710 Conference W–PW/2–1445

Economic Memorandum No. 2 by Mr. Merwin L. Bohan, a Technical Officer of the Delegation

Interview Between Licenciado Luciano Wiechers and Sanders, Machold, and Bohan

We called on Licenciado Wiechers this morning and spent two hours with him. He spoke with entire frankness, and throughout the interview appeared to have a genuine desire to be of every possible assistance in arriving at a mutually satisfactory basis for consideration of the problems which will come up at the forthcoming Conference.

The fears raised at the luncheon meeting reported in Economic Memorandum No. 1 were amply confirmed. The Mexicans are not thinking in terms of early restoration of a free, competitive international [Page 112] economy. Rather they envisage a period of even more rigid control of international commerce. Their approach to the problems of the transition is thoroughly realistic but the solutions proposed, while on an equally practical nature, run almost directly counter to the liberal trade objectives of the Department. Inter-American commodity agreements as a protection against colonial raw material producing areas; stimulation of strategic production (rubber, et cetera) in the Western Hemisphere as a continuing defense measure; extension of American procurement programs; protective devices for the stimulation of industry, and rigid controls over the use of accumulated gold and exchange reserves are the principal foundation points of their program.

It was obvious from the beginning of Licenciado Wiechers’ conversation, that his chief preoccupation, and in this he seems to reflect the consensus in the Committee, was the effect on Mexican economy of a restoration after the war of a free, competitive market. He said that Mexico was in no position to compete with colonial areas and frankly acknowledged that the maintenance of a stable economy had to be secured by following, perhaps initially only, certain unorthodox economic principles. Thus, although Mexico was not a good agricultural zone, continued development was justified on two grounds, as follows: (1) The importance of this industry in Mexican economy, as well as in that of other American countries, required continued promotion as well as protection against colonial producing areas, and (2) the necessity of the United States, as a continuing defense measure, to assure the supply of strategic materials, favored the production of such materials in the Western Hemisphere and particularly in Mexico because of its geographic position. It was clear that Licenciado Wiechers, although expressing the majority opinion, had personal reservations as to the efficacy of this program as other than a temporary palliative. His long term solution, not only for Mexico’s specific problems but for the majority of the other countries of Latin America, is the building up of a strong internal economy primarily through industrialization, which would tend to strengthen internal markets for internal production while increasing demands for United States products. Initial impetus for the industrial program would be given by utilizing accumulated foreign exchange reserves for industrial machinery and continued through the American program of capital and technical assistance.

The Mexicans are drafting resolutions on the following specific topics:

Commodity agreements. Mexican thought is directed towards assuring Latin American production against colonial competition rather than international commodity agreements in the sense contemplated [Page 113] at Hot Springs. The Committee, apparently, is thinking of these agreements as both long and short term solutions, but Licenciado Wiechers, personally, while admitting their short term necessity, seriously questions their long term efficacy. Licenciado Wiechers, in explaining the position of the Mexicans, stated that it was necessary to assure the raw material producer of as square a deal as the industrial producer. He pointed out that, for all the talk of free and unhindered international trade, the prices of raw materials are generally set by the country whose labor is paid the lowest wage and works the longest hours. On the other hand, Licenciado Wiechers apparently believes that the industrial countries are able to maintain and set prices of industrial products at profitable levels, through either formal or informal arrangements. Thus, he feels that the raw material producing countries of Latin America are at the mercy, on the one hand, of the strong industrial nations which supply their needs, and on the other hand, of colonial producing areas which set world prices for the principal Latin American export products.
Inter-American development machinery. The Mexicans are keenly interested in promoting the creation of inter-American machinery to assist in the industrialization of Latin American countries. Licenciado Wiechers said that he concurs in the statements made by Espinosa de los Monteros that the development of Latin American industries and resources should not be dependent upon the concurrence of European countries.
Utilization and Conservation of exchange resources. This subject has apparently been studied in detail, and the Mexicans have arrived at definite conclusions. It was the only subject on which Licenciado Wiechers appeared to be adamant. As he pointed out, Mexico has the choice of permitting the exchange balances acquired during the war to be thrown away, in a relatively short time, on “luxury” items, or to see that these funds are utilized to purchase machinery upon which to base the future industrial economy of Mexico. He said that he would prefer to see the United States prohibit the exportation of certain articles to Mexico or to limit them to given amounts rather than for his country to set up prohibitions against their importation, and indicated that Mexico would be perfectly willing to enter into an arrangement with the United States and other supplying countries to reach this objective. At this point, we answered Licenciado Wiechers with the very strongest arguments we could marshal, and pointed out to him that it would be impossible for the United States to prohibit or limit the exportation of such products as automobiles, refrigerators, and radios to Mexico, and that we felt that the supply situation for at least two years after the end of hostilities would be such as to place a brake on the total amount of “luxury” [Page 114] goods that could be supplied by the United States, and that hence, private business itself would, in effect, limit exports. To this, he answered that we probably did not know the Mexicans, since, at whatever cost, they would see to it that the present exchange resources were translated into the goods which they were so anxious to buy, and that only customs control could really answer the problem. We asked Licenciado Wiechers whether, if as a result of inter-American cooperation, it were possible to assure Mexico of a moderately favorable balance of payments during the transition period, it would not be wiser to keep away from government controls. While willing to listen to our arguments, he apparently is convinced, and we gathered that the Committee shares his ideas, that some form of control over the present exchange balances is essential in the transition and immediate postwar periods in order that the objective of securing machinery may be achieved.