Foreign Relations of the United States Diplomatic Papers, 1940, The American Republics, Volume V

812.6363/6451

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

[Washington,] January 11, 1940.

Participants:	The Mexican Secretary of the Treasury, His Excellency Eduardo E. Suárez;
	The Mexican Ambassador, Señor Dr. Don Francisco Castillo Nájera;
	The Under Secretary.

I paid yesterday evening a return visit of courtesy on the Mexican Secretary of the Treasury at the Mexican Embassy. The Secretary of the Treasury received me in the company of the Mexican Ambassador, and there were no others present at the interview.

The Ambassador commenced the conversation by telling in considerable detail of the conversations which had been taking place on reiterated occasions during the past few days between the representatives of the Sinclair interests and the Ambassador and the Mexican Secretary of the Treasury. The Ambassador said that the Sinclair group was represented by Harry Sinclair himself as well as by Colonel Patrick J. Hurley and one or two other lawyers. He surprised me by saying that Mr. John L. Lewis³⁵ had been present at all of these interviews, although Mr. Lewis had alleged at the first interview that he had no personal or pecuniary interest in the issues involved, but was acting solely as a friend of Mexico and in the altruistic desire to be of assistance in composing the difficulties between the Mexican Government and the American oil companies.

The Ambassador gave me to understand that from the standpoint of the Mexican representatives the Sinclair people were still asking far too much for their properties. The sum about which the Sinclair people were now talking, he alleged, being between fourteen and fifteen million dollars. (Colonel Hurley in previous conversations with me had given me to understand that the sum they had in mind was more than twenty million dollars.) The Mexican Government was not willing to talk about more than seven or eight millions as compensation, (although the Ambassador gave me to believe that the Mexican Government would go up to nine million dollars). The basis for compensation, as Colonel Hurley had told me in talks with me, was the transfer by the Mexican Government to the Sinclair group of Mexican oil at a price less than the market price, the Sinclair group to obtain its compensation over a period of years. The Mexican Government was insisting that the price at which the Mexican Government was to sell the oil was to vary in accordance with the world market price.

The Ambassador told me that another interview with the Sinclair group was scheduled for that evening, and that he believed several more interviews would take place. He appeared to have far greater optimism as to the successful conclusion of these discussions than did Colonel Hurley in his last conversation with me.

Before I left I expressed to Señor Suárez my deep chagrin that the splendid opportunity which had been afforded both Governments by his visit to Washington in the autumn of 1937^35a to take up for consideration and solution all the many controversies which existed between them had been indefinitely postponed as a result of the inability of the Mexican Government to reach any decision which would be satisfactory to the oil companies as a result of the expropriation of their properties. I said that so long as this situation remained unsolved, it was of course out of the question for the Government of the United States to attempt to undertake the determination of any of these controversies and problems.³⁶ I expressed the earnest hope that the Government of Mexico would agree to arbitrate in the broadest sense the questions arising from the expropriation of the properties of those companies with which negotiations had proved fruitful. I reminded Señor Suárez of his standing on this continent as a leading international lawyer and of his often evinced devotion to the principle of arbitration. Señor Suárez expressed his general agreement with what I had said and stated specifically that he himself favored arbitration and arbitration on the broadest terms. He added that he had no idea what the views of President Cárdenas with regard thereto might be. The Ambassador reminded him that President Cárdenas had already agreed in principle to arbitration. Señor Suárez seemed suddenly to recollect that this was the case.

I also took occasion to urge upon Señor Suárez as soon as he returned to Mexico City the need for a very speedy settlement of the pending questions arising from the agrarian agreement between the two Governments.³⁷ I said that we had expressed our willingness to discuss a settlement of a global nature, but that such a settlement was of course contingent upon the amount being sufficient to meet the just claims of our nationals, including American citizens who are stockholders in Mexican corporations whose properties have been expropriated. Señor Suárez assured me that he would exert his official influence as well as his personal influence to that end. The Ambassador interjected to say that inasmuch as the amount of ten million dollars had been spoken of as a satisfactory total, he believed that an agreement could be had upon that basis. I told the Ambassador that I regretted that it was quite impossible for me to agree with him and that, while ten million dollars had in the early days of our discussions with the Mexican Government been casually mentioned, investigation had now shown that the amounts owing to our nationals whose agrarian properties had been expropriated in Mexico was very greatly in excess of any such sum as that.

S[umner] W[elles]

35. Representative of Sinclair Oil Company.
36. See Foreign Relations, 1937, Vol. v, pp. 676–678.
36. For correspondence concerning negotiations for a general settlement of outstanding questions between the United States and Mexico, see pp. 1040 ff.
37. Effected by an exchange of notes dated November 9 and 12, 1938, Foreign Relations, 1938, Vol. v, pp. 714–719.