812.5018/23
The Chief of the Division of the American Republics (Bonsal) to the Ambassador in Mexico (Messersmith)
My Dear Mr. Ambassador: As there may be some reaction in Mexico, we think it would be well for you to have some background information on the following matter:
In October of last year, the Mexican Embassy addressed a note to this Department asking this Government to assist Mexico to obtain between 150,000 and 200,000 tons of wheat in the United States, F.O.B. Laredo, Texas, at a price of about one dollar a bushel.
Eventually arrangements were made for the establishment of a wheat export program whereby the Department of Agriculture would pay a subsidy of 25 cents per bushel on wheat bought by foreign governments in accordance with this program, thus providing for a lower price. In the case of Mexico, arrangements were made for a subsidy which in the beginning was 25 cents a bushel and later 30 cents a bushel, on some five million bushels of wheat in January and, [Page 431] apparently, between one and three million bushels more wheat during recent months.
Recently, the Department of Agriculture found that it would be necessary to stop granting this subsidy, as the funds which Agriculture had had for this purpose had been exhausted. In the circumstances, the Department of Agriculture found that its subsidy program would have to expire May 14, 1943, at 2 p.m., and published a statement to that effect.
On May 12, the Mexican Chargé d’Affaires44 called on me to discuss this matter. He pointed out that Mexico had devoted much of her efforts to the production of war and other materials, and had diverted this effort from wheat producing. He said that Mexico had done this on the basis of her belief that she was able to buy wheat either from Canada, from the United States, or from the Argentine. He said that wheat was currently available in Canada for a little bit under a dollar a bushel and that Mexico would be glad to buy it there, but that she realized our transportation situation was such it would be difficult to be able to take care of large wheat shipments by rail from Canada to Mexico. He then said that Mexico wanted to contract for seven and one-half million bushels of wheat prior to the expiration of the program, and he asked for all possible assistance from the Department.
In the premises, I telephoned Mr. Leslie A. Wheeler, Director of Foreign Agricultural Relations, shortly after the Chargé left my office. Mr. Wheeler said he would look into the matter and would call me back this morning. He called me back around 10 o’clock today and said that he was very sorry but Agriculture was not in a position to make available to the Mexican Government for this wheat the export subsidy which had heretofore existed. Accordingly, this was communicated immediately to the Mexican Embassy.
From what I gather, the quantity of wheat available next month will be about what it is today. There is no doubt in our minds but that the Mexicans are simply anxious to avoid paying the full price for the wheat. Actually, of course, they would only be paying the full domestic price next month. If it is considered that the subsidy on the wheat they now request runs to two and a quarter millions of dollars, you will readily see how it is that there is some hesitation in pushing this matter further. Also, this would mean that the consumer in this country would have to pay about $1.50 for wheat while the consumer in Mexico would get his wheat on a basis of $1.20 a bushel.
There does not seem to be any assurance that Agriculture will endeavor to renew its export subsidy program the next fiscal year. [Page 432] If it is renewed, Mexico will of course be in a position to share in its benefits equally with any other countries to which it may be granted.
So far as shipping wheat from Canada to Mexico is concerned, I may say that it is estimated a shipment of two million bushels would require about 1,500 freight cars according to figures of the Office of Defense Transportation. I have not checked these figures, but I assume they are accurate. Obviously, it would be just about impossible to allocate the 5,500 [1,500] freight cars necessary for such a shipment. Also, I wonder as to the capacity of the Mexican railroads to handle such a sudden, large influx of cars.
I am enclosing a copy of a memorandum46 on this matter.
Should anything new develop, I will send it down to you immediately.
With best wishes,
Sincerely yours,