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

812.6363/7185½

Memorandum of Conversation, by the Assistant Chief of the Division of the American Republics (Bursley)

[Washington,] December 16, 1940.

Participants:	Señor Dr. Don Francisco Castillo Nájera, Mexican Ambassador;
	Mr. Welles;
	Mr. Duggan;
	Mr. Bursley.

The conversation related mainly to the oil settlement aspects of the Department’s memorandum of October 7 and the Mexican Ambassador’s reply of November 16.

Mr. Welles emphasized the extreme desirability of the prompt initiation of discussions between representatives of the Standard Oil Company of New Jersey and the Mexican Ambassador. The Under Secretary also emphasized the advisability of deferring until considerably later any discussion of the evaluation of the expropriated oil properties. He said that a general agreement should be worked out and that the question of figures on evaluation could be worked out later. In reply to a statement by the Ambassador indicating that he might propose a settlement to Standard practically identical with the Sinclair settlement, Mr. Welles said that he wanted to make it clear that the settlement with Standard need not necessarily follow precisely the terms of the Sinclair settlement.

The Mexican Ambassador appeared to be in entire agreement with Mr. Welles’ suggestions. The Mexican Ambassador said that conversations were now going on between the Mexican Government and Penn-Mex (?) and that as a matter of fact no difficulty was anticipated in effecting settlements with all the American companies including California Standard; he said, however, that the real difficulty was with Standard of New Jersey.

. . . . . . . . . . . . . .

Mr. Duggan, having in mind the two plans referred to in the Department’s memorandum of October 7, asked whether some arrangement should not be made whereby there would be an alternative plan for settlement, inferentially between the two Governments, in the event the Mexican Government and the oil companies were not able to reach an agreement reasonably soon. The Ambassador replied to the general effect that if the companies would not reach an agreement with the Mexican Government, they would have to fall back upon the findings of the Mexican courts and experts, adding that the position of the Mexican Government was very strong and as he had done several other times in the course of the conversation, rehashed many of the stock Mexican arguments in the oil matter.

The Under Secretary said that with a view to saving time, it would be well to begin soon preliminary discussions relating to the question of distribution of international waters. Before taking up this point, Mr. Welles referred to a statement in the Mexican Ambassador’s memorandum of November 16 regarding an earlier statement of Mr. Welles’ on this subject. The statement in question indicated that Mr. Welles had referred to the matter of distribution of the Colorado River waters as a political one. Mr. Welles said that what he had previously stated was that this problem had important domestic political aspects in the United States. He emphasized that he had not said the matter was an international political question. The Mexican Ambassador said that his Government would be very glad to go ahead with discussions of the water problem and inquired whether Mr. Serrano should be brought to Washington. Mr. Welles said that he did not think this was necessary as yet.

Mr. Welles inquired whether the Mexican memorandum of November 16 contemplated a discussion of the public debt of Mexico. The Mexican Ambassador said that it did not but that his Government would desire to go ahead with this matter somewhat later on, perhaps in one or two months, and that the Mexican Government would prefer to take up this matter direct with the representatives of the bondholders. He said that one of the difficulties in solving the question of the debts was that the banker’s committee did not represent all of the bondholders. He also touched lightly upon the fact that most of the bondholders were Europeans. Mr. Welles said that a further complication might be involved if any of the bondholders were Germans.