The Project Gutenberg eBook of Trading with Mexico
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Title: Trading with Mexico
Author: Wallace Thompson
Release date: February 26, 2025 [eBook #75469]
Language: English
Original publication: New York: Dodd, Mead and Company, 1921
Credits: The Online Distributed Proofreading Team at https://www.pgdp.net (This file was produced from images generously made available by The Internet Archive)
*** START OF THE PROJECT GUTENBERG EBOOK TRADING WITH MEXICO ***
TRADING WITH
MEXICO
BY
WALLACE THOMPSON
AUTHOR OF “THE PEOPLE OF MEXICO”
[Illustration]
NEW YORK
DODD, MEAD AND COMPANY
1921
COPYRIGHT 1921
BY DODD, MEAD AND COMPANY, INC.
PRINTED IN THE U. S. A. BY
The Quinn & Boden Company
BOOK MANUFACTURERS
RAHWAY NEW JERSEY
TO
ALBERT BACON FALL
A Statesman Whose Insight and Whose
Knowledge of Mexico Have Long
Sustained the Faith of Those
Who Love Her Best.
PREFACE
The book whose pages follow is the result of a conviction, firm-rooted
in observation and experience, that the American business man prefers
to judge for himself. He wishes the facts, and beyond all the
fundamental facts, and when he has them his judgment is sure, quick and
final. It is to men who think in this way that this book is addressed.
It is the story, told as concisely as the facts permit, of conditions
as they truly exist in the great land which, like a cornucopia,
stretches to the south of us. It is written for the business man of the
United States, definitely, with such limitations as exist for such a
book--its value to the European may be the greater because it does not
seek to straddle the national issue.
I have written other books on Mexico. One has seen the light of
publication before this volume was written.[1] I have sought, in
these other volumes, one upon the people of Mexico and one upon the
psychology which governs their actions in social and in business life,
to lay a solid ground for the understanding of the country and its
people. In the book which is offered here I give, freely, openly,
without apology, the facts of a commercial situation which to me is
the most astounding condition in the business world to-day. I picture,
with the simplicity of truth, a country of vast natural mineral
resources, but virtually no agricultural wealth, a country with almost
no consuming population, a country of radical governments which have
sought, frankly, to destroy capital and the machinery of Mexico’s own
wealth. I have told but little of the famous resources of Mexico--those
are described elaborately in many works. I have told little of the
labor of Mexico, for this is yet to be harnessed. I have described none
of the great industrial needs of Mexico, because those are obvious to
all who run.
I have sought, rather, to set down those phases of Mexican life to-day
which are the background of Mexican business. I have dared--what no
man with less faith in the American business man would dare to do--to
set forth honestly the truth about Mexicans of to-day, the secrets of
Mexican government, the facts of Mexican “bolshevism,” the horrors
of Mexico’s degeneration under the rule of her predatory _caciques_.
These to me are the fundamentals of Mexican trade, just as they are the
fundamentals of Mexican politics and of the life of the Mexican people
to-day. I have sought to set them forth in their relation to the grave
issues of world trade, to set them in their relationship with the ways
of men in business and with the ways of business in its relationship
to human life.
I am a friend of Mexico. Few who have written of her life have been
more deeply interested in her welfare. I should like to lay here the
foundations for a solution of the Mexican business problem by setting
forth the unhappy picture, ignoring no detail, seeking no self-deceit,
as is too often the practice of those who write on Mexico. I believe
that more will be gained, more business of a solid sort won, by those
who realize and recognize the truth of conditions in Mexico, than by
those who deliberately close their eyes to those conditions.
Let us have the truth, then! Let us face the Mexican trade problem
as it is, with its vast potentialities balanced, as they actually
are, by the sinister elements of ignorance, bitter poverty and racial
conservatism. Let us see the problem while we see the golden goal. For
this problem is no mere issue of beating the British or the Germans to
a thriving market. It is an issue of bringing into being the purchasing
power of a populous nation, which is bowed down to-day by the horrors
of revolution, of unthinking radicalism, of national degeneracy. He
who shall solve that problem will win the trade of Mexico when she
has trade. That is all which is to be known, and the only issue to be
faced.
This book is not a radical document. It does not seek to explain the
problems of to-day in terms of to-morrow. The author finds in the
radical movements of the present the leaven of the future--little else.
He sees in the upheavals of our day a searching for some essential
truth which will be a clarifying factor in this time of chaos and
distrust. He does not see in them the final solution of any of the
difficulties which hatched them out into a too ready world.
Nor is this book reactionary. The author believes that the day of
Diaz is long past in Mexico, that the day of the dreamer of utopian
visions--Madero--is past in Mexico. He seeks in the present and in
the future the sane, firm grasp of actualities which to the watcher
on the tower is the only hope of true progress. He sees in the orgies
of Carranza and his immediate successors not the upsurgence of mighty
ideals, but of personal ambitions and crass disregard of the bases of
all human progress. He seeks, in the whirling chaos of the present, a
firm footing. He seeks to give the direction of such understanding as
he may have to those who think with him. He believes that if he gives
such a direction to them, it will enable them to go forward to the
winning of some of the vast profits which await them in the Mexican
market.
One word more I would add. There rules to-day in Washington
a government one of whose mighty maxims is the protection and
encouragement of those Americans who to-day go forth, as their fathers
went forth before them, to carve their way in the wilderness. The
Washington government knows, as we all know, that the only wilderness
left to us is the open field of the vast undeveloped lands to the
South. I believe that Washington plans definitely to support the
American pioneer to the fullest in his new conquest of the New World.
That his weapons of conquest are dollars and brains and energy matter
not, and that he battles in lands over which the flag shall never fly
matters less. The fact that he is an American, that he is honest, that
he is patriotic and sincere--these matter much in Washington.
This book, then, goes upon its way, its record clear and envisioned
in deep frankness and in deep faith in the American business man and
in the American government of to-day. I offer it to those who must go
forth, to those who must perforce place the funds at the disposal of
those who go, and to those who, in the councils of our government, are
quietly, without ostentation or political apology, placing firm hands
to the backs of those who dare and who give.
WALLACE THOMPSON.
NEW YORK,
August 5, 1921.
FOOTNOTES:
[1] _The People of Mexico._ Harper & Bros., New York, 1921. The
companion book, _The Mexican Mind_, is in preparation for publication
as this present volume goes to press.
CONTENTS
CHAPTER PAGE
I TRADING WITH MEXICO 1
II NATURE AND THE MEXICAN MARKET 16
III THE PEOPLE WHO BUY 48
IV THE CREDIT OF MEXICO AND OF THE MEXICANS 69
V OUR BILL AGAINST REVOLUTIONARY MEXICO 96
VI MEXICO AND HER “BOLSHEVISM” 128
VII THE RAPE OF YUCATAN 159
VIII THE ROMANCE OF MEXICAN OIL 196
IX THE GOLDEN GEESE 240
X THE HIGHWAY TO SOLUTION 258
TRADING WITH MEXICO
CHAPTER I
TRADING WITH MEXICO
Three fundamentals determine and will determine American participation
in Mexican trade. Excursions, however wet, will not change those
fundamentals. Enthusiasm, however sincere, will not affect them. Above
all, promises should not be taken into consideration in our cool
judgment of them. American business men have never been noted for
sentimentalism in their own country; they should not be sentimental in
other countries. Let us take up the situation and look at it with the
sane judgment we would apply to the question of selling, say, a new
type of water meter in New York City.
The three fundamentals of the Mexican trade question are not unique.
They are, first, the Market; second, the Credit, and third, the
Government and Laws under which trade must be carried on. Truly not
original, and the astonishing thing about American business men who
consider Mexico is that they apparently lose sight of them, and most of
all lose sight of the emphasis which must be given to each.
First, the Mexican market. Three phases again: the people, the
industries and the need. There are 15,000,000 people in Mexico.
Of these, 6,000,000 are Indians, and Indians that are comparable,
literally, to our own reservation Indians in the United States, in
the things they buy and the things they make. There are 8,000,000
mixed-bloods, a cross of Indian and Spanish, but of these 8,000,000
fully 6,000,000 are almost as Indian as their full-blood cousins. In
other words, 12,000,000 out of 15,000,000 take and need nothing from
the outside world excepting food, at those times, like the present,
when they do not produce enough for their own needs. More than that,
the money or goods which would pay for imported food for the 12,000,000
are created by the remaining 3,000,000--in other words, the actual
market in Mexico is not 15,000,000 people but 3,000,000. The rest wear
no shoes--only native tanned sandals. They wear no civilized clothes,
only white cotton woven at home. They wear only home-made hats, the raw
material the fiber of palm trees which grow wild. They have no need for
culture, for houses, for travel. Remember, then, a buying population of
3,000,000.
The industries are limited almost exclusively to the extraction of
the riches of the soil by mining and through deep oil wells. In all
Mexico, with its vast sweep of territory, virtually nothing is produced
for export excepting those riches which come from Mother Earth, and
those overwhelmingly under the enterprising management of the foreign
companies and individuals who alone have ever sought to develop them.
Only one industry in Mexico puts human hands and human brains to the
wheel of progress and creates wealth--that is the industry of growing
sisal hemp in Yucatan. Sisal hemp is indispensable for the making of
binder twine for the world’s wheat crop, and is the basis of what was
once a great national and international industry. Yet to-day even
that commodity has been cut in production almost to the point of
destruction, by the machinations of Mexican government and graft, and
Yucatan is not to-day the great purchasing center that it once was.
Moreover, Yucatan is far from the Mexican mainland, a principality, a
country of its own, and its riches have never been a true part of the
resources of Mexico, for it buys and sells direct with the outside
world.
Gold is the common medium of circulation in Mexico to-day. There is
not a peso of Mexican paper currency in use. All is gold, or foreign
bills, with low-grade silver and copper as subsidiary coins. The use
of gold is reassuring to the business man. It looks like prosperity
and it does assure a firm rate of exchange. But the gold in Mexico
does not mean these things. Its great significance is the absence of
credit. Gold circulates because no man trusts the government, and
every piece of gold that passes through your hands in Mexico tells you
that Mexico is far from being on a stable financial basis, either as a
government or as a business community. Gold is of value, really, only
because it makes credit possible. When you must ship boxes of gold
into distant states at an appalling rate of insurance against bandits
and highwaymen, it is not prosperity, but rather the lack of it. When
gold is in circulation, and there are no bills, the available money
of the country is limited, literally, to the total of the gold and to
not one cent more. When there is paper in circulation it means that
the gold supply has been increased many fold because the credit of the
government has been added to the gold to supplement the supply of money
to be used in trade.
In Mexico there is not only no paper money, but there is practically no
commercial paper. The drafts of great foreign companies travel about
the land for weeks and months before they are cashed and when they
finally reach the bank on which they are drawn, the backs are covered
with endorsements, and on some an extra sheet of paper has been pasted
to carry more signatures. And that is not good business, and should not
be reassuring to the prospective trader.
In Mexico to-day no one trusts the government, and as a result no one
trusts his neighbor. The business men of Mexico who are demanding
long-term credits abroad will not trust their oldest customers, and
cannot themselves get credit in their own country. Recently, when
the Mexican government wanted credit on a large supply of railway
equipment, it was told that if one young American, engaged in running
private trains at heavy cost over the Mexican railway systems, would
guarantee the bills, the Mexican government could have what it
needed. Otherwise, cash with order. The Mexican government is trying
to get railway equipment, and is making promising announcements.
But it is getting very little, and for what it is getting it pays
almost entirely in cash, or, strangely enough in this age, barters
commodities or prepaid freight tickets for it! These are facts, and
extremely significant facts. The railway equipment men want to know
how the government is going to pay--and that is what all Americans who
contemplate trade with Mexico should want to know.
But the need of Mexico, the power we have to help her rehabilitate
herself! Ah, that is a strong bid, even with what we have called the
unsentimental American business man. He wants to give her a lift now,
when she needs it, and then he will not be forgotten when the big
splitting up of profits comes. Perhaps this is true. Let us look at
it. For some years now we have been following the very laudable and
beautiful system of going more than half way with Mexico. We are still
urged to follow this excellent method. The only trouble is that the
“more than half way” is getting longer and longer, and Mexico is asking
more and more and giving less and less. The kindly souls who have
sought to get into Mexico with their surplus stocks are not gaining
anything, except curses and distrust. So far, save for the promises
which have always been forthcoming, there is nothing coming out of
Mexico to help the trade we are hearing about.
Most of the talk about Mexican trade for American manufacturers was
born, moreover, of our own need to get rid of accumulated goods.
Beginning late in 1919, there was considerable inflow of these cheap
goods into Mexico on good terms. Those who were fortunate enough to
unload talked of it, and the gossip went about that Mexico was a
fine place to sell off extra stocks. But after a year, the unloading
system began to glut the Mexican market, and to-day, when the same
manufacturers want to sell again, they find that Mexico will
take--only goods at sacrifice prices. They went half way and more, did
our manufacturers, and Mexico did not “come back.” Instead she sat
tight where we came to her, and insisted on our coming a little further
with concessions to her needs and wants. The result is that to-day
there is nothing like the demand for American goods that there was when
we first did the unloading which we thought would whet the Mexican
appetite. Mexico is like the customer of a “fire sale” store--she will
buy only the most obvious bargains. It is cash trade for a section of
a town where there used to be credit, and where there is no credit
to-day. But the customer is again demanding credit--and cash-trade
bargains at the same time.
This question of credit is of necessity complicated. But perhaps the
answer as far as the American business man is concerned is contained
in the fact that while the Mexican merchant demands credit he himself
does not give credit--no country was ever on so thorough a cash basis
as Mexico is to-day. The merchant who is asking for credit is carrying
on his business from hand to mouth; he has no accounts on his books to
guarantee the goods for which he is promising to pay. He asks credit
on his character standing and on the possibilities of his market--he
offers literally nothing else. Personally, many Mexicans and many
foreigners in Mexico are reliable and honest men, but no sane business
man would take in the United States risks similar to those demanded
by his prospective customers in Mexico. And the possibilities of
the market--those are as yet thin air and enthusiastic hope, which
gain strength only from our national need to get a foreign outlet to
keep our plants going. Let the American manufacturer weigh these two
considerations with the additional realization that there is no reserve
credit in the background.
Reserve credit, such as bills payable, sound real estate values and
prospects of peace and good business years ahead, are comparable to
the unseen sources of energy in the human body, on which that body
lives and thrives during lean periods. Mexico’s lean period has now
lasted for eleven long years, and in that period the country has been
living literally on its reserves alone. Again and again one hears the
expression, “Mexico is living on her fat,” and the continued marvel
is that she has lived so long and survived such lengthened calamities
through so many ghastly years of destruction. As this is written, there
has been some appearance of regeneration, a noisily announced period
of “reconstruction.” But as yet this is only an appearance. Actually
while the wheels of business and life are running more smoothly for the
moment, this is obviously a surface condition--deep down under the
surface of Mexican life the wasted tissue remains. Mexico is not yet
filling the interstices of her flesh with that reserve strength which
is business credit and business promise.
But why not help in the rebuilding, and thus take a risk which will
probably bring great gain in the years of progress to come?
The answer to this question must be based on a thorough understanding
of the third of our three great issues--Mexican Government and Law as
applied to business. The Mexican revolutions which began in 1910 had
for their announced object, “Mexico for the Mexicans.” The idea was to
bring the foreigner under control of Mexican law and government. This
was eminently just--if it were true, as assumed, that under the Diaz
régime the foreigners had been above the Mexican law. The facts were
largely otherwise, however, despite some glaring abuses. In the working
out of the idea of “Mexico for the Mexicans,” the revised as well as
the entirely new legislation and procedure went far beyond the normal
reaction against the alleged irregularities of the Diaz time.
In the new “Constitution of 1917,” which is literally the most radical
written constitution of any country in the world to-day, the chief, if
not the only object was to make difficult the operation of foreigners
in any line of business in the country. The laws against their holding
land are drastic and final in their import; no foreigner may own
property within sixty miles of the border or within thirty miles of the
sea; foreigners may not control a Mexican corporation formed for the
purpose of holding such land unless they waive their citizenship rights
with respect to such companies; great estates are prohibited, so that
true agricultural industry is made virtually impossible; foreign plans
for irrigation projects--the one hope of the Mexican farmer--are nipped
and killed; most serious of all, such lands are virtually confiscated
through nationalization projects which have already been applied to
many great properties, some of them of foreigners, and have been kept
from affecting others only by active diplomatic protest.
But, the casual observer of things Mexican asks, how is it that
business still continues? How is it that the oil companies to whom,
we are told, these nationalization laws especially apply, how is it
that the oil companies are still doing business, are still drilling
wells and taking out oil? Does this not mean that these laws are merely
provisions against a revival of the abuses of the old days? These are
the questions that occur, as the Mexicans planned them to occur, to the
outside observer.
The Mexicans assure us that this is truly the case, but the effect of
the laws is very different. Their effect is to place all business,
Mexican and American, foreign oil wells and native merchants alike, in
the status of receiving the _privilege_ of doing business, in place
of the _right_ of doing business. In effect they make every foreigner
in Mexico, from the missionaries who conduct services contrary to the
law of the land which prohibits foreigners from officiating as priests
before their own altars to the oil men who dig wells under permits
wheedled out of a grasping government department, law-breakers or
receivers of special and “pernicious” privilege. To-day no business
man can defend his rights before the courts of Mexico, for all rights,
even the common rights of corporate business, are in some way or
another contradictory to the laws of the land. They receive privilege,
and privilege in great and generous measure--if they are friendly to
the ruling group or their satellites. They receive privilege by the
grace of government, not rights by the power of government. Government
theoretically exists for the protection of the weak, but government in
Mexico exists actually for the exploitation of the strong by officials
and for the suppression of the weak if the strong want and can pay for
such suppression.
Strangely enough, the strong in Mexico are not altogether contented
with this condition. Somehow business, with its awakening consciousness
to its helplessness, is finding the situation irksome. The greatest
single industry in Mexico to-day is oil, and oil pays about $50,000,000
a year in various taxes to the Mexican government--and for what? Almost
all of it for the privilege of doing business, and the result is that
oil is at the mercy, to-day, of government caprice and the caprice of
Mexican officials. The laws of the present era of Mexico are enacted
literally for the purpose of having a “club” of control over all forms
of business activity, laws to be enforced when it is convenient, or to
be “forgotten” when that is desirable. The oil companies spend time
and vast effort to keep their protests to the Washington and Mexican
governments in good order--so that the price of their privileges may be
kept low. The legitimate portion of their taxes is only about forty per
cent of the total sum they pay, but it is probably literally true that
they would pay all they now pay and more if they could dispense with
the rule of privilege and trade it for decent human rights to do decent
business in a decently governed country.
In this, these companies are fighting the fight of the individual
business man as well as the fight of their own stockholders. It may all
be selfish, and doubtless is, but by a strange turn of affairs, the
laws of Mexico have worked out to the creation of salable privilege
instead of defensible rights, and this has thrown all business into
the same group. The business problem of Mexico is literally the
achievement of this exchange of privileges for rights. And until that
exchange is effected, he is but a gambler who goes into Mexico to seek
or to offer honest business, for even though he should gain much sure
profit in the beginning, those profits will be more than wiped out
later unless the legitimate business of Mexico is given the legitimate
rights of business.
And how is this exchange of privileges for rights to be effected? This
is the problem that confronts American business and American government
to-day. The issue is joined clean and is simple indeed. The provisions
of the Mexican Constitution of 1917 and the laws which give it effect
remain on the Mexican statute books to-day because they are profitable
to the group in control of the government. They mean, literally, graft
and power, for where privilege is necessary for the carrying out of
business, there is a price on privilege, but where rights are provided
for business, the price and the prize are upon industry and activity.
To the members of the American Chambers of Commerce on tour in Mexico,
to the American manufacturers who are invited to ship goods to Mexico
to-day, offers of privilege are made, privilege without graft or
price, now. But the price is there, and is clearly worked out in the
subtle Mexican mind. These American business men, pleased with their
reception, are to become boosters of the Mexican government, demanding
its recognition and scouting the great financial interests who are
their traditional enemies at home. That is price enough to the Mexican
mind. But when recognition is gained, and when those same individuals
seek to do business in Mexico under “normal” conditions, the laws
which ensconce privilege and give it into the hands of petty and high
officials for dispensation, will reap their toll.
One way only remains--the removal of privilege, the establishment
of rights. Insistence on these issues alone will almost solve the
Mexican problems politically and commercially. But the Mexicans are
wise indeed when they seek to divide the counsels of this country, to
place the small American business man and manufacturer in a position of
antagonism to the issues that are set clear in Washington, the issues
of political privilege versus political rights, the issues of the
business privileges which those individual Americans seek to gain for
themselves versus the business rights that will include them and all
their fellows.
The call is again for clear foresight and not for sentimentalism, for
a social conception of business and not for a selfish, individualistic
hope of getting in ahead of the next fellow. The Americans who have
been longest in Mexico are begging to-day for rights in exchange for
privilege. They know, as those who look upon Mexico from outside or as
newcomers do not know, that until Mexico mends her ways with business,
business can never rescue Mexico from the slough of her present
unhappiness. They know that no business in any nation can long prosper
without the prosperity and the good sense of the government of that
nation. They are not pirates, and they know that piracy, in government
or in business, leads but to the destruction of both. What they know we
may have for the listening. If we do not take it, we, too, must learn,
as they learned, in the costly school of experience.
CHAPTER II
NATURE AND THE MEXICAN MARKET[2]
Every land upon this globe owes to nature that predetermination of its
products and its needs which are the vital factors of its commerce and
its industries. Even the nature of its races, which has so much to do
with the standards of living which affect the quality and volume of
business, is determined to a certain extent by climate and geography.
It is therefore a fundamental need of all who have a deep interest in
Mexican business to grasp something of the location, the formation, and
the climate of that country. For few nations in the world have a more
wonderful location, and few have a more disastrous climate.
The vast cornucopia-like triangle of land which comprises the territory
of Mexico lies south of nearly three-quarters of the southern boundary
of the United States. Its western tip touches Southern California at
the Pacific and its most easterly point is 500 miles south of the
Pensacola, at the western end of Florida. For 1,833 miles Mexico’s
northern border is contiguous to the United States, 693 miles eastward
along arbitrarily marked lines from the Pacific Ocean to El Paso,
Texas, and the remainder southeastward along the sinuous course of the
Rio Grande to the Gulf of Mexico. Its jagged southern border is hardly
400 miles long, touching Guatemala and British Honduras (Belize).
This cornucopia, grasping the Gulf of Mexico on the east like a great
hand, swings southeastward from the Pacific contact with the United
States until the most westerly point of the Guatemalan border is 500
miles _east_ of Mexico’s easternmost contact with the United States on
the north.
Set apart, as Mexico is by her boundaries, she seems in form much like
a great peninsula, but she has, herself, two important peninsulas as
part of her territorial extent and configuration. One is the Peninsula
of Yucatan, which forms the eastern end of the cornucopia, the thumb
of the curving hand which grasps the Gulf of Mexico, an area of about
50,000 square miles. The other is the long, narrow peninsula of Lower
California, with 58,343 square miles, extending directly south of the
American state of California and connected with the Mexican mainland by
only a narrow strip.
That mainland comprises, with the two peninsulas, 765,762 square
miles, and the 1,561 square miles of coastal islands under Mexican
sovereignty bring the total area of the country up to 767,323 square
miles. The greatest width of the mainland is 750 miles, and the
greatest length is 1,942 miles, from the northwestern tip of Lower
California, where it joins the United States, to the southernmost point
in the jagged Guatemalan border in the Mexican state of Chiapas. The
narrowest point in Mexico is 120 miles, at the Isthmus of Tehuantepec,
once discussed as the possible site of an interoceanic canal, and in
the time of Diaz the route of a great transshipping railway between the
Pacific and the Gulf of Mexico. The Atlantic (Gulf of Mexico) coastline
of Mexico is 1,727 miles long, that of the Pacific (including the long
border of Lower California) 4,574 miles.
Lying between 32° 30′ and 14° 30′ North Latitude and 86° 30′ to 117°
Longitude west from Greenwich, the triangular form of the Mexican
territory places it about equally in the temperate and torrid zones.
This is a primary factor in Mexican climate, but far more significant
is the contour of the country itself.
This is largely mountainous, for if we include the high but fertile
table-lands, nearly two-thirds of the country is covered with mountain
ranges. The Rocky Mountains of the United States, the great backbone of
the Western Hemisphere, cross the Mexican border into Sonora, in a low,
narrow range. Almost immediately south of the international line they
begin spreading eastward. A long, slowly rising valley a hundred miles
wide continues southward from El Paso, narrowing rapidly, while to the
eastward of this valley rises an apparently new range of mountains,
obviously a part of the great Rocky Mountain range, but unconnected
with it in the United States and south, indeed, of the broad flat
plains of Texas. This is the _Sierra Madre Oriental_, or Eastern Mother
Range, the continuation of the Rockies in Sonora and Durango being
called the _Sierra Madre Occidental_, or Western Mother Range. Further
south, these two join together, and spread to virtually the whole width
of Mexico, excepting for the Gulf coastal plain, some 300 miles wide,
to the east. All of Central Mexico is mountainous, flattened only by
vast plateaus which, according to the accepted geological theory, were
created by alluvial deposits and lava dust from the mountains which
rise still above them. At the Isthmus of Tehuantepec, the Sierra Madre
flattens out till, save for the relatively easy grades which climb from
the Gulf and from the Pacific to the summit of the low divide (less
than 300 feet above sea level) the mountains might be all but gone. The
narrow plane of the Isthmus passed, the mountains rise again until the
center of the state of Chiapas is once more a vast plateau accented
with towering peaks, a formation which continues southward through
Central America, lowers again at Panama, but joins directly, at last,
with the South American Andes.
In this sweep of mountainous territory are hundreds of deep cañons or
_barrancas_, great fertile plateaus, and many wonderful mountains.
Of these last those about the Valley of Anahuac, the site of Mexico
City and for ages the center of Mexican government and population, are
the most famous. Here are Popocatepetl (17,520 feet) and Ixtaccihuatl
(16,960 feet) the snow-peaked volcanoes, and to the eastward the still
more beautiful cone of Orizaba (18,250 feet). Virtually at the same
latitude, but far to the west, is Colima, (12,991 feet), a still active
volcano. Toluca (14,950 feet), close to the Valley of Mexico, Malinche
(14,636 feet) in the state Tlaxcala, the Cofre de Perote (13,400 feet)
in the state of Vera Cruz, and Tancitaro (12,664 feet) are those of
greatest height. Only the already great altitude of the plateaus
of Mexico from which most of the striking mountains spring keeps
hundreds of others from filling the eye of the traveler. The scenery
which results from the mountainous formations of Mexico is literally
unsurpassed, for Popocatepetl and Ixtaccihuatl can give the climber all
the thrills of the Alps, and the crater lakes to be found in one or two
sections of Mexico rival in splendor the more famous resorts in Europe.
