This is a tale of two development models used by northern Mexican cities. Both of them are located in the state of Chihuahua; one of them can be considered a success and the other, although it had a recent turnaround, has seen a bitter and brutal chapter of its history unfold during the last decade. Our working assumption is that business is good for cities. However, government must function effectively if businesses, and thus cities, are going to thrive.

The city of Chihuahua is devoted to manufacturing. It has the third largest GDP per capita of any city in the country. Of its currently employed population, 77 percent have a bachelor’s degree. By 2011, up to 17 percent of Mexico’s exports were manufactured in the state of Chihuahua. Of these, 18.3 percent were produced in the city of Chihuahua. Also, the city received $853 million in foreign investment in one recent year.

The other city is Ciudad Juarez. This city’s exports comprise 78.1 percent of the total exports produced in the state of Chihuahua. This figure represents annual exports of $33 billion in manufactured goods; four of every 10 employed people work in manufacturing. Additionally, Ciudad Juarez received $8.2 billion in foreign investment during 2011. It is a city so industrialized that according to, before the 2008 economic crisis, it had more factory jobs than Detroit and Atlanta combined.

Ciudad Juarez, a city that once was catalogued as the most dangerous city on earth, with a murder rate of 200 per 100,000 people, has dealt with devastating drug-related violence and the mysterious recent raping and killing of more than 500 women. Furthermore, by July 2010, the overall death toll had climbed to 6,000 people in about five years, which is more than the number of coalition troops killed who fought in our wars in Iraq and Afghanistan combined.

The key question about Ciudad Juarez is: how is it possible that a city with such a high economic profile can suffer from such dreadful conditions? What went wrong with its development program? While the situation is complex, it seems clear that this mess was partly due to failures in the execution of the city’s urban programs, as well as failure to elaborate suitable measures for the city’s fast-changing conditions.

Lack of planning is by no means a complete explanation of the issues at hand. As a matter of fact, both cities have a long tradition of urban planning. Ciudad Juarez’s first urban plan dates from 1956, and so the question remains, what went wrong?

We know that in the 1970s, both of these cities experienced a demographic explosion. Ciudad Juarez’s boom was noticeably bigger; this was the consequence of the Borderline Industrialization Program, the government plan that enabled in-bond maquila factories to obtain privileged conditions. The manufacturing sector became, by far, the dominant economic force in the city, creating jobs for up to 50 percent of the working population. Suddenly, people began immigrating from other cities and from agricultural areas to Ciudad Juarez.

Consequently, population more than quadrupled between 1960 and 2000, with the biggest growth coming in the mid-1990s following the approval of the North Atlantic Free Trade Agreement (NAFTA). This accelerated growth had consequences; the city didn’t have the resources to create new urban zones with basic services. As a result, new settlers squatted on land surrounding the city, creating sub-urbanized slums. Up to 50 percent of the streets weren’t paved years later. These areas lacked lighting, water, sewer systems, police stations and schools.

Furthermore, the city didn’t create zoning laws, which meant that the land wasn’t strictly separated into industrial, residential or commercial areas. Therefore, factories were dispersed all over the city, which complicated transportation. This was made additionally difficult because the city did not have an efficient public transportation system even for non-industrial areas. Owning a car was almost a requirement for many families. In fact, in 2001, 76 percent of families in the city had a car. On the other hand, those living in the informal housing areas could not afford such transportation.

Additionally, Juarez is a city located on the border of the U.S. This makes it an attractive location for big export-oriented manufacturing facilities. As a border town, it is perhaps not surprising that large illegal industries, such as drug and arms smuggling, would spring up side-by-side with official industry. What is worse, since many of the young people living in the shanty towns did not have good educational opportunities, they were also less able to obtain decent jobs. It is no wonder that some of them were attracted to the many gangs that used Juarez as a base. Subsequently, as drug lords started recruiting members from these places, they were very successful at finding foot soldiers for their drug operations and wars.

Oddly enough, the city did have a plan to cope with these circumstances. Furthermore, the state had an Urban Planning Institute devoted to addressing such problems before they happened. Nevertheless, as documented in the Territorial Diagnosis Study, there was a complete breakdown between the processes of planning and execution. Furthermore, the municipal administration’s ability to control gang violence and activity, on a day-in, day-out basis, proved almost non-existent. The period from 2006 to 2012, which corresponds to the time span when President Felipe Calderon was in charge, marked a time of intense violence throughout Mexico, with 31 mayors murdered all over Mexico. It is not surprising that in this general climate of violence local control might fail.

