Memorandum by the Chief of the Division of Mexican Affairs, Department of State (Hanna) of a Conference between the Secretary of State and the Mexican Secretary of Hacienda (de la Huerta), July 18, 1922

There were present at the Conference, besides Mr. de la Huerta and the Secretary, a Mr. Rubio, interpreter for Mr. de la Huerta, General James A. Ryan, U. S. A., Ret., representative of the Texas Oil Company in Mexico, and Mr. Hanna, Chief of the Division of Mexican Affairs.

Mr. de la Huerta opened the conversation by a reference to his conferences with the International Bankers Committee and the Petroleum Committee, and then proceeded to discuss other matters connected with the relations between the United States and Mexico which came up in the course of the conversation. His observations are briefly summarized below, without any attempt to follow the order in which they were made.

He emphasized repeatedly the popularity of General Obregon and his strength with the Mexican people, and in this connection gave a long and detailed statement of the events leading up to the overthrow of President Carranza, including the part played in it by the State of Sonora and by himself as a citizen of that State, the effort of President Carranza to force Mr. Bonillas upon Mexico as President, and the consequent revulsion of popular feelings against Mr. Carranza, and the resultant disaffection in the Army, which finally turned against Mr. Carranza. He also asserted that Mr. Carranza, when he saw that all was lost, killed himself as a brave man might be expected to do, and exhibited a letter to that effect signed by an individual who claimed to have been with Mr. Carranza when he died. The purpose of this lengthy narration appeared to be to show that General Obregon had nothing whatsoever to do with the killing of Carranza and that the present regime in Mexico is constitutional.

He had no comment to make on the delay in the official publication of the four decisions of the Mexican Supreme Court supplementing the decisions in the Texas Oil case. Unsolicited, he asserted that the Mexican Constitution is retroactive, and that it can be construed in no [Page 671] other way, but added that this is true of all Constitutions resulting from a revolution. He stated, however, that the Supreme Court decisions above mentioned clearly established that the Constitution is not retroactive or confiscatory, although, in his opinion, the decision is a judicial error.

He expressed at length his opinion as to what constitutes confiscation and by way of illustration he stated that numerous properties had been confiscated in Mexico in the course of the revolution headed by Mr. Carranza, as a revolutionary measure, but that those properties had all been returned to their owners. He denied that the taking of properties under the Agrarian Laws by expropriation procedure as provided in the Constitution constitutes confiscation, and made the broad, unqualified statement that the present regime in Mexico had not taken a single foot of land without paying for it. The Secretary commented upon this that he had before him a number of cases where property had been taken from American citizens without indemnity, and Mr. de la Huerta, manifestly confused, replied that there had been cases where the owners of property refused to accept the bonds offered them in payment, but he had nothing to say concerning the presumable worthlessness of these bonds, although he was given an opportunity. With reference to an observation that the expropriated land is undervalued by the method prescribed in the Constitution, he merely cited the recent expropriation of the Terrazas estate in Chihuahua at a considerably higher value than that fixed by the Constitution.

He stated that titles to the surface of lands are not affected by Article 27 which nationalizes only the subsoil, and added that owners of subsoil rights had merely been asked to exchange their old titles to the subsoil for new ones which the Mexican authorities are prepared to extend. He took occasion to repeat this later, apparently with the purpose of making it clear that any controversy on this point was chargeable to the obstinacy of the owners of subsoil rights in refusing thus to acquire new titles. He added that he had a plan, however, for disposing of this point, which is for the Mexican authorities to extend new titles for such rights, the idea apparently being that this would obviate the necessity for the owners of such rights to admit that they had lost their original titles.

He was emphatic in his assurance that the Bankers Agreement would be approved and added literally that “as sure as my name is de la Huerta this will be done.” He had little or nothing to say regarding his conference with the Petroleum Committee and its outcome.

