Memorandum of Conversation by the Under Secretary of State (Welles)

The Mexican Ambassador called to see me this afternoon. He told me in the first place, with reference to our conversation on the telephone of last night, that he had succeeded in speaking with President Cárdenas on the telephone this morning. President Cárdenas had authorized him to say to me that the Davis proposal had been submitted to him on the evening of February 16 through Secretary of the Treasury Suarez and that the President had immediately rejected it and said that he would not even discuss it. President Cárdenas further wanted me to know that the Davis proposal was not as alleged [Page 668] by Davis to the American Embassy, but contemplated the barter of 70 German planes instead of 30 for Mexican oil to be repaid over a ten-year period. The proposal also envisaged the sending to Mexico of a very considerable number of German military and technical people. President Cárdenas further wanted us to know that the Mexican Government possessed only American aircraft and had no desire to obtain other than American aircraft and that it would continue to deal with the United States in all aviation matters. He had further authorized the Mexican Ambassador here to deny to the press the truth of the report published this morning that the Mexican Government was considering such a proposal and to state categorically that the Mexican Government had rejected the proposal and would not agree to it under any circumstances.

I told the Ambassador that I was very much gratified by this information and I asked him to express to President Cárdenas the appreciation of this Government for this courtesy in informing us thus fully of the decisions he had reached.

The Ambassador then went on to discuss the oil situation. He said that he would have come in to see me earlier about this but he had been laid up with grippe for a week and he now wanted to tell me that with regard to the four points comprising the basis of the proposal Mr. Richberg27 was to make to President Cárdenas, the first point, namely, complete operation of the properties by the companies, could not be accepted in toto by the Mexican Government but that President Cárdenas believed some form of agreement on this point could be found; with regard to the second point, binding long-term contracts, the Mexican Government was perfectly prepared to agree and would even agree to a 50-year basis for such contracts; but point three, compensation to the companies for the losses suffered while the Government was in possession of the properties, could not be agreed to upon the basis proposed, although the difficulty might be evaded by stepping up the percentage of profits to be obtained by the companies through the contracts or by extending the term of the contracts beyond the period which would otherwise be agreed upon; finally, with regard to point four, namely, the inclusion of the contract in some official agreement between the Government of Mexico and the Government of the United States such as a commercial agreement, President Cárdenas had stated that he would first have to know the wishes of the Government of the United States in this regard but that he saw in principle no objection to this point.

President Cárdenas had insistently urged that Mr. Richberg come to Mexico City before March 1st because he himself was taking one of his periodical trips around the country starting March 6th. He had [Page 669] asked the Ambassador to come to Mexico a few days before Mr. Richberg was due to arrive and suggested that the meeting place between the three of them might be at Monterrey.

The Ambassador then said that he had had two or three talks on the telephone in the past few days with Mr. Hurley28 and that he now understood that while Mr. Hurley would be in Mexico at the same time as Mr. Richberg, the latter did not desire to negotiate conjointly with Mr. Hurley but rather separately. Mr. Hurley had told the Ambassador that while his proposal was along the same lines as that of Mr. Richberg, it also comprised a suggestion that the companies lend the Government of Mexico $100,000,000 of which seventy or eighty million dollars would go into immediate improvements of the oil properties and into the further exploitation of new properties and the remainder would be utilized by the Government of Mexico in its public works program.

S[umner] W[elles]
  1. Danold Richberg, representing the oil companies whose properties were expropriated.
  2. Patrick J. Hurley, representing the Sinclair Oil Company.