In the Matter of the Settlement of Disputed Questions between Mexico and the United States, April 18, 1921

FOREIGN POLICY ASSOCIATION

(Formerly League of Free Nations Ass'n)

3 WEST 29TH STREET, NEW YORK

IN THE MATTER OF THE SETTLEMENT OF DISPUTED QUESTIONS BETWEEN MEXICO AND THE UNITED STATES

MEMORANDUM TO

NEW YORK, April 18, 1921. [page 2]

BRIEF SUBMITTED RE MEXICO BY FOREIGN POLICY ASSOCIATION {FORMERLY THE LEAGUE OF FREE NATIONS' ASSOCIATION}.

I. Mexico, from the facts which this Association has been able to gather, appears to have emerged unaided from the disorders of the revolution and to have [reestablished] her commerce and agriculture, to have restored her manufacturing to close to, if not quite, the production in 1910, and to have very greatly increased the production of her mines in the last few years.

II. The government is everywhere recognized; no revolutionary movement threatening the permanence of the government is under way. The return of normal relations between the United States and Mexico -- political, commercial and financial -- the last of these in particular depending on the first, would assure great advantages to American business, and would, we believe, insure the firm establishment of the present Mexican administration, thus banishing the fear of and reason for intervention.

III. The oil controversy is essentially a justiciable question.

IV. The disorders in Mexico marking the period of 1910 to 1920 were not merely outbursts of Latin-American politics. The Madero-Carranza-Obregón movement has been throughout essentially single. It was a real and far-reaching social and economic revolution, and resulted in the transfer of political control from the comparatively small capitalistic and aristocratic group, allied [page 3] with the church leaders, to representatives of the recently formed middle class, committed to liberal political principles. Those principles are essential to the establishment of successful popular government. The more equitable distribution of land, the separation of church and state, the abolition of peonage, the development of local political control, a system of taxation more favorable to the poor, the promotion of education by the state, progressive labor and welfare legislation -- such are the watchwords of the Obregón administration, identical with those of Carranza, and before him of Madero.

V. Neither the Catholic Church in Mexico nor the representatives of the Protestant Missionary boards operating there are demanding that pressure be brought to bear upon the Mexican Government with reference to its laws relating to religious matters.

VI. Interference in Mexico would be resented by all Latin-American peoples and would have a very harmful effect on our commercial and political relations with them.

I.

The business and agricultural life of the country is stable and developing.

1. The merchant is able to carry on his business to an ever-increasing extent, as is shown by: (a) the increasing exports and imports; (b) the steady and increasing tax payments from the tax on business transactions, the stamp tax; (c) the increasing interest in trade relations with Mexico shown by American merchants, the [reestablishment] [page 4] of the American Chamber of Commerce of Mexico, the establishment of a Mexican trade bureau with an office in Mexico City by the Chicago Association of Commerce, the numerous excursions of American merchants and bankers to Mexico; (d) the improvement of the banking situation through the decree providing for the reopening of Mexican banks with a provision for settlement of their claims against the government under which a number of banks have been already permitted to [reopen], and the [reestablishment] under another decree of two banks of issue in Mexico City, and the visit of the Good-will Commission of Mexican merchants to the United States, so well received by our business men; (e) the establishment of the Mexican branch of the American Foreign Banking Corporation, which is an American bank formed under the provisions of the Federal Reserve Bank Act to do foreign banking, and which is controlled principally by national banks throughout the United States.

See Appendix I.

2. The farmer is largely increasing his production, and new agricultural enterprises are beginning. The result is that Mexican cotton mills, for example, are being amply supplied by Mexican-grown cotton, leaving surplus for export; Mexican sugar and other products are being exported, and there is no lack of food grown in the country. The evidence is contained in (a) figures as to production; (b) export figures.

See Appendix II.

3. The mining operators are able to carry on their business to an increasing extent, and smelters have been reopened in Mexico to take [page 5] care of the ore produced. Evidence: (a) statistics of operation; (b) exports; (c) coal production increasing to meet increase of business.

See Appendix III.

(The last few months of 1920 and first months of 1921 show a decrease in production, probably due to world conditions.)

4. The oil wells show a steadily increasing output and export. The difficulties between the oil companies and the Mexican Government have evidently not had the effect of decreasing the development of oil lands so far as production is concerned. The actual exports of 1920 are estimated at 153,797,036 barrels, as compared with a production in 1910 of 3,634,080 barrels.

See Appendix IV.

5. The manufacturers are increasing their production. Evidence: (a) cotton statistics of production and export; (b) iron mill at Monterey.

See Appendix V.

6. The land transportation system of the country is carrying goods to its capacity, and the sea transportation is increasing, evidencing the amount of business being done in the country and the increasing demand for facilities. Evidence of the security of the country is shown in connection with transportation by the fact that guard trains are not operated at all, and only in a few outlying mountainous districts of the Republic are military escorts carried. American railway freight cars are now allowed to go to Mexico with freight in transit. Cars operated by the Pullman Company have been running in [page 6] the country for some time, on both Mexican and international routes.

See Appendix VI.

7. Mexico is now on a gold basis and exchange with the United States is about on a parity with the pre-war figure, so that there is no unfavorable exchange rate against American merchants, and there is not the danger of being obliged to take paper currency of fluctuating value in payment, a statement which can be made of very few important customers of the United States at the present time.

8. The emigration from Mexico to the United States has been due chiefly to the high wages paid on this side of the border as compared with the comparatively low wages in Mexico. Wages on the American side of the boundary were $5 a day and in the border states in Mexico not more than $2 a day in towns, $1.50 in the country, and the average wage paid operatives in the mills of Orizaba, in Central Mexico, about 92 cents, United States currency, a day (See Supp. C. R., April 28, 1919, page 8, and October 29, 1920, page 475).

II.

The Mexican Government is recognized throughout the Republic.

The existing Mexican Government is established and recognized in all parts of the republic, there having been no revolt of moment since de la Huerta assumed the provisional presidency in May, 1920. The Congress is meeting regularly, [page 7] and the expression of opinions on the floor appears to be free, the courts are open throughout the country and the taxes are being collected regularly. The Constitution of 1917 is accepted throughout the country, and has, in fact, since it went into effect on May 1, 1917, been acknowledged in the Mexican courts, in the Congress, and by the administration as the supreme law of the land.

Appendix VII.

