Audio Transcript:

MARCO WERMAN: President Obama arrived in Mexico City this afternoon. He's was welcomed by President Felipe Calderon and other Mexican officials. They have lots to talk about -- and little time. President Obama leaves tomorrow for the Summit of the Americas in Trinidad and Tobago. Top of the US-Mexico agenda -- the fight against drug traffickers. At his arrival ceremony today, Mr. Obama acknowledged that Mexico is not alone in that fight.

PRESIDENT BARACK OBAMA: At a time when the Mexican government has so courageously taken on the drug cartels that have plagued both sides of the borders, it is absolutely critical that the United States joins as a full partner in dealing with this issue both through initiatives like the Merida initiative but also on our side of the border in dealing with the flow of guns and cash south.

WERMAN: Every day in Mexico, there is news of more drug-related violence. Today, a shootout between the army and cartel gunmen, in the state of Guerrero, left 16 people dead. That was just hours before President Obama arrived. Mexico's drug cartels have already started to expand their operations inside the United States. Now they're also expanding south into Central America. From Panama, The World's Lorne Matalon reports.

LORNE MATALON: Panama City has become a new staging ground for Mexico's cartels. This report on a seized cocaine shipment allegedly tied to Mexico's Sinaloa cartel is one of several reported this year in Panama. Javier Caraballo is Panama's highest ranking anti-narcotics agent. He says, "Increased Mexican cartel activity in Panama has brought with it violence," because, he says, "Mexico's cartels are characterized by extreme violence." The region's governments also say US efforts to stop drug smuggling by air and sea over the Caribbean have made overland routes across Central America more important as transit points. The Editor of Panama's El Siglo, Jean Marcel Chery, says Mexican cartels are leaving their typical calling cards. Chery says at least 30 people have been found dead, bound & gagged sometimes with placards claiming Mexican cartels are responsible, something that hasn't been seen in Panama before. The same is happening in Guatemala.

MALCOM BEITH: They're expanding because the can. They have the clout, they have the power. Everyone's deadly scared of them

MATALON: Mexico-based reporter Malcolm Beith recently travelled to Guatemala.

BEITH: There are concerns throughout Central America, Panama, El Salvador, Nicaragua, and certainly Guatemala where it's already been seen, these types of beheadings or at the very least clashes between Mexican drug lords down there with local Guatemalan gangs or in between Mexican drug lords.

MATALON: Security analyst Alejandro Schtulmann has just written a report for a Mexican bank on cartel money-laundering in Central America. He says the move is partially explained because Mexico has limited the number of airports allowing flights from South America to land.

ALEJANDRO SCHTULMANN: Nowadays, because of pressure on them in Mexico, the Mexican cartels are meeting their Colombian suppliers in Panama, Costa Rica and Guatemala. The Mexican cartels are establishing new land-based smuggling routes starting in Panama, going through Central America for their shipments to the US.

MATALON: A US law enforcement official, speaking on background, says the US is aware of Mexican cartel expansion into Central America, and is monitoring the situation. For The World, I'm Lorne Matalon in Panama.