Bush Asks Latin Debt Forgiveness : Diplomacy: Aides say the President will next seek a free-trade pact with Mexico to spur oil production.

President Bush today sent Congress legislation to forgive part of Latin America’s debt and aides said he will follow it by seeking authority for a free-trade pact with Mexico.

With the Persian Gulf situation focusing attention on world oil supplies, a free-trade pact with Mexico could help spur production in that country. Mexico has the world’s eighth-largest reserves of oil.

The United States already has such an agreement with Canada, under which all tariffs and other trade barriers will be lifted by the end of the century.

Administration officials, speaking on condition of anonymity, said Bush would like to have congressional agreement to begin free-trade talks with Mexico ready when he goes to Mexico City in November.

In a signing ceremony at the White House, Bush said the current attention on the Middle East does not lessen his Administration’s commitment to Latin America.

Bush has called for an eventual free-trade zone extending from the Arctic Circle to Cape Horn. He said the legislation sent to Capitol Hill today is an important step toward that goal.

The legislation submitted today would forgive about $7 billion in loans owed to the government by Latin American and Caribbean countries.

Latin nations owe U.S. banks an additional $48.3 billion.

The bill also seeks to make it easier for U.S. companies to invest in Latin America. Bush called the package “trade, not aid.”

Administration sources said the free trade measure could be sent to Congress as early as next week.