Mexico drug cartel kills candidate for governor

A popular candidate for governor in the northern Mexican state of Tamaulipas was murdered by suspected hit men on Monday in the worst sign so far of political intimidation by drug cartels.

Traders sold the Mexican peso heavily as TV images showed the bodies of Rodolfo Torre and four aides from the opposition Institutional Revolutionary Party, or PRI, which holds power in Tamaulipas, lying on a highway after they were ambushed on their way to a campaign event for the July 4 election.

Interior minister Fernando Gomez Mont condemned the attack as "absolutely reprehensible" and headed to Tamaulipas, across the US border from Texas, to offer his support.

"This is not a message, it's a challenge. How far are they prepared to go," said national security specialist Javier Oliva at Mexico's National Autonomous University in Mexico City.

Torre's killing is the highest-level political assassination in Mexico since the 1994 murders of PRI presidential candidate Luis Donaldo Colosio in the border city of Tijuana and prominent PRI party leader Jose Francisco Ruiz Massieu in Mexico City, as the country grappled with its slow transition to democracy after decades of one-party rule.

Torre's killing was the latest sign that Mexico's drug gangs are trying to sway this weekend's vote for governors, mayors, and local deputies in a dozen states as they brazenly fight back against security forces deployed to quash their power.

"We cannot permit these kinds of actions that threaten the lives, peace and security of all Mexicans," Gomez Mont told a news conference. "This renews the need to fight organised crime on all fronts."

Mexico is in the grip of a deadly and escalating war on drug gangs that has killed more than 25,500 people, mainly traffickers and police, since president Felipe Calderon took power in late 2006 and launched his army crackdown.

The soaring toll is alarming Washington and worrying tourists and foreign investors.

News of Monday's killing hit Mexico's peso, leaving it 0.46% weaker at 12.71 to a dollar as TV images showed the bodies of Torre and his aides, covered by sheets, on a highway next to PRI campaign trucks.

"It's the political level it is reaching that is the worry," said Daniela Blancas, a currency strategist at Scotia Capital in Mexico City.

A Tamaulipas government official, who declined to be named, blamed Torre's killing on the fight for power between the powerful Gulf cartel and its former armed wing, the Zetas, who are warring over lucrative smuggling routes into Texas.

A local police officer, who asked not to be identified, told Reuters that 16 hooded gunmen ambushed Torre as he was travelling to the town of Valle Hermoso, near the US border, for a campaign event.

TV images showed shattered windows in the two abandoned campaign trucks near the victims' bodies.

Valle Hermosa was the scene of another suspected drug gang attack last month when a mayoral candidate for the ruling National Action Party, or PAN, was killed.

"The change, the new thing we're seeing in Mexico is how the cartels are pushing into the political environment," said independent Mexican security analyst Alberto Islas.

"It's an act aimed at sending a message ... to say we are the ones in charge here ... This area is controlled by the Gulf cartel or the Zetas. Now we are seeing their dispute reaching the level of getting rid of gubernatorial candidates."

To date, Mexico's financial securities have been largely unaffected by the raging drug war, although some foreign companies operating in the violent northern border area have said they are reconsidering some investment projects.

Jimena Zuniga, an analyst at Barclays Capital in New York, said Monday's killing was harder to dismiss from a markets standpoint than previous episodes of violence.

"There have been some hints in that state that organised crime was trying to intimidate candidates. Fortunately, it doesn't seem to be generalised in other states holding elections this Sunday, but nonetheless it raises a big yellow light," she said.