Foreign Relations of the United States, 1947, The American Republics, Volume VIII

812.75/4–1847

Memorandum by the Assistant Secretary of State for American Republic Affairs (Braden)⁴⁰

Washington, April 18, 1947.

The IT&T states that in recent years it has been losing money with its company in Mexico and that it needs financial assistance to purchase the Ericsson Company there and to combine the two systems; or it will have to negotiate a sale of its own Mexican interests to Ericsson.⁴¹ The latter development would be highly undesirable. A–Br and ARA believe it extremely important that telephone communications in Mexico be in American hands. Arrangements should be concluded for the IT&T to purchase the Ericsson system.

During the war the Ericsson company in Mexico, like the Swedish legation there, tried to convince us it was friendly to us while at the same time it did the same with the Germans, and in fact actively furnished information to the Nazis.

The Ericsson company amongst other foreign companies makes a practice of furnishing commercial information to their own nationals competing with Americans, thus giving them an unfair advantage over American interests.

Russia since VE day has imposed an increasing political and economic influence on Sweden. The Ericsson company may already have Russian agents in Mexico but if it obtained control of the entire telephone system there, Russian agents would undoubtedly filter in. This is a most important reason why IT&T should purchase Ericsson in Mexico. In the event of war, telephone communications in Mexico would be far more important to us than they have ever been.

With Ericsson controlling all telephone communications in Mexico, an effective weapon would be placed in the hands of the Russians in promoting the communist cause in Mexico. The necessity of preventing the application against us of geopolitical actions by non-hemisphere powers makes it prudent to facilitate the acquisition of IT&T of the entire telephone system in a contiguous country.

The Secretary of State, on March 4, 1946, wrote Colonel Sosthenes Behn, president of IT&T,⁴² that “no objection will be interposed by the Government of the United States to the sale or other disposition of your telephone subsidiary in Mexico”. Prior to writing this letter, Mr. Acheson addressed letters to the Acting Secretary of War and to the Secretary of the Navy, dated January 17, 1946,⁴³ asking for the advice of these Departments as to whether considerations of national security would justify the financial support of this Government to enable IT&T to acquire the Ericsson interests in the Mex-Ericsson Telephone Company. As replies were not received early in March, 1946, and as IT&T desired a reply to its inquiry, the Department, in the March 4, 1946 letter, referred to above, stated that no objection would be interposed by the Government of the United States to the sale or other disposition of IT&T’s telephone subsidiary in Mexico. ARA has always felt strongly that no foreign interest should acquire this property. However, the lack of timely information from the War and Navy Departments resulted in the March 4, 1946, letter, which apparently expressed the views of the economic divisions of the Department, but not the opinion of ARA.

The Secretary of War, in a letter dated April 25, 1946,⁴³ to the Secretary of State, stated that: “The War Department desires to inform the State Department of its conviction that it is of utmost importance to national interest and security that all communications facilities in the Western Hemisphere be owned by hemispheric interests and, if possible, by companies controlled by citizens of the United States.” The Secretary of the Navy, in a letter dated April 11, 1946,⁴³ informed the Secretary of State that: “The Navy Department favors the acquisition by hemisphere interests of all communications systems now owned, directly or indirectly, by non-hemisphere interests—a position previously taken by this Department.” We believe that the above-quoted opinions of the two defense departments express in definite terms the importance which these Departments attach to the acquisition by an American-controlled company of Ericsson telephone interests in Mexico. ARA concurs fully, as it has done consistently in the past, with this point of view.

We believe in ARA that the political considerations in favor of the purchase of Ericsson interests in Mexico by IT&T are so overwhelming and so important to our security that we should use every means in our possession to make possible the consummation of this transaction.

Spruille Braden

40. Addressed to Under Secretary of State Acheson and Under Secretary of State for Economic Affairs Clayton.
41. Letters of March 12 and April 14, 1947 (not printed) from the International Telephone and Telegraph Corporation (IT&T) inquired whether or not the Department of State would recommend and support a plan for financial assistance by United States Government agencies (1) for the consolidation of the Mexican Telephone and Telegraph Company and the Swedish Ericsson Telephone Company in Mexico under American control subject to IT&T’s purchasing the L. M. Ericsson Company (LME), or (2) advance to a Mexican Government controlled company, with both Mexican Governmental and private capital, for the acquisition of the two companies. Both letters stated that failing a favorable answer, the IT&T would have no other alternative than to negotiate the sale of IT&T’s Mexican Company to the L. M. Ericsson Company. (812.75/4–2247)
42. For letter of March 4, 1946, see Foreign Relations, 1946, vol. xi, p. 1000.
43. Not printed.
43. Not printed.
43. Not printed.