Baja, Land of Drug Wars, Tries to Draw Tourists

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A vendor waits for customers at an artisan market in Rosarito, Mexico. The tourist industry in some Northern Mexican resort towns is feeling the effects of the ongoing drug war.

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Baffert estimates business is down 25% from last year, with the only winners being the all-inclusive resorts, which offer rooms, food and entertainment at one price. "Everyone is discounting, even the five star hotels. People are looking at every penny, brand new luxury properties are wholesaling for $50 a night now."

Lucrative golf rounds have gone south too, down between 30% and 50% this season, according to Greg Tallman, director of golf at Cabo del Sol, considered the "Pebble Beach of Baja."

"Everyone is terrified to spend money," says Tallman. "We're still trying to get a handle on what's happening; this got way out in front of us. We're hunkering down now and seeing what can be done if anything for next season."

Messerli says next season they are going to woo back rich tourists via the Internet, using web-based testimonials, e-mail campaigns, and one-on-one "familiarization trips" for the media and travel specialists. "We want to promote Los Cabos as a value destination now," she says.

Back in Baja Norte, the bad news isn't stopping golf superstar Tiger Woods, from building a new luxury oceanfront golf course on the rocky Pacific coastline south of Ensenada, 70 miles below San Diego. Called Punta Brava, the development includes 125 homes, with prices starting at $3 million for a one-acre lot and $3.5 million for a condo. Opening is slated for 2011. The developer is the Flagship Group, whose principals include Red McCombs, co-founder of Clear Channel Communications.

"It's too difficult to navigate who's corrupt and who isn't; everyone is lying," says the former Gringo Gazette North publisher Conroy. "Basically, many of the developments are gigantic piles of dirt, but the developers have no problem taking your deposits and promising the world. It's just another Mexican rip-off."

A few positives have come out this, says Conroy, who has gone back to making a living as a lawyer in Los Angeles. "The military patrols have cut down on carjackings and their presence has slowed real estate sales," she says. "You can thank the narco wars for preventing more Americans from losing all their money in bad Mexican real estate deals."

See TIME's pictures of the week.

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