All in all, during the same period, official data reveal that up to 50,000 people died as a consequence of the drug war. This number is bitterly disputed by civil organizations and researchers, such as Molly Molloy at New Mexico State University, who claims that the real death toll was closer to 100,000. Notice that even in the lower case of 50,000 people murdered, this figure is comparable with the 58,286 American soldiers killed in action during the Vietnam War. From January 2011 to April 2012 alone, 219 police officers died in Ciudad Juarez as victims of the cartel’s strategy to intimidate law enforcement officers.

To summarize, the success of the Borderline Industrialization Program encouraged many people to immigrate to the city looking for jobs. This occurred on a very large scale. The city did not have the infrastructure or resources to cope with the increased demand for housing and services. Consequently, new settlers squatted on land surrounding the city, creating isolated suburban zones lacking services. With no access to jobs, and no schools, poor people and others began to turn to illegal sectors. Correspondingly, drug cartels were eager to hire cheap foot soldiers, and given the dreadful conditions in these slums, they found entire armies. Additionally, less-than-competent city management did not follow planning guidelines that were on the books, and thus allowed disorderly city growth.

Finally, drug cartels inside Ciudad Juarez and from neighboring sectors began wars to control the lucrative trade of narcotics that were on their way to the U.S. by way of Juarez. These wars had incredible impact on the lives of innocent civilians and on the city’s living standards.

By way of contrast, Chihuahua City was more competent in its planning and, more importantly, execution. Admittedly, Chihuahua’s problems were not as severe as those in Juarez. Nevertheless, its population tripled from 1970 to 2005. The city followed a strategy based mainly on controlling the expansion of the urban area. It started by defining an urban center and a road system that made sense. They zoned the city so that each sector had its own internal zones connected by roads and high capacity freeways. In that way, urban structures functioned, connecting the periphery with the center. With good planning, there was a better balance of the number of people who needed work and the number of jobs that were available. This curtailed, to some degree, the development of illegal businesses inside the city and in surrounding areas.

What is more, the municipal administration increased the city’s density by encouraging the infill of empty lots. This strategy brought a reduction in the energy cost for public lighting per person and reduced transportation costs by making the system more efficient. It also had benefits for commerce, since a higher density brings a higher number of potential customers to an area. Finally, Chihuahua didn’t forget the periphery. It built schools, police stations and urban services in these zones. As well, they developed parks to create green zones which fostered citizen interaction and created pleasing environments.

Meanwhile, the municipal strategy in Juarez ignored the potential problems that unfettered and unregulated peripheral growth could cause. At some point, a perfect storm hit. Inefficient transportation, recession, inequality in education and jobs, illegal economic activities, youth delinquency and other factors led to almost complete breakdown. The city administration was unable to cope with all of these problems at the same time.

Although Chihuahua also had crime problems, it sorted them out. It had better planning and better execution, which in the end paid its rewards. On the other side, Ciudad Juarez has learned some lessons and started rebuilding itself, both in terms of planning and execution; it has remarkably improved its economic and safety situation although it still is far from reaching healthy conditions for its people.

Today, the city of Chihuahua has an unemployment rate of 5.9 percent, while Ciudad Juarez, which by the beginning of 2007 saw less than 1 percent of its people without jobs, now reports more than 7 percent. Moreover, according to the executive director of the city’s Association of Maquiladoras, Jorge Pedroza Lozano, the unemployment rate reached 20 percent at its worst, which meant that 97,647 people were out of jobs. The monetary value in terms of salaries lost during the recession was around $500 million per year. This amount of money is so big that it is equivalent to 2.5 times the yearly municipal budget.

The official number of homicides has fallen in Ciudad Juarez to 850 in 2012, while in Chihuahua there were 587 in the same year.

It is not that planning means everything. But, at times, good government with a well-defined strategy can really make a difference.

John Hoffmire teaches at SaÏd Business School at the University of Oxford.

Mario Alejandro Mercado Mendoza is a Mexican citizen and a graduate student at Kaust, a Saudi Arabian University.