812.5045/522: Telegram
The Chargé in Mexico ( Boal ) to the Secretary of State
[Received August 31—2:55 a.m.]
245. My 241, August 28, 4 p.m. President Cardenas received the representatives of the petroleum companies today. He was alone and was apparently expecting a small delegation of one or more with whom he could speak freely. However, all of the local managers of the companies in Mexico City went, some eight or nine, accompanied by Mexican interpreters. The exchange of views was therefore necessarily more limited than might otherwise have been the case.
The companies’ spokesman began by setting forth their views that the experts’ recommendations were strongly biased against them and that if they were approved by the Labor Board and placed into effect the companies would have no alternative but to suspend operations. The companies could not afford to exceed the offers they had already made to the workers.
The President replied that he was much concerned over recent press reports from Mexico to the United States indicating that the attitude of the Mexican Government was calculated to drive out foreign capital. He said that it was the purpose of his Government to see that [Page 671] both labor and capital were treated justly and that it wanted foreign capital to remain in the country although it intended to see that labor received fair treatment. He remarked that Mexico would only consider buying the foreign petroleum interests as a last resort.
He then said that his problems were made much more difficult by the companies’ going for support to the Governments or diplomatic representatives of the stockholders’ countries. He said that as yet the companies had not exhausted their legal remedies and he appealed to them not to go to their Governments or the local representatives of these Governments until such recourse had been exhausted and had resulted in conviction on their part that they had not been accorded justice.
At this point, Anderson of the Huasteca told him that the representatives of the companies had gone to New York to consult with the representatives of their stockholders in view of the critical labor situation and determine whether operations should be continued if the Labor Board upheld the experts findings and if the stockholders would be willing to invest additional funds in Mexico if occasion required. They had secured a decision authorizing suspension of operations in the event of an unfavorable decision of the Labor Board and a refusal to consider the investment of additional funds from sources outside of Mexico. The President then said that he intended to take the entire petroleum question into his own hands for settlement; that he wished to have further discussion with the committee of the petroleum companies representatives (the committee which had previously dealt with the President consists of two members only, Beckwith of the Standard Oil Company of California and Van Hasselt of the Aguila. However, indications are that to these two will be added a representative of the Huasteca). The President set noon of September 2nd as the date for his interview with the committee. He said he would have the three members of the experts committee there so that there might be a discussion with them of the situation created by the report.
At the end of the interview Anderson set forth the theory that if the Government supported the petroleum labor in obtaining the utmost that the companies could afford to pay it would automatically deprive itself of money for taxes which could be used for the general benefit of all classes of the country instead of for disproportionate benefits to a small number of laborers. Anderson then suggested to him the merits of the excess profits tax in lieu of heavy additional benefits to the petroleum workers. The President replied that he believed that this was a matter very worthy of consideration and that he would give it serious thought.
An account of the interview above-mentioned has, I understand, been telegraphed by the local managers to their New York offices. Our [Page 672] information of it was secured from Anderson of the Huasteca who comments that the President appeared more worried and harassed than he has ever seen him and that the idea that the Governments of the companies might be disposed to support their rights appeared to cause him serious concern.
Lockett learned today in confidence from the Comptroller of the Treasury that the Treasury is more than able to meet ordinary administrative expenditures (he calculated that by the end of the year the income would exceed original budget estimates by 100 million pesos). However, the Treasury has been exceedingly hard pressed to meet extraordinary expenditures which have been pledged in connection with the President’s social program. It appears that in addition to having expended all income received to date the Government has borrowed approximately 8 million pesos from the Bank of Mexico. In other words, as the Comptroller admitted, there is actually a minimum deficit of 8 million. This year the Government expects to have to fill a gap of from 20 to 25 million pesos for expenditures in the Laguna. It is not known how much will have to be spent in connection with the division of lands in Yucatan. At the moment the federal income is diminished due to what the Comptroller called “the abominable handling of the petroleum situation by the Government” and due to the fact as fast as lands are divided the taxes formerly paid to the Government on such lands cease. The Comptroller is going to recommend to the Secretary of the Treasury that the Government closely investigate tax returns of the petroleum companies to catch evasions which he believes exist.
Information which we have received from other sources indicates that if the petroleum companies should cease operations which they have already diminished somewhat in prevision of difficulties the Government’s revenue from petroleum sources would drop at least 50%. There are also indications that the companies are certain of controlling all tanker tonnage so that the Government would be unable to market abroad any substantial part of the oil which it might produce.