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

244. Memorandum of a Conversation, American Embassy, Mexico City, August 6, 1957¹

Mexico City, August 6, 1957

SUBJECT

• Conversation with Minister of Finance

PARTICIPANTS

• Minister of Finance Antonio Carrillo Flores,
• Roy R. Rubottom, Assistant Secretary of State, and
• Elmer H. Bourgerie, Economic Counselor of Embassy.

During the course of a conversation with Minister Antonio Carrillo Flores the following points were discussed:

1. Buenos Aires Economic Conference.

Mr. Rubottom told the Minister that he was pleased with the announcement last week that the latter would head the Mexican Delegation to Buenos Aires.² He said that the exchange of views by the Minister and Messrs. Bourgerie and Ordway of the Embassy on the subject matter for the conference had been very useful and had helped to clarify the United States approach to several of the more knotty problems which were certain to arise in Buenos Aires. Mr. Rubottom said that the United States had literally “laid its cards on the table” far in advance of the conference in order to erase any possibility of a misunderstanding as to our attitude regarding the agenda, especially the draft Inter-American Economic Agreement, which was a complex document that seemed to pay lip service to almost every point of view that had been expressed on economic subjects by the various American States during the past ten or fifteen years. Mr. Rubottom said that the United States had been encouraged by the apparently similar approaches taken by Brazil, Peru and more recently Uruguay, although he had seen only a very preliminary report of the latter country’s position, which, along with the very practical approach being taken by Mexico, should lessen the area of disagreement and speed up the work of the conference.

The Minister said that his consultation with the Embassy had been most productive from the Mexican standpoint and that except for the obvious problem of treatment of foreign investment, and possibly the subject of terms of trade, there should be very little difficulty between Mexico and the United States. He hoped that a debate on treatment of foreign investment, such as occurred in Bogota in 1948³ could be avoided, and with this point Mr. Rubottom agreed. The Minister expressed understanding and sympathy for the United States position on terms of trade, but went on to say that there was equal validity with the Latin American viewpoint and that he hoped that within the next decade, more or less, something could be done to cushion the effects of the violent market fluctuations of such Latin American export products as cotton, lead and zinc, etc.

The Minister recalled that the attitude which prevailed at the Chapultepec Conference in Mexico City in 1945⁴ was the most statesmanlike of any conference which he had attended over the past twelve years and he wished that that spirit could be recaptured in Buenos Aires. Mr. Rubottom shared this hope but pointed out that Chapultepec had reached that high tone by virtue of the war-time emergency which then prevailed and which seemed always to drive men to nobler accomplishments than when they were operating under more normal circumstances. The Minister expressed the hope also that the United States could make some dramatic move, even if it had more psychological impact than real, at Buenos Aires, and recalled the favorable impression created at Bogota in 1948 when General Marshall announced that a five hundred million dollar “line of credit” had been earmarked in the Export Import Bank for Latin America.

2. Lead and Zinc.

Mr. Rubottom explained the problem facing the Administration in the United States in view of the strong position being taken by the Congress as a result of the adverse effects of the weak metals market in the mineral-producing states. The Minister acknowledged the United States problem, but said it was inconceivable that the United States would take final action to place an excise tax on lead and zinc prior to the Buenos Aires Economic Conference. Such action, he said, would be like a slap in the face to virtually all of Latin America. Mr. Rubottom said that he was not sure about the timing of the measure but that he assumed some action would be taken by the Congress and that the Administration’s recommendations had been calculated to prevent possibly more stringent action by the Congress.

3. PL 480 Agreement for Corn.

Mr. Rubottom told the Minister of the lengthy discussions which had been held in Washington on this subject and of the serious opposition which existed in several quarters there by virtue of Mexico’s relatively strong reserve position and the tremendous demand for PL 480 commodities from countries which seemed to be more eligible than Mexico for such agreements. The Minister said that the International Monetary Fund’s studies showed that Mexico’s financial reserves were hardly as much as should be required under a program of prudent management and that, furthermore, Mexico had serious need for the corn. He said that the Government also was looking forward to using as a loan part of the proceeds of the sale for certain public works projects, like port improvements, which neither one of the international banks liked to finance, and that the President was looking forward to announcing that agreement in principle had been reached, at least, in his September 1 message to the Congress and the people of Mexico.

Mr. Rubottom said that he had always insisted that Mexico be made fully aware of the terms and conditions of sales under PL 480. Mexico might even find it more convenient to buy corn in the open dollar market or under CCC three-year credit terms. He asked the Minister whether Mexico realized that the United States would expect repayment in dollars rather than local currency, and the answer was affirmative. He inquired of the Minister whether Mexico was prepared to have the various loan projects scrutinized by ICA and other agencies of the United States prior to approval; the Minister’s reply was again affirmative, with the statement that Mexico was accustomed to this treatment by the Export Import Bank and World Bank and that he assumed that projects for Mexican Light and Power and American and Foreign Power might qualify. Mr. Rubottom next asked whether the Minister realized that the United States wanted to keep thirty per cent of the proceeds for its own use, which with twenty-five per cent to go to the private enterprise sector as likely to be required under the amended law, would leave Mexico only forty-five per cent for its public works program. Here the Minister showed surprise and asked why the United States would need thirty per cent, acknowledging that Mexico had expected to be loaned seventy-five per cent of the proceeds.

The net result of the discussion, however, was that the two Governments could probably arrive at agreement if, as and when negotiations for a PL 480 Agreement can be undertaken. Mr. Rubottom also told the Minister that the United States would expect to negotiate the sales and loan agreements simultaneously, if a decision should be made to proceed with the negotiations. Mr. Rubottom made it clear that he was unable to offer any real encouragement to the Minister as to the prospects of offering a PL 480 Agreement to Mexico, but added that he felt it was necessary to clarify as many of the terms and conditions as possible in order to avoid any misunderstanding later, should actual negotiations be authorized.

1. Source: Department of State, Central Files, 362/8–657. Confidential. Drafted by Rubottom. A secret annex on the disputed Sabalo claim attached to the source text is not printed.
2. The Economic Conference of the Organization of American States met at Buenos Aires, Argentina, August 15–September 4; for documentation, see Documents 135 ff.
3. The Ninth International Conference of American States was held at Bogotá, Colombia, March 30–May 2, 1948. For documentation on U.S. participation in this conference, see Foreign Relations, 1948, vol. ix, pp. 1–72. The Charter of the Organization of American States was signed at Bogota on April 30, 1948. For text, see 2 UST (pt. 2) 394.
4. The Inter-American Conference on Problems of War and Peace, commonly called the Chapultepec Conference, was held at Mexico City, February 21–March 8, 1945. For documentation, see Foreign Relations, 1945, vol. ix, pp. 1–153.