Canadian companies will be eligible to bid on the second round of Iraq reconstruction contracts, U.S. President George W. Bush said Tuesday, shifting a policy that had originally drawn the ire of Prime Minister Paul Martin.

The two leaders released the details following a 45-minute breakfast meeting at the Summit of the Americas in Monterrey, Mexico.

"They (Canada) want Iraq to succeed, they want Iraq to be free and they understand the stakes with having a free country," Mr. Bush said. "Right now, they're eligible for sub-contracting bids in the first round of construction projects.

"In the second round, Canada will be eligible to bid."

In December, the United States said it would forbid Canada and other countries that did not send troops to help the U.S.-led war effort in Iraq from bidding on $18.6-billion (U.S.) worth of infrastructure rebuilding contracts.

At the time, Mr. Martin called the policy "very difficult to fathom" and noted that Canada had pledged $300-million for Iraqi reconstruction and sent soldiers to work alongside U.S. forces in Afghanistan.

The Prime Minister seemed much happier with the new U.S. position on Tuesday.

"It does show that working together, we can arrive at a reasonable solution," he said.

More to come