The Assistant Secretary of State for American Republic Affairs (Braden) to the Ambassador in Mexico (Thurston)

Dear Walter: We are sending you an instruction60 enclosing a memorandum on the policy of the United States Government with regard to Mexican petroleum.

[Page 1006]

You will understand, of course, that it is not intended that you should make any representations at this time to the Mexican Government, but that the memorandum is sent you for your information and for guidance in any discussions which you may have. I take it that the present administration will not take any decision on the future of Mexico’s oil industry, but that this is a matter which will be handled by the new administration. Your letter of August 2, 1946, to Mr. Carrigan,62 relating a conversation between a representative of a foreign oil company with Señor Ramón Beteta63 would seem to indicate that the new administration will realize the seriousness of the oil situation in Mexico and that it may seek to find a way to provide for future participation of foreign oil companies in the Mexican oil development in some manner or other. There are also other indications that the new administration is worried over the heavy drain which Petróleos Mexicanos64 constitutes on the Mexican Treasury and that Señor Alemán will seek to find a way to permit foreign oil companies to operate again, probably on a contractual basis.

If foreign companies are permitted to operate on some basis in Mexico the new administration will attach much importance to “face saving”. It will no doubt insist, first of all, that subsoil rights remain the property of the Mexican Government and also will probably try to keep away from mentioning the word “concession”. We have heard rumors recently that Señor Alemán was under the impression that the United States Government would grant a loan to Mexico for the commercial development of its petroleum resources. If the subject should come up with any Mexican officials or with persons who appear to be connected with the new administration, you may make it clear to them that this Government will not make such a loan to the Mexican Government.

It is reported that the Standard Oil may send Mr. Laurence Duggan to Mexico in the near future to make an impartial report on the possibilities of the return of American oil companies to Mexico, or at least their participation on some basis in Mexican oil industry. The thought in this connection appears to be that the Standard Oil representatives think in terms of the company’s former operations in Mexico and that Mr. Duggan might have the advantage of being able to look at the situation objectively and submit a more impartial report. If Standard should decide to ask Mr. Duggan to go to Mexico, the Department will make no objection.

With particular reference to the instruction mentioned above, I should mention that in the first paragraph on page 365 the thought is [Page 1007] not that the United States is precluded from taking any initiative, but that if any arrangement should be reached whereby American companies could participate in the Mexican oil industry it should appear in any publicity given the matter that the initiative came entirely from the Mexican Government. In the fourth paragraph on page 3, it is desired to maintain the principle that all foreign companies at least have the legal right to participate. On page 4, under the heading of Mexican Requirements, these are merely some of the points which will probably be emphasized by the Mexican Government, which may of course state other conditions. The statement in paragraph 2 (c) on page 5 may not be entirely clear. This is meant to apply, of course, only to American participation and is a point which probably would not need to be mentioned in any discussions.

The Department of course favors no one particular American company as far as participation in the Mexican oil industry is concerned. There are indications that some of the American companies would like to stage a triumphant return to Mexico. It appears that the Mexicans will attach great importance to face saving and that they will probably insist on avoiding a general impression that the foreign oil companies are “coming back”. We of course have no thought that any of the American companies should participate in the oil industry in Mexico under a subterfuge, but it appears likely that if they do take part in the development of the industry it will have to be on a contractual basis in such a way that the Mexican Government can avoid the appearance of granting outright concessions to foreign interests.

We are enclosing for your information and as a sort of commentary on the formal instruction, a draft record of a meeting66 which was held in Mr. Clayton’s office on August 19, 1946 with representatives of five of the companies most likely to be interested in the Mexican situation. As the record will show, the companies are not altogether convinced that there is any practical basis at the present time for a satisfactory re-entry into Mexico. There appeared, however, to be no insuperable substantive points in their minds which could not be met by the Mexican Government in the process of detailed negotiations if the Mexicans really want the Americans to participate in their oil industry.

I assume that we will be receiving further comments both orally and in writing from some, if not all, of these companies; and also from certain other companies whose offices were too remote to permit them to participate in the meeting, but who have been provided with copies of the agenda and the record and who have been asked to comment. [Page 1008] Any further advice that we receive will be promptly transmitted to you with our comment, if any is needed.

With all good wishes,
Sincerely yours,

Spruille Braden
  1. Infra.
  2. John W. Carrigan, Chief of the Division of Mexican Affairs (appointed First Secretary and Vice Consul at San José, July 17, 1946); letter not printed.
  3. Under Secretary of the Treasury and Public Credit.
  4. Petróleos Mexicanos (Pemex), the Mexican Government’s oil monopoly.
  5. Paragraph beginning “First, it would be desirable …”, p. 1010.
  6. Not printed.