File No. 812.51/258

The Secretary of State to Mr. Parker, representing American interests


496. Reference decree entitled Law of Payments, copied with your 522, September 20, 1916.

In applying terms of decree to contracts executed prior to orders General Carranza creating paper money, which decree aims to compel creditors to accept such money in discharge of obligations, decree is given retroactive effect apparently contrary to Mexican Constitution. In providing that without regard to the express stipulations of the contracting parties as to the money in which contract payments shall be made, creditors must accept paper currency at a fixed ratio to coin, which is far in excess of the commercial value of the currency, the decree clearly appears to impair the obligation of contracts. In [Page 1004] directing the courts to give preference to the provisions of this decree which may be in conflict with existing law, the executive power appears to assume judicial functions contrary to the Mexican Constitution thus laying the foundation for denials of justice. In excepting several classes of persons from the operation of decree, the de facto Government has obviously attempted to exercise discrimination, in disregard of the generally accepted principle of jurisprudence that all men shall be equal before the law.

As a practical matter, the decree will operate as a measure of confiscation of the vastly greater portion of indebtedness contracted prior to the coming into power of the de facto Government of Mexico and still unpaid.

You will inform the appropriate authorities that because of the foregoing considerations, the Government of the United States cannot be expected to recognize the right of the Mexican Government to apply the terms of this decree to American citizens, and that it will so advise those of its citizens who may seek its advice.