Mexico has fallen upon harsh times. Journeying to one of the more popular North American vacation destinations has, in the last few years, been met by stringent warnings, some perhaps overblown, from both Canadian and American security intelligence regarding police corruption, civil unrest and indeed a risk of kidnapping that may await one there. The tourism industry had also been grappling with fears that Mexico’s drug war has made the country too risky to visit. Now comes a mysterious virus that runs the risk of turning the country into a no-go zone in the minds of many travelers. The most recent news about an outbreak of swine flu that has left the streets of Mexico City baron and schools and offices closed only further added to the devaluation of the peso due to a severe drop in Mexican tourism.

Rafael García González, president of the Mexico City Hotel Association, reported a 20 percent drop in national tourism to the capital over the weekend alone and said the effects of the crisis on international visitors were still being assessed. Daniel Loaeza, vice president of the National Restaurant Association, said the closing of restaurants for even a few days could signify the beginnings of major damage to the industry.

Alejandro Rojas, Mexico City’s secretary of tourism, met with Rodolfo Elizondo, the national tourism director, and others in the industry on Sunday to assess how the health crisis could affect tourism and to mount an aggressive response.

“We are going to come to an agreement to distribute to the world the real situation in Mexico,” Mr. Rojas told the newspaper Reforma.

Still, the news from health officials only seems to get worse, with the number of deaths believed tied to the flu virus rising to 103, according to government officials, and the number of people suspected to have been sickened across the country about 1,600 since April 13.

Mexican officials took pains to note that no government had issued an official travel ban to Mexico. But there were worrisome indications on the horizon, with Canada, the United States and Hong Kong issuing a strong warnings against travel here. As the threat spread to other parts of North America and beyond, officials at the World Health Organisation (WHO) and at America’s Centres for Disease Control (CDC) declared public-health emergencies.

For those who had already arrived, many of the usually-recommended tourist destinations, including historical sites, museums and top restaurants, have been shut down on the order of health officials. Mayor Marcelo Ebrard stated to reporters yesterday that if the epidemic grew worse he might order additional measures, including the closing of the public transportation system.

It comes as no surprise that the economic backdraft has been severe. Mexico’s peso currency sank further in early trading today on worries that the outbreak of swine flu could further hobble Mexico’s already battered economy. The peso weakened 3.14 percent to 13.715 per U.S. dollar before the local market’s open. Stocks tumbled worldwide after concerns intensified that the spread of swine flu would hit the global economy.

“Cases do seem to be popping up across continents and people seem to be taking it quite seriously. Since Mexico seems to be where it all started, there is some medium-term impact particularly related to tourism,” said Beat Siegenthaler, head of emerging markets strategy at TD Securities in London. ”But it is too early to say that it could have a major economic impact,” Siegenthaler added.

A prolonged epidemic could hit Mexico’s $13 billion-a-year tourism industry and weigh on already weak retail sales as Mexicans frightened by the flu stay home.

Political risk in foreign investment? Likely to be found in how swiftly the government can curb this growing pandemic, an outbreak likely not to last but indeed to linger in the minds of investors. The ever-growing threat of corruption in investment has unfortunately only intensified as the virus rapidly spreads to an industry vital to the economic standing of a NAFTA member and one-time tourist haven.