File No. 812.51/409

The British Embassy to the Department of State


On making enquiries of the Foreign Office concerning the transaction between Messrs. Pearson and the Mexican Government it appears that the former entered into an arrangement with the latter on the 14th instant for putting an end to their common partnership in the Tehuantepec Railway, dividing between them the assets of the company which include thirty per cent of the Hawaiian Steamship Company. The remaining assets are £436,000 which represents interest owing to bondholders in Europe, £475,000 the capital of the company together with interest due and £489,000 which represents profit not yet shared and funds raised by bonds for the upkeep of the line and repairs for damage caused during the insurrectionary movement in Mexico. The share due to the Mexican Government amounts to about £400,000 whilst their share of the shipping line amounts to about one million and a quarter to one million and a half pounds.

This arrangement was made solely through stress of circumstances, the Mexican Government having violently taken possession of the railway in April and refusing to return it.

It will thus be seen that there is no question of giving aid to Carranza but merely a dissolution of partnership with its attendant results. His Majesty’s Government have understood that the United States Government had no objection to private firms furnishing Carranza with money though they would do nothing to facilitate a loan to him. Furthermore, it is to be remembered that Carranza has on several occasions sought to justify his violent treatment of British interests by the allegation that His Majesty’s Government had prevented supplies being granted from the United States. The State [Page 1017] Department are aware that His Majesty’s Government have never sought to impose such a veto and should the statement be again made in regard to the present negotiations there will be no course left to His Majesty’s Government but to inform the Mexican Government of the reason for its failure.