812.6363/12–1247
The Ambassador in Mexico (Thurston) to the Secretary of State
No. 5217
Sir: The Department’s confidential unnumbered instruction dated October 31, 1947, directing me to enter into discussions at the earliest opportunity with the President of Mexico with respect to the desirability and urgency of developing Mexico’s petroleum resources [Page 799] reached me on November 6—on the eve of the departure of President Alemán on an extended visit to the northern districts of this Republic. President Alemán returned from this tour on the afternoon of December 3 and on December 4 I called on the Minister for Foreign Affairs, informed him of the general nature of my instructions, and requested an appointment with the President.
President Alemán received me yesterday afternoon. At this interview I reminded the President of my inquiry shortly after he had assumed office with respect to Mexico’s petroleum policy and the likelihood that American and other foreign oil companies might be permitted to participate in the development of Mexico’s petroleum resources, and of my brief conversation with him on this subject shortly before my last visit to Washington in mid-September. I stated that upon my arrival in Washington I had found that considerable interest existed in connection with the need for petroleum for peacetime requirements and hemisphere defense, and that I was of course aware of Mexico’s own increasing need for petroleum for the development of its economy and as a source of urgently required dollar exchange. I mentioned that I had been informed of the conversations held here by Mr. Paul Shields with Licenciado Ramón Beteta and others, and that I had discussed all these matters with our officials and that as a result it had been decided that upon my return to Mexico I would discuss with the President the general subject of the development and expansion of oil production in Mexico. I added that there had been some exchange of views on these matters between the Mexican Ambassador in Washington and Secretary Forrestal, and that the Secretary had informed Señor Espinosa de los Monteros99 that I would undertake these discussions.
The President in reply recalled his earlier statements to me to the effect that while yet a Presidential candidate, he had recognized that should he be elected one of the most important problems with which his Government would have to deal would be that of petroleum. For this reason he had conducted extensive studies of the subject, and since his election he had followed developments in the field of petroleum and was aware of the present situation in the United States and of the growing demands for this product in Mexico itself. He repeated the statement made to me at our first interview on this subject that Mexico’s petroleum would always and instantly be at the disposal of the Government of the United States in the event of an emergency. I thanked the President for this renewed assurance but stated that in the event of an emergency, undeveloped petroleum resources would be of little avail. I then read to him the first six points of the memorandum [Page 800] I had prepared for this interview, into which were incorporated the essential points of the Department’s instruction No. 209 dated August 27, 1946,1 and the Department’s instruction above cited of October 31, 1947. A copy of this memorandum is attached hereto.2
The President indicated during my reading his understanding and appreciation of the several points developed, and with specific reference to point number six stated that the initiative regarding the creation of a military or naval petroleum reserve had been taken by us in the conversations held by Mr. Paul Shields on behalf of our Navy Department. He added that the initiative had been well-received and that it would again receive friendly consideration should it be revived. Nonetheless he made it quite clear that he understood that this subject has been dropped.
The President then stated that Pemex is currently in negotiation not only with American drilling contractors on a fee basis but also with several small independent American oil companies, and that he believes that some of these negotiations may be carried to a successful conclusion. In consequence, he said, American companies would be permitted to undertake “wild cat” operations—which operations, he said, have constituted the basis of the development of the oil industry in the United States. At this point I remarked that some American oil companies have indicated an unwillingness to participate in the development of Mexico’s oil industry until the present Petroleum Law should be modified by the removal of the restriction against foreign participation in exploration and exploitation. The President stated that he does not agree that operations of the kind contemplated under the negotiations now pending with Pemex are precluded by the Petroleum Law, adding that it would be very difficult for political reasons to change the law. He said that the arrangements now under discussion with Pemex contemplate that the company concerned would be allocated a tract of land on which it might explore for petroleum. If these explorations should be fruitless, the cost of the exploration would be borne by the company; if they were successful, the company would receive a share of the oil produced. I repeated that in the opinion of some companies, this arrangement, which seems to provide for exploration and exploitation, would be in conflict with the Petroleum Law. To this observation, the President again assured me that he did not agree, inasmuch as the company concerned would be operating on the basis of a contract extended by Pemex. I infer that in the President’s mind (and a similar view was advanced by Foreign Minister Torres Bodet when I spoke with him on December 4) the paramount [Page 801] fact is that Pemex is the Government agency possessing monopoly faculties for the development of Mexico’s petroleum resources. Hence, no violation of the Petroleum Law would result from operations of Pemex even though these take the form of the delegation to a foreign oil company of certain operations and the payment therefor should be made in Mexican oil. I stated to the President that his opinions in this regard led me to hope that a formula might be found whereunder American and other foreign companies could operate in the development of Mexico’s petroleum industry, and that in this hope, and if it were agreeable to him, I would be glad to explore this possibility further with Licenciado Beteta or any others whom he might designate for the purpose. The President stated that he felt that upon the return of Foreign Minister Torres Bodet and Finance Minister Ramón Beteta, it would be well if they and I and Senator Antonio Bermúdez should enter into such discussions, and that he would communicate with them following their return and arrange for a meeting.
Toward the close of our conversation I mentioned the position of the Government of the United States in regard to the employment of United States public funds for the development of Mexico’s oil industry, and in this connection read to him paragraph number seven of the memorandum already mentioned. President Alemán said that he had understood this to be our position but made no further comment.
As is stated in the telegram I despatched to the Department last evening following my meeting with President Alemán, I received the impression that President Alemán’s attitude toward a frank and thorough discussion of the matter of American and foreign participation in the development of the Mexican petroleum industry is favorable. When I mentioned, for example, the existence of a hostile public attitude toward such participation, the President remarked that this could be overcome by a suitable public presentation of the Government’s views, and that, moreover, the frequent references in the public press to negotiations between Pemex and American oil companies had provoked no adverse reaction. He displayed, furthermore, an understanding of the time factor, although he did not agree with the view that were strong oil companies to be admitted into Mexico immediately, full beneficial results would not accrue for several years. He was of the opinion that in certain areas, strong companies could bring in important production within as short a time as one year. In brief, the President’s attitude was one of optimism and readiness to hold serious discussions. It is expected that Licenciado Beteta will return from Havana over the weekend, and it is understood that the Foreign Minister has returned today from his brief vacation. Senator Bermúdez is already here. It is possible, therefore, unless Beteta must return to Havana, that our conversations may take place in the near future.
[Page 802]In so far as I am aware, only the Standard Oil Company of New Jersey has asserted that it could not and would not operate in Mexico until the Petroleum Laws have been changed. I believe that the Trumbull Asphalt Company, the Phillips Petroleum Company, the Signal Oil Company, the Cities Service Company, and perhaps others have sought contracts from Pemex without raising this issue. I shall, of course, in my conversations with Messrs. Beteta, Torres Bodet, and Bermúdez go very thoroughly into this subject. Should the Department, however, have any information as to the attitudes of other companies or any opinions of its own, it would be helpful if they might be imparted to me.
Respectfully yours,
- Antonio Espinosa de los Monteros, Mexican Ambassador in the United States.↩
- Foreign Relations, 1946, vol. xi, p. 1008.↩
- Not printed.↩