312.0051/36
The Acting Secretary of State to the Secretary of State
My Dear Mr. Secretary: Please refer to my telegram of November 30, 1936, regarding the expropriation law of Mexico, in which I promised to send you a copy of Ambassador Daniels’ report on the law when received.
I now enclose a copy of the Ambassador’s despatch, No. 4128 of November 28, 1936, containing his comment on the law and the Department’s instruction of November 23, 1936. I also enclose a copy [Page 729] of his confidential despatch No. 4002 of October 9, 1936, concerning the conference had by him with President Cárdenas on October 7, 1936, regarding agrarian and religious matters. Your particular attention is invited to the marked paragraph on pages 3 and 4 of the latter despatch.
As stated in the Department’s instruction of November 23, 1936, addressed to Ambassador Daniels, a copy of which I sent you recently, Article X of the law fixes, as a basis of compensation for property seized, the amount declared to the tax offices as fiscal value, and apparently the only provision made for appraisal of the property by experts or by judicial process is that contained in Article X, this provision being limited to questions pertaining to improvements made or depreciation suffered subsequent to the date of the assignment of the fiscal value. The instruction also pointed out that compensation shall be made within a period of ten years under the provisions of Article XX but at the same time pointed out that no provision is made in the law for appropriating funds for the payment of compensation or for the manner of payment. If payment should be offered in bonds, it must be remembered that the agrarian bonds, heretofore available in very limited quantities to pay for lands taken in agrarian expropriations, usually are quoted at between seven and ten percent of their face value.
It is impossible to reconcile the terms of the expropriation law with the Mexican President’s statement of October 7 to Ambassador Daniels that the law will not apply to private industry. It is furthermore not clear how satisfactory arrangements can be made in the matter of compensation for losses suffered by those whose property may be taken under the law while the unsatisfactory provisions relating to compensation remain a part of the act. Furthermore, in view of the fact that numerous American properties have already been subjected to expropriation under Mexican agrarian laws without any compensation whatsoever, I do not see how our Government can safely place any reliance on the verbal assurances given to Ambassador Daniels by the President of Mexico that bona fide investments in Mexico by American citizens will be afforded complete protection, and that satisfactory arrangements will be made in the matter of properly compensating the American owners of property that may be taken, especially since these assurances were given in a casual conversation before the passage of the act.
Either of two courses of action would seem to be open to this Government, (1) to follow the suggestion of Ambassador Daniels that we rest on the assurances above referred to and make no representations until American property has been interfered with under the law, or (2) instruct the Ambassador to take the matter up confidentially [Page 730] and informally with President Cárdenas along the lines of our instruction of November 23. The latter course would have the advantage of possibly warding off difficulties in connection with American properties or perhaps lessening those difficulties and it would give us a better record in the Department should difficulties arise and we be asked by Congress whether we had done anything to protect American interests against possible consequences of the application of the law.
I am inclined to think that the second alternative is to be preferred since it could hardly offend the President of Mexico if taken up with him in a confidential and informal way and would probably be more productive of satisfactory results than we could hope to achieve by following the Ambassador’s recommendation, but I shall be glad to have your views. Foreign governments, including the Government of Mexico, do not hesitate to communicate with us with respect to legislation pending or enacted when they feel that their interests are affected. We frequently send copies of their communications to committees in Congress with respect to pending legislation and to administrative branches of the Government respecting legislation that has been enacted.
A copy of this letter is being sent to Ambassador Daniels with whom you may prefer to communicate direct, so as to avoid the delay of communicating with him through me, particularly in view of the fact that the Ambassador is planning to avail himself of leave of absence for thirty-one days beginning December 17, 1936. In such case I shall appreciate receiving a copy of your communication for the records of the Department.
Sincerely yours,