710.G 1A/188

Memorandum by the Secretary of State

The Mexican Ambassador called at my request. I began by stating that the Mexican Foreign Minister at Mexico City had been good enough to send me a copy of his proposal for the consideration of public and private indebtedness in Latin America due externally, and, in fact, due largely to private creditors in the United States. I said that it appeared the proposal contemplated a moratorium of these billions of debts for some six years and a considerable reduction of interest, and that I inferred the plan would be to have all the delegates officially representing the debtor countries, vote through a sweeping refinancing and deflation policy, with the delegates of the United States Government voting virtually alone against such a proposal, on the ground, among other things, that our government had no control over such private debt readjustments. I told the Ambassador that my Government was in strong sympathy with all debtors in Latin America and recognized the wisdom of a policy of lenience by American and other creditors towards these debtors. I stated also that our Government was opposed to permitting any hard-boiled American banks to control or otherwise handle any debt readjustment matters that might arise between these debtors and creditors; to that end, our government under the recent Securities Act was about to create a commission of 12 or 15 of the most outstanding, able and humane persons that could be selected to deal with this entire debtor and creditor situation; that this personnel would comprise such outstanding persons as Newton D. Baker and Frank O. Lowden; that their control would be reasonable and sympathetic as to the debtors; that it would be free from improper banking influences; and that, in brief, this agency, in our judgment, offered the wisest possible course of treatment for this acute debtor and creditor situation.22 I expressed the earnest hope that the Mexican Government might, therefore, view with favor the plan of our government thus to deal with the debtor situation in Latin America as it involved external creditors and external payments.

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The Mexican Ambassador did not commit himself as to whether the proposed course of the Mexican Minister would be persisted in and adhered to, but he did acquiesce, in rather definite words of approval, in my statement outlining our plan. I am hoping that it may be possible to avoid acute and, for our government, disagreeable developments with respect to this problem at Montevideo. I pointed out also to the Ambassador that at the London Conference23 there were discussions on this same subject but that, of course, there was no effort made to embarrass, much less bind, any nation where many creditors resided by presenting a drastic plan of deflation such as the one proposed in the instant case.

C[ordell] H[ull]
  1. See section entitled “Organizing the Foreign Bondholders Protective Council”, vol. i, pp. 934 ff.
  2. Monetary and Economic Conference held at London, June 12–July 27; for correspondence, see vol. i, pp. 452 ff.