Foreign Relations of the United States Diplomatic Papers, 1940, The American Republics, Volume V

812.6363/6529

Memorandum of Conversation, by the Chief of the Division of the American Republics (Duggan)

[ Washington ,] February 19, 1940.

[Participants:]	Señor Dr. Don Francisco Castillo Nájera, Ambassador of Mexico;
	The Secretary of State.

The Secretary said to the Ambassador that in an informal sort of way he would like to obtain clarification from the Ambassador of the views regarding the petroleum controversy expressed by President Cárdenas in his press conference of January 31, 1940.⁵³

After looking over President Cárdenas’ statement, the Ambassador said that on the basis of what he knew the statement represented the judgment of the Mexican Government. With regard to the appraisals, the companies had been requested to participate but had declined and had objected to the making of the appraisals so that at the present time work on the appraisals had stopped until the competent authorities decided whether the objections of the companies were valid or not. If it is decided that the objections are not valid, the appraisals will then be continued. During the period of the appraisals the Mexican Government is ready to continue direct negotiations with the companies for a settlement in the same way that the Ambassador is now carrying on conversations with the representative of the Sinclair Oil Corporation. Once the appraisals have been made, however, the President does not have authority to change them, so that in any negotiations the amounts fixed in the appraisals could not be modified either up or down.

The Ambassador added that after the appraisals have been made, the companies have the right to object to the valuations in the Mexican courts.

The Secretary then asked the Ambassador to explain further his personal views regarding President Cárdenas’ views on arbitration. The Ambassador said that the President alone could give a definitive clarification of his statement but that he, the Ambassador, thought there were two steps in deciding upon an arbitration. The first step was to determine whether under The Hague Conventions⁵⁴ or under the 1929 Inter-American Treaty the matter was of an international justiciable character. The Ambassador thought that it was not, since Mexico considered the oil controversy an internal matter and since there had not yet been grounds for charge of denial of justice. If it were decided that the question was of an international justiciable character, the second step would be to determine precisely what is to be arbitrated. The Ambassador indicated as his personal view that if the question were the entire subject including the right of Mexico to expropriate property the Mexican Government would undoubtedly decline. Moreover, he thought that Mexico would not consider an arbitration of subsoil values. However, if it were a question of arbitrating the value of the physical properties (e. g., oil well equipment, refineries, pipe lines, storage tanks, tank cars, distribution systems, et cetera), including the terms of payments and guarantees of payments, perhaps the Mexican Government would be willing, as long as other possibilities of direct negotiations had been exhausted.

The Secretary inquired whether the Ambassador meant by “guarantees of payment” that the arbitrators would be empowered to establish in their award the guarantees necessary to assure full compliance with the terms of the award. The Ambassador replied in the affirmative. The Ambassador then reiterated that Mexico could consider arbitration only after all possibilities of direct negotiation had been exhausted, as President Cárdenas had informed President Roosevelt in his letter of October 7, 1939.⁵⁵

The Secretary asked again in an exploratory way whether the Ambassador thought the Mexican Government would be willing to deal with non-American interests in the same way. The Ambassador replied that he presumed that the United States was interested only in the claims of American interests, but that Mexico would treat non-American interests in the same way as American interests.

The Secretary said that he would like to secure President Cárdenas’ own clarification of his views, and that he would appreciate anything the Ambassador could do to secure it. The Ambassador said he would write President Cárdenas by airmail tonight, and would hope to have a reply by telegram within a week.

53. See telegram No. 33, January 31, 9 p.m., from the Ambassador in Mexico, p. 981.
54. Convention for the pacific settlement of international disputes, signed at The Hague, July 29, 1899, Foreign Relations, 1902, Appendix II, pp. 169–194; convention for the pacific settlement of international disputes, signed at The Hague, October 18, 1907, ibid., 1907, pt. 2, pp. 1181–1199.
55. Not printed.