412.11 (41) Agreement/21

The Mexican Embassy to the Department of State



After several conversations in the months of August, September and the beginning of October in which there participated, on behalf of the Department of State, Mr. Sumner Welles, Commissioner Lawson and Mr. Duggan, and, on behalf of the Government of Mexico, Ambassador Castillo Nájera, Mr. Espinosa de los Monteros, Under Secretary of Treasury, and Commissioner-Engineer Serrano, Mr. Welles delivered for the consideration of the Government of Mexico a memorandum dated October 7, 1940 containing a general plan for the settlement of a number of the problems pending between the two countries.

This memorandum was handed to President Cárdenas in the City of Mexico by Ambassador Castillo Nájera on October 11. The President, in various conferences, discussed with the Ambassador each one of the sections of the document, hearing the opinions of certain members of his Cabinet and of Engineer Serrano. Later the President [Page 1057] instructed the Ambassador to continue negotiating these matters on the bases which the Government of Mexico considered practicable and just, following the Ambassador’s return to Washington.

In the meetings held from the end of October to the eleventh of November, 1940, Messrs. Welles, Hackworth and Bursley, on behalf of the United States, and Ambassador Castillo Nájera and the legal counselor, Córdova, on behalf of Mexico, set forth fully the points of view of the two Governments, particularly with relation to the section on claims, having touched, in general terms, on the other parts of the memorandum of the United States dated October 7.

The conferees were in agreement that a global settlement for all the claims pending between the two countries, without classification by items or other reasons, would be the most satisfactory solution of this problem. The American officials maintained that the minimum sum acceptable to the United States, for the accomplishment of this settlement, is forty million dollars. The Mexicans, on the other hand, stated that they found that sum very high and, in the name of their Government, proposed thirty millions as a maximum figure, emphasizing that in their opinion even this sum was excessive, since their most liberal estimates do not justify a payment greater than twenty-five millions.

It was not possible for the representatives of the two sides to make concessions; each of them stating that, in determining the sums mentioned, they had reached the minimum that the United States could accept and the maximum that Mexico could offer.

At the meeting of November 11, Mr. Welles considered that the success of the negotiations depended upon the acceptance by Mexico of the indicated sum of forty millions and pointed out also that, through the general operation of the project contained in the memorandum of October 7, Mexico would obtain economic benefits which would surely facilitate the fulfillment of the pecuniary obligations which it would contract in accordance with the said plan.

The Ambassador pointed out that he was not authorized by his Government to exceed the amount of thirty millions offered and that, therefore, he would be obliged to consult [his Government]94 again.

The appropriate instructions having been received, another meeting was held on November 13. The Ambassador stated at that meeting that the Government of Mexico, having studied the question once more, remained of the opinion that the figure it had proposed—thirty millions—constituted not only just and adequate, but excessively liberal compensation; that, nevertheless, impelled by the desire to conclude a settlement and thereby manifest its friendly disposition towards the United States, it would consent to increase the indicated sum if, [Page 1058] through the functioning of the general plan, there would be brought about an economic situation making it possible for Mexico to fulfill, in a regular and uninterrupted way, any monetary commitments which it accepts. The Ambassador added that his Government could not assume any commitment in that sense without having the certainty that, at the end of some years, it would not see itself obliged to declare moratoriums or definitive suspension of the payments.

Mr. Sumner Welles referred to the forthcoming agrarian expropriation of the properties of the “El Potrero” company, and the Ambassador of Mexico stated, regarding it and other expropriations which have to be carried out in the near future, that, as he had had the honor to explain to Mr. Welles in the conversation on the eleventh, the Mexican Government had delayed the application of the agrarian law in certain cases in which properties of American individuals or companies would be affected because of its desire that the work of the Serrano–Lawson Commission might be completed without incidents, but that this suspension could not be indefinite since, in order to avoid having the rural population, which has a right to the possession of such lands, continue in an agitation which might become serious, the Mexican Government has found itself obliged to comply with the respective laws and to continue the agrarian proceedings in each case. The Ambassador said that the Mexican Government had already formulated the evaluations of these properties and is disposed, in the settlement being negotiated, to have included additional just and adequate sums which would be employed to compensate the affected owners. He also pointed out that, according to the calculations of the Agrarian Department, more than three million hectares of lands belonging to Americans remain unaffected, principally in the States of Sonora, Chihuahua, Sinaloa, Durango, Nayarit, Veracruz, Campeche and the Territory of Lower California. Regarding the lands presently the property of nationals of the United States, and since it is a question principally of cattle lands, it would be advisable for the owners to hasten to apply for the certificates of agrarian non-affectability in order to be duly protected by the law.

In view of the conversations above referred to, and taking into account the foregoing reasons, the Mexican Ambassador submits to the consideration of Mr. Welles the following minimum bases of a general agreement.


There is accepted, in principle, the amount of forty million dollars as payment of all the claims specified in the memorandum of October 7, 1940, referred to above, it being understood that this acceptance shall be subject to final agreement on the plan contained in these same bases;
The installments on and periods in which the foregoing sum is to be paid will be discussed and fixed definitively when it is possible to estimate the economic advantages which the carrying out of the other bases would produce.
The agreement will contain a clause by which the Government of the United States will agree to refrain from resorting to diplomatic action in those cases in which agrarian legislation is applied in the future to lands belonging to Americans which they may have acquired subsequent to the date of the agreement drawn up.

