At 3.48pm, eight men entered the Casino Royale in Monterrey, Mexico. The terrorists – branded so by President Felipe Calderón – doused the carpet, slot machines and tables with petrol. They set the two-story building ablaze and dashed out. Within 150 seconds, the place was a veritable inferno, its escape-proof restrooms filled with patrons seeking refuge from the gunmen and the flames.

An external security camera caught the arrival of the criminals, though black plumes of smoke veiled their escape. Five men, allegedly members of the Zetas cartel who have since confessed to participating in the attack, were arrested on Monday. The authorities believe the men were avenging the owner's refusal to pay extortion money – a modern-day, Mexican black hand: the terrifying extortion method used on wealthy Italian immigrants in New York at the turn of the 20th century.

It was a spectacle of bloodshed that shook Mexico to its core: in a matter of minutes, 52 civilians were killed. A war-hardened nation was left in a pained stupor and a void of disbelief. The victims, mostly well-to-do women, were innocent people, used by the men who really run the country to broadcast their latest message: we set the rules here and impose our authority with impunity.

The casino attack has set a damning new precedent in Mexico. Cartels will play dirtier than ever as a bid for dominance in an escalating retaliatory war. The massacre has unlocked the next level of "acceptable" atrocity, in which ruthlessness means survival and civilians are convenient pawns.

Mexicans have been terrorised into an ever-higher state of paranoia. People who avoided night-time activities and risky places in the hopes of decreasing their exposure now understand that violence has become an equal-opportunity demon. The entire country feels like it's the wrong place, and now feels like the wrong time to be in it.

The current administration will have to alter its strategy. It has already shown uncharacteristic spine, with President Calderón offering a $2.4m reward for information on the authors of the crime in Monterrey – an amount on par with the recompense offered for the capture of Mexico's top drug lords. Despite being historically wary of intervention from its northern neighbour, the government and the people may now be more receptive to broader and more direct assistance from the United States. There is a collective sense that last week's attack in Monterrey has proved, beyond a shadow of a doubt, that the situation is out of control – and it is time to enlist and accept external help.

President Calderón addresses the nation, Thursday, with his annual report. From their grief-stricken homes, many Mexicans will be watching closely – not for his update on the economy, social programmes or foreign investment, but for an admission of failed responsibility in the face of a war he has never been prepared to win.

If he acknowledges that the government is losing the war on drugs, President Calderón may bury the last shred of hope that his political party, the PAN, will stay in power through 2012, when the next presidential elections will take place. But any incoming administration will be forced to admit the existence and extent of a drug war perpetuated by international demand and aided by internal corruption.

The government's first task in fighting organised crime must be to tackle corruption in law enforcement. In a land where "silver or lead" (the standard euphemism for "money or bullet") has usurped the rule of law, that challenge is a monumental one.