Memorandum of Conversation, by the Chief of the Division of the American Republics (Duggan)

Participants: Mexican Ambassador2
Mexican Minister of Finance, Dr. Suarez3
Mr. Welles4
Dr. Feis5
Mr. Duggan

The Under Secretary stated that he would like to take advantage of the presence in Washington of the Minister of Finance to discuss certain of the problems which are impeding the fullest development of friendly relations between the United States and Mexico. He expressed the thought that the two Governments, since they were both desirous of strengthening the existing relations, should face frankly and fairly any problems that exist between them and endeavor to settle them promptly and on a satisfactory basis, lest with the passage of time these problems grow to become real issues confronting the two Governments.

Mr. Welles then stated his sympathy with the objectives of the agrarian program and his interest in learning from Ambassador Daniels from time to time that the administration of President Cárdenas had made enormous strides in its execution.

Mr. Welles then stated that the policy of expropriation of land and its distribution had, of course, affected many American citizens. [Page 658] A majority of these citizens he thought likewise were sympathetic to the objectives of the agrarian policy but had become antagonistic to the Mexican Government because their land had been taken without real compensation. At this point Mr. Welles stated that the Department was well aware that some American citizens who had gone to Mexico during a previous era and had acquired land for practically nothing and were now faced with expropriation, were claiming fantastic sums for compensation. The Department had no intention of supporting such claims. On the other hand, there were many more citizens who had gone to Mexico in good faith, had purchased lands, had invested their savings and by their own labor and industry had added to the wealth of Mexico by tilling the soil, by installing irrigation works, by erecting processing plants, and by giving new employment to the agriculturists in the regions where their lands were situated. These citizens now saw their lands being expropriated without any effective compensation. Unable to make satisfactory arrangements by direct negotiations with the Mexican Government, these persons were now in increasing numbers appealing to this Government for protection and assistance. Not only were their appeals becoming more insistent but now they were being directed to members of Congress. Mr. Welles indicated that he realized that an airing of the situation in the Congress would not get compensation for American citizens. It would undoubtedly have the effect of seriously impairing the good relations now existing between the two countries. The Department has so far been able to persuade congressional leaders of the undesirability of a public airing of the situation. However, he did not know whether the leading congressmen would remain persuaded unless some measures were taken that would provide relief to the American citizens whose lands were being expropriated.

The Minister in reply gave a lengthy detailed exposition of the objectives of the agrarian reform. He likewise elaborated at some length on the determination of President Cárdenas to make agrarian reform a reality during his term of office. Mr. Welles took occasion, during a pause, to point out that as already indicated there was no difference of opinion between the two Governments with regard to the desirability of improving the lot of the Mexican agriculturists. The exact focus of the discussion was on the compensation of property expropriated which was due under the generally recognized principles of international law, which the Mexican Government espoused.

Dr. Suarez at first seemed inclined to attempt an elaborate defense of the right of Mexico to take property without compensation. It was pointed out to him, however, that while he might be able to cite [Page 659] the opinion in support of that contention of one or two international lawyers to the contrary, it was the opinion of the overwhelming majority, supported by decisions of The Hague Court, that while any Government had the right to take property for the public weal it must pay the owners of that property adequate compensation. It was likewise pointed out to Dr. Suarez that from an economic point of view the expropriation of land without compensation had already produced such a lack of confidence that capital had fled Mexico and a currency crisis was now impending. It was further pointed out that for the development of Mexico along the lines which the Mexican Government itself desires vast sums of money would be necessary, sums far in excess of those that Mexico itself could provide. These sums would of course not be forthcoming if capital had no confidence in the security of its investment.

Dr. Suarez at the end of this conversation implicitly recognized the validity of the arguments advanced both under international law and from an economic point of view. He stated that he was giving study to the possibility of the issuance of agrarian bonds. This possibility is complicated by the fact that the Mexican Government would not wish to give bonds to the nationals of one country and not give them to the nationals of all the others, as well as to Mexican citizens. He said that the Agrarian Code6 was estimated at around 700,000,000 pesos. He indicated that upon his return to Mexico he would give renewed thought and effort to finding ways and means of compensating American citizens for expropriated lands.

During the course of the discussion of the possibility of a bond issue, it was brought out that the interest of this Government is in real compensation for its citizens.

It was pointed out to the Minister that the American landowners who have taken up their difficulties with the local national officials of the Agrarian Department have found that the responsible officers are so occupied with a multitude of routine matters that it is often not possible for them to devote detailed attention to their specific cases. The result has been that many American landowners, particularly when they have believed that there have been irregularities in the administration of the Agrarian Code, have become unnecessarily antagonistic considering that their cases have not enjoyed the full consideration and review that they merit. While the Foreign Office when approached by the Embassy with regard to agrarian cases has always shown the fullest disposition to be helpful, nevertheless the press of other matters is such as to prevent extensive consideration being given to any particular case. The Minister was [Page 660] informed, therefore, that the appointment by the President of some person in his confidence and without other responsibilities to discuss with American landowners the application of the Agrarian Code in cases affecting their properties would be most favorably received by American landowners, as well as by this Government. Both the Ambassador and Dr. Suarez indicated that they saw merit in this idea, and Dr. Suarez stated that he would commend it to the consideration of his Government upon his return.

  1. Francisco Castillo Nájera.
  2. Eduardo Suarez.
  3. Sumner Welles, Under Secretary of State.
  4. Herbert Feis, Adviser on International Economic Affairs.
  5. Mexico, Codigo Agrario de los Estados Unidos Mexicanos (Mexico, 1934); translation in Eyler N. Simpson, The Ejido, Mexico’s Way Out (Chapel Hill, 1937), pp. 757–808.