Evening star. [volume], April 03, 1938, Page A-5, Image 5

About Evening star. [volume] (Washington, D.C.) 1854-1972

Image provided by: Library of Congress, Washington, DC

                
Smith and Rickett Return
to New York, but Won’t
Divulge Intentions.
Er thr Associmed Press.
NEW YORK, April 2.—The two men
who may hold the key to the imme
diate future of Mexico's vast oil in
dustry came back to New York today,
smiling and amiable as they greeted
friends but firm in their refusal to
discuss their reported deal with Presi
dent Lazaro Cardenas to sell the oil of
confiscated British and American in
terests.
Stout Francis W. Rickett, British
promoter who negotiated an oil conces
sion in Ethiopia before the Italian
conquest, and Bernard E. Smith,
wealthy New York broker, stepped
from a plane in Newark Airport to
face a barrage of questions.
Mr. Smith, first to alight, shook
cfT all questions with a ‘ nothing to
say."
"Have you negotiated the deal in
principle?” "How do you Intend sell
ing the oil with a contemplated em
bargo against it?” "What are the
names of your financial backers?”
To all, Mr. Smith answered, “Noth
ing to say.”
Mr. Rickett followed him. a heavy
set. tanned, smiling man wearing a
dark gray suit with a chalk stripe, a
dark blue shirt.
a He turned as he reached the car.
Which Mr. Smith had already entered.
"You've got me cornered.” he said
with a smile. “Well, here's a state
ment,"
Listeners waited. Said Mr. Pickett:
‘I've read what we're supposed to
have done. Well, we’ll just let it go
et that. ’
He stepped into the car and was
whisked away.
Mr. Smith and Mr. Rickett. were re
ported to have talked to President
Cardenas Thursday at the presidential
palace in Mexico City, and were re
ported to have offered to solve Mexico's
urgent oil problem by selling the oil
for the government. |
Named in Mexican Oil Deal
Francis TV. Rickett (right), British mystery
man, as he arrived at the Newark Airport yes
terday jrom Mexico City, xchere he was reported
to have made a huge oil deal with President
Cardenas.
Bernard E. Smith (right), wealthy New
Yorker, as he arrived from Mexico. He and
Rickett are said to have arranged with Car
denas to put 25.000.000 barrels of Mexican oil
on the market. —Copyright, A. P. Wirephotos.
Mexican Oil World Factor
In Economics and Politics
Dispute Is Far More Than Question of
Hoiv Much Shall Be Paid Companies
for Seizure.
By R. H. HIPPELHELSER.
Associated Press Staff Writer.
Mexico is a merchant of oil now, in
business for itself, seeking markets.
The eyes of the oil-needing powers
of the world are on the vast storage
tanks that line both shores of the wide
Panuco River, from its mouth to far
tip beyond the port of Tampico.
Little more than a week ago, this
oil was controlled by British. Nether
lands and American companies.
Today it is a free commodity.
And as it flows through the pipe
lines from the oil fields to the sea it
is an influencing factor in the eco
nomic and political relationships not
only of North and South America but
of the world.
Consequently, the Mexican oil con
troversy is far more than a question
of how much shall be paid to the com
panies for the expropriation of their
property; it even dominates the ‘'pro
tection of the billion-dollar American
investment in Mexico.
Dominated by Foreigners.
First of all. however, what is the
background of this controversy?
For many years foreign interests
dominated oil, mining, railroads, elec
tric power, manufacturing and even
great areas of agricultural land in
Mexico.
But since the inauguration of
Lazaro Cardenas as President on No
vember 30. 1934, the position of for
eign capital in Mexico has been in
creasingly endangered by a social
economic program threefold in scope;
The gradual extension of state so
cialism in the industrial life of the
country, widespread seizure of lands, j
which were turned over to the peons,
and an ever-increasing program of ;
labor legislation.
Last June the government took over
the railroads. It moved more slowly
against the mining industry, but the
oil companies soon found themselves
in the middle of a pincers movement.
Increasing regulation, official inter
vention and competition fared them
on the one side; on the other there
was the threat to profits by the de
mands of the labor unions, reinforced
by government support.
Finally, the oil companies said they
could go no further in meeting these
demands; they refused to comply writh
an order of the Supreme Court, and
on March 18 President Cardenas
signed a decree taking over the oil
companies in the name of the gov
ernment.
Indemnification Promised.
Indemnification was promised, just
Bs in the case of the railroads.
The friendliest of relationships has
existed between the United States
Government and the administration
of Lazaro Cardenas. The American
State Department, however, filed a
protest against the seizure, asking a
“fair and equitable” settlement.
