Memorandum by Mr. Emilio G. Collado, Special Assistant to the Under Secretary of State, to the Secretary

The Secretary: The Coordinator84 has requested the Department’s endorsement of a recommendation of Ambassador Messersmith85 that CIAA86 authorize additional commitments for the rehabilitation of the National Railways of Mexico, not to exceed $500,000 during the first three months of 1944. A draft letter for signature is attached.87 Some urgency attaches to this matter as the Railway Mission88 must receive immediate instructions as to how to proceed.

More than two years ago the Department and the War Production Board realized that the Mexican railway system faced a general breakdown that would prejudice the movement of the then existing volume of metals and other strategic materials to the United States. [Page 1235] It was further apparent that with the withdrawal of shipping the load would be even greater, and that there was no use in undertaking a large program of procurement and expansion of production if transportation facilities were to be inadequate. The CIAA was asked to help in the matter and an experienced railway engineer89 was sent to Mexico to investigate the question.

By the latter part of 1942 it became evident that vigorous action by this Government was needed to help Mexico in the rehabilitation of the National Railways to permit the transportation of the greatly increased volume of materials to the United States. Accordingly the CIAA, with the strong backing of the Department and the WPB,90 requested and received funds from the President’s Emergency Fund. The total funds which have been allocated for the project amount to $7,500,000 of which $5,000,000 came from the Emergency Funds, and $2,500,000 was transferred from unused appropriations of CIAA. The latter transfer was approved by Congress in connection with CIAA’s budget for fiscal 1944, at which time the whole matter was reviewed before the appropriations committees.

The program has two parts. The Chief of the Railway Mission, Mr. Oliver Stevens,91 who is an experienced railroad man, has gradually built up a large staff of United States railway maintenance and operations technicians who work with Mexican assistants, training the latter and studying the entire Mexican railway operation and recommending improvements. This staff rose at one time to 55 Americans, is now at about 50 Americans, and Mr. Stevens proposes gradually to reduce it to about 30–35 by the end of 1944. At its peak this part of the program cost almost $1,000,000 a year in salaries, traveling expenses, etc.

The other part of the program consists of carrying out and financing specific railway maintenance and rehabilitation projects. Some of the work is done by letting contracts to United States contractors, and some is undertaken by the Mexican railways under the supervision of Mr. Stevens and his staff. During 1943 about $2,800,000 has been committed for such purposes; the total has not all been actually spent as yet. Much of this is to United States contractors and for United States materials and equipment.

The Railway Mission has also performed a very useful service in screening all applications for export licenses and priorities for railway equipment for Mexico.

Because of the success of Mr. Stevens’ work, total expenditures are remaining well below the original estimates, only about half the funds [Page 1236] have been expended or committed and the railways are carrying a greatly increased volume of traffic. Mr. Stevens and the CIAA wish to taper off the expenditures as rapidly as possible consistent with the maintenance of adequate transportation for materials needed for war purposes and the undertakings this Government has entered into, at our initiative, with Mexico. They have consulted Ambassador Messersmith,92 and the Ambassador and Mr. Stevens recommend that commitments at the reduced rate of a maximum of $500,000 be authorized during the first three months of 1944. Ambassador Messersmith has written a very strong letter to Mr. Rockefeller, a copy of which is attached.93

I have consulted Mr. W. Y. Elliott, head of the Transportation Branch of WPB, who has sent me the attached letter. The facts are that both WPB and WFA94 require and desire the maintenance of the Mexican railway system as the total volume of strategic materials and food imported continues to increase. In fact, although the metals situation generally is much easier, manpower considerations have caused WPB to reduce slightly production within the United States while maintaining it in Mexico. The WPB would not wish to state this in writing because of domestic political considerations.

On the other hand WPB has felt right along that some of the strain on the Mexican railways could be taken off if the movement of certain unessential items, such as bananas, was curtailed. The Mexican Government and Ambassador have refused to do so in any important degree, for obvious Mexican local political reasons, and the Department has not approved measures for the purposes suggested by WPB.

It is obviously necessary both from the point of view of war materials transportation, and our commitments to the Mexican Government to carry on with the railway program. At the same time it is possible to taper off the program at a relatively rapid rate, as the operating economics resulting from Mr. Stevens’ work and advice are so great as to render actual rehabilitation expenditures less needed.

Mr. Percy Douglas of CIAA believes that the entire program can be held down to about $5,000,000 against the $7,500,000 available. As previously indicated, he proposes that the technical staff be gradually reduced during 1944. Commitments for actual rehabilitation he suggests at not over $500,000 during the first quarter (he hopes that $400,000 will be sufficient); $300,000 during the second quarter; and perhaps $100,000 during each of the third and fourth quarter. In [Page 1237] 1945 the program would probably be reduced to some expenditures for technical staffs only.

The Department needs to decide now only with respect to the first quarter of 1944. A letter endorsing Ambassador Messersmith’s recommendation is attached.95 In addition there is attached an instruction to Ambassador Messersmith95a transmitting the correspondence and a copy of the memorandum96 to indicate the line of the Department’s thinking regarding succeeding quarters.

Emilio G. Collado
  1. Coordinator of Inter-American Affairs, Nelson A. Rockefeller.
  2. George S. Messersmith, Ambassador to Mexico.
  3. Office of the Coordinator of Inter-American Affairs.
  4. Presumably the draft of a letter from Secretary Hull to Mr. Rockefeller dated January 7, 1944; not printed.
  5. The Railway Mission to Mexico dated from April 6, 1942, when Maj. Howard G. Hill of the U. S. Army Corps of Engineers, under assignment to the Office of the Coordinator of Inter-American Affairs, arrived in Mexico to survey the Nation’s railways. With Departmental support, the scope of the project was enlarged during April and May, and was further broadened and formalized by an exchange of notes signed at Mexico City on November 18, 1942, by Ambassador Messersmith and Mexican Foreign Minister Ezequiel Padilla. For texts of notes, see Department of State Executive Agreement Series No. 289, or Department of State Bulletin, November 21, 1942, pp. 954–957.
  6. Maj. Howard G. Hill.
  7. War Production Board.
  8. Mr. Stevens succeeded Major Hill in October 1942.
  9. The substance of these conversations of early December in Mexico Citv was covered by Percy L. Douglas, Assistant Coordinator of CIAA, in a memorandum dated December 9, 1943; not printed.
  10. Letter dated December 15, 1943; not printed.
  11. War Food Administration.
  12. Draft of the letter of January 7 referred to in first paragraph of this memorandum.
  13. Draft of instruction No. 5057, January 7, 1944, not printed.
  14. Reference is to this memorandum of January 1 by Mr. Collado.