PRIVATE PROPERTY AND CONTRACT RIGHTS.

The above facts testify to the existence of security for private property and respect for contract rights, as well as confidence in the stability of the existing government, on the part of the Mexican citizen, merchant, farmer and manufacturer, the American in Mexico, and the merchants and manufacturers in the United States who are seeking markets in that country. The increase in commercial transactions, especially transactions with the United States, is the more significant in that business has been hampered by lack of banking facilities, now being improved by the opening of the great banks in Mexico City, other Mexican banks and agency branches of American banks, so that business is done very largely, almost wholly, with American exporters on a cash basis, and cash means gold. The merchant who buys goods, therefore, must be paid promptly, so that he can secure the gold with which to pay for the goods on his shelves. Consequently, the ultimate consumers must have money with which to pay. It is notable that the revival in trade with the United States occurred at a time when there was so great a demand for goods in this country and abroad that [page 8] American business men and manufacturers were not seeking customers.

The agricultural statistics are eloquent of stable conditions and respect for property. Farmers will not plant annual crops like grain, cotton, and beans, if they do not believe that they will be permitted to harvest them. Still less will coffee, banana, or sugar plantations, involving a period of [nonproductivity], and a large investment, be started if the landowners are not satisfied that the titles to their property will not be in dispute and that their plantations will be safe from hostile raiders.

Appendix II.

PRESENT TRADE DEPRESSION.

Figures for the first months of 1921 of the last months of 1920 show a decrease, especially in mining production, but this is another evidence of the increasing sympathy of Mexican trade and industry with that of the world at large. The country is suffering from the same trade depression which affects the United States and Europe. Her cotton and sugar producers, her cattle ranchers, will be seriously affected by the drop in prices of their products, and the reduction in the production of mines, especially silver and copper, constitutes a great problem for their laborers. It would be of the greatest importance to the peace and welfare of the country if at this time of general business depression the reconstruction of Mexican railways and roads could be begun, sugar mills rebuilt, electrical works constructed or restored, so that work could be provided for a large number of men on enterprises which would in themselves greatly facilitate and increase the movement of goods, both within the country and from the United States into Mexico. [page 9]

Mexico should be a source of strength to the industrial situation in the United States. She is on a gold basis, exchange with the United States is on a parity, not against us, as in so many trading communities. The loans for the improvement of railroads and public utilities must be floated in the United States. Her mines, manufactures, and railroads are equipped and organized largely by Americans after the American model, so that she will naturally turn to this country for the material needed to restore them. The repairs and [reequipment] of the railroads, especially, and the extension of existing lines to meet new needs will in itself mean a large expenditure in the steel and equipment works of the United States.

EARLY RECOGNITION DESIRABLE

The danger of disaffection caused by unemployment is a real menace to any established government and particularly so to a government in a country which has just emerged from a long continued revolution. Furthermore, at the present time, the general discontent is not without its exploiters among Mexican workmen and their doctrines will find ready hearers among the unemployed in that country as in Europe. It is, therefore, of the greatest importance politically as well as economically that this government should take a position in respect to Mexico without a long delay. If it does not do so the increase of unemployment in the mines, on development works, and in the factories will constitute a serious menace to the government which is politically weakened by the fact that it is not recognized by the United States. [Nonrecognition instills] a doubt of stability in the minds of the people and [page 10] is the strongest kind of encouragement to revolutionary activity.

In the minds of a large number of Mexicans [nonrecognition] implies hostility, and a government to which the United States is considered hostile will have great difficulty in continuing in power in the midst of trade and industrial depression. If, on the other hand, the Mexican Government were to come to the aid of the unemployed by supplying work on the railroads and government undertakings, and, as a result of confidence in its stability, private capital, native and foreign, were to go forward in improvement work, the present government, with the man who is universally regarded as the best man in Mexico to restore order at its head, should be able to start Mexico on the path of development which will end in the creation of a permanently strong independent Latin-American republic. We endorse the recent statement of the American Commercial Attaché in Mexico City: "Until the attitude of our Government is made manifest not much progress can be expected here." (Lester C. Jackson, Dept. of Commerce, Monthly Cable Letter No. 123, March 3, 1921.)

III.

The oil controversy is essentially a justiciable question.

It is not our purpose to engage in, nor would the length or character of this brief admit, an extensive discussion of the "oil question." From such information as we possess, we believe that the Mexican Government desires to arrive at a settlement of this disturbing matter. It is obvious that a settlement ought to be arrived at. It [page 11] is equally clear that delay does not prejudice the interests of the oil companies, rather the contrary. The statistics and reports for 1920 given out by the producers themselves speak most eloquently of their ability to thrive under even the present equivocal conditions. So long as the matter remains undetermined, so long as their profits and production are not harmed, it is quite natural that the companies should wish the settlement left open, hoping as well as striving to gain every possible advantage. To reach a basis of agreement involves concessions on both sides. Such concessions require a conciliatory spirit. Mexico for her part has already expressed such a spirit.

So long as the question remains undetermined and so long as, in spite of this, the companies are operating successfully, it is obviously the better strategy for them to submit to no understandings. Some eventuality may occur which will place the companies in a position where they will not be obliged to make any concessions or to waive any rights, actual or claimed. Their publicity seems to indicate they are seeking to have resolved in advance in their favor every contingency and every implication arising out of the debated field of vested rights. We say "debated field" because there are few fields of the law more difficult of exact ascertainment and determination than that of vested rights. What are and what are not vested rights, and what is a deprivation of such rights, are issues which have been the source of much litigation and even of conflicting decisions. For the oil companies to ask, therefore, that all questions, immediate as well as ultimate and remote, arising out of this oil controversy should be resolved in advance in their favor, hardly shows a conciliatory spirit on their part.

Appendices I and IV. [page 12]

IV.

The revolution through which the country has just passed was a real revolution and not a mere change of power from one faction to another.

In the main there was a contest of principles, the old clerical conservative forces against the new liberal party. The latter party coming into power with Madero has finally established itself in the election of Obregón. Mexico is a different country from what she was in 1876, when Don Porfirio Díaz as the Man of Iron, became President after a successful revolution. During his autocratic rule there was the slow development in the country of a middle class, and a strong financial and manufacturing group. The rise of the manufacturing industry, (in the case of cotton, the increase in production from 1900-1910 was 200 [percent]) the development of the mines, in the hands largely of foreign companies, the construction of the railways, the increase in the size of the cities, called into being a class of laborers better paid than the agricultural peon, and not, like him, bound to the soil by the device of keeping him always in debt. Many of these men became skillful mechanics and therefore acquired the leisure and intelligence which have enabled them to form the unions which, during and since the revolution, have become established in the labor world of Mexico.