The deep and wide _barrancas_ which mark the mountainous formation all
through Mexico are magnificent to contemplate, but the day’s journey
down and up the sides of such a geological spectacle as the Barranca
of Beltran brings home to even the unscientific observer the terrific
handicaps which these vast cuts put upon the industrial development of
the country. Much of the conquering of these handicaps was achieved
under the broad railway policy of President Diaz, and the work done
still remains, but many years must now pass before the final conquest
is achieved. Such a work as the building of the Colima branch of
the Mexican Central, completing the only direct line for the first
time from the Capital to the Pacific, will hardly be repeated when
revolution threatens, for here, in less than 100 miles, twenty great
bridges had to be built, most of them crossing _barrancas_ and cuts of
mere geological formation, with virtually no streams filling them even
in the rainy season. The Southern Pacific line from the northern border
in Sonora lacks but sixty miles of linking up with the Guadalajara
branch of the National Railways, but thirty of those sixty miles are
through a mountainous territory cut with deep _barrancas_ which will
cost close to a million dollars a mile to build.
Such _barrancas_ and valleys do not, of themselves, indicate either
great natural water power or navigable streams. There are wonderful
water power possibilities in Mexico, to be sure, which come from two
factors, the sheer drops which give ideal power sites with tremendous
heads of water, and the heavy torrential rainy season. But the streams
themselves do not carry sufficient water the year round to justify any
plant, and tremendous reservoir development is vital to any power plant
design. Such reservoirs have been built in various parts of Mexico,
but at appalling expense, such as only great financial interests can
swing--only foreign capital or the government has been able to handle
them. There is an added and unexpected element of difficulty--the
porousness of much of the soil of Mexico. The mountains, indeed, are of
igneous rocks, but underneath the valleys is often soft limestone, and
more often still, under those places where a great impounding of water
might be made with a relatively low and inexpensive dam, is the soft,
porous alluvial and volcanic-ash land with which the valleys have been
filled up.
This porous soil and limestone are factors bearing on the absence of
navigable streams. Even in the lowlands the streams run underground in
Mexico, and while they can be tapped by shallow wells, they deprive
Mexico almost entirely of the advantages of river transportation. Even
the Rio Grande, on the northern border, is useless for navigation most
of the year. The Panuco, at whose mouth is located the great oil center
of Tampico, is navigable only a short distance above that port. The
broad, rich coastal plain along the Gulf of Mexico is watered by tiny
streams, all of which, excepting the partially navigable Papaloapam,
are useless for steamers and even for launches most of the year. Not
until we reach the Isthmus of Tehuantepec do we find a river worth
considering for transportation. The Coatzacoalcos, at whose mouth
on the Gulf of Mexico is Puerto Mexico (the eastern terminus of the
Tehuantepec National Railway), furnishes a highway which made possible
the relatively great development of American tropical plantations
during the years of peace under Diaz. Its mouth was then the port of
loading for great ships, but only by continual dredging was it kept
open, and to-day the port is abandoned except for light-draft coasting
ships. Further south, emptying into the Gulf at Frontera, is the
magnificent system of which the Grijalva and the Usumacinta are the
chief streams. Here indeed have plied and in the future will ply great
river steamers, for upon the banks of the Usumacinta, at least, are
rich oil fields and the fairest farming land in all tropical Mexico.
Both the Grijalva and the Usumacinta are magnificent streams, and
the latter is comparable, in its majestic volume, to the Mississippi
itself. Only the bar at Frontera keeps them from being navigable to
ocean steamers. For a brief period under President Madero this bar
was dredged so that fruit boats could enter and go to the docks of
banana farms, encouraging a promising industry which was killed by
heavy taxation and government neglect of the dredging, under the
revolutionary presidents of recent years. But this one system of rivers
offers virtually all there is of navigation in Mexico.
Yucatan, the peninsula which separates the Caribbean sea from the Gulf
of Mexico, is virtually without rivers, the water from the abundant
rainfall of its interior finding its way to underground streams in the
porous underlying coral limestone.
On the west coast there are a few rivers. The most important is
the Lerma, which waters a large territory on the Pacific side of
the continental divide, and allows some local transportation. The
Balsas, in the states of Oaxaca and Guerrero, reaches far inland, but
rapids and shallows make its use for navigation expensive and all but
impossible. In Sonora is the Yaqui river, navigable for small boats and
of some value for transportation. The Fuerte is also in this class.
Another phase of the geography of Mexico which affects transportation
is the complete absence of good natural harbors well located.
The chief port of Mexico, Vera Cruz, has a harbor which was built
artificially around a partially protected bay. Tampico is a port solely
because of the jetties which narrow the mouth of the Panuco and, with
the help of dredges, keep the channel clear. Puerto Mexico has a
similar problem, but the smaller river makes dredging absolutely vital.
Frontera is solely a dredging proposition, as the Usumacinta and the
Grijalva, emptying together into the Gulf, have formed a vast delta in
the lowlands which can probably never be narrowed to take advantage of
the great volume of water which they pour out. Yucatan has literally
no semblance of a harbor, and its great crops of sisal hemp are loaded
from lighters at appalling expense.
On the Pacific coast, Acapulco has one of the ideal harbors of the
world, completely landlocked, and open for medium-draft ships. But it
is relatively small, and moreover as yet almost inaccessible to any
railway survey, although it was used by the galleons from Manila as a
port for trans-shipment of the treasures of the Orient across Mexico
to the galleons from Cadiz which came to Vera Cruz. Salina Cruz, the
Pacific terminus of the Tehuantepec National Railway, was built from
an open roadstead with two lines of jetties and seawalls, a work which
inattention has now all but ruined. Manzanillo, the terminus of the
only direct railway line from Mexico City to the Pacific, was also
built with seawalls and opened by dredges. Mazatlan, further up the
coast, and the chief port of the Southern Pacific Railway of Mexico,
is an open roadstead. Guaymas, the port of the state of Sonora, is
accessible only to light-draft ships.
These are all great natural handicaps, and have affected the life of
Mexico probably more than it will be possible to estimate. The mighty
and costly work of the Diaz régime in building harbors is a monument
to that “materialistic” era which will last through many years and has
already played a tremendous part in furnishing the sinews of revolution
to succeeding governments, for without that work Mexico would be far
from capable of sustaining herself in the period of her agony to-day.
But beyond all these factors of mountains and rivers and sea looms
a yet greater problem, and still more far-reaching--the problem of
climate. As noted, Mexico lies in about equal parts in the temperate
and torrid zones. But the geological zones are far more important, for
climate is affected not alone by latitude but by altitude as well.
These geological zones are three, the hot country or _tierra caliente_,
the temperate country or _tierra templada_ and the (relatively) cold
country or _tierra fria_. The hot country is the lowland section
along the coasts from sea level to 3,000 feet altitude, where the mean
annual temperature varies from 76° to 88° Fahrenheit. The Mexican
terminology includes not only the lowlands of the torrid zone, but the
whole coastal plain up to the northern border. The _tierra templada_
lies along the mountain slopes and in the lower plateaus, between 3,000
and 6,500 feet altitude, where the temperature is between 65° and 76°.
This zone takes in the higher northern sections which are within the
temperate zone proper. The _tierra fria_ takes in the high plateaus
and the mountains, between 6,500 and 12,500 feet, the yearly average
temperatures varying from 30° to 60°, although the important sections
record 50° or more. The three geological zones each include about equal
portions of the country, but half of the inhabitants live in the cold
zone, and only a quarter each in the temperate and hot sections. The
mean temperatures of the cold zone are approximately those recognized
as the most favorable for physical exertion, but in the hot country the
body struggles against a handicap of almost 20° F. more than the 65°
at which it normally functions best. More significant still are the
temperatures of all the zones in their relation to mental activity.
The human mind is at its best under the stimulus of a mean temperature
of about 40° F., but even at Mexico City, 7,600 feet above sea level,
the mean temperature of winter is as high as 53°. In the temperate and
hot countries the handicaps under which the brain functions run to 20°
and up to 45° above the 40° at which the human mind works at highest
efficiency. No stimulating winters, no clarifying cool spells, even, in
the midst of the endlessly beautiful summers of Mexico!
Only the cold zone has any advantages in temperature, and these
advantages are equally important with the fertility of the soil in
accounting for the predominance of population there. Yet even where
the temperature is favorable to at least physical work, there is the
debilitating sameness of the tropics, the assurance that there will
always be more difference between day and night than between the
seasons. There, on the heights, too, the nervous drain of altitude
and of lack of moisture in the air takes the place--with no advantage
to the human machine--of the humidity and heat of the hot country. At
every turn in Mexico climate takes toll of human energy, even if we
ignore the undoubtedly debilitating effect of tropical and sub-tropical
light upon the white men and upon their mixed-blood descendants as well.
All these climatic factors, then, have continuous influence on the
health of all the Mexican people as well as upon Mexican business. The
hot, humid weather of the hot country makes those who live there low
in resistance of disease, while the nervous strain of the altitudes and
dryness of air in the better portions achieves a not dissimilar result
in lowering resistance. It is axiomatic that the Mexicans as a people
are seldom well and, as has been recorded in detail elsewhere,[3]
this ill-health has been and is to-day one of the determinants of the
relatively low state of progress of the country. No people who are
continually sick and upon whose energies their climate is a continuous
drain can work well or achieve greatly.
The relation of this thoroughly recognized factor of ill-health to
Mexican trade and commerce must not be overlooked. It is at the root
of much of the apathy which keeps the Mexican people at their low
ebb of business enterprise. It determines with peculiar insistence
their predilection for the easy road, the “_mañana_ habit,” even for
the dominance of outworn traditional methods in agriculture and in
business. It has a great deal to do with the ease with which foreigners
develop a land which has for centuries lain virtually fallow. But it
places vast difficulties in the way of that development, for it keeps
the labor problem continually in the foreground and vitiates much of
the great advantage which the relative cheapness of that labor seems to
offer. It has and will continue to have a powerful effect on trade,
for it keeps even the enterprising among Mexican business men at a low
standard of efficiency and makes it almost imperative that foreigners,
for the present, do most of the jobbing and export and much of the
retail trade and export buying of the country. This element is too
likely to be lost sight of, because it is not a condition common to
other lands. But it explains much that seems at first inexplicable in
the difficulties of the American exporter and importer in getting the
adequate representation in Mexico which he must have.
Another vitally important effect of Mexican geography is the
uncertainty and untoward distribution of rainfall. This has forced
upon the Mexicans their diet of corn and with it their use of fiery
condiments which are probable causes of the digestive disorders which
ravage all classes. Moreover, the rainfall conditions have been vitally
important in the determination of the entire agricultural tendency of
the country.
The seasons in Mexico are marked, not by winter cold and summer heat so
much as by seasons of rain and drought. The winter is the dry season,
roughly between October and May, and the summer is the salubrious rainy
season, from June to September. The distribution of rain throughout
the year and the failure of the rains in the important growing seasons
in some of the otherwise fertile sections is due primarily to the
geography of the country. Professor Ellsworth Huntington, of Yale, the
great American climatologist, finds that Mexico’s summer rains are due
to the vertical rays of the sun which cause the rapid rising of the
heated air, with sudden expansion and condensation, first over the
low-lying hot country and later on the rising uplands of the _tierra
templada_, where the function of the mountains in bringing about
condensation is amply proven by the well-watered eastern slopes and the
dry western sides of the ranges.
This mountain contour and the peculiar shape of the Mexican mainland
(very wide at the north in proportion to the south) create another
important climatological effect--the broad stretches of desert in the
northern sections. The so-called continental type of climate which
forms the American deserts further north combines with the mountain
contour and the distance from the eastern seashore (driving the
rain-clouds southward) to make immense sections of Mexico desert,
capable of supporting, at best, only wandering herds. These deserts
lie between the broad arms of the great “Y” of the Mexican mountain
ranges, and combined with the mountainsides themselves render nearly
three-fourths of the area of Mexico unfit for cultivation, even if
irrigation were general.
The result is that of the 500,000,000 acres of land in Mexico, not
more than 25,000,000 acres are arable. Great sections are useless, so
that in the state of Chihuahua, 90,000 square miles in extent, only
about 125,000 acres, or less than two-tenths of one per cent can be
cultivated--and most of that arable portion is irrigated.
The most fertile sections of Mexico are rich indeed, and in the plateau
valleys, where alluvial deposits and lava dust have been poured in
together to form the soil, great crops can be raised--when there is
rain. Only in a relatively limited section, however, is rain sure to
come at the times needed by the crops. Often when it does come, it is
in torrential downpours which are likely to wash cultivated fields
away in a single night. It is this condition which makes the so-called
_tierra templada_, on the slopes of the mountains, in many ways the
least desirable of all the farming land of Mexico.
Uncertainty of rainfall is, then, one of the outstanding results of the
Mexican climate as influenced by Mexican geography. This uncertainty
works forever upon the mind of the Mexican farmer, making him a
hopeless fatalist, making it less than worth his while to attempt
scientific cultivation. If there is rain, his crops are good anyway,
and if there is not rain, the cost of labor and fertilizer and good
seed are lost. The Mexican farmer is the worst of gamblers, and his
fondest hope is that his average crop over a period of years will be
twenty-five per cent of normal!
Famine has ravaged Mexico periodically for thousands of years. It is
most interesting, in looking at the present stage (when the largest
items of import are foodstuffs), to realize that it has probably been
only the much-abused hacienda system which has saved Mexico from severe
ravages of recent famine. The hacienda system, which is the operation
of huge estates under an elaborate overseership, approaches as nearly
as the living conditions of the country permit to a businesslike
administration of the farming of the land. It was the stable factor in
Mexican food production in the time of the Spaniards and in the later
era of Diaz.
The small farmer of Mexico has worked, since the beginning of Indian
history, without a thought of supplying the market and thus feeding
the industrial workers of the towns. He has lived from hand to mouth,
and only when he chances to have a surplus does he transport it or
sell it on the ground for the needs of the city market. So true is
this that in the period of mining and industrial expansion under Diaz,
the draining of the labor from the haciendas to the mines and to the
few factories had an immediate effect on the food production, and the
imports of foreign corn and wheat grew almost in exact proportion
to the diversion of this labor to industry. The small farmers, the
Indians and peons, who had places of their own or worked in the village
commons, did not go to the mines, but continued their relatively easy
existence on their own little _fincas_. They learned only slowly the
possibilities of the increased market for their product, and only to an
infinitesimal degree did they rise to meet that market.
To-day, with the shutting down of hundreds of the haciendas, and the
return of the country to its primeval agriculture, the situation has
become extremely serious, and the food importations have grown out of
all proportion to the industrial growth of the country; in fact, almost
in inverse ratio to the industrial depression of the country.
This presents a serious problem, but it also presents a promise of
new opportunity when peace comes to Mexico. For then there must come
a revival of large-scale farming, the growth of a new farming system,
and with it a tremendously increased market for modern farm implements.
There has been much talk, on the part of the revolutionary governments,
of the needs of the new small farmers for agricultural machinery,
but this is almost entirely talk, for the new small farmers are only
falling back to the way of their ancestors, and are not in any sense
taking the place of the ruined haciendas in food production for the
cities and industrial sections. That development will probably come in
the form of an entirely new system of agriculture, in which foreign
machinery and of necessity foreign capital must have a vital part.
One of the inevitable developments of Mexican agriculture must be
in the direction of irrigation. There is literally not enough good
accessible land which will produce without irrigation to feed the
country or, what is more important, to make an increase of population
possible. This land must be created by irrigation, and irrigation,
owing to the geographical formation of the country, must of necessity
be carried out by great capital. Many of the village communes have
irrigation systems, of a crude sort. Water is brought from distant
streams, where it flows after the rainy season, and in some places
it is brought up from the underground streams by means of crude
water-wheels operated by man-power. But the total area watered by such
irrigation is relatively insignificant, and as dams can be built in
Mexico only at large cost, the true development of Mexican irrigation
waits on peace, on foreign capital and government investment and
encouragement.
Something of this sort had been begun before the present era of
revolutions. In the closing years of the Diaz régime (before 1911)
many franchises were granted to large private companies which planned
irrigation projects, and the sum of 90,000,000 pesos was ordered
expended on government irrigation over a period of years. A few of
the private companies had put their plans into execution, and many
others, on the way to accomplishment, were nipped and destroyed by the
subsequent revolutions. For the past ten years, nothing has been done
toward solving the problems of irrigating the fertile but unwatered
lands of Mexico, and it seems hardly likely that anything will be
done under the threats of confiscation which now hang over all great
enterprise there.
Rainfall conditions have had much to do with the overemphasis on the
land problem and indeed with the failure of succeeding governments
to solve that problem. As in all arid countries, water rights were
originally more important to the natives than were land rights. In
hundreds of the Indian communes which still persist, the communal
rights of the Indians are distributed, not on the basis of land
assigned, but of the water allowed; each Indian receives a proportion
of the water brought by the communal irrigation ditches, and may
take three or four times the amount of land which his water will
irrigate--for crop rotation, forage, etc. This inevitable emphasis
on water has perhaps had its part in directing the attention of the
Indians in their demands for land distribution, toward the cultivated
haciendas where water is available. But it also gives promise for
a future which will make possible the rehabilitation of the country
through great irrigation projects creating thousands of rich small
tracts available for distribution to industrious natives--and foreign
small farmers as well. In the government franchises given under Diaz to
private irrigation projects, provision was made that about one-third
of the land brought into cultivation should be turned over to the
government for distribution to small native farmers.
Aside from the indirect effect of these rainfall conditions, they
have determined, with imperative insistence, the type of agriculture
which is followed in Mexico, and so have affected her trade in foods
and raw materials. They have made corn (maize) the staple food of the
country, as wheat is the staple of the lands where there is winter
snow and regular rainfall throughout the year. They have allowed the
development of only the tropical products like coffee, sugar and rubber
in the rich districts of Vera Cruz and Oaxaca which were partially
opened by foreign stock companies under Diaz. They have, more than
all, enthroned, as the only important agricultural export of Mexico,
the sisal hemp of Yucatan. This desert product, which requires slow
growth for the maturing of the long stout fibers which make rope and
binder twine, is the greatest export of Mexico which is the product
of Nature’s bounty and human enterprise. Coffee and some rubber and
tobacco and a little sugar were raised for export in happier days,
but only sisal hemp, the product of the desert _henequen_ plant, has
become a wealth-producer in any great quantity. Mexico has long been
an importer of foodstuffs, for, as I have noted, before the days of
modern commerce, famine came with terrible regularity. Under Diaz, food
was imported in increasing quantities, and since his fall, Mexico has
been utterly dependent on the outside world for a large portion of the
nutriment of her people.
It is impossible now to predict when and how Mexico will become an
agricultural country in fact as well as in potentialities. Irrigation
must come, for only when it does will agriculture and the prosperity
of agriculture fill the land. In one section where irrigation has
been carried out on a large scale--the Laguna district near Torreon,
Coah.--cotton is grown in quantity. This product feeds into the native
industry of cotton weaving which flourishes near Orizaba and in other
sections where local, direct water-power is available.
It seems inevitable that the increase in irrigated lands will add
to the acreage of cotton and also to the number and importance of
agricultural products of the class of raw materials. The country
which irrigation will water in Mexico is of vast extent, and is
safely comparable, even at its worst, with what the lands of Utah
and California and the Imperial Valley were before water was brought
to them. Again, however, we wait on peace and on the great works of
modern scientific irrigation. And, however enthusiastic we may be as
tradesmen, our capital will not be rushing to seek Mexican investments
of this sort until civilized government again rules, with a promise of
relative permanency.
The desert character of the country in the north was responsible for
the establishment of a great cattle-raising industry, for the land was
cheap and the ranges were vast. This has to-day been virtually wiped
out, and Mexico imports meat from the United States--all the result of
revolution, so that when peace comes the cattle industry will surely
be revived. But always the cattle of northern Mexico have been of the
range, still unfit for profitable slaughter, and sections suitable for
their fattening have been badly needed. There was, in other days, much
shipment of range cattle into the United States, and to the better
watered southern sections of Mexico. But although peace will bring a
revival of the ranges, Mexico cannot look forward to becoming a great
meat-producing country until the irrigation problem is solved.
There are rich, well-watered sections of Mexico--this must not be
overlooked--but these have resulted in a crowding of population on
the plateaus and through the rich valleys such as that of the Lerma
river in Jalisco state, and have contributed but little toward the
broad development of the country. In fact, one of the characteristics
of Mexico’s population distribution has been the tendency to gather
into groups, so that a great city like the capital or like Guadalajara
or Puebla will have a dozen cities and villages of considerable size
close about it--and then stretches of sparsely populated country for
leagues until another group is found. This is essentially climatic--and
geographical.
The mountain contour of the country and this same grouping of the
important centers of population have been the chief influences in the
location of the railways. Owing to the absence of navigable streams,
the mere possibility of Mexico’s industrial and of even her true
national development had to wait upon the coming of the railways. The
first line was that completed in 1872 by English capital between Vera
Cruz, the chief port of the Gulf of Mexico, and the City of Mexico,
some 400 miles inland and a mile and a half above the level of the
port. This “Mexican Railway” touches the groups of cities along the
old Spanish highway, and gave them an industrial primacy which was
unchallenged until the very last years of the Diaz peace.
After the building of this first line railway construction turned to
follow the great natural avenues laid out by the mountain valleys.
There were, as we have seen, two main valleys, that between the Eastern
and Western Mother ranges, and that to the east of the Eastern chain.
Looking at a map of Mexico, the most casual observer is struck by
the fact mentioned more than once by Mexican revolutionists, that
both these valleys lead directly to the heart of the United States.
The railroads which were built there might indeed be taken to have
been built to drain Mexico’s resources into the United States. But it
was only because these roadbeds had been laid out by Nature herself
that the lines came to be built there, with the inevitable result of
increasing immeasurably the importance of the United States to Mexican
development. One early Mexican president (Sebastian Lerdo de Tejada,
1872-76), in fact, refused to allow these obvious roads to be built,
explaining, in a much-quoted phrase: “Between the weak and the strong,
let the desert remain.”
The roads were both built by American companies under President Diaz,
the Mexican National on the east, the Mexican Central on the west.
They had a mighty part to play in the modernizing of Mexico, and in
her development through the trade in the minerals and in the building
of such industries as followed them. Throughout their history to the
present, they have been of far greater importance to Mexico than to her
allegedly covetous northern neighbor.
After these lines were built, others came, to follow the mountain
valleys. One went from Mexico City westward to Guadalajara, tapping the
rich Valley of the Lerma, the granary of Mexico. Narrow gauge lines
twisted through the rich states of Mexico and Michoacan, lines which
when modernized and extended in some future time will open agricultural
and mining territory comparable to anything yet known to commerce
and Mexican industry. Another line found its way to Oaxaca, deep in
the mountains to the east and south of Mexico City. Others followed
the seacoast to the Isthmus of Tehuantepec, and crossed that narrow,
shallow neck of land to the Pacific.
Along the western slope of the Sierra Madre other lines were built
through Sonora, and then the Southern Pacific of Mexico, an American
company, pushed these roads still further southward, opening new
territory, not to the commerce of Central Mexico, but to that of the
United States. And last of all, the line to Guadalajara left its easy
grades and smooth roadbed to leap the _barrancas_ and climb down the
mountains to achieve the contact with the Pacific at Manzanillo. A
mighty hand, indeed, has nature had in the locating of Mexico’s
railway lines, and with their connection to the United States and our
trade.
The mountainous character of the Mexican territory has upturned vast
mineral resources, whose effect on the development of the country
has been greater perhaps than any other single fact. These minerals
gave the wealth of the Aztecs which tempted the Spaniards to take
and to develop the country so thoroughly. They were drained for the
three centuries that Spain ruled, and their exploitation shaped all
the policy of the colonial régime. They were the greatest of the
attractions to foreign capital at the beginning of the Diaz rule,
and they paid most of the revenue of taxes upon which the material
civilization of the Mexico of that day was built. It seems safe
to promise that when there is lengthened peace again in Mexico,
mining will take its place with the greatest industries of the
country--although oil may still retain its present primacy when it,
too, can spread out and develop itself.
Mining camps and groups of mining camps dot the country, and whole
distinct territories are devoted to the mining, here of silver,
there of gold, there of copper, lead, etc. Indeed, the geography of
Mexico has had a tremendous effect in the creation there of a country
primarily rich in minerals as she is poor in agriculture. Oil is to-day
the greatest single wealth of Mexico, but the other minerals have had
and will again have their important bearing on her development.
The mineral wealth (oil as well as metals) has as I have noted been
the chief attraction which has brought foreign capital to Mexico.
The Spaniards and to a lesser extent the Indians before them, mined
the mountains of Mexico, but it remained to foreign enterprise in
the time of Diaz to open up the great bonanza sections to scientific
development. In the train of this development, came more foreign
capital of every sort, for agriculture, for industry, for oil, and for
public service investment. This foreign capital, developing Mexico’s
latent wealth, opened her to the world, and brought forth her great
promise of the future, even though it also gave to the revolutionists
who overthrew Diaz a handy battle cry of anti-foreignism.
It seems unlikely that without the geographical and geological
conditions which offered the wealth of minerals to the development
of capital, Mexico would or could have entered upon the modern stage
of her development. In that was the hope of the past and in it,
too, is the hope of the future regeneration of Mexico. The tempting
possibilities of such development are the only bait which will bring
back to Mexico the stream of foreign capital to which alone she can
look for her prompt salvation, when peace comes at last.
The geography and climate have had their hand, too, in the industrial
situation in Mexico. Mining, in the time of Diaz, drained the available
labor away from the farms and away from the small factories which then
existed. The oil fields have more recently taken a large proportion of
the available workers. The supply of labor in Mexico is astonishingly
small--the development of the latent labor supplies in the Indian
communes waits on peace and education. Temperamentally (and in this we
find the hand of climate) the Mexican is not a good factory worker.
The raw products which the land produces, sisal hemp, cotton, rubber,
etc., all demand for their profitable manufacture large and intricate
plants, such as Mexico has not built and for whose operation she has
never trained her people. Therefore, save for the cotton factories
(which produce only the coarser staples) there is to-day in Mexico
almost no industrial development. The lists of industries of which
such a manufacturing town as Monterey boasts, include, for instance,
candle and match factories employing thirty or forty people, brass bed
“factories,” where the products of American foundries are put together,
soda water factories--the industries which no city in any other land
would find worth mentioning. Mexican industry, indeed, waits surely
upon the development of the crops of raw materials, upon the education
of her laboring classes, and upon the solution of the problems of
irrigation and water power.
Geography and climate have been cruel to Mexico,--of this we need
not seek to deceive ourselves. But throughout the list of unhappy
conditions which has been set down here there runs a promise of
advancement and of better things--when peace comes and when foreign
enterprise shall again be welcomed. All of the advance which Mexico has
made in her long fight against an unkind Nature has been made with the
help of foreign energy. First was Spain, and the 300 years in which she
built up the colony to a semblance of a modern state, creating great
cities and peace and prosperity. Then, after fifty years of destructive
revolution, Diaz, and his wise invitation to and use of foreign
enterprises and foreign money. Only in these two periods has Mexico
been prosperous.