When discussing the Agrarian question he pointed out how various problems confronting Mexican authorities are interlocked, by way of strengthening his statement that Mexico is vitally in need [Page 672] of a loan to pay for the expropriated lands, and pledged his word that every penny of such a loan would be devoted to such a purpose. He touched upon this matter of a loan at other times in the course of his conversation and made it quite apparent that he looked upon it as most vital.

Finally, with reference to the apparent impasse in the negotiations for recognition, he said that he had a plan to settle the questions at issue and then gave the Secretary drafts of two letters which he proposed should be exchanged between the Secretary and General Obregon. The letter which he proposed the Secretary should send General Obregon to initiate this correspondence constituted a direct and immediate recognition. General Obregon’s reply, signed as President of Mexico, purported to be his promise to do the things which this Government has been asking of Mexico. After the Secretary’s comment upon this proposal there was no further discussion of the subject.

The Secretary replied to Mr. de la Huerta’s observations from time to time. The following is a summary of his more important replies and remarks.

He made no comment on Mr. de la Huerta’s lengthy narration of events which led up to the overthrow of President Carranza except to say that he was interested in hearing it.

He made it clear that it has always been his desire to assist Mexico in every proper way and that he has only the highest regard for General Obregon. He pointed out that there is no objection on the part of this Government to Mexico enacting whatever laws she may desire provided legally vested American rights are always protected.

He was very frank and clear in stating his objections to the Agrarian Laws, pointing out the arbitrary procedure thereunder, the insufficiency of the indemnity as established in the constitution, the frequent failure to pay for expropriated property, and the worthlessness of federal and state bonds in which the indemnity is to be paid. As already stated, he added that he has before him a number of cases in which American properties have been expropriated and taken from their owners without any indemnity being paid.

He also pointed out the insufficiency of the promises of General Obregon made from time to time in the public press and in his public utterances as adequate and acceptable guarantees for legally vested American interests in Mexico.

He outlined fully and frankly the existing situation by stating the more important things which General Obregon has promised would be done but which have not been accomplished, and by inviting attention to the failure to carry through to completion any [Page 673] single important measure in this connection which the Mexican authorities have initiated. Specifically, he pointed out that Mr. de la Huerta’s agreement with the bankers is yet to be approved, that nothing definite resulted from his conference with the Petroleum Committee, so far as the Department is informed, that the decision of the Mexican Supreme Court in the Texas Company case apparently does not solve the question of the confiscatory and retroactive character of the constitution, that the four supplementary decisions of that court have not yet been officially published, that American properties are being confiscated without indemnifying their owners despite statements to the contrary, and that the Mexican Congress has failed to enact the regulations for Article 27 of the Mexican Constitution.

He pointed out that General Obregon had asserted that he cannot accept the Treaty of Amity and Commerce which has been proposed by this Government, but that the Department has not been able to procure from him any proposal or suggestion which would assist in the negotiation of some agreement which would be acceptable to him and to this Government.

With reference to the two drafts of letters to be exchanged between himself and General Obregon, the Secretary observed very briefly but very positively that, if he should address such a letter to General Obregon, he would recognize the Government of Mexico, whereas General Obregon in his reply merely promises to do certain things which he has assured the Department he has not the power to do. The Secretary added that he would subject himself to serious and just criticism by so doing, and that he could not even consider the matter. Mr. de la Huerta did not press the proposal.

The Secretary took exception to Mr. de la Huerta’s assertion that American properties are not being confiscated in Mexico at the present time, and pointed out that the expropriation of such properties by the procedure which is being followed and without indemnifying the owners with a valuable indemnity is confiscation.

At the end of the conference the Secretary again touched upon the failure of the Mexican authorities to do the many positive acts which are necessary to the realization of the numerous promises which General Obregon has made. In conclusion he advised Mr. de la Huerta to the effect that he would await with interest the official reports of the decisions of the Supreme Court in the petroleum cases, the development of the Agrarian question, and the action of the Mexican Congress on the legislation pending before it in this connection, and he added: “Come back when all those matters are settled and we will talk things over again.”

M[atthew] E. H[anna]