812.6363/3092: Telegram
The Ambassador in Mexico (Daniels) to the Secretary of State
[Received 10:39 p.m.]
58. Referring to my telegram No. 55, March 18, 11 p.m.75 Expropriation decree issued this morning76 against all of the properties of the following companies: Aguila, Naviera, San Ricardo, Naviera de San Cristobal, Huasteca, Sinclair Pierce, Mexican Sinclair, Stanford Penn-Mex, Richmond, California of Mexico, Agwi, Imperio, [Page 726] Consolidated, Sabalo, Vapores San Antonio, Clarita, Cacalil to the extent necessary in the judgment of the Minister of National Economy for the discovery, production, conveyance, storage, relationship and distribution of the production of the petroleum industry. The decree is effective immediately.
Decree states that the Minister of Finance will pay a corresponding indemnity in accordance with the provisions of article 27 of the Constitution77 and articles 10 and 20 of the Law of Expropriation78 in cash within a period of not to exceed 10 years; that the funds for payment will be taken from a percentage to be subsequently determined of the production of petroleum from the properties expropriated. Expropriation is based on the “companies’ refusal to accept the award” which “brought about as a necessary consequence the application of fraction 21 of article 23 of the Constitution of the Republic in the sense that the respective authority should declare broken the labor contracts derived from the award mentioned.” It is also based on consequent inevitable “total suspension of activities of the petroleum industry” and necessity for the national economy to prevent such suspension. Text of the decree has been forwarded this morning by air mail.
Amending expropriation does not cover the Mexican Petroleum Company of California; Transcontinental Petroleum Company; Tuxpam Petroleum Company; Tamiahuha Petroleum Company; Minerva Petroleum Company; and possibly one or two other smaller companies. The above are American companies owning properties but have no employees as all their operations have been a Huasteca company79 service. They own no pipe lines or refineries. Production from their properties amounts to about 12,500 barrels per day.
The decree does not expropriate the Ulysses Petroleum Company which is an American company owning all service stations and bulk plants handling Huasteca production. Gulf Oil Company was not expropriated.
The companies expropriated expect to enter amparo proceedings80 promptly with no hope of practical results.
The Aguila Company has brought three airplane loads of wives and children of foreign employees to Mexico City from the Isthmus of Tehuantepec. Most of the foreign men are still there including, we understand, about 35 Americans.
It is believed the Aguila intends to bring most of these to Mexico City preparatory to sending them out of the country. Other foreign [Page 727] countries are planning to send their foreign employees to positions in other countries keeping a small nucleus here.
Situation reported to be quiet in Tampico with expropriation of all plants and offices closed and management in process of formation by syndicates.
American Smelting and Refining plants at Monterrey and Chihuahua closed completely because of sit down strikes. Under legal process in the presence of Government representative strikers are being discharged by mining companies, some 300 having already been discharged. See my telegram 56, March 19, 10 a.m.81
The Bank of Mexico this morning temporarily suspended purchasing and sale of gold and foreign currencies including dollars. Private offerings for dollars are at the rate of 3.70 but general expectation is that peso will depreciate over the week-end. Withdrawals of deposits from banks heavy but not panicky.
Representative of Huasteca Oil Company states there are current rumors that our Treasury has supported the Mexican exchange in the last few days to the extent of 4 million dollars and that Castillo Nájera has informed the President that our Government would follow a hands off policy with regard to petroleum matters.