Papers Relating to the Foreign Relations of the United States, 1927, Volume III

812.6363/2421½

The Ambassador in Mexico (Morrow) to the Secretary of State

[Mexico,] November 8, 1927.
[Received November 12.]

My Dear Mr. Secretary: I have now been in Mexico a little over two weeks. A great deal of time, as you so well know, has been taken up in necessary formalities. I have had an opportunity, however, to talk with several business men of Mexico, including Mr. Legorreta, Director of the Banco Nacional de Mexico; Mr. Woodull, the Mexican Manager of the American Smelting and Refining Co.; Mr. Hugh Rose, the Managing Director of Santa Gertrudis Mines; Mr. H. Weldon, local Manager of the Bank of Montreal; Mr. G. R. G. Conway, Managing Director of the Mexican Light & Power Co.; Mr. Matton, of the British American Tobacco Co.; Mr. Hilary N. Branch, local representative of Huasteca Petroleum Company; and Messrs. Hogan and Basham, prominent American lawyers here. I shall expect later to make some report on the general Mexican economic condition. The despatches on economic conditions sent since I have come here have been largely based upon such information as we are able to receive from newspapers or other documents, or personal conversations with such persons as are referred to above.

At the formal presentation of my letters of credence to the President I met formally all the members of the President’s Cabinet. The only members of the Government I have talked with, however, are the President himself, Mr. Estrada, the Acting-Minister of Foreign Affairs, and Mr. Montes de Oca, the Minister of Finance. With no one of these except the President have I had anything like a full talk.

When I made my first call upon the Acting-Minister of Foreign Affairs, as referred to in despatch No. I, of October 31st,¹³ Mr. Estrada, after courteously expressing his pleasure that I had come to Mexico, took occasion to say to me that it was the desire of President Calles that I should take matters; up personally with him. He further stated that in Mexico the system of administration was a “Presidential system” and that as the President alone had the authority to make decisions on behalf of the Government he hoped that I would at all times discuss with President Calles matters of difference between the Governments. Mr. Estrada’s manner of expressing this opinion made quite an impression upon Mr. Schoenfeld, who accompanied me upon this formal call and acted as interpreter.

On Saturday, October 29th, I presented my letter of credence to the President. What formally took place on that occasion is also referred to in despatch No. I, of October 31st. After I had read my brief remarks and the President had replied, he signified that he desired to have a conversation with me. I sat down beside him and we had four or five minutes’ conversation. Mr. Martinez de Alva acted as interpreter. In this conversation the President expressed the hope that I would feel free at all times to come directly to him, stating that he was not a diplomat, and that he thought many of the matters as to which there were differences of opinion between the two governments could be readily adjusted in personal meetings, but that diplomatic notes tended to separate further the Governments. I expressed my appreciation of the cordiality of my reception by his Government and the people of Mexico, and stated that I would be very glad to avail of the courtesy extended to me of talking things over with him personally from time to time. He then repeated to me that he did not want me to consider this invitation to take things up with him personally as merely a formal invitation, that he did earnestly desire that the matters in difference between the Governments be settled amicably, and he thought this could best be accomplished by taking questions up personally.

On Monday afternoon, October 31st, Mr. Thomas A. Robinson, a son-in-law of President Calles, and an American citizen, called upon me and on behalf of the President extended to me an invitation to breakfast with the President on Wednesday, November 2nd, at his ranch at Santa Barbara, about twenty miles east of Mexico City. Mr. Robinson stated that the President would be glad to send a car for me at 6:15 a.m., and that we could then go to the Castle of Chapultepec, where the President would join us and motor from there to the ranch. I accepted the invitation. After consultation with the Embassy staff, it seemed wise for me to go alone to this meeting as it was a social invitation, and despite the fact that such talk as I might have with the President would necessarily be through an interpreter. On Wednesday morning at 6:15 Mr. Robinson, accompanied by Mr. Smithers, also an American citizen and a friend of President Calles, called at the Embassy for me. We motored to the Castle of Chapultepec, which the President occupies as a home in the City of Mexico. There the President joined us. We motored from there to the ranch, reaching the ranch shortly after 7 o’clock. After a cup of coffee the President walked us over his ranch, which contains approximately 160 hectares, which is a little less than 400 acres. The house is a small, simple one. The stables, however, which are in process of construction, are quite elaborate. The President stated to me that he contemplated having stable capacity for 200 Holstein cows. He is apparently planning when he leaves the presidency to run what would be called in the United States a dairy farm. An irrigation system consisting of pumps, cement pipes, ditches, etc., is in process of construction. After perhaps an hour’s walk we returned to the house and had breakfast. After breakfast the President discussed affairs in Mexico generally, particularly the reforms that he has been trying to bring about in connection with lands and education. None of the questions under discussion between the two governments were taken up by him, nor were they taken up by me, the whole meeting being a purely social one, his purpose evidently being to get acquainted. I asked him something about his own early education, his teaching experience and his new educational system. I also asked him about his agricultural policy. During the conversation the President’s friend, Mr. James Smithers, acted as interpreter. We left the ranch at about 10 o’clock, reaching the City of Mexico at about 11. On the way back the President talked about the amount of money he had spent on roads and agriculture and education, and insisted again that he wanted the opportunity to go over with me in person the various points on which the two governments differed.

