Mexico Warms U.S. Ties, Is Open to Oil Industry Role

The Mexican government showed a new willingness Tuesday to give American companies a role in its state-owned oil monopoly, U.S. officials said as President Bush and Mexican President Carlos Salinas de Gortari wrapped up two days of talks.

Reports from U.S. Cabinet officials after the meetings indicated that in several areas in addition to oil--most notably, diplomacy and law enforcement--Salinas is reversing Mexico’s longstanding effort to demonstrate independence from U.S. policies.

Treasury Secretary Nicholas F. Brady said the Mexican government has requested a $1.5-billion loan guarantee for Pemex, the state oil monopoly, to contract with U.S. companies to drill for Mexican oil.

“What it means is that, for the first time, the services of American companies will be welcomed and sought after with regard to drilling and other supplies in the Mexican oil fields,” Brady told reporters at a news conference.

Mexican presidential spokesman Otto Granados Roldan confirmed the request for a loan guarantee but rejected predictions by some business experts that this may open the door to wider U.S. participation across the board in the Mexican oil industry.

Brady said the loan guarantee “is not a done deal yet, but it is being contemplated.”

Jack Sweeney, the Treasury Department representative at the U.S. Embassy in Mexico City, added, “I consider it a very important step. It is a step toward showing that Mexico needs to open its economy and get the capital necessary to develop Pemex.”

U.S. drilling companies would not be given equity or a share in any oil reserves they might discover, Brady said. Mexico nationalized its oil industry in 1938, expropriating the holdings of U.S. and other foreign companies.

The opening of the oil industry, even just a crack, occurs as the two nations are about to embark on negotiations on a free-trade agreement that would sharply reduce or eliminate tariffs and other barriers to cross-border trade.

In another demonstration of the warming of the bilateral relationship, Salinas reiterated his support for U.S. policy in the Persian Gulf.

With Bush at his side, the Mexican president said in a speech to Monterrey civic and business leaders that he has supported U.N. Security Council resolutions passed up to now to pressure Iraq into withdrawing from Kuwait.

In another area, Atty. Gen. Dick Thornburgh said he and his Mexican counterpart, Enrique Alvarez del Castillo, agreed to hold a conference of drug prosecutors from both nations in Phoenix in January.

He suggested, but avoided confirming, that the Mexican government is allowing U.S. officials to fly on Mexican radar airplanes on anti-drug missions over northern Mexico. The airplanes, recently purchased from the United States, are used to track aircraft believed carrying Colombian cocaine to the United States.

The two nations also announced in a joint communique at the end of the meetings that they would open nine new border crossings. Their locations were not disclosed.

The indications of new cooperation in oil exploration occur at a time of heightened concern over further cutbacks in the delivery of Persian Gulf oil in the event of war. Brady said the American officials did not directly ask Mexico to increase its oil deliveries to the United States if there is a war, but he pointed out that Mexico already has agreed to try to increase its production and “that still stands.”

The Mexican government increased its oil production by 100,000 barrels a day soon after the gulf crisis began. Mexico exports about 1.4 million barrels a day, 60% of that to the United States.

There was no sign that Mexico would relax its strict--and constitutionally mandated--prohibition on foreign investment in the oil industry or ownership of the oil itself, which would remain in Mexican hands.

Still, George Baker, author of a book on the Mexican oil industry and a visiting scholar with UCLA’s Program on Mexico, said: “This is cracking ajar the door to some future date at which that (investment) would be possible.”

Even the opening suggested by the U.S. officials Tuesday reflected what Baker said was a “profound change” in the way Mexico views its oil industry. Pemex has been more than a cash producer for the government--it has been a subject of national pride.

“It has to do with the fundamental meat and potatoes of Mexican politics,” Baker said in a telephone interview.

The sensitivity of the issue in Mexico was reflected in the fact that, although the greater U.S. role was disclosed Tuesday, the government apparently opened the way for foreign participation in drilling a year ago. At that time, Pemex renegotiated a contract with oil workers eliminating a clause that gave union-owned companies the right to a percentage of all contracts with the firm.

Then Pemex quietly began contracting with foreign companies directly, according to Miguel Angel Sanchez, a reporter who covers the oil industry for El Financio newspaper in Mexico City.

During his second day with Salinas, Bush spent more than an hour with the Mexican president and senior advisers from both nations.

In a speech to Monterrey business and civic leaders at the Teatro de la Ciudad, Bush raised a red flag against “trade-distorting subsidies and artificial barriers,” which he said “create winners and losers before the game ever begins.”

“We must insist that trade with the nations of Europe, Asia and elsewhere, at the very least, be conducted on a level playing field,” the President said, pressing for agreement to conduct global trade in a spirit of “fairness and openness.”

Juanita Darling in Mexico City contributed to this report.