Memorandum of Conversation, by Mr. Emilio G. Collado of the Division of the American Republics

Participants: Dr. Antonio Espinosa de los Monteros, Under Secretary of the Mexican Treasury.
Mr. Duggan
Mr. Collado

Dr. Monteros came in by arrangement made at the meeting on Monday with Mr. Welles and the Mexican Ambassador to indicate informally ideas on certain details of the suggested arrangement with Mexico.

On the question of claims he indicated that it was his opinion that it might be easier to put across a settlement in Mexico if the agrarian and general claims were lumped. He stated that while there was general opinion in financial circles that the general claims should be settled, the Mexican population had the opinion that $10,000,000 would be the total of the agrarian settlement. … With respect to the amounts which Mr. Duggan had previously mentioned to him, he felt that the total would be too high in relation to Mexico’s capacity to pay. He stated that the stabilization arrangement would be a very useful facilitation which would permit the carrying out of the deal but that the real measure of Mexico’s capacity to pay in the long run would be the movement of capital to Mexico and the whole readjustment of the balance of payments including especially increases in Mexico’s exports. He suggested that a reasonable figure for the total claim might be from $30,000,000 to $35,000,000, of which the agrarian claims might get up to $20,000,000 and general claims $13,000,000 to $15,000,000.

With respect to the stabilization arrangement, Dr. Monteros asked what the Department might have in mind. Mr. Collado stated that any ultimate arrangement would of course depend upon the Treasury Department and that it was consequently impossible to discuss the matter satisfactorily, but that an arrangement such as that informally suggested by Dr. Monteros several weeks ago to Dr. White,87 Dr. [Page 1046] Laughlin Currie88 and Mr. Collado might be a possible basis of discussion. Mr. Collado described such an arrangement, pointing out that the Treasury might conceivably agree to a line of credit of up to $60,000,000, individual drawings to be collateraled by gold up to 50 percent. The Bank of Mexico currently has approximately $30,000,000 of gold. This would amount to a net line of credit of $30,000,000 in uncovered funds. In addition, this would permit a more complete utilization of the Bank of Mexico’s existing reserves. There occurred considerable discussion of the effects of such an operation on the Mexican exchange situation, and it was stated that perhaps $20,000,000 might flow back to Mexico as a result of increased confidence of Mexicans in the stability of the peso. These funds would of course become a part of the reserves of the Bank of Mexico and would facilitate the carrying out of the transactions.

With respect to the total down payments suggested, that is $3,000,000 on the claims and $9,000,000 or so on an oil settlement, Dr. Monteros stated that these would appear to be possible if a satisfactory stabilization arrangement were concluded. At his request Mr. Duggan summarized the oil procedure, which would be to announce the down payment at the time of the announcement with respect to the claims and the Stabilization Fund, and simultaneously to announce the appointment of two commissioners to value the oil properties. If these commissioners could agree upon a valuation and arrange for payment, this would be subsequently announced; if not the governments would have to make the settlement by negotiation. The method of payment would probably envisage some annual minimum payment to be made in any case, plus some percentage based upon oil exports from Mexico, Dr. Monteros indicated that such a general arrangement would appear to be practicable.

Dr. Monteros emphasized frequently throughout the conversation that in order for Mexico to be in a position to carry out the entire settlement, as well as a settlement on its public debt, which he indicated was also essential, it would be necessary for the payments to be scaled to Mexico’s capacity to pay, and that every possible means would have to be found to increase Mexico’s exports. He suggested possibilities of increased customs quota on oil and cattle, and some sort of a seasonal duty reduction on fresh fruits and vegetables, which he believed could be fixed so as not to compete with United States production. Mr. Duggan indicated that while the first of these might be possible to carry out administratively under existing trade agreements with other countries, the others would probably require the negotiation of a new trade agreement with Mexico, which of course could not be carried out during the period of the discussions, although [Page 1047] consideration could be given to announcing such negotiations. Dr. Monteros also emphasized the necessity of obtaining suitable markets for oil and raised in addition to the question of an increased customs quota, the possibility of sales to the United States Government and of suitable marketing arrangements with the American oil companies.

  1. Harry Dexter White, Special Assistant to the Secretary of the Treasury.
  2. Lauchlin Currie, Administrative Assistant to President Roosevelt.