Mr. Legorreta, the Director of the Banco Nacional de Mexico, called on me Thursday, November 3rd, and told me the President had a long talk with him that morning, that the President had expressed himself as being very much pleased with his conversation with me at the ranch but somewhat disappointed that I did not bring up some of the questions in dispute. He told me further that the President had told him that he intended to get me to go out again to the ranch as soon as it could be arranged. On Saturday afternoon, November 5th, Mr. Robinson again called on me and told me that the President would be glad to have me breakfast again with him at the ranch on Tuesday morning, November 8th. I felt a little reluctant to do this because of the publicity that had attended the first meeting, but I asked Mr. Robinson to tell the President that I would be very glad to come if it were at all possible for me to arrange it. On Monday, November 7th, I sent for Mr. Robinson and told him that I would be glad to go to the ranch for breakfast on Tuesday if the President really desired that, but that if it were equally agreeable to the President I would be glad to go to breakfast at some later date. Mr. Robinson advised me late Monday afternoon that it was entirely agreeable to the President to put the breakfast off, but that he would be pleased to see me at the Castle of Chapultepec at 11 o’clock Tuesday morning, November 8th, if that were convenient to me.

Accordingly, I went to the President’s home this morning at 11 o’clock. Again I went alone, reaching this decision after consultation with the Embassy staff. I felt that he might talk more frankly and I might get a clearer picture of his mind if I showed my confidence in him. I think the result fully justified this position.

My talk with the President this morning lasted perhaps an hour and a half. Mr. Robinson and Mr. Smithers were present, Mr. Smithers acting as interpreter. Mr. J. Reuben Clark and myself had made a very careful study of the record with reference to oil, going back particularly to the Carranza decrees,¹⁴ to the decision in the Texas Oil Company case¹⁵ and to the Warren-Payne record¹⁶ in which so much emphasis was laid upon respecting and enforcing the principles of the decisions in the Texas case to the effect that Paragraph 4 of Article 27 of the Constitution was not retroactive. Mr. Clark and I had both felt that it would be very difficult to find a compromise that would really maintain the principle of the Warren-Payne meetings and of the State Department correspondence unless there could be an affirmance of the Texas Oil Company case. It also seemed to us both that an affirmance of the Texas Oil Company case was more or less a natural thing for the courts to do because substantially the same principle was involved in the so-called Carranza decrees and in the legislation of 1925.

The President opened the conversation this morning by asking me directly what solution I thought could be found for the oil controversy. I told him that I thought an almost necessary preliminary to any solution would be a clear decision of the Supreme Court following the Texas Oil Company cases. I told him that I had been a lawyer, and it was not easy to get out of the habit of talking as a lawyer, and asked him to bear with me while I explained to him the Texas Oil Company case as I understood it. I then quite slowly, with the interpreter translating to him sentence by sentence, explained to him that the Carranza decrees had attempted to hold Paragraph 4 of Article 27 of the Constitution of 1917 to be retroactive as to the subsoil of oil lands, that those who had brought the amparos had asserted, first, that President Carranza had no official power to act by decree in the way he had acted, and, second, that even if he had been given such official power it would be violative of article 14 of the Constitution, which provides that no law shall be given a retroactive effect. I explained to him further that the Supreme Court of Mexico in the Texas case had clearly held that the question of Carranza’s official power to act by decree did not arise because the decrees issued by him and called in question had been officially ratified by the legislative body, and that, therefore, his decrees had the full effect of laws. The Court then went on to hold that these laws (made by Carranza decree and legislative ratification) could not constitutionally be given retroactive effect. In the Texas case, therefore, as in the pending cases, it was not a decree of the executive but a law of Congress, and executive acts thereunder, which were held to be violative of Article 14 of the Constitution. I further said to the President that I had been expecting that the courts would hand down a decision sustaining the Texas cases and that if such a decision came down I thought the ground would be cleared for a satisfactory adjustment of the oil matter.

