File No. 812.516/153
The French Ambassador to
the Secretary of State
[Translation]
French Embassy,
Washington,
December 9, 1916.
Mr. Secretary of State: Referring to the oral
remarks I have had occasion to make to your excellency in the course of
recent conversations, I have the honor to inform you that my Government
has
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asked me again to call to
your most earnest attention the situation in which the Mexican de facto Government has placed the banks and, in
particular, the National Bank of Mexico.
* * * As you know, I had, by direction of my Government, to go to Shadow
Lawn on October 10 last, to talk over those very grave matters with the
President of the United States in person. President Wilson
unhesitatingly admitted that they would not be acquiesced in.
They had given occasion to my Government to enter a formal protest with
the Minister of Mexico at Paris. As the protest makes a detailed
statement of the nature of the French interests involved and of our view
of the recent Carranzist measures which may be brought to bear on
American as well as on French citizens, it occurred to me that your
excellency might be pleased to peruse that document and I have the honor
to enclose a copy for your information.
Seemingly changing its mind as to the means of obtaining funds, the
Carranzist Government lately applied to the National Bank with
propositions looking to a loan agreement. The application in itself
constituted an implicit recognition of the lack of absolute value in the
Decree of September 15, which could be enforced or infringed at the will
of the de facto dictator. The proposition, in
fact, tended to diminish the cash in hand, which the decree ordered to
be increased.
The situation in which the National Bank was then placed was all the more
awkward as the Mexican authorities evinced an intention to negotiate
with it alone and to acknowledge, through special favors from which
other banks would be excluded, the good will it would evidence; the
other banks would be put under receivers. It also realized that refusal
would expose it to further exactions, all the more as it knows it is
reproached by the de facto Government for not
denying assistance to that which preceded it, which was but very natural
anyway since that other Government had likewise been recognized as a de facto Government by France.
Upon examination of these several points and of the nature of the
guaranties offered by the Carranzist authorities the bank’s committee
answered them that:
1. That the bank could not conclude anything as long as the unwarranted
provisions of the decree of September 15, which must be repealed first,
subsisted;
2. The questions of eventual redemption of its notes in coin and of
collection of its debts in good currency, must before anything else be
settled through a moratorium, giving it legitimate satisfaction;
3. It is not possible for the National Bank to part with the other banks
and particularly with the Bank of London, which represents general
interests for which the first named bank considers itself jointly
responsible and the decree of September 15 must be abrogated for the one
as for the other, without prejudice to a friendly endeavor freely to
bring about a consolidation of the two institutions, as seems to be the
wish of the Mexican Government;
4. The security which is offered and consists of railway stock deposited
in New York is delusive; the rehabilitation of the railways will require
large sums of money indeed and the latest lenders, if any, will demand
and will necessarily be given the supervision of the business; so that
the stock, third in order of preference, that is offered by the
Government, does not represent any value and does not constitute a moral
guaranty any more than a commercial security. The Mexican Government
then should offer other reliable securities and first institute reforms
apt to reassure the banks as to its general solvency;
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5. No arrangement will be of any advantage to the Government, or the
bank, or Mexico so long as the financial question shall not have been
settled as a whole, that is to say in such a way as to insure, in the
near future, a well balanced budget, an improved rate of exchange, and a
sound, untrammeled currency. The contemplated loan is but an expedient
which would drive out of the country a few millions of metal without in
the least improving the present and future conditions.
Lastly: The National Bank Committee has instructed its representative in
Mexico to declare to the Carranza Government that in the undertaking to
carry out necessary reforms in Mexico in accordance with a methodical
national plan it will be given the banks’ fullest cooperation.
In asking me to bring this answer of the National Bank to your
excellency’s knowledge my Government directed me to say to you that it
had met with its full approval. The Government of the Republic regards
as inadmissible the proposition that part of the French interests may be
sacrificed while Mr. Carranza would condescend to spare others as he
might see fit and consider that the repeal of the decree of September 15
stands as a condition antecedent to any agreement.
It stands to reason and I need hardly add that the necessity in which
French interests are placed to take as many precautions as possible for
their safeguard, does not in any way imply a disposition on their part
to oppose the Government of Mr. Carranza, duly recognized by us, who in
so doing followed the example set by the Government of the United
States, as a de facto Government or to take sides
in the internal politics of Mexico. The institutions concerned have no
other desire or indeed interest than the maintenance of order and of any
Government that the country may wish to take unto itself. But the
management of those banks, which many of our fellow citizens have
entrusted with their savings cannot any more be lured with idle promises
or accept empty guaranties than they can tolerate the seizures which
this or that dictatorial and certainly illegal decree would aim to
permit.
The assurance which your excellency was pleased to give me and those I
have received from President Wilson himself are my warrant that the
views of the Governments of the Republic and of the United States
coincide in this respect and that we may rely upon the high authority of
the American Government supporting our own action tending to prevent and
if need be seek reparation for any spoliation.
Be pleased [etc.]
[Inclosure—Translation]
The French Minister of Foreign
Affairs to the Mexican Minister at
Paris
You were pleased to communicate to me, under date of the seventh of
this month, two telegrams you had received from your Government to
the effect that no prejudicial measure had been taken in Mexico
against the banks and that the Government’s action had been confined
to suppressing privileges.
I have the honor, in reply to that communication, to lodge with you
the French Government’s formal protest against the measures decreed
by the Mexican Government in regard to the banks by reason of the
French capital they represent and of the legitimate French interest
which the new regulations greatly affect.
