812.6363/3341
Memorandum of Conversation, by the Under Secretary of State (Welles)
The Mexican Ambassador called to see me this afternoon at his own request. He told me that he had just been speaking with his [Page 737] Foreign Minister, General Hay, on the telephone and that the latter had communicated to the Ambassador the text of the note92 which was handed to Ambassador Daniels yesterday evening. The Ambassador asked me what I thought of it.
I told the Ambassador that we had not as yet made a reply, but that we would do so within the next day or so. I said that the note had been given consideration by the Secretary of State and by myself this morning, and that to our regret we could not help but feel that it was not responsive to the specific requests and inquiries addressed by this Government to the Government of Mexico. I said that, while of course we were gratified to know that the Government of Mexico intended to pay compensation for the properties expropriated and that the President of Mexico stated that the Government of Mexico was in a position to pay such compensation, nevertheless, the note did not make clear either directly or by implication what kind of payment was to be made, whether in cash or in some other form of payment, nor when compensation was to be paid. I said that unless the Mexican Government had formulated some concrete plan of payment which it could communicate to us in full detail, it did not seem to this Government that the Mexican Government was answering the questions we had very plainly asked.
The Ambassador said that he not only fully shared my opinion but that he had already informed his Government that he knew that the reply would not be considered adequate nor fully responsive, and that he would once more urge his Government as soon as our anticipated response was received to make a further reply along the lines desired by us.
The Ambassador then said that General Hay was likewise very much exercised because of the fact that yesterday in the House of Commons in London it had been stated that the British Government had been informed that this Government had presented “a very energetic note” to the Mexican Government. General Hay said that it had been agreed with Ambassador Daniels that our note would be considered as held in suspense temporarily, and that he was now very much embarrassed in view of the British statement lest the Mexican Government find itself in a position to have to admit that a note actually had been presented. He also was worried by the statement in London that joint action by the United States and Great Britain would be undertaken.
I asked the Ambassador to tell General Hay that this Government had at no time made any statement publicly to the effect that a note had been presented to the Mexican Government; that we had merely [Page 738] limited ourselves to saying that our point of view had been very clearly presented to the Mexican Government, and that in the statement given to the press by the Secretary of State yesterday93 it had been made fully clear what our point of view was. I said that of course I could not assume any responsibility for what some member of the House of Commons might say any more than I could for what some member of Congress here might say, and that I did not see that this need occasion any embarrassment whatever. I also said that this Government had never agreed to and had no plans to agree to any form of joint action with any other government in the difficulty which had arisen with Mexico. The Ambassador said he would inform his Foreign Minister accordingly.
The Ambassador then said that he had been visited last evening by a Swedish subject, Mr. Grafmann, who is interested in the Swedish telephone company in Mexico City. Mr. Grafmann had told the Ambassador that he thought a solution of the present difficulty would be for a Mexican company to be formed, headed by the most honorable private citizens that could be found in Mexico, for the exploitation of the properties expropriated, and for the British and American companies to agree to permit this new company to be used as a facade behind which they themselves would continue to develop the properties. Mr. Grafmann further said that if an arrangement along these lines could be obtained, his own Swedish group, the Wallenberg group, would be prepared to raise additional capital to put into the properties up to perhaps forty millions of dollars. In this way, he stated to the Ambassador, the Government could save its face and at the same time the companies could not only recoup their loss but could also obtain additional profits in the future.
The Ambassador seemed to be quite impressed with this possibility. I told the Ambassador that any equitable solution of the problem was of course what we had uppermost in our minds and, for that reason, every proposal that might be made should be examined with care and with attentive consideration. I said, however, that I knew he would pardon my frankness in saying that unless the Mexican Government agreed to live up to the principle of fair, immediate and effective compensation for properties belonging to foreign interests which were expropriated by the Mexican Government, I could not conceive how one penny of additional foreign capital could be invested in Mexico except by persons residing in a lunatic asylum. The Ambassador smiled and said he had to agree that he felt the crisis had now been reached and that the Mexican Government would have to agree to this principle; that perhaps in the long run it might be a salutary experience.
[Page 739]The Ambassador, before he left, expressed the very firm belief that a satisfactory agreement would be reached within the next two or three weeks by reason of the fact that oil supplies were piling up, that if the wells were capped the oil would seek lower levels and in part be dissipated and the potential wealth of the fields be lost to the Mexican Government, that labor difficulties would be enhanced every day, and that the Government would be in a position where it would have to reach a fair adjustment. He expressed the belief that when this time came, the practical negotiations which would be necessary had better be carried out in Washington or in some American city between the representatives of the Mexican Government and the American interests involved rather than in Mexico City. The Ambassador said he had already expressed this opinion to his Government and that he was rather afraid of reiterating it. He asked if we would be willing to express the same opinion to our Embassy in Mexico City. I told the Ambassador that we would be very glad to consider the suggestion, but that it seemed to me that until we had a responsive reply from his Government we were hardly in a position to make any suggestions of this character. To that he agreed.