Foreign Relations of the United States, 1955–1957, American Republics: Multilateral; Mexico; Caribbean, Volume VI

236. Memorandum From the Assistant Secretary of State for Inter-American Affairs (Holland) to the Under Secretary of State (Hoover)¹

Washington, September 6, 1956.

SUBJECT

• U.S. Policy on Loans to Mexico—Proposed National Railways Credit

Discussion:

Ambassador White has been strongly recommending that conditions similar to those applied by the IBRD for a loan to the Pacific Railway be now applied to the proposed Export-Import Bank loan of $23.26 million to the National Railways. President Ruiz Cortines and Finance Minister Carrillo Flores have indicated they consider the Pacific Railway conditions sound and reasonable, and that they could be advantageously applied to the National Railways. Under Secretary of the Treasury Burgess expressed to Ambassador White agreement on this point.

A statement from the Bank, addressed to the National Railways, reciting the conditions under which a loan could be made, would permit the Ambassador to use the National Railways loan as a bargaining point in his efforts to get a satisfactory air agreement. Mr. Waugh last week in a meeting with Messrs. Holland and Corbett declined to establish such conditions for the National Railways loan, contending that the Bank believed other conditions were more appropriate for the National Railways situation.

In these circumstances the Department asked whether in the Ambassador’s view we should now use the only remaining lever to obtain an air agreement expeditiously, to wit, issuance of a Show Cause order. The Ambassador replied that issuance of a Show Cause order now would be too drastic and extremely harmful to United States-Mexican relations, without insuring conclusion of an air agreement with which we agree. Instead, the Ambassador again urges the imposition of full conditions for all phases of the proposed Railways loan, and the withholding of the loan until the conclusion of a satisfactory air agreement.

Recommendation:

1. That no action in regard to a Show Cause order be taken at this time.

2. In order to strengthen the Ambassador’s negotiating position in the matter of an air agreement that,

(a) recognizing that the Export-Import Bank is continuing to withhold the National Railways loan, you review with Mr. Waugh the desirability of imposing on the National Railways loan conditions analagous to those imposed on the Pacific Railway; and, if failing in this course,

(b) that consideration be given to referral of the problem to the President personally for a decision.²

1. Source: Department of State, Central Files, 912.712/9–657. Secret.
2. Hoover initialed his approval of this recommendation on September 6. A handwritten notation on the source text reads: “Subject to Amb. White’s concurrence after a scheduled meeting in Washington with the Treasury and Exim Bank.”