812.6363/3153
Memorandum of Conversation, by the Under Secretary of State (Welles)
The Mexican Ambassador called to see me at my request this afternoon.
I commenced our conversation by saying that during the three years that the Ambassador had been in Washington he had had reason to know, I felt sure, the very high regard which the members of this Government had for him because of their conviction that he had labored consistently and most effectively in interpreting to his own Government the friendly desire of this Government to cooperate with the Government of Mexico and to solve in a friendly and fair manner all of the controversial questions which had arisen between the two Governments. I said that as a result of the policy which he and the Department of State had been following, we had now actually reached the point where we had under review all of the twenty odd important and controversial questions which had arisen during the past twenty years and some of which had never been capable of solution, and that we both had reason to feel there was ground for optimism in assuming that all of these matters could now be settled by friendly negotiation between our two Governments. For all of these reasons therefore, I said, I felt it was all the more deeply regrettable that he and I were confronting this afternoon what gave promise of being the most critical moment in the relations between the peoples of the two countries which had arisen during the course of his mission here.
I said it was most regrettable that just at the time when the negotiations I had mentioned were commencing to crystallize and not [Page 730] so many weeks after this Government had gone very much out of its way in the first days of last January to help the Mexican Government pass through a serious financial crisis by purchasing a large quantity of Mexican silver which could not otherwise have been profitably sold, the Mexican Government should issue a decree providing for the expropriation of American Oil properties amounting to many hundreds of millions of dollars in value. It was all the more regrettable, I said, because this action had been taken at the very moment when the American companies had offered to accept an agreement with the Government of Mexico which gave the Mexican Government practically all that it had been contending for under the terms of the decisions of the Labor Board and of the Mexican Supreme Court.
The Ambassador knew well, I said, how closely the Department of State had been following the course of the negotiations between the companies and the Mexican Government during recent months and how frequently it had endeavored through its informal advice to the companies to smooth the path of the negotiations in order that an equitable and friendly compromise solution might be found between the Mexican Government and the American companies. I reminded the Ambassador of many incidents in the course of the negotiations which had arisen and which had been surmounted due in part to his own representations to his Government and in part to the conferences which I had had with the representatives of the companies.
I said that, speaking in the name of my Government, I felt sure that no matter how strongly the Mexican Government might feel with regard to the attitude which it alleged had been displayed by the American companies and no matter how positive its conviction might be that the companies had been ill advised and that Mexican justice and Mexican law were on the side of the contention of the Mexican Government, the Mexican Government could not deny that there were very important equities involved in these properties; and that in view of the fact that it was a matter of widespread knowledge that the Mexican Government was not financially in a position where it could pay in cash for the properties expropriated, the mere assertion by the Mexican authorities that the terms of the law would be complied with and that cash would be given for these equities within a period of ten years carried no conviction whatever and merely reaffirmed the impression generally prevailing in the United States that the Mexican Government was intent upon taking over properties of American citizens residing in Mexico of every character and nature and had no intention of giving actual compensation therefor. I said that to those of us in the Department of State who were deeply interested in seeing the advancement of the prosperity and well-being of the Mexican [Page 731] people and the achievement of the policy for which President Cárdenas stood, namely, the raising of the standards of living in Mexico and the betterment, in every sense, of the life of the average Mexican citizen, the policy upon which the Mexican Government had now embarked appeared to be absolutely suicidal. I said that such a policy was bound to have the most serious repercussions upon the commercial and financial relations between our two peoples, and that there was not the slightest doubt that if this policy were persisted in it would create such a revulsion on the part of American public opinion as to make it utterly out of the question for the two Governments to negotiate in a friendly and satisfactory way the adjustment of all of these major problems which the Ambassador and I had had under review.
I then inquired of the Ambassador whether the fifteen day period during which the companies could ask for an injunction against the decree issued by the Executive still provided in his judgment a period during which a final effort could be made to seek a reasonable compromise of this acute difficulty.