The greatest advance was under Diaz, when in thirty years Mexico
rose from the ashes of her revolutions and flew toward the heights
of commercial advancement. In that time her railways were almost
all of them built, all the water power which she now has developed,
the one great and productive irrigation section--the Laguna cotton
district--reclaimed from the desert, the sisal hemp industry created,
the factories, such as they are, built and set in operation. Virtually
all of these advances were made with foreign capital and under the
control of foreign engineers and managers. Success rewarded the faith
and the efforts of all who devoted themselves to these developments and
it was their conquering of the great natural handicaps of Mexico which
made possible the glowing tales of her “treasure-house.” When such
times as those come again, and only when they come, will the battle
against Nature be resumed, and in its resumption, the signs of man’s
great conquest reappear.
FOOTNOTES:
[2] This chapter is based upon the author’s article on Mexican
Geography contributed to the important _Mexican Year Book for 1920-21_,
published in Los Angeles, Calif., concurrently with this volume.
[3] _The People of Mexico_, Book I, Chap. V.
CHAPTER III
THE PEOPLE WHO BUY
A bamboo hut with a clumsy thatch of grass, a hovel of sundried
bricks, made, as the Israelites made them, of straw and clay, a shack
of unfinished lumber or rotting railway ties topped with a roof of
laminated sheet-iron--these are the symbols of the social level of
Mexico. Within them all a dirt floor, a box filled with earth for a
brazier, two or three earthenware pots, a _metate_ over which the woman
bends at her endless task of grinding meal for the family cakes of
unleavened corn, a few rush mats for beds and a tawdry shrine with a
dim light before it--the inert millions of Mexico live to-day as they
have lived for a thousand years.
Their minds untutored, their thoughts and desires confined literally
to the animal plane, their religious instincts almost entirely
superstition, their government the support of rulers upon the vast
misery of the lowly, Mexico finds her parallels only in China and in
Turkey. And Mexico is at our own back door, the cynosure of our most
hopeful tradesmen!
Up until ten years ago, there was an aristocracy in Mexico counting in
its make-up many able men, groups of able men, devoted as far as their
lights allowed them, to a paternalistic care of the Indians and peons,
and to the development of Mexico as a great, modern state. Under Diaz
there was also a slow building of a material civilization, looking, in
the future, to the filling of the peon stomach and the lifting of the
peon mind through education to the light of the white man’s world, to
a place in the white man’s commerce. It has been the common usage, in
this past decade since Diaz fell, to excoriate that aristocracy, to
blame it for all the evils of the country, to point with bitter scorn
at its wealth, at its material monuments of churches and palaces and
mines and railways. And yet, although these ten years of revolutions
have been devoted most effectively to the elimination of the Mexican
upper classes and of their materialism and its monuments, the condition
of the lower classes has not been alleviated by one tiny burden, nor
has it been lifted by one hair’s breadth.
The Mexicans of to-day are worse off than they were in the days of
Diaz; they are worse off than in that wild revolutionary period before
Diaz; I am not so sure that they are not in worse condition than they
were under the Spaniards, for they seem literally to be sliding back to
an era of barbarism like only to that misery which was theirs before
the Spaniards came.
We lose sight of the essential fact of Mexico, commercially as well as
socially, if we lose sight for one moment of the lowest of the Mexican
people. They present to us our first and greatest problem, whether
we are traders, missionaries, or those who seek to develop Mexico’s
resources or to sell her our goods.
It is they who must buy our merchandise or aid our work or operate our
factories, mines and oil wells. They were, and are, a vast potential
market, a great, slow-moving force for us to re-shape by education into
an advanced people, civilized, progressive, using the products of the
world and pouring their own products back into the stream of commerce.
They offer us an immense, a wonderful well of labor, perhaps a greater
contributant to the nation’s future wealth than anything else in all
Mexico. Because of these potentialities and because of our inability to
understand why such possibilities do not find their development, it is
vital that we look, clear-eyed and sympathetically, on the one great
and overwhelming factor in that hopeless inertia--the ignorance of the
mass of the Mexicans.
Mexico is a land of innumerable children. A land where there are twice
as many children under ten years old as there are in the United States
(in proportion to population). And a land where not one child in six
has even the chance to go to school, because there are no schools for
them.
The depth of Mexico’s ignorance, in childhood and in adulthood, in life
and in business, literally passes comprehension. The active, curious
minds of the Indian youngsters grow quickly into sodden stupidity; the
keen and vivid intelligences of the children of the middle and upper
classes expend their growing forces in sensuality and plunge themselves
and their country into debilitating excesses--because there is no
training to give them a life above the animals.
I have seen, in the seats of government in Mexico, men who know less
of world history than a boy in an American high school; I have talked
with “experts” of government departments who knew less of their special
subjects than did I, a layman. I have seen in the presidential chair
men who believed, literally, that the shrunken, sick Mexico of to-day
was one of the great, advanced countries of the world--because they had
no conception of the development of world civilization.
I have seen, in Mexican homes, the slow murder of Mexican babies,
because neither I nor any one else could change the round of tradition,
unrelieved by training of any sort, which takes an annual toll of child
life in Mexico that is perhaps not surpassed even by the toll of the
famine in China.
The chain of tradition links Mexico together, and links her, too, to a
past which goes back into the furthest reaches of prehistoric legend.
The ways of modern agriculture are those of the early Aztecs, and
modern tools, even, are introduced with the greatest difficulty. The
round of life is a brief cycle of dull days, unlivened by any thought
or knowledge beyond the confines of a village or a township or a few
blocks of a city. The schools, such as they are, are patterned after
models long abandoned everywhere else in the world, and are stifled
by a traditional belief that war and revolution and the erection of
imposing buildings are more important to the progress of the country
than the education of its youth.
All this has driven Mexico on through the years handicapped with a load
of illiteracy that can well be recognized as the most potent factor in
the degeneration that marks her every manifestation to-day.
Only figures can tell, even in part, the depths of that ignorance. Back
in 1895, the Mexican government reports (which one must always remember
speak as favorably as they dare) showed that only 2,000,000 out of
a population of 12,500,000 could read and write! This means that 82
per cent of all the people of Mexico were without these rudiments of
learning. By 1900 this percentage had been reduced to 80 and in 1910
the Diaz government claimed that it had been reduced to 78, in other
words that of the 15,000,000 population of that year, a little over
3,000,000 could read and write, while nearly 12,000,000 remained in
the depths of their ignorance. In 1919, the Carranza government issued
a report claiming but a slight advance over these figures in the nine
years since the fall of Diaz.
It is literally true that not a tenth of all the people in Mexico have
what we would call a common school education, and three out of four
cannot read a street sign or scrawl their own names. Indeed, one great
British mining company reported that of its 595 Mexican employees,
including scores of what we would call skilled workmen, only six, or
about one per cent could sign a receipt for the money they were paid.
To those of us who look on through foreign eyes, this condition
explains much of Mexico’s dilemma, and the point is further clarified
when we know that the greatest claim ever made for Mexican education
showed but 12,000 schools, with 850,000 pupils enrolled--while the
population of children of school age was more than 4,000,000! No single
issue is greater or more pressing than education. Yet education waits,
as everything in Mexico waits, on peace and better times, on food
and on health. And these wait--and more than all, from our selfish
interest, business and commerce wait--on education! Around and around
the problem swings, and each issue is dependent upon another, and that,
then, upon the first.
Of all the complicated, interwoven factors of Mexican life and of
the tendencies, this very day, of Mexican business and trade none,
however, offers so true an understanding as race. The basis of Mexico’s
ignorance and the basis of her steel-bound traditions is Indianism.
For Mexico’s 15,000,000 people include 6,000,000 pure-blooded Indians,
of some fifty tribal strains, literal aborigines in their life and in
their thoughts. There are, as I have noted, 8,000,000 mixed-bloods,
three-quarters of whom are virtually Indians in their way of life and
in their outlook upon the world. And there are only 1,000,000 of white
strain, mostly Spanish, a group which is to-day without voice in the
affairs of the country. Two-thirds of Mexico is Indian, and most of the
other third a mixture of Indian and white, a mass with the dark Indian
sea below it and virtually no light coming to it from above.
To-day there sifts into the Mexican ruling classes--these same
mixed-bloods--hardly a ray of culture, hardly a gleam of a truly
broader outlook, to lift them and their people out of the dull cavern
of their circumscribed life, or to lead them to the better things of
modern civilization and commerce. We talk of the heathen of China, of
the darkness of ignorance and superstition in Africa, but in Mexico
the churches and the foreign industrial concerns seem to me to face a
greater need than in any other country in the world.
For Mexico is at our door, and the cultural traditions of Mexico are
those of our own world, the white. For 300 years she was a subject
state of Spain, and for all the mistakes of the Spaniards and the Roman
Catholic Church, the foundation-stones they laid are as the foundation
stones of our own life.
The Indian mass was the great problem of Spain; it was the great
problem of Diaz; it is the great problem of all those who would lead
her to the ways of the world of to-day. For the past ten years it has
been forgotten, lost in the struggles of individual men for personal
power. But always those individuals have been swallowed up, without
their realizing it, in the mire of Indianism, for Indianism, the
very epitome of ignorance, lies there always beneath the Mexico that
the world sees, waiting to engulf its own masters and to destroy all
social and business progress. The Spaniards and Diaz built above these
shifting sands, ever conscious of them, providing against them always.
Diaz fell because after he built his foundations he did not reach
down into the Indian mass to up-raise them. He fell in his old age,
forgetting, as old men forget, the dangers which have been with them
through all their life. But before he fell he had laid the foundations,
building upon those of the Spaniards and erecting new ones of his
own, among them foundations of foreign business, of foreign missions,
of foreign schools, business and missions and schools which by their
own enterprise and perhaps as much by the examples which they set for
Mexican business, Catholic churches and native school teachers, were
beginning the great uplift of that vast, inert Indian mass.
The brief rule of Madero (1911-1913) was the link between Diaz and the
upheaval of radicalism and Indianism which was to begin with Carranza,
in 1914. Then commenced the process of casting away, bit by bit, all
the slow-built civilization, all the shallow foundations of commercial
prosperity, of Diaz. With Carranza began the upsurgence of the Indian,
the terrific push upward of the long-hidden forces of destruction which
had been held in check, not only for the thirty years of the Diaz
peace, but for all the four centuries since the Spaniards had first
come to Mexico.
Primarily, this destruction was marked by the wiping out of the fabric
of the promising Mexican educational system--for Diaz had made sound
beginnings toward raising the Indians out of the depths of their
ignorance. His rule was building a foundation for business and for
progress by creating an intelligence which would demand and would
develop the better things which white civilization had to offer.
Under Carranza the ideal was not of slow uplift by education and the
creation of a substantial economic existence which would make life and
peace worth striving for. Carranza and those who followed him under the
banner of the revolution have thought little of solid progress. Their
ideal has been revolution--the political remedy for the economic ills
of the land.
So, despite all the sweeping promises of Carranza and his immediate
successors, education and the progress of business, of trade and
of development have gone into the discard. With the pressure of
the needs of the revolutionary “generals” for greater and greater
appropriations for their armies (and for the graft which ate up most
of such appropriations), with the ever-widening circle of vampires who
fattened on government patronage in every other conceivable way, the
money available for education as well as for industrial advancement
shrank steadily. Where under Diaz the total annual budget of the
government was $50,000,000 a year, with a total appropriation for
schools, federal and state, probably less than $4,000,000, Carranza
had nearer $100,000,000 and spent less than $2,000,000 a year on
education. For Carranza, when the demands of his “generals” for their
“share” increased, shut off the federal support of the schools of the
City of Mexico and its neighboring villages, and also the sums which
in other days had gone to help the poorly provided state governments.
He threw the school systems on the hands of absolutely bankrupt cities
and towns, with the result that in the City of Mexico alone some 120
schools, half the former number, were closed, and 25,000 children,
despite crowding into other buildings, were deprived of education. All
this is history. And statistics do not show that there has been any
recovery since that day.
The Obregon government, on paper, re-established the federal department
of education with a cabinet officer at its head, which was abolished
by Carranza as an economy measure. There was some more of the endless
Mexican discussion of systems of education, but so far as can be
found, no increase in appropriations or in plans for better support
of the public schools. All those wait, perhaps, as I have said, on
the improvement of business conditions, as the final solution of the
business problem waits, I believe, upon them.
But they all wait on something else, which I have mentioned above,
and that is the improved physical condition of the Mexican people.
Comfort, food and health are as important to mental and moral
development as the training of the mind by education. The misery of
Mexico is so profound, her crashing inertia so deep-rooted and so
self-perpetuating, that it sometimes seems that she can never be cured
from within herself. Some outside force must break the circle and this
I believe is the great opportunity of the American missions, working in
conjunction with the great civilizing energies of American business.
Already something has been done, by great American business concerns,
and by American trade unions along the northern border and even within
Mexico itself, to improve living conditions. But the terrific chasm of
the Mexican mass remains utterly unplumbed, and the childhood of Mexico
and the manhood and womanhood of Mexico wait, hungry because their food
does not feed them; in discomfort because their long traditions do not
let them even desire comfort; in sickness because of utter ignorance of
the foundations of human health.
Of this last a word must be written here. I have compiled,
elsewhere,[4] the astonishing figures bearing upon this question, and
have found, in the mass of Mexican official statistics, that the death
rate of Mexican babies under one year is nearly twice that of the
United States; between birth and ten years, three times that of this
country, and that clear through the whole range of Mexican life, from
two to four times as many Mexicans die in each thousand as die in the
United States at the same ages. The average life of every Mexican born
is but 15 years, while in the United States it is about 35 years, and
half of the Mexicans born this year will be dead before they are 7
years old, while in the United States half of all the babies born will
live to be 42 years old.
High death rate means sickness. Experts estimate that for each death in
the United States there are 300 days of severe illness and 6,000 days
of indisposition or slight illness, spread over the average 35 years of
American life. But in Mexico the average age of death is 15 years, so
that the days of sickness must be crowded into less than half the space
of time they cover in the United States.
In Mexico, almost no care, as we conceive it, is given to the sick.
The government reports show that only one-quarter of all the deaths
reported in the country are listed as “classified by the doctor”--in
other words, there is no medical attendance at all in three-quarters
of all the fatal illnesses in Mexico. It is well known to those who
know that unhappy land that in the case of illness, the priest and the
doctor are sent for at the same time, the priest to administer extreme
unction, the doctor to do what he can with a dying patient.
This factor of ill-health in Mexico is one of the most terrible of
all the pictures of her misery, perhaps the most potent element in
the national ineptitude. No one who is continually ill can be greatly
interested in progress, mental, or moral, or industrial, for illness
is the greatest force working against the material advancement of the
people and of the country. And upon material advancement, upon the
increase of income and the increase of needs physical and cultural (as
the money comes to procure them) we must build the solidity of the
Mexican people that are to be, as well as the trade which we seek to
gain from them.
Out of this picture of darkness, then, comes opportunity and with
opportunity the dawning of a new day in Mexico. Because ill health is
so great a factor as it is, there is something that we can attack and
can conquer. Because education is at the low ebb that it is, there is
something which we can do that is direct and tangible, when the means
are put into our hands.
There is hope in Mexico, and that hope is tied up with the opportunity
for foreign help, which is actually, and even more potentially, the
most disinterested and direct force working on conditions in Mexico
to-day. The land is so torn by personal politics, so nearly ruined
by the exactions of unthinking government, so much the football of
well-deserved calumny, that this single ray of clean, clear light can
be recognized by all as one of the great hopes in the horizon to-day.
That hope must be made to dawn, and it is well for us to consider how
that dawn may be assured, and how the day which must follow may be
firmly grounded on economic permanence, on social stability and on
the comfort, health, education and industrial progress of the Mexican
people.
This is the field wherein I believe that the coöperation of the
American companies established in Mexico and the American missions
operating there will bring about a solution of the ultimate Mexican
problem. For the companies, ready and anxious as they appear to be to
serve, would, through the missions, find a means wherein their money
and the great force of their prestige would have efficient direction.
The foreign oil, mining and railway corporations will not hesitate,
I believe, to place their resources and their opportunities at the
disposal of workers whom they are convinced can truly improve the
morale and thus the productive capacity of the workers upon whom their
business depends. Heretofore there has been mutual misunderstanding.
The companies have not always found the mission workers as efficient as
they would like, and the missionaries have been quite ready to suspect
the companies of representing “predatory capital” with the ambition,
not merely of making their business profitable, but of putting down the
“devoted” leaders of the people or of forcing American intervention at
once.
I have faith in both the companies and the missionaries, and I believe
that in the new political crisis which Mexico is bringing upon herself
as this is written (and which she may have tumbling about her ears
before it is printed) these two must reach out, and will reach out, to
clasp hands and go on together.
Both have done wonderful things for Mexican education, the missions
through the conscious development in Mexico of the ideal of education
for service, and to the end of raising and training leaders for the
Mexican masses, and the companies through isolated examples of truly
constructive welfare and educational work.
Probably the most outstanding example of the educational achievements
of American corporations was that of the trade schools which were
organized and operated by the National Railroad between 1890 and
1912, under the direction of E. N. Brown, president of the National
Railways--one of the “pernicious foreigners” who were exiled under
Carranza’s “nationalization” of the railway properties in 1914. These
railway schools trained between 15,000 and 18,000 Mexican mechanics
and engineers, taking boys of 14 and 15, paying them first 62 cents a
day and gradually increasing that until, after four years’ training,
they were receiving three and a half pesos a day. They were then
ready to take positions as skilled workers in the railway shops or on
the locomotives or, if they chose, in other industries. The railway
placed no limitation on them, holding that the company benefited in the
increase of the efficiency of the Mexican worker wherever he might be.
The whole scheme of this work, including the paying of apprentices
while learning, was the broadest kind of educational service, taken
up, to be sure, because the railway company needed mechanics and
trainmen, but with an effect on Mexico and on the creation of the
so-called Mexican “middle class” (the buying and building as well as
the elevating element in any population) which is still felt through
the chaos of revolutionary destruction.
To-day the greatest industry of Mexico is the production and refining
of petroleum, and foreign companies, of course, control it. Much
genuinely helpful welfare work is being done by them, including not
only schools for children but training schools for workers as well. In
addition the very conscious plan of increasing wages until unskilled
labor now receives a minimum of $2 a day is having a remarkable effect
upon the standard of living and upon the buying capacity (as well as
upon the efficiency) of the Mexicans of the Tampico oil section. There
is much undigested prosperity, and agitators are creating trouble as
far as they can for the foreigners, but on the whole the effect on the
material well-being of the peon has been advantageous. It is inevitable
that a continuation of this attitude should bring forth a vastly
increased civilization at least in this one section of Mexico.
Education has been pushed forward by the companies, and in the model
villages such as the town of Terminal (across the river from Tampico
on the property of the Doheny companies) really excellent schools are
maintained with Mexican teachers under American supervision.
Conditions in the oil country outside the private company towns are,
however, deplorable, presenting a contrast which is not without its
mighty lesson for us all. The graft and incompetence of the present
ruling classes of Mexico have regarded the prosperous oil towns only as
the most luxurious of posts for influential favorites. The educational
conditions of Tampico, where in a city of more than 100,000 people
there are only twenty government primary schools with an attendance of
4,500 pupils, beggars description. Yet the foreign companies have been
called on regularly to support the Tampico schools, just as they are
called on to pay for pavements, sanitation, etc. And this money has
gone, hardly a single dollar into the work for which it was collected,
but countless thousands into the bottomless pit of revolutionary graft.
But for all the unfortunate conditions of the moment, the possibilities
of the foreign corporations aiding in the uplift of the Mexican
mass throughout the country is one of the encouraging phases of the
Mexican trade and business problem. It links up definitely with the
solution (on which we shall touch, in later chapters) of the parts of
the question which deal with other elements than the human equation.
The beginning which has been made in Tampico, chiefly by the great
American companies, carries with it an import far greater than the
mere contrast between their trim little company villages and schools
and the ugly squalor of the Mexican towns. Somehow, out of the dark
present, American business has learned how closely it is linked with
the welfare of the human element in its scheme. They have learned how
the simple man, how his happiness and prosperity, are wrapped up with
the prosperity and success of every enterprise which remotely touches
him.
Until these recent years, and through these American corporations,
there has never been scientific welfare work in Mexico, there has
never been considerate treatment of the workers, little study of
their weaknesses and their needs. If we contemplate that, in its bare
truth, we can begin to understand something of the importance of even
the relatively little work which has been done of late. Perhaps the
greatest potentiality of the future of the human side of the Mexican
market lies in the broad extension of that genuinely American attitude
toward the masses of the country.
I have advocated the union of the forces of American missionaries and
American corporations in Mexico. I believe that this will bring great
good and will eventually, as it has done in this country, bring a
higher efficiency of labor and a larger market for the things which
this country can export to Mexico. The desertion of the masses by the
revolutionary government and the exile of the natural aristocracy, have
brought the human problem of the country home with tremendous force to
the foreigners. It lies to-day almost solely in their hands, and seems
likely to wait long for a rescue or aid from any other source whatever.
For the missionaries, education and improved economic conditions
amongst the workers is indispensable--they are the tools and the signs
of their great plan of regeneration. For business, the encouragement
of religion and education which the mission schools give promises that
improvement in the laboring population and in the buying capacity of
that population which is demanded by the advancement of their business.
Somehow that buying population which I have set at 3,000,000 must be
increased. Somehow the efficiency of the laboring group (which numbers
little more than the buying public) must be increased. Only one way
is open--to make the masses better men, happier men, more cultured
men. The ignorance of Mexico, the inefficiency which results from that
ignorance, the low standard of living which keeps the people from those
“wants” which make luxuries into necessities and so improve trade by
widening the eddies of demand--all these affect us all in Mexico.
Trade follows education. It follows the missionaries of business and
of religion. It thrives alone on the prosperity of peoples. To-day
these factors of trade in Mexico are only depressants--in the future
they must and surely will be changed slowly into booming creators of
trade. But so long as the chief item of import is food and so long as
the productive capacity of the Mexicans is only half developed, so long
will the market in Mexico swing at its lowest ebb.
FOOTNOTES:
[4] _The People of Mexico._ Mexican health is treated directly in the
chapter on “Vitality,” pp. 86-109, and indirectly in the chapter on
“Climate,” pp. 131-151.
CHAPTER IV
THE CREDIT OF MEXICO AND OF THE MEXICANS
The Mexican government to-day is bankrupt, and Mexican business
is bankrupt. The most sanguine propagandists of the revolutionary
governments can offer nothing better than promises to offset the
obvious facts of Mexican finance. The government to-day owes nearly
a billion dollars--including unpaid interest on her debts for eleven
years. Commercial credit has reflected the ghastly vision of government
bankruptcy, because the ingrained principle of Mexican politics has
been the subservience of economic progress to political exigencies.
The history of Mexican revolutionary government has been marked by the
steady suction of business into the maelstrom of political horror. This
began in the earliest years of the rule of Carranza (1914-1920). For
five years Carranza carried on a deliberate campaign to destroy the
banks, as the representatives of the capitalists. He succeeded, despite
all the magnificent resiliency of business. He swamped the country with
paper currency; he withdrew the metallic reserves of the banks until
their bank notes reached almost the degradation of his own issues. He
made Mexico into a land of thieves, and gave their thievery the cloak
of government sanction--as of one thief underwriting the ventures of
another.
When her banks were gone, Mexico had nothing left but her mines and
her oil, for Mexico creates virtually no wealth. She manufactures
nothing and exports nothing save the ultimately exhaustible resources
of her soil. Mining flourished during the war, with allied governments
supporting the lead and silver markets, and oil has flowed on and
continues to flow, giving Mexico herself only the curse of incalculable
unearned wealth for the personal loot of her government officials.
Credit was Mexico’s great asset under Diaz--he spent years in
establishing it and upon it he built the nation. To-day in Mexico there
is no credit. There is gold in circulation and the sight of gold is
encouraging to the business man. But the gold in Mexico circulates
because there is no credit; no man trusts another and none trusts the
promises of the government. Mexico cannot to-day issue paper money, and
her heavily alloyed silver coin is on a par with her gold only because
an artificial scarcity is maintained in order to increase the value of
silver as the change needed in business.
Mexico is one of the great potential markets of the world. The American
manufacturer can justly look to it for an outlet for his wares. But
a market is useless until the buyer can pay for his goods. Mexico is
not yet a place to dispose of what we make until she can pay for what
she takes. The credit situation is the crux of Mexico, and the crux of
the credit situation is the political chauvinism which, eight years
ago, set out deliberately to destroy that credit, because credit was
capitalism and capitalism was unfriendly to the self-appointed leaders
of the proletariat and, more important still, was said to be the enemy
of that world radical movement to which the Mexican revolutionary
leaders look so smugly to save them from interference in their orgy of
loot and glory.
When Diaz left the presidency in 1911, there were $35,000,000 in the
national treasury, and Mexico’s credit was such that she could float
at par a national bond issue drawing 4¹⁄₂ per cent. To-day the unpaid
interest on her public obligations exceeds $150,000,000 and she cannot
at any price borrow a cent on any security less than the indorsement of
the government of the United States of America.
This is the way the situation is expressed in cold figures. But Mexico
is a land of infinite resource, both natural and diplomatic, and
nations in worse condition than this have been taken in hand by great
bankers and placed upon their financial feet. Any Mexican official can
explain Mexico’s condition convincingly--the long years of revolution,
the paralyzation of industry through destruction and through the prices
and want brought to all the world by the Great War. It is therefore of
no really deep significance, they say, that Mexico owes millions of
dollars, and that she is to-day suing for favor in the world’s money
markets. But there is a deep and fundamental cause which is back of
her financial bankruptcy, back even of its merely economic causes in
wrecked mines and abandoned factories, in ranches stripped of millions
of head of cattle which bandits have killed for their hides.
The real bankruptcy of Mexico goes deep down into the minds of
men, Mexicans and foreigners, government officials and rabid
interventionists alike. The bankruptcy of Mexico is a sickness born
of broken faith, a moral bankruptcy that is ugly with human greed and
hopeless with nervous fear.
The trouble with Mexico to-day is that Mexicans as well as foreigners
have ceased to believe in Mexico.
At the time of my several recent visits to Mexico, I did not go as a
stranger to the country. I had watched her develop during six years
prior to 1910, under the peace and prosperity of the Diaz régime.
Understanding something of the native psychology and much of that
of the foreigners, I was prepared to find that a good deal of the
seriousness of the situation was due to panicky fear and distrust one
of another. What I was not prepared for was a condition where every
incident, every situation, every tight-strung nerve of potential
strength or weakness led down pell-mell paths to a deep ravine of
utterly blasted faith not only in present conditions in Mexico, but in
the possibility of the country’s ever crawling back to her old serenity
and strength in any measurable time.
