U.S. President Bush, seeking to mend relations with America's northern neighbor, said Tuesday that Canada will be eligible for a second round of U.S.-financed reconstruction contracts in Iraq.

In a breakfast meeting with new Canadian Prime Minister Paul Martin, Bush said he had told Martin of the shift in policy. Martin "understands the stakes" in rebuilding a free and peaceful Iraq, Bush said. He offered no details of what the contracts would be worth.

It was Bush's second fence-mending session in two days. On Monday, Bush and Mexican President Vicente Fox put aside two years of differences and said they see eye-to-eye about a new U.S. proposal to grant legal status to millions of undocumented workers in the United States, many of them Mexicans.

The United States had angered many allies last month by banning firms in countries that had opposed the Iraq war from bidding on Iraqi reconstruction projects. French, German and Russian leaders had protested to Bush, and Canada threatened to stop sending aid to Baghdad.

Martin, eager to patch up the cross-border relationship, said he was pleased by the new U.S. stance toward Canada, and the lucrative contracts that could come Canada's way.

"It does show that working together, we can arrive at a reasonable solution," Martin told reporters after the breakfast.

Bush did not say whether other countries would be affected by the policy shift. A French Embassy spokeswoman said French Defense minister Michelle Alliot-Marie will meet with Defense Secretary Donald Rumsfeld and National Security Adviser Condoleezza Rice on Thursday in Washington.

Bush and Martin also pledged cooperation on another issue that has irritated U.S.-Canada relations, the discovery of mad cow disease in America in a cow that apparently came from Canada.

"This is an issue that's going to require close coordination between our two countries," Bush said. "The best way to make sure we're able to satisfy consumers ... is for there to be (coordination) on regulation, on information and on the science."

Bush said he was confident in the safety of the beef supply, and was still himself eating beef.

Bush took a firm stance on border security, an issue that has irritated many American neighbors, including Mexico and Canada.

"We will do everything we can do to protect our country from attack," Bush said. But he pledged to "work closely with the Martin government on passport issues."

"Canada and America have got special status ... by virtue of the fact of a significant interchange on an hourly basis between our two countries," Bush said. "It's special because we share a long border."

Bush and Martin met on the sidelines of the Summit of the Americas, where the president pledged to fight corruption, nurture democracies and work to bring all people in the Western Hemisphere into an "expanding circle of development."

But disputes over a free trade agreement that would span the entire region and arguments over proposed penalties for corrupt nations are hanging over the meeting like the haze over this industrial city.

Before returning to Washington on Tuesday evening, Bush also will meet with Argentina's President Nestor Kirchner, who has said that his nation is no longer interested in "automatic alignment" with U.S. policy. Kirchner, who has been angered by recent U.S. criticism over Argentina's warming relations with Cuba, boldly stated that he would "win by a knockout" at his meeting with Bush.

Bush also was meeting with Bolivian President Carlos Mesa.

On his summit slate, Bush is calling for a firm 2005 deadline to complete negotiations on a free trade agreement spanning the Western Hemisphere — his top policy goal for Latin America. Brazil and Venezuela are resisting.

Bush is continuing his hardline stance against Cuba, the only nation in the hemisphere not invited to the summit. "Together we will succeed, because the spirit of liberty still thrives, even in the darkest corners of Fidel Castro's prisons," Bush said Monday.

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