When American baseball executives were looking for a place to move the struggling Montreal Expos franchise five years ago, Mexican investors brought them here, to this booming metropolis two hours south of the Texas border.

The case for Monterrey was a strong one then. Business journals ranked the city as Latin America’s safest, and hundreds of U.S. companies were setting up operations. Nothing would cement Monterrey’s reputation as a world-class city like a Major League Baseball team.

“It would have been a source of pride for all of Mexico,” said Roberto Magdaleno, general manager of the local club, the Sultans, as he looked out over his aging ballpark.

Instead, the Montreal Expos moved to Washington and became the Nationals. And the Zetas drug cartel moved to Monterrey and began dumping bodies.

As Mexico’s wealthiest urban area, Monterrey is a symbol of the country’s aspirations, with a well-educated workforce, leading universities, thousands of U.S. and other foreign business executives, and a per capita income twice the national average. But today the city is at the front of Mexican President Felipe Calderon’s U.S.-backed drug war, and its future is clouded by lawlessness. As one top executive here said, “If Monterrey is lost, all is lost.”

Until recently, the city’s chic shopping plazas and shady streets filled with joggers seemed more like Houston than Ciudad Juarez, the gritty, low-wage manufacturing town along the Texas border that is being depopulated by eight homicides a day. But the same qualities that made Monterrey appealing to investors — good schools, exclusive neighborhoods, upscale restaurants — made it attractive to bosses of the Gulf cartel and its main rival, Los Zetas.

The two mafias are locked in vicious competition at a particularly inopportune time for Monterrey. With the U.S. economy rebounding and labor costs rising in China, the city is poised for another boom. But a surge in violence is putting the economy at risk.

“It could be devastating for Monterrey’s international image,” said Jesus Cantu, a professor at the Tecnologico de Monterrey, Mexico’s top university.

Homicides in the city and the surrounding state of Nuevo Leon more than tripled last year, to 828, state prosecutors said, and January’s tally of 144 killings was the highest on record.

Last month, the 60-year-old security chief of the local prison was snatched from his home, and his butchered remains turned up in a cardboard box. Ten days later, the corpse of the state’s top intelligence official was found in a burned-out car, one of more than a dozen police officers slain this year. In the past week and a half, assailants have attacked five Monterrey area police stations with grenades and automatic weapons.

Motorists travel in fear of having their cars commandeered for impromptu roadblocks set up by grenade-throwing gangsters. Gunmen stormed a seafood restaurant in a middle-class neighborhood Feb. 16 and held patrons hostage, robbing and beating them, then stripping and sexually assaulting several women.

“The city has changed,” said Carlos Miguel, a 42-year-old accountant shelling out $120 to buy his wife a 5,000-volt stun gun at a kiosk in a mall. “We don’t go out at night anymore.”

Scars amid growth

Local officials insist that Monterrey is not descending into the kind of criminal anarchy that has turned border cities into no-go zones. Despite the grisly headlines, the region added 95,000 jobs last year and pulled in $2.4 billion in foreign investment, a record amount. Construction cranes still sculpt the city’s skyline.

Scott Wine, chief executive of Minnesota-based Polaris Industries, stands by his decision to open a 420,000-square-foot factory in Monterrey this year, where his company will manufacture all-terrain vehicles. But when he attended a meeting that Calderon held last month to soothe jittery foreign investors, Wine said, business leaders asked tough questions about security.

“Monterrey is world class in manufacturing, but it needs to be world class in safety again,” Wine said.

Yet even Monterrey’s biggest boosters say their town’s reputation has been scarred. Helicopter maker Eurocopter announced last month that it was scrapping plans to build a $500 million facility here, opting for the central Mexico state of Queretaro, where drug violence has been minimal.

“We could grow a lot more if we didn’t have these security problems,” said Juan Ernesto Sandoval, Chamber of Commerce president.

Monterrey’s captains of industry have been drawn into the fight. Lorenzo Zambrano, chief executive of cement giant Cemex, assigned his top executives to help the state government carry out its rescue plan. He said leaders let cockroaches into the kitchen. “We have to work together to fight this plague,” Zambrano said.

Calderon said that he will send four additional army battalions to Monterrey and the border region, which Mexican newspapers have taken to calling the “northern front.”

Top state officials say they have a comprehensive plan to boost social spending, reform the judicial system and purge the police of corrupt officers. Salaries for starting officers will nearly double, from roughly $600 a month to $1,100, Lt. Governor Javier Trevino said.

“We are facing problems created by many years of social neglect,” Trevino said. “But it is no longer possible to live on little islands of security.”

In San Pedro Garza Garcia, the Monterrey suburb that is Mexico’s richest enclave, Mayor Mauricio Fernandez has tried to do just that, stoking his reputation as a “rudo,” one of the tough guys in the pantheon of Mexican wrestling.

“The more prepared you are for war, the less likely you are to be attacked,” said Fernandez, a scion of Monterrey wealth whose family made its fortune in paints and plastics. “If you pick a fight with me, you are going to lose.”

Fernandez has installed 2,000 security cameras, quadrupled the police force, established neighborhood watches with 1,000 residents and built his own intelligence service in a $65 million bid to “armor plate” the district. “I pay for information, just like the FBI or Scotland Yard,” he said.

But Monterrey’s affluent are skittish. At the Ferrari dealership, both of the $350,000 cherry-red models on the showroom floor had been bought and paid for, but the owners have been too fearful to pick them up, employees said.

Living with fear

In August, the U.S. consulate ordered its personnel to move their children out of Monterrey after two security guards were slain in a botched kidnapping attempt at an elite school attended by children of consulate staffers.

Nervous Mexican parents now keep their kids at home at night, and concerts by the Jonas Brothers, Bon Jovi and Lady Gaga have been canceled. Even Magdaleno, the baseball executive, said games have been moved up to 7 p.m. so fans can get home early.

The threats became too much for Alejandro Junco, publisher of El Norte, Monterrey’s largest newspaper, and the national paper Reforma.

Junco moved his family to Texas after someone dumped a corpse at his ranch, and the Zetas crime syndicate started demanding extortion money from the summer camp run by his daughter. Junco now commutes to Monterrey by private jet, then arrives on the roof of his newspaper offices by helicopter. He says he feels lonely.

“I loved my life here. I wouldn’t give it up for anything. But I did. I gave it up,” Junco said. “We had trouble before, but nothing like this, nothing.”

A representative of the Zetas demanded that Junco take down a Reforma Web site — called the Red Hot Border, Frontera al Rojo Vivo — because the cartel didn’t like the comments section. “They said we had 72 hours, or they would blow up our building,” Junco said.

The publisher took the site down, then later brought it back, without a comments section.