Foreign Relations of the United States: Diplomatic Papers, 1943, The American Republics, Volume V

103.91702/1232

The Ambassador in Mexico (Messersmith) to the Secretary of State

[Extracts]

No. 8698

Mexico, March 24, 1943.
[Received March 27.]

Sir: I have the honor to inform the Department of a problem which has been raised by the Mexican Government in reference to decentralization. This problem is fundamentally quite serious from the standpoint of the effective operation of that portion of the Economic Section⁷⁷ which has been set up on behalf of the Board of Economic Warfare for the purpose of investigating, processing and approving requests for exports from the United States. It is believed that a better understanding of the problem can be obtained from a full exposition of the difficulties as they have arisen.

Last December, when Mr. Hector Lazo, Mr. Christian Ravndal, Mr. Charles Cunningham and others from Washington were in Mexico City,⁷⁸ Embassy memorandum of December 17, 1942, was presented to Under Secretary of Foreign Relations, Torres Bodet. The Embassy memorandum in question was presented to the Foreign Office for the purpose of acquainting the Mexican Government with a plan of procedure for decentralization of export control which our Government had found most satisfactory. Copies of the Embassy’s memorandum to the Foreign Office of December 17 were attached to Embassy despatch No. 6109 of December 22, 1942,⁷⁹ and the memorandum is only mentioned in this despatch because of the answer thereto from the Foreign Office⁸⁰ and the relation thereof to the present difficult problem which has arisen.

Embassy despatch No. 6901 of January 23, 1943,⁸¹ discussed the Foreign Office memorandum of January 7, 1943, which was in answer to Embassy memorandum of December 17, 1942. The Foreign Office memorandum of January 7 in paragraph numbered (1) very carefully stated that the Mexican Government, in the exercise of its sovereign right, will determine its essential requirements and will handle all distribution within its own territory. However, this definite statement of sovereign rights was somewhat softened by the announcement in paragraph marked (5), which stated that, in order to secure full cooperation, the two Governments would informally exchange impressions concerning the distribution of quotas, issuance of certificates of necessity, et cetera. Nevertheless, paragraph numbered (6) is now coming to light in all of its significance and is pointed to as setting forth the position of the Mexican Government, which is that in matters pertaining to distribution and essential requirements, the Embassy should have no contact with Governmental Departments, Agencies of the Government, or private industry and that any information desired by the Embassy on these subjects should be requested from the Comité Coordinador, or the Primo Villa Michel⁸² committee. This paragraph numbered (6) of the memorandum of January 7 from the Foreign Office states, in free language, that in order to establish one channel for negotiations and exchange of impressions between the Mexican Government and the Embassy, all Governmental Departments and Agencies of the Mexican Government and Mexican importers in general will present their import problems to the Comité Coordinador. It was not so explained or envisaged at the time of the receipt of the Foreign Office memorandum that the Embassy would be requested not to send out any questionnaires to firms in Mexico or to make personal investigations concerning any matters pertaining to distribution or requirements. In so many words, the request of the Mexican Government that these questionnaires and investigations be discontinued and that any information desired should be requested of the Comité Coordinador means, strictly speaking, that the Economic Section should have no contact with business interests in Mexico on matters pertaining to the checking on distribution of American products in Mexico, the securing of information for determining essential requirements of Mexico or the determining of the justice of amounts allotted to consignees.

For more than six months, the Minister of National Economy Gaxiola has mentioned to the Economic Counselor from time to time that the distribution of products within Mexico was the sovereign right of Mexico, regardless of the origin of the products. The Economic Counselor always agreed with Minister Gaxiola on this point, but, it has been evident for some time that he was chafing under the fact that the Embassy was making its own investigations and, at times, found it necessary to disagree on quantities and consignees. Whenever such disagreements occurred, there was always a friendly discussion concerning them, but, nevertheless, Minister Gaxiola always felt that any objection raised on our part was an interference with his plan of distribution. Speaking frankly, a good many of the consignees were so flagrantly not entitled to receive the materials distributed to them by Minister Gaxiola’s committees that the Embassy felt that it could not recommend them, in view of the sacrifices our own people are making by permitting the exportation of products which could be so well used at home. Nevertheless, Minister Gaxiola felt that we should take no notice of what distribution was made of American products after they entered the territory of Mexico, even though they might all be dumped into the river. Minister Gaxiola mentioned this matter to the Economic Counselor from time to time in informal conversations, but he did not carry it to the point of making a definite issue of it.

