The Ambassador in Mexico (Messersmith) to the Director of the Office of American Republic Affairs (Duggan)

Dear Larry: I got your secret letter of July 15, with regard to the conversations which Dr. Padilla had with the President and with Secretary Ickes on petroleum policy, etc. yesterday afternoon late just about the time that Dr. Padilla was arriving. Padilla got off the train at Lecheria some 40 kilometers outside of Mexico City in order to avoid the correspondents, etc. and came into the City by car. I therefore did not see him yesterday. I will not see him today unless he sends for me as I know he will be with the president a good part of the day reporting on his trip.

I was naturally greatly disturbed when I received Joe McGurk’s71 telephone message on the morning of July 17, to the effect that I was not to say anything about petroleum to Padilla until I heard further from the Department in view of the fact that President Roosevelt had been encouraging to Dr. Padilla on the question of Government to Government collaboration in this development of Mexico’s oil resources. Your letter of July 15, which reached me yesterday afternoon, did not decrease my concern and I confess I had a rather sleepless night thinking about this matter from various angles.

If we are to do anything in the oil picture in Mexico and if there is to be anything in the way of a decision by Mexico on major oil policy on sound grounds, and if there is to be any development of Mexico’s oil resources, it will in my opinion, and in view of my two years’ study of this matter here and of what I believe to be our situation at home, have to be on the basis of private initiative. The President of Mexico and Dr. Padilla really understand this as well as most of us at home do. I thought we had this matter well on the track again and were on the way to getting a resumption of the conversations on Dr. Padilla’s return from Washington on a sound basis and could make rapid progress.

You will recall that in my letters to the Secretary prior to the visit of Dr. Padilla I mentioned the importance of emphasizing that a loan was out of the question, as I had just been authorized72 to tell Dr. Padilla again, before he left for Washington.

I am absolutely convinced that in spite of the encouraging words which President Roosevelt gave to Dr. Padilla and of the encouragement which Secretary Ickes gave Dr. Padilla that such a loan is out of the question. Even though we might wish to do it, I think it would not prove feasible and quite impossible. To hold out any hopes, therefore, [Page 1344] that such a loan will be made is merely to delay any progress on this matter and to make it impossible for Mexico even to develop her own resources to meet her constantly increasing internal needs, not to speak of export or any collaboration with us in furnishing us or any of the other Americas or anyone else any oil.

I can appreciate the confusion in which Dr. Padilla must have been as a result of the apparent conversations which he has had on this matter. I know the confusion in which the President will be here and the dilemma in which it will place him with respect to General Cárdenas. This has very serious aspects internally here.

I know that President Roosevelt has always had in mind collaboration with Mexico in the development of a small area in Mexico for use in time of war. I was careful to mention this in my letter to the Secretary sometime ago73 when I asked him to clear up this question of a loan which had been raised by General Cárdenas with the President here. I knew, of course, that President Roosevelt was in favor of Government to Government collaboration in such a limited field and I spoke about this to Dr. Padilla on my return from Washington in February but the idea did not seem to take very well at the time. The Mexicans know that Government to Government collaboration in this matter is not really the solution. I am not sure whether President Roosevelt who has so much on his mind these days may not have confused this limited idea with the broad question. President Roosevelt has so many things to think about that such a confusion may have taken place in his mind or he may not have made himself clear in his conversation with Dr. Padilla that he was thinking of Government to Government collaboration in only this limited field.

The idea that we could collaborate with Mexico on a Government to Government basis in the broad field of oil exploration and development, which of course the Mexicans would have in mind in such an arrangement, is quite out of the question for it would cause us more difficulties than we ever had in the oil question as a result of the difficulties between the private companies and the Mexican Government in the past. Any action on our part of this kind at home would create enormous problems for the administration and I don’t believe it would be possible even from our internal point of view—even if it were in some respects feasible.

The thought of Secretary Ickes that we could have such collaboration in the broad field of development in Mexico as we have in connection with the high octane plant is not practical for the two operations are entirely different. In the case of the high octane plant it involves an industrial operation and not exploration and development which involves such great risks. Besides that I am not sure that Petróleos Mexicanos is playing fair with us in connection with the [Page 1345] high octane plant arrangement. The Philips Petroleum Company is supposed to be doing the supervision work on the high octane plant which is quite all right and desirable that this be done by an American firm which is competent. I had my fears from the beginning that Philips Petroleum was interested in the supervision contract only as a means of getting into the drilling and exploration and development field through a back door. They assured me that it was not so. I saw the contracts and they were all right. I am now getting in the last days some information to the effect that Petróleos Mexicanos in its desperation may be using Philips Petroleum in a much broader way than was contemplated and that we had in mind. Some of the other companies already have wind of this and of course it can make a lot of trouble. If it should develop that through this high octane plant arrangement, which is a good one, we have opened the door for Phillips Petroleum or any single American Company to come in here through a back door when the front door and the back door are closed to other companies, we can come in for a lot of criticism and for a lot of trouble with the other big oil companies at home. Besides that, letting Philips in through the back door here is not going to really help in the Mexican situation.

I was so much concerned about all this that I confess I had one of my few sleepless nights last night since I came to Mexico and in view of the fact that Dr. Padilla will undoubtedly have to make some kind of statement to the press today after he has seen President Avila Camacho and may make at least some indirect reference to this matter I thought it best to call you on the phone this morning74 as to whether I should not say a word to Dr. Padilla before he sees the President to not discuss with the President or anyone this question of oil until he has heard further from me and until I have heard further from the Department. Even if nothing is said by Dr. Padilla to the press with regard to petroleum, he will undoubtedly mention his Washington conversations to the President and the President may feel that he has to say something to General Cárdenas and this will place President Avila Camacho in a very unhappy situation vis-à-vis General Cárdenas and will not help the situation here in Mexico in any respect.

I am sending you herewith a memorandum of the conversation which I had with Joe McGurk75 over the telephone this morning and as a result of the conversation I am, of course, refraining from saying anything to Dr. Padilla before he sees the President. We run the risk of some reference being made to this matter in a statement which Dr. Padilla may give to the press but McGurk agreed with me that [Page 1346] under the circumstances as they were in Washington I could say nothing here.

I am therefore refraining from saying anything to Dr. Padilla whatever on oil until I hear further from the Department.

After two years of hard work on this matter and getting to the point where a constructive solution seemed to be in the offing I need not tell you I am very much discouraged but I feel in some way or other the thing has got to be got on the track at home and here for any playing with the idea of Government to Government cooperation or of a loan or anything of that kind is only going to delay and confuse any constructive solution and make our task and the Mexicans’ task the more difficult.

I know that you all have been very helpful in this matter and I appreciate it.

With all good wishes,

Cordially and faithfully yours,

[File copy not signed]
  1. Joseph F. McGurk, Chief of the Division of Mexican Affairs.
  2. By instruction 5894 of June 27, 1944; not printed.
  3. Presumably a letter dated May 22, 1944, not printed.
  4. The Ambassador was unable to contact Mr. Duggan and talked instead with Mr. McGurk.
  5. Not printed.