U.S. President George Bush says Canadian companies will be eligible to bid on a second round of U.S.-funded reconstruction contracts in Iraq. The president made the announcement in Monterrey, Mexico, where he is attending a hemispheric summit.

It is another sign the Bush White House is trying to mend relations with countries that opposed the U.S.-led invasion of Iraq, or stood on the sidelines. "In the second round, in the second tranche of bidding, Canada will be eligible to bid," he said.

News of the shift in policy came as the president met over breakfast in Monterrey with Canadian Prime Minister Paul Martin. Mr. Bush said Canada's leaders are well aware of the importance of building a free and peaceful Iraq. "First of all, they have been very strong supporters of the Madrid Conference [of Iraq donors], they want Iraq to succeed, they want Irag to be free, they understand the stakes in having a free country in the midst of the Middle East," he said.

The Bush administration angered America's neighbor to the north late last year when it put restrictions on the first round of reconstruction contracts. Only countries that actively supported the war and were part of the coalition that toppled ousted Iraqi leader Saddam Hussein were eligible, along with American firms.

U.S. allies such as Canada, Germany, Russia and France were told that they could only bid on subcontracts. But from the start, White House officials hinted that conditions could change.

Prime Minister Martin told reporters he discussed that possibility with President Bush in a phone call a few weeks ago. "I think this really shows how it can work. We had a very good conversation before Christmas. And subsequently our officials went to work and Canada will be eligible to bid on all the construction projects in the next tranche," he said.

This was the president's first meeting with Paul Martin since he assumed the post of prime minister, and both men portrayed U.S.-Canadian relations in the best possible light.

President Bush made no mention of Mr. Martin's predecessor Jean Chretien, who refused to endorse the Iraq war. Instead, he had high praise for the new Canadian leader, saying he is straightforward and easy to talk to.

The prime minister said the United States and Canada share a continent, values, and a perspective on what is best for their people.