VANCOUVER, British Columbia (AP) – With its spectacular bay and stunning, snowcapped peaks, Vancouver ranks as one of the world’s most beautiful cities. But in recent months, the people of Canada’s Olympic city have been living in fear.

Even as Vancouver prepares to host the 2010 Winter Games, its crime rate is going up. Since January alone, there have been 45 shootings in the region, 17 of them fatal. There were 58 murders last year in this region of 2.7 million people, up from 41 the year before, according to the regional Integrated Homicide Investigation Team.

“It’s terrifying,” says Doris Luong, who lives near the scene of a double murder on March 10. “This used to be the best city in the world… I fear for my children.” At a nearby elementary school, students’ movements were immediately restricted as word of the killings spread.

The root of the problem seems to be drugs, or rather a shortage of them.

The Mexican cocaine supply line extends through the United States, especially Los Angeles, up to Vancouver, according to Royal Canadian Mounted Police Superintendent Pat Fogarty. But now the Mexican Government of President Felipe Calderon has mobilised 45,000 soldiers and 5,000 federal police to curb cartel activity. That has driven up the price of cocaine in Vancouver from $23,300 per kilogram to almost $39,000, Fogarty says, and gangs are killing each other.

“People are nervous … and so are the police,” says Fogarty, head of the regional gang task force. “The public’s outraged. The Government’s outraged.”

Vancouver social activist Jamie Lee Hamilton, who lives in Vancouver’s seedy Downtown Eastside, says she no longer has much faith in the justice system.

“I’m really apprehensive about going out in the evening,” Hamilton says. “We’ve turned into an American city.”

Public Safety Minister Peter Van Loan recently called Vancouver the country’s gang capital, and said the violence is the worst in Canada. Canada’s largest city, Toronto, has seen only 11 murders this year in a population of 5.1 million, almost double that of the Vancouver region.

On a visit to Vancouver earlier this month where he met with family members of victims, Canadian Prime Minister Stephen Harper proposed a new law that would label gang killings as first-degree murder with a sentence of at least 25 years and no parole. The law would also create a new offence with a minimum four-year jail term for drive-by shootings.

Harper has said people planning to attend the Winter Games should not worry about violence, with 15,000 police officers, private security and military personnel expected to provide security.

But shopkeeper Nandal Oad disagrees. He says nobody should feel safe coming to the Games.

Oad’s suburban convenience store is just across the street from where shots were fired over morning rush-hour traffic March 10, leaving two brothers aged 19 and 22 dead. The violence has spread far beyond the city’s notoriously drug-infested Downtown Eastside.

Oad says he has removed a wire cash transfer business from his store because of the violence. Police warned him weeks earlier of people carrying guns in the neighbourhood, and he believes unemployment and addiction are fuelling the violence. The unemployment rate in British Columbia jumped to 7.25 per cent in February, up from 4.4 per cent last February.

“It’s very, very scary,” Oad says. “We can’t carry money here.”

In one particularly brazen shooting last month, a mother was shot dead in her husband’s luxury vehicle in broad daylight as her four-year-old sat in the back seat. Hundreds turned out to protest gang violence last month after the string of shootings.

Local authorities say they have stepped up actions to curb the gangs and their violence. Police announced the arrests of 10 gang members recently, and four more were arrested on drugs and weapons offences earlier this month.

Vancouver police Chief Jim Chu acknowledged the city is in the middle of a “brutal” gang war, and said the strategy is to detain gang members on as many charges as possible. However, some of those arrested are being released on bail by the courts.

Vancouver’s mayor, Gregor Robertson, has offered his own blunt assessment: Police are fighting a losing battle.

Vancouver may in part be paying the price for some of the very features that help make it so attractive. Rob Gordon, director of the criminology school at British Columbia’s Simon Fraser University, noted that the city has a laid-back attitude, easy access to the US border and a vast backcountry with a climate ripe for growing potent marijuana. Police say British Columbia marijuana, known as BC bud, is often traded for cocaine, and Vancouver is known for marijuana grow-ops, or growing operations.

“Vancouver has become a safe place in which to grow and produce a variety of drugs,” Gordon said. “It’s a combination of our geography, a somewhat more laid-back approach to drugs and drug use, and the proximity to the border, easy export routes primarily to the United States – I can’t think of any other city in Canada that shares those characteristics.”