Mexico a Potential "Failed State"?

Way off topic: I am stunned by this article in the Wall Street Journal about the decline of the civil order in Mexico. I had seen No Country for Old Men, and various segments about Mexico, and the kidnappings in Phoenix, Arizona on Fox News, but I thought it was sensationalizing the problem. I do value the Wall Street Journal as a news source and this article, The Perilous State of Mexico, says that many fear the drug cartels have grown too powerful for the Mexican government to control and the the U.S. military has recently singled out Mexico and Pakistan as "the two countries where there is a risk the government could suffer a swift and catastrophic collapse, becoming a failed state."

Pakistan is the greater worry because the risk of collapse is higher and because it has nuclear weapons. But Mexico is also scary: It has 100 million people on the southern doorstep of the U.S., meaning any serious instability would flood the U.S. with refugees. Mexico is also the U.S.'s second biggest trading partner.

Mexico's cartels already have tentacles that stretch across the border. The U.S. Justice Department said recently that Mexican gangs are the "biggest organized crime threat to the United States," operating in at least 230 cities and towns. Crimes connected to Mexican cartels are spreading across the Southwest. Phoenix had more than 370 kidnapping cases last year, turning it into the kidnapping capital of the U.S. Most of the victims were illegal aliens or linked to the drugs trade.

Former U.S. antidrug czar Barry McCaffrey said Mexico risks becoming a "narco-state" within five years if things don't improve. Outgoing CIA director Michael Hayden listed Mexico alongside Iran as a possible top challenge for President Obama. Other analysts say the risk is not that the Mexican state collapses, but rather becomes like Russia, a state heavily influenced by mafias.

Is this scaremongering or another real threat?