate, so the number of dependants is still falling. But starting in about a decade the dependency ratio will get steadily worse. The state will have to support a larger population of pensioners, just as families will have to help out ageing parents and grandparents.

The welfare net will thus need a serious revamp. At the moment many Mexicans are not even covered by it. The 5m or so who work in the public sector get a health and pension package, and so do salaried workers who pay into the state welfare system. But probably no more than 15m of the 40m who work in the private sector have this insurance, estimates Santiago Levy, a former head of Mexico’s Social Security Institute who is now at the Inter-American Development Bank. The uncovered include the self-employed as well as those who duck under the taxman’s radar or work in the informal sector.

On average, low earners spend about half their careers in the formal sector and half outside it. People who alternated between working in a textile factory and selling clothes door-to-door, for instance, would pay into the system only half the time. They would thus have to toil for 50 years to build up the 25 years of contributions required to get a basic pension. Because low earners are the most likely to work in the informal sector, “those who need pensions the most will get the least,” says Mr Levy.

A parallel system has slowly been growing to help the uninsured. The biggest example is in the health service (see box). Similar programmes to support informal workers have been set up in housing and child care. A universal pension, begun in left-leaning Mexico City, has been adopted by about half the states. A federal pension programme called “70 and up” has been expanded from small communities to bigger ones.

Millions have benefited, but there is a snag. If social services are available to all comers, there is little reason to work in the formal sector and pay taxes. Partly for that reason, informal employment has been growing faster than the formal sort. Some companies offer employees a choice: work formally for a given wage or informally for a slightly higher one. With health care and pensions available either way, workers are quite sensibly taking the informal route, but this will cause a further drop in fiscal revenues.

One solution would be to eliminate the difference between formal and informal employment by financing health care and social security through consumption rather than payroll taxes. Not everybody is a salaried employee, but everybody is a consumer, reasons Mr Levy, an advocate of this plan. “Instead of collecting taxes at the door of the factory, you would collect them at the door of the store,” he says. Consumption taxes are easier to enforce than payroll taxes. But they are also regressive, and would require subsidies to ensure that Mexico’s yawning inequalities do not widen further.

Mr Peña has trailed fiscal reform as one of his big legislative projects, not least to increase revenues sufficiently to allow Pemex, the state oil monopoly (which provides about a third of the government’s income), to invest more in exploration and technology. He has also promised a new “universal social-security system” to provide health and unemployment insurance and pensions, financed by general taxation. Congress already has a lot on its plate, but it would do better to overhaul the system now than wait until the demographic time bomb goes off.

 Has the pain in the wallet stopped?

IN SOME RICH countries it remains a distant hope, but in Mexico free universal health care became more or less a reality this year. Having insurance used to be contingent on having a salaried job, which left about half of Mexico’s population with only the most basic care. But since 2004 a programme called Seguro Popular (Popular Insurance) has been gradually rolled out all over the country to provide better services to those without employment-linked insurance. The overwhelming majority of Mexicans are now covered—“a remarkable feat”, according to the Lancet, a British medical journal.

To cover the uninsured, the government has increased its spending on health from 5% of GDP at the turn of the century to nearly 6.5%, which is still lower than in most of the rich world. More than 200 new hospitals and 2,000 clinics have been built and thousands more renovated. The ratio of doctors to patients is up by more than half.

Mexicans’ health has perked up dramatically in some areas. Since 2008, when Seguro Popular began providing a vaccine against rotavirus, a common cause of diarrhoea, deaths from the illness have fallen by 60%. When the programme started to pay for treatment of acute leukaemia in children, the survival rate improved from three in ten to seven in ten. Nearly a third of women with breast cancer used to abandon treatment because they could not afford it. Since 2008, when treatment became free, the drop-out rate has come down almost to zero.

Insurance has saved many people from another affliction: poverty. When the poorer half of the population had to pay for medicines or procedures not covered by state hospitals, millions of families were bankrupted by illness. Julio Frenk, a former health secretary who oversaw the beginning of Seguro Popular and is now dean of Harvard’s School of Public Health, recalls meeting a family in which the mother had needed a Caesarean section and the baby had spent a couple of weeks in intensive care. The child survived, but the medical bill cost his father his animals and tools and meant that his brother had to be taken out of school. “People liquidated their productive assets and their poverty was transmitted to the next generation,” says Mr Frenk. Until the late 1990s nearly 7% of families were dragged below the poverty line each year by medical emergencies. By 2010 the figure had fallen to less than 3%.

Seguro Popular is still a work in progress. Quality is patchy and people in remote regions have to trek a long way to see a doctor. Mr Frenk estimates that about 5% of the population are still not covered. Some conditions are not yet being paid for. There is a shortage of specialist doctors, and some rural clinics are manned by students.

There are also big regional disparities. Nine out of ten pesos going on Seguro Popular are spent by state governments, and the results are mixed. “We need to work on accountability,” acknowledges Salomón Chertorivski, the health secretary. When some states inexplicably paid far more than the market value for certain drugs, the federal government set maximum prices for medicines. There have been reports of bent doctors tricking people into paying for their supposedly free care. The government has introduced a system of certification for clinics. But in rural areas it is still hit-and-miss—one reason why Mexico’s infant-mortality rate remains stubbornly high.

Success in treating communicable diseases has brought new problems. The biggest killer now is diabetes, brought on by sugary diets and sedentary lifestyles. Mexicans are among the world’s fattest people: 70% are overweight, more than in the United States. A third of women are obese, double the OECD average. On a per-head basis, Mexico has the world’s highest consumption of Coca-Cola. In rural areas seven out of ten children have a fizzy drink with their breakfast, according to Consumer Power, a civil organisation. Public sports facilities are scarce, which may help to explain why Mexico came only 39th in this year’s Olympics, level with Georgia, which has only a small fraction of its population. Health care may be expanding rapidly, but so are waistlines.