File No. 812.512/1479
The Secretary of State to Mr. Parker, representing American interests
Washington, December 5, 1916, 6 p.m.
574. Department is advised that a committee of American owners of mines and smelters in Mexico has reached an understanding with Mr. Cabrera as to future export taxes on bullion and ore. Mr. Cabrera has promised to incorporate the said understanding in a new decree, to go into effect January 1, provided General Carranza approves. The Department, therefore, sincerely hopes that General Carranza will promptly approve the understanding so that it may be substituted at once for the export taxes prescribed in the mining decree of May 1, last.
[Page 739]Department is also advised that the committee failed to reach an understanding with Mr. Cabrera as regards the pertenencia tax prescribed in decree of May 1, which tax has been the subject of numerous earnest protests from this Government. Although the mining men conferred with Mr. Cabrera for several hours, they were unable to obtain satisfactory assurances from him either as to the modification or the repeal of the present high pertenencia tax, which, they claim, if not modified or annulled, will result in the loss of their properties. The mining men have received the impression from Mr. Cabrera and others that the decree of May 1 is not intended as a revenue measure, but is intended to accomplish the confiscation of American and other foreign gold and silver mining claims exceeding fifty pertenencias in area and of holdings of two hundred or more pertenencias in area of mines other than gold or silver. This is a most unfortunate impression and should be promptly rectified.
Therefore the Government of the United States cannot too urgently recommend to the de facto Government that it remove the cause for said impression by adopting a tax which will result in unlimited development of mining operations in Mexico and lead to the future prosperity of the country. The mining men, after careful study, have concluded that a modified pertenencia tax is urgently needed, and that such tax, whether it be a graded or a flat tax, should not exceed the sum of ten pesos per pertenencia, and they positively assert that the industry cannot support a tax above that figure. They suggest therefore the following progressive tax: Gold and silver claims: six pesos per pertenencia on first one hundred pertenencias and nine pesos on holdings over one hundred, or six pesos on first fifty; eight pesos on fifty-one to one hundred, and ten pesos on holdings over one hundred pertenencias. Base metal claims: six pesos per pertenencia on first five hundred pertenencias, and nine pesos on holdings over five hundred, or six pesos on first two hundred; eight pesos on two hundred one to five hundred; and ten pesos on all holdings over five hundred pertenencias.
American mine owners assert most positively that a policy to split up mining property in small individual holdings is unsound, that it has no foundation in reason or justice, and that it cannot be considered a program for the betterment of the condition of the peon because of the nature of the mining business. These men further assert that a number of claims that constituted the reserves necessary for successful future operation and expansion have already been surrendered because of the unjust taxes. They add that the decree of May 1 will, unless it is promptly annulled or radically modified, destroy the mining industry in Mexico, since large concerns cannot operate without adequate reserves, principally because of the low grade of practically all ores in Mexico, which makes necessary large areas for successful operation, and they claim that it is manifest that all mining claims cannot be developed at the same time, as the very character of the ore veins requires their exploitation in progression. Finally, they state that the action of the de facto Government in levying exorbitant taxes against all properties [Page 740] regardless of whether they are operating or idle discourages a normal prosecution of the mining industry.
The Government of the United States recognizes the justice of the contentions enumerated and holds that the confiscation of properties in the manner indicated is absolutely unwarranted. Further, this Government confidently looks to the de facto Government to apply a prompt remedy. With this end in view, it is urgently requested that when the decree of May 1 is modified so as to put in force the understanding with Mr. Cabrera as to export taxes that the modified pertenencia tax hereinbefore mentioned as being the highest the industry in Mexico can sustain, be also incorporated in the same decree.
You are instructed to bring the foregoing to the personal attention of General Carranza and to impress upon him the importance of the matter and to request that he give the subject his early attention, adding that this Government will appreciate being promptly informed of the action he proposes to take in the premises.