The Attorney General (Biddle) to the Assistant Secretary of State (Berle)

My Dear Adolf: I refer to your letters dated July 29, 1944 and August 31, 1944,42 which ask for my views on the proposal for the consolidation of the two telephone companies now operating in Mexico.

This matter first came to our attention in the form of a proposal that this government lend International Telephone and Telegraph Company 19 million dollars to enable it to buy out the interests of the Swedish Ericsson Company in Mexico and merge the Mexican properties of that company with those of I. T. & T.’s own subsidiary in Mexico, the Mexican Telephone Company. As you say in your letter,43 we objected to the plan on the ground that we believed that [Page 1278] I. T. & T. was unsuitable as an instrument of national policy. We also pointed out that there were other American companies that might be suitable instruments of national policy in Mexico but that so far as we knew, no attempt had been made to interest these other companies in the proposal.

As you doubtless know, I. T. & T. owns approximately 30% of the stock of the Swedish Ericsson Company. Information in our possession leads us to believe that this stock interest gives I. T. & T. effective control of the management of the Swedish Ericsson Company. In these circumstances the difference between having the Mexican Telephone properties merged under I. T. & T. and merged under the Ericsson Company does not seem to me to be sufficiently substantial to justify the intervention of this government in favor of one form of merger as against the other.

If this transaction were now to be consummated as a purely private affair, that is to say, if it did not involve the selection of I. T. & T. as an instrument of national policy and the advance of public funds to I. T. & T. to enable it to carry out the project, I am not sure that it would be appropriate for this Department either to object to, or to approve of the proposal. But since the question has been put to me on the other assumption, I think that I must say that I cannot regard governmental participation in the project as being in the public interest. At the same time I realize that it is a question on which reasonable men may differ and that the agencies directly engaged in operations in this field may wish to go on with the project on their own responsibility.

When this matter was under consideration before, Secretary Jones44 and I discussed the matter with the President. At that time the President objected to the proposal on the ground that he believed it was unwise for this government to promote actively any project whereby a Mexican public utility was to be owned and operated by a foreign corporation. In the light of this fact you may wish to discuss the matter with the President before reaching any decision.

Sincerely yours,

Francis Biddle
  1. Neither printed.
  2. The letter of July 29.
  3. Jesse H. Jones, Secretary of Commerce.