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Reuters - A Mexican drug cartel is responsible for a cellphone-detonated car bomb that killed four people in a city on the U.S. border, state security forces said on Friday.

In the first attack of its kind in Mexico's drug war, the explosion tore through a major intersection in Ciudad Juarez across the border from El Paso, Texas, late on Thursday, damaging nearby buildings and sending flames into the air.

Federal police blamed La Linea, the armed wing of the powerful Juarez cartel, for the attack and Mexico's security ministry said it was retaliation for the arrest this week of a Juarez cartel member.

"There were 10 kilos (22 pounds) of explosives, activated from a distance by a cellphone," said Enrique Torres, an army spokesman in Ciudad Juarez, a manufacturing center that has become one of the world's deadliest cities over the past two and a half years.

TV images showed the wreck of a car with just one front wheel intact and two federal police vehicles charred and on fire after the blast in the city's downtown area.

The army said C4 plastic explosive was used in the attack, which killed a policeman, a doctor, a rescue worker and an unidentified man.

Ciudad Juarez Mayor Jose Reyes Ferriz said drug gangs set up an elaborate trap in which a wounded man dressed as a city police officer was dumped on the street as bait. The assailants then called emergency services to lure federal police to the scene and detonated the bomb as they arrived, the mayor told a news conference.

President Felipe Calderon is battling against surging violence across Mexico after launching his military-backed crackdown on drug gangs in December 2006. More than 26,000 people have been killed.

The violence is worrying Washington and some investors in a the oil-producing country with an emerging economy once known for its political stability next door to the United States.

'REMINISCENT OF COLOMBIA'

Two rival drug gangs -- the local Juarez cartel and the Sinaloa cartel led by Joaquin "Shorty" Guzman -- have been fighting an all-out war in Ciudad Juarez for control of the drug trade that has killed nearly 6,000 people there in the past three and a half years.

Hitmen have decapitated people and gunned down rivals in daylight attacks. But the car bomb was a clear escalation of the violence, a U.S. law enforcement source told Reuters.

"What you are seeing now is a whole new level of violence. It's a vehicle-born improvised explosive device," said the source, who is following the investigation closely and did not want to be named.

"This has raised the bar to a level of violence that Mexico has not seen yet. It is reminiscent of Colombia ... What we are seeing now is what the military is running into in Iraq and Afghanistan."

Graffiti scrawled on a wall near the blast claimed the attack was the work of the Juarez cartel and warned that "what occurred ... would continue to happen to authorities that carry on supporting Shorty."

Mexican authorities arrested Jesus Armando Acosta Guerrero, who is accused of being a senior member of the Juarez cartel, on Thursday in Ciudad Juarez.

Mexico's peso pared losses after the bombing, as traders appeared unfazed. But economists said if drug gangs launched more car bomb attacks, financial markets could be hit.

"If this is repeated, it could begin to have more of an impact in economic activity," said Jimena Zuniga, an economist at Barclay's Capital in New York.

Mexico's peso fell after the assassination of a candidate for governor before July 4 state elections, a rare case where Mexico's drug war immediately affected markets.



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