[Enclosure]
Memorandum on the Mexican Debt by the Under
Secretary of State (Cotton)
[Westchester,] August 3,
1930.
I have examined the Montes de Oca-Lamont financial agreement and the
Loan Agreement under which the proposed new bonds are to be issued,
McBride’s letter to Sterrett, Lamont’s letter to Morrow, and
Morrow’s report of July 17, 1930, and I have, at Lamont’s request,
talked to Munroe and also to Rublee.
The attitude of the Department towards the proposed agreement will be
determined by the Department—not by the Ambassador—but
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I should like the
Ambassador’s full comments on my view of the facts and the
deductions I draw from them in this memorandum.
Lamont views this as a private arrangement and he has not asked our
consent—either as to the negotiation or the agreement. If he had I
should have stated that such a separate agreement is not much value
to him and foolish for Mexico. From my examination of his settlement
which leaves the whole question of the National Railway
reorganization in the air with a simple promise by Mexico to take it
up, I am led to the belief that Lamont gets nowhere. I note that
Montes de Oca states that he has in mind the adjustment of other
debts also—but I am unable to believe that is as yet anything more
than a wish.
From the point of view of the American claims under the Conventions
and claims of our nationals not so filed (e. g. for land takings
subsequent to the Conventions) I have objections to the new Lamont
arrangement:
- I.
- It assumes a right to assert an exclusive charge against
certain very important revenues which form a large part of
Mexico’s income. (I should like to know about what
percentage). Some of the old bonds (not all) may have
asserted similar liens. Without going into the question of
the legalities of those old liens, I am not willing to stand
mute while in the first partial settlement of Mexico’s
external debt any group of creditors receive exclusive
rights to so important a source of revenue. And I
contemplate notice to Mexico that the Department will assert
that position and even if the Lamont arrangement be ratified
by Mexico will not regard it as binding.
- II.
- I do not know whether all classes of subsidiary or State
bonds given rights by the Lamont agreement are debts of
Mexico.
- III.
- I do not know what the estimated results of Mexico’s
income for 1930 now are. If there be the falling off I
suspect I am inclined to object to the initial payment under
the Lamont agreement.
- IV.
- Speaking generally, the scale of payments under the Lamont
agreement seems generally in line with McBride’s memorandum.
But we may desire to assert priorities.
- V.
- I think the provision of the loan agreement for future
financing issues is unwise and that the conditions stated
are unwise. I am not sure that wiser conditions are now
possible.
But in spite of these objections the course of the Department is
bound to be much affected by the fact whether active negotiations
for settlement of other external Mexican claims is a probability in
any reasonably clear [near] future. I am
clear that Mexico could wisely start such general negotiations
now—but I doubt the wisdom or effectiveness of any official
suggestion to that effect—then we should hope to see Mexico take its
own lead—we would give it all help and cooperation, but unless it is
a Mexican suggestion it can hardly succeed
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and it is not our job. If the Nationalities
were reversed we would feel that keenly. What is the Ambassador’s
view? I am prepared to state that we are ready for such a
negotiation, will recommend it to our nationals and other foreign
offices. My own view is that the Claims Conventions will never
settle the matter—they are badly planned and they do not operate
well and I do not think they ever will.
Mexico also has internal problems—the expropriation claims and the
bank claims which ought to be settled now. But those are so clearly
domestic matters that we probably could not be remotely helpful in
that regard.
So what I want information on is whether—in spite of the fact that we
may not be able to count on active and intelligent cooperation from
Lamont’s committee, any general financial plan is now feasible and
probable. And what—in practice—is the best way to get it
started.
I should think a conference in Mexico would be the start at which the
Government could come forward with a general plan.
I should hope to receive advice from the Ambassador so that the
Department could take any definite steps in the matter that seem
wise before he leaves Mexico.
