"Bush Pressing Mexico to Open Energy Market on 1st Foreign Trip"
A U.S. plan to ease energy shortages by helping Mexico extract more oil and natural gas will be a major focus of Bush's meeting tomorrow with Mexican President Vicente Fox, Bush's national economic adviser Larry Lindsey said. That plan faces obstacles, including Mexico's law prohibiting foreign companies or governments from tapping the reserves.
"It'll be years'' before U.S. companies can make "major'' investments in Mexico, said George Lermer, an energy expert at Walden University in Canada. "There's still a lot of symbolism associated with'' having a national oil industry.
Instead Bush's trip to Fox's ranch in central Mexico likely will emphasize the bond between the two former governors. They'll discuss reining in violence against Mexicans trying to enter the U.S. illegally, curbing narcotics traffic, and broadening the North American Free Trade Agreement to Central and South America.
Bush's choice of Mexico for his first trip marks a shift in priorities from President Bill Clinton, who didn't visit the country until his second term in office. "It's an opportunity for Bush to strike a new, more positive note with Latin America,'' said Terry McCoy, a Latin American expert at the University of Florida.
'Any Little Bit'
Except for Venezuela, Mexico has the second-largest proven crude oil reserves in the Western Hemisphere, at 28.4 billion barrels. "Any little bit'' of that oil will help the U.S. energy crunch because it will ease U.S. prices, said Lermer. U.S. crude oil prices have risen 17 percent since the start of the year.
Mexico produces 3.01 million barrels a day, and exports 1.65 million barrels a day.
The main obstacle to U.S. companies' tapping the reserves is Petroleos Mexicanos, Mexico's state-run oil company. Labor unions, which control 40 percent of the Pemex board of directors, are concerned about losing control, said Philip Hughes, a former director of Latin affairs for Bush's father, President George Bush.
"They're terribly fearful'' of losing jobs if foreign companies take over, said Hughes, who attended a recent Pemex board meeting. Pemex also finances a third of government spending.
The political difficulties Fox faces are underscored by the fact that Mexicans still celebrate the anniversary of Mexico's taking over U.S. and British oil facilities on March 18, 1938.
What's more, overhauling Mexico's constitution requires a two-thirds majority. Fox says he intends to make Pemex more efficient.
"It's an extremely difficult situation,'' said Alejandro Poire, a political scientist at the Mexican Autonomous Institute of Technology in Mexico City. "President Fox is going to confront serious legal battles in all the reforms he plans to implement.''
'Political Cover'
The U.S. may lure support by offering to furnish Mexican oil fields with modern equipment, said Hughes. That can provide "political cover,'' he said.
Lermer agreed, saying U.S. companies will ultimately have to be partners with the Mexican government. A 1995 law eased access to the state-run natural gas business, allowing private companies to participate in gas transportation, storage and distribution.
A Department of Energy report said Sempra Energy International is the only U.S.-based company with significant involvement in Mexico's natural gas infrastructure.
Bush said helping Mexico develop natural gas will help the U.S. trade balance. "Gas can flow both ways. And any gas down in Mexico that improves the Mexican situation will help America,'' he told reporters this week.
Mexico imports from the U.S. about 20 billion cubic feet a year, enough to supply about 225,000 U.S. households.
Migration 'Touchy'
Fox will bring to Friday's talks a sensitive issue for the American president: treatment of illegal Mexican immigrants to the U.S. About 150,000 Mexicans slip across the shared 1,936-mile border illegally each year. Fox wants to cut down on crimes against migrants and get them better-paying jobs.
"It's a very touchy issue for Bush because he can't appear to be opening the United States to Mexican workers,'' said McCoy. "There are concerns about the United States not protecting the border very well to begin with.''
Fox will also press Bush on a U.S. anti-drug-trafficking law that's created "enormous'' tension, said Jorge Pinto, who served as the Mexican government's consul general to the U.S.
The U.S. president must confirm each year that countries receiving foreign aid are cooperating with efforts to reduce narcotics trafficking. Mexico says the law is ineffective because the U.S. regularly grants waivers and is unfair because the U.S. generates demand for narcotics.
Bush is likely "to reconsider what is largely a media sideshow more than anything else,'' said Steven Johnson, Latin America policy analyst at the conservative Heritage Foundation, based in Washington. "A better way to handle it would be to make it a simple reporting requirement.''
Trade Bond
Bush's relationship with Mexico dates back to his father's administration. The former president laid the groundwork for the 1994 NAFTA that knocked down tariffs and other trade barriers between Mexico, the U.S. and Canada. Mexico is the second largest U.S. trading partner, behind Canada.
"The conditions are now right to set up an even more profound agenda,'' said Pinto. Bush wants to stretch the accord to Central and South America by 2005. Leaders from 34 nations will discuss the accord at a summit in April in Quebec.
Bush faces an uphill battle because he lacks the authority, called fast-track, to negotiate without amendments from Congress. U.S. labor unions say they fear companies will export jobs to countries where labor costs are cheaper.
About 200 Teamsters plan to protest in the border city of El Paso during the Fox-Bush meeting, according to Rob Black, a Teamster spokesman.
El Paso has lost more than 10,000 manufacturing jobs since NAFTA took effect, as hundreds of companies, from General Electric Co. to Alcoa Inc., set up manufacturing plants in the country, the New York Times reported this week.
A close relationship with Mexico also figures into Bush's domestic agenda, analysts say.
Roughly 40 percent of Hispanics in the U.S. come from Mexico, according to the Mexican Embassy. Bush captured just 35 percent of all Hispanic votes in last year's election. That compares with Democratic opponent Al Gore's 62 percent.
"Despite great expectations by the Republican party, Bush did not get enough Hispanic votes,'' said Mohammad Elahee, assistant professor of international business at Quinnipiac University in Connecticut. "A successful trip to Mexico might change all this.''
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