The Ambassador in Mexico ( Daniels ) to the Secretary of State

No. 8262

Sir: I have the honor to report that after a stay of two weeks, in which he had a number of conferences with President Cárdenas seeking an agreement with reference to the expropriated petroleum properties, Mr. Donald Richberg returns to Washington today. The period of his stay here was not conducive to success in the negotiations, for it was during the week when the schools and the petroleum syndicates, the Mexican Revolutionary Party, and others staged a celebration commemorating the expropriation. In these celebrations, while President Cárdenas was moderate in his utterances as compared with the declarations of other speakers, they all stated that no step backward would be taken and that the properties would not be returned. President Cárdenas made a statement which the press interpreted as conveying the impression that an agreement was in sight by which the petroleum fields would be operated under the direction of the Mexican Government. Immediately Mr. Richberg made a statement correcting the impression created by saying that no agreement had been reached in the conferences. (See my despatch 8256 of March 22, 1939.31)

Mr. Richberg called to see me yesterday afternoon and gave me the substance of the above and related at length his various conferences with President Cárdenas. Without any optimism he expressed gratification at certain advances in the negotiations. He stressed that, instead of discussing the value of the properties expropriated, about which agreement was out of the question, he had succeeded in turning the discussion to methods and plans for operation, a certain percentage of the profits to go to the companies and a certain proportion to the Mexican Government. He hopes the management will be solely in the hands of the oil companies, whereas the Mexicans think they should manage. If a solution is reached Mr. Richberg, I think, expects both sides must make some concessions. In case of agreement as to operation, the question of percentage of profits will be next up for discussion. He said he had not suggested any particular division, believing it most important to secure an agreement on principle. If that is reached, both sides might give such consideration to a just division as would lead to an agreement.

President Cárdenas suggested that in case an accord could be reached the oil companies ought to unite so that it could be possible to settle [Page 672] everything between only two parties. He thought the fact that there are now sixteen oil companies under different management would militate against the success of the best carrying out of the operations suggested by Mr. Richberg. The answer of Mr. Richberg was that to amalgamate all the sixteen companies would be involved with many difficulties and he would like to discuss the proposal with the representatives of the oil companies. He said that when he first made the suggestion they “went up in the air” and said it was utterly impossible. However, a few days later they softened and he told President Cárdenas it would involve many difficulties but he believed it might be possible to include them in only four companies for the purpose of acting with the Mexican authorities. He pointed out to me that the companies concerned here were competitors and some of them might prefer competitive instead of cooperative action.

“I am pleased”, said Mr. Richberg, “at the friendly spirit in the negotiations and the evident desire of President Cárdenas to find a solution. However, I am giving out rather pessimistic statements because the early optimistic reports conveyed the impression that agreement was near, which the situation did not justify. Also, if I spoke optimistically, the Mexican Government might suppose I was ready to make concessions and not feel it necessary to recede from some of its positions. If I speak pessimistically, they will feel that concord is possible only by mutual concessions.” He said that the very optimistic statements in the press here had conveyed the impression, not justified, that agreement was certainly in the offing, whereas there are more hurdles ahead.

The fact that he is leaving Thursday has been variously interpreted. Some of the American correspondents believe it signifies that the negotiations have failed and that is why Mr. Richberg is going home now. I told them that on the first day of his arrival, before he had even seen the President, Mr. Richberg informed me that he was compelled to be in Washington on the 26th or 27th of March to argue an important case. He told me in his latest conversation that it would be necessary for him to see officials of the oil companies in New York and to suggest some reconsideration of matters that would aid in successful negotiations, and that he could return here toward the end of April for further discussions. He believes an agreement is not impossible and that the groundwork has been laid which may end the impasse; but he appreciates that it is not wise to be either too optimistic or too pessimistic.

Respectfully yours,

Josephus Daniels
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