812.51/1685A

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

Dear Dwight: The enclosure speaks for itself. I had some idea of coming to Mexico, starting in say a week or so, but 1 don’t want to. Wire what you think of that. Would it help? Stimson is off for the summer. I am in Westchester but do not mean to go back to Washington until Labor Day. Send your wires to Washington. They will relay them to wherever I am.

Yours,

J. P. Cotton
[Enclosure]

Memorandum on the Mexican Debt by the Under Secretary of State (Cotton)

I have examined the Montes de Oca-Lamont financial agreement and the Loan Agreement under which the proposed new bonds are to be issued, McBride’s letter to Sterrett, Lamont’s letter to Morrow, and Morrow’s report of July 17, 1930, and I have, at Lamont’s request, talked to Munroe and also to Rublee.

The attitude of the Department towards the proposed agreement will be determined by the Department—not by the Ambassador—but [Page 474] I should like the Ambassador’s full comments on my view of the facts and the deductions I draw from them in this memorandum.

Lamont views this as a private arrangement and he has not asked our consent—either as to the negotiation or the agreement. If he had I should have stated that such a separate agreement is not much value to him and foolish for Mexico. From my examination of his settlement which leaves the whole question of the National Railway reorganization in the air with a simple promise by Mexico to take it up, I am led to the belief that Lamont gets nowhere. I note that Montes de Oca states that he has in mind the adjustment of other debts also—but I am unable to believe that is as yet anything more than a wish.

From the point of view of the American claims under the Conventions and claims of our nationals not so filed (e. g. for land takings subsequent to the Conventions) I have objections to the new Lamont arrangement:

I.
It assumes a right to assert an exclusive charge against certain very important revenues which form a large part of Mexico’s income. (I should like to know about what percentage). Some of the old bonds (not all) may have asserted similar liens. Without going into the question of the legalities of those old liens, I am not willing to stand mute while in the first partial settlement of Mexico’s external debt any group of creditors receive exclusive rights to so important a source of revenue. And I contemplate notice to Mexico that the Department will assert that position and even if the Lamont arrangement be ratified by Mexico will not regard it as binding.
II.
I do not know whether all classes of subsidiary or State bonds given rights by the Lamont agreement are debts of Mexico.
III.
I do not know what the estimated results of Mexico’s income for 1930 now are. If there be the falling off I suspect I am inclined to object to the initial payment under the Lamont agreement.
IV.
Speaking generally, the scale of payments under the Lamont agreement seems generally in line with McBride’s memorandum. But we may desire to assert priorities.
V.
I think the provision of the loan agreement for future financing issues is unwise and that the conditions stated are unwise. I am not sure that wiser conditions are now possible.

But in spite of these objections the course of the Department is bound to be much affected by the fact whether active negotiations for settlement of other external Mexican claims is a probability in any reasonably clear [near] future. I am clear that Mexico could wisely start such general negotiations now—but I doubt the wisdom or effectiveness of any official suggestion to that effect—then we should hope to see Mexico take its own lead—we would give it all help and cooperation, but unless it is a Mexican suggestion it can hardly succeed [Page 475] and it is not our job. If the Nationalities were reversed we would feel that keenly. What is the Ambassador’s view? I am prepared to state that we are ready for such a negotiation, will recommend it to our nationals and other foreign offices. My own view is that the Claims Conventions will never settle the matter—they are badly planned and they do not operate well and I do not think they ever will.

Mexico also has internal problems—the expropriation claims and the bank claims which ought to be settled now. But those are so clearly domestic matters that we probably could not be remotely helpful in that regard.

So what I want information on is whether—in spite of the fact that we may not be able to count on active and intelligent cooperation from Lamont’s committee, any general financial plan is now feasible and probable. And what—in practice—is the best way to get it started.

I should think a conference in Mexico would be the start at which the Government could come forward with a general plan.

I should hope to receive advice from the Ambassador so that the Department could take any definite steps in the matter that seem wise before he leaves Mexico.