Mexico Agrees to Entry of U.S. Banks and Insurers : Economics: Breakthrough removes barrier to controversial North American Free Trade Agreement.

U.S. and Mexican negotiators have reached a crucial agreement that will allow U.S. banks, insurance companies and brokerage houses to operate in Mexico, moving the two countries one major step closer economically, a senior Bush Administration official said Monday.

With President Bush and Mexican President Carlos Salinas de Gortari scheduled to meet for about an hour in San Diego this afternoon, before they both attend the Major League Baseball All-Star Game at Jack Murphy Stadium, the agreement eases the way for the officials to move beyond one of the stickiest elements in the negotiations on the controversial North American Free Trade Agreement.

The Administration official, speaking on condition of anonymity, said that the pact would be fully operational by the year 2000.

“This was one of the primary subjects for the negotiations,” he said. “It’s a big issue for the United States. It’s an important issue for U.S. industry.”

Indeed, he said, had agreement not been reached in the last few weeks, the issue would have stalled the entire range of negotiations on the free trade pact, putting the broad agreement at risk.

“If it hadn’t opened up, it would have been a deal-breaker,” he said.

As a result of the movement, however, the overall trade agreement, which Bush has made one of his key economic sales pitches in the presidential campaign, “seems to be getting nearer,” the official said.

It had been hoped as recently as last week that the free trade agreement would be ready for initialing today by Bush and Salinas in San Diego, but--as is frequently the case in complex trade talks on which billions of dollars rest--last-minute obstacles slowed the negotiations beyond the point of achieving overall agreement by today.

Bush has frequently pointed to the impact that exports have on the U.S. economy, and in California, $5.5 billion worth of exports--10% of the goods the state ships out of the country--go to Mexico, the United States’ third-largest trading partner.

Remaining obstacles to an agreement include issues involving agriculture and energy, a senior Administration official said. “But I think both sides feel that we’re moving along quite well,” he added.

The talks today are expected to help close the gap, with the two leaders expected to search for possible breakthroughs on which negotiators could be told to focus.

Carla Anderson Hills, the U.S. special trade representative, is accompanying Bush to the meeting, the President’s 10th such session with Salinas.

By at least one account, an agreement with Mexico to free up barriers to trade and eliminate tariffs that boost the cost of one country’s products in its neighbor’s stores could increase U.S. exports by $10 billion.

Bush has emphasized this impact--rather than the potential to eliminate some American jobs by making competing Mexican products cheaper in this country--on the presidential campaign trail.

Bush has said that his long-range goal is to see trade barriers fall throughout the hemisphere. The financial services agreement would be a first step in creating a single, integrated economic zone.

Foreign banks now are virtually barred from doing business in Mexico, except for giant Citibank, which has done business in the country for more than half a century. Insurance companies and securities firms are permitted less than 50% ownership in joint ventures with Mexican companies.

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