With regard to this last paragraph, the clarification should be made that the Mexican Government has definite reasons for fearing that in a fairly near future, lands which now are the property of Mexicans or of foreigners of nationality other than American will be transferred by real or simulated sales to the possession of nationals of the United States in an attempt thus to seek the protection of the Government at Washington and cause to arise a problem similar to that which it is now sought to resolve. To avoid the difficulty indicated, which would involve new friction between the two Governments, that of Mexico considers it indispensable that, after the conclusion of this agreement, lands which do not now belong to American nationals, if they are later the subject of expropriation, shall remain subject to the general law and that, therefore, diplomatic action will not be in order in those cases in which, by real or pretended transfer, these lands appear as owned by Americans.

II—Monetary Stabilization:

Since, in the various conversations which have been held, this section of the negotiations has been touched on in a very superficial way, my Government considers it indispensable, without going into minute details, to establish certain fundamental points which must be decided:

The conclusion of an agreement between the appropriate American institution and the Bank of Mexico by means of which there would be opened a credit in favor of the latter for the amount of $30,000,000, in current account, with the right, on the part of the Bank of Mexico, to make dollar deposits in the said account. Mutual interest on balances. The said fund would be used for the objects of monetary and exchange regularization, it being understood that a relative stability would be sought. Mexico would have the right, when the economic condition of its balance of payments so requires, to change the rate in an adequate manner.
The foregoing agreement would be supplemented by a stipulation in the sense that after five years of operation, if it should not be extended by mutual accord, the balances would be liquidated and it would be agreed, moreover, that those [balances]95 remaining against Mexico would be paid through the issuance of long-term bonds with a low rate of interest. Mexico would have the option of paying in silver, at a fixed price, if this should suit it better.
The agreement would also contain a clause through which the dollars in any balance in favor of or against Mexico would be computed in gold at the rate of $35 per ounce.


The Government of Mexico is disposed, as it has always been, to come to an agreement with the interested companies both with regard to the amount of the indemnity pertaining to them and with regard to the form of payment.

a. The Mexican Government would consider any project of settlement on bases similar to those which served for the agreement with the Sinclair group, or on any others proposed by the interested parties, provided that the control of the direction and administration of the industry remains in the hands of the Government of Mexico through an adequate organization or organizations.

The negotiations would be initiated between representatives of the Government and of the companies in the city of Mexico or in the city of Washington.

This acceptance by the Government of Mexico conforms to the alternative contained in paragraph 8 of the memorandum of October 7.

b. Independently of the foregoing, Mexico believes it just and suitable that the quota assigned to it for the importation of petroleum and its derivatives into the United States be increased while enjoying the exemption of 50 percent of the import duty.

Regarding this last paragraph, I permit myself to recall that when the present quotas were fixed in December last year, I had several conversations with Mr. Duggan in which I set forth the reasons upon which Mexico based its desire, and that official promised to seek means of obtaining an increase in this quota. Subsequently, Mr. Duggan informed me that for the present year 1940 it would not be possible to modify the allocation of the quotas, but he added that for the coming year the wishes of Mexico would be taken into account.

In order not to increase the length of this memorandum, I shall not recite the extensive, pertinent arguments; I limit myself for the moment to expressing the conviction that the American experts should have no great difficulty in agreeing that the quota granted Mexico could be increased five or six times over that presently in effect without harming anyone.


An agreement will be made for the sale of newly-mined silver to the United States in quantities and at prices greater than at present and for a period of not less than five years.

V—International Waters:

Although Mr. Welles, in one of our former talks, designated this problem as political in character, for Mexico it has an economic aspect [Page 1061] of great importance since the development of extensive agricultural regions depends on its solution.* My Government cannot but be concerned about this matter and exert itself for its definitive solution. The passage of time works unfavorably for my country and the interests being created in the United States continually make an adequate solution more difficult.

The Ministry for Foreign Relations of Mexico has presented,—or is about to present,—to the Embassy of the United States in the capital of my country, a note96 protesting against the performance of acts which impair or may impair the right which international law gives Mexico to the use and enjoyment of the waters of the international rivers, or which may damage its territory, and protesting against the injurious effects for my country of the construction of a gravity and storage canal in the Río Grande Valley.

In view of the injuries which we have already suffered and those which seemingly still menace us, my Government considers it necessary that this subject be discussed simultaneously with the others herein mentioned. Because of the special importance which Mexico has attached to this problem, our experts believe they have completed the study thereof and are ready to negotiate with the American experts regarding the results of their arduous work, which for many years has been the constant subject [of study]97 of numerous technical commissions.

My Government is ready to propose a treaty, based on a proposal which could solve the problem, granting to each one of the countries reciprocal advantages which fully satisfy the desiderata of the two nations.

The other parts of the memorandum of October 7 are, in the belief of my Government, of much lesser importance and therefore could be considered later.

If the Government of the United States accepts the general principles enunciated in this document, it would be possible to proceed to the discussion of the treaties or agreements which may be reached in the partial negotiations, the initiation of which can be immediate.

  1. Brackets appear in the file translation.
  2. Brackets appear in the file translation.
  3. N. B. The Under Secretary has been incorrectly quoted. This should be clarified in the Department’s reply to the Mexican memorandum. [Footnote in the file translation.]
  4. Not printed.
  5. Brackets appear in the file translation.
  6. i. e. Presumably, separate negotiations on the various parts of the general agreement. [Footnote in the file translation.]