812.77/1194: Telegram
The Chargé in Mexico (Boal) to the Secretary of State
[Received 11 p.m.]
165. Department’s 121 of June 24, 6 p.m. Beteta expects to see the President tonight and will seek to obtain the desired information from him in order to inform me tomorrow. Suarez has informed Lockett that the question of valuation of the railroad properties is under study and no decision as yet has been reached regarding the method of valuation although he is attempting to secure a fiscal estimate of the value. This presumably means on the basis of their taxable value as provided in article 10 in the expropriation law. Suarez and Mujica are having a conference this afternoon at which time more definite financial arrangements may be decided upon. This indicates that the entire matter is largely in Mujica’s hands. Suarez is leaving tonight for Guadalajara and expects to return June 28th to Mexico City. In the meantime further information will be sought from General Mujica.
Suarez said that he felt sure that a satisfactory arrangement could be reached with the bondholders of the National Railroads and added the statement that the outstanding obligations of the railroads would more than exceed the value of the stock and therefore the Mexican Government was only interested in making an arrangement with the bondholders. In other words the stockholders will not be taken into consideration. Suarez asked whether any reaction from the International Commission of Bankers on Mexico had been received and was answered in the negative. Suarez said that the expropriation would have no effect upon outstanding contracts for orders and equipment [Page 686] which would be fully respected and complied with without changing procedure.
From the above it appears likely that it will be difficult for the bondholders to obtain even as satisfactory an arrangement as the one last under discussion with Suarez inasmuch as the present action is the first major action under the expropriation law. It is likely that the Government will not wish to establish a precedent of indemnification exceeding that which is contemplated in the terms of the law.
Lockett requests that the pertinent parts of this be repeated to Commerce.