MEXICO CITY, Feb 5 (Reuters) - British companies recognize the security threats posed by Mexico's drug violence but are more focused on opportunities in a batch of economic reforms in Latin America's No.2 economy, Britain's visiting deputy prime minister said on Wednesday.
"Most of the investors I've spoken to accept there are parts of the country where there is conflict, there is violence, there is insecurity," Deputy Prime Minister Nick Clegg told Reuters in an interview during a trade visit to the Mexican capital.
"But I think ... far from seeing threats, many, most, all of the members of the delegation I've brought only see opportunities in Mexico."
Grisly drug gang violence in Mexico has killed more than 80,000 people since 2007. But President Enrique Pena Nieto has sought to shift attention toward an overhaul of the economy, pushing through landmark reforms to spur competition in a telecommunications industry dominated by billionaire Carlos Slim, and to open up the state-dominated energy sector to private oil majors in a bid to boost growth.
Clegg highlighted Mexico's population of nearly 120 million people and Pena Nieto's reform package as the main lure for British businesses.
Heads of the Mexico offices of oil giants BP and Royal Dutch Shell as well as an executive from Britain's BG Group were among business leaders at a reception held for Clegg on Tuesday, underscoring British interest in Mexico's newly-opened energy sector.
U.S. Commerce Secretary Penny Pritzker, also visiting Mexico, said American firms were also focusing on business opportunities.
"The issue of security has not been at the forefront of conversation," she said. "The focus has really been on what are the opportunities and how can American companies be part of a win-win solution for some of the challenges facing Mexico."
Clegg's comments highlight the conundrum faced by Mexico as it seeks to bolster its international image, drive foreign investment and boost growth, which has lagged regional peers in recent years.
Mexico had its sovereign rating upgraded to the coveted "A" grade by Moody's on Monday, but is still grappling with nationwide violence as drug gangs battle with fellow cartels, vigilante groups and security forces, while extorting businesses and kidnapping executives.
Although the murder rate has fallen slightly since Pena Nieto took office in December 2012, it remains stubbornly high and the kidnapping and extortion rates have sky-rocketed.
Investors, however, appear unperturbed by the violence and Mexico has said that foreign direct investment (FDI) totaled a record $28 billion during the first 9 months of 2013.
The endless cycle of drug violence, which is also ravaging Central America, has led some regional leaders like Guatemala's Otto Perez to begin openly discussing drug legalization.
Last week, the left-leaning party that rules Mexico City said it would propose raising the amount of marijuana residents can possess to help speed up drug liberalization in Mexico.
In September, a group of prominent Mexicans including former ministers, businessmen, artists and Nobel Prize-winning scientist Mario Molina urged the government to decriminalize marijuana in an effort to reduce corruption and lower the income of cartels.
Pena Nieto has resisted taking that step, but officials have said that he is closely watching developments elsewhere, such as in Uruguay which recently legalized marijuana. Lawmakers say that Mexico is likely to gradually change tack once more countries in the Americas have liberalized drug laws.
Despite advocating a more "open-minded" drug policy that makes room for alternative approaches, Clegg did not think legalization was necessarily the answer.
"I don't think legalization is the magic wand solution for the drugs problem in the U.K. or the world as a whole," he said. "I'm not going to start telling the Mexican government or Mexican regional governments what to do."
(Additional reporting by Christine Murray; Editing by Simon Gardner and David Gregorio)