Foreign Relations of the United States, Diplomatic Papers, 1933, The American Republics, Volume V

411.12/1717: Telegram

The Acting Secretary of State to the Ambassador in Mexico ( Daniels )

Washington , December 26, 1933—1 p.m.

168. Your despatch No. 886, December 13,³⁷ and cable No. 227, Dec. 21. Department has no difficulty in agreeing to the theory that en bloc settlement would offer ideal solution of diplomatic phase of problem if payment were assured. Careful reading of instruction No. 214 of December 16 and its enclosure will probably convince you, however, of the extremely difficult practical problems involved in such a settlement. In view of the fact, as you state, Mexican Government is already asserting its inability to meet foreign debt obligations and has, at Montevideo,³⁸ taken lead in a general movement for moratorium for several years, there would appear to be no considerable advantage to either Mexico or claimants in arbitrarily and blindly reducing claims obligation to definite figures at the present time. Even if payments were to be made by Mexico, distribution thereof to American claimants would have to await domestic adjudication of the claims, since any blindly estimated liability which Mexico would accept in general claims would undoubtedly represent but partial total of adjudications by domestic tribunal and therefore require apportionment of the payments after completion of all adjudications by a domestic tribunal. Such adjudications without defense evidence involve immense difficulties.

Department feels that, so far as concerns general claims, the practical solution suggested by instruction No. 214 of December 16 meets every reasonable expectation or requirement of the present situation, is economical, non-provocative of friction, and could, with cooperation, result in systematic and sane evaluation in 2 or 3 years at which time expectation of more favorable terms of payment would perhaps be justified.

By first pouch Department is sending you memorandum³⁷ of conversation with Senator Pittman, who agrees with this method of procedure.

Please, therefore, endeavor to obtain acceptance of proposed protocol covering general claims enclosed with instruction No. 214.

Department is considering the advisability of authorizing you to propose, for Special Claims, settlement by payment of eight million dollars, which amount represents application of approximately the same average percentage as resulted from settlement of all European claims of the same category. Such a proposal would be on the basis of payment in 10 equal yearly installments with interest on deferred payments beginning at one-half of 1 percent for the first year and increasing by one-half of 1 percent each year thereafter, ending at 5 percent on the last payment and representing an average rate of 2.75. This is a most modest interest requirement and the graduated scale should afford a material inducement to avoid default.

You may, in your discretion when presenting proposed protocol covering general claims, indicate to the Foreign Office that this Government is considering the question as to the proper course of action with respect to special claims. When you have advised of the reaction of the Mexican Government to the proposal dealing with general claims we will be in a better position to communicate with you with respect to an en bloc settlement of the special claims. Meanwhile, Department would be glad to receive your views with respect to such a proposal concerning special claims as above indicated.

Phillips

37. Not printed.
38. For correspondence concerning the Seventh International Conference of American States, held at Montevideo, December 3–26, 1933, see vol. iv, pp. 1 ff.
37. Not printed.