Mexico is in a state of anarchy. Although some towns have been spared most of the violence, large cities like Mexico City are cesspools of crime. Millions of Mexicans are currently crossing over the border into the also-ailing United States. Although most Mexicans and Americans just want peace and stability, many Mexicans in the U.S. are currently being killed at the hands of vigilante Americans or are killing and robbing for a living in their new home.
Mexico never made it to the fully-developed level, but its economy had gotten a nudge from NAFTA, which had been passed just before Peak Oil hit. Also, Cantarell Field, discovered in 1966 and one of the last "big four", had put out its most oil ever in 1994 - ironically the same year that it peaked and NAFTA came into effect. With hope for the future, Mexicans didn't see the clouds brewing on the horizon.
The peaking of the Cantarell field in 1994, which was only realized to be in serious decline more than 2 years later after a 20% drop in production, sent tremors throughout the world. Two other problems hastened Mexico's fall. The first was that oil production around the world was also in decline, so it was hard for Mexico to get oil from elsewhere, though Venezuela helped out to some extent in the first few years. The second thing was that the United States heavily promoted ethanol (which itself has turned out to be a dead end), which pushed up the price of corn to extremely high levels. Corn, of course, is the main ingredient in most Mexicans' diet. It has been a cheap, nutritious food that could be made into tortilla chips and many other forms. Since schools and other government-funded organizations relied on the oil revenue from Cantarell and millions of low-income Mexicans found themselves unable to feed themselves, all hell broke loose. The end of the government was around the year 2001, when most areas ceased to be governed and powerful gangs quickly filled the void left behind. As Mexicans flood into the neighboring U.S., the gangs have followed. De facto, parts of southern Texas are under control of Mexican gangs, some of which are calling for a "reconquista", though it is thought that this is just a ploy to give them more support (which is tenuous at best) among the mostly Mexican people they rule over with an iron fist.