The preamble to the decree of September 15, as also the
communications of which you were pleased to deliver copies to me,
seem to be prompted by the
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idea that the concessions granted to the banks were unconstitutional
and, furthermore, that those institutions did not live up to their
engagements. In addition they have been reproached with being
instrumental in the depreciation of paper money and thereby
comprising the credit of the State.
Those charges rest on no foundation in point of equity, of law or of
fact. So far as the alleged illegal character of the concessions is
concerned, the de facto Government of which
Mr. Venustiano Carranza is the head, seems to lose sight of the fact
that the question is not one of rights it may cancel at will, but of
bilateral instruments carrying mutual rights and obligations on both
sides, and it stands in opposition to the principles of law,
sanctioned by the legislation of all countries that a bilateral
contract cannot be terminated at the will of one of the parties, the
instrument being the law of the parties. It was the faith in the
pledges given by a regularly constituted Mexican Government, in the
name of the Mexican State itself, that brought over large French
capitals wanted to develop the property of Mexico for investment in
that country under the protection of the pledged word of the Mexican
people and the guaranty of stipulations that were freely agreed upon
and regularly recorded. Modifications made in those compacts without
the simultaneous consent of the interests concerned can but be
regarded by the Government of the Republic as an arbitrary act
tending to destroy to the prejudice of its nationals and contrary to
justice, a régime based on unquestionable rights.
No substantiated cause can be seriously invoked in support of such a
denunciation of those conventions, some of them of more than thirty
years standing, which lived intact under the Governments—many and
varied as they were—that have succeeded one another since their
birth. The banks cannot be reproached with a violation of their
charters and, in particular, in the special matter of the ratio
existing between their metallic holdings and circulation, it is well
known that the National Bank holds metallic cash in hand
representing about fifty per cent of its circulation, and the Bank
of London over fifty per cent, which is entirely within the
prescribed limit, even though no account should be taken of later
acts authorizing a wider margin. Besides, your Government itself
acknowledged the condition of the banks to be quite regular when,
under the decree of September 29, 1915, a commission of inspectors
upon a thorough investigation had to pass upon the observance of the
concessions. In its decision the commission declared:
- 1.
- That the National Bank meets the requirements of its
concession.
- 2.
- That it has availed itself of the privileges granted by
its concession in such manner as to stay within the required
conditions of solvency in accordance with the general
principles of banking economics.
- 3.
- That the concession cannot be, and is not declared to be
forfeited.
So positive affirmations make it all the more difficult to understand
what may be the foundation for the measures which give rise to the
present protest of the French Government. For, as regards the
depreciation of paper money everybody knows what are the constant
phenomena that bring its value down, not only in Mexico but in the
countries which would, under similar conditions, undergo the same
hurtful experience. It does not lie in the power of any financial
institution to interfere with the operation of ineluctable economic
laws, and besides even if the banks had had the power it is obvious
that they would never have consented to lead a policy of which they
were to be the first victims and which could only mean enormous
losses to themselves; as a matter of fact, every new fall of a few
points on the quotations of paper money had its immediate effect on
their assets by decreasing their value in amounts soaring into the
millions. The part played by the banks in the matter and the
Minister of Hacienda of Mexico, so acknowledged, was to check as far
as possible the collapse of the rates.
That beneficient part was not unnoticed by public opinion, therefore,
one is somewhat astonished when reading in the telegram of September
28, communicated by the Mexican Legation, that the new measures were
taken “for the protection of the interests of the public.” The
public never gave any signs of distrust, and the rates at which the
notes of the National Bank and of the Bank of London stood, prove
it. In the last two years there was heard of but one attempt at
claiming coin payments of the notes, which attempt was instigated
for a purpose that need not be discussed here, and was doomed to
failure when the three instigators themselves desisted.
The Government of the Republic, is unable to discover the reasons
which impel the de facto Government of which
Mr. Venustiano Carranza is the head, to act with such rigor through
dictatorial decrees without any legislative restraint
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and without leaving a
recourse at present open to the interests thus wronged to indicate
their rights in judicial hearing before an independent jurisdiction.
It cannot suppose that the First Chief had it in mind, when hitting
those institutions to attempt to carry out the democratic program of
his Government by destroying alleged financial oligarchies said to
be obstacles to the aspirations of his country. Such an idea would
be wholly at variance with the facts, for the French interests
involved in those institutions have, like the institutions
themselves, strictly kept aloof from any political activity or
anything that could in the least be an incorrect attitude toward the
established authorities. On the other hand the considerable French
interests which France proposes to protect are represented in this
case by popular savings; the French capital invested in Mexico was
for the most part gotten together by the aggregation of small
holders who have not parted with their stock, clerks, domestic
servants, city and farm laborers, those lowly classes whose hard
earned savings were contributed have placed their trust in Mexico
and have a right to count upon the word of the Mexican Government
which offered its guaranty therefor.
The Government of the French republic cannot bring itself to believe
that the de facto Government of which Mr.
Venustiano Carranza is the head will not modify the measures it has
taken and adhere to Mexico’s loyal observance of its
undertakings.
The French Government has instructed its Minister to Mexico to
formulate these express reservations to the de
facto Government of which Mr. Venustiano Carranza is the
head, and has the honor so to inform you in reply to your
communication of the 7th of this month.
It firmly hopes that your Government will acknowledge that they are
well founded and in any event adhere to its resolution to seek at
the proper time reparation for the injuries suffered by its
nationals.