Mexico, as most Americans do not realize, considers herself to have
been at peace for the past five years, for the bandits were in the
hills and most “revolutionary” outbreaks were being successfully
nipped. Yet in the important city of Monterey, typical of the interior
of Mexico, the damage done “in the revolution” remains untouched. On
the main plaza the stones that are left of the beautiful old Casino,
burned by Carranza’s soldiers six years ago, have barely been moved
from the roadway. Smoke-stained shells of buildings rise here and
there, and in the suburbs bullet-ridden windows still remain in fine
private houses and factories. The once paved streets are full of
unexpected bumps, the roads leading to the smelters and out into the
country are cut deep with ruts and puddles and railway crossings are
all but impassable, even to skipping Fords. The street cars limp and
bump and leak, and the very civic improvements seem installed with a
fatalistic certainty that they will soon be destroyed.
There is industry and there is business in Monterey, each of a kind.
In the old days there were two great smelters, foreign owned, a steel
plant and a brewery, besides three railway shops and miscellaneous
other factories. Most of the miscellaneous factories closed long ago,
but the smelters and the steel plant kept going in good order--as long
as war prices sustained them. Now, one of the smelters has closed, for
London has ceased holding up the lead market, and the other (owned by
the American Smelting and Refining Company) continues only because it
uses the ore from its own mines. During the war the steel plant was
handled by the United States War Trade Board, the great organization
which harnessed our own industries to war needs, and 80 per cent of its
product was, by agreement, sold in the United States and in Cuba--at
war prices. When the war ended, the Monterey steel plant was forced to
curtail, and to-day the great blast furnace is cold and only a Mexican
government order for a few thousand tons of steel rails keeps the
rolling mill moving.
The railway shops are content with the most perfunctory of repairs,
and are more remarkable for the appalling array of rusted and rotted
engines (I have counted 150 engines out of commission in the Monterey
yards) and for the wrecks of burned freight cars which fill their
sidings than for any activity which inspires their machinery.
The few factories which operate are sustained, in their turn, by the
high prices which even the staples of existence command in Mexico.
Three small cotton goods factories, reopened five years ago, get
prices only a few cents below those paid for imported goods, to whose
cost in this country is added a heavy import duty. The brewery keeps
running, although it pays the government a tax of 100 per cent on its
product--estimated to be $1,000 in American gold per day.
Retail trade goes on, throughout Mexico, but the sales are greatly
curtailed and the prices are out of reach of the masses, being twice to
five times those of the last normal period, 1912. Stocks are hopelessly
depleted, for no merchant will keep a large supply of goods on hand,
for fear not alone of the long-promised drop in the world market, but
of what will happen in Mexico to-day or to-morrow or next week.
Moreover, all business is on an absolutely cash basis, and for “hard”
money--gold and silver--alone, whether the trade be wholesale or
retail. In Mexico to-day credit is practically unknown, either amongst
Mexicans or between Mexican houses and those with whom they deal
abroad. There is a stringency of currency, due to the destruction (for
various reasons soon to be noted) of all forms of paper money. Mexico
is spending literally her economic life blood, gold and silver, and her
great resources are wasting and rotting because there is no money with
which to develop them or to move them.
Those are simple conditions, patent to any observer who stays longer
than the few hours or a day allowed the busy junketer on his trip
through “prosperous Mexico.” Back of these conditions, however, are
facts which are as incontrovertible and menacing. The closing of
the smelters has back of it the conditions of mining, in a country
which for centuries has depended on its mines for its existence as an
economic entity. Even through the war, with war prices for metals, the
mines which were producing were only those with high grade ores, which
could bear the risks of banditry, the cost of ponderous freight rates,
or could maintain their private railway trains to transport ore which
the run-down government rolling stock could not handle. Moreover, even
war time prices did not make possible the proper development of the
properties, and when the bottom dropped out of the lead and copper
markets, many of the richest mines closed, because they had not been
able or had not dared do enough normal development to keep ahead of the
work on the rich veins.
Back of the hand-to-mouth operation of factories and wholesale and
retail stores is the situation with regard to currency and banking.
Money in Mexico is worth, at legal interest, 1 per cent per month (12
per cent per year) but if you have money, and will take a chance, you
can get 5 per cent a month and even more on as good security as the
country affords. So few are the men who believe enough in Mexico to
take the chance that there is not enough capital even to satisfy the
needs of speculators. And can legitimate business expand or even carry
its normal load when the money it ought to borrow, the money it has
already invested, is worth so much as that? The only form of business
which thrives in Mexico is speculation, and I think I am safe in saying
that virtually every sign of business activity which any visitor to
Mexico sees to-day is speculative at its source or dependent upon
speculation.
This speculation finds its chief manifestation in the marketing of
food--the distribution of the necessities of life is in Mexico, as
elsewhere, the source of sure profit. But in Mexico, so great is
the fear of men of what may happen, that the profits of speculation
transcend anything known to our busiest food profiteers. The farmers
will not take the chances (which include the uncertainties of costly
graft) incident to getting freight cars or pack animals as well as the
fear of bandits. This allows the speculators, in quick turnovers, to
make as much as 200 per cent on a car of corn in a fortnight, and this
condition has lasted for nearly eight years.
Another phase of speculative activity is in the importation of foreign
goods. The Mexican customs laws are complicated with elaborate
classifications, and at best it is something of a speculation
for a merchant to import goods in the days of sudden changes in
classifications and boosts of tariffs without notice. In addition,
however, many favored henchmen of government officials have been given
concessions to import all goods free, privileges which it is said they
sell to any one who will take the risk for a fixed charge of one-half
of the customs fee that would otherwise have been collected. Now and
then these favored persons take a flyer of their own and one of them
once sent in a carload of shoes, most of which were dumped in Monterey.
Having paid no duty, the shoes were sold at prices which demoralized
the local market, for the normal duty on a pair of shoes averages $1.50.
Other things “happen.” For instance, a favored group gets a trainload
of goods--say foodstuffs--at an entry port. Then the government
suddenly announces that, effective at once, the high duties on these
foodstuffs are to be removed. The goods of those “in the know” go
across duty free, and if other merchants telegraph orders to take
advantage of the open port, as like as not they find, when the goods
reach the border, that the high duties have been put back as suddenly
as they were removed.
Such things as these happened with great frequency in the days of
Carranza. Perhaps they are not happening now, for Mexico is on her good
behavior. But all this has occurred frequently enough to have shaken
the faith of simple men. The fear of what may happen to-morrow--things
of this sort or something else--stifles business, for business is a
timid spirit, and does not recover its confidence quickly.
I hold no brief against the present governments of Mexico. They have
been and still are revolutionary governments. They have a natural faith
in their own vital importance to Mexico, and consider that whatever it
may have cost the country to get such government is money well spent.
But for her own sake and for the sake of those of us who are sincerely
interested in knowing what troubles Mexico, it seems that we should
realize by this frank analysis the lack of faith which I describe.
The situation which I have just outlined is economic, but back of the
economic and basically more important is the financial situation. The
cause of the economic bankruptcy is to be found in the new conception
of the financial organization of Mexico which the Carranza officials
have pronounced, and upon which Mexico has been acting for the past
seven years.
Let us look for a moment at the financial side of the foreign
investments in Mexico, for recent activities on the part of the
government seem to admit that Mexico recognizes that an important
factor in the present national bankruptcy is the loss of foreign
capital. This damming up of the flow of foreign investments has been
the result of two distinct situations. First is the outrages, the
wanton destruction of foreign property and foreign lives by bandits and
revolutionaries. The other is the enactment and partial enforcement of
drastic anti-foreign laws.
One of the strongest pillars of the material prosperity of the Diaz
time was foreign investments. The bonanza mines had to become paying
low-grade business propositions in order to preserve mining as a
national asset. The barren agricultural lands had to be irrigated,
with water that fell in mountains hundreds of miles away. More than
that, Mexico had to begin to build an industrial machine of railroads
and factories which would create new national wealth--the economists
of even a generation ago realized that no land, however rich, could
prosper from her natural resources alone. These were the axiomatic
bases of the economic need of foreign money.
The financial need for foreign capital was yet more pressing. At
the beginning of the Diaz rule, the trade balance against Mexico
was apparently insurmountable, and although year by year it was cut
down through the economic development of the country, each year the
trade balance has to be evened up. This was the function of foreign
investments, and this was the financial reason for its continued
encouragement under Diaz. To the last year of his reign, this inflow
of foreign money kept coming evenly, in tens and twenties of millions
annually. As it came in, balancing the outgo of interest on the
national debt and on private loans, it became itself a producer of
Mexican wealth, so that in time it would have eliminated the necessity
of further forced-draft encouragement for outside investment.
That time had not come in 1911, however, when Diaz left Mexico. But the
net result of the stoppage of foreign investment in the revolutionary
period which followed is to be found to-day in that unpaid interest of
nearly $200,000,000 on government securities alone.
This is no apology for the mistakes of the Diaz régime. The great men
of that day built a vast commercial enterprise, the Business of Being
the Republic of Mexico, but like many commercial enterprises of the
period before the Great War, it had left out the human equation. It was
this failure which wrecked the Diaz government in the end, and made
such purely paternalistic régimes virtually impossible in Mexico again.
To-day the rulers of Mexico, awake at last to the need for the foreign
money which their revolutionary predecessors shut out so stubbornly
under the “Mexico for the Mexicans” policy and the socialistic
constitution, have been carrying on an active campaign of publicity and
official conciliation. The junkets of Chambers of Commerce from all
over the United States are part of the big plan. Yet in the hearts of
the people, of this country and of Europe, who hold the purse strings,
be they bankers or enthusiastic investors of little capital, there
lingers and will linger many doubts. It seems likely to be a long day
before the foreign investor finds any new faith in Mexico.
But what of Mexico herself? Where lie the financial roots of her lost
faith in Mexico’s own future? After the economic conditions noted
above, they lie in the Mexican currency situation.
To-day Mexico has no currency but gold, silver, nickel and copper
coins. There are no bank bills, there is no bankable paper, there are
no promissory notes, no checks, no credit. Seven years ago there was no
metallic currency whatever, only banknotes, depreciated till a peso
(normally worth fifty cents) would hardly pay carfare. During that
time the banking business was all but wiped out, and bankable paper
disappeared.
Yet back of that period, in turn, was the time of Diaz, when paper
money was as good as gold, and the ordinary processes of exchange
went on as in any civilized country. Diaz had found, when he came to
power, a condition similar to that which exists to-day, with only
metallic currency in circulation. He brought in a new financial régime,
establishing sound banks, which under government control issued paper
money. In 1910, the circulating medium of the country was $150,000,000,
of which $65,000,000 was banknotes, accepted on an absolute parity
with the $85,000,000 of gold and silver. This money was, as noted,
supplemented by active bankable paper circulating freely in business.
To-day, by contrast, the government admits that there is less than
$50,000,000 (I personally think it is very much less) of gold and
silver money in the country--to transact the business (on a cash basis)
of nearly 15,000,000 people!
The loss of $100,000,000 of the circulating medium of the country (to
make no estimate of the loss and inconvenience due to the destruction
of credit) is the work of the revolutions of the past eleven years.
It was Carranza who started the paper money orgy. In the course
of three years he issued probably 2,000,000,000 pesos of paper
currency--the exact records, if kept, have never been made public.
Through this means he destroyed the confidence of the public in paper
money, and ultimately, when he came to full power, wiped out of
existence the whole system of Banks of Issue established by Diaz.
The first of the Carranza paper money was issued in Chihuahua, and was
accepted at its face value. Diaz had taught the people, down to the
humblest peon, to accept paper money, and the bayonets of the Carranza
troops convinced any who doubted the quality of the new issue. It was a
good scheme for financing a revolution--till Villa drove Carranza out
of Chihuahua and declared Carranza money worthless and its possession
a political crime. Now Villa money was issued, and was forced upon the
people at the points of new bayonets, and as the various chieftains
chased each other over the country the money of the towns fluctuated
with the identity of the conqueror. Metallic currency disappeared
completely and the value of paper money fell by jolts to a few centavos
on the peso.
These were the days when men who were paid in American money lived like
kings. House rent was fifty cents a month; light, gas and water cost
a dime. You could travel hundreds of miles in a Pullman for a dollar,
and settle all your old debts for two per cent of the original figure.
Food prices went up, of course, and the natives, mostly paid in the
depreciated paper, suffered terribly. Starvation followed in waves, and
the mortality in the cities was appalling.
The value of paper money fluctuated over night, and after closing hours
each day, there was a scampering of merchants to sell the currency
taken in during the day. They bought New York drafts, worn American
bills, diamonds, carriages and real estate, at prices whose rise could
not possibly keep up with the fall in the value of paper money.
Early in the excitement Carranza had begun to repudiate his various
issues of currency. The reason given was a real one--that they were
being counterfeited everywhere, a process simple enough, for the
original issues were themselves crudely printed on ordinary paper. At
first the Carrancistas had attempted to keep up with the avalanche of
counterfeits by requiring that all paper money on hand in banks, stores
and private tills be submitted regularly for inspection. Not even the
government “experts” could tell the bad from the good, however, and
they ended by declaring all of the money submitted by their political
friends to be all right, and confiscating, as counterfeit, a large
and fixed percentage of that owned by men of doubtful “loyalty.”
The process did not tend to increase the public confidence in the
administration.
The final issues of Carranza revolutionary paper money came from
Vera Cruz in 1915. This money alone was recognized as a part of the
Carranza government obligation, and $8,000,000 was set aside in the
Carranza financial plans for its redemption. This last paper money,
issued after Carranza was recognized by the United States, consisted
of engraved notes, known as “infalsificables” or “uncounterfeitables.”
These were issued at 10 centavos on the peso, and the government was
pledged to “redeem” them. This is being done, but not by anything
so simple as paying honest money for them (which would put them,
perhaps, into general circulation). Instead, all who pay direct taxes
are required to return a surtax of the face value of their taxes in
these “infalsificables.” A friend of Carranza wrote that “this was a
beautifully simple and ingenious scheme.” It is that still, for those
favored ones who control the remaining supply of the notes and sell
them at advanced prices to the taxpayers who have to have them--mostly
the big foreign mining and oil companies.
The story of the paper money days in Mexico, and the fact that of the
billions issued but $8,000,000 is recognized as a just debt, may
stir the indignation, and it certainly clarifies our understanding of
Mexico’s lost faith in her rulers. But in point of actual fact, the
destruction of the banking and credit system of the country, which was
a corollary of the paper money orgy, was far more terrible and cast an
even more lasting blight on the standing of the government.
Early in his revolutionary career Carranza was at odds with the
banks. He considered it an unfriendly act, one “taking advantage of
the unlettered,” for the banks to use their knowledge of financial
conditions to profit from the fluctuations of his paper currency.
He also found the banks “reactionary” in their refusal to use their
standing to assist him in making his money popular, and he charged
openly that the banks had “combined to discredit the government.” On
his entry into Mexico City he endeavored to coerce banking officials
personally, and jail was sometimes the boarding place of bank managers
and bank presidents, when they refused to unlock the vaults to
government “inspection.”
The wrecking of the banking system extended over more than a year.
Huerta, who preceded Carranza in the presidency, took the first forced
loans of $5,000,000 from the banks, allowing them to issue new paper
currency to cover this coin taken out. Carranza, on gaining control of
Mexico City, found the forced loan idea convenient, for he was in sore
financial straits. As one chronicler has it, “Money had to be found....
The money in the banks was the only money available, and it was taken
as the only way out of a very difficult situation.”[5] In its statement
of debts, however, the Carranza government recognized these forced
loans to a total of $20,000,000, none of which has been paid in six
years.
The Carranza “loans” from the banks inevitably shook their credit and
with it the credit of every business man and business organization,
and inevitably the credit of the Mexican government itself. Banknotes
dropped in value and although they never reached the low mark touched
by government paper, their fall to 75, to 50 and finally 30 per cent of
their face value reduced in like manner the value of all bank deposits,
and finally brought banking transactions to a stand-still. The process
of final destruction of the banks began with the edict of September 26,
1915, abolishing out of hand the Huerta concession which had allowed
some of the banks to issue additional paper currency to cover the
Huerta “loans.” The banks were required to bring their reserves up to
the old basis in forty-five days, and despite the blow to their credit,
this was accomplished. On November 10, however, another Carranza edict
reduced the recognized bank reserves by requiring that silver coins be
estimated at their bullion, instead of their face value. This storm was
weathered, in its turn, and nothing further was done for nearly a year,
although during that time the breach between Carranza and the banks was
continually widening.
An edict of September 15, 1916, required that the banks should have
in their vaults within sixty days enough gold and silver to redeem at
par every banknote which they had in circulation, currency which had
been issued under concessions allowing a banknote circulation twice
the total of the bank reserves in metal and bankable paper. The decree
also prohibited the banks from doing business with the public until
the conditions set down were fulfilled. In other words, liquidation
of notes and deposits was stopped, and the life blood of banking, the
active turning over of funds in the course of business, was cut off.
Finally, on December 14, 1916, the _coup de grace_ was given, and the
banks were officially closed to all business excepting the collection
of bills receivable in the depreciated currency of the banks themselves.
Thus by a series of cumulative blows the whole Mexican national banking
system which had been built up under Diaz was destroyed utterly. At
the time the final blow was given, banknotes were accepted at about 30
per cent of their face value, and had apparently reached stability.
Bankers assure me that had they been allowed to operate, even under
the conditions then prevailing, they could eventually have pulled
themselves and much of the business of the country out of the hole. It
is also interesting to remember that the franchises of the Banks of
Issue were to expire in 1922, time sufficient, under careful government
leadership, for them to wind up their affairs and furnish a solid
financial basis for the erection of some new form of national currency.
The Mexican governments, one after the other, have lent what prestige
they had to a proposed and elaborate new banking law, based on a
“Sole Bank of Issue.” From Carranza’s time the men in charge of the
government finances apparently believed that this system could be
established on the wrecks of the ruined Banks of Issue. Up to the
present this has not yet been attempted, for Mexico was and is in no
mood to receive any form of paper currency or government banking,
however it may be guaranteed.
It was inevitable, after the banks were closed, that the country should
go back to a metallic basis. This was made more difficult, however, by
the government’s decree, recently reiterated in the summer of 1921,
making illegal the circulation of American silver and banknotes. This
plan, although it brought out the Mexican gold and silver which had
been hoarded, inevitably cut down the circulating medium of the country
to absolutely inadequate proportions, even though American money could
easily have been obtained to provide enough currency to tide over the
crisis.
There were many difficulties connected with the establishment of gold
and silver again, but most of them had to do with the scarcity of
these mediums. There was a further complication for which no one was
responsible. This was the phenomenal rise in the price of silver during
the Great War. This early became a crisis, for first the silver pesos
became more valuable as bullion than the fifty cents (American money)
at which they had been fixed in the time of Diaz, and soon even the
subsidiary coins, of a lower silver content, became worth more than
their legal value in gold. The export of silver coins had to be stopped
by government order, and under the guidance of American monetary
experts the recoinage of silver in smaller pieces was begun. To-day
this money is in general circulation, accepted at face value for the
simple and deliberately created reason that it is issued only as the
crying demands of business for change force it out. The new pesos are
about half the bullion value of the old, and the subsidiary coins are
even less valuable in proportion.
Needless to say, this change in the size of the silver coins had an
unfavorable effect on the public mind, already on edge over the various
financial coups of the Carranza government. This was aggravated by a
destructive form of favoritism by which a few men were allowed, under
Carranza, to buy up and export the old silver coins, a form of graft
which amazes and disgusts the observer and also, be it noted, made the
money shortage greater and less easy to endure.
The ruin of the economic structure of Mexico lies bare for any one
to see, and beneath it is the rotted structure of the old financial
system. The closing of the banks, the destruction of credit, the
shutting off of the relief which might have been given by the use of
American currency, seem at the root of most of the ills which then
beset Mexico, because they are at the root of the lack of faith of the
people and their fear of the caprices of the morrow. For instance,
to-day in Monterey, the great industrial center of northern Mexico,
there are no banks save two private houses where money can be left on
deposit, and a few exchange offices. Where, in 1910, the four Banks
of Issue had more than $10,000,000 out in industrial, mining and
farm loans, there is hardly as much as $250,000 loaned to-day, and
that is by American banks on the border. The safe commercial paper
which circulates in Northern Mexico is checks on American banks. The
drafts of strong mining and oil companies form the chief basis of
money transfer, and are shipped from place to place all over Mexico.
Optimists call this a peaceful penetration of American credit into
Mexico, and so it is, but all that can be done from outside of Mexico
is but a drop in the bucket compared with her financial needs. Credit
within and without must be established, and that is a problem which
rests with Mexico alone.
To understand at all the mountain of distrust which looms before her,
it is necessary to set down, briefly, the condition of the Mexican
foreign debt.
The external government debt is $173,000,000, and on this interest
has been defaulted for more than eight years, a total of $50,000,000
remaining unpaid. The internal national debt is $67,000,000 and the
defaulted interest $20,000,000. State and other debts (save railroads),
which have been guaranteed by the government are $33,000,000 and
$10,000,000 in interest.
The bonds of the National Railways of Mexico, guaranteed by the Mexican
government, total $239,000,000, the interest defaulted being about
$75,000,000.
With other items, and counting alone the debts guaranteed by the credit
of the government, these obligations total $603,000,000, and the unpaid
interest thereon is over $155,000,000. Unguaranteed state and city bond
issues, the $20,000,000 recognized as due the banks for “loans,” and
$8,000,000 with which to redeem outstanding fiat currency bring the
total up to a principal of $779,120,915. Nearly eight hundred million
dollars, and defaulted interest to nearly two hundred million!
From time to time, and government after government, treasury officials
have come to New York to arrange for the refunding of this debt. The
plan is usually for New York bankers to loan Mexico $300,000,000,
refund the whole debt, eliminating some items (notably by a reduction
of the bond issue of the railroads) and take as security the Mexican
government’s pledge of a portion of the customs duties.
The answer to this proposition has been astonishingly to the point.
No Mexican guarantee of customs receipts has interested the bankers
unless it was backed by the United States government, presumably with
a collection agency of American marines, as in Haiti and Honduras
to-day. The most interesting development in answer to the Mexican
suggestions of refunding was the appointment of one of the most
impressive international banking committees ever created some three
years ago. This was headed by J. Pierpont Morgan and announced that its
purpose was “the protecting of the holders of securities of the Mexican
republic and of the various railway systems of Mexico and generally
of such other enterprises as have their field of action in Mexico.”
It would seem that the probity of the Mexican government, both as to
its debts and as to its willingness to repay the losses of foreign
investors was slightly under suspicion in the financial circles of the
world, a suspicion which is shared by no other Latin-American country
save those in actual and admitted bankruptcy.
FOOTNOTES:
[5] E. D. Trowbridge. _Mexico Today and Tomorrow_, p. 198.
CHAPTER V
OUR BILL AGAINST REVOLUTIONARY MEXICO
The American after-dinner orator roars his boast of “two billions
of American dollars in Mexico” and moans his claim of “a billion of
damage” done to those pioneer American dollars. Whereupon the Mexican
(of whatever political complexion) wails protest that three-quarters
of those American dollars were made out of Mexico herself, and our
State Department, which alone might clarify the matter, perforce keeps
silence. Up to the present time few have attempted to bridge the gulf
between the orator and the Mexican and no one that gulf between the
orator and the State Department. We live in an age of “convictions” and
we choose our figures according to our beliefs.
Fifteen years ago an American consul in Chihuahua, Marion Letcher,
wrote a report in which he estimated (frankly without figures) that the
total foreign investments in Mexico were $1,641,054,180, distributed as
follows:
American $1,057,770,000
British 321,302,800
French 143,446,000
Various 118,535,380
--------------
Total $1,641,054,180
These figures have been assailed, especially as regards the
comparatively small sum alloted to the British, but they remain to this
day the only official estimate available. I have, however, been able
to find another compilation, worked out also by Americans, but this by
the research departments of several large banking groups, with full
access to all Mexican government figures and to the stock books of most
of the great American companies. The total, which is for 1914, before
the vast bulk of the investment in oil, is almost identical, but the
distribution is startlingly different:
American $655,000,000
British 670,000,000
French 285,000,000
German 75,000,000
Spanish, Dutch, etc. 190,000,000
-------------
Total $1,875,000,000
These figures claim to include the foreign investment in the National
Debt of Mexico and are said to estimate the actual distribution,
as far as can be worked out, of the holdings of the securities of
all companies operating in Mexico. Consul Letcher’s figures were
conceivably based largely on the nationality of the corporations alone.
On the other hand, Europe contributed more than half the invested
capital of such important groups as the National Railways of Mexico,
made up of companies which were all incorporated under American laws.
When this new compilation of investment distribution first came to
my hands, I was, I may admit, inclined to “split the difference.” As
careful a study of the American investment field as it is possible to
make has, however, convinced me that the new figures are much more
nearly correct than those of Consul Letcher with one exception. I
do not believe that they include all the American investment in the
Mexican government, state and municipal bonds held abroad.
On the other hand, neither Consul Letcher’s figures nor the other
compilation represent the actual full value of American investments in
Mexico at the fall of Diaz in 1911. It is important that this fact be
remembered because by that date the moneys which had gone into Mexico
for foreign enterprise had increased many fold through the energy
which went with them and pushed them forward to success. I believe
that the original American investment had grown, by 1911, to fully
$2,000,000,000, but in order to be absolutely just from the Mexican
viewpoint we can discuss the damages on the basis of the actual cash
invested--the loss, incidentally, looms even greater. On the other
hand, we must not forget that however the Mexicans may claim that the
increase in values represents an “exploitation” of their country’s
resources, the concomitant advance in all values throughout the land
in the era of Diaz was almost entirely the direct result of those same
foreign enterprises.
From many sources, including of course the two authorities which have
been quoted, I have estimated the American investment of actual cash
capital and have set against it the losses in actual physical damage
and in ruined business, since 1910, as follows:
AMERICAN CAPITAL IN MEXICO
Original Physical Actual
Investment Damage Losses
Railroads $150,000,000 $30,000,000 $60,000,000
Oil 200,000,000 5,000,000 100,000,000
Mines 200,000,000 15,000,000 100,000,000
Lands and cattle 50,000,000 10,000,000 20,000,000
Industries and public
service 50,000,000 10,000,000 20,000,000
------------ ----------- ------------
Total $650,000,000 $70,000,000 $300,000,000
Damage claims aggregating $500,000,000 are said to have been filed with
the American State Department, but no official confirmation of this has
ever been forthcoming. However, the claims which Americans have against
Mexico, whether filed in the State Department or not, must be divided
into two categories, the actual and the potential damage, and perforce
includes also the claims due for loss of life and personal damages.
The actual harm already done includes: physical damage to property;
unwarranted and illegitimate taxes which approach confiscation;
destruction of property values through such taxation and through the
prevalence of banditry; destruction of property values by the driving
out of stable government; destruction of the financial and credit
system of the country through government decrees and repudiations;
losses in legitimate profits which would have been made during the
recent eras of high prices; actual loss in market value of property
through the estrangement of the foreign capital which alone, in Mexico,
presents a reliable buying element; destruction of property values
through the exile of the foreigners who formed the industrious and
capable organization which maintained those values.