Furthermore, the United States Gov
ernment suspended its purchase of
Mexican silver. Not only did Mex
ico—in keeping with this country's
policy of the "good neighbor”—have
fullest advantage of the United States’
silver purchase program, selling the
United States Treasury around 5.000,
000 ounces a month at the supported
price of 45 cents an ounce, but it is
also understood thaB the Treasury,
last December, agreed to give the Bank
of Mexico financial advice during the
crisis which beset it first some
months ago.
The change in silver policy was
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. regarded in Mexico City as an eco
I nomic sanction, imposed as punish
i ment for the expropriation. There
was speculation, also, as to whether
I the United States Government would
| take further retaliatory measures
along any one of several lines:
1. Increase the tariff on Mexican
goods. Publicly, the American Gov
ernment could base such action on
| the tariff increase put into effect by
j Mexico some months aeo.
2. It could adopt the same attitude
it has shown toward Germany,
amounting to a Virtual "black list”
1 on trade.
3. It could ‘‘discourage” the Amer
ican tourist from visiting Mexico. In
the past few years. Mexico has reaped
around $40,000,000 annually from
American tourists.
4. If the American Government de
sired to go to the extreme, it could
lift the arms embargo. The shipment
of arms to any one but the govern
ment in Mexico was prohibited by this
Government in the Obregon adminis
tration. Without access to American
munitions, any opposition In Mexico
has little chance of staging a rev
olution.
N'ot to Pursue Retaliations.
These things this Government could
do. But from indications in official
Washington, this Government has no
intention of pursuing further retali
ation. In the business and financial
community of New York, as well, there i
is found a widespread opinion that it I
would be to the political disadvantage
of this country—in the protection of
its dominating position in the Western j
World—to follow such a course.
In the first place, Mexico is in a
state of dire economic need. Washing- |
ton officials and well-informed busi
ness and financial men in New York
have been aware of this for some time.
A few years ago, Mexican fiscal af
fairs were in good shape. The budget
was in a state of balance, exports were
well over imports, and the treasury I
had a large surplus. The tourist trade
had poured new-found millions into [
Mexican coffers; and the world-wide
boom in commodity prices had a
highly beneficial effect on the coun- j
try's exporters.
Reserves in the Bank of Mexico— :
the country's central bank, corre- i
sponding to the Federal Reserve Bank
—were over 100 per cent coverage of
the currency.
The Cardenas program of land re- ’
form, loans for the establishment of
the E.ildo (the communal farm vil
lage!, the heavy expense in the devel- |
opment of the cotton-growing experi
ment in Laguna, tremendous advances |
by the state for equipment and seeds—
all of these things, coupled with the
cost of social reform in industry,
proved too heavy a drain on the
treasury.
Today, according to the most reli- \
able financial sources, currency cov- j
erage of the Bank of Mexico is down '
to around 30 per rent; the government
has ovedrawn on the Bank of Mexico: i
and it, in turn, has restricted redis
counting operations with the commer
cial banks, resulting in a monetary
stringency.
Nevertheless, the country is proceed
ing with arrangements to make at
least a part payment on the property ;
it has expropriated, and also upon its ;
■ foreign debt in bonds which have been
in default for years.
The Mexican external bonded debt :
i is around So00.000.000. of which only j.
1 $60,000,000 is held in this country, the !
bulk being held in Europe, principally |
England. This total includes the rail
road bonds. The total Mexican lor- ,
eign debt, with interest unpaid since ,
1928. approaches $1,000,000,000. Ne
gotiations have made progress along i
the line of transferring the principal
of this debt, with a portion, but not
all, of the accumulated interest—into
an internal Mexican peso loan, giving
the bondholders peso for dollar.
This would mean scaling down the
debt by around 75 per cent.
The coming session cf the Mexican
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Congress will consider the Cardenas
proposal for an immediate 100.000,000
peso loan, with which to start paying
back the oil companies. In the end,
financial sources close to the Mexican
situation believed the companies would
be paid back by a "cut” from the
government's profit in operating the
oil wells, a certain proportion being
set aside annually. The companies
have placed their investment at around
$400,000,000. but these sources believed
that, in the end, the sum would be
trimmed down by agreement to at least
half the amount.
The American Government gave its
blessing to such a scaling-down proc
ess; Cardenas promised Mexico would
honor "its obligations of today and its
obligations of yesterday"; and it be
came clear that the friendship of the
two administrations was less shaken
by the expropriation of the oil com
panies' property as first appeared.
OIL CONCERNS MAP
Appeal to Supreme Court of
Mexico Embraces 22
Charges.
By the Associated :*ress.
MEXICO CITY, April 2—An ap
peal to the supreme court embracing
22 charges of constitutional violation
was drawn up today by foreign oil
company executives seeking ^.o regain
their $400,000,000 properties expropri
ated by the government.
Officials of the 17 American and
British companies taken over by
President Lazaro Cardenas said they
would ask the supreme court Mon
day to declare his March 19 decree
unconstitutional on grounds which
included:
That article 27 of Mexico's consti
tution authorizes expropriation of land
and water only; whereas they lost
their tools, plants and equipment.
