The Secretary of State to the Mexican Ambassador ( Castillo Nájera )

Excellency: I have the honor to acknowledge the receipt of the note addressed by your Government on September 1 to Ambassador Daniels.

Careful examination of that note discloses no grounds that would justify this Government in modifying the position set forth at length in my notes to you dated July 21 and August 22, 1938. My Government must insist that the recognized rules of law and equity require the prompt payment of just compensation for property that may be expropriated. Therefore, inasmuch as my Government remains convinced of the basic soundness of its position, buttressed as it is by law and justice, and in view of the scope and content of our recent conversations, in the course of which you informed me of the policy of your Government and of the desire of the Government of Mexico, which is similar to the desire of the Government of the United States, to settle all difficulties which may arise between the two Governments in a spirit of friendship and of equity, further discussion of the note under reference seems unnecessary.

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My Government has a particular desire to safeguard friendship with Mexico not only because Mexico is one of its nearest neighbors but on account of the many ways in which ever improving relations, in the fullest sense, between the two countries could be complementary and mutually beneficial. It has, therefore, spared no effort to arrive at prompt, friendly and satisfactory solutions of problems as they arose. It was in this spirit that last November my Government urged, in accordance with the principle of just compensation, the desirability of a comprehensive agreement providing for the compensation of the American citizens whose properties had been seized by the Mexican Government. It is in that same spirit that I have given every attention to the proposals of your Government which you recently communicated to me. Based upon them, my Government would be willing to agree to the plan proposed hereafter which, if acceptable to your Government, would resolve at once the present controversy, in so far as it relates to compensation for American-owned agrarian properties seized since August 30, 1927, that if continued must seriously impair the friendly relations between the two countries. It is also in this same spirit that I earnestly commend it to the favorable consideration of your Government.

  • One: Both our Governments are in accord that the values of the American-owned agrarian properties expropriated since August 30, 1927, be determined by a Commission composed of one representative of each of our Governments, and in case of disagreement, by a third person selected by the Permanent Commission with seat at Washington, as established by the so-called Gondra Treaty.
  • Two: My Government proposes (a) that the two commissioners be appointed by their respective Governments at once; (b) that they hold their first meeting in the City of Mexico on the first day of December 1938; (c) that each Government bear the entire expense of the salaries, maintenance, transportation, and incidentals of its commissioner and his staff and that any expense incurred jointly, as for instance in connection with airplane travel, be shared equally.
  • Three: My Government believes it important, and understands that your Government is in accord in this regard, that a time limit be established for the completion of the work of the commissioners. It is therefore proposed that the commissioners be instructed that they must complete the determinations of value by not later than May 31, 1939. If during the course of the deliberations of the two commissioners they are unable to reach a common finding upon the matters submitted to them for their joint determination, my Government proposes that the Permanent Commission at Washington be requested to appoint immediately the third commissioner in order that he may resolve [Page 716] the matters upon which the two Governments’ commissioners are unable to agree. It is further proposed that in case of disagreement in any particular case, the representative appointed by the Permanent Commission be requested to render his award within not more than two months from the time the case is submitted to him. The salaries and expenses of the third commissioner will be defrayed in equal proportions by the two Governments.
  • Four: The adequate and effective measure of compensation to be paid in each case shall be determined in the usual manner by taking into consideration, among other pertinent factors, the establishment of the nationality of the claimant, the legitimacy of his title, the just value of the property expropriated, the fair return from the property of which claimant has been deprived between the time of expropriation and the time of receiving compensation, as well as such other facts as in the opinion of the commissioners should be taken into account in reaching a determination as to compensation.
  • Five: It is my understanding that the Mexican Government will pay the sum of $1,000,000 United States currency as first payment of the idemnities to be determined by the Commission to which this note refers, and that this payment will be made to the Government of the United States on or before May 31, 1939.

It is my further understanding that immediately subsequent to the determination by the Commission of the final valuation, in accordance with the procedure indicated in numbered paragraph Four of this note, of American-owned agrarian properties as defined in numbered paragraph One, the two Governments will reach an agreement as to the amounts to be paid to the Government of the United States by the Government of Mexico annually for the account of such claims in the years subsequent to the year 1939. As the basis for such agreement there will be taken into consideration such statement of its ability to pay as may be demonstrated by the Government of Mexico. The Government of Mexico, I understand, agrees that the annual payments to be made by it to the Government of the United States subsequent to the year 1939 for the account of these claims will in no event be less than $1,000,000 United States currency, and that such payments will be made on June 30 of the corresponding year.

In view of our recent conversations I have every confidence that the foregoing proposals will prove acceptable to Your Excellency’s Government. I shall await with interest Your Excellency’s response to the suggestions made.

Accept [etc.]

Cordell Hull