812.24/2–1048
The Secretary of State to
the Embassy in Mexico
confidential
No. 330
Washington, July 26,
1948.
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.
. . . . . . . . . . . . . .
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.
. . . . . . . . . . . . . .
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,
For the Secretary of State:
Garrison Norton
[Enclosure]
Proposed Note To Be Presented by U.S. Ambassador, Mexico, to the Mexican Foreign
Minister
Excellency: In the course of conversations
held during the late months of 1947 concurrence was given to a
revision of the terms of payment set forth in the last sentence of
numbered paragraph 2 of the exchange of notes signed March 18, 1943,
and accompanying the Lend-Lease Agreement signed the same date,
between the Government of the United Mexican States and the
Government of the United States of America, in the following form:
A. The obligation of the United Mexican States may be
discharged by payment of the amount due in United States
dollars, or, with the approval of the Government of the
United States, by any or all of the following means;
- (1)
- When the Government of the United States wishes to
acquire any property, real or personal, tangible or
intangible, or to improve any property in which it
has an interest, located in the Republic of Mexico
or in territory under the jurisdiction of the
Government of Mexico, at the expense of the
Government of Mexico, the Government of the United
States will request at any time or times and the
Government of Mexico agrees at any such time or
times to enter into negotiations with the Government
of the United States, and to use its best efforts,
consistent with its public policy, to consummate
without any undue delay appropriate contracts by
mutual agreement wherein the Government of Mexico
will furnish to the Government of the United States,
or corporation designated by the Government of the
United States, the properties or improvements it
desires or which its representatives have selected.
Representatives of the Government of the United
States may, at their discretion, conduct discussions
directly with owners or with contractors for
improvements as to fair terms and price prior to the
acquisition of such property or improvements by the
Government of Mexico for delivery to the Government
of the United States. When performance of any such
contract is made by the Government of Mexico, the
Government of the United States shall credit the
Government of Mexico with the United States dollar
equivalent of the fair value received at an exchange
rate as provided in paragraph A (3), such credit
being applied first to past due interest, if any,
and then to interest
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and principal currently due and
finally to the payment of all remaining unpaid
installments of principal in the order of their
maturity.
- (2)
- In the event the Government of the United States
wishes to receive local currency of the Government
of Mexico for the payment of any or all expenditures
in Mexico of the Government of the United States and
its agencies, the Government of the United States
may request at any time or times, and the Government
of Mexico agrees to furnish at such time or times,
Mexican currency at an exchange rate as provided in
the following paragraph—A (3)—, in any amount not in
excess of the net outstanding balance of principal
(whether or not then due in United States dollars)
plus interest (then due in United States dollars)
payable under the terms of this settlement
arrangement.
-
- In the event that local currency is received by
the Government of the United States under the terms
of this settlement arrangement, the United States
dollar equivalent of the amount received shall be
credited first to past due interest, if any, and
then to interest and principal currently due, and
finally, to the payment of all remaining unpaid
installments of principal in the order of their
maturity.
- (3)
- The rate of exchange for each transaction under
this settlement arrangement for which a rate of
exchange is required shall be that rate most
favorable to the United States which, at the time of
such transaction, is available to any party;
provided such rate is not unlawful and, if both
countries have agreed par values with the
International Monetary Fund, is not prohibited by
the Articles of Agreement of such Fund.
B. The Government of the United Mexican States will liquidate
the obligation incurred under the terms of the Lend-Lease
Agreement of March 18, 1943, in accordance with the
following payment schedule:
|
Due Date On or Before
|
United States Dollars or Mexican
Pesos Equivalent
|
| February 15, 1949 |
$1,500,000.00 |
| May 15, 1949 |
1,500,000.00 |
| August 15, 1949 |
1,000,000.00 |
| November 15, 1949 |
1,000,000.00 |
| February 15, 1950 |
1,000,000.00 |
| May 15, 1950 |
1,000,000.00 |
| August 15, 1950 |
1,000,000.00 |
| November 15. 1950 |
1,000,000.00 |
| February 15, 1951 |
1,000,000.00 |
| May 15. 1951 |
1,000,000.00 |
| August 15, 1951 |
1,000,000.00 |
The total amount due, and to be paid under this settlement
arrangement shall be twelve million United States dollars
($12,000,000.00). It is understood and agreed that this
amount relates only to charges arising out of defense aid
transferred, or otherwise supplied under the specific terms
of the Lend-Lease Agreement of March 18, 1943 and that it
does not include charges against such other accounts as
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those relating to
vessels leased under Charter Party Agreements, nor to cash
repayment obligations and other similar accounts; such
accounts, where they may exist, are subject to treatment
separately and apart from this lend-lease settlement
arrangement.
C. Interest shall be paid by the Government of Mexico to the
Government of the United States at a fixed rate of 2 and ⅜
percent per annum on any installment payment not made on the
due date as scheduled in paragraph B, above, and shall begin
from such due date and continue until date of payment.
D. The Government of Mexico will be free to make advance
payments in United States dollars, or, subject to the
concurrence of the Government of the United States, by any
of those other means specified in paragraph A above, of any
or all of the several payments provided for in paragraph B
above.
E. Upon the receipt, by the Government of the United States,
of the final payment due under this settlement arrangement
and conditional only upon the satisfactory fulfillment of
the terms and conditions made a part hereof, the Lend-Lease
Agreement of March 18, 1943 shall, by virtue of such
settlement, become terminated by the mutual consent of the
two signatory Governments as provided for in Article VII of
the Agreement, provided, however, that nothing in this
settlement arrangement shall, at any time, either waive or
modify the force of the provisions of Article IV and Article
V of the Lend-Lease Agreement.
If this arrangement is in accordance with Your Excellency’s
understanding of the substance of the conversation already held, it
would be appreciated if Your Excellency would so indicate in
writing.
Accept, Excellency, the renewed assurances of my highest
consideration.
