TUXTLA GUTIÉRREZ, Mexico—Criminal gangs behind the U.S. drug epidemic are seeing accelerated growth, commanding greater control over more territory in Mexico, where they are largely free to murder rivals, neuter police, seize property and strong-arm municipalities into giving them public contracts.

Gangs affiliated with Mexico’s two largest drug cartels—battling to the death over market share—have grown in number and influence since President Andrés Manuel López Obrador took office in 2018. He eased up under a policy he called “hugs, not bullets.” Arrests by Mexico’s national guard, created under López Obrador to replace federal police, fell to 2,800 in 2022 from 21,700 in 2018, according to the national statistics agency.

Mexico’s retreat from interdiction opened the door to an expansion of criminal enterprises by cartels whose most lucrative business remains the production and transport of fentanyl and methamphetamine to the U.S. Softening prices for cocaine and marijuana have squeezed profits, prompting cartels to broaden extortion rackets and pursue new moneymaking schemes.

Under the threat of force, city mayors are appointing gang members to local treasury offices, said two former mayors in Mexico’s state of Guerrero. Those jobs effectively give cartels control over contracts for municipal construction, procurement and other public services. Killings of government officials, candidates and political party members rose to 355 in 2023 from 94 in 2018, said Sandra Ley, a security expert at the México Evalúa research center. “It’s not just violence,” she said. “It is political, social control.”

The spread of cartel control and increasingly violent tactics have driven Mexican families to the U.S. in record numbers. Around 87,000 Mexicans traveling with children were apprehended on the Southwest U.S. border in the fiscal year that ended Sept. 30, nearly four times as many as in the previous year, according to Border Patrol data. In December, nearly 30,000 were detained. By diversifying into migrant smuggling, cartels profit even from people trying to escape their control.

“You feel totally helpless, totally abandoned by authorities and society in general. You feel like nothing,” said Araceli Gatica, a 32-year-old who left San Luis Acatlán, a mountain village in Guerrero. A local gang threatened to kill her after she refused to keep paying $200 a month in extortion. She arrived recently with her three children in Ciudad Juárez, across the border from El Paso, Texas, hoping to seek asylum in the U.S.

Extortion has surged since 2018, according to data from Mexico’s statistics agency. Avocado and lime producers in the state of Michoacán, an export hub for U.S. markets, have blocked roads in recent months to protest extortion and thefts of their products by gangs, which has tripled in the past year. Truck drivers staged a nationwide strike this month demanding action.

In December, farmers from a village in the state of Mexico attacked local cartel members with machetes and sickles, revolting against demands they each pay as much as $600 to work their own land, authorities said. The fight killed 10 gang members and four farmers.

Many local officials in López Obrador’s Morena party, which governs 23 of Mexico’s 32 states, interpreted the hugs-not-bullets policy as permission for them to accommodate gangs as a way to quell violent crime and reduce death threats, said Samuel Logan, head of Southern Pulse, a U.S.-based security consultant.

Some cartels now fund the election campaigns of allies, in addition to eliminating officials who oppose them. Such interference with fair and free elections puts Mexico’s democracy at risk, said Manelich Castilla, who served as Mexico’s federal police chief from 2016 and 2018.

Norma Otilia Hernández, the mayor of Guerrero’s capital city of Chilpancingo and a Morena party member, was recorded on video at a restaurant with the alleged leader of a local drug gang. “Tell me, how can I help you?” she said, according to a social-media post of the video.

The mayor didn’t know she was meeting with a presumed criminal, her aide said. Months later, gang members killed Guerrero’s top prosecutor and the federal security chief of the state, authorities said.

Mexico’s cartel expansion landed with fury in the mountains of Chiapas, a southern state. In September, two dozen armed men of the Jalisco New Generation Cartel arrived in Motozintla, a village where Saturday night drunks used to be the biggest headache for police.

The Jalisco cartel, Mexico’s fastest-growing criminal group, known for its brutal paramilitary tactics, has seized properties in the area, demanded payments from shopkeepers and killed those who object. One political activist was beaten to death in front of his family.

Hundreds of people have since fled Motozintla and nearby towns. “We are at war, we live under siege,” said Braulio, a teacher. “People just ask themselves: Who can help us? Not even God.”