Foreign Relations of the United States: Diplomatic Papers, 1943, The American Republics, Volume VI

812.6363/7828½

The Ambassador in Mexico ( Messersmith ) to the Under Secretary of State ( Welles )

Mexico , January 7, 1943.

Dear Sumner: Mr. Duggan⁶⁶ called me on the telephone on December 12th and indicated the need for an early clarification of the policy of the Mexican Government with respect to the participation by United States interests in the Mexican petroleum industry, and referred to the exploratory memorandum⁶⁷ which I had delivered in August under instructions of the Department to the President⁶⁸ and to Padilla⁶⁹ on this matter. I indicated to him that although I had on several occasions referred to my desire to discuss this matter in detail with the President and with Padilla, I had been told by Padilla that he was giving careful study to the memorandum and would discuss it with me in due course.

After the conversation with Duggan, I informed Señor Padilla that I wished to discuss this matter with him fully and I have had two talks with him during the first part of this week. He did not show any considerable disposition to discuss the questions involved, but rather wished to explore our own views. He indicated that so far as their studies had gone, they did not see the possibility of the participation of foreign, and of course American, capital, except in the foreign marketing of Mexican oil. I told him that this would, I believed, be an altogether inadequate basis for discussion, as it would not be of sufficient interest to my Government and of no interest to the foreign oil interests whose cooperation in any marketing scheme was essential. I called his attention to the fact that while in Mexico and in Russia the oil industry may be a Government monopoly, the major oil producing interests in the world are private companies which to a large extent control the world markets.

There are reasons why I wish to get this letter off by this air mail this morning, so that I cannot enter into a discussion of the conversations I had with Padilla at this time. This is just a word to tell you that I find, through my discussions with him and Mr. Suárez,⁷⁰ that the Mexican study of our memorandum has not made the progress which, in my opinion, it should have made, and that they have not yet adequately attacked the basic problems of policy which they must face. While I cannot go into details, I can only say here that I discussed fully with Padilla the various points raised in our memorandum and I finally secured from him a statement to the effect that he realized that the Mexican Government would have to consider these major questions of policy and he would go into them again immediately with his associates and with the President and would talk with me before he left on a holiday which he is taking and with the President, so that I could talk with the President before I left on a brief leave for Washington on January 15th. Padilla indicated that he realized that a certain participation on an equitable basis by foreign capital in the Mexican industry was necessary. In a conversation with Suárez, he indicated to me that he believed foreign participation in a certain measure and on an equitable basis was necessary. The only forward progress which I have made in the conversations is that I think they are now actually studying the method under which foreign capital can on an acceptable basis to both sides participate in the industry. One thing is clear, and that is that the internal marketing is closed to foreign capital, so far as distribution and sale of oil products in Mexico is concerned. Another thing which is clear is that the oil industry will remain a monopoly of the government in Mexico, and that the principle of subsoil rights, etc., will be maintained. As I see it, their approach will be to determine in what measure and in what form foreign capital can participate with Petroleos Mexicanos⁷¹ and with the Mexican Government in phases of the oil industry other than the internal marketing in Mexico.

The reason I am writing you this letter so hurriedly is because Pauley and a man named Mosher⁷² have been here and have been to see various people in the Government. Pauley came in to see me with Mosher yesterday. He knows all about the deGolyer report,⁷³ and far more than I know here. I told him that I had been given some partial information with regard to the deGolyer report and that I was authorized to make a communication to the Mexican Government with regard to certain materials for repairs to the refineries and to increasing the capacity of the Mexico City refinery; and that we were prepared to consider the possibilities of a high-octane plant in Mexico City, but this latter was a more difficult problem on account of the considerable amount of new material involved. I said that I was communicating with the Mexican Government in this sense and indicating that conversations as to the details would have to be between the Department of State and members of the Mexican Government designated for this purpose. Pauley asked where he came in under this, and I told him that I believed our conversations with regard to the deGolyer report and with regard to the oil question, so far as rehabilitation is concerned, had been on the basis of what had to be done and without any reference to companies. I emphasized that the conversations with regard to repairs and improvement in facilities would be between the State Department and the Mexican Government. Pauley said he had been giving his time and attention to this matter for three years and that he was naturally deeply interested. I told him that so far as I was concerned I was thinking of the matter in terms of what had to be done and not in terms of his interest or any other individual interest. He said he quite understood and he was going home on Saturday. He will undoubtedly come down on the Department and other agencies almost at once.

I saw Mr. Suárez and we had a very frank talk about Pauley’s being here and Suárez told me that he would tell Pauley that so far as the Mexican Government is concerned these conversations had to be with the Department of State on this matter and they were not prepared to talk to any individuals.

. . . . . . . . . . . . . .

I am so tremendously pressed here that it may be several days before I can find an opportunity to dictate a full report on my conversations on oil with Padilla and Suárez, but I will try to get it off as soon as possible. This is just a preliminary word to give you a somewhat inadequate idea of what has developed, so that you may be aware of Pauley’s presence here, etc.

With all good wishes,

Cordially and faithfully yours,

G. S. Messersmith

66. Laurence Duggan, Adviser on Political Relations.
67. Undated copy transmitted to the Department by the Ambassador in Mexico in his despatch No. 3498, August 24, 1942 (not printed). It was based on Department’s instruction No. 1336, August 6, 1942, Foreign Relations, 1942, vol. vi, p. 528.
68. Manuel Avila Camacho.
69. Ezequiel Padilla, Mexican Minister for Foreign Affairs.
70. Eduardo Suárez, Mexican Minister of Finance.
71. Mexican Government instrumentality referred to as “Pemex”.
72. Edwin W. Pauley, with his associate Mosher, proposed to construct and operate several oil plants in Mexico, including a high octane plant. The Department disapproved.
73. Not printed; the report (made by a mission headed by Everette L. DeGolyer, Assistant Deputy Petroleum Administrator) recommended a rehabilitation of the refineries of Pemex and the construction of a high octane plant in Mexico City (812.6363/7801).