The potential damages are chiefly those which come from the fact that
there hangs over all foreign property in Mexico to-day, and has hung
for five years, a sword of Damocles in the threatened confiscation
of such property under the radical “nationalization” plans of the
revolutionary governments. These, briefly, provide that: foreign
corporations and individuals are incompetent to own property in Mexico
unless they renounce their citizenship and appear only as Mexicans
before the Mexican law; the government may appropriate all large
tracts of land, giving in return unguaranteed state agrarian bonds of
virtually no value; the government may “nationalize” the oil in the
ground, making it subject to the denouncement of any one, whether the
property owner or not, when the whole oil-producing organization of
Mexico to-day is founded on the principle of the oil belonging to the
land itself; no foreigners, under any conditions, may own any land
within sixty miles of the frontier or thirty miles of the seacoast.
Lastly, and in a group by itself, are the damage claims arising from
the killing of nearly 600 American citizens in Mexico since the Madero
revolution began in 1910. The claims for these outrages and for the
maiming and raping of many hundreds more occupy a class by themselves,
and will, we may confidently believe, be the first which will be paid
when Mexico returns to the ways of civilization.
Just here we can imagine the official Mexican “press department”
preparing to state that “Mexico has always paid her bills, including
all damage claims.” This, however, is not quite literally true. She
has paid foreign damage claims at the muzzles of foreign cannon, to
be sure, and President Diaz, in that long rule which many call “the
anomaly of Mexican history” paid all the bills presented to him. But
the only “convention” which ever sat to adjudicate American damage
claims was hardly the success that would justify any such sweeping
assertion of Mexico’s probity. In 1840, after years of turmoil,
and after a show of force, President Jackson called a convention of
Americans and Mexicans together to consider American damage claims.
They sat from 1840 to 1842, allowed $2,000,000 in damage claims,
rejected $1,000,000 and when they adjourned left $3,000,000 still to
be considered. Under an arrangement of twenty installments, Mexico
paid three and defaulted the rest. The cash was paid by the United
States, and the slate was wiped clean after the Mexican war of 1847-48.
Finally, this war, which as schoolboys we were taught to regard as a
sort of “blot on the national escutcheon” was the result of continued
outrages to Americans and continued diplomatic jockeyings with an Uncle
Sam who even then was much the same model of patience which he is
to-day.
In the public discussion of the damage which has been done to American
properties in Mexico, there has been much emphasis on the potential
harm from the so-called “socialistic” or “bolsheviki” tenets of the new
Mexican constitution. There have been vast, crippling losses, yet it
seems as if most of what we have heard has been the things which will
happen if Mexico is allowed to proceed along her present road. There is
reason enough for this fear and for this emphasis, and one of the great
battles being fought in the world to-day is that which these Americans
are putting up not alone for themselves but for the very principles of
property rights. But so far Mexico and particularly the wily gentlemen
who have occupied the Mexican presidential chair have always tried to
get all they could and have often carried the mis-named “American”
bluff to astonishing lengths--but have almost as often retired when
the game turned against them. They have used the potential damage as a
means of extracting an increasing toll of taxes and of loot, and for
little else, as yet.
In this chapter I am, as already mentioned, intentionally avoiding
taking these “potential damages” into consideration. I feel that we
must have, as a starting point, a comprehensible picture of what has
already actually happened to American investments in Mexico.
Most of the American money in Mexico went to that country during the
thirty-four years of Diaz rule. This period was marked not by blind
adoration of the foreigner, as the revolutionists now state, but by
a sane and far-seeing realization that foreign capital must come
to Mexico if her national and economic potentialities were to be
developed. Foreigners were encouraged generously by laws recognizing
the privileges of pioneers in protection and in assistance in the form
of exemption from taxes during their development period (the term
was usually for ten years). The idea was to allow them to import
machinery without duties and get on their feet as quickly as possible.
Practically none of these companies was given land, for there is no
vacant Mexican government land worth having.
The first and the greatest American corporations to enter Mexico were
the railroads. These held concessions, made according to law, but
Mexico had profited by the American government’s experience with its
trans-continental lines, and the subsidies and grants were small indeed
compared with those given to our Union Pacific, for instance. It is
worth noting also that there have never been such scandals as our great
railroads reveled in, and that virtually every cent was invested in the
lines themselves. The Mexican railway companies which were consolidated
in 1907 into the National Railways of Mexico were never paying ventures
for the builders, and until the merger few dividends had ever been
paid by any of the lines. For about four years following the merger
conditions improved greatly, but in 1912 troubles began, and by 1913
all was chaos and destruction.
From then on to to-day, the story of the railways of Mexico has been
a tragic romance. It can be reduced to figures, necessarily cold in
the telling, but every figure the result of dramatic and crushingly
realistic incident. The National Railways of Mexico, a property worth
over $250,000,000 as a physical plant alone, was taken over by the
Carranza government on December 4, 1914, and since that time the
bondholders have received no cent of interest and the physical property
has been crushed and battered and all but destroyed. On January 1 of
1921 over $75,000,000 of back interest was unpaid and the defaulted
payments on fixed charges is still piling up at the rate of $1,000,000
a month, while the Mexican government is collecting from the operating
commission $1,500,000 a month--a sum set by Carranza for the commission
to turn in by any means available, as higher rates, scrimping on
repairs, deterioration in upkeep.
The confiscation of the railway properties by the Mexican government
under Carranza is one of the most astonishing and illuminating
pages in the whole story of Carranza’s campaign against capital and
the foreigners. But although it began with him, it apparently has
continued into the rule of his successors--for they seem a part of
the revolution of which he was and still is the dominating, sinister
genius. Under the terms of the merger of 1907, the Mexican government
was given the voting power--but not the title to--50 per cent of the
stock of the company, under certain definite conditions laid down by
the bondholders. This 50 per cent interest represented no capital
invested, nor was it a recognition of any debt which the railways
might have imagined they owed the government. It was given outright in
consideration of one thing, the guaranteeing by the Mexican government
of a return of 4 per cent interest on the bonds of the merged lines. To
the merger the government contributed nothing of tangible value--save
one short line of railway worth about $5,000. Its permission was
needed, perhaps, for the transfer of the railway concessions to the
merger, but this would probably have been given without question had it
been asked alone. The interests back of the merger believed that the
Mexican government guarantee of the interest on the bonds was worth
the gift of the voting right of half the common stock--and on this
understanding alone it was given.
The taking over of the physical property by the Mexican government
followed the American occupation of Vera Cruz in 1914, and shortly
afterwards Carranza made his claim official, on the ground of the 50
per cent voting right! On the basis of this right alone the Mexican
government to-day holds control of the National Railways of Mexico,
a right once given on the solemn guarantee of the interest on the
bonds--which has not been paid for eight years--and with the recognized
provision that the bondholders should name the president of the lines,
and various officials and members of the board--and to-day there is
not one official who is not a creature of the government which happens
to be in power in Mexico!
Upon such a basis rests the title of the Mexican government to the
National Railways. The subsidies paid by the Diaz government in years
gone by for construction were given as the subsidies were given to the
American railways which crossed the prairies to the Pacific coast--to
make such construction possible in recognition of their benefit to the
country. The Mexican subsidies were less than those given to the Union
Pacific by the United States government and not one touch of scandal
(such as marked our own railway development) was ever breathed against
that of Mexico. The subsidies give no tangible claim to the lines--and
as far as I know have never been advanced as a claim. The only hold
of Mexico over those properties is the shadowy title conveyed by the
voting right of a block of stock given voluntarily by the bondholders
in return for guarantees which have been thrown to the winds for these
eight years.
In the period since the government has had control of the lines,
the physical property has deteriorated to a point where only the
magnificently solid work done by the American builders to-day holds
them together. Operated by the Mexicans, with former firemen as
general superintendents and minor native clerks as high officials, the
properties went their way of slow destruction in the days of Carranza.
Since that time, the turnover of railway officials has eliminated many
of the employees who were trained under the American executives of the
Diaz and Madero time, and to-day the roads are in the hands of men who
learned all they know of the railway business from those who in their
turn had gleaned their little knowledge from their American chiefs--now
gone from Mexico eight years. The result is a ruin comparable to
nothing, probably, but the ruin of railway properties in Russia to-day.
Of the more than 800 locomotives owned in 1914, only 333 (by the
notoriously inaccurate Mexican government figures) are said to be
running. The rest lie at the bottoms of cañons or are rusting in
banks of hundreds in shop yards, as I have this year seen and counted
over 100 in the one yard of Monterey. The freight cars have decreased
from 18,000 to 7,000, and usable passenger cars are virtually unknown
off the main lines to-day--all were wantonly destroyed in the early
revolution or stolen and converted into dwelling-places for “deserving
revolutionaries.” Three-quarters of all the bridges on the 8,000 miles
of line are damaged, dozens of them beyond repair, thanks to the
diabolical perfection of the methods of destruction used by various
Mexican patriots. The tie replacements are seven years behind; nearly
20,000,000 are needed, worth over $17,000,000. Other items in the
$80,000,000 replacement bill are $30,000,000 for cars, $12,000,000 for
locomotives and $4,000,000 for rails.
This loss has been the result of two forms of destruction--the
depredations of the fighting factions and the cumulative destruction
of neglect and failure in upkeep. Instances multiply. During one month
(March, 1914) seventy trains were blown up while running at 30 to 40
miles an hour; the patriots used to connect up their dynamite with
electric batteries and then sight along two sticks from their safe
retreat in the bushes and so set off the charge under whatever section
of the train caught their fancy. At one time in Monterey in 1915,
revolutionary troops burned 800 loaded freight cars; their skeletons
line the Monterey sidings for all the world to see, to-day. One of the
long bridges on the road to Eagle Pass, on the American border, was
wrecked by running a train of loaded coke cars with two locomotives on
each end out on the bridge, firing the train and blowing up the bridge
when the burning coke had heated the steel. A similar trick on the
Tampico line was to take out a rail, then set fire to a train of oil
cars and run it full speed on the bridge, where it was derailed and the
same process was followed as with the coke train.
The rotting of the ties on the road has left most of the branch lines
all but impassable, save to the Mexican enginemen who know each bump
and are quite willing to “take another chance.” The wrecked bridges,
jacked up on timbers, have uncomfortable and terrifying “dips.” The
list can be multiplied indefinitely. Yet perhaps the most expressive
sight to be seen in Mexico to-day is those banks of rusting engines,
100 in Monterey, 100 at Aguascalientes, others at San Luis Potosi,
Mexico City and Guadalajara. These engines were only slightly damaged
when they were side-tracked, but through the failure of the government
to furnish repair materials, they have been gradually stripped of parts
to repair other engines, the brasses have been carried off and sold for
junk and the whole field of ruin left like a desert waste.
There is in the Mexican railway law a provision for compensation
in case the railways are taken over “for military purposes.” It
is estimated that under this law the damages collectable are only
$10,000,000 a year--less by $2,000,000 than the default in the fixed
charges alone. The estimated $80,000,000 of physical damage (a
mere estimate until an actual valuation can be made) is presumably
collectable. The bill of the railroads is, however, as follows:
Physical losses, $80,000,000; defaulted interest to June, 1921,
$75,000,000; total, $155,000,000. It is believed that about one-third
of the bonds are held by Americans, so that their loss is over
$50,000,000. In addition, there has been an individual loss in the
disposal of the bonds by small holders, at sacrifices as great as 80
per cent. It is even said that the Carranza government had hopes of
being able to buy up the railway bond issue when its administrative
policies had reduced the quotations to less than 30 per cent of
par. Only the lack of money prevented this coup for real government
ownership, it is said.
In the above, I have treated only with the National Railways of Mexico.
Outside of this system the only important lines in Mexico are the
Mexican Railway (British owned) which has now been returned to the
stockholders but without compensation for damages and the Southern
Pacific in Mexico (American owned). The former suffered severe physical
destructions, but the latter’s bill for damages, while heavy, sinks
into relative insignificance.
In the confines of a general study, space can not be given to the
sidelights on the Mexican railway situation--a situation almost
Teutonic in its colossal blunders, splendidly American in the elements
which have gone to save it from utter wreck. The long years of patient
railway building, the hundreds of miles of rock-ballasted lines across
unproductive wastes, all done under American management, gave Mexico
a system which has held together despite the wreckage of bandits
and the ravages of time and neglect. The traffic of the nation moves
to-day, not in the wheezy trains which the Mexicans maintain, but
overwhelmingly in a system of privately owned locomotives and cars
operated by the American mining and trading companies at staggering
expense. Their 100 locomotives, in perfect repair (kept so in their own
shops) and their nearly 3,000 freight cars probably represent half of
the railway equipment running on the National Railways to-day, and they
probably carry far more than half the freight. They pay full freight
rates in addition to furnishing the trains, and although much of this
equipment has been taken over by the government as this is written, it
is no exaggeration to say that but for these American companies and
their magnificent efforts to save what is to be saved of their Mexican
properties Mexico would to-day be stagnant,--a land of chaos comparable
only to the period of fifty years ago, before Diaz ruled.
The great oil business of Mexico owes its existence primarily to
American enterprise. Of the $300,000,000 of cash invested in the oil
fields, $200,000,000 is American. To-day, even after the colossal
production during the war, only a small portion of this investment has
been recovered, for only two purely Mexican companies, the Mexican
Petroleum (American) and the Eagle (British) are paying dividends. The
oil business in all lands is so speculative that its returns are quoted
not as “dividends” or “interest,” but as “recovery,” for until the
great investment in drilling, tanks, pipe lines, refineries and ships
is got back, there is no surety that the venture itself will prove
profitable. For this reason the losses of the oil companies through
the Mexican revolutions can be only an estimate. From sources which I
have been able to reach, I place the actual physical losses at about
$5,000,000 for the American companies. This seems like a very small
item, but it does not count the failures of most of the 300 companies
which have put money into Mexican oil or the vast sums paid in taxes
or lost through oppression. Nor does it take into consideration the
potential losses if Mexico enforces her “nationalization” plan. These
last would be legitimately included here, for as I say, they jeopardize
the “recovery” of the investment still remaining unpaid for, and
Mexican oil stock quotations have suffered as a result. Mexico still
threatens to enforce the provisions of the new constitution which
make oil the property of the nation and its exploitation a matter of
concession, like gold and silver. The oil companies are fighting this
plan, for they entered Mexico and invested millions in oil lands and
leases from individuals (no land was ever given them) under a mining
law which left coal and oil the property of the owner of the land,
unlike gold and all other minerals.
The actual bill of our oil companies includes, as the chief single
item, a $2,000,000 loss due to the Battle of Ebano, fought over
American property in the spring of 1915. Oil, tanks, pipe lines and
refinery buildings were destroyed, a single cannon ball igniting a tank
containing 850,000 barrels of oil, all of which was burned. The item
of direct thievery (largely by federal troops) is only about $300,000,
but petty destruction, murderous assaults, the killing of a score of
valuable employees and the tribute to bandits and federal “generals”
pile the total up. Tribute has been levied, first by the federal
Carrancistas, and from January, 1915, to March, 1920, by Manuel Pelaez,
the former rebel leader, to a total of about $2,000,000, Pelaez’s
figure being a regular $30,000 a month up to his joining the successful
Obregon revolution in 1920 and so becoming a “federal.”
The ravaging of the oil wells is full of picturesque and terrible
incident, like the railways. The most striking and costly was the
outrage perpetuated by General Candido Aguilar, son-in-law of Carranza.
On December 13, 1913, Aguilar demanded, from the Eagle Oil Company
(British) tribute to the sum of $10,000. This was not forthcoming
so Aguilar proceeded to carry out his threat of “shutting in” the
great “El Portrero” well, one of the most famous in Mexican oil
history, which had been a steady producer, for two and a half years,
of 30,000 barrels per day. He succeeded in capping it, and before the
casing was finally blown out, the oil had broken through the ground
in dozens of places, including the bed of a neighboring river. The
whole countryside was in imminent danger of a terrible holocaust if
the oil on the river flowed away and ignited, as it surely would, but
by superhuman efforts this danger was averted. But all other attempts
to save the oil and repair the damage were almost fruitless, and for
months the seepage went on, until at last the well was reduced to
salt water and $20,000,000 worth of oil had been lost. This loss is
technically British, although it is probable that the bill for damages
will fall upon the United States, for it was undoubtedly through the
instrumentality of our State Department and its emphasis of the Monroe
Doctrine that Great Britain was restrained from taking action.
Another item to be noted is the great Carranza tax system which
continued in full force into the era of Obregon and costs the oil
companies some $4,000,000 per month. Part of this may be recognized in
time as legitimate, but it violates the letter of the franchises of
most of the companies. To this bill of claims will also be added the
losses incident to carrying out the orders of our Department of State
for all Americans to withdraw from Mexico on two occasions. Each time
about one month’s production was lost.
I have noted above the far-reaching possibilities of destruction to oil
properties entailed in the “nationalization” plans. While these are
in abeyance pending “investigation and legislation” the oil companies
have other drains on their resources, such as government levies for
dredging the river at Tampico (while the companies’ own dredges do the
work), the requirement of special licenses to drill each well, and the
virtual curtailment of all development work outside the Tampico-Tuxpam
district. All add to the total loot of the revolutionists, and continue
the threat against foreign business development throughout all Mexico.
About $200,000,000 of American money has gone into mining in Mexico.
Practically all of it has been legitimate business investment, in
low grade or old abandoned bonanza properties, in mills and in
smelters--the speculative period of bonanza mining such as we have
had in our own West was passed in Mexico a century before American
money began to flow across the Rio Grande. Our American investment
could therefore by no means be regarded as a speculative venture, and
the margin of return was relatively small--so small in fact that
Mexicans did not and would not now consider such mining as profitable
investment. We are, therefore, justified in taking a serious and
calculating view of the damage done to American mining properties under
revolutionary rule.
From sources available, I would estimate the damage done American
mining properties in Mexico at $15,000,000--this is very conservative.
There has, however, been little of the wanton destruction of mines such
as the Germans practiced in Northern France. One instance, however,
stands out, and this was to a coal mining property in northern Mexico,
the Agujita, less than 100 miles south of Eagle Pass, Texas. In May,
1913, General Jesus Carranza, brother of the president, demanded
$50,000 from the manager of this property, owned by American and other
foreign capital. The money was not on the ground and there was no
telegraphic communication with Mexico City, so it could not be paid.
The property was then wrecked by Carranza soldiers, several hundred
coke ovens blown up, the mines fired and flooded, buildings burned,
etc.,--damage estimated at $1,000,000.
Some other incidents of this sort are recorded, but the largest
physical damage is indirect, due to the driving off of workers and
the murder of the American engineers, so that great mining properties
were abandoned temporarily with the result that the water came in
and tremendous values in timbering and stoping have been destroyed.
In some instances the damage caused by water has mounted up to vast
sums; one great mine, the Tiro General, an American property, will
for instance require $300,000 before it can be operated again. Other
properties abandoned from time to time during the years when railway
traffic was interrupted, have similar bills for repairs, and hundreds
of other mines, great and small, have been kept closed through the most
profitable period mining has ever known (that during the Great War),
with vast losses, although the ore is of course still in the ground and
will some day be taken out.
The decrees and laws put into effect by the Mexican government in its
effort to raise money have had a serious effect on mining. There have
been new export taxes on metals, for instance, 5 per cent on lead,
copper and zinc, where before nothing was assessed, and in some cases,
as in that of copper, definite sums per pound have been assessed,
with the result that the falling copper prices caused the closing of
great properties like that of Cananea (American) and El Boleo (largely
French). Silver and gold were taxed 10 per cent as against 2¹⁄₂ per
cent in the old days; during the war the export of gold was prohibited
and half of the value of the silver exported had to be returned
to Mexico in gold. Taxes on mining claims also have been increased
tremendously, so that in 1916 a group of forty-five American companies
estimated for the American-Mexican commission sitting in Atlantic City
that where in 1912 they paid $96,000 in taxes on a group of claims the
new laws would have collected $569,000 and where in 1912 the export
taxes were $1,726,000, the export taxes on the same quantity of metal
(if it had been taken out, which it was not) would have been $7,000,000.
During the war, only high metal prices kept any mining business going
in Mexico. After the armistice, hundreds of mines and all but a few
smelters were closed down, and only the high price of silver, as long
as it continued, allowed those that were left to keep running. Even
during the era of high prices it was impossible for the mines which
were operating to do the development work which alone makes possible
the continued operation of mines under modern conditions.
Due to taxation, heavy freight costs, scarcity of materials and of
labor, bandit raids and uncertain supplies, the science of mining in
Mexico thus slipped back thirty years. This, in a phrase, sums up the
reason for the losses and the conditions which make it impossible
for mines to operate to-day where in times of ordered, intelligent
government, they were running and supporting hundreds of thousands of
Mexicans in comfort and peace.
Figures presenting the case of the land and cattle companies are
almost impossible to obtain, for these interests have never organized
as the oil and mining men have, and the only possible sources of such
information have not been able to collect figures enough to cover the
situation. Roughly, however, it is estimated that $50,000,000 of actual
American money has been invested in land in Mexico, and although the
titles to the properties still remain (always subject to the proposed
confiscation of foreign property), the loss in capital invested, of
live stock and crops, can probably be placed at over $10,000,000. The
land companies and individual American holders of lands have, however,
been the greatest sufferers, perhaps, of all the interests, for the
actual worth of the land they occupied was infinitesimal compared with
the value which their very presence and industry created for it.
The Mormon colonies of northern Chihuahua, near Casas Grandes, were
amongst the most prosperous, in a comparatively large way, of all the
agricultural sections of Mexico. Here the “desert blossomed as the
rose” and the American colonists, industrious and prosperous, were
becoming valuable contributors to the Mexican national wealth. All this
has been swept away, houses burned, cattle run off, men, women and
even the children murdered and maltreated, and the whole enterprise all
but destroyed. The case is paralleled all over the country.
Millions of dollars have been invested by Americans in tropical
plantations, and some at least of the properties were of great
potential value. The story of the wrecking, raiding, pillaging and
murdering on these properties would cover pages and the sums actually
lost and the values destroyed by the interruption of development run up
into great totals.
At the other end of the country, in Sonora, the records show the
systematic ruin of the Yaqui Delta Land and Water Co., which, beginning
under President Madero, had invested $3,000,000 in land, surveys and
experiment stations and was turning a great property worthless for
anything but grazing, into a paradise of irrigated farms. Beginning
with Carranza and continuing steadily since this company’s property
has been despoiled, and by means of confiscatory legislation, new
interpretations of franchises and overwhelming taxation has been
reduced to ruin and even the government franchise itself finally
annulled. The Mexicans have no plans and no money to do such vast
development themselves, so the destruction of this property, pushing
it back to the mere value of the grazing land, was utterly wanton and
deprives Mexico of a great agricultural development of the type which
she sorely needs.
In industrial, public service, banks and other classes of investment
American money has been put into Mexico to a total of about
$50,000,000. Most of the industrial and public service corporations
are owned by foreigners in Mexico, the only exceptions being a few
manufacturing plants and undeveloped tramway and city water plants.
The majority of this capital is, however, British, French and German,
American money having gone into the other interests described. Much of
this industrial property has been destroyed, and the public service
corporations have been taken over by the government on various pretexts
and without payment, for the money they have earned has gone into the
Mexican national war chest. There remains, however, the possibility of
damage claims, which in these cases can be easily established.
Of the American corporations engaged in industries a typical case is
that of the Continental Rubber Company, which has invested $5,000,000
in the guayule rubber business in north central Mexico. In 1910 the
guayule exports of Mexico were 28,000,000 pounds, worth in the market
approximately $20,000,000, and of this the Continental exported the
largest share. To-day the guayule exports are practically nothing on
the part of the companies, while the guayule shrubs on their lands are
being cut and shipped by roving bands of bandits and peons. The vast
Hacienda de Cedros, covering 2,000,000 acres, was bought by the company
nearly fifteen years ago, when its value was around $1,000,000. At the
height of the guayule business its worth was many times this sum, but
to-day, even with the chances of a future recognition of the title of
the American company, it could not be sold for its original cost. Like
all foreign properties in Mexico which have been successful, the value
of this hacienda was in the industry of the Americans who owned and
managed it--a value which cannot be estimated or set down in figures in
a damage claim.
The Mexican Banks of Issue, the backbone of the credit system of
Mexico, were owned only in small part by American interests. Their
destruction and the wiping out of the entire Mexican financial system
which was built up by Diaz, must not be forgotten in trying to get a
picture of the destruction wrought by the Mexican revolutionary bandits
and their governments. The paper money systems which scourged the
country from 1913 to 1916 cost foreigners millions of dollars which
can never be shown in figures, owing to the fluctuations of the paper
pesos. The upsetting of credit, which those who study the situation
soon find was due largely to Carranza decrees (whether justified by
circumstances or not) has set Mexico back nearly fifty years and has
depressed values of property and investment beyond any calculation but
the most careful studies by experts in finance as well as industry.
It is such phases of the Mexican credit system of to-day which
constitute the real damage claims against Mexico--claims which
can hardly be estimated. I place the figure at $1,000,000,000,
and yet its potentialities are far more than that. At the present
moment the greatest actual loss--even though it can be partially
repaired if the future develops sane government in Mexico--is in the
virtual destruction of the market for property in Mexico. The new
constitution and the decrees and laws under it virtually prohibit
foreigners from owning anything in a vast restricted zone along the
border and seacoast, a zone including the richest foreign holdings
in Mexico. They prohibit foreigners from owning real estate anywhere
unless they agree never to appeal to their home governments in case
of trouble. The effect of this is to eliminate the only possible
market for valuable property. The Mexicans, and particularly the
Mexicans who are in control to-day, will not, need not, can not buy
such properties--foreigners and the opportunities which were open to
foreigners in Mexico before the revolution actually created the market
value of such property, because they and they alone were the possible
purchasers.
Even well-developed small farming tracts cannot be sold to small
Mexican farmers--such small farmers hardly exist as a class and where
they do exist, their experience and their financial capacity do not
lead them to consider the purchase of improved farms. And above all is
the promise and the performance, in some cases, of the much-heralded
land distribution of the revolutionary governments. Where men can get
something for nothing, or on their own worthless credit, they do not
buy in the open market.
Aside from this destruction of the values of foreign property holdings
in Mexico by making transfer virtually impossible, there is, once more,
that omnipresent menace of confiscation which makes men seek privileges
instead of their as yet uncertain legal rights, for the protection
of what they have. No longer do men buy to develop--they take, as in
the oil fields, only what is sure to return large profits in a very
brief time, for they know that even if they have privilege, and think
they know how to keep on having privilege for themselves, they cannot
transfer their capacity for getting privilege when they seek to sell
their property. There are no longer relative values of property, in
Mexico--property is worth only what can be got out of it, and got
quickly.
This all makes up an uninspiring picture. But we must look on such
pictures, must weigh and judge them ere we can see the way through and
beyond them. That there is such a way must not be forgotten. It lies
beyond the realm of mere political reform, for to-day, as all through
the revolutionary history of Mexico the curse of the country is _the
application of political remedies to economic ills_--that phrase should
be burned into the brain of all who seek knowledge of the real Mexico.
