711.12/164911/21
The Mexican Embassy to the Department of State
Informal Memorandum
I
An informal study made recently by United States Treasury and Mexican officials showed how very unfavorable is Mexico’s balance of payments. The heavy loss of gold and dollars by the Bank of Mexico in recent months proves that conclusion. The underlying causes of this situation are, of course, a decrease in Mexican exports because of the war, and an increase in the value of Mexico’s imports from the United States.
II
As Mexico has undertaken to pay to the United States certain obligations, and as additional foreign obligations will have to be met sooner or later, it is reasonable to expect that Mexico’s balance of payments will tend to become more and more unfavorable as time goes on, unless something is done quickly to strengthen the Mexican economy.
III
In order to meet this very serious menace, without disrupting Mexican-American trade through monetary devaluation, tariff walls or other arbitrary methods, there can be but one logical policy for Mexico: to increase production of goods, both for the domestic and the United States markets. Aware of this fact, the Mexican Government has approved and is now carrying out an economic plan. This plan includes, among other things:
- 1.
- To increase the production of tropical and sub-tropical products, such as oil seeds and bananas, both for the local and the United States markets;
- 2.
- To stimulate the production of manufactured goods, such as cellulose and rayon, which were previously imported into Mexico from countries outside the Hemisphere, and which cannot be supplied by the United States;
- 3.
- To stimulate the production of semi-manufactured goods such as steel sheets and plates, of which there is a scarcity even in the United States and which are vital to Mexican industry;
- 4.
- To develop one or several bodies of high-grade iron ores in order to ship such ores to the United States where they are sorely needed;
- 5.
- To establish plants for the production of heavy chemicals and fertilizers;
- 6.
- To increase the capacity of electrical power plants. There is a chronic deficiency of power which has held back Mexico’s economic development during the last ten years;
- 7.
- To build one or more dry-docks to repair and build Mexican shipping. At present Mexico does not have such facilities nor can she avail herself of American dry-docks, because of the present emergency;
- 8.
- To increase the efficiency of the Mexican railroad system, through the acquisition of new material and equipment, so that said system can take care of the increased volume of freight resulting from new trade with the United States and within Mexico;
- 9.
- To finish, in the shortest possible time, the dams and irrigation projects which were started by previous Administrations;
- 10.
- To complete Mexico’s road system with a view both to finish the Mexican section of the Pan American highway and to open up the West Coast to automobile traffic.
IV
The advantages of this plan, both to Mexico and the United States cannot be over-estimated. Through its realization, not only would Mexico’s foreign-trade balance become favorable, but also the standard of living of the Mexican people would be raised considerably. For the United States this program would mean, in the short run, an increasing volume of the so-called critical materials from Mexico, and, in the long run, the greater capacity of Mexicans to consume American manufactures.
V
However, Mexico cannot even hope to accomplish the realization of this program without the full cooperation of the United States. Much of the machinery and equipment that Mexico will buy need not be entirely new, for even during the present emergency usable second-hand plants are still available. But Mexico will also need the cooperation of the American Government in order to be able to purchase some new equipment. On the other hand, a fair portion of the capital necessary to carry out this economic program can and will be readily furnished by Mexicans and the Mexican Government, but still another portion has to be borrowed by Mexico from the United States.
VI
Should the U. S. Government find it possible to cooperate with the Mexican Government towards the realization of the economic scheme herein outlined, it is respectfully suggested that the United States Government, through one of its agencies, appoint a liaison officer devoted exclusively to:
- a.
- —Discuss the plan with Mexican authorities;
- b.
- —Advise them on priorities and export licenses related to the carrying out of the plan;
- c.
- —Cooperate with them on the technical and financial aspects of the program;
- d.
- —Discuss with them such questions as affect the economic defense of both countries;
- e.
- —Cooperate with them in general in economic and financial matters of interest to both Governments.