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

As soon as the Ambassador learned that Minister Gaxiola had sent instructions to Chambers of Commerce, industries, etc. that they should not give commercial information direct to Embassies, Legations, etc., he instructed the Economic Counselor to ask the Minister informally to request the Chambers of Commerce not to repeat the letter to their members until the whole subject could be discussed. When the Ambassador’s request was given to Minister Gaxiola, he said that the matter of foreign representatives making investigations in Mexico and contacting direct business interests was a very serious thing for Mexico. He said that he would be very glad to discuss the problem with the Ambassador, but he did not say whether or not he would ask the Chambers of Commerce not to advise their membership.

In view of the seriousness of the situation created by the letter received by the Economic Counselor from Primo Villa Michel and the instructions sent out to Chambers of Commerce from the Minister of National Economy, a number of conferences were held at the Embassy between the Ambassador, Mr. Bursley,⁸⁴ Mr. Cunningham and the Economic Counselor. The Ambassador said that the instructions to the effect that no commercial information should be given to representatives of foreign Governments had two very important aspects, (1) that pertaining to decentralization and (2) that relating to consular investigations which had been authorized by international agreements, practices and customs for many years. If the instructions issued by the Minister of National Economy should be strictly followed, then consular officers would be prevented from performing their essential commercial interviews. It seemed to be the consensus of opinion that this entire problem probably originated with Minister Gaxiola, and, the Ambassador said that he would invite him for luncheon on the following day, so that he could discuss the matter fully with him. He also said that he would see Minister Padilla⁸⁵ and Under Secretary Torres Bodet as soon as possible after his conferences with Minister Gaxiola.

The Ambassador said that Minister Gaxiola was very adamant in his belief that the Embassy should not make direct investigations but should seek the information which it desires through the Secretariat of National Economy. The Ambassador said Minister Gaxiola showed him a routine questionnaire which had been sent out by the Economic Section requesting certain information for export control. The Minister pointed to the question which asked for end use of a product and seemed to be quite exercised over the fact that we would think of asking such a question. The Ambassador discussed the whole problem at much length with Minister Gaxiola, explaining to him that our Government had decided to establish decentralization in Mexico for the purpose of better aiding that country to secure its requirements with greater ease. He told him of the tremendous volume of work involved in processing export applications and of the responsibility which the Board of Economic Warfare had placed upon the Embassy in performing the functions necessary to decentralization. The Ambassador explained to him that we were working under time limits and that volumes of information had to be forwarded to Washington by specific dates or the licenses would not be issued. The Ambassador said that all of these points made some impression on Minister Gaxiola, but that he still remained adamant in his position that the Mexican Government should supply us with whatever information we might desire and that we should not directly contact business interests. Minister Gaxiola reinforced his position by saying that many complaints concerning the fact that we are making investigations had reached the Government and that they could not be ignored.

The Ambassador held several conferences with Under Secretary of Foreign Relations, Senor Torres Bodet, in order to do everything possible to iron out the fundamental problem of our making investigations in Mexico. In addition, a memorandum (No. 51592 of February 26, 1943)⁸⁶ had been received from the Foreign Office stating that the Minister’s attention had been brought to the fact that the Embassy had been seeking information direct from industrial and commercial establishments relative to production, sale and exportation of certain products. The memorandum in question requested the Embassy to solicit such information from the Foreign Office. The Ambassador told Mr. Torres Bodet that the instructions of Minister Gaxiola and the memorandum from the Foreign Office had raised the fundamental problem of the right of consuls to contact merchants and seek information, which custom and practice had been long established by international law and procedure. The Ambassador inquired of the Under Secretary as to whether or not it was intended that this aspect of the question should be raised and the Under Secretary replied in the negative. In view of the seriousness of the problems involved, the Ambassador said that he would like to consider the memorandum No. 51592 of February 26, 1943, from the Foreign Office as undelivered, at least until after further discussions had taken place, and the Under Secretary agreed to this. The memorandum in question and translation thereof are attached hereto as enclosures Nos. 7 and 8.

The Ambassador told Mr. Torres Bodet that the decentralizing part of the Economic Section of the Embassy was established in Mexico by the Department of State on behalf of the Board of Economic Warfare and that to maintain the organization in the Imperial Hotel Building, it was costing our Government between three million five hundred thousand and four million pesos a year. He said that the decentralizing unit had been set up in Mexico for no other purpose than to aid Mexico in securing its requirements with greater rapidity and certainty. He said to Mr. Torres Bodet that he wanted him to know that this was the real reason why we had established decentralization in Mexico and why we were making investigations to forward information to the Board of Economic Warfare.

