207. Memorandum of a Conversation Between the Assistant Secretary of State for Inter-American Affairs (Holland) and the Mexican Ambassador (Tello), Washington, June 8, 19551

SUBJECT

  • Mexico: Decrees Increasing Duties on U.S. Exports; Encouragement of Private Enterprise

Today I had lunch with the Mexican Ambassador.

I told him that we were receiving a good many complaints from U.S. exporters regarding Mexican decrees increasing duties on U.S. exports without warning and occasionally with prejudice to long established business connections. I asked the Ambassador whether he felt that Mexico would be disposed to give the United States Government an opportunity to express its views on proposed tariff increases before they were placed in effect. I pointed out to him that [Page 662]under our system not only the Mexican Government, but Mexican exporters have such an opportunity here. I said that were such an opportunity afforded us there might be occasions on which we could indicate means whereby the Mexican objectives in proposing a tariff increase could be achieved, but with an impact on our own exporters less prejudicial than would otherwise be the case. I stated that I could anticipate the fear that some Mexican Government officials might entertain that if we were given an opportunity to express our views prior to the effective date of proposed tariff increases we might seek to exert pressures to prevent the step. I said that the success of any such arrangement would depend on the understanding and restraint with which each of the two Governments expressed their views.

In response Ambassador Tello said:

1.
That Mexico, like the United States, was following a policy of protecting its industries from foreign competition in order to encourage industrialization.
2.
That Mexico through its tariff sought to protect its balance of payments position.

I replied that I could fully understand each of these points of view, but that I did not feel that they were inconsistent with the purely personal suggestion that I was making. He replied that he would write Mr. Carrillo Flores of my suggestion and ask for his views, which he would then pass on to me.

I then said that I was concerned at the number of reports which I was receiving and which, if accepted at their face value, would cause one to wonder whether the present Mexican administration was relying on the private enterprise system to the same extent as its predecessor.

The Ambassador said that he understood my concern, and that it would not be necessary for me to cite him examples which provoked it. He said that the Mexican Government was anxious to make a greater quantity of goods and services accessible to the bulk of its people. He used the hypothetical case of a privately operated shirt factory which could produce and sell shirts profitably at 20 pesos each. He pointed out that, if there were 300,000 Mexican citizens who could afford to pay this price and an equal number who could not pay more than 5 pesos, the Government should enter the shirt-manufacturing business for the purpose of producing shirts and making them available to the latter group only until such time as their purchasing power should increase to a point that enabled them to pass to the first group.

Ambassador Tello offered as an example the electrical industry. He argued that the Mexican Electricity Commission produced substantial quantities of power which it supplied to consumers through [Page 663]the existing private distribution companies. He said that because the Commission sought no profits the power which it supplied to distributing companies was sold at a cheap price, which enabled the latter to furnish it to consumers at a price cheaper than would be possible if it had been produced by the private companies themselves.

He said that he fully understood the great reliance placed by the United States Government on private enterprise; that this was understandable because we were settled by a people which had come to establish itself permanently rather than to conquer and exploit. He then went on to argue that, as a matter of fact, Mexico offered attractive conditions to United States investors.

I replied that my concern was not that Mexico offer more attractive opportunities to United States investors, but that it rely more on the private enterprise system. I expressed my own conviction that the private businessman, and particularly the Mexican businessman, could do more for his own country’s economy than could the Mexican Government.

I stated that this had certainly been our opinion, and that I felt the same principle would hold true in Mexico.

The Ambassador replied that the Mexican businessman could not contribute much to Mexico’s development because of lack of capital. I pointed out that under the existing policy of the Export-Import Bank applications for economic development loans from private applicants received more favorable attention than did those from governments seeking to invade the field of private enterprise.

The Ambassador replied that while in Mexico earlier in the week he had recounted to Minister Carrillo Flores my concern on this general subject; that the latter had stated that he was going to write the Ambassador a letter on the subject and attach a list of new enterprises recently established in Mexico by foreign investors, both of U.S. and other nationalities. The Ambassador said that when he received this letter he would get in touch with me in order that we might talk further.

I had to break off the conference at this time but shall find another opportunity to continue my talks with the Ambassador.

  1. Source: Department of State, Holland Files: Lot 57 D 295, Mexico. Confidential. Drafted by Holland.