One Big Question

Diplomatic efforts . . . to reach a general, fair and equitable arrangement on various questions pending between [Mexico and the U.S.] are about to reach a completely satisfactory result. . . . I hope that within a few days the nation will learn in detail the importance of the solutions obtained....

So, last week, spoke Manuel Avila Camacho, President of Mexico, in his opening message to Mexico's Congress. It took three hours and a half to read the speech. For two hours the President read it himself. Then he passed the bulky manuscript to his private secretary, mopped his brow, sat down to recuperate. After an hour's rest he took over once more and read on to the end.

In the 175 pages of this mammoth document were numerous references to Mexico's friendly relations with the U.S., Mexico's willingness to welcome foreign capital, Mexico's place in Hemisphere defense. But what made foreign diplomats in the gallery, including U.S. Ambassador Josephus Daniels, sit up and listen was Manuel Camacho's hint that a comprehensive economic agreement may soon be reached between the U.S. and Mexico.

The "various questions" mentioned by Mexico's President might include: 1) further U.S. purchases of Mexican silver, to help stabilize the peso; 2) U.S. tariff concessions on Mexican products, to help redress Mexico's unfavorable trade balance ; 3) a trade agreement to assure Mexico a supply of U.S. machinery and raw materials* 4) settlement of such tiny but touchy international issues as the boundary dispute between Mexico and the U.S. over the Chamizal territory (about one square mile) on the Texas border.

But everybody knew that before these issues could be settled there was one big question at stake that had to be solved. It was the problem of those Mexican oil properties which Manuel Avila Camacho's predecessor Lazaro Cardenas expropriated from their U.S. owners in 1938.

Troubled Waters. Present U.S. investments in Mexican petroleum, mostly by subsidiaries of Standard Oil, have been estimated at $175,000,000. British and Dutch are valued at $250,000,000.

Mexico's theory is that the oil companies had already earned their original investment several times over when the properties were expropriated, that they should receive only the value of their refineries, pipelines, field equipment, etc.--unofficially estimated at $69,000,000. Harry Sinclair's Consolidated Oil Corp. settled last year. Standard Oil and Royal Dutch-Shell balked, fearing a precedent which might be followed by other Latin American countries. Standard and Shell appealed to the U.S., British and Netherlands Governments.

Britain broke off diplomatic relations with Mexico three years ago. The U.S. was content to exchange notes. Stern old Secretary of State Cordell Hull suggested last year that an impartial arbitration commission be set up, "with authority ... to make certain that adequate and effective compensation shall promptly be paid." Mexico refused, on the ground that it was a domestic, not an international, question. There the matter still rested last week.

Mysterious Accord. Day after President Avila Camacho dropped his gentle hint, the New York Times reported from Washington that an oil settlement is indeed in the making. It will be part of a general agreement with Mexico for economic and military defense of the Western Hemisphere.

The U.S., said the Times, will make $60,000,000 available to Mexico in loans and credits--half through the Treasury, half through the Export-Import Bank. Export-Import's $30,000,000 will be used for building roads, developing Mexican agriculture, etc. Treasury's $30,000,000 will be used to stabilize the peso. From this fund will come a $9,000,000 "token payment" to U.S. oil companies while negotiations for a final settlement are in progress.

The State Department was discreetly and mysteriously silent about this reported accord. But that some such agreement must be made was amply clear, if Mexico and the U.S. are to continue working together on defense. Mexico's economy has suffered considerably since the war cut off her European markets. The money to pay for those oil properties cannot possibly be dug out of Mexico's pocket. But expropriation of her natural resources is a point of national honor to all good Mexicans. Possible solutions: 1) Mexico will offer the oil companies long-term leases to operate the expropriated properties; 2) the U.S. will lend Mexico the money to buy the properties on terms the companies consider fair, i.e., U.S. taxpayers will buy off their own oilmen.

*The U.S. State Department last week gave priority to Mexico on a $4,000,000 order for 1,000 boxcars needed by the National Railways of Mexico.

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