FREEDOM OF LABOR.

The freedom of labor which had never existed under the old regime, began its development under Díaz as a corollary of the industrial development [page 13] of the country and has now become a fact through the revolution. Increasing trade and increasing opportunities for trade developed the class of smaller merchants and professional men of various sorts and the great increase in the banking and financial life of the country contributed another element to the causes which were breaking up the old landlord-ruled Mexico.

In the latter days of Daiz's rule clericalism as a political element was believed by the people to be joined with high finance in control of the old president's government, so that when the revolt of Madero broke out as a liberal movement, the strength of the liberal thinking people in the country was clearly demonstrated by the ease with which he succeeded.

The United States should recognize the character of the revolution and should lend its support to the progressive elements in the country who, it would appear from the evidence of increasing business and agricultural activity, have restored order and a degree of prosperity to the country. From all indications, if order can be continued, Mexico is ready to go ahead more rapidly than ever under a more liberal and progressive regime than she has hitherto enjoyed.

DAMAGES TO AMERICAN CITIZENS.

Heavy damages have been suffered by American citizens in the course of this revolution. The figures, however, show that most of the deaths and the larger part of the losses were suffered in the early years of the revolution. Mexico can and should pay for those losses and the Association believes that a joint commission should be set up to determine their amount.

Appendix VIII. [page 14]

V.

The religious question.

Interference in the religious affairs of one country by another is a serious step, contrary to all American traditions. Especially is this so in the case of a state where, as in Mexico, clericalism has been a political issue. Only because of the very strongest appeal from American missionaries and in defense of outraged rights of humanity should interference be considered. No such appeal has been made, and there is no evidence of any recent interference with the free exercise of religion in that country. American missionaries and the American missionary societies are opposed to interference (See letters Appendix IX). Three of the Catholic Archbishops of Mexico, in a formal statement issued April 4, 1919, set forth in vigorous language their opposition to intervention (Appendix IX). Monsignor A. E. Burke, Prothonotary to His Holiness the Pope, who during the last three years has taken an active part in the affairs of the Church in Mexico, on March 25, 1921, in reply to an inquiry from the Association, wrote a strong letter to the same effect. (This correspondence follows in Appendix IX.) [page 15]

VI.

Effect of intervention on American relations with South America.

The Latin-American fear of American aggression was clearly shown at the time of the Pershing expedition in 1916. Although the United States Government declared that the expedition was intended only to prevent raids over the border and with no object of taking Mexican territory, or interfering in Mexican affairs, a strong current of Anti-Americanism swept over Latin-America from Cuba to the Argentine.

So convinced of our greed and of our imperialistic spirit are the members of a large and influential group of leaders in every one of these countries that a constant and minute watch is kept on our policies and acts. Anything that can be constructed as a proof of that spirit is heralded widely in the press. When marines were landed in Nicaragua, it caused a stir throughout Latin-America. The fate of the treaty with Colombia is being followed with deep interest. Our occupancy of [Haiti] and Santo Domingo has exposed us to bitter and almost universal criticism. When not long ago the military authorities (American marines) in the latter republic suppressed a troublesome daily paper it created a storm of indignation. Numerous stirring meetings for protest were held, and the papers were full of indignant editorials and letters.

Pan-Americanism would suffer a severe setback, if not a death blow, if intervention in Mexico should take place. That the resentment over the Pershing expedition had no permanent bad effect [page 16] on American trade was chiefly because in 1916 Latin-America had no other country to trade with. At present we have numerous and active competitors in South America and they will be quick to take advantage of any ill feeling against the United States.

The trade of the United States with Latin America during 1920 was next in value to that with Europe. Its relative importance in world trade appears from the table in Appendix X.

Conclusion.

The Association is opposed to intervention, and believes that the United States Government should adopt a sympathetic attitude toward the liberal government in Mexico. The facts cited above, it believes, show that Mexico is internally at peace and that business and agriculture are proceeding rapidly towards the [reestablishment] of a normal community life. There is no indication of serious resistance to the existing government. Taxes are being paid regularly and the legislative, executive, and judicial branches of the government are functioning. The abolition of the system of jefes politicos through whom the control of the central government was maintained over the local administrations throughout the country, and the substitution of a locally elected government for local affairs in the towns and the smaller country administrative districts, roughly corresponding to New England towns, should tend to develop a truly representative government, and educate politically the people in the cities and rural communities through the administration of their local affairs.

The Association believes that joint commissions should be set up to fix claims for damages against [page 17] the Mexican Government on the part of Americans and against the United States Government on the part of Mexicans, and to settle the questions in regard to boundaries and international rivers which are so vital to the populations on both sides of the border. The Association believes that the procedure, which has been followed since the agreement to settle differences by negotiation or arbitration was inserted in Article 21 of the Treaty of [Guadalupe] Hidalgo in 1848, should be followed now. It believes that the two governments can find a way to protect American property rights existing at the time the present constitution took effect without unduly wounding the susceptibilities of the weaker nation or unduly interfering with her system of internal legislation and administration. It believes that protection of property rights of American citizens acquired since May 1, 1917 or to be acquired hereafter in Mexico should be left to the rules of international law rather than to a vague general treaty provision, [dictatorially] imposed, a procedure which might, it seems to us, make any law affecting property rights passed by the Mexican Congress subject to veto by the United States Government. The Association is the more insistent upon this point since it is convinced that the upbuilding of the rules of international law and their equal application to all nations, great and small, strong and weak, is at once a moral and a material interest of the United States and necessary to the preservation of peace in the world. The world is entitled to nothing less from its greatest democracy.

Respectfully submitted,

Appendix I.

Babson's Statistical Reports -- March 29, 1921.

UNITED STATES EXPORTS TO MEXICO.

IMPORTS FROM MEXICO TO THE UNITED STATES.

[page 19]

The largest article of import from Mexico, not given, is henequen.

1919 -- 141,414 tons, worth $37,581,495.

1920 -- 154,289 tons, worth $30,184,291.

