740.00112A European War 1939/34238

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

No. 11503

Sir: I have the honor to refer to the Department’s Circular Instruction dated June 18, 1943,60 transmitting to this Embassy a copy of a memorandum entitled: “United States Financial Assistance to Eliminate Undesirable Ownership and Control from Proclaimed List Firms”. The Embassy is instructed to transmit to the Department any comments, suggestions, or questions which it might have, particularly with reference to the problems of Mexico.

The Embassy is of the opinion that funds are not needed for the purpose of furnishing firms which have been seized by the Mexican Government with working capital. Mexican officials have, in conferences with officers of the Embassy, indicated that most of the seized firms are in excellent financial condition and, in fact, have an excess of available capital which has accumulated as a result of their inability to purchase American merchandise.

The Embassy is further of the opinion that it would be inadvisable to offer financial assistance as an encouragement to the sale of seized firms by the Mexican Government. This conclusion is based on several considerations.

All Proclaimed List firms the seizure of which was recommended by the Embassy have been vested and, so long as they are operated by the Mexican Government, there need be no fear of undesirable activities. It is feared, however, that, should they be sold, a strong possibility would exist that the purchasers would be dummies who, at the expiration of the war, would return the enterprises to their former owners.

The Mexican Government has indicated a desire to retain and [Page 517] operate these companies at least for the present. As previous correspondence on this subject reveals, it has established an elaborate and efficient organization for the administration and development of the seized firms, an organization which appears to be determined to see that the companies prosper.

That the policy of the Mexican Government does not envisage the sale of the vested enterprises is also evidenced by statements of various interested persons that the minimum bid required when El Nuevo Japón, Trapeha S.A., and certain other vested companies were offered for sale in the latter part of 1942 was so high as to make bidding impossible. This, coupled with the fact that the offer of sale has not been renewed since their deletion, despite the fact that the representative of the Junta de Administracíon stated to the Embassy that the reason the firms were not sold was that no one wanted to bid on a Proclaimed List firm, indicates that these offers may have been made without any real intention to sell the firms and solely because of the favorable impression that the offers would make on this Embassy.

Further evidence of the Mexican Government’s present unwillingness to offer vested firms for sale arises from the fact that although there is at present a large amount of interested capital available in Mexico for investment in such firms as these, it has been reported that the Mexican Government has discouraged overtures from local investors seeking to negotiate for the purchase of vested firms.

In view of the foregoing, it is not believed that an offer of financial assistance such as that described in the circular instruction under reference would improve the situation in Mexico. The prosperity and growth of vested firms under government ownership and direction constitutes in itself the best assurance that they will never be relinquished to their former owners. The more important aims of a program of financial assistance, namely, the adoption and enforcement of a comprehensive program to eliminate undesirable elements of ownership and control from seized firms, have already been obtained in Mexico. As has been stated, Mexico’s program for controlling enemy property is effective not only in its terms but also in the vigorous manner of its application. The Mexican Government has not only seized all firms whose vestiture was requested by this Embassy, but has also taken over numerous other Axis enterprises. It has not only discharged those employees whom its own investigations revealed to be undesirable, but has also removed others who were discharged for no other reason than because the Embassy requested it. Some individuals have been discharged at the request of the Embassy even though the company by which they were employed had already been deleted from the Proclaimed List. The cooperation between the officials of the Mexican Government charged with the administration of vested [Page 518] companies and officers of the Embassy has been frank and sincere. The Embassy has encountered no resentment against its suggestions regarding the administration of seized firms. On the contrary, the responsible Mexican officials have on several occasions pointed out that, because of its numerous sources of information, the Embassy can frequently be of material assistance to them.

For the foregoing reasons, namely:

a.
That there is at present ample capital in Mexico available for investment in the vested firms,
b.
That the general policy of the Mexican Government is against their sale,
c.
That their prosperity under the administration of the Junta de Administracíon is a strong factor operating against their ultimate return to their former owners,
d.
That a possibility exists that if they are offered for sale the former owners would attempt to repurchase them through dummies, and
e.
That Mexican controls over enemy firms are satisfactory,

the Embassy believes that the type of financing described in the Department’s instruction under reference is not needed in Mexico and that many of the purposes of the proposed financing have already been accomplished.

Respectfully yours,

For the Ambassador,
Charles A. Bay

Commercial Attaché
  1. Not printed.