812.24/3369: Airgram

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

A–2756. Embassy’s airgram A–2307 of October 8, 1943, and airgram A–2324 of October 11, 1943,37 concerning the project application of [Page 425] Cía. Fundidora de Fierro y Acero de Monterrey for $325,000 of materials and equipment; also Embassy’s despatch no. 12906 of September 11,38 concerning the project application of Cía. de las Fábricas de Papel de San Rafael y Anexas, S.A., for completion of a Kraft Pulp Plant. It is noted that in both the airgram and despatch under reference the Embassy indicates its desire that the necessary machinery and equipment be supplied outside of Mexico’s estimate of supply for general requirements and the existing estimate of supply for projects. It is noted that for this reason the Mexican Imports Coordination Committee has not issued an Export Recommendation in either case.

As the Embassy is no doubt aware, the estimate of supply set aside for general requirements and for country projects represents the total amount of materials (including B products) which the War Production Board has indicated can be made available out of total production, after taking into account the requirements of the armed forces, the civilian requirements of the United States, the requirements of our fighting Allies, and the requirements of the Latin American republics other than Mexico. Therefore, it is impossible to supply critical materials and equipment to Mexico outside of its allocation, without a corresponding reduction in the amount of materials supplied to meet other requirements. It is, of course, possible to accommodate small requests outside of allocation, by charging these to the contingency reserve which is maintained for that purpose. However, when the materials are substantial in amount, the Office of Economic Warfare can only accommodate the request by securing an additional allocation or by increasing its overall request to the War Production Board in subsequent quarters.

It is noted that the above two projects are not the only projects which the Embassy or the Industrial Commission have recommended for licensing outside of allocation. If these projects are approved and materials provided by increasing the requests presented to the War Production Board, it is inevitable that the requirements for must be supplied at the expense of the requirements of our armed forces, our own civilian requirements or other export requirements. Production of materials is not yet sufficient to meet all necessary requirements of the war effort. Even more critical is the production of machinery and equipment, because of the shortage of skilled labor in the United States. The Embassy is, therefore, again cautioned to approve only essential projects. Such projects should be covered by Export Recommendations in all cases. Wherever there is an existing estimate of supply, a charge should be made thereto. If this is impossible because of the relatively small estimate of supply, the Embassy [Page 426] should recommend an increase in subsequent estimates of supply. It should be realized that such large projects cannot be passed without some sacrifice on the part of the Mexican general requirements. How great this sacrifice will be must be decided in Washington in the light of other demands upon supply.

The Embassy is therefore informed that under present procedures of the Office of Economic Warfare, an Export Recommendation will be required for the expansion of the facilities of Cía. Fundidora, as well as for the Kraft Pulp Plant of Cía. de las Fábricas de Papel de San Rafael y Anexas, S. A. It is further suggested that, if the Mexican Estimates of Supply are insufficient to provide the materials required by these Projects, the Embassy indicate the maximum amounts of materials which may be charged to the regular estimates of supply without interfering with the normal minimum requirements of Mexico’s wartime economy and the extent to which it will be necessary to increase subsequent estimates of supply if these projects are authorized.

The War Production Board has indicated informally to the Department that in all probability, it will not approve the San Rafael Project. It must therefore be emphasized that the chances of securing favorable action at the War Production Board in the case of both Projects will be substantially enhanced if a considerable portion of the Project requirements may be met from the regular Mexican Estimates of Supply.

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