The Department of State to the Mexiean Embassy 1


The Department of State refers to conversations last Spring between His Excellency Señor Don Rafael de la Colina, the Mexican Ambassador; Senator Antonio J. Bermudez, Director General of Petroleos Mexicanos; other officials of the Mexican Government, and officials of the Department of State and other agencies of the United States Government, on the subject of financial assistance to Petroleos Mexicanos by means of loans of United States public funds for the development of the petroleum resources of Mexico, including the construction and modernization of facilities. The Department of State, together with the Export-Import Bank and other interested agencies of the United States Government, has accorded this subject detailed study and examination and is now able to inform the Mexican Government of the views of the United States Government in regard to this matter.

It is the considered opinion of the United States Government that the history of the development of the world’s petroleum resources indicates that this industry is a field most appropriate for the operation of private enterprise. It is believed that this is particularly evident in exploration, development and production activities and that the industry has developed most rapidly and most successfully where [Page 676] private organizations have been permitted to conduct these operations on a competitive basis. It understands that private companies are prepared to enter in the development and production of Mexico’s oil resources when satisfied that they can do so on a legal basis and with prospects of returns commensurate with the magnitude of the enterprise and the risks involved.

The United States Government has always been sympathetic toward programs for the economic betterment of Mexico and has been disturbed by recent economic and monetary difficulties which Mexico has experienced. It is also fully aware of the contribution that an accelerated development of the Mexican petroleum industry could make to the overall prosperity of Mexico and is happy to observe the formulation by Mexican authorities of a comprehensive program for petroleum development. The Government of the United States is prepared to consider applications for financial assistance in regard to certain types of projects under the following conditions:

The United States Government, through the Export-Import Bank, will consider applications by Pemex for financial assistance in the construction of refining, transportation and other distribution facilities in Mexico, provided that Mexico will take steps to assure an increase in oil production in Mexico through increased participation by private companies, including foreign companies. It is the view of this Government that a prerequisite to such increased participation by private companies is appropriate action by the Mexican Government which would provide an accepted legal basis for such private companies to undertake exploration, development and production activities at their own risk.

The United States Government, on its part, is prepared to implement this policy through a step-by-step procedure in which action by one government follows upon action by the other. In such a cooperative approach to the problem it would seem that the first essential step is agreement by the United States and Mexican authorities as to the basic policy. It would be desirable that this agreement be announced by the two governments. In any event, the United States Government considers that it must be free publicly to state the basis of its policy.

Following agreement on the basic policy, the United States Government considers it desirable that legal action be taken by the Mexican Government, such as Congressional approval of the Compañía Independente Mexieana-Americana contract, or specific action establishing the legal basis under which private companies, including foreign companies, can explore, develop and actually produce oil in Mexico, coupled in either case with the signing of additional contracts with other foreign concerns.

In case the Governments of the United States and Mexico agree as to basic policy, the United States Government, through the Export-Import [Page 677] Bank, is prepared to accept and consider an application for a loan for a refining or a transportation facility. This application would, of course, be considered on its merits and would be for a relatively small project which would be economical even without an increase in the production of crude petroleum in Mexico.

Upon satisfactory progress in carrying out the foregoing measures, the United States Government would then be prepared to consider further loans to the Mexican Government for similar facilities. The scope of such additional loans, assuming that they are economically justifiable, would vary with the comprehensiveness of the action taken by the Mexican Government in achieving an expansion in oil production through increased participation of private companies.

As previously discussed by Assistant Secretary Thorp with Senator Bermudez during his recent visit to Washington, several American individuals and companies have royalty and other claims against the Mexican Government based on investments made several years ago in the Mexican petroleum industry. Some of these, particularly one large claim, have not been adjudicated and settled. The speedy settlement of these claims, or adjustment of rights, would be one of the ways by which the Mexican Government might indicate its attitude towards private capital in the field of petroleum exploration, development and production and would unquestionably be one of the elements in evaluating the steps taken by the Mexican Government.

The United States Government believes that a program of equitable collaboration, as outlined in the above paragraphs, and carried out in the atmosphere of the friendly relations existing between the two nations, would result in the realization of the objectives desired by Mexico in the intensified development of its petroleum resources.

  1. Handed to Ambassador de la Colina by Mr. Webb, July 6, 1949.