Relatives of victims cry in front of the recently burned-down Casino Royale, in Monterrey, Mexico.  AFP PHOTO/RONALDO SCHEMIDT
Relatives of victims cry in front of the recently burned-down Casino Royale, in Monterrey, Mexico. AFP PHOTO/RONALDO SCHEMIDT - 
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Steve Chiotakis: In Mexican governmentcontinues to wage war against drug cartels -- some say not hard enough, though. But all the violence just South of the border is affecting Mexico's economy.

The BBC's Julian Miglierini reports.

Julian Miglierini: Mexico may be a country at war, but it's not apparent on the streets of the capital Mexico City. Mexico's overall economy is booming. It grew by 5.5 percent in 2010 and forecasts for this year are also optimistic.

But it's pretty clear that Mexico would be growing even more quickly if not for the widespread violence in some parts of the country, such as along the border with the United States.

John Ackerman is an analyst at Mexico's National Autonomous University.

John Ackerman: The Mexican government is in denial in terms of real impact of violence on tourism and economic development in general. They are correct in that it could be a lot worse, and that the violence is located in specific areas of the country, nevertheless, the Mexican economy would be much more advanced if it weren't for this level of violence.

The government argues investment is still flowing. And it uses the example of Wal-Mart to prove its point. The American retail giant recently announced that it will invest more than $1 billion in Mexico this year.

The company's Mexican spokesperson is Antonio Ocaranza.

Antonio Ocaranza: Year by year, we continue to have historic levels of sales, so we have not seen an impact of that situation on our sales or the way we do business.

But the story is different for small business owners. Many of them suffer dearly from the escalation in crime and the form of extortion by organized gangs.

This woman runs a small company. Six months ago she was approached by armed men demanding she pay more than $4,000 every month, or her family would be killed. She agreed to pay. She asked us not to name her.

Woman: We had a peaceful, quiet life, and all of a sudden these people come into your life and you can't go out into the streets because you think "they're there." But what hurts the most is the nerve of the authorities to deny it. There's no reason I would make this up.

Her story is far from unique. And with the drug war engulfing more and more areas of the country -- including its industrial heart, the northern city of Monterrey - few in Mexico believe that its economy will remain bulletproof.

In Mexico City, I'm the BBC's Julian Miglierini for Marketplace.