That the relief is to come from the womb of revolution has been
the hope of all who have watched the struggles in Mexico without
understanding them. The failure of their hopes has been continuous.
Madero, Huerta, Carranza, de la Huerta, Obregon,--to each in turn
have such watchers transferred their allegiance and their faith. Each
has failed, in so far as each has applied only the political remedy.
The result has been the utter debasement of Mexican credit, the utter
outraging of Mexican and foreign faith in Mexico herself. To-day, as
I have said, Mexicans do not believe in Mexico, and each new failure
of the political remedy sends them further away from her altars. What,
then, is the answer?
The answer is but the following of the inexorable logic of life--and
of business. We shall find it, not in the application of new politics,
of new (or of old) constitutions and laws and decrees, not in the
ravings of dreamers or of petty states-men. We shall find it, and shall
know it when we find it, in a solution of the practical problems of
Mexican commerce, labor and business by the practical men of affairs
of Mexico and of the world. Our part shall be a very great part, for
the business men of the United States, above all others, must show the
way. Mexico must in the end bow to practical ideas of practical men,
and in bowing to that yoke she will see her future unfold. Of the ways
of finding the road and of turning Mexico upon it, we shall deal later.
Only here, at the end of this dismal chapter of failure to solve the
economic problems by political nostrums, I wish to indicate that there
is, and will be, a way of hope and of salvation--from within Mexico
herself.
CHAPTER VI
MEXICO AND HER “BOLSHEVISM”
Ten years ago Mexico was one of the great, progressive nations of the
world; to-day she is just “another Latin American Republic.” Then she
showed literally the achievement and the promise of Japan; to-day she
is as backward and as hopeless as Turkey. Ten years ago her diplomats
were honored in the councils of kings, her credit ranked with that of
the best of Europe, her cities were miniatures of Paris, her mines
operated with the perfection of those in England, her railways and
budding industries bore comparison with those of the United States,
her people lived in arcadian peace, wakening slowly and surely, if
sometimes painfully, to a civilization which was meeting their needs.
To-day, Mexico is a little worse than Turkey, a little better than
Hayti, her diplomats are as inconsequential as those of Thibet, her
credit is as low as that of Austria, her cities and ports are mud
puddles and pest holes, her mines are back to the rat-hole workings
of the colonial Spaniards and Indians, her railroads are rattling
skeletons, her industries virtually non-existent. Life is again
arcadian, with all those discomforts of Arcadia which the poets of old
and the propagandists of to-day neglect, so carefully, to mention.
The world has learned, in these past years, to take colossal
destructions calmly, so that few of us wonder and none of us really
questions the fact or the why of Mexico’s sudden and astounding
degeneration. And yet that failure is in miniature the threat and
the promise of the failure of our civilization, in epitome the boast
of bolshevism and the nightmare of capitalism. Mexico is like the
Chamber of Horrors at the old Eden Musee or Mme. Tussaud’s, a row of
illuminated pictures which tell in ghastly realism what is sure to
happen to careless people if they play too recklessly with the world
which is given them to use.
This seems indeed a cycle of bolshevism, but it is a cycle in which
radicalism, like capitalism, is a sorry victim. As a picture the events
in Mexico approximate the drama in Russia, carried to the logical
conclusions which such a drama would reach on any national stage where
personal aggrandizement is a mightier lodestone than public devotion.
The historical facts of the past decade in Mexico are unrelated to the
facts and background of Russia, yet in Mexico there have been heard the
same shibboleths, the same promises, the same cries of the downtrodden.
There have been seen the same red flags, the same uprisings and
assassinations, and the same “redistribution” of property as in Russia.
And more than all has unrolled the drama of the rising of obscure
chieftains and politicians to colossal and wicked power. But in Mexico
the cycle has gone far beyond Russia, perhaps because here there has,
indeed, been no touch of even such idealism as there may be in Moscow.
In Mexico the crimson day of bolshevism has been followed quickly by
the purple twilight of the aftermath of graft and privilege. To-day
there is to be seen there a power of wealth mightier than any which
is conceivable in the now almost forgotten dawn of bolshevism’s red
day in Mexico. Privilege and not the proletariat, capitalism and not
socialism, are the gods of that stricken land,--a land which ten years
ago was mistress of her life and of her destiny, and to-day is a beggar
in the marts of the world, ready to sell her body and her soul for gold.
I have no desire to force a parallel between the early events in
Mexico and those in Russia. The parallel is there, and could fill the
eye and mind with the aid of a modicum of imagination. But the facts
alone are eloquent, and the primary fact is not whether the revolution
against the czar was day for day and hour for hour a repetition of
the Madero revolution against Diaz, or whether Huerta was an Indian
Denekin, or Carranza a weak Lenin or Obregon the realization of what
Trotzky might be to-morrow or next year. The first fact and the last
is that in one great section of Mexico we have seen and in the whole
of Mexico we are to-day watching the rolling on of an ugly spiral from
plutocracy to revolution, from revolution to socialism, from socialism
to bolshevism and then from bolshevism to demagogy, to a later and
darker dictatorship, with a more miserable proletariat, and on into the
vast sweep of an age of privilege which holds and wields power greater
than government, greater and more direct than capital or labor has ever
wielded. For privilege stands alone in the midst of the smoking ruins
of what was once the Mexican nation.
He braves much in this day who dares define or limit bolshevism, but
in Mexico its manifestations have been carried to a point where they
have limited and defined themselves. First, Mexican bolshevism was and
is the application of political remedies to economic ills; second, it
is the raising up of the proletariat by promises and agitation to the
overturning of established government and the setting up, not of the
promised millennium, but of new dictatorships and new oppressions. Both
sought, and claim, the improvement of the workers, but both have failed
and faded to shadowy appearance and raucous boast.
In Mexico to-day there are spots where peace and progress reign--but
they are literally those spots where “capitalism,” entrenched behind
a wall of gold and foreign protection, has been able to give its
workers the value of the profits which they gain. The rest of Mexico
is worse off, politically and economically, than in the days of Diaz,
and increasingly the only hope of the country seems, by some means,
to achieve the extension of sane business to the replacement of the
economic ruin of native demagogues masquerading behind the fair words
of socialism.
The essence of the beneficent effects of this foreign business has been
the education of the Mexicans whom it touches toward broader horizons
of living and personal efficiency. For actually the history of Mexico’s
downfall is a history of the failure of her education, of the failure
of the past governments of Mexico to utilize the forces which were at
their hand for the uplift and the development of the unhappy masses of
the people. That failure of the past has become a colossal catastrophe
in the days of present and past revolution.
For their day and time, Spain and the Roman Catholic church did much
for Mexico. We do not know what the Church might have done if it had
had different, more educational ideals, but we do know that, save for
the work of the Protestant missions in the past thirty years, hardly
any other force but Rome has done anything for social improvement
in Mexico. We do not know what Anglo-Saxon educational and economic
leadership would have done in the place of that of the Spaniards and
mixed-bloods--such comparisons are necessarily academic. But we do know
that under the Spanish viceroys and under Diaz more was done toward
improving the material welfare and toward building the foundations of
material and moral prosperity for the unfortunate peons than has been
done or even sincerely attempted in the ten years of revolutionary rule
since the fall of Diaz.
Mexico has been, and indeed is, what we sometimes call in our brusque
Americanism, a “white man’s country.” It is essentially one of the
spots in this world where the burden of uplift is the white man’s
burden. For 300 years white Spaniards sought to lift it, and in that
long effort, with all its failures, they placed Mexico, even with her
six millions of unlettered, superstitious Indians, in the category of
the white lands. The duty of the white man, imperialist or socialist as
he may be, has ever been two-fold, and its duality has been its power;
we have lifted the material plane of our wards and we have upraised
those wards themselves to a higher and yet higher mental and spiritual
plane.
It is this dual duty that the revolutionists of Mexico have shirked
and have scouted. The economic rain of the country is to-day almost
complete, and its spiritual uplift has been halted as by a wall of
flame. From those material ruins, Mexico might conceivably rise in a
spiritual rebirth, but the fact has been otherwise, for the material
ruin has been accomplished by the prostitution of all the ideals,
all the sacred faiths of men, concentrated by self-seeking bandit
governments to the aggrandizement and the enrichment of a few sodden
favorites.
I would, if I could, paint a different picture, but the half lights of
such a panorama can be added only after the dull background has been
set in. And that background is dark indeed. The panorama of misery
begins when one crosses the northern border to-day. There the scattered
but once almost happy villages of other times have been replaced by
ruined, roofless railway stations lined with starving vendors of food
who fight with the bony dogs for the refuse of the very food they
sell. All the long trip to Mexico City is marked by the same voiceless
suffering, and the capital itself has a dismal dinginess that cries of
hopeless misery, in appalling contrast to the gallant days of the Diaz
“materialism.”
The unhappy toll of war and revolution, one says? Yes, in part, for
such “war” as Mexico has known always takes that toll and always, too,
from the weaklings, putting starvation and sickness and filth and
dismay where once were comfort and health and some cleanliness and
happiness.
But, again the question, was it not worth the price, will it not be
worth the price, in the victories won for human freedom? And here the
answer is unequivocably “No.”
Many hoped, with the fine faith of their own sincerity, that the
upheaval which followed Diaz was the dawning of a new era. But in
that hope even those who knew Mexico forgot the Mexicans and their
history. Political independence from Spain had been won, freedom from
the domination of religious bigotry had been won, before Diaz came. The
struggle of his day was one of uplift, carried on with faulty tools,
perhaps, but slowly reaching toward the light. Living was improving,
slowly; religion was improving, slowly; education was advancing,
slowly. Then came a period of crystallization; the Diaz oligarchy
grew old. Many sincere men, inside and outside Mexico, thought that
the advance could and should move more rapidly. Diaz repressed those
hastening reformers, and the spiritual force which finally broke forth
into the Madero revolution of 1910-11 was undoubtedly the result of
that repression of progressive thought.
Like all the revolutions of Mexico’s stormy history, this one began
with a beautiful stating of ideals and of the unrealized needs of
the common man; but as with all those other revolutions, the power
passed quickly to the hands of men whose sole “ideal” was personal
aggrandizement, personal wealth, and ruin to all whose needs might
incommode these exalted “leaders.”
The so-called “social revolution” of Mexico borrowed the battle cries
of European socialism, but in the land in which it worked it stirred up
only a tempest in a teapot, with the miserable masses of the country
serving as tinder and fuel beneath the vessel. The teapot is the
diminutive organized labor world of Mexico, and that is boiling more
violently, perhaps, than elsewhere. But to-day the “advanced” ideas of
Mexico serve, in the name of socialism, only to put sweeping power into
the hands of unscrupulous men, men who know and care nothing of the
responsibilities of power, and are using it only to the destruction of
the very bases of Mexican society.
Thus, while there seems to be a light dawning in the labor world of
Mexico, I am not sure that the light does not come from the burning
of something which Mexico cannot afford to lose. In that organized
labor world there are fewer than 50,000 workers out of a population
of 15,000,000, while there are more than 3,000,000 peons, heads of
families, who work, when there is work, in the fields, or as common
laborers. It is upon the continued, unbroken suffering of these
3,000,000 that the 50,000 profit to-day--the peons have but changed
masters once again and in the name of freedom, now, serve a vaster
company. The Mexican leaders, drawing their power in turn from the
coherent, organized industrial workers, are to-day destroying the
civilization of Diaz, and with it the civilization of American business
men, American teachers and American missionaries, which was and is the
hope of the downtrodden majority. The “modern” laws which labor has
promulgated might, we may conceive, fit the advanced industrial life of
Germany or the United States, but they are utterly suicidal to Mexico.
The new Constitution of 1917 has written into its fabric an idealistic
set of labor laws, beautiful in terminology but under present
conditions of industry and psychology and government in Mexico, about
as impractical for the development of industry and the true welfare of
labor as they are efficient as a means of graft and extortion against
labor as well as against employers. These laws are worked out for the
sole benefit of the industrial workers of Mexico, that total of less
than 50,000 as against the 3,000,000 farm and day laborers. They are
thus far more important as a propaganda document with the foreign
radicals who caused the inclusion of those administrative laws in the
new national constitution than they are helpful to Mexico’s own social
advancement.
The eight-hour day provided in the constitution, the welfare projects
such as the stern proviso that nursing mothers shall have two half-hour
periods per day in which to care for their children, the constitutional
support of the right to strike even in public utilities, and the
virtual provision against the employment of strikebreakers, or the
closing of a shop in a lock-out, are typical of the privileges for
labor--they cover everything which the most radical would make the laws
of every land. In Mexico, and under the peculiar conditions of Mexican
psychology and inter-class relationships, they become little more than
tools of the demagogues. The rulers do as they choose in any case,
as when, not long ago, a railway strike was successful to the last
detail of the demands made in the name of “the social revolution” and
two months later a similar strike for similar ends was opposed by the
general use of strikebreakers. The labor courts, theoretically a great
advance, are used almost without exception as a palladium of radical
propaganda--and as a toll-gate on the road of privilege.
Such are the reforms of the new era. They provide six or eight hour
days, for men who cannot read and whose children are not taught to read
or to think. They provide minimum wages, to be determined by factory
committees, with the most ignorant workmen in the world on a par with
employers and industrial engineers. They provide against discharge for
any cause except proven drunkenness, in a land where, to say the least,
drunkenness is relative.
Their own people have begun, a little, to wonder at the wisdom of these
sweeping changes, and one, Ing. Carlos Arroyo, not long ago wrote in
the official but very radical “Bulletin of Industry, Commerce and
Labor” that there were four main difficulties which would have to be
corrected before factory efficiency could be arranged in Mexico on a
coöperative basis: first, scientific method would have to replace the
empirical system now in use; second, there would have to be special
training for apprentices; third, there would have to be study of
employees to have them properly placed; fourth, the responsibility
for the tasks assigned would have to be “equally” divided (not given
entirely to the workers) between the management and the workers,
“because the former continues to be charged with the responsibility for
the competence of the latter.”
And as to that competence, this same bulletin regularly publishes the
records of accidents. There one will find that in 1918, for instance,
there were, in 278 industrial establishments having 292,364 employees,
6,424 accidents, in which 184 were killed, and 42 maimed and 6,198
wounded. And, most illuminating of all, 5,165 of the accidents were
admittedly due to the “carelessness of workmen,” only 195 were the
fault of the management and 1,064 were due to unavoidable causes.
As to the value of the achieved reforms, I have but this to tell: In
all the cities, in the centers of industry like the Tampico oil fields
and the busy port of Vera Cruz (busier to-day than it has ever been
because all Mexico must live on imported goods) I found a sullen hatred
of the foreigner, an ugly self-assertion that bodes but ill for those
missionaries of religion and of business to whom we look for so much of
the future regeneration of the country. I saw none of the contented,
happy calm of prosperous laborers, but only the unrest of the great
cities of other lands, ugly with resentment, fertile field for
revolution but not for progress. And yet those very resentful workers,
convinced of an unappreciated importance which they knew but by rote,
are all that there is of the “fruits” of the “social revolution” in
Mexico.
No, Mexico has not changed, even amongst her petted laboring classes,
and I fear that the old rule of our ancient civilization will have to
persist a little longer, and the long, dim road be trod again through
failure and reform, and failure again and yet again. I fear that we
shall still have to lift by reaching down and, by training the dull
forces of those dull minds, teach them to help themselves and to climb
by themselves.
Out on the plantations the workers are going the rounds which they have
covered since Mexico began, and in the fairs I saw the only evidence of
happiness which smile on one in the length and breadth of the country.
The market places and the fairs of Mexico, sunny, crowded, colorful,
rich because the Indians in the booths are close to Nature and Nature’s
bounty! That simple happiness has been the source of all Mexico’s
joy--and of all her misfortune. That simplicity has made her people
the dupes of predatory chieftains, and hideous priests of pre-Spanish
times, of Spaniard and priest through the long centuries of the
viceroys, of master and of some priests, too, through the years since
the Independence. Yet in those periods those who have duped the Indians
have, most of them, protected the Indians in an easy, medieval way, and
slowly there has grown a civilization, and in that civilization have
been nurtured the seeds of better things.
The time was coming for those seeds to bear fruit, when, hastening the
ripening, came the revolutions of 1910 and after. It was like the child
who pulled up the stalks to see how the seeds were growing--they were
growing much faster than appeared on the surface, but they did not grow
after they were pulled up.
Looking back to the Diaz day we can find, for instance, the slow,
constructive work toward the creation of arable land for small farms.
It was being hampered somewhat by grasping office-holders, but it was
advancing, a great national plan of irrigation to make possible the
use of small tracts in a country where rain conditions have forever
made small farming all but impossible. Then the revolution and the
resounding cry for “land.” The alleged land hunger of the Mexican
Indians and peons has been at once the rallying cry for each succeeding
revolution and the one appeal of all of them for foreign sympathy.
But whatever authorities may conceive as to the facts of the existence
of this land hunger or of the forms which it takes--a desire for
little farms, for prehistoric communal ownership, or for property only
because it is wealth and can be converted into cash--it is also true
that the schemes of the revolutionists for land distribution have
been impossible except by the confiscation of rich properties and the
destruction of vested rights. Obviously, no land which is not tillable
is satisfactory for distribution, and the tillable land of Mexico
is, as I have pointed out, actually only about 25,000,000 acres, or
one-twentieth of the area of the country. Land distribution must long
remain largely a beautiful theory, good only for raising up the natives
by direct appeal to their bitter poverty or to their human greed,
and for the raising up of foreign sympathy by the flaunting of the
misfortunes of the soil under more appealing names.
In Mexico to-day all these dreams of land distribution have gone
the way of other “reforms” for the benefit of the peons. Nothing,
virtually, has been done. Some great properties have been confiscated,
or “paid for” in unguaranteed bonds of bankrupt state governments, but
most of such properties are to-day in the hands of former revolutionary
“generals.” Some few have been distributed to Indians, but even
these tracts are taken with but scant enthusiasm. One great “land
distribution” in Yucatan called forth a crowd of 6,000 to the festival
(all Mexico goes to any _fiesta_) but only thirty Indians took up any
of the hundreds of small tracts offered.
The essential facts of the Mexican situation are patent to all who
go to Mexico to-day, and they are inescapable to those who have a
background of knowledge of Mexico by which to judge of what they see.
And yet it is true that in the councils of Carranza, in the entourages
of de la Huerta and of Obregon there have been men representing forces
which we in our time have felt could not be used to evil purpose.
These were men who had been stirred by the fine frenzy of the first
revolution, and whose ideas, caught as mere phrases by the leaders of
revolts, were handed back to their originators again, as the “ideals”
of the revolution. Strange indeed it is, and yet not only newcomers,
but foreigners of long residence and sincere and devoted Mexicans as
well, fell victims to that subtle flattery. In business, in education,
in the churches, there were such men, their very hopes too great to
protect them from the petty deceits of those who climbed to power upon
them.
I think I can understand why travelers in Mexico, sincere students
as well as moistily entertained excursions of American “Chambers of
Commerce” can be deceived as to conditions there. I have been inclined
to be impatient with those who let themselves be led this way and
that, and flattered by the apparent sincerity of self-deluding Mexican
officials, but Mexico is, after all, an eternal enigma. It is an enigma
because its colossal depths of ignorance and the smallness of its
deceits are literally incomprehensible to simpler and less subtle minds.
It is that enigma which I have sought through all my writing on Mexico
to resolve. On my last trip through the country, I saw just the eternal
Mexico, the Mexico of ignorance and misery, whose only change was that
it was a little sadder, a little more resentful of those whom it once
regarded as its helpers and its friends, a little more pompous in
parading its borrowed intellectual plumage.
A most perfect example of this ability of the Mexican of the “modern”
type to absorb one’s ideas and deceive one by the redishing of those
ideas, happened to me on my last trip to Mexico City. In the course
of the preparation of an article on a great business for a popular
magazine, I met a Mexican _licenciado_ (a title of vast elegance,
meaning much more than its dictionary equivalent of “lawyer”) who was
extremely anxious to be quoted as an expert on the subject which I was
studying. He evidently thought that my quoting him would help him to a
government post to which he aspired, so he expounded his ideas at great
length. When he was finished, I answered his arguments in kind, and
with considerable interest in his response to my counter-play. He was
pleasantly combative, and we parted in thorough friendship.
It was only a few hours later that I had an urgent call from this same
gentleman, who had, he told me, been going into new material on the
subject, and wished to express his views, stated in the morning, more
definitely to me. Whereupon he returned me, recooked and eloquently
served, my own friendly contentions of the previous interview. It was a
bit thick for me, but it is worth the telling that an American business
man of long experience in Mexico who had introduced this gentleman to
me remarked when the subject came up again, a day or two later:
“By the way, Licenciado Blank is getting much broader. He has figured
out a pretty decent attitude on this problem ...” and he redished me my
own views again!
This is Mexico to-day. On the top a group of men who have absorbed in
just this way the phrases of the intelligent radicals of the world
but who still remain, as always, sycophants without background of
education, or even genuine radical convictions. Below them the vast
misery of the unthinking serfs of the country, duller, certainly sadder
and even less well nourished than in the days of the viceroys and of
Diaz.
We are all responsible for the Mexico which is before us. We Americans
of every type in that old Mexico were too willing to let the misery
of Mexico be what it was, were too willing to take our helpers and
our support from the middle classes which were emerging so slowly.
We made a fetish of that middle class, built our hope of Mexico upon
it, called it the crowning achievement of the age of Diaz, and from
it came the beginnings of that group of Mexican leaders of which we
all had dreamed. We saw Diaz clear--all of us, I think--and knew
that his day could not be forever. But we had faith in that middle
class, forgetting, as it was easy to forget, the instability of that
foundation of Indian poverty and misery. We were going to transmute
those shifting sands by making more striking the examples of its
brothers--artisans and clerks and students and teachers. We trusted
so blindly, then, in the leaven of example--we knew so little of the
sodden flour which made our loaves.
And then came the day of revolution, Madero the deliverer. There were
few of us who regretted the passing of Diaz, save sentimentally,
that it should have to be in just that way--we had hoped he would
die gloriously, beloved by the people for whom he had given so much.
And then the disappointment and the horror of that wild cabal of
graft and loot under Madero, when the dreamers, the repressed brains
of a generation, stood waiting, wringing their hands in helpless
impotence--those who could, truly, have done so much! It was pitiful,
as was the aftermath of Huerta, the reaction, the impossible reaction
with its ugly tinge of a coming uprush of Indian barbarism.
Then Carranza, riding upon the winged horse of Madero--it seems that
not all of us understood, quite, for we heard the fair words, as
we have heard them echoing through empty halls and across dead and
tortured bodies these five years since. Many sincere men were caught
by those fair, echoing words, and many followed the phantom to the end.
And many continue to this day.
I have no need to talk of the recent past, nor of the present. The
story is written in the starving babies of the Mexican towns, in the
dismal railway stations where wretched food can be bought (if one
dares) from the very mouths of hungry, filthy vendors. Misery and grief
and pain stalk in Mexico to-day. Somewhere those who have used these
wretched bodies, as infinite in number, as minute in importance, as the
skeletons of a coral reef, for climbing to wealth and power--somewhere
these must make answer.
In another chapter I shall tell something of the story of Yucatan,
where the ideas of radical socialism were accepted and then used to
destroy even itself. It is a story of horror and of wreckage, the
clearest picture of Mexican conditions at their ultimate which has
passed in the gory panorama of the recent years.
What has happened in Yucatan is in essence what has been going on
all over Mexico. In the larger field of the whole country, the
revolutionists have been more coherent, and at the same time in their
utterances somewhat more considerate of the prejudices of the world at
large. Yucatan, isolated from the rest of Mexico, and free from the
prying eyes of most of the world as well, has gone on with the round
of despotism and oppression, rape and murder in the name of socialism,
but on the mainland, the “rights of labor” have been more elaborately
defended (in words) and the legal systems of confiscation and
anti-foreignism have been more logically developed, under the standard
of progressive socialism!
The years have written records of Mexican political and social
revolution which are identical with those of the present in all save
their battlecries. The first outbreak against Spain in 1810 and the
dozens of revolutions which followed it were a _reductio ad absurdum_
of the political ideals of Thomas Paine and the American and French
revolutionaries. The Constitution of 1857, under which Diaz ruled,
was little more than a copy of the Constitution of the United States,
and few of its provisions were really adapted to Mexico’s peculiar
conditions. So it is not strange, perhaps, that the Constitution of
1917 is as far from being Mexican and far more false an effort to solve
the nation’s problems than was its predecessor, for it was dictated by
foreign radicals and merely adapted by the Mexican politicians who knew
best what would arouse enthusiasm in the Mexican crowd.
Despite its beauties of theory and its direct appeal to the serious
radical thought of the world, its most useful function is becoming
obvious even to the most credulous, for it gives the governing groups
that control of Mexican life by which it is possible for them to
sell the privilege of doing business, because the ancient rights of
business are utterly done away with. The ills of Mexico are essentially
economic, and the new constitution and its revolutions, even more than
their predecessors, have sought to apply only the political remedy, a
remedy which has so far served only to destroy the efficiency of the
economic machinery of the country and place it upon the auction-block
of graft.
To-day all over Mexico, labor is paid higher wages than it ever
received, but it is paying more for its food and shelter than it
ever spent before. The misery of Mexico is just as obvious and as
unescapable as ever to him who sees truly. Save for those sections
where foreign business still survives the Mexican lives as he has
always lived, on the verge of pauperism. And upon the summit of the
heap, lounging in easy magnificence, is the mixed-blood agitator,
the general, the governor, the cabinet official who have battened on
Mexico’s misery before this day and will doubtless do so long after
this day is passed.
The raising of the Indian masses of Mexico by promises and by
high-sounding battlecries is a game as old as Mexican history; it is
played with unvarying success year after year and generation after
generation. The more extravagant the promises, the more complete the
enthusiasm of the “proletariat,” both for the political movement of the
moment, and for the one which follows it immediately upon the discovery
by the unfortunate “people” that the previous promises are not going to
be kept.
But in to-day’s orgy of revolution, Mexico has gone further toward
destruction than she has ever gone before. Values throughout native
Mexico are almost non-existent, and the wheels of Mexican civilization
like the wheels of the wheezy locomotives of her railways, creak and
groan on their rounds. The nation’s economic life is tied together
by strings, and what remains is only what has been salvaged from her
junk-heaps, and like the lawn-mower borrowed from a neighbor, is kept
running only to serve the purposes of the borrower.
The seventy years of warfare before Diaz left intact the civilization
of the Spaniards for Diaz to revive, but the ten years from Diaz to
Obregon have torn that civilization to shreds. Nearly all that Diaz
built has disappeared, and to-day the business of Mexico is swapping
jack-knives and selling food and shelter at the highest prices the
traffic will bear.
No man who would face truth in Mexico can ignore these potent facts.
And the reason is not revolution, nor even mere radicalism, but the
cynical application of political control to economic needs for the
aggrandizement of individual leaders whose power is in the market for
all who will buy the privileges which they have to offer.
