812.6363/6467: Telegram

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

31. Mexico’s answer to Richberg’s40 story officially made public today through the Department of Information in Ministry of Gobernación. In summary it says Standard Oil Company of New Jersey distributed a pamphlet entitled “The Mexican Oil Seizure” with the intention of influencing the reader and convincing him the Mexican Government when expropriating the oil companies acted lightly, violating applicable precepts of internal law and principles of international law and repudiated the companies formal offers making any settlement impossible. Because of public opinion falsehoods and misrepresentations will be refuted but for the moment only the most notorious untruths will be referred to. The pamphlet said the oil companies’ investments represent several hundred millions of dollars that Mexico confessed its financial inability to pay, and that the companies reached the conclusion that they had no other remedy than to seek return of their properties through the courts and with the support of their governments, because Mexico could not legally expropriate them because of evident incapacity to make immediate and just payment. This conclusion is false because it is founded upon two false premises: It is not true that the value of the properties fluctuates between 262 and 500 million dollars because these amounts were taken from an article written by Luis Cabrera in Hoy of July 23, 1939. These figures are arbitrary, and the only basis for valuation of the properties is that stated in the companies’ books on March 18, 1938, which is 100,899,890 pesos 40 cents. American interests represent a minimum part of that amount and the statement blames American companies for not intensifying production and for limiting efforts to investment amortization, and leaving refineries, pipe lines and installations in bad condition. Companies systematically refused to discuss value of their properties and ask the question of appraisals be omitted in negotiations. They could not deny Mexico’s right to expropriate private property with just payment and tried to create the impression that Mexico could not legally expropriate because of its inability to pay the fantastic sum of millions arbitrarily fixed by the companies. Mexico has made known many times its willingness to pay for the properties by surrendering a percentage of production from reserves which unquestionably belong to the Government.

Nonpayment of foreign debt does not mean inability to pay for petroleum properties because income from the industry would be [Page 981] allotted therefor. Important nations have put off payment of some of their obligations and no one has said that they are permanently incapacitated to pay all their debts. The statement says an agreement was reached with the United States Government which created a commission to determine indemnification to American citizens for land expropriations and Mexico began to pay before exact amount of lands was known. Statement summarizes events leading to expropriation for the purpose of justifying intervention by the Government. Says award granted to workmen by Junta was for 26 million pesos which was midway between the demands of the workers’ organizations and what the companies were willing to give. Companies’ statement that net profit was 23 million pesos a year has been proven false by governmental operation. President Cárdenas offered to guarantee companies that they would not pay excess of 26 million pesos but the companies refused. Then for the public interest expropriation became necessary. Mexico invited companies to make appraisal of their properties so payment could be made but they imposed all kinds of obstacles. The pamphlet distributed by Standard Oil Company is lacking in truth when it said that the bases suggested by the representative of the companies was accepted by the Government because they were immediately considered unacceptable as they practically placed the companies in the same position as before expropriation. Statement enters discussion of 5 points suggested by companies’ representative, and then says that it is lamentable that the reduced investments which American citizens have in the petroleum industry and for which the Government is ready to pay might serve as an excuse for the companies to continue a dispute that not only affects the beneficial commercial relations between Mexico and the United States, but also, might tend to disturb the close and friendly relations which exist between the two peoples.

Full translation by air mail.

Daniels
  1. Donald Richberg, representative of the American oil companies.