The Secretary of State to the Embassy in Mexico
Sir: Reference is made to the Department’s instruction No. 1585 of November 19, 1947 and the Embassy’s despatches No. 5225 of December 18, 1947, No. 5258 of December 23, 1947, No. 6 of January 2, 1948 [Page 630] and No. 287 of February 10, 19481 relating to negotiations toward a settlement of the Mexican Government’s lend-lease accounts and the subject of this Government’s buildings program.
With reference to the second paragraph of your despatch No. 5225, the impediments interposed by the Foreign Minister are seriously regretted by the Department. As you are aware, the Department has desired the earliest possible arrangement providing for the settlement of and payments against this lend-lease indebtedness in order that active progress might accelerate the buildings program.
Due to the unforeseen delay in reaching terms with the Mexican Government it is now necessary to withdraw the formal settlement proposal which was submitted to the Embassy as an attachment to the Department’s instruction No. 1585. In its place there is transmitted herewith a new, or revised version of the first proposal in which, it will be noted, there have been made a number of changes, principally those which involve the provision of funds for the Embassy’s operating expenses (paragraph A (2)), the method of applying a rate of exchange (paragraph A(3)) and a newly arranged schedule of payments (paragraph B).
It will be noted that the new schedule of payments begins with a payment of $1,500,000 due February 15, 1949 and that subsequent payments, at three months’ intervals, continue to August 15, 1951 when a final installment of $1,000,000 will be payable. According to the latest note sent to the Mexican Embassy in Washington2 the aggregate repayment responsibility of the Mexican Government for defense aid supplied through May 31, 1948 is $12,072,689.33. For the purpose of expediting a settlement arrangement the Department is agreeable to the adoption of a round figure of $12,000,000 as indicated in the last portion of paragraph B of the proposed note to the Mexican Government.
In the event that there is objection on the part of the Mexican Government to the exchange rate provision (paragraph A (3)) the Department will give further consideration to any counter proposal by the Mexican Government which is recommended by you. You will wish to keep in mind that the basic approach of this Government is to avoid the acceptance of the official rate as the sole effective exchange rate for the settlement of this indebtedness.
It is hoped, therefore, that at the first opportunity, you will resume and continue conversations with officials of the Foreign Ministry with the view of reaching an understanding pursuant to the terms of the [Page 631] revised proposal. In your conversations with the Mexican officials it may be stressed that it is the strong feeling of this Government that there should not be any further slowing up in the schedule of payments as now proposed; on the contrary, you may state that, since it is assumed that Mexico will no doubt wish to pay its lend-lease obligations, as others of the American republics have done, it is hoped these amounts of periodic payments may be increased because of the urgent concern of the Department for providing, as soon as possible, adequate housing facilities for Embassy requirements. As you understand, the program which the Department has in mind at this time includes the acquisition of sites and the construction of buildings in several important Mexican cities in addition to the work to be undertaken in the Capital, itself. This part of the buildings program should be the subject of a portion of your conversations with the Foreign Minister in order that further undesirable delays may be obviated.
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The Department concurs with the viewpoint expressed to the Foreign Minister as reported in the Embassy’s despatch No. 6, second paragraph. With reference to the suggestion that the Mexican Government might desire to return certain lend-lease materials, it should be noted that, in accordance with the terms of the lend-lease agreement signed with Mexico, the privilege of returning lend-lease materials is dependent upon a determination by the President of the United States that such materials are “useful in the defense of the United States of America”. The validity of such an assumption would be highly questionable in this instance. Therefore, the return of lend-lease materials by the Government of Mexico at this or any later time would not appear to be warranted and the Department is not disposed to consider any proposal for such returns.
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While desiring that you make the strongest possible effort to secure from the Government of Mexico its unequivocal acceptance of a lend-lease settlement arrangement in the form of this amended proposal, the Department is not unmindful of the seemingly deliberate tactics of procrastination which have characterized the official Mexican attitude in the matter of lend-lease payments. In the event that this impeding attitude continues to be maintained by the Mexican officials in spite of your renewed conversations you are authorized to suggest, at your discretion, that, in order that it may be submitted to your Government for appropriate consideration, the Mexican Government should hand to you an official statement indicating its acceptance in principle of the proposed settlement plan and further stating its readiness to [Page 632] render such a settlement effective through the providing of budgetary funds not later than at the next assembly of the Mexican Congress.
The Department desires to be kept currently informed concerning developments in this matter.
Very truly yours,