It is in this condition that the importance and the menace of
radical Mexican government are found. What it has seemed well to
call bolshevism in Mexico has its greatest power in its mere threat
against capital and business. That threat, the mere presence of the
anti-capitalistic constitution and laws, has probably far greater power
than their actual application would have. Once the blow of confiscation
fell, the answer from the world of business and civilized government
would be quick and sure--Mexico cannot be ignored as Russia can be, for
Mexico lies in the center of the trade-routes of the globe, and we in
the United States would feel the menace of her anarchy too strongly to
remain passive.
But the static power, the threat of laws which are never
enforced--there is the menace and there the great influence which
creates the graft and cynicism of Mexican officials. So long as
those laws remain, business, if it would survive in Mexico, must
buy immunity. And it does buy it, for business is ever timid, and
no single business organization and seldom a group of business
organizations, will ever go to the stake for a principle. Its duty
to its stockholders and to its employees makes it buy its way, not
always by direct graft, but in submission to vast taxes, to unwarranted
extortions, to the riding of official annoyances--rather than accept
the shut-down and fight with its own great power, its inertia of
movement or of the silence which ruins empires.
In recent months the great business groups in Mexico have opposed a
certain amount of strength to the growing power of the auction-block
of Mexican graft and privilege. The oil companies have from time to
time offered a solid front to the encroachments of this marketing of
the privilege of doing business in contraversion of the temporary
laws of Mexico. They have held back, apparently, the crushing fall of
actual enforcement of the confiscatory provisions of the Constitution
of 1917, and they have, here and there, stopped the marketing of
privilege--for brief periods. But looking at the whole picture, it
seems as if the Mexican officials of the present era are in no greater
hurry to enforce the confiscation than are the foreigners to have it
enforced. The static power of those provisions, waiting to fall, is
far more profitable to Mexican pockets than would be the sudden and
final crash of their genuine application. Their enforcement would be
of little value to the seller of privilege, for then he would have to
invent another method of extortion. No, privilege will long remain
upon the market counters of Mexico. It will remain there, in fact,
until some means is found, within or without Mexico, for destroying the
system which is so profitable. That need of change is the crisis of the
business world of Mexico, the crisis of all who would do business with
Mexico in the present or in the future.
What, then, can save Mexico in this crisis? The panacea of the Obregon
idea was certainly not a solution. Here indeed was a probably genuine
desire to solve the problem in a final and glorious way. But the tools
were but the tools of the old days of Carranza and the rest. That was
a political remedy for an economic condition, and its promise was a
sordid thing, an unworthy thing for Mexico or for the United States to
expect. For the promise of Obregon was at first for reaction, a belief
that Obregon was comfortably wealthy already or that his ambition was
for power alone. Therefore he was to be the great conservative, who
would save Mexico by slipping back to the days of Diaz. But reaction
must always fail in the end. In this case it passed quickly, for this
was a “reaction” which was part and parcel of the “radicalism” of
Carranza, its power but a manifestation in another form of the same
personalism, the same sale of privilege, which made Carranza impossible
and in the end, brought him to his ruin.
The later developments of the Obregon idea were marked by an obvious
anxiety to reach a permanent solution of the immediate and pressing
difficulties of Mexico, and most of all to secure recognition by the
United States and financial aid from American bankers, as the _sine
qua non_ of such a solution. The efforts put forth were powerful, but
the driving force back of them was primarily personal ambition and the
realization that only such a solution could save the happy hunting
grounds of revolutionary leaders from some sort of foreign intendancy.
And above and beyond and behind all, were the factors of government
whose origins and whose immediate past seem indeed to be as firmly
stamped upon their natures as the spots upon the leopard or his skin
upon the Ethiopian.
The completed cycle of the bolshevist experiment and the arrival back
at the sale of privilege links up with the failure of Obregon to offer
anything but, first, a promise of reversion to reactionary czarism and,
second, that unconcealed offering of privileges and promises of power
to all who could or who might aid in the campaign for recognition and
for foreign loans. The condition seems to me to sound a call as of
Elijah for a new understanding of the Mexican problem. Carrancism might
have been but an isolated interlude, might have been a mere question
of observation and interpretation, if the end had not come and if
business in Mexico were not continuing to pay for its sorry privileges
in the same sorry way. Obregon might perhaps have been the hope for
peace and happiness in Mexico if we had not had Carranza and de la
Huerta and if their followers, with their cynical mouthings of all the
most sacred faiths of man, were not to-day still the rulers of Mexico,
still the sellers of privilege in the name of human progress.
We must, I believe, cast away the too long nurtured idea that the
battle in Mexico is between the progressive thought of the day and
the reactionary conservatism of great interests. I have sought here
to show why this is so. A revolution which can evolve the idea of the
socialization of great industry and can, in the very conception of that
idea, turn it to the looting of that industry for private graft and
gain, as in Yucatan; a revolution which can produce the uncontrolled
radicalism of Carranza and evolve through the cynical play-acting
of de la Huerta into the promise of reactionism in Obregon with all
the unholy forces which supported Carranza rallying to uphold his
successors--such a revolution will not, unredeemed, carry Mexico into
her next era of progress and peace. Capital and socialism must alike
beware. Neither should, in honesty with itself, accept a cause in
Mexico until the issue is joined clear.
In the past ten years we have seen in turn the appeal of political
Mexico, to-day to the bolshevist, to-morrow to the Christian
missionary, to-day to the thinking radical of the universities,
to-morrow to the deep-dyed conservative of the counting room. Confusion
has piled upon confusion until we have each seen in Mexico what we
hoped or what we feared.
We can only begin to see the truth, and in the truth the solution of
the complicated Mexican problem, when we clear our minds of these
old ideas that he who is against the revolutionary government in
Mexico is a hopeless reactionary, and that he who is for it is a
raving bolshevist. For the Mexican revolution is part of the “world
revolution” only as the shibboleths of that vast upheaval have been
turned to the aggrandizement of Mexican leaders who know neither what
the phrases mean nor where they lead.
If this is grasped, and if we will look at Mexico as a problem for us
all, then the beginning of the road away from foreign intervention and
the peril to our peace and Mexico’s will begin to open. Intervention
can be avoided, even though it may be grievously close to-day. But it
cannot be avoided until we see clearly that the issue of intervention,
like the whole issue of the Mexican revolution, is not one of
capitalistic interests against the unhappy Mexican peon, but a struggle
of all the constructive thinkers and workers of the world--be they
radical, socialistic, religious, philosophical, laborite, capitalistic,
industrial or social, be they American, English, French, Russian or
Mexican--against forces of greed and ignorance which turn every ideal
of honest men to the prostitution of their country and the exploitation
of their fellows within and without its borders.
CHAPTER VII
THE RAPE OF YUCATAN
From the golden wheat fields of Kansas to the barren sands of
Yucatan, from the loaf of bread on your table to the loot of Mexican
revolutions--these seem mighty leaps of imagination or of fiction. Yet
the link is closer than imagination could ever forge, the analogy a
stranger tale than the yarns of Captain Kidd.
The modern industry of wheat farming depends, by one of the romantic
balances of world commerce, upon the supply of binder twine for the
mechanical harvester, a supply which comes alone, to-day, from the
cultivation of a humble cactus plant in far-off Yucatan. The great
Mexican industry of raising this henequen or sisal hemp was prostituted
by Mexican revolutionists to the manipulation of the binder twine
market so that in four years more than a hundred million dollars in
artificially inflated prices were dragged from American farmers. Thus
it was that through the helpless years of the Great War, all who ate
the bread of the wheat, from you and me in America to the starving
children of Belgium, paid bitter tribute to the greed of Mexican
agitators.
The story of Yucatan is no mere tale of the by-play of revolution,
the “fortunes of war” or the “necessary accompaniments of a great
social upheaval.” It is the history of the deliberate looting of a
commonwealth and of an indispensable international industry. In the
name of socialism, shouting the battle-cries of the age-long struggle
for human freedom, Mexican revolutionary leaders turned the richest
agricultural state of Mexico into a desert waste, prostituted the only
creative industry in the whole country to the looting of the world’s
farmlands and the taxing of every loaf of bread consumed in the world.
The vast tribute which thus poured into the coffers of revolutionary
government was utterly lost to public vision almost before it had
left the market-places, and not one cent of it was ever turned to the
easing of the sorry human burden of the Mexican peon or devoted to the
education and upbuilding of the Mexican people.
The story of Yucatan is the story of as gruesome a rape of Mother
Earth as man has known. Beginning with the familiar picture of the
downtrodden peon of the Diaz time, it runs the gamut through the
marching armies of conquerors, through a cycle of high-sounding
socialism to bloody oppressions, and on to a newer despotism and
finally to utter economic collapse. In the end it flattens down into
the present, an era of capitalistic struggle in which the state, by
the laws of economics which its despots perverted so vigorously, is
being ground between the millstones of opposing forces of the very
business which was once the source of all its wealth and all its
progress.
Upon the wheat crop of the world depends the life of the world, and
upon the mechanical harvester depends, literally, the life of the
modern wheat industry. In its turn, the operation of the harvester
is dependent upon the millions of miles of binder twine which alone
make possible the handling of the wheat on its way from the standing
fields to the thresher which converts it to golden grain. Since Cyrus
McCormick first offered his “reaper” to the American farmer, more than
fifty years ago, invention has sought far and wide for freedom from the
need of twine for the binding of the sheaves, but neither “header” nor
mechanical flail has been able to achieve it; to-day the wheat farmer
must have twine, and that by the hundreds and millions of pounds, to
harvest his crop.
Thus, because the sisal hemp or henequen of Yucatan is the only fiber
which can be produced in sufficient quantities at a low price to
meet the farmer’s need for binder twine, the wheat for the world’s
food supply depends vitally on the product of this one distant state
of Mexico. Without its humble aid, the American farmer might,
conceivably, hark back to the binding of wheat sheaves by hand--it
is certain that we could anticipate the scrapping of billions of
dollars’ worth of mechanical harvesters in the substitution of some
other method than theirs. The only other fiber that will serve for the
making of binder twine is true Manila hemp, whose total crop would not
fill a tenth of the needs of the world’s annual harvest, and whose
finer quality and greater cost have caused it to be devoted almost
exclusively to the making of high-class cordage. Cotton and jute and
silk and all other known or promised vegetable or animal fibers from
which binder twine might conceivably be made have proven useless for
the purpose. One of them is too stout, one too soft, one too short of
fiber, one not brittle enough, another too brittle. Sisal, the Yucatan
henequen, is to-day the only hemp which meets all demands of the
world’s annual wheat harvest, a demand which has reached the colossal
total of 400,000,000 pounds a year.
Upon this need has been built the one great creative industry of
Mexico, the one business, agricultural or manufacturing, which in
Mexico produces wealth through human energy. Its source is the
long-leaved henequen plant, to whose necessarily slow growth for
fiber the sandy, desert soil of the Yucatan coastland is peculiarly
adapted. The henequen is a species of the great agave, that strange,
cactus-like “Century plant,” which is found in one form or another
in almost all desert countries. As the maguey, it grows in the great
Central Mexican plateau, furnishing the heavy drink called _pulque_,
and giving up a hand-extracted fiber which has been woven into the
raiment of the Indians of the Valley of Mexico for centuries. Still
other varieties, in the warmer sections of Mexico, furnish food for
cattle and, distilled, the fiery _mescal_ or _tequila_ which is an even
more terrible curse of Mexico than the much-berated _pulque_.
It is the henequen, however, which is the most commercially useful of
all the agaves, for its narrow leaves, three to four feet long, are
peculiarly adapted to the mechanical extraction of their fiber (which
most of the agaves are not). The coarse, rasping, yellow strands have
the thickness and the strength of horsehair, so that they survive the
vigorous de-pulping process of the great gin-like machines. After
drying, they furnish a stout fiber which, when woven into thick cord,
ties the wheat sheaves in the harvester, and breaks easily as each
sheaf is thrown back into the thresher in the gorgeous pageant of the
harvest.
This henequen, the sisal hemp of commerce, was first exported in 1864,
and by 1880 was one of the well-known but minor fibers in the American
market. In 1898, when the Spanish-American war cut off the exports of
Manila hemp, henequen sprang into immediate and great importance, its
price rose from 2¹⁄₂ cents to 10 cents a pound in New York, and an
immediate increase in the industry and in the economic importance of
the state of Yucatan took place. There was a lively boom in henequen
lands, and incidentally an improvement in social and political
conditions in Yucatan, followed by something of a slump with a few mild
panics around 1907.
But henequen fiber had been definitely established in the market and
selling as it did at an average price of 5¹⁄₄ cents a pound, became
the great staple for the manufacture of binder twine. This new and
virtually inexhaustible supply of cheap fiber for twine-making played
its part in the broadening use of the mechanical harvester, until by
1915 Yucatan henequen binder twine was being shipped to every wheat
producing area in the world, from the Siberian steppes to the pampas of
the Argentine.
In 1914 the exports from Mexico were more than a million bales or
approximately 400,000,000 pounds, which was a doubling of production in
fourteen years. The current price of about 6 cents a pound had enabled
the Yucatan growers to build up immense fortunes and made it possible
for the manufacturers of the thousands of tons of binder twine to
furnish it to the American farmer at less than 10 cents a pound.
The chief manufacturers of binder twine and, therefore, the chief
buyers of Yucatan henequen, are the International Harvester Company,
which makes about half the binder twine used in the world, the
Plymouth Cordage Company, which makes about a quarter of the entire
supply, and various state penitentiaries in the wheat belt of the
United States. All of these manufacturers work on close margins for
the Harvester Company’s business is selling harvester machines and it
seems interested materially in keeping the price of such accessories
as twine as low as possible. The effect of this, combined with Yankee
shrewdness, has been a continuous effort to keep the price of Yucatan
henequen down to rock bottom, and to this end its buyers have been
cheerful arbiters of the price of the sisal in the Mexican market.
They were never, however, quite the grasping, grinding capitalistic
despots they were described as being by the Yucatecans, for those of
us who can remember back into the philosophic days before 1914 will
recollect that it was not customary for even American capital to kill
the geese that laid the golden eggs. The Yucatan hacendados were
encouraged to demand, and get, comfortable prices for their product,
and incidentally to plant large new acreages of the henequen plants.
It was this large planting, which went on from 1900 to 1914, which
caused the first glimmering of the idea of “direct action” on the part
of the hacendados, the growers of the sisal. It takes seven years for
henequen plants to come into bearing, and the prospect of immensely
increased production and probably lowered prices inspired the first
idea of a pool which would maintain the old price levels. In 1912 a
scheme for regulating the price of henequen was first presented to his
fellows by a Yucatan hacendado. His idea was not so much to create
an artificial shortage by storing the hemp, as to form some sort of
organization which would have first chance to buy the henequen crop
and thus make the hacendados participants in the profits made by the
jobbers or middlemen.
The organization which resulted, in 1914, was called the “_Comisión
Reguladora del Mercado de Henequén_” (Commission for Regulating
the Henequen Market), or, for short, the “Reguladora.” It was not,
however, a great success, for the Reguladora was only an organization
buying in competition with the old established agents, and the
growers still pursued their own immediate interests in seeking their
markets. Coöperation has never been one of the outstanding virtues
of the Mexicans, and in the selling of their crops the Yucatecan
hacendados have never shown any sign of a break away from the national
individualism. The hacendados have always done their business in
Merida, the capital and business center of Yucatan. They pass from one
sunlit office to another, wailing dismally over the terrible prices
the comfortably ensconced buyers offered them and their unfortunate
fellows, but seeking and ready at a momentary hint to drive a bargain
which would cut their neighbors’ throats on the possible chance of a
temporary personal profit. The gentlemanly agreement of the Reguladora
was not, under these circumstances, a controlling factor in the
henequen market.
This was the situation when, in March, 1915, General Salvador Alvarado,
a doughty retainer of President Carranza, “captured” the state of
Yucatan with an army of 8,000 men which he had brought from Vera
Cruz. Although Mexico has been in revolution since 1911, Yucatan had,
till this time, taken little part, accepting new governors with mild
surprise but no opposition as one administration succeeded another
in Mexico City. Yucatan is a great peninsula far to the east of the
Mexican mainland, unconnected by railways, and thirty-six hours’
journey by fast steamer across the Gulf of Mexico from Vera Cruz. The
Yucatecans have always considered themselves as a people somewhat
apart from other Mexicans, and during many of the revolutions previous
to Diaz, the peninsula remained aloof and politically independent,
re-entering the Mexican confederation only toward the close of the
pre-Diaz era.
General Alvarado is a product of northern Mexico. He belongs with
the true Carrancista group in Mexican politics, has been a candidate
for president of Mexico and has made many trips to the United States
as a financier, most recently as an envoy of the de la Huerta
government in search of a rehabilitating loan. All this, however, has
come since his spectacular experience in Yucatan. In that state he
gained the experience, and political record, which made him aspire
to the presidency of Mexico, and earned his diploma as revolutionary
financier. There, also, he probably first acquired those radical ideas
which enabled him to assert, as he did in the Mexican Chamber of
Deputies in November of 1920:
“I am a bolshevist, I have always been a bolshevist, and I shall always
be a bolshevist.”
General Alvarado’s first government work was as a custom-house
employee, but he joined the Carranza movement early and early rose to
the rank of general through the manifestation of a thoroughly forceful
personality and a ruthless preoccupation with his own advancement.
Yucatan, in its isolation, in its great wealth, and its easy-going
manners, presented General Alvarado with the opportunity of his career.
Here were ungathered riches for revolutionary spoils, here was noble
opportunity for the uplift of the “submerged 85 per cent,” here was
waiting easy military glory of conquest with no one to oppose. In going
to Yucatan, General Alvarado was, moreover, encumbered by none of the
political and business experience which delays the prompt execution
of inspired ideas. Nor was he inhibited by any preconception of the
needs of the commonwealth or its chief industry, for this was his first
visit to his future principality. All he knew or heard was that Yucatan
was rich and that its proletariat was “oppressed,” largely by wicked
foreigners of shocking and predatory manners.
When he arrived in Yucatan, General Alvarado noted with interest
the beauty of that gem of Mexican state capitals, Merida, with its
sun-clear streets and its beautiful parks and public buildings. He
saw the luxurious equipages and homes and visited the great haciendas
of henequen. In the meantime, he looked over the documents in the
governor’s office and the stock of gold in the state treasury.
He scowled his disapproval, as was the Carrancista habit, at the
foreigners engaged in the henequen business. Then his attention was
called to the charter of the Reguladora, the harmless agreement of the
hacendados to keep the price of the fiber as high as they could and
still not soil their hands with trade.
This charter had courteously made the governor of the state ex-officio
head of the Reguladora. Promptly, and without more authority, General
Alvarado took charge of the organization. His first act was to force
upon the unhappy hacendados, through the authority of their own
instrument, a corporation which took their own business utterly out of
their own hands and forced them to the acceptance of official dictation
without dissent or question.
To the end of organizing his Reguladora in line with modern thought and
to thorough efficiency for his own ends, he invited in from Mexico City
the one set of brains in the Carranza administration, those of Luis
Cabrera, and called in the motley company of self-styled “socialists”
who had been drawn to Yucatan by the lurid tales of revolutionary
propagandists who had predicted the inevitable uprising of the
oppressed proletariat when opportunity should be given them.
This cabinet laid out the Reguladora plan, and two American bankers of
New Orleans, Saul Wechsler and Lynn H. Dinkins, organized a syndicate
which agreed to finance the cornering of the henequen market up to
$10,000,000. There was no socialism in this phase of the plan, for the
bankers were to receive a commission of $4 per bale on all henequen
marketed, plus the current banking rate of interest for all moneys
needed, the loans to be fully secured by mortgages against hemp in
storage or in transit.
So far all was well, but here Alvarado met his first difficulty. The
henequen growers were not socialistically inclined, nor were they
as trusting of his good faith, or so well secured as the American
bankers, nor had they so much to gain or so little to lose as the
“socialist” advisers of the governor. Many of them refused to be bound
by the new rules of the Reguladora, which included, amongst others, a
provision that no hemp should be sold to any agent or interest save the
Reguladora.
But Alvarado’s government called on the hacendados to subscribe to
his rules for the Reguladora, and to those who refused it threatened
(and gave evidence of the fullness of its intentions to carry out its
threats) to fire the fields and throw the offending hacendados and
their families into the flames. It organized the Red Guard of Yucatan
(called the “Leagues of Resistance”), and spread terrorism throughout
the peninsula. It drove out the tiny group of foreigners who for
twenty-five years had been engaged in “exploiting” the unfortunate
Yucatan proletariat by keeping the capitalistic hacendados from getting
too much money out of American farmers. Along with them went hundreds
of the hacendados and their families, and also priests and nuns, while
the simple Indians who could not take steamers for foreign ports
emigrated quietly back into the forests of interior Yucatan.
For Alvarado’s henchmen closed the churches, burned their priceless
historical records, and outraged nuns and priests. They turned the
church buildings into “labor temples” and barracks and storehouses
from which later was sold, over the counter, the liquor which had
been confiscated in enforcement of “prohibition” in Yucatan. They
turned the schools of towns and plantations into centers of propaganda
and espionage under imported “teachers” who knew none of the Indian
language, and many of whom could not write their own names. They
confiscated great haciendas under the elaborately “socialistic”
agrarian law, and for those upon whom the iron hand did not fall
directly, established a reign of terror in the raids of the “Leagues of
Resistance,” whose crimes, from night-riding and burglary to rape and
murder, the Legislature declared to be “political offenses” in the name
of “socialism,” and thus outside the jurisdiction of the common courts.
His henchmen, foreigners, Mexicans and Yucatecans, raised up the
previously contented “industrial workers,” railway men, porters
and longshoremen (numbering in all less than 9,000 out of a state
population of 300,000), forming them into unions whose increasing wages
were overlapped more rapidly than they were raised by the rising costs
of the handling of the imported commodities upon which they, like
every one else, must live in desert Yucatan. Their wages, and the cost
of living, multiplied eight times in the four years, while the wages
of the farm workers little more than doubled, and a grievously added
burden was placed upon the hacendados who from time immemorial have
taken up the loss in increased food prices so that their farm workers
may live.
By such means, and with such control, General Alvarado acquired the
domination of the industrial life of Yucatan and of henequen production
upon which he built up his market corner. In the selling of the product
so controlled, he raised the price of raw henequen from 7 cents a
pound in New York to more than 19 cents a pound in the same market.
So firm was his grip on production and on distribution that he could,
and did, withhold stock which was sorely needed in the harvest fields,
bringing about, in 1916 (through this means and through the soaring
prices which had to be asked for the binder twine which was sold),
an investigation by a committee of the United States Senate. This
committee, after months of investigation, completely exonerated the
American manufacturers from the charge of profiteering, and perhaps
for the first time in the history of that august body, placed itself on
record as asserting that a foreign government had acted the rôle of an
iniquitous trust in creating an artificial shortage and artificially
inflated prices for a product vital to the business of America’s farms.
In the four years that the Reguladora corner lasted, more than
$200,000,000 in advanced prices were taken from American buyers, an
average advance of more than 200 per cent. Thus, granting a legitimate
doubling of the price of the fiber in keeping with the doubling of the
costs of other commodities in this period (1915-1919), the accepted
figure of $112,000,000 of direct loot through the Alvarado henequen
corner may be taken as literally true. And this was loot that never
reached either the cruel hacendados who owned the farms or the workers
who furnished the labor for the creation of the product. All this and
more went into the bottomless pit of Mexican revolutionary graft.
This henequen corner was, it must be remembered, created in the name
of socialism and the salvation of the downtrodden peon. Along with it
went a mass of other activities, wherein the funds derived from the
sale of henequen at the advancing prices were turned to schemes of
ostensible government ownership, socialization and coöperation. Before
even the hacendados were given the 4 cents a pound guaranteed them
as first payment against the great profits to come from the “corner,”
the Reguladora funds were invested in the purchase of the state
railways, at prices to this day unknown. These funds also financed the
organization of the _Compañia de Fomento del Sur-Est_ (Development
Company of the South-East) and bought nine old Mexican coasting
steamers at a cost of $4,000,000 so that the socialists of Yucatan
might not be dependent on capitalistic steamship lines. The Reguladora
also financed the drilling of oil wells, and built a flock of tanks
to contain the oil--which never came out of the ground. It also built
a railway, confiscating therefor, “for the common good,” one-tenth of
all the rails and equipment of the private plantation railways on the
henequen farms; in a few months it sold this railway to a favorite for
$150,000, a tenth of its cash cost, payable in ten years.
The _Cia. de Fomento del Sur-Est_ entered upon the business of
relieving the oppressed proletariat from the wicked prices for the
necessities of life fixed by capitalistic grocerymen. It bought its own
supplies in the United States, transported them in its own steamers,
and sold them--for more than the current retail rates! The proletariat
did not benefit from any of these schemes, but the government henchmen
who bought in the United States, and those who sold in Yucatan, waxed
fat and comfortable, although remaining firm and loyal socialists to
the end.
All these things were done in the name of socialism, and in that name,
also, the power of Reguladora gold was felt even in the heart of the
United States, in a heart made sensitive to such machinations by the
nervous strain of the war which was already at our throats. Not a
little of the money derived from the sale of henequen at prices four
and five times normal was used in the conducting of a campaign of
propaganda. Mexican and foreign “socialists” were kept in the United
States lecturing and writing and publishing magazines and books. These
activities were radical and, in part at least, I. W. W., in general
character but they were devoted also to spreading the fame of the
Alvarado brand of socialization of industry in Yucatan and to the
dissemination of anti-American ideas under the guise of socialism.
It was glory and it was madness to strike thus at the heart of the
“Colossus of the North” as the anti-foreign Mexican orators like to
call the United States, and at the very same time at the “Colossus of
Mammon,” as the wilder socialists referred to us in Yucatan. Carranza
had tried the former form of baiting, but the combination of the two
was an orgy of glory reserved for the satellites of Alvarado. Never
was anything quite so daring and quite so magnificent ever done by a
Mexican revolutionist before, and not even Carranza dared do more.
So glory and madness traveled together, but meanwhile, out in the
henequen fields and in the Indian villages, Yucatan toiled on. The
simple natives could not quite appreciate the “socialists” and
literally fled in terror before some of their manifestations, so that
in that day, and in this as well, they tell you with eager friendship
to “beware of these terrible socialists.” To them, “socialist” is a
name associated with things that are, to their simple minds, quite
unsocial.
Alvarado, in his “conquest” of Yucatan, had frankly spread terror
throughout the peninsula. Opposed, on his triumphal march to Merida, by
a small “home guard” of upper and middle class youths, he had captured
and shot scores of them in cold blood, as “traitors,” and pursued his
way. He had, as I have noted, closed and sacked the churches, remarking
that “As the revolution advances, God recedes.” Then, on one of the
main boulevards of Merida, he had allowed the dead bodies of two who
had offended him to swing from sunrise to sunset from a limb of an oak
tree, so that thereafter the simple words, “Remember the oak tree,”
were sufficient to bring the stoutest-hearted conservative to terms.
