File No. 612.119/1138
The Secretary of State to the Ambassador in Mexico ( Fletcher )
901. The following has been prepared by Mr. Albert Strauss and has been approved by the Federal Reserve Board. You are requested to give it your immediate attention and to forward your reply by wire. In the event that your reply is favorable, the Federal Reserve Board proposes to bring about a meeting of the representatives of the various American mining interests in Mexico, in order to make arrangements for handling the gold requirements of all these companies through one consolidated agency.
In view of the breakdown of negotiations for a financial arrangement with Mexico, the Federal Reserve Board is seeking to devise some method to minimize exports of gold to Mexico. Will you telegraph: (1) Whether, in your opinion, an arrangement on following general lines is feasible? (2) Will you suggest any modifications or changes that seem desirable? (3) If the general plan, either with or without changes, is approved by you, will you telegraph whether some existing banking institution should be used or some individual be appointed by parties in interest, and (4) if former, indicate the institution. (5) Will such an arrangement lead to further oppressive decrees by the Mexican Government?
Mexican decrees requiring importation into Mexico of gold equivalent to gold exported in the form of bullion and equivalent to 25 per cent of the gold value of silver bullion exported probably calls for gold to be sent to Mexico in excess of the total requirements of American interests in Mexico for the payment of taxes, export duties, etc. Present policy of Federal Reserve Board permits export gold only for such importation requirements and for taxes and duties except in Tampico district where parties have apparently until now been able to provide themselves locally with gold at moderate premium. Mexican Petroleum Co. now represents that this will henceforth be impossible owing to prohibitive premiums.
As matters now stand, the exporters of gold and silver bullion undoubtedly receive from Federal Reserve Board for export to Mexico in compliance with importation decrees an amount of gold considerably in excess of their own requirements for taxes and duties and use that excess either in the payment of wages or else by buying New York exchange at a discount.
It has been suggested that American mining interests combine and employ joint agent in Mexico City to whom shall be consigned all gold for which licenses are granted in the United States, and that no licenses for the export of gold from the United States be permitted except to comply with the Mexican importation decrees above referred to with possible exception of small amounts for isolated points like Yucatan, Lower California, or Cananea. This would result in gold accumulating in the hands of the agent in Mexico City, which gold would in turn be paid out only on orders approved by Federal Reserve Board for such duties and taxes as that board may approve, which orders would be approved only for such American firms or companies as had made forma applications to the Federal Reserve Board and had received permission to avail themselves of these facilities.