Papers Relating to the Foreign Relations of the United States, With the Address of the President to Congress December 7, 1915
File No. 812.512/951.
Mr. Wm. Loeb, Jr., to the Secretary of State.
Sir: The Mine & Smelter Operators’ Association of El Paso, Texas, have asked me to hand you the accompanying petition and papers in reference to the taxes on mining claims and production imposed by the Carranza decrees, and in which they pray that the said decrees be abrogated and that the mining tax laws established by the last duly constituted legislative branch of the established Government, that of 1905, be made effective.
Very respectfully yours,
The Mine & Smelter Operators’ Association to the Secretary of State.
Sir: Under date of October 16 we had the honor of addressing you by telegram as follows:
[Quotes the telegram; see ante.]
In answer to the above telegram we had the pleasure of receiving the following message from you:
[Quotes the Department’s telegram of October 19; see ante.]
Under date of October 19, Mr. Wm. Loeb, Jr., on behalf of many of the American companies operating mining properties in Mexico, had the honor of addressing a letter to you supplementing the conference which he had just had with your Department.
A copy of this letter is hereto attached. [Subinclosure 1.]
On October 19 formal recognition was extended to General Carranza. Apparently, however, nothing that had any reference to the arbitrary and excessive mining tax decree was involved in the recognition extended him. We are led to infer, however, that it was your opinion that the best plan for us to pursue was to lay our case before General Carranza and his appointed Departments, requesting his consideration of the same, with the end in view of obtaining the abrogation of his decree and a return to the laws established by the last constitutionally appointed legislative branch of the Mexican Government. Therefore practically the entire mineral industry of Mexico, all of which is so vitally affected, has taken great pains to compile a statement of the situation as it affects the various parts of the industry in the various parts of the Republic of Mexico.
We attach hereto a copy of the petition presented by this Association to the Secretary in charge of the Department of Finance and Public Credit in Mexico [subinclosure 3]. We also attach a copy of the petition presented to General Carranza by the owners and representatives with headquarters in New York of many of the more important American and foreign-owned mining undertakings in Mexico [subinclosure 2]. We also attach a copy of the petition presented to [Page 960] the Secretary in charge of the Department of Finance and Public Credit by the many members of the International Mining Association with headquarters in Mexico City [subinclosure 4]. Besides the petitions above referred to, many other representations were made to both General Carranza and his department chiefs. Every petition, without exception, has involved the request for the abrogation of the excessive tax decreed by General Carranza and the return to the last tax laws legally enacted in accordance with the Mexican Constitution.
We regret to have to advise you that the Secretary in charge of the Department of Finance and Public Credit in Mexico has stated to us in reply to the petition that, with the possible exception of a slight modification in the rate of taxation on mining claims (a division of the total tax on the mining industry which is insignificant in comparison with the tax on the production of the mineral industry), it was his belief that no modification of the decree should be made; but that, on the contrary, the tax should be increased to an even higher extent. And we regret to state that General Carranza, in reply to the petitions, has stated to us through our representative who conferred with him at Monterey on November 26, that he would not change the decree.
In view of the desperate condition of affairs with which we are confronted because of the refusal by General Carranza and his Departments to abrogate his excessive tax upon the products of our mining properties, and in view of the kind consideration which you have given to our messages and to the friendly attitude indicated in your telegram to us of October 19, we appeal to you for your assistance in the endeavor to have abrogated the decree of General Carranza of March 1, 1915, and to have made effective once more the mining-tax laws of Mexico as established by the last duly constituted legislative branch of the established Government, which laws are referred to in our petitions as the laws in effect in 1905.
We on our part assure you, as we have already endeavored to do to General Carranza, that if the decree is abrogated and the constitutional laws made effective, we will bend every effort to effect the earliest possible restoration of the industry in all its branches, which will result in ever steadily increasing revenue and prestige to the present Mexican Government.
Very respectfully,
Mr. Loeb to the Secretary of State.
Sir: With further reference to the position of this and other American companies in respect of mining interests in the Republic of Mexico, and as supplementary to the conference which I had the honor to have at your Department on the 14th instant, I beg leave to submit certain data in connection with the taxation of Mexican mining properties, present and prospective, and respectfully to submit for your consideration the suggestion that General Carranza, as a condition to the recognition of his government by the Government of the United States, may be brought to guarantee that mining interests in Mexico, pending the restoration of civil government, will not be taxed otherwise than in accordance with the constitutional laws of the Republic now in force. The occasion of the present representation is the fact of a mining decree issued by General Carranza under date of March 1, 1915. * * * By this executive or military decree, the taxes on gold and silver are raised 2–1/2 times above the taxes prescribed by law; and a tax is levied against copper, lead and zinc, whereas none exists against these metals under present laws; the pertenencia tax, or annual tax on mining claims, is raised from two to eight times above the tax lawfully imposed; and all taxes are further increased by the requirement that the same shall be paid in gold, whereas under the present law they are payable in Mexican currency. In view of the great depreciation in Mexican currency, this company is not disposed to question the inherent justness of requiring the payment of taxes to be made in gold, notwithstanding the departure from existing law in this respect; and, as a matter of equity, it is not unwilling to make payment of the lawful taxes in the latter specie. It is insisted, however, that changes in the amounts or kinds of taxes imposed cannot properly, justly nor lawfully be made by military order or executive decree, but must await the [Page 961] consideration and action of a duly constituted legislative branch of an established government. If taxes can arbitrarily be laid and collected by the autocratic decree of a civil or military chief, the services of a deliberative and representative body, such as a legislature, is likely to be permanently dispensed with. And if such a claim of authority is allowed in one instance, future exertions of authority in the same direction are likely to follow, with less and less restraint, until the point of confiscation is reached and passed. * * * The present mining taxes in Mexico as prescribed by law, compared with like taxes imposed on similar operations almost universally elsewhere, are in themselves burdensome, independently of the additions imposed by the decree of March 1, 1915. In the face of such burdens, we protest against the exaction of tribute by arbitrary and irresponsible authority, and the danger, inherent in such decrees, of the confiscation of private property through the exercise of essentially despotic power.
