812.51/1460a: Telegram

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

287. Press reports indicate that representatives of the foreign holders of Mexican bonds are in Mexico City attempting some adjustment of the issued and outstanding bonded indebtedness of Mexico, of which it is understood American citizens hold approximately 20 per cent. The Department has not been consulted regarding and is not advised concerning the nature of these negotiations. While the Department does not at this time wish to express any views or opinions whatsoever regarding these negotiations, nevertheless it desires that in your discretion, formally or informally as you deem wisest, you call to the attention of the Mexican Government the fact that there are other obligations, liquidated and unliquidated, of the Mexican Government to American citizens, the existence of which should not be overlooked in connection with any financial adjustments which the Mexican Government may have under consideration with its foreign bondholders of whom, as stated, only one-fifth approximately in amount are American citizens. While the Department does not at this time feel it necessary to make any determination or indeed to enter upon any discussion of the question of the relative priorities of various Mexican obligations to American citizens or others, either with reference to the time of origin or to the character of such obligations, [Page 322]yet the Department is prepared now to say that it would consider that the obligation of Mexico to compensate an American citizen upon a claim espoused by his Government for property appropriated or destroyed, or for life lost, or for arrest and imprisonment, or for a personal assault in Mexico, contrary to the laws and principles of international law controlling in the circumstances surrounding such appropriation or destruction or loss of life, arrest, imprisonment, or assault, is not inferior to the obligation running in favor of one who had voluntarily lent money to Mexico upon the faith of a bond.

Under the existing financial condition of Mexico the Department would feel that it must carefully consider whether it should not earnestly protest any adjustment by Mexico with any class of its creditors either American, foreign, or domestic, which appeared to the Department to constitute an undue or unfair preference in favor of such creditors to the detriment of other American creditors of equal rank.

In connection with the general financial condition of Mexico and with any proposed adjustment connected therewith and involving Mexican creditors, there should not be overlooked the gold obligations of Mexico maturing under the American-Mexican claims conventions as also the obligations maturing under similar conventions with other countries.