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

The Mexican Ambassador called upon me this morning at my request. I handed the Mexican Ambassador the note signed by the Secretary of State of today’s date59 and told him that I would request him to communicate it to his Government at his early convenience, I further said that for the time being this Government did not propose to make the text of the note public.

The Ambassador told me that he was having a further interview this afternoon with Mr. Hurley and other representatives of the Sinclair interests and that he believed that a final agreement would be reached at that meeting for a settlement of the Sinclair properties expropriation claim on the basis of compensation of $9,000,000 to be paid in oil over a period of years. In addition thereto, the Sinclair [Page 1008] Company would claim something over $4,000,000 for their physical investments in Mexico and the Mexican Government would pay for this claim in the same manner, providing a subsequent accounting verified the amount claimed by the Sinclair Company. The Ambassador said that his Government had reason to believe that the amount to which the Sinclair Company was entitled in this latter category was less than that claimed and that an impartial accounting would confirm this belief.

The Mexican Ambassador said that with this settlement it would be necessary for the United States Government to increase the quota permitted Mexico for Mexican oil inasmuch as otherwise the Sinclair Company could not recoup the amount of the indemnity which was to be paid by the Mexican Government. He stated that Mr. Hurley was going to make representations in this sense in the near future, pointing out that Venezuela was not utilizing the quota granted it and the amount not utilized by Venezuela should be diverted to Mexico, particularly since the Mexican quota was based upon the period of the last three years which included the period subsequent to expropriation during which period importations of oil from Mexico had been abnormally low.

I told the Ambassador that my own view was that there was involved a question of principle and not a question of indemnity due to one particular company. I stated that the note which I had handed to the Ambassador provided an honorable and friendly way for the settlement of the basic difficulties which had created so much damage to the two countries and to the best interests of the peoples of the two countries. I stated that with the submission to arbitration of the petroleum controversy and the settlement of the General Claims, both Governments could go ahead with common sense to a friendly adjustment of all the important problems pending between them, and that if this course were pursued, such matters as the amount of the oil quota to be given the Mexican Government would most decidedly be settled in a manner satisfactory to both Governments. I told him, however, that I was afraid I could hold out no hope that any constructive steps could be taken towards the adjustment of these problems until and unless Mexico were willing to pass through the open door which had now been offered by the United States in the note I had given him.

The Ambassador seemed well disposed and stated clearly that the public statement made by President Cárdenas rejecting the idea of arbitration had referred solely to the kind of arbitration proposed by the Standard Oil Company and that President Cárdenas had not placed himself in a position where he could not in a dignified and proper manner accept the principle of arbitration.

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I said I was glad to hear that this was the case and that I felt sure that the Ambassador would urge upon his Government a resort to the procedure indicated in the note in question.

The Ambassador said that he would advise me of the final result of the interview today with the Sinclair interests and also said that if there were any points in the note upon which he required clarification, he would telephone me before sending it to his Government.

S[umner] W[elles]
  1. Infra.