He then gave me quite a full description of his troubles with the oil companies. He said that the Government of Mexico had never wanted to confiscate any property. Least of all did they want to confiscate the oil properties; that they needed the revenues, and obviously “they did not want to commit suicide;” that the act of 1925 was a most necessary piece of legislation at the time because the country was in considerable disorder and there was an extreme radical wing whose wishes had to be met in that legislation; that he had thought the grant of the 50-year right as good as a perpetual right to take out the oil, and that such a grant would satisfy every practical purpose, but that the oil companies had not co-operated with him at all, but in fact their representatives had boasted all over Mexico that they did not need to obey the laws of Mexico. To this I responded that, without defending the attitude of the oil companies toward Mexico or toward the Mexican courts, there was a very real principle which they had asserted and which the American Government had felt it necessary to assert on their behalf: that a 50-year right to take oil out of a piece of ground might be fully as good as a perpetual right, but it was certainly arguable that if one administration could cut the right down from a perpetual right to a 50-year right, a later administration might cut it down from a 50–year right to a 40–year right, or a 30, or a 10 or a 1-year right, and that it seemed to me in the interests of Mexico as well as in the interests of the United States that that question should be cleared up.

The President then asked me if I thought a decision of the court following the Texas case would settle the main controversy in the oil dispute. I told him I thought such a decision would remove the main difficulty. He then rather startled me by saying that such a decision could be expected in two months. I said to the President that it was important that during the time the cases are pending before the court no overt act which could be called confiscation should take place; that if difficulties were not to increase, pending a decision by the courts, there should be no change in the status quo.

I think it proper to say that there was nothing in the President’s conversation to indicate that he intended to direct the courts to make a decision. In fact, he would doubtless assert that he had no such power. His words were entirely consistent with the fact that he had knowledge of what the courts already had in mind. At the same time it must be remembered that it is generally believed in this country that the courts are not independent of the Executive. While this may seem quite shocking to those trained in American jurisprudence and English jurisprudence, it is not an essentially different situation than has existed in all early governments and is substantially the same situation that existed in England two or three hundred years ago. The King’s Bench was originally more than the name of the court; it was the bench that belonged to the King, and administered justice for him.

After the talk about the oil, the President then took up the question of the railroad. He told me that he was determined to see a better railroad administration, that he had asked Sir Henry Thornton, of the Canadian Government Railroad, to come down and make a report to him, and that even though it meant sweeping out a lot of holders of jobs who were intrenched in the railroad he was prepared to do so. He also spoke of his desire to expedite the claims settlements. He spoke of his earnest desire to improve agricultural conditions in Mexico and in this connection stated that Mexico was not ready yet for industrial development, that he hoped that a betterment of agriculture here would lead [tend?] to create trade with the United States, that industrial products should come into Mexico from the United States during the next generation, and that Mexico would not be ready for industrial development until long after his time.

I returned from the President’s Castle to the Embassy. A half hour later Mr. Robinson called upon me and told me that the President was very anxious that none of the oil people should know at all about our conference, that his greatest difficulty in dealing with the oil question in a proper way had been the oil people themselves, and that if they knew that a Supreme Court decision was likely to come down within a short time they would again begin to intrigue.

Despite the informality of this whole conversation I am setting it out somewhat fully to you. I think it is of extreme importance that the oil people shall, if possible, be kept from complicating the situation until the courts have had an opportunity to act.

I have nothing to add about the general political situation down here to what has been sent you in despatches. I think it is true that President Calles has been greatly strengthened by the rigorous method in which he has handled the recent revolutions. There are some people who feel that the revolts were not real revolts. I think, however, the best opinion is that it was a question of who struck first; it was a case of “thy head or my head”, which again was pretty much the rule in English history until well past the Tudor days.

There is difference of opinion as to whether President Calles and General Obregon will remain together, but I think there are no real indications at present that they have quarreled. A year, however, in Mexico is a long time. I must say that my personal impression, for whatever it is worth, is that President Calles seemed to me to be a man who wanted to do as much as he could during this last year of his term and then get out. The pressure, however, upon him by those who share the advantages of office will certainly be very great, and much may happen as a result thereof.

In both of my talks with the President I have been impressed by his strength, his earnestness, and his apparent sincerity. I think he is a strong man, sincerely devoted to his country and capable of going a long way in either the right or the wrong direction. …

With kindest regards [etc.]

Dwight W. Morrow

13. Not printed.
14. For text of the decree of Mar. 31, 1917, see Foreign Relations, 1917, p. 1053.
15. See ibid., 1921, vol. ii, pp. 461 ff.
16. See Proceedings of the United States-Mexican Commission convened in Mexico City, May 14, 1923.