Yet, in spite of all this congestion on the railroads, the Collector of Customs at Vera Cruz, says that March was the biggest month he has ever had in collections. He collected that month 3,223,923.75 pesos for duties, and for the whole first quarter of 1921 he collected 9,040,491.20 pesos. -– (Weekly News Bulletin, April 6, 1921.)

BANKS ALLOWED TO REOPEN.

Secretary of the Treasury de La Huerta announces that the following banks have been granted permission to reopen and renew their operations:

Banco Nacional de México, Banco de Londres y México, Banco Mercantil de [Monterrey], Banco de Nuevo León, Banco de Coahuila, Banco de Oaxaca, Banco del Estado de México, Banco de Sonora, Banco de Morelos, Banco de Aguascalientes y Banco de Durango.

Other banks have applied for permission and will be inspected before they are granted permission. [page 20]

Appendix II.

AGRICULTURE

The statistics for 1918 show that:

Cotton was nearly double the 1906-10 average.

Wheat nearly equaled that average.

Corn was about one-third less.

Sugar about one-third less.

Henequen nearly double.

-- (Commerce Reports, Sept. 27, 1919, and Feb. 12, 1920)

Statistics for subsequent years show that the crop returns, on the whole, in those years were larger, in some cases much larger, than in 1906-1910. An exception is the cattle industry which suffered during the revolution and which is recovering more slowly.

In 1920 $2,204,493 worth of sugar entered the United States through Nogales from Western Mexico in the first six months. (C. R., Sept. 24, 1920.)

Sugar growers in the State of Vera Cruz expect the 1921 crop to be 25 [percent] more than the 1920 crop of 35,000 metric tons, so the 1921 crop will be more than that of 1909, which was 40,800 metric tons. (C. R., March 23, 1921.)

Wheat -- The wheat crop of 1919 was 387,522,320 kilos, considerably more than 1906-10, and the crop of 1920 was estimated at 406,898,436, or one-third more than 1906-10. (C. R., August 2, 1920.) [page 21]

Cotton -- The estimated crop from the Laguna District in 1920 was 200,000 bales, as against 140,000 in 1919. The 1920 crop from this district alone more than from all Mexico in 1906-10. (Weekly News Bulletin, April 28, 1920.)

Seventy-one thousand two hundred and eight bales from Lower California alone entered in the United States in 1920; in 1919, 33,609 bales. (C. R., March 23, 1921.)

Rice -- Rice crop of 1920 in the Yaqui Valley largest in the history of the region -- 150,000 sacks, or three times the yield of 1919. (C. R., Nov. 23, 1920.)

Henequen -- Exported in 1919, 141,414 tons. (C. R., March 23, 1921.)

Tomatoes -- Crop of 1918 -- 19 from the State of Sinaloa filled 780 cars. Crop for 1920 expected to be larger. The export all went to the United States and Canada (C. R., Feb. 27, 1920.)

Bananas -- Exported from Frontera, 1919, 200,000 stems; 1920, 1,000,000; estimated, 1921, 2,000,000. (C. R., March 23, 1921.)

Corn is abundant throughout the Republic, especially in the states of Pueblo, Sinaloa, Sonora and Nayarit. (C. R., March 24, 1919.) [page 22]

Appendix III.

COAL

In 1919 coal in Piedras Negras District, 75,000 tons a month; soon expected to be 100,000 tons. (Industrial Mexico, P. Harvey Middleton, page 70.)

PRODUCTION PRINCIPAL METALS.

-- (C. R., March 23, 1920.)

Figures given by the Mexican Government for 1919-20 in kilos:

-- (Mexican Review, Apr., 1921, page 26.)

These figures compare with, in 1914: Gold, 8,000 kilos; silver, 800,000 kilos.

-- (Financial and Commercial Chronicle, Jan. 31, 1920, page 416, speech of Mr. Sobral at Pan-American Conference.)

Appendix IV.

The exports from 1914 to 1919, inclusive, as compiled by George Blardone, oil statistician, are as follows, in barrels of 42 gallons each: 1914, [page 23] 20,647,357 barrels; 1915,  24,381,101; 1916,  30,088,343; 1917, 46,054,208; 1918, 56,765,396; 1919, 80,690,000.

The total export for the year 1920 was estimated at 153,797,036 barrels. (Mexican Review, February, 1921, page 8.)

President de la Huerta, in his message to Congress, of September 1, 1920, says: "The number of petroleum wells has now reached 1,123, of which 147 are located, 123 are being perforated, 313 are producing and 540 are abandoned." (C. R., Oct. 4, 1920.)

The average daily shipments are quoted in another source as follows:

-- (From The Lamp of October, 1919, published by Standard Oil Co.)

"During January, 1921, the shipments of petroleum from the Tampico Consular District reached a total of 18,602,498 barrels (42 gallons to the barrel). This was an increase of more than 10,600,000 barrels over the exports for the corresponding month of 1920, and 1,000,000 barrels over the shipments for December, 1920.

"Twenty companies exported petroleum from the Tampico District during January, 1921, of which 18 were American companies and 2 English and Dutch. The American companies exported 15,732,583 barrels, or 84.7 [percent] of the total, against 2,869,915 barrels, or 15.3 [percent], by their English and Dutch competitors." (C. R., April 6, 1921.)

Increase in production shows that the interference by the Government has not had the effect of endangering production. In respect to the [page 24] year 1918, on this question, the report of the Mexican Petroleum Company says: "Owing to the great disproportion between the pipe line facilities and the potential production of your completed wells, no oil-well drilling has been done on your properties in Mexico except the completion of one well on a property jointly and equally controlled by the Mexican Eagle Company and your company. On this joint property, known as the Alliance property, a well was developed in 1918 which has a potential capacity of 50,000 barrels of oil daily, and is yielding approximately 8,000 barrels daily. Had there been no obstacles in the way of free development of the properties, nevertheless, none would have been made during 1918 because of the number and potential production of the completed wells of your company from which either none or a small proportion of the production is being taken. Arrangements which have been made, however, looking to a large increase in the marketing of your crude and refined oils, will probably justify the beginning of a campaign of oil-well drilling and pipe-line construction during the present year."

Mr. Doheny is reported in the papers as being very optimistic concerning the remarkable activity in Mexican petroleum fields. "He expects to see a big increase in production rather than a decrease, and predicts that the current year's output will be the largest in the history of Mexico. More than 100 companies, Mr. Doheny says, are engaged in drilling wells, building pipe lines and storage tanks. Great areas, which only a year ago were covered with dense jungle, are now being cleared by thousands of workmen." (New York Sun, March 22, 1921.)

