The Ambassador in Mexico (Thurston) to the Secretary of State

No. 671

Sir: As was stated by the writer of this despatch in a memorandum submitted to officers of the Department last February,2 the objective of the instructions under which the Embassy had held informal discussions with the Mexican authorities was to bring about the formulation of an oil program under which foreign oil companies would be permitted to operate in Mexico on a competitive and non-discriminatory basis. That objective was attained, in principle, when the Mexican Minister for Foreign Affairs handed to the American Ambassador a document describing the “Bases” upon which foreign oil companies might negotiate contracts enabling them to operate in Mexico.3 The present communication may be regarded as a progress report.

1) Attitude of the Mexican Government.

Although the Director General of Petroleos Mexicanos, Senator Antonio J. Bermudez, appears to be operating upon an eclectic basis, inasmuch as he has revealed an unwillingness to deal with certain representatives of American oil companies while freely negotiating with others, there has been nothing to indicate that the Mexican Government will not carry through the commitment implicit in its action in handing to the American Ambassador the document referred to in the introductory paragraph of this report. There appears to be no reason to doubt that the Mexican Government has opened the door to foreign capital and enterprise for the development of the nation’s petroleum resources under certain restrictions and controls.

[Page 604]

[Here follows a series of statements on the attitudes of eighteen American Companies on the possibility of obtaining contractual arrangements with Petroleos Mexicanos.]

5) Provisional Conclusions.

From the foregoing, and from other observations not dealt with herein, it appears safe to conclude that the Government will continue with its new policy of permitting, under adequate safeguards, the participation of foreign capital in the development of Mexico’s oil resources; that certain American oil companies are interested in operating in Mexico on the “basis” proffered by the Mexican Government; and that public opinion and Labor are disposed to view these developments with a degree of complacency which probably would be disturbed only were the arrangements with the American companies to be demonstrably in violation of the laws of Mexico, the national interests, or the interests of Mexican Labor.

It is also to be concluded that a clear pattern is being developed by Petroleos Mexicanos, in that the effort is being made, and apparently will continue to be made, to rest American participation in the development of Mexico’s oil resources upon a basis of financial cooperation rather than upon operating arrangements. That is, the Mexican Government will endeavor in the first instance, as it has done with Cities Service and appears to be doing with The Texas Company, to obtain funds and material for development work by Pemex itself, with the American company providing the funds benefiting in the form of petroleum deliveries. It is likely, however, that not many American companies will be disposed to follow the example set by the two Companies just named, and that in future arrangements Pemex will be obliged to grant American or other foreign companies genuine operating contracts. This latter supposition would be invalidated were Pemex to achieve substantial new production through its own efforts—a contingency regarded by some observers as remote, but one which nonetheless should not be disregarded.

Respectfully yours,

Walter Thurston
  1. Not printed.
  2. Ambassador Thurston reported in despatch 248, February 9, not printed, that the Minister for Foreign Affairs (Torres Bodet) had that morning handed to him copies of a document entitled “Bases for a Draft Contract” setting forth the terms under which a contract could be entered into by Petróleos Mexicanos and a private oil company, either Meican or foreign, and that the Minister had repeated that this action was not to be construed as constituting official negotiations between the Governments of the United States and of Mexico (812.6363/2–948).