Mexico cheers Obama but fears his trade stance

By Catherine Bremer - Analysis

MEXICO CITY (Reuters) - Mexico's government and business leaders are worried about U.S. President-elect Barack Obama's commitment to free trade and the war on drug cartels, even though Mexicans cheered his election win as a chance to restore a jaded friendship.

Mexico felt neglected as President George W. Bush, who made his first foreign trip as U.S. president to Mexico in 2001, became embroiled in the wars in Iraq and Afghanistan and failed to win a much-vaunted reform of U.S. immigration laws.

As "Obamamania" swept the world, polls showed three-quarters of Mexicans backed the Democrat for president, but Mexican exporters and President Felipe Calderon's government fretted about Obama's campaign promise to revise the North American Free Trade Agreement, or NAFTA.

Obama is likely to spend much of his time fighting the economic meltdown at home, and Calderon warned him last weekend against trying to save U.S. jobs by using trade protectionism.

"Renegotiating NAFTA is a very bad idea," Calderon said at a meeting of Asian and Pacific leaders in Peru.

The pact is seen by Mexican business as a boon for Mexico. It went into effect in 1994 and Mexican exports to the United States have soared, although the slump north of the border is now hitting Mexican economic growth.

Mexico's "maquiladora" export-for-assembly industry has surged under NAFTA, generating $150 billion a year in sales and $25 billion a year in taxes and salaries that stay in Mexico.

"NAFTA has been very good for both sides. It keeps more manufacturing in the U.S. and Mexico, and stops it all going to China," said Enrique Castro, who runs a factory making foam packaging in Reynosa, on the border with McAllen, Texas.

Obama is likely to be too busy rescuing the U.S. economy to pay much attention to ties with Mexico, described by Bush early in his first presidency as the most important relationship the United States has.

"The composition and timing of Obama's policy agenda toward Mexico will depend heavily on the depth of the U.S. economic slowdown," the Eurasia Group political risk consultancy said.

DRUG WAR

Bush has pledged $1.4 billion in equipment to help Mexico and Central America battle increasingly bolder drug cartels but U.S. officials, worried about human rights abuses in Mexico, are still wrangling over the details of delivering it.

Some 4,300 people have been murdered this year as cartels who supply cocaine and other drugs to U.S. streets fight turf wars and lash back at a Mexican army crackdown.

Obama has said he will support the drugs war, and Mexico wants Washington to crack down on U.S. sales of guns which end up being used by Mexican cartels.

Analysts say the real anti-drug fight is inside Mexico, where gangs have bribed high level security officials and police, especially on the U.S. border, to let drug shipments through.