File No. 612.119/1256a
The Secretary of State to the Ambassador in Mexico ( Fletcher )
981. The following is sent you at the request of the Federal Reserve Board:
Referring to your telegram of March 22, 1918,1 we fear that the matter was not made sufficiently clear. Since beginning of gold embargo to March 21 gold exports to Mexico apart from exports for account of the Mexican Government itself have been authorized to total of $13,800,000, whereof $6,740,000 was for the purpose of meeting reimportation requirements of Mexican Government, being the requirements that compel the reimportation of gold against the export of gold and silver bullion, and whereof $7,060,000 was for taxes, export duties, etc., and other purposes.
The gold introduced into Mexico by reason of the import requirements remains free gold in the hands of the importer, and unless he requires it for the payment of taxes or duties or wages, he sells it, taking in payment exchange on New York on which transaction he makes a large profit. The purpose of the suggestion contained in previous telegram was to compel parties sending gold into Mexico under the reimportation decrees to use the surplus of such gold over their own requirements for taxes and duties for the benefit of American interests having taxes or duties to pay, but who, by the nature of their business, are not subject to the importation decrees. We estimate that since beginning of embargo gold exports for reimportation requirements would have about sufficed to take care of all requirements of American interests for taxes, export duties, etc., and the amount of gold exported for the latter purpose, some $7,000,000 might have been saved.
In view of your telegram of March 22 setting forth the reasons why you consider our previous suggestions not feasible, we venture to inquire whether in your opinion that plan could be made workable by making shipments to a joint agent of the mining and smelting companies on the American side of the Mexican border, possibly the El Paso branch of the Federal Reserve Bank of Dallas. It would be the duty of that agent within the 30 or 60 days within which each bullion exporter is required to reimport gold to send into Mexico the proper amount of gold for account of each exporter. The gold once in Mexico, instead of being at the free disposal of the exporter, would, however, be applied to the payment of taxes and export duties of such parties as have such payments to make and as have through formal license granted by the Federal Reserve Board upon application become entitled to its use.
This plan would mean that the smelting interests would advance the money for the importation into Mexico of gold used for their reimportation requirements and would be reimbursed from time to time through payment in New York by the oil or other interests who have gold payments to make to the Government of Mexico but whose business does not require them to bring gold into Mexico. The oil interests would pay the smelting interests in New York and the gold sent into Mexico to satisfy the reimportation requirements of the smelters would be applied to the payment of the taxes of the oil interests. Of course, the smelters could apply and have their taxes paid in the same manner as the oil interests.
In the light of the above explanation, we should be glad once more to have your views on the plan as changed.
- Not printed.↩