The Ambassador told Mr. Torres Bodet that the Board of Economic Warfare had placed a great responsibility upon the Embassy in Mexico City and that to properly discharge that responsibility to the benefit of Mexico and to the satisfaction of the Board of Economic Warfare, it was necessary that certain information relative to exports from the United States be secured and forwarded promptly to Washington. He emphasized that if the information sent by the Embassy was not satisfactory and did not reach Washington in time, the export licenses involved would not be granted, consequently, the Embassy was working under great pressure in order to obtain the information desired by the Board of Economic Warfare with the greatest possible accuracy and speed, so that Mexico would not be deprived of exports which it so badly needed. The Ambassador further explained in detail that if the Embassy were deprived of securing information direct from industry and commerce and, if the Mexican Government insisted that such information should be sought exclusively from it, then, the Mexican Government would be assuming full responsibility for its adequacy and for supplying the information within the time limits required by the Board of Economic Warfare. The Ambassador said that he wanted the Under Secretary to know that his Government would be assuming a tremendous responsibility under the circumstances and that if the information were not forthcoming in a satisfactory form and on time, it would mean that the export licenses for the materials involved would not be granted by the Board of Economic Warfare. In order to further emphasize this point, the Ambassador stated to the Under Secretary that the complaints which had been received by the Mexican Government concerning our direct investigations would probably sink into insignificance in comparison with the complaints which would be received in case export licenses could not be granted because of a lack of timely and satisfactory information. The Ambassador suggested that possibly a number of complaints which had reached the Mexican Government might have originated with intermediaries and companies that were trying to take an unfair advantage of the export situation and which had been unsuccessful as a result of investigations made by the Economic Section. The Under Secretary replied that no doubt some of them came from sources of that nature, but that they were not limited to that category.

The Under Secretary said to the Ambassador that a great amount of pressure had been brought upon the Government because the American Embassy was making these direct investigations instead of the Mexican Government. He said that this tremendous pressure could not be ignored and, therefore, it would be necessary for the Mexican Government to assume the responsibility of making the investigations and supplying the Embassy with information which it required. The Under Secretary said that beginning immediately, he wanted the Embassy to start requesting this information from the Comité Coordinador and to discontinue sending out questionnaires or soliciting information direct which pertained to distribution within Mexico. The Ambassador explained in detail to Mr. Torres Bodet that the volume of work involved in securing the necessary information for Washington would completely swamp the Comité Coordinador and would do nothing other than create a large backlog which would suspend the procedure of considering export licenses. He said to the Under Secretary that it would take months and months to create and train an organization which would be able to secure the type of information indispensable to the issuance of export licenses. Mr. Torres Bodet said that he would have to discuss this phase of the question with the other officials of the Government, including Mr. Primo Villa Michel, and that he would advise the Ambassador a little later. The Ambassador suggested that he thought a conference between Mr. Primo Villa Michel, Mr. Cunningham and the Economic Counselor would be advisable so that the former could receive some idea of the responsibility and the tremendous volume of work which would fall upon him, in case the Mexican Government should undertake to supply the information requested by the Embassy for the Board of Economic Warfare. The Under Secretary concurred in this suggestion and arrangements were made for the conference. Before leaving, the Ambassador stated to Mr. Torres Bodet that he wanted him to know that he could not say yes or no to the request of the Mexican Government until after the matter had been thoroughly discussed in Washington between the Department of State and the Board of Economic Warfare, and, under such circumstances, it would probably be necessary to send Mr. Cunningham and the Economic Counselor to Washington for the purpose of fully presenting the matter before our officials.

At a further conference with Under Secretary Torres Bodet on Saturday, March 20th, the Ambassador restated to him that the Mexican Government was insisting on the assumption of a tremendous responsibility by requesting that it make the investigations pertaining to distribution and supply them to the Embassy. He said to Mr. Torres Bodet that he had decided to send Mr. Cunningham and the Economic Counselor to Washington in order to place the entire matter before our officials, which he felt could not be adequately done by correspondence or telephone. The Ambassador stated that he thought it would be advisable for the Mexican Government to prepare a memorandum of its wishes in the matter so that it could be taken to Washington by Messrs. Cunningham and Lockett, and that, by so doing, there would be no misunderstanding of the exact position of the Foreign Office. The Under Secretary agreed to prepare such a memorandum and, in the presence of the Ambassador, telephoned Primo Villa Michel and asked him if he could have such a memorandum ready by Monday. Mr. Primo Villa Michel replied that he could not, but he believed he could prepare it by about Wednesday, and this was agreed to.