The annual report of the Sinclair Consolidated Oil Corporation for year ended December 31, 1920, [page 25] is explicit in respect to the increase in production and shipment.

"Crude oil produced from the oil properties in Mexico amounted to approximately 11,250,000 barrels, showing an increase of approximately 6,250,000 barrels over the amount produced during the year 1919.

"Increased export shipments of Mexican crude oil and the expansion of foreign business necessitated building additional oil-tank vessels. The total tonnage owned, controlled and building, is approximately 177,000 tons deadweight, plus 1,009 gross tons of ocean-going tugs."

We recognize the complexity and difficulty involved in the settlement of the oil question. We do not believe, however, that it is insoluble, with due respect to the independence and honor of both the United States and Mexico. We especially urge that the question of the property rights of the oil men on May 1, 1917, when the Constitution went into effect, be not complicated with the question of the validity of the titles by which the land was held at that time. The registration of titles to oil lands for the purpose of determining their validity, the extent of land owned, and the legitimate owner, appears to be a reasonable measure.

Appendix V.

MANUFACTURING.

Cotton -- In 1910 mills used 34,000,000 kilos. In 1920 estimate was for 90,000 to 100,000 bales of 500 pounds each, so that it is likely that the value and the volume of the output will be greater than ever before.

Wholesale prices of Mexican cotton cloth in Juarez, opposite El Paso -- 10-18 cents, U.S., a [page 26] yard, and 20-25 cents a yard for American cloth in El Paso.

In 1918-19 Mexico exported a considerable quantity of cotton goods. (C. R., Oct. 29, 1920.)

Auto Tires -- Local factory in Mexico City produces about 250 outer tires a day. (C. R., Sept. 20, 1919.)

Iron -- Steel plant at Monterey running at full capacity, employing 6,000 men. (Weekly News Bulletin, March 9, 1921.)

General -- "There were practically no signs of revolution or warfare. The street cars were running, factories, foundries and mines in full operation, and their stores all open and apparently doing a brisk business.

"Mexico appears to have gone back to work. Her factories, mines, smelters, mills, oil industries, railroads, and, in fact, all lines of industry seem to be working full speed. There is an urgent local demand for all manufactured products, and the people engaged in these enterprises appear to be making money." (Mexico Today, American Exchange National Bank Statement, Oct. 20, 1920.)

"As Mexico made a good cotton crop last year, and, owing to their prohibitory laws forbidding the export of cotton from Mexico, their mills are making nearly all the cheaper and medium grades of cotton goods and selling them for less money than they can be produced in the United States." (Chamber of Commerce and Manufacturers' Association, Dallas, Tex.; Report on Mexican Trade Trip, July, 1919.) [page 27] 

Appendix VI.

Steamships -- There was a very decided improvement in the foreign-carrying trade during 1920 from Frontera. This improvement has been mainly due to the availability of more ships in the Gulf trade, especially during the latter part of the year. Vessels carrying freight to Tampico and Vera Cruz from New Orleans would often call at Frontera for bananas for return cargo. Two steamship companies operated irregular sailings in this manner between this port and New Orleans. In December the Gulfport Fruit and Steamship Company established a 10-day direct service between Frontera and Gulfport for the purpose of carrying bananas. In January, 1921, the Snyder Banana Company, of Houston, Tex., inaugurated a service, and this company expects to maintain a 5-day direct schedule between that port and Frontera during the coming year. All four companies are now bringing freight from the United States to this district. Of the 57 vessels (all steamers) clearing for the United States in 1920, 43 were American, 9 were British, and 5 Norwegian. (C. R., March 23, 1921.)

The following lines have regular service to Vera Cruz: Holland-American Line, Gulf Navigation Steamship Corporation, Mexican Fruit and Steamship Corporation, Federal Lines, Union Fruit Steamship Company, Five Continent Steamship Company, Ocean Line, Harrison Lines, Atlantic and Mexican Gulf Steamship Company, Leyland Lines, Munson Steamship Company, Norwegian and Mexican Gulf Line, Beniato Fruit and Steamship Company, Swedish-Mexican Line, Compagnie Generale Transatlantique, Gulf Export and Transport Company, Societa Nazionale Di Navigacione, [page 28] Cie. Maritime Messageries, Cia. Transatlantica de Barcelona, New York and Cuba Mail Steamship Company and Linea de Navegacio del Sureste. (Commerce Reports, March 23, 1921.)

Telephone and Telegraph -- The Director General of National Telegraph Lines in Mexico has recently furnished statistics regarding the telegraph and telephone service of that Republic. In 1918 the national system was extended 83,229 kilometers. There were 528 telegraph offices, 12 telephone offices and 21 wireless radio stations in existence. Receipts for the 5,591,453 messages transmitted were 4,195,845 Mexican pesos ($2,097,924, U.S. currency). Disbursements equal to 3,806,102 Mexican pesos ($1,903,051) were made during the year. (C. R., Feb. 20, 1920.)

A new telegraph line has just been completed and put in operation by the State of Chihuahua, between the city of Jimenez and Allende. (C. R., March 28, 1921.)

Railroads -- The American Railway Association and the Mexican Railways of Mexico made an agreement on the 22nd day of December, 1920, providing for the settlement of claims of injury to or destruction of cars on either side of the border and for arbitration of any differences by a committee of the American Railway Association. The first payment under the agreement was made by the Mexican Railways on December 28, 1920. (Weekly News Bulletin, Jan. 5, 1921.)

Another agreement of January 1, 1921, provides for the interchange of cars with all American and Canadian roads, and freight and passenger cars are interchanged freely without bond. (National Republican, Jan. 8, 1921.)

The Pullman Company is running their cars in Mexico without any indemnity bond. Through [page 29] Pullman cars run daily between San Antonio and the City of Mexico, Houston and the City of Mexico, Houston and Tampico, and Mexico City and Guadalajara.

As a result of lack of rolling stock and especially of locomotives, there is a heavy handicap put on business. The Director General of the National Railways says that if he had 100 more locomotives he could quadruple the freight hauling. Many of the larger industries have bought and now operate their own railway cars by special contract with the Mexican Railroad Administration. Approximately 100 locomotives and 1,000 freight cars are owned by Monterey concerns alone, and the New York Times, on April 14 of this year, stated that the President of the Oliver Locomotive Trading Company, Inc., had bought 65 locomotives for use on Mexican railways. (Weekly News Bulletin, April 6, 1921; Supplement Commerce Reports, April 28, 1919, page 10.)