That the companies were deprived
of their properties without due legal
procedure.
That no indemnification was paid at
the time of the expropriation .
That the properties expropriated
were not designated beforehand In
accordance with law.
That a government monopoly of pe
troleum was set up in violation of
article 27 of the constitution.
In addition to the supreme court
appeal, the officials said they would
petition the department of national
economy for administrative revocation
of the Cardenas decree.
Meanwhile, the peso improved, in
view of the United States Govern
ment’s recognition of Mexico's right
to expropriate foreigji-owned property
and its willingness to the see the com
panies’ claims scaled down.
The peso was quoted in unofficial
trading at 4.50 to 4.60 to the dollar,
an improvement of 10 to 15 points
over yesterday’s quotations. Transac
tions have been carried on by pri
vate banks since foreign exchange
dealings were suspended at the time
of the expropriation.
WYOMINGITES STAGE
ANNUAL SPRING PARTY
300 Members of Society Take
Part in Gr1r Festivity.
Arnold Toastmaster.
Cowboys ate roast rump of elk and
modishly gowned women danced the
“ranch rhumba” last night in the
Raleigh Hotel, where 300 members of
the Society of Wyomingites in Wash
ington held their annual spring party
in the form of an “April fool’s rodeo.”
Thurman Arnold, Assistant Attorney
General and one-time member of the
Wyoming Legislature, was toastmaster.
Brief talks were made by Mrs. Nellie
Tayloe Ross, former Wyoming Gover
nor and now director of the mint;
Senators O'Mahoney and Schwartz
and Representative Greever, Wyom
ing Democrats, and Prank Mondell,
former Wyoming- Representative and
now a Washington attorney.
Miss Helen McCarthy, “queen” of
Cheyenne's annual frontier days
rodeo, was introduced as a special
guest.
DR. M’NALLY HONORED
Observatory Director Is Elected
by Amateur Group.
The Rev. Dr. Paul A. McNally,
S. J„ director of the Georgetown
University Observatory, last night
was elected an honorary member of
the National Capital Amateur Astron
omers Association.
Earlier in the evening he lectured
the group on the Naval and National
Geographic Society expedition t« Can
ton Island, where the eclipse was
photographed. His talk was illus
trated with slides.
Stephen Nagy, president of the as
tronomers group, presided at the
meeting, held in the National Museum
Building.
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Another Organ Recital
Tomorrow, Monday Afternoon, 4 to 5 O’Clock
For the benefit of those who were unable to attend the
Annual Spring Exhibition on Wednesday, Thursday and Friday
evenings you are cordially invited to review the display, which
remains intact. Tomorrow, from 4 to 5, Mr. Sidney Willoughby
will give another of his enjoyable recitals on the Hammond'
Organ which was graciously loaned for our Spring Exhibition
by E. F. Droop & Sons.
W. &J. Sloane 711 Twelfth St.
Tune in WMAL today at 1:30 for another "Visit With the Famous"
SUSPECT IS HELD
IN MEXICO BLAST
Man Described as Friend of
Former Governor Is
Questioned.
By the Associated Press.
JUAREZ, Chihuahua, Mexico, April
2.—Chihuahua state authorities, prob
ing yesterday's bomb assassination of
Mayor Jose Borunda of Juarez, tonight
held in custody a man described as a
close friend of former Gov. Rodrigo M.
Quevedo, political antagonist of pres
ent Gov. G. L. Talamantes.
Gen. Quevedo is at liberty under
10,000 pesos bond for future court
action in connection with the fatal
shooting three weeks ago of Federal
Senator Angel Posada.
In a long-distance telephone con
versation with the El Paso Herald
Past, Ignacio J. Lomelo, Chihuahua
attorney general, said he was holding
in custody Efren Escobar, who was
characterized as a friend of Gen.
Quevedo.
The attorney general said investi
gators had arrested Nicolas Chavez,
60, as the man who took a paekage
addressed to the mayor to an express
office in Chihuahua City Thursday.
He quoted Chavez as testifying he
mailed the package at the request of
his friend Escobar. Chavez, however.
said he did not know the contents
of the package.
Mayor Borunda was mangled by the
explosion of a 7-pound nitroglycerin
bomb delivered to his office. The blast
also killed Domingo Barraza, City Hall
doorman. The office was wrecked by
the blast.
Federal troops from the Juarez gar
rison Immediately mounted guard
around the City Hail, the jail and the
adjacent plaza of the city market place.
The gay night life of Juarez. Inter
national border hot spot for tourists,
was restrained arid tense
Wheat Imports Permitted.
South Africa has authorized the
importation of wheat and flour to
avert soaring bread prices.
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More than 2,225 local communltiea
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