312.0051/37
The Ambassador in Mexico (Daniels) to the Secretary of State
[Received December 2.]
Sir: I have the honor to refer to the Department’s air mail instruction No. 1285 of November 23, 1936 (File number 312.0051/34), concerning the new Law of Expropriation. As set forth in my telegram No. 205 of November 27, 5 p.m.31 President Cárdenas signed this Law of Expropriation on November 23 and it was published in the Diario Oficial of November 25. Since all copies of this number of the Diario Oficial were promptly sold out, the Embassy was unable to obtain extra copies for forwarding to the Department and, therefore, obtained three official copies of the new Law from the Ministry of Gobernación and forwarded these to the Department by despatch No. 412332 which left in last night’s pouch.
In its instruction under reference, the Department suggests that I discuss the Law of Expropriation informally and confidentially with President Cárdenas and express the hope that steps will not be taken to apply this new legislation to American nationals, particularly in the absence of an adequate method for determining and paying just compensation at the time the property is taken. In my telegram of yesterday, November 27, 1 informed the Department that President Cárdenas had left Mexico City on November 7 for Torreon, personally to supervise the distribution and organization of ejidos in the Laguna district and that General Hay, the Foreign Minister, had informed me that the President had not as yet decided when he [Page 726] would return to the capital. Since, in the absence of the President, the Department’s instruction cannot immediately be complied with, I should like to present the following facts bearing on the Law of Expropriation and ask that with these in mind the Department reconsider its instruction directing me to make representations against the application of this Law.
Reference is made to my confidential despatch No. 4002 of October 9, 1936, reporting a long conversation which I had with President Cárdenas on October 7. On page 5 of this despatch, I reported that I informed President Cárdenas that [concerning?] the proposed Law of Expropriation [that?] “because of its vagueness investors and businessmen and manufacturers feared it might give the right, and in some cases it might be exercised, to take private property from its owners. I told him that the publication of that proposed measure had caused much apprehension among Americans and other foreigners doing business here. I added that, unless the measure was drawn up with great clearness and gave assurances that private property would be protected, instead of the further investments he desired there would be such fear as would decrease investments and manufacturing plants and purchase of property here”.
To these representations, President Cárdenas replied (see page 6 of my despatch), “The Law is being carefully studied both by a special committee of Congress and by very able men whom I have named. Nothing will be done until I have the results of these considered studies. The terms of the Law, when and if enacted, will not apply to private industry”. He was emphatic in his statement “that Mexico desires and needs United States capital to develop Mexican industries and assured me again that in every case of such bona fide investments in Mexico complete protection would be afforded the investors”.
It would seem that renewed representations based on the Department’s air mail instruction under reference could hardly be expected to result in any more reassuring statements than those given to me by the President on October 7 last and which I have quoted above. The Law was unanimously approved by the Mexican Senate without one single dissenting voice in spite of various representations made by the larger business interests and numerous full page paid advertisements published by foreign companies describing the dire financial catastrophe which would result should the bill be passed.
As the Department is aware the bill in question was actually drafted under the direction of President Cárdenas and was presented to the Mexican Chamber of Deputies last September. In my despatch No. 4000 of October 7, 1936,33 there was forwarded a copy and translation [Page 727] of the bill, together with an analysis of its provisions and numerous excerpts from editorial comment giving the Government’s views as well as those of the private corporations opposed to the bill. Similar despatches were submitted by the American Consulate General and the Commercial Attaché towards the end of September and these despatches were followed with others giving the Department a thorough and timely picture of the progress of the proposed legislation and particularly the views of the large corporations and private business interests opposed to the bill which were given a long and careful hearing before the bill was approved by the Chamber of Deputies. Every argument presented by the Department in its air mail instruction under reference was elaborated on at great length by those opposed to the bill in their memoranda to the Congress, and because of these views presented by the business interests some changes were made in the bill as originally drafted. It would seem that any representations by our Government should have been made at this time, instead of waiting until the bill was passed, signed, promulgated and published.
Sub-Article VI, second paragraph, of Article 27 of the Mexican Constitution34 as amended on December 30, 1933, reads in translation as follows:
“The Laws of the Federation and of the States, in their respective jurisdictions, shall determine the cases in which private property must be occupied for reasons of public utility, and the administrative authorities will make the respective declaration in accordance with such laws. The amount fixed as indemnity for the thing expropriated shall be based on the amount which is recorded in the cadastral or tax receiving offices as its fiscal value, such value having either been declared by the owner, or tacitly accepted by him, due to having paid taxes on such basis. The only point which may be decided upon by experts and judicial resolution is the increase in value of the private property, on account of improvements, or its depreciation since the date of the last fiscal appraisal. The same procedure shall be followed in the case of objects whose value is not determined by the tax offices.”
Article 10 of the Law of Expropriation reads in translation as follows:
“The amount fixed as indemnity for the thing expropriated shall be based on its fiscal value as recorded in the cadastral or tax receiving offices, such value having been declared by the owner or tacitly accepted by him due to his having paid taxes on such basis. The only point which may be decided upon by experts and judicial resolution is the increase or decrease in the value of the private property because of improvements or depreciation since the date of the last fiscal appraisal. The same procedure shall be followed in the case of objects whose value is not determined by the tax offices.”
The Department will observe that these two quotations, one from the Mexican Constitution of 1917, and the other from the Law of Expropriation, are identical. In other words, the Mexican Constitution of 1917 carries the identical provision against which the Department has instructed me to make representations. The Mexican Constitution itself provides the amount, and the method of computing, compensation in all cases of expropriation. The identical provision appears in the Agrarian Code and has been in effect since 1917.
In view of the representations that I have already made and of the assurances given to me personally by President Cárdenas, I do not believe that it will serve any useful purpose nor that it would be advisable for me to make the further representations called for in the Department’s instruction under reference.
Very truly yours,