Appendix VII.

The Mexican national debt is comparatively very small. President de la Huerta, in his message to Congress, estimates the debt as 657,599,112 pesos, about $328,799,556. (Financial and Commercial Chronicle, Oct. 23, 1920, page 1630.)

"The total revenues received during the 10 months from September 1, 1918, to June 30, 1919, were (at normal exchange the Mexican peso is worth $0.498 United States gold); Customs -- Imports, 27,600,000 pesos; exports, 6,450,000 pesos; ports, 1,644,000 pesos; total, 35,694,000 pesos. Stamp Tax -- Petroleum, 13,100,000 pesos; metals, 11,900,000 pesos; ordinary stamp taxes, 11,550,000 pesos; Federal contribution, 27,100,000 pesos; [page 30] other sources, 22,178,000 pesos; total, 85,828,000 pesos; consulates (approximately), 5,000,000 pesos; post offices and telegraphs (approximately), 7,400,000 pesos; nationalized and intervened properties, 730,000 pesos; various receipts, 649,000 pesos; total for 10 months, 135,301,000 pesos.

"The total revenues for the year at the above rate should be, approximately, 162,000,000 pesos. For the first 9 months of this year the receipts were 18,000,000 pesos more than for the corresponding months of the preceding year; the increase in receipts from the petroleum tax was 4,000,000 pesos, and from tax on metals, 3,000,000 pesos; the customs receipts were 1,800,000 pesos less." (Report of President to Congress, Sept. 1, 1919; C. R., Oct. 17, 1919.)

A preliminary report has been issued by the Secretary of Finance, showing estimates of probable revenues of the Federal Government for 1920. It is calculated that revenues from all sources will amount to 167,800,500 pesos. Of this amount 40,000,000 pesos are expected from import duties and 8,000,000 pesos from export duties. These estimates are based on the revenues of 1918 in comparison with figures, as far as obtainable for 1919. The report proposes little variation from the revenue laws already in force, but increased receipts are expected from the general revival of commerce and industry, which has been noted in 1919. (Report of American Consul, Mexico City, Dec. 10, 1919.) [page 31]

Appendix VIII.

Number of Americans who lost their lives in Mexico, from November 20, 1910, to September 30, 1919:

Those deaths occurred during a revolution in which great social forces were striving for the mastery. Economic interests became involved, and one at least, the oil interest, took a part in the struggle by its contributions to an independent chief, Pelaez. (Statistics compiled from Press Release No. 1080 of the National Association for the Protection of American Rights in Mexico, 347 Fifth Avenue, New York; December 14, 1920.) [page 32]

Appendix IX.

[QUESTIONNAIRE] SENT TO THE REPRESENTATIVES OF THE PROTESTANT MISSIONARY BOARDS OPERATING IN MEXICO.

1. Do your representatives suffer any disabilities or persecutions in Mexico? (a) from the Government (b) from [nongovernment] sources -- bandits or the like.

2. Is your work seriously handicapped by any provisions of the Mexican Constitution or laws passed thereunder?

3. Do you approve of Secretary Fall's demands?

4. Do you have any reason to believe that the Fall demands were shaped after conference with representatives of religious bodies?

Replies.

1. So far as I have been able to ascertain our missionaries in Mexico do not suffer any disabilities or persecution in Mexico either from the government or from [nongovernmental] sources. They have been greatly inconvenienced during the revolutionary period, but they never have made any complaint, unless it be one missionary living in Sonora, who reported a short time ago that a heavy tax on his salary was being made by the [page 33] local officials. This, however, is something that the missionaries have been liable to for many years, due to sudden changes in local conditions rather than through any governmental policy. Bandits have not affected our work, nor have we ever lost a building through revolutionary changes or policies.

2. I cannot say that our work has been seriously handicapped by any provisions of the Mexican Constitution or laws passed thereunder. It is true that our missionaries are not now allowed to serve as pastors of Mexican churches. We have never been keenly desirous of this anyhow, our general policy having been in favor of exalting the Mexicans as rapidly as possible to moral and spiritual leadership and of course to the control and support of the Mexican churches.

3. Our Board has never taken direct action on Secretary Fall's "demands." Those of us who have been in Mexico and have studied the situation there since the days of Díaz cannot help believing that Mr. Fall leaves Mexican psychology out of account altogether, or at any rate underestimates its value and power during these days of negotiation. I for one believe that Mr. Fall could have brought about the acceptance by the Mexicans of much of his so-called demands had he not been so eager to hand them down from his superior heights. His spirit may be all right, but his methods are unfortunate.

I don't like the idea that one nation can suggest constitutional changes to another nation. We recognized Mr. Carranza as soon as he set up his government, and Mexico and America were friendly states while Article 27 was on the books. It is true that certain groups in America never wanted to work under Article 27. In this they lacked the wisdom of the British and the Germans. [page 34] At the same time, I don't think that our own government would ever be justified in demanding that the Constitution of Mexico be changed to suit our tastes, I can say this without being at all enthusiastic over the Article.

As for the causes bearing upon the teaching of schools by ministers of the gospel and the preaching of Christianity by Americans and so on, they do not bother us the least bit. Under no considerations should we, the representatives of American churches, allow our missionary interests to be so closely tied up to these political and financial questions that are involved in Secretary Fall's letter.

4. I have never found out that the Fall demands were shaped at the conference with representatives of religious bodies. If any Protestant missionaries or Christian leaders urged those things upon Mr. Fall, then they must have done so in their personal capacity and not as representatives of the Boards or Churches.

Very truly yours,

1. The missionaries of this Board are not to our knowledge suffering greater interference with their work than has been common during the entire period of their residence in Mexico. The traditional hostile attitude of Catholic priests is maintained, but we have little if any cause to complain of the government. [page 35]

2. The administration under the present constitution of Mexico has seemed to be as considerate in its treatment of our missionaries as could be expected. It is no great handicap to us that baptisms are administered by native pastors and that the teaching in primary schools is done by natives since the foreign missionaries are left free to teach in theological schools and schools of higher grade as well as to promote the literature department of our work.