In view of the fact that Mr. Torres Bodet had asked the Ambassador to begin immediately requesting information from the Comité Coordinador, the Ambassador inquired as to whether or not he thought it would be advisable to turn over requests for information gradually, as the Comité Coordinador might prepare itself to receive them, rather than to discontinue investigations by the Embassy at once which would create a backlog at the rate of about one hundred requests for information a day. The Under Secretary replied that he had just conferred with Mr. Primo Villa Michel and that the latter had agreed that a transition period would be much preferable to an immediate stoppage of investigations by the Embassy. The Ambassador said that, under the circumstances, the Embassy would continue its present practice of making investigations until some decision had been reached in Washington and here concerning the entire matter.

[Here follow reports of further conversations along the same lines as those reported above.]

In view of the attitude of the Mexican Government in insisting that the Embassy discontinue its contacts with industrial and commercial houses and request commercial information through the Mexican Government, a very serious problem has been raised. The Board of Economic Warfare charged the Embassy under decentralization with the responsibility of screening and approving export recommendations. If the Embassy is prevented from directly securing sufficient information on which to base its approval of import recommendations, it will be greatly handicapped in its work, as the Department will readily understand. Nevertheless, the Mexican Government is insisting that all information pertaining to distribution within Mexico should be sought through the Comité Coordinador, and, therefore, since the operation of distribution is within the territory of Mexico, the desires of the Mexican Government cannot be ignored. Undoubtedly, regular investigations, such as WTDs and personal investigations concerning political desirability of consignees can be continued by the Embassy by using caution in order not to offend the sensibilities of certain Mexican officials on the subject of sovereignty.

The Economic Section has accumulated tremendous volumes of information on individuals, companies and projects which will enable it to screen most import recommendations, both carefully and thoroughly, even though the normal means of direct investigation might be closed. Should we agree to the desires of the Mexican Government, it is believed that enough avenues for securing information will be left open to permit the Economic Section to function adequately in the screening of import recommendations although it will constitute a heavy load for our present staff. It is gratifying to report to the Department that not a single Mexican firm or individual has refused to supply information to the Embassy, in spite of the instructions which were sent out by the Minister of National Economy. In fact, a number of them have advised the Embassy that, regardless of such instructions, they want it known that they are ready to give any information desired. Therefore, in addition to the tremendous amount of information already accumulated in the Economic Section, it seems that, even though questionnaires on export control are discontinued, ways and means will be available for securing indispensable information, provided it does not arrive adequately and on time from the Mexican Government or, if the information supplied is questionable. From 40% to 50% of WT inquiries⁸⁷ relate to importers outside of Mexico City and in view of the favorable standing of our consuls in their respective districts, it is a certainty that they could supply the desired information. It seems to be certain that when Mexican importers fail to receive export licenses, they will come in droves to the Embassy for information and assistance, which naturally would afford a means of obtaining information. As a result, rather than to risk a break with the Mexican Government on this issue, which would no doubt handicap other important matters now under consideration, it seems the part of wisdom to go along with the Foreign Office as far as possible in its insistence that we secure our information pertaining to distribution through the Comité Coordinador, doing everything possible to help that Comité to function properly, but, making it very clear to the Mexican Government that if it does not supply the requested information adequately and on time, the responsibility for the non-issuance of export licenses will rest exclusively with the Mexican Government.

Respectfully yours,

For the Ambassador:

Thomas H. Lockett

Counselor of Embassy for Economic Affairs

77. Of the Embassy staff.
78. Christian M. Ravndal, Chief of the Division of Exports and Requirements, Department of State, headed an interdepartmental mission concerned with economic warfare in general and priorities in particular.
79. Neither printed.
80. Foreign Office reply of January 7 not printed.
81. Not printed.
82. Licenciado Primo Villa Michel, head of the Comité Coordinador.
84. Herbert S. Bursley, Counselor of Embassy.
85. Ezequiel Padilla, Minister for Foreign Relations.
86. Not printed.
87. Inquiries of the Division of World Trade Intelligence.