213. Letter From the Ambassador in Mexico (White) to the President1
Dear Mr. President: This letter is in response to your request last month that I write to you regarding the situation in Mexico.
I have delayed it for a few days after my return here to check up again on the situation to be able to send you my considered opinion as of this date. The fuller details and background of the situation as I see it are contained in the annex to this letter which is an integral part hereof.
Due to the circumstances elaborated in the attachment, the policy of President Ruiz Cortines’ administration at the outset was not very friendly to the United States. The dominant role was played by the group favoring nationalization of industry and resources and hostile to the competition of foreign enterprise. The steady deterioration of Mexico’s balance of payments since 1951; the steady lowering of her gold and foreign exchange reserves; the unusually large quantity of liquid funds in the hands of the public; the unfavorable long-term outlook regarding “terms of trade”; the run on the peso in April 1954; the deferring of new investments by Mexican business men and industrialists through uncertainty as to the economic policies of the new Government increased the accumulation of idle bank deposits, and led to the devaluation of the peso in April 1954.
The press attacks on the United States at the time of the expiration January 15, 1954, of the bracero agreement2 and the Mexican policy at the Inter-American Conference at Caracas3 in [Page 681]March of that year, supporting the communist regime in Guatemala and hostile to the United States, together with the devaluation of the peso, brought such an outcry from the stable elements in Mexico, the banking groups, the Federated Chambers of Commerce, the Federation of Industrial Chambers of Commerce and the capitalists and fast-growing middle class groups that they caused the President to hold a long series of conferences to re-examine the Government’s policy. At that time he also initiated very informal and personal talks with me at his residence in the evenings. As a result, President Ruiz Cortines ordered the Foreign Office to reverse completely its policy towards Guatemala and, furthermore, to adopt a policy of cooperation with the United States. This latter has resulted in settling a number of run-of-the-mill problems inherent in the relations between two countries, as well as a beginning of a discussion for the settlement of the outstanding claims of each country against the other. It also resulted in President Ruiz Cortines forming a more realistic view of the danger of communism not only in Guatemala but also in Mexico and asking for close cooperation with the Embassy in taking measures to combat communism here. This is a really big advance. It also resulted in the President supporting private industry in many concrete cases, the most important so far being the power industry and the telephone company.
I am convinced that President Ruiz Cortines wants to cooperate with us and he has told me so in all sincerity. In many cases he cannot proceed too rapidly but must prepare public opinion in advance. In this connection, however, he told me, well over a year ago and repeated on several occasions, that if the communists should force a showdown with us, Mexico would definitely be on our side.
Apart from the usual grist of problems that go constantly through the mill of diplomacy in relations between any two countries and which, while sometimes intricate and even seemingly frustrating to handle, do get solved in due course without fanfare or publicity, there are about a handful of outstanding problems between the two countries.
Attempts on our part to conclude a bi-lateral air transport agreement with Mexico have been made for the last ten years without success. The fact that President Ruiz Cortines has now taken an interest in the proposed agreement and has asked me to take it up with him personally rather than with the Minister or others in the Department of Communications, leads me to hope that dealt with on this basis a solution satisfactory to both countries may [Page 682]be found. If not the procedures agreed on in Washington to follow will cause the Mexicans to make clamorous protest as in the case of sugar quotas, proposed increase in U.S. tariffs on lead and zinc (the Simpson Bill4), and the lapse of the bracero agreement a year and a half ago. That will be something we shall have to face and live with while working the matter out.
There are other problems of American interests here, such as the very burdensome taxation of the mining industry, tariffs, export and import controls, quotas and prohibitions, etc. These are matters which can and are being worked out reasonably well in the normal course without causing friction or unpleasantness in the relations between the two countries, although the individuals concerned are at times understandably unhappy about them.
The only other problem, and the one in my opinion which is at the back of allegations of unfriendly relations between the two countries is the desire of PEMEX, the Mexican Government’s petroleum monopoly, to get large, long-term loans, without having to show a balance sheet and run an economic, profitable industry. The deficit financing of PEMEX imposed on the Mexican Treasury is wholly concealed from the public. As stated in the attached memorandum, Señor Bermudez, the head of PEMEX, wanted to be the official party’s candidate for President of Mexico in the elections of ’52 and he is very much a candidate for the 1958 elections. He brought great pressure upon President Truman and other high Government officials from 1948 to 1950, through many individuals including chairmen and members of the Committee of Interstate and Foreign Commerce of the House of Representatives (Mr. Wolventon and subsequently Mr. Crosser), whom he invited to Mexico and entertained lavishly, to get a loan of $470 million, subsequently scaled down to $203 million. Our Government declined to give PEMEX the loan in accordance with its long and consistent policy not to give public loans for petroleum exploration and exploitation considering this a matter more appropriate for private enterprise.
PEMEX did not become reconciled to this decision and its representatives and employees have been persistently and sedulously advocating such a loan. For the reasons given in the attachment I feel it would be most unwise for our Government to accede to this request which besides being unsound and contrary to our long established policy, would strengthen the advocates of nationalization [Page 683]and government control and be a blow to our supporters who favor private enterprise.