3. Not having seen Secretary Fall's letter, I cannot give an opinion as to his demands.

4. I cannot say whether the Fall demands were shaped after conference with representatives of religious bodies or not. No conference was had with representatives of this Board or any Southern Baptist body so far as my knowledge goes.

Speaking in general terms, I may say that the evangelistic work of this Board is enjoying as great prosperity as at any time in its history. Of course, the period through which Mexico has been passing has given us anxiety and inconvenience, but the signs are that these troubles are passing. My Associate, Dr. Ray, who has just visited Mexico, entertains the opinion that recognition of the present administration by our government would stimulate peace, order and prosperity for our neighboring Republic, and with this recognition given first, other things would in time take care of themselves.

Yours very truly,

I will say that for most of the time since 1919 I have been associated with Mr. Hadley in the administration of our mission work in Mexico, have twice visited Mexico and have spent nearly twenty years in Spanish countries.

Our representatives in Mexico have suffered no unreasonable disabilities and no persecution at all in Mexico either from the government or from revolutionary or bandit groups.

Our work has suffered no serious inconvenience because of the provisions of the Mexican Constitution and laws passed thereunder.

Article 27 of the Mexican Constitution does not nor does any decree or law issued or enacted thereunder, so far as I know, operate to deprive American citizens of their property rights legally acquired. The clause of the Constitution which refer to the teaching of schools by ministers of the gospel apply only to primary schools, and I know of no unfairness in its application. The preaching of Christianity by Americans is not prohibited to my certain knowledge. I visited three different states of Mexico and in every place where I visited the Protestant churches I was invited by the native pastors to preach and I had as great freedom in preaching in Mexico as in the United States.

I have no knowledge of any conference with representatives of religious bodies which gave rise to the Fall demands.

Very sincerely,

First -- That our representatives in Mexico have not been subjected to any persecution either from government sources or from bandits for several years past. They have remained at their posts and carried on their work without hindrance.

Second -- Of course the provisions of the Mexico Constitution in regard to church property are more or less embarrassing to us, but we have confidence that by friendly conference with the authorities all such matters will sooner or later be put into satisfactory shape.

Third -- I am not thoroughly familiar with what you call "Secretary Fall's demands." I do not approve of Secretary Fall's methods of dealing with the Mexican question as indicated in the work of his Investigating Committee while he was Senator, for the reason that they seemed to point directly to forcible intervention in Mexican affairs by our Government. The fact that he disclaimed any purpose of this kind did not satisfy me, because such intervention was the only possible conclusion of the course recommended by him, as it seemed to me. I would very much rather see our Government continue to wait patiently and use friendly methods of correcting things that need to be corrected in Mexico's dealings with our Government and our nationals, and the only real solution of the Mexican problem, in my opinion, would be found in the work of Christian education and Christian social service that is being carried on by the various mission boards in that [page 38] country. At the mission stations where this work has been conducted for as long a period as twenty or twenty-five years you will find no "Mexican problem" left to deal with. On the contrary you will find an intelligent middle-class of people who can read and write and who are living in respectable and sanitary homes and who are not amenable to the appeals of either political or military demagogues. I would like to see great patience exercised towards Mexico while this kind of work is being done, whether by churches or other philanthropic agencies. It would be cheaper financially for the Government to buy out every American investor, giving him full value for his holdings, than it would to wage war on Mexico for the purpose of protecting these holdings in that way. I would state finally that in my own judgment it is the purpose of President Obregón to pursue a conciliatory policy towards this country rather than the stubborn anti-American policy that was pursued by his predecessor.

Yours very cordially,

As a Board we have steadily refused to make any utterances in regard to political conditions which might involve us in any way either with the Mexican Government or the United States Government. We are in the business of working for the uplift of the Mexican people, and in the [page 39] prosecution of our work we have always had the best wishes and aid of the officials in Mexico.

Latin-American laws, as you may know, are provided in order to enforce them when necessary, and we have been assured so long as we conduct our missionary activities for the good of the people of Mexico that we will not be disturbed in the face of our property or the liberty and freedom of our actions. During the revolution we have not suffered greatly. A few of our churches and primary schools have been destroyed, and some of our preachers have lost their lives, but the American missionaries have suffered neither from the Government on one hand, nor the revolutionaries.

Yours truly yours,

I have yours of the 17th in which you submit copies of brief [questionnaires] concerning Mexico, which you have sent to the executives of the evangelical missionary societies at work in that republic, and request that from the point of view of this Committee's office, being, as it is, a sort of clearing house for all these societies, we comment on the matters brought up.

Were we here authorized to speak officially for [page 40] the several boards -- which we are not -- that would be superfluous since you have, properly, applied directly to them. In their replies to your specific questions, however, it is just possible that they may not bring out, as clearly as is to be desired, certain rather large principles which underlie this whole subject. My long and close contact with Latin American missionary agencies emboldens me to lay down a few of these. I am willing to assume full responsibility, both with the societies and with the public, for what I say.

1. Missionary workers are brought into very close touch with the people of the country in which they labor. Better than most foreigners they come to understand the age-old abuses against which these people struggle. They are very tolerant, therefore, of legislation, of even rough and tumble legislation, bearing by chance rather heavily on them, which aims at public betterment. In particular they submit willingly to rough usage at the hands of an anti-clerical regime, since long experience has shown that real disaster for them lies in one quarter only -- the ascendancy of clericalism.

2. Since missionary work can only prosper on the basis of the good will of the people -- in Mexico, of the Mexicans --missionaries, after the manner of Paul, become all things to all men. They do not surrender their own nationality, but they cultivate the grace of sympathy. The Latin mind is peculiarly sensitive to national slights, and so mission workers are scrupulous to avoid any appearance of looking for protection to their home government. No missionary asks that the stars and stripes be waved over him. [page 41]

3. The missionary to Mexico is concerned with the people of Mexico, not with the material products of the country. He is the inveterate foe of anything likely to lead to armed strife between Mexico and the United States, as that would wreck mission work in Mexico and cramp it in every other Latin republic. Of his hostility to armed intervention he makes no concealment and for it he offers no apology. He is willing, moreover, to trust to the laws and courts of the country of his adoption. Mexican laws are the least of his troubles.

I venture to surmise, in advance, that the replies to your queries will be such as to leave the public wondering by what authority Senator Fall in his published "terms of recognition for Mexico" assumes to link together missionaries and oil producers, and to demand "protection" for Christian workers, who will probably thus learn for the first time that they had need of it.