In conclusion, I beg leave to add that the matter here presented is in no way connected with the much misunderstood subject of Mexican “concessions.” Such concessions are granted pursuant to law, and in the manner and under the rules prescribed by law (see law of Nov. 10, 1908). Foreigners may have the benefit of them not otherwise than natives may. They are not available to the mining industry except as they are available to every other industry. They are in the nature of franchises, analogous to our grant of a charter of incorporation, or of a license to engage in a certain business, and are granted to encourage the investment of capital in new enterprises and to aid in the development of new industries. They run for a limited term of years, and the exemptions they allow from certain minor forms of taxation are counterbalanced by the obligations they impose upon the concessionary, in respect of the amount of capital invested, the character of the development, and the subjection exacted to supervision by the state. Such mining concessions as this company and its subsidiaries have held have long since expired by limitation. Moreover, the tax exemptions granted under such concessions, have, and had, no relation to the taxes herein referred to.
Very respectfully,
Foreign mine owners to President Carranza.
[See Mr. S. C. Neale’s letter of December 22 to the Secretary of State.]
The Mine and Smelter Operators’ Association to the Secretary of Finance.
H. M. Dieffenbach, in representation of the Mine and Smelter Operators’ Association, formed of the principal mining and smelting companies in the north of the Republic, before you appears and respectfully states:
[Here follows an extensive argument for the abrogation of the existing decree and a return to the old law.]
From the foregoing it plainly appears that all governments have always endeavored to stimulate the low-grade mines, thus contributing to the prosperity that such mines now enjoy. This corroborates our contention that it is absolutely indispensable not to increase or overburden with further taxes these properties, for the reason that this would tend to annihilate the low-grade mines, which require for their existence considerable extents of ground where from to extract ores in large quantities. And in this connection we repeat that this class of mines are valuable only under appropriate legislation, and upon the understanding that the taxes under which they are brought into existence shall not be increased.
In view of all the foregoing, I beg very earnestly to request that yon give your attention to each and all of the points that I have taken the liberty of including in the foregoing paragraphs; that, acting in equity and justice, you [Page 962] kindly reconsider the Decree of March 1, 1915; and that, upon finding our petition justified, you abrogate the same in all its parts, in order that the laws governing the mineral industry during the constitutional administration of the late President Madero may be placed again in full force, with the sole exception that the taxes therein comprised be paid in Mexican gold.
I avail [etc.]
The International Mining Association of Mexico to the Secretary of Finance.
The undersigned, owners of mines and plants for the treatment of ores, or representatives thereof, as may be verified in due course, before you respectfully appear and state:
That the study embodied in the enclosed memorandum, which should be considered as forming a part of this petition, demonstrates, in our opinion, that the mining taxes actually in effect will result in enormous injury to the mineral industry at large, and will also impair the revenue of the National Government. In view of which, and for the reasons set forth in the said memorandum, we respectfully request that, taking into consideration our allegations and with the promptness and urgency the case requires, you will be pleased to declare that, for the best interests of the Government as well as that of the taxpayers, the Decree of March 1, 1915, with all its effects and consequences, either arising from said decree or from other decrees, orders, circulars, etc., recently issued in connection with this matter, be abrogated.
[Signatures.]
MEMORANDUM.
[Argument against the existing laws relating to the tax on mining property and the tax on mining products.]
From the arguments hereinabove set forth, it is evident that the Decree of March 1, 1915, must be abrogated; that greater franchises be granted to the mineral industry; and that regular transportation service be reestablished as quickly as possible. With all of which, four things of vital importance may be achieved at once: furnish work to thousands of laborers in the various mineral zones of the country; spread liberally important sums of money, thus vivifying extensive regions now completely stagnant; increase exports, thus bettering the commercial balance; and, finally, provide the treasuries of the Federal Government, as well as those of the states and municipalities, with revenues of considerable importance which they now fail to receive and which will certainly continue to be missing if it is determined to leave in effect the decree hereinbefore repeatedly mentioned.