812.51/10–549: Telegram

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

confidential
Priority

1204. Inasmuch as Mexican aide-mémoire July 181 obviously was drafted pursuant instructions from Minister Foreign Affairs,2 I did not attempt last evening interrogate President Alemán with respect particular obstacles which prevented Mexican acceptance proposals presented our aide-mémoire July 6 (penultimate paragraph your instruction 828, September 19, 2 p. m., and my 1196 October 4, 8 p. m.3).

I discussed this matter with Acting Foreign Minister4 in frank informal conversation this morning. I believe that, as result, I can correctly describe Mexican reaction our aide-mémoire, as follows:

1.
Tone aide-mémoire was considered wounding because made no effort conceal mistrust Mexican good faith. Specifically, this was implied in statement we would be prepared implement loan policy “through step-by-step procedure, in which action by one government follows upon action by other” and statement that “upon satisfactory progress in carrying out foregoing measures, US Government would [Page 689] then be prepared consider further loans to Mexican Government for similar facilities”;
2.
Aide-mémoire was construed establish, as condition to granting of loan, change in Mexico’s petroleum laws through statement “private companies are prepared enter in development and production Mexico’s oil resources when satisfied can do so on legal basis”, and, additionally, “is view this government that prerequisite to such increased participation by private companies is appropriate action by Mexican Government which would provide accepted legal basis for such companies to undertake exploration, development, and production activities at their own risk”.
3.
Our action in incorporating into aide-mémoire unmistakable reference Sabalo case was especially distasteful. This was so, not only because Mexicans felt loan application should be treated on its merits as banking proposition and that Sabalo case was extraneous to application, but because conversations with respect settlement were already in progress between representatives company and Pemex.

Tello will discuss this subject with President Alemán and Bermudez and give me informal memorandum next week confirming foregoing.

As to my views official Mexican thinking and my recommendations, they are as follows: I believe Mexicans were honestly offended by general tone our aide-mémoire and its specific terms, which probably were unexpected. I further believe they desire Pemex loan and are agreeable to proposition that proceeds be utilized for construction, refining, and distribution facilities. I likewise believe possible some improvement over terms CIMA contract can be obtained for private capital although unlikely general framework that contract can be greatly altered. Tello assured me this morning possibility Congressional ratification CIMA contract had been explored and was discovered no machinery exists, under constitution or otherwise, for Congressional action. It is possible that, through discussions, procedure might be devised that would ensure legal safeguards against succeeding administrations for contracts with private enterprises entered into by this government. Pertinence this point as topic for further government-to-government discussion, however, seems impaired by action CIMA group in entering into contracts with Pemex and apparent willingness other companies follow its example. (President Alemán informed me last night Texas Company and Sinclair are negotiating with Pemex.)

As indicated my telegram last night, I believe President Alemán welcomed our approach. Accordingly, I recommend we inform this government we are prepared resume loan negotiations. I would recommend that when conveying this message, it be accompanied by conciliatory statement to effect we concede that pending claims are being dealt with by Pemex and interested parties, thus satisfying that part our policy incorporated July 6 aide-mémoire dealing with claims. I [Page 690] would further recommend that all discussions be conducted orally for time being in order that points discord may be overcome before they are reduced to writing.

Thurston
  1. Not printed.
  2. Jaimé Torres Bodet.
  3. Latter not printed. In it, Ambassador Thurston reported that on the evening of October 4 he had conveyed to President Alemán the appropriate passages of Department telegram 828, September 19, and that the President gave every evidence of pleasure at this initiative and requested the Ambassador to say to the Department that he [President Alemán] believed it possible to establish a mutually satisfactory basis on which the interrupted Pemex loan talks might be resumed (812.51/10–449).
  4. Manuel Tello.