Yours very sincerely,

STATEMENT OF MEXICAN ARCHBISHOPS.

The late war has spread desolation and destruction over large areas of the earth; has shaken our social fabric to its foundation; has left in a maimed, starving, and plague-stricken condition multitudes of our fellow-men; and has filled the world with the lamentations of the bereaved and the suffering. As the common father of mankind and as the custodian of the Christian world, the Sovereign Pontiff has appealed to us all in the name of God and for the sake of humanity, not [page 42] merely to bind up the wounds of our civilization, but, through steadfast advocacy of justice to all peoples, also to point the way to permanent peace and good-will. Even while we in love and charity labor to [fulfill] this duty which Christianity imposes upon us and which the Holy Father so eloquently requires of us, there are other who fan old fears and rekindle old hates. A small, selfish, but very powerful minority still pervert and obscure the interests of the plain people. The rights of the weakest continue to be sacrificed to the interests of the strongest.

In Mexico, anarchy is abetted by a few aliens; and our people are angered by unwarranted foreign interference in their domestic concerns, an indignity which a proud and sovereign race cannot lightly endure. The purpose of these activities is made plain by a press which is filled with the threats and portents of a new war, the work of a small group of heartless or thoughtless men against our own well-beloved people of Mexico.

We, the undersigned bishops of Mexico, sustained in our exile by our faith and trust in God and by love of our country, share the hopes and tribulations of our people. We rejoice in their gladness, and grieve over their sorrows. And in obedience to the command of our blessed Lord and Master, Jesus Christ, in conformity with the behest of His Vicar, our Sovereign Pontiff, and dominated by our ever vigilant solicitude for the safety and well-being of those committed to our care, we are impelled to appeal to the citizens of the United States and to the citizens of the Republic of Mexico to be patient and forbearing the one with the other, lest the amity which just men desire to preserve and to foster should be disrupted by the machinations of the evil forces that are now arrayed against it. We desire that wise [page 43] counsel should displace all thoughts of violence in the consideration of such differences as exist, or as may be created, between our dear land of Mexico and the land of our refuge. Between lands linked in a common destiny by nature and by sentiment, free lands intended by God to help each other in harmony, mutual confidence, and disinterested friendship, in the fulfillment of the high purposes for which He has created them -- peace, the peace of God and the Church, should prevail.

We, as representatives of the Church which has under our leadership and in our persons suffered persecution at the hands of the Mexican Government, appeal in our anguish especially to all who are bearing burdens unfairly placed upon them by the Mexican authorities. Before those who are burdened, we would give testimony of our abiding faith in the essential justice of the Mexican people, and our unalterable trust in the ultimate triumph of all just causes placed before the tribunal of our people. We, homeless shepherds whose folds are wrecked and ruined, and whose flocks are scattered and sorely beset; we who are bound in conscience to abate no effort till the trust be fulfilled that God gave to our care; we urge mutual patience and forbearance, for our trust in the Mexican people is absolute. And proclaiming that trust before men, shall we appeal in vain to the fair-minded [molders] of American opinion that they refrain from thoughts of violence and instruct their public in the ways of charity, and of peace settlement of all difficulties? We appeal especially to those in the United States who in good faith have made our cause their own, reminding them that the temples of God are the hearts of His people and that the mission of His Church is to create peace and good-will among men. The principle on which our Church is founded [page 44] will [ensure] a peace of justice, for the capacity of the Mexican people to respond to the mission of the Church is limited only by the artificial and temporary barriers which restrict our functions. Finally we appeal to the faithful in the United States and in Mexico to join us in our prayers that God may be blessed speedily to remove all occasions of misunderstanding between these two sovereign states so that the American and the Mexican peoples, each preserving its own sovereignty, may dwell together in perfect peace now and forever.

Chicago, April 4, 1919. -- (New York Times.)

March 25, 1921.

Dear Monsignor:

We are very anxious to have your judgment on the situation of the Church in Mexico, particularly in its relation to the Government, under the provisions of the Constitution of 1917. Your residence there for two years and your long negotiations with the governmental authorities must give your opinion in this matter very great weight. Specifically we would appreciate knowing whether [page 45] in your opinion, desirable modifications of the constitutional provisions, relating to the activities of ecclesiastics, would be expedited by political or other pressure from a foreign government.

With assurances of our highest respect, I beg to remain,

Very sincerely yours,

JGM:CBB

My Dear Sir:

Replying to your courteous note of even date soliciting an expression of opinion with regard to armed intervention by the United States in Mexico, I can only repeat what I said in a memorandum to President Wilson in March, 1919; and since in every public utterance I have made either here or in Europe, that any such move would be, in my opinion, nothing short of criminal unless something occurred which could be construed, without any stretching, into a real casus belli as understood in the polity of civilized nations. Those business matters surely; those claims, personal and national; those cases where the rights of conscience or property are invoked, can be and should be arranged by other and much less drastic [page 46] means than this. With regard to religious liberty, I am free to say, after working two years in Mexico on this proposition, that all the bishops are back in their dioceses, and public worship is carried on as freely in Mexico as in any other country today. It is true that there are ugly things in the Constitution of Querétaro, but ex-President Carranza promised me that they should be remedied. He also had legislation introduced to effect this, but unfortunately died before he could carry it through. Provisional President de la Huerta gave me a letter in which all Carranza's promises were confirmed; and my conversations with the Actual President, Álvaro Obregón, all tend in the same direction. I am, therefore, still of the opinion so often expressed that it would be unwise and impolitic to endeavor to fasten down to a treaty or formal written engagement the Government of Mexico, which I believe will, of its own volition, and at first opportunity, make necessary change in the damaging sections of the Constitution. Mexico, I know, is most anxious to remove this blot from her escutcheon as soon as may be, so as to stand for the fullest measure of liberty enjoyed by modern nations. I can only regard another "Scrap of Paper" on these matters as unfortunate and exasperating. It would be no proper evidence of the friendliness which should exist amongst neighbors either, and, as such, could not make for international amity and confidence. We are stronger in the Church without the imposition of ignoble conditions on the country; I cannot help feeling that you are stronger also in the state.

And I have the honor to be, dear Mr. McDonald, very truly yours,

(Signed) A. E. Burke, P.A. [page 47]

Appendix X.