On Señor Bermudez’ recent trip to New York, his public relations representatives arranged a dinner for him with leaders of American finance and industry. He was chagrined that he was unable to convince them of the soundness of large, long-term, private loans to PEMEX. PEMEX is not likely to get very much more additional private financing, except certain short-term credits for specific objects, until PEMEX is run on a business-like basis.
PEMEX’ failure to get long-term loans from the United States has not caused unfriendliness in the relations of the Mexican people as a whole, or of the Mexican Government towards the United States. I understand President Ruiz Cortines recently told Señor Bermudez not to ask for any foreign loans for PEMEX and certainly the Mexican Treasury does not want any loans to PEMEX under the present inability of that organization to produce the funds necessary to service such a loan. The Minister of Finance, since my return here, has told me that he asked the President to restrict PEMEX and other semi-autonomous agencies such as the Federal Power Commission, the railroads, etc., from seeking loans independently of the Treasury or he could not be responsible for the Mexican national credit. President Ruiz Cortines has done so. He has set up a Committee on Investments and all Government agencies are now prohibited from contracting any foreign indebtedness exceeding $100,000 and requiring more than twelve months for repayment without the approval of that Government committee and the Nacional Financiera. The Minister further complained of the tactics of Bermudez both in 1948–1950 and now in attempting to by-pass the Mexican Treasury and Foreign Office and the American Treasury and Department of State and negotiate through personal friends and intermediaries. In other words, the failure of PEMEX to get a loan is not a problem in Mexico disruptive of our relations. On the contrary the attempt of Señor Bermudez to go out of channels to get a loan is contrary to the policy of President Ruiz Cortines and his Finance Minister. Those who are supporting Señor Bermudez for any of a variety of reasons will use every means at their command to obtain their ends, but I ask you to believe, Mr. President, that they are doing it from partisan, personal reasons, that they are not representing the true situation here and that one of their tactics is to stir up groundless anxiety that relations between the United States and Mexico are endangered by PEMEX not getting a loan. I have no hesitancy in asserting that such is not the case.
The attempt of Señor Bermudez to obtain loans against the policy of his Government is not the only case of this sort. The question arose of a visit of one of our aircraft carriers to Acapulco. [Page 684]Señor Bermudez without going through the Foreign Office, which knew nothing about it, got Ambassador Tello to tell the Department of State that President Ruiz Cortines would welcome such a visit. When I enquired of President Ruiz Cortines when he would like to have this ship come to Acapulco so he could visit it, I found it was not his idea at all. He told me very confidentially and personally he hoped the visit would not be made and, consequently, it was abandoned.
Relations between the United States and Mexico are better than they have been for some years and over the last fifteen or sixteen months have made gratifying advances. In making this statement I am merely making a factual description of the situation as it exists. I am not thereby advocating any negative outlook or suggesting nothing further is to be done by us and that we can sit back complacently. Far from it. There are always opportunities to improve the situation and we should and must avail ourselves of them all.
The Mexicans are a proud people and they cannot be pushed or rushed into anything. They resent anybody trying to outline a program or plan for them, or direct any of their activities. For example, in the field of technical cooperation, we should wait for the Mexican Government (not individuals or agencies) to ask for help in a given situation and meet their desires to the extent we properly can. Such requests should, as heretofore, be largely for technicians and advisers and may include some rather limited financing of dollar expenses. On the basis of cooperating with them at their request we can do much to improve relations and good will, but if we try to dominate and dictate the policies, or what they should do and how they should do it, we will at best accomplish nothing and can very well cause considerable resentment.
Señor Carrillo Flores, the Minister of Finance, sounded out the Export-Import Bank whether it would consider financing some private power companies in Mexico. Under authorization from the Bank and the Department I have informed him the Bank will gladly consider such a request. That is one concrete example of something we can do to be of service. There are others coming up all the time. The Boundary and Water Commission is a cooperative enterprise of great value to the two countries. The joint AFTOSA, or Foot and Mouth Commission, with many frustrations and difficulties to be sure, nevertheless succeeded in a period of under two years in eradicating a new outbreak of that dreadful disease that occurred here in May 1953. The American business men in Mexico are most cooperative and have the friendliest relations with the Mexicans. A group of them has formed a Committee Pro-Mexico which is doing much to stimulate the important tourist trade and to foster general good relations. They also participate in the American-Mexican business [Page 685]men’s committee sponsored by the U.S. Chamber of Commerce and by important Mexican business and financial groups. The Mexican Federation of Industrial Chambers of Commerce became very interested in a program of increasing productivity. With the aid of Point IV5 this is being carried out as a Mexican project. It has the enthusiastic support of the Mexicans and indications are that it will eventually be a very successful program.
In other words, we are not taking a negative attitude—we are doing things to be helpful to increase friendly relations and we shall continue to do so and to take advantage of any new opportunities that arise.
