The Mexican Embassy to the Department of State12



With reference to the conversation which the Mexican Ambassador had with Messrs. Duggan and Bursley of the Department of State on July 14, 1941,13 regarding the arrangements necessary for the solution of the problem which calls for the payment of compensation to the American petroleum companies expropriated (sic) in conformity with the Decree of March 18, 1938, there is furnished below, following careful study by the Mexican Government of the plan proposed by the representatives of the Department of State, explanation of the point of view of the Government of Mexico.

I. The setting up of a Mexican-American commission is not considered opportune and the Mexican Government states immediately [Page 385] that it cannot accept the designation of a third person who would serve as umpire of the expert officials since the American experts, who have been studying the matter, know it perfectly and their report should represent for the Government of the United States the expression of an impartial opinion which would be just and technically satisfactory.

In this regard it may be recalled that the designation of an arbiter was not included in the initial proposal formulated by Under Secretary Welles in his memorandum of October 7, 1940 (Vl-a.)14 The proposals contained in the said memorandum of the Government of the United States by implication discarded the arbitral system, a circumstance which precisely made possible the initiation (of discussions) for the direct settlement between the Government of Mexico and the United States.

II. It is not possible to accept the idea of constituting a commission such as that which Mr. Duggan suggested in the conversation held with the Ambassador of Mexico on July 5, 1941,15 because the proceedings would involve great slowness in the transaction of this matter and a purely unfortunate situation in Mexican public opinion which, for months, has been awaiting an equitable solution which the Mexican Government is desirable to agree to and to facilitate.

The Government of the United States may rest assured that the Government of Mexico understands its desire to be absolutely guaranteed, not only with regard to the expropriated companies but before the public opinion of its country, but it is of the opinion that the authority of the official experts who participated in the conversations with Engineer Zevada16 is incontestable and that, on the other hand, the proposed trip of the said experts to Mexico in the near future with the object of verifying the data upon which their report is based, will be sufficient to give to American public opinion the assurances that their report is based strictly upon the facts (realidad). In this regard, the Government of Mexico proposes to that of the United States that it will authorize for the American technicians all the facilities in the Republic of Mexico in order that they may check the books and examine the expropriated properties.

The Government of Mexico considers it indispensable that the experts of the two Governments terminate their work, already begun in Washington, within the briefest period and suggests that they be given a period of two months.

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The experts will submit a joint report in which they will set forth their points of difference in case there are any.

III. In this event, the Governments of Mexico and the United States, within the month following the receipt of the report of the experts, will discuss the points of difference and will agree upon the final figure of indemnity through diplomatic negotiations.

IV. The Government of Mexico agrees to make a deposit of $9,000,000 on account of the total of the indemnity with the understanding, nevertheless, that the making of this deposit will take place only when the Government of Mexico knows exactly the economic and financial advantages upon which it may count in order to face not only this new commitment (compromiso) but also those which will arise from the arrangement regarding claims. These advantages can be understood upon the conclusion of the negotiations now in progress with the Department of State, that of Treasury and the Export-Import Bank of the United States.

V. For the period in which this deposit is not applied to the compensation agreed upon, the sum of $9,000,000 will draw interest at the rate of . . percent annually. In case the diplomatic negotiations referred to in point III above do not succeed in determining the definitive indemnity, the deposit of $9,000,000 will be returned to the Government of Mexico.

VI. The exchange of notes by which this arrangement is made and the treaties regarding the payment of claims, the money stabilization and other arrangements, shall be signed simultaneously.

VII. If any balance remains for the total payment of the indemnity which is definitively determined in accordance with the foregoing points, it will be paid by the Government of Mexico by means of percentages of petroleum production which shall be delivered during a period to be determined by the experts referred to in point II above, the Government of Mexico reserving the right to increase the annual deliveries in such form that the liquidation of the debt will be made in a briefer period if, in its opinion, circumstances so permit.

VIII. The Government of the United States agrees to increase the quota actually permitted by the importation of Mexican petroleum and its derivatives into the United States enjoying the exemption of 50% of import tax to a minimum of 25,000,000 barrels annually beginning with December 1, 1941.


Draft of Press Statement

The Government of Mexico and the Government of the United States have each named an expert who jointly and separately will [Page 387] examine all available data, visiting the oil fields and the physical properties of the expropriated companies with a view to seeing and estimating their value and consequently determine definitively the total amount of the indemnity that the Mexican Government shall pay to the American oil companies which have not yet made separate settlements with the Government of Mexico. The experts may employ such assistants as they deem necessary.

The Government of Mexico will establish in the Treasury of the United States a deposit of $9,000,000 which shall be applied to the full or partial payment of the indemnity according to the total which shall be definitively fixed for this purpose as a result of the work of the experts and the agreement of the Governments of Mexico and the United States.

In the unlikely event that the experts designated by both Governments find differences in their estimates, the Governments of Mexico and the United States agree to resolve these differences by diplomatic negotiations.

  1. Handed to the Adviser on Political Relations by the Mexican Ambassador on July 26, 1941.
  2. Memorandum of conversation not printed.
  3. Foreign Relations, 1940, vol. v, p. 1048.
  4. Memorandum of conversation not printed.
  5. Manuel J. Zevada had held conversations with officials of the Department of the Interior.