The Ambassador replied that in his judgment it did. He told me that on March 19 he had, on his own initiative, spoken at great length to President Cárdenas on the long distance telephone and had told him what effect the then proposed action would have upon public opinion in the United States and of the very material difficulties which the Mexican Government would encounter as a result thereof. He told me that at first President Cárdenas had appeared to be adamant but that as a result of the conversation he had seemed to weaken considerably in his insistence to undertake expropriation and had told the Ambassador that he would give further thought to the questions involved. The Ambassador had thereupon been hopeful. Only this morning, however, the Ambassador said, he had been called up on the long distance telephone by Mr. Beteta, the Under Secretary for Foreign Affairs, who had told him that the Mexican Government had been very much pleased with the interview which Mr. Daniels had given to the press correspondents and which was interpreted by the Mexican Government as meaning that the Government of the United States would raise no objection to the expropriation order. Mr. Beteta had even requested the Ambassador to see that Mr. Daniels’ interview was given the widest publicity in the United States. The Ambassador said, “What can I do under these conditions? If I should say any more without communicating an official message from this Government I would merely lay myself open to the charge that I was favoring American interests whereas the American Ambassador in Mexico was making it clear that the American Government was not concerned.”
[Page 732]I told the Ambassador that the Secretary of State, in my presence, had this morning called Mr. Daniels on the long distance telephone84 and had instructed him fully regarding the views and desires of this Government, as I had expressed them to the Ambassador; that Mr. Daniels had further been requested to lay these views and requests before the Minister for Foreign Affairs and to request an audience with President Cárdenas in order to make the same representations directly to the latter. The Ambassador expressed great satisfaction at learning of this, and said that he felt that nothing could be more helpful and that if Mr. Daniels carried out his instructions fully in this regard, they would be bound to make an impression upon President Cárdenas. He said he would immediately communicate the message I had given him to President Cárdenas on the long distance telephone and would advise him at the same time that Mr. Daniels had been instructed to make identical representations.
I then said that, speaking in a more personal way, I wondered if the Ambassador did not agree with me that the dangers involved in the step which President Cárdenas had announced, to the welfare of the Mexican Government and of the Mexican people were very great and very real. I said it was a notorious fact that the Government of Mexico could not possibly operate these oil properties except at a figure less than the cost of production and that the wages which it would have to pay the workers in the oil fields would be very much lower than the wages which the companies had agreed and were able to pay. Furthermore, I said, as the Ambassador knew, in view of the way in which oil was sold in the world market and of the control by the companies of the oil tankers, it would be out of the question for the Government of Mexico to sell this oil in the world market except at ruinous prices, and that this raised the question whether the Mexican Government would not be forced to dump the oil which it might produce into the hands of Japan, Germany, or Italy, which were the very Governments that the Mexican Government had consistently and openly opposed on the grounds of national policy. All of these questions, the Ambassador told me, he had emphasized in his last conversation with President Cárdenas. The Ambassador told me that it was his considered opinion that if President Cárdenas persisted in his present policy, the internal situation would become steadily worse, that political unrest would soon become manifest and that it would be a miracle if such conditions did not give rise to a change of government in Mexico.
Before the Ambassador left he told me that he would do everything that he possibly could to try and work out a solution. He asked me if [Page 733] anything occurred to me. I told him that I remembered very well that President Cárdenas in his annual message to the Mexican Congress had specifically stated that he welcomed the investment of foreign capital in Mexico provided such foreign capital operated in accordance with the laws of Mexico and for the well-being of the Mexican people. I said it seemed to me that the President might now well refer to that statement in his annual message and find that, in the national interest and inasmuch as the companies had agreed to accede to all of the important points laid down in the decisions of the Labor Board and of the Mexican Supreme Court, and inasmuch as under these conditions the companies could pay higher rates of wages to the workers in the oil fields than could the properties under Government management, he had determined to rescind the decree of expropriation and to permit the companies to continue operating under these conditions. The Ambassador said that it seemed to him that this might prove to be a face-saving device which would satisfy the desires of the President. He said, however, that the situation of course was now more difficult than it would have been two days ago inasmuch as a great deal of public agitation had been aroused in support of the action of the President, and that it would not be easy for the President to go back in his tracks. He again emphasized his own determination to do everything possible to bring about a solution of this character. He told me that he would advise me of the result of his efforts.
- See remarks by the Secretary at press conference of March 21, Department of State, Press Releases, March 26, 1938, p. 393.↩