The Minister of Finance has just told me that it would be most helpful to him if it could be announced after the World Bank meeting at Istanbul, which both he and Secretary Humphrey will attend, that it was agreed in principle that the Stabilization Agreement for the peso will be renewed upon its expiration December thirty-first, the details thereof to be negotiated in November. Since our government departments concerned are agreed in principle that the Agreement be renewed I am recommending that such an announcement be made as Señor Carrillo Flores requests. Whether the amount of the fund be increased from seventy-five to one hundred million dollars and the agreement be tied in to the present exchange rate of the peso are matters that can be left to the good judgment of Secretary Humphrey.
Incidentally, Mr. Carrillo stated he was making this request because the Mexican public will not believe he is going all the way to Istanbul merely to attend the annual meeting of the Board of the World Bank on which he is the Mexican representative. The public will, he said, expect him to be negotiating on other matters and if no result is announced, will say his trip was a failure. This gives support to what I said to Messrs. Dulles, Hoover, and Holland in Washington regarding a suggested visit of President Ruiz Cortines to Washington that he will be expected to bring back from any such visit something for Mexico in the way of a loan or other benefit. If he does not, his prestige may be impaired and the visit result in more harm than good. I feel the suggestion that the invitation for the visit be put on a purely ceremonial basis might seem rather ungracious to President Ruiz Cortines and result in his not accepting it. That also would not be helpful. Even assuming that a tactful approach could be made to obviate any such feeling on President Ruiz Cortines’ part, it would not prevent the Mexican press and others from feeling and stating that something of benefit to Mexico [Page 686]must have been sought and not obtained and thus at best cause embarrassment to him. Furthermore, any such invitation to President Ruiz Cortines would have to be most carefully handled to insure that no slightest intimation regarding it should reach him before it is made to him or those with advance knowledge of it will exploit it to their benefit and seek to take credit for their personal advantage. Therefore, I recommend that while we keep the possibility of such an invitation in mind for serious consideration in case circumstances should be such that a visit could not be misconstrued, it now be kept in abeyance. Incidentally, the Mexican Congress, under the Mexican Constitution, would have to give President Ruiz Cortines permission to visit the United States as it did for his brief visit to American territory at the dedication of the Falcon Dam.
A positive action of benefit to our relations would be the prompt renewal by an exchange of notes of the bracero agreement that expires on December 31. This is mentioned more fully in the annex. The present agreement has been remarkably successful in the year and a half it has been in effect. To try to renegotiate it de novo would present many difficulties and possibly lead to a repetition of the unfortunate situation we had at the end of 1953 and the beginning of 1954. I, therefore, most earnestly recommend, now that our Congress has authorized the continuation of the agreement, that I be instructed to exchange notes with the Foreign Office to bring this about.
The most ticklish problem before us at present is the proposed bi-lateral air transport agreement and, as I said before, President Ruiz Cortines has asked me to take it up with him personally and he is fixing an appointment for me after he delivers his annual message to Congress on September 1st.
I feel, in the light of the above analysis, I am justified in sending you a confident report on relations between the two countries. If I felt otherwise I would be the first to bring it to your attention and to that of Secretary Dulles to try to remedy the situation.
With kindest regards and great respect, I am
- Source: Department of State, Holland Files: Lot 57 D 295, Mexico. Secret. Under cover of a letter dated August 29, Ambassador White transmitted a copy of this letter to Secretary Dulles. Another copy was transmitted to Assistant Secretary Holland, under cover of a letter from White dated August 30. A memorandum of conversation by Dulles dated June 21 records the President as stating in part that he “felt that with our long frontier with Mexico there was great need of better relations. He feared that we might be pressing too hard for a kind of government we wanted which was not necessarily what the Mexicans wanted. He said he would like to talk to Francis White if he was back in the country and spend some time with him reviewing the situation. I said we would arrange this.” (Eisenhower Library, Dulles Papers, Meetings with the President) Copies of this memorandum were forwarded to Under Secretary Hoover and Assistant Secretary Holland.↩
- Documentation on the termination of the bracero agreement is printed in Foreign Relations, 1952–1954, vol. iv, pp. 1353 ff.↩
- Reference is to Mexico’s abstention during voting on Resolution XCIII, “Declaration of Solidarity for the Preservation of the Political Integrity of the American States Against the Intervention of International Communism,” approved on March 28, 1954, at the Tenth Inter-American Conference which met at Caracas, March 1–28, 1954. For text, see Tenth Inter-American Conference: Report of the Delegation of the United States of America with Related Documents (Department of State Publication 5692, Washington, 1955), pp. 156–158. For pertinent documentation regarding the resolution, see Foreign Relations, 1952–1954, vol. iv, pp. 264 ff.↩
- Reference is to a bill introduced in the House of Representatives in 1954 by Congressman Richard M. Simpson (R.–Pa.) which would have imposed quotas or import taxes on lead, zinc, and petroleum imports. A vote in the House defeated this proposal which was opposed by the administration.↩
- Reference is to the fourth point of a plan of action outlined by President Harry S. Truman in his inaugural address in Washington on January 20, 1949.↩
- Printed from a copy which bears this typed signature.↩