But for all that, General Alvarado protested unfailing friendship for
the peons and the Indians, grieved somewhat by their distrust of him,
but pronouncing his devotion to their welfare in no measured terms. In
his carrying out of his “socialistic” policies, he did not, however,
consult their wishes or even their possibilities of development. His
one panacea for the ills of the Indians was “land,” and land he and
his imported advisers were determined to give them, no matter whether
they wanted it or not. Never did the ideals of socialism, beautiful in
themselves, have an uglier distortion.
“Land distribution” is, as I have said, the crux of the protestations
of all Mexican revolutionists. Upon the alleged land hunger of the
Indians the revolutionists have based most of their appeals for
foreign sympathy. The actual facts of the labor situation, in Mexico
and especially in Yucatan, are therefore worth brief description in
this connection. The so-called “peonage system” of Mexico goes back
historically to pre-Spanish times. It is based on the psychological
difficulty of obtaining continuous labor. Continuous labor being vital
to such an industry as henequen growing, there flourished in Yucatan,
previous to 1914, a system of indebtedness which was practically
slavery. Laborers on the plantations were allowed to get into debt in
order that they might be held on the plantations on the pretext of
working out the advances which were made from time to time by the
hacendados. These debts averaged about 200 pesos ($100) a man, and it
is undoubtedly true that the system was the origin of wicked abuses,
a plantation store credit system being devised to keep the peons
always in debt, and workers being sold by the head for their debts.
Confinement in barbed wire enclosures was common in some sections, and
altogether the picture of the Yucatan situation especially was a very
unlovely one.
But the system of debt advances was really effectively abolished under
Madero, two full years before Carranza and Alvarado entered upon the
scene, and it is worth noting that the hacendados, many of whom had
fortunes tied up in peon debts, found themselves far happier to be free
from the system than were the peons. It is indeed questionable whether
the peonage system, as such (and where it was not abused), was entirely
distasteful to the Indians who were its victims. Lacking any ability to
save, the abolition of the system of debt advances wrenched from their
grasp the only possible form of enjoying the fruits of their labor
outside their usual hand-to-mouth existence. Under the old systems they
were able to have some of the good things of life by getting an advance
in money, which they spent gayly, careless of the future, and then
proceeded to work out the debt in the months or years which followed.
Basically, the system had its redeeming features, when considered from
the viewpoint of Indian psychology, even though the abuses were such
that its abolition was inevitable.
Linked up with the peonage system was the land distribution question,
far too complicated for its origins to be gone into here.[6] In
Yucatan, the most heavily populated section is not the most fertile.
Henequen is not grown in the forests back from the sandy seacoast where
prehistoric civilization left the great ruins of a rich and glorious
empire, but on the seacoast itself. This virtual desert, extending in
some places twenty-five miles back from the coast, is the land which is
adapted to the growing of henequen, for a slow maturing of the plant is
vital to the creation of those long, strong fibers which constitute the
valuable portion of the leaves.
This so-called desert land is sometimes capable, when first cleared of
brush, of one or even two croppings of corn. Then it must lie fallow
for many years before another food crop can be raised. The native
Indian, therefore, has little or no use for a small plot, or indeed
for the ownership of any plot of ground, unless he can crop it once or
twice and then sell it to a henequen planter, while the Indian seeks
other corn-lands elsewhere. If the government hampers him in moving
about, he prefers not to try to live as an independent farmer, but to
work on a plantation where he can get regular pay for cutting henequen
leaves, and also can cultivate a little corn-plot lent him by the
hacendado and renewed each year.
Now the Indian, despite the fortunes which have been made by the
hacendados in the henequen business, has no interest at all in
becoming a henequen grower. He knows from experience that the value
of the leaves he himself produces are little more than what he would
be paid on an hacienda for cutting the hacendado’s own leaves, and
he knows that he has not the capital or the initiative to go into
hemp production himself. The result was that some years ago, when the
communal land was first distributed to the Indians, it was cropped once
or twice and then sold to the nearest hacendado to become henequen
plots.
Sometimes indeed, the communal land was so worthless for corn that the
hacendados were allowed to take it over without payment or protest and
to plant it to henequen. This loss, from the Indian viewpoint, was
far from an unmixed evil, for the natives of the commune profited in
the gaining of an opportunity for assured livelihood close by their
homes--difficult enough except on the henequen farms, in the desert
sections of Yucatan.
Henequen production is far more of an industry than it is a farming
project. Primarily, it requires from the planting of the shoots until
the first leaves are ready for cutting, eight years of continual and
expensive care, for the fields must be kept clear of brush and weeds,
the plants tended and those which die replaced with regularity. After
eight years of continuous outlay, the leaves are cut, brought into a
great industrial plant where machinery and many workers are required to
remove the pulp, to dry the hemp fiber on racks under the sun, to pack
it into 400-pound bales in hydraulic presses, and to ship it to the
distant American market. The agricultural end of the henequen business
is but a small item in its process, and no individual farmer, even if
he has moderate capital, can prosper on it.
The land distribution planned by Alvarado was to be made from the
great henequen haciendas, and some of the oratory defending the
confiscation of those haciendas pointed out the fact that this very
land had been stolen from the Indian communes in years gone by and was
now being returned to the original Indian owners. That was interesting
to the pitying audiences of the Alvarado propagandists in the United
States, but it was of not the slightest interest to the Indians of
Yucatan. They had once owned that land, and had or had not cropped it
in corn once or twice. They knew quite well it was hardly worth the
trouble and the expense in taxes it would be for them to own it again,
especially as they saw the hacendados being skillfully put out of
business and knew that with their disappearance went the only market in
which Indians could sell the land after they got it, or the henequen
leaves if they raised them.
Thus it came about that despite the apparent incongruity of the fact,
the Indians of Yucatan paid almost no attention to Alvarado’s land
distribution plans, listening to the alluring official announcements
with stolid indifference. They attended the festivals which accompanied
the distribution, but they took up no land grants.
There were indeed, many Indians who actually took flight into the
interior of the state as a result of the efforts to force land upon
them. The Mexican Indian, of whatever tribe, in reality desires deeply
but one thing--to be left alone to pursue his half-savage life in
his own way, an aboriginal ambition which should not be difficult to
understand by those who know anything of the North American Indian
of the United States. Socialism, like the responsibilities of land
ownership, is beyond his ken and he literally ran away from the offers
of either in Yucatan.
Some Indians, of course, remained, along with a great number of the
mixed-blood “slaves” who had been imported from the Mexican mainland
into the state during the boom period of the henequen business. These
were thoroughly “unionized” in the Mexican sense. That is, they were
forced to pay their poor little three pesos for a big red card which
proclaimed their membership in some union or other, were promised all
that the human heart could desire--and were allowed to subsist as long
as possible upon the promises. The unions were used to the double
end of ruining the capitalistic landlords and reducing the output of
henequen so that the price would go higher.
On the plantations where these “unionized” workmen remained, the old
task system, by which each man cut from 2,500 to 3,000 leaves a day,
was abandoned for a regular “eight-hour day” in which the workmen did
as little as they cared to do, and worked, not under instructions, but
wherever they chose to work. As a result the cutting of leaves was
reduced fully one-half, and the plants near the roads were overcut
while those deep in the fields were allowed to blossom and go to seed.
Both processes killed the henequen, which has to be cut regularly and
skillfully in order to prolong its life of usefulness. For miles the
great pole-like blossoms marked the henequen fields like a forest, and
thousands of productive acres went to ruin. Thus Nature’s inevitable
process of flowering and decay marked, itself, man’s crass flinging
back of her riches into the dust from which those riches had come in
the long slow years of his care of her.
Meanwhile, other forces had been at work, some building the pyramid
of mad ideas and madder methods, others undermining the pyramid’s
foundations upon the rocks of the conservative past or disintegrating
its mortar of imitation socialistic idealism. Of these forces, the
greatest was the financial cycle of paper money, “short” drafts and
towering mortgages against increasing stocks of unsold henequen.
By 1915, when Alvarado arrived in Yucatan, the system of paper money
which Carranza used to finance his revolution had already engulfed
Mexico. Carranza had recently issued his famous dictum that if
Gresham’s law (one of the fundamental laws of economics, which holds
that bad money, in any quantity, inevitably drives out good money) was
interfering with the circulation of the Carranza paper, Gresham’s law
should forthwith be repealed by executive decree. Billions of Carranza
paper had been printed, and it was already the circulating medium in
Yucatan; gold and bank bills were in hiding. Alvarado decided that the
time was ripe for a currency of his own, and issued, before he had been
long in the state, the Reguladora paper money, ostensibly guaranteed by
hemp in storage in Yucatan and in the United States. By decree, this
money had to be received at the old value of the silver peso, two for
one American dollar.
It was a beautiful idea, except for economic law. The bayonets of
Alvarado’s soldiers helped keep up values for a while, but slowly the
theory that power can achieve anything the “proletariat” wants was
blasted by fact. Alvarado had promised to redeem his Reguladora paper
in gold or in New York exchange, but he did not bother to back up his
promises by a limitation of the currency to the amount he could redeem,
so that at one time he had $34,000,000 in paper in circulation, against
henequen stores of half the value, stores which he could not liquidate.
The currency’s value dropped, cent by cent, then by groups of cents,
and finally it was almost waste paper, like that of Carranza. There was
not enough henequen in New York, nor enough gold in Yucatan, to redeem
the paper, and the political nostrum for the economic ill of bad paper
currency failed.
The failure was colossal enough, in any case, without the financial
complication of the currency. Alvarado had closed the ports to all
hemp from the interior that was not consigned to the Reguladora. That
beneficent monopoly allowed no shipments by rail, and before he got
through Alvarado had to close the roads with soldiers, so that no
carts could reach the port. Meanwhile, he had been boosting the price,
deliberately and virtually by decree, until, as I have said, it
reached more than 19 cents, as against less than 7 cents a pound which
had been its price before the Reguladora took charge of the market.
This raising of the price cut off a large portion of the market,--and
that had not been anticipated. Virtually all consumption of henequen
except for binder twine ceased. At 19 cents Manila hemp could
compete--and it is far better hemp. At 19 cents jute cord can compete,
and jute cord is soft and pleasant to handle, and where previously
henequen cord had been used for big bundles of newspapers and magazines
and mail, jute was substituted--and now the men who handle the bundles
of newspapers and magazines and mail refuse to go back to the rasping
henequen cord which cuts their hands so uncomfortably.
The consumption of henequen was actually reduced to half by this
deliberate destruction of its market. In spite of the new low prices
to-day, this condition in the general fiber market combines with the
cutting off of the Russian and some of the other European demand to
reduce the world consumption of the Yucatan fiber to about 70 per cent
of what it was prior to 1914. All this loss the Reguladora had to take
up, in addition to the stores which it laid aside to push up the price.
Economic law was at work, and all the contentious statements that the
price was going up only in proportion to the rising costs the world
over was answered by the fact that henequen was driven out of the
general fiber market by other hemps which had increased in price, to
be sure, but had never approached the geometrical progression which
henequen assumed under the lordly sway of Alvarado’s corner.
When all is said and done, however, it was Mother Nature and Gresham’s
law which finally broke the corner. Corners in the products of Nature
have a way of piling up unexpected responsibilities and finally loosing
unexpected forces which swamp the unwary juggler. So it was in Yucatan.
With about a year’s supply of fiber in storage in the United States and
Mexico, more than half of it mortgaged to American bankers, and with
about $10,000,000 in Reguladora currency in circulation with nothing
but photographs of gold stores to guarantee it, Alvarado’s henequen
corner went the way of all the corners of history. That was in the
spring of 1920 when, after a year of price fluctuation, Nature and the
eternal laws of economics began gently wafting the prices downward
until they reached the lowest level in fifteen years. Then it was
that the banking syndicate, which had loaned money against henequen
shipments, foreclosed on 250,000 bales in storage in New York, marking
the final chapter in the story of Alvarado’s Reguladora experiment.
When the smash came, there was an Association of Henequen Growers which
had been begging in Yucatan and in the Supreme Court of Mexico for a
chance to take back their business. As the financial difficulties and
the financial needs of Alvarado’s henchmen increased, the Reguladora
had all but given up paying any money to the haciendas where the
henequen was produced. The mule that lived on sawdust up to the day he
died is a fable of ancient times, but even under such loudly acclaimed
“socialism” as that of Yucatan something has to be paid for a product
which is produced and exported. The growers had all but reached the
end of their resources, and Alvarado offered them only paper money,
which he would or could not change into gold drafts. So just before the
crash, to satisfy the clamor, Alvarado took his way to Mexico City and
royally presented the Reguladora to the Association of the Producers of
Henequen.
The hacendados had hardly had time to look over the ruins when those
financial interests which had loaned money on hemp that was to sell
around 20 cents a pound foreclosed on those 250,000 bales in New York
and New Orleans, placing thereon a value of 5 cents a pound. Alvarado
was safe in Mexico City preparing to visit New York in an effort to
get a loan of a few hundred millions for the government of Carranza.
The hacendados held the sack, and watching the sack was a group of
financiers, including the Equitable Trust Company of New York, the
Royal Bank of Canada and the Interstate Trust Company of New Orleans,
the latter the Dinkins concern through which most of the loans on the
henequen had been placed.
Down in Yucatan the hacendados had their farms back, the Indians
were returning at night to look things over and see whether the
“socialists” had retired far enough for them to return in safety to
their comfortable “slavery”--but nobody had any money. When Alvarado
left, the hacendados had inherited the Reguladora offices, and had
opened its money vaults. These vaults, photographs of whose gold stocks
had been circulated by Alvarado to sustain his paper currency, were
quite empty. The haciendas were in terrible condition, and there was no
way of getting funds with which to rebuild and replant them. The only
hope was for capital from outside--Alvarado’s “socialism” had passed on
its way. Of the possible sources of rescue, the chief was in the group
of unhappy banks in New York, New Orleans and Montreal, which were
already in the henequen business with their 250,000 bales of foreclosed
stock. The second hope was the International Harvester Company, which
needs henequen in its business. The hacendados chose the banks, and
the Equitable Trust Company, the Royal Bank of Canada, the Interstate
Trust Co., and the Comisión Reguladora (which still existed in name if
not in spirit) formed a company, and taking the four initials, called
themselves the Eric Corporation.
There was much rejoicing in Yucatan, for the Eric was going to lend
a few more paltry American and Canadian millions and reëstablish the
great state industry. The Reguladora (now consisting of the hacendados)
turned in some 300,000 more bales of hemp that were stored at Progreso,
the Yucatan port, as their part of the capital stock of the Eric, and
the hacendados went back to work.
Now one of the peculiar things about “economic ruin” is that it
seldom ruins a business--individuals are the only victims. Yucatan
was devastated, many thousands of acres put on the non-productive
list. There was no money to pay labor or to finance the crops, but the
henequen business went on. To all intents and purposes about all that
had happened was the elimination of most of the surplus planting which
there would have been if all had gone along properly and there had been
no Alvarado to corner and destroy the market. Henequen kept on growing
on the haciendas and, despite increased costs of handling, it continued
to move to market.
Don Avelino Montes, a Spaniard who had been the chief buyer of the
International Harvester Company, returned from his exile in Cuba and
resumed buying. Don Arturo Pierce, the honorary British vice-consul who
did the buying for the Plymouth Cordage Company, abandoned consuling
and returned to the henequen trade. The price of Yucatan hemp kept
slumping, but to the surprise of the Eric people, the demand was
supplied with new hemp, and the Eric’s stocks of old hemp diminished
but slightly. The money to rehabilitate the Yucatan haciendas was not
forthcoming. The old hemp stock had to be sold first, and the wretched
hacendados refused to coöperate and let the Eric unload.
Henequen deteriorates, and also it requires insurance, as the many
fires in Progreso and New Orleans at the time testified. The cost
of holding the half million bales of henequen of the Eric is about
$2,500,000 a year, and the price at which it was bought in, plus
insurance, represents a cost of about 8 cents a pound. The price of
hemp had been stabilized at that very figure by Señores Montes and
Pierce, with some outside assistance from New York brokers, but the
sales were made in Yucatan, of new hemp. So the Eric, in righteous
anger, cut the price from 8 cents to 7, and then to 6. The price of
new hemp also fell, and the hacendados, partners in the Eric, wailed
at the evil which was being done them. However, they continued to sell
the new crop at the new price, to the Harvester and the Plymouth
and Henry Peabody & Co., and Hanson and Orth, while the gradually
deteriorating stocks of the Eric went begging. The price was finally
cut to 5 cents, by the Eric. Yucatan has met this price, too, with new
hemp, and because it is still possible to make money out of henequen
with the price at 4 cents in New York, it seems likely that Yucatan
will continue to grow henequen, and to sell it. Meanwhile, however,
the business doctors of the Obregon administration in Mexico City at
one time succumbed to the pressure of the unhappy hacendados and even
agreed to try the “Reguladora” experiment all over again, with the
central government buying 60 per cent of the henequen crop at 6 cents
a pound, and again “controlling” the market, a step in the spiral of
destruction which had but a brief life and little significance. For
the story of Yucatan is written and the state and its great industry
are to-day being ground between the wheels of the “capitalism” which
the beautiful theories of Yucatan’s “socialistic” autocrats sought to
destroy.
This is the outcome of Yucatan’s experiments in Alvarado’s brand of
so-called socialism. The price of the fiber is back to less than it
was before the inflation began, the production has been cut from
1,000,000 bales in 1914 to less than 700,000 in 1919, a decline of 30
per cent, while, taking the potential production from the plantings
up to 1914, the present production is about half of what it would have
been if Alvarado had never come to Yucatan. The haciendas are back
in the hands of their original owners, the market is in the hands
of foreign capital, and foreign capital is fighting over the spoils
with what seems to the Yucatecans utter and cruel disregard of the
amenities of gentlemen. The $112,000,000 squeezed from American farmers
and the other untold millions taken from Yucatan by loot, by false
prices in “coöperative stores,” by freight rates on the graft-owned
railways, and all the other means used by Alvarado’s retainers, have
gone to the enrichment of his group and to the upkeeping of the
Carranza government. No noticeable part of it has remained in Yucatan,
and save for increased wages all around (and the world has surely
learned that this is not prosperity) no possible profit has remained.
The spiral cycle is complete, and none has gained, not even the
predatory capitalists, who are unhappily cutting each other’s throats
in an effort to solve the problems into which they were swept by the
machinations of Alvarado and his henchmen.
To-day Yucatan is not free from the domination of the “socialists,” but
that domination is political, marked by those outrages which have come
to be merely a part of politics in Mexico. Elections are held from time
to time, elections wherein two parties of socialists alone confronted
each other. The battle is bitter, as battles are when brothers are the
contestants. There is still killing and loot, and women and children
suffer death and worse in the solution of such glowing political
questions as whether, we might say, the flag of Yucatan should be all
red or merely red with a black bar across it--its problems are daily
forgotten, for the real issue is only to find out who should have the
next hand at the graft. Socialistic, to be sure, because all Mexican
manifestations to-day are masquerading under the name of socialism,
but quite as little in tune with true socialistic ideals as a battle
between two factions in Tammany Hall over the control of New York
politics would be socialism.
FOOTNOTES:
[6] Both peonage and the Mexican systems of land distribution are
discussed at some length in _The People of Mexico_.
CHAPTER VIII
THE ROMANCE OF MEXICAN OIL
When you cross the Mexican border at Laredo, oil enters your
consciousness--and your clothes. It is everywhere, the thick, odorous
_chapapote_ which furnishes the fuel for Mexico’s locomotives, the
energy for every Mexican industry which has no water power, the
pavements for her streets, and, I am still convinced, the heavy
lubricant with which the sandal-clad brakeman of our train eased an
incidental hot-box. In Tampico, whence comes all the oil of Mexico, the
heavy, black “crude” is even more ubiquitous. It “tars” your shoes when
you walk abroad; it decorates your clothes when you ride in anybody’s
motor car or motor boat; it oozes between your toes and sticks in your
hair when you bathe at the beach.
But the physical presence of oil is as a whiff from the dead well at
Dos Bocas compared to its spiritual domination in all Mexican affairs.
Oil is the greatest--I had almost said the only--wealth of Mexico
to-day, its possession the issue of one of the mighty diplomatic
battles of recent times, while the taxes and graft of it have fed the
wellsprings of ten years of devastating revolutions.
Far and away and by many fold, oil is the largest single item of
export of Mexico, and the varied needs of the oil industry and of the
beneficiaries of that industry dominate the imports as well. To Tampico
go shiploads of steel, machinery and supplies, and trainloads of soap
and shoes; the factors which build civilization go chiefly and all but
alone, in Mexico, to the oil fields.
Oil dominates the political life of the country not because oil
companies or oil millionaires seek to control the Mexican government
but because the vast unbelievable wealth which is pouring into the
coffers of that government in taxes and in tribute makes revolution a
game the stakes of which eclipse any sum or any potentiality of wealth
or power which has ever been known in Mexico.
Oil is the inspiration for the “nationalization” policies which,
forged by foreign radicals and given edge by Mexican cupidity, the
Carrancistas wrote into their Constitution of 1917. This policy of
nationalization, the decrees, the laws, the taxation and the graft
which have come in its train, have brought into the field of diplomatic
controversy the whole problem of the right of a government to enforce
radical, socialistic or, if you will, bolshevik policies against
foreign interests which may have entered a country and developed it
under older, more conservative ideals and systems of government.
For the oil industry of Mexico is overwhelmingly a foreign enterprise.
American and British and Dutch are the flags which should fly from the
oil derricks, for neither Mexico nor Mexicans have had a hand worth
the naming in the opening of the nation’s richest treasure-house. The
search for oil in Mexico has taken on the nature of a race, a battle,
between British and American oil interests, a battle not without its
tremendous significance in the world oil situation. But behind this
struggle, which is still and, we may hope, will remain a friendly one,
loom controversies which are vaster than Mexico or England or America,
problems on whose solution the very future of our civilization depends.
For the real battle in Mexico is not between the two great Anglo-Saxon
powers, but between the powers of light and the powers of darkness. In
Mexico’s oil fields to-day is being settled the question of whether
enterprise shall have the right to bring the riches of the earth
to the aid of humanity, of whether industrial power belongs to the
backward people who by accident find that power in their inept hands,
or to those who can develop and raise it up to the service of mankind.
Upon the issue in Mexico depends not only the usefulness of all the
petroleum resources of that country, but the future development of
oil in Colombia, Venezuela, all South America, all Asia, all Africa.
And the future of oil development in those lands is the future of the
world’s oil supply, for there, alone, remain stores sufficient to meet
the multiplying needs of the world.
The solution of this question is vastly complicated. Within the
oil situation itself are many problems such as those just noted.
Bearing upon it is the tangle of cross-purposes, indirections and
varying psychologies. That solution is made all but impossible by the
conditions of Mexico to-day, by the flabby weakness of the rulers of
the Mexican people, by their blindness and selfishness. It has been
jammed, time and again, by the failure of the oil companies and their
representatives to assert their rights with a skill equal to that of
the Mexicans in casting up mountains of controversy out of mole hills
of technicality.
But the story of Mexican oil is not all ugly calling of names, not all
mere hopeless tangle. The history of its discovery and development is
rich with color. The romance of an oil field, like the romance of a
gold camp, is always a thrilling tale. But the story of Tampico has
this other element, for it is indeed the great romance of our race,
the tale of the white man round the world, the building of gigantic
enterprises, the harnessing of unknown forces, neglected for centuries
by apathetic natives, unlocked by the vision and the enterprise of the
Anglo-Saxon.
Oil began with Tampico, but the story of Tampico antedates oil. It
goes back to the late 80’s, when one of the great railway builders of
America’s youth left Kansas for Mexico. A. A. Robinson, who surveyed
and built the Santa Fe Railroad from the Kansas prairies to the Pacific
Ocean, who swung the track of the Denver and Rio Grande Railroad above
the rapids of the Royal Gorge, was also one of the great builders of
modern Mexico. Leaving the Santa Fe in 1889, he became president of
the Mexican Central and built almost the whole of this first standard
gauge line in the country, its branches and tributaries toward the
rich granary of Mexico about Guadalajara in the west, to the mines of
Pachuca in the mountains and to Tampico on the Gulf of Mexico.
Tampico, a wretched, fever-ridden village beside a beautiful river,
was no port in those days. The railroad which brought Mr. Robinson to
Tampico brought also the engineers who built the great jetties which
cleared the bar and opened Tampico to the world, carried the ores of
Pachuca to their markets and began the conscious development of what is
now the busiest seaport of Mexico. The railroad company built and paid
for the jetties, and under Mr. Robinson a short-line to Mexico City
was surveyed and construction was begun, to be halted, in 1908, by the
government merger of the lines.
All this seems to lead far away from oil, but it was in 1900, two years
before the jetties were completed, that Mr. Robinson invited Edward L.
Doheny and his partner, the late Charles A. Canfield, to Tampico to
develop oil wells. Doheny, who had made himself famous and unpopular by
discovering petroleum in the middle of Los Angeles, came to examine the
seepages of which Robinson had told him in the hope that he might find
an oil to help the Mexican Central solve its fuel problems, for the
coal of Mexico is scarce and poor, and all the fuel for the railways
had to be imported.
Mr. Robinson agreed to buy the oil for fuel if Mr. Doheny developed
it, and it was this encouragement, this faith of two great believers
in Mexico, which brought about the discovery and the later development
of Mexican oil. The board of directors for the Mexican Central later
repudiated the Robinson contract, but the development of the Mexican
oil fields had been begun, and it has never stopped from that day to
this.
It was in 1905 that I first visited Tampico. I was the guest of Mr.
Robinson, and as we looked out, one day, over the marshes along the
river which runs past Tampico to the sea, six miles away, he told me of
his dreams for his port, of the day when not only the Tampico side of
the river, but the barren jungle on the other bank would be lined with
wharves and great steamers, greater than any of the coasters and tramps
that to the number of half a dozen a month were then carrying coal and
ore and, amusingly enough as we look back on it now, crude oil from
Pennsylvania for use in Tampico’s one industrial establishment, the
Waters-Pierce Refinery.
I visited Tampico twice again, the last time in 1908. And then this
year! It was as if the dream of the builder of the port had come true
since the setting of yesterday’s sun. To-day the river is lined, from
its mouth all the six miles to Tampico and above, with wharves and
warehouses and hundreds of great tanks of oil, and throughout all this
length are ships, tankers and cargo boats, while on the hills above are
refineries and modern towns, and at night the lights are like those
of great cities. The dream, indeed, of a builder of civilization, of
civilized Mexico, has apparently come true.
A. A. Robinson is gone, laid away with his honors and his vision
these four years. But still there is that other American, who twenty
years ago rode off into the jungles of the coastal plain, saw with
his own eyes the thick, slimy puddles of asphalt at Ebano, and there
drilled his first wells. Years later, after his railway contracts were
abrogated, seeking lighter, better oils, Mr. Doheny went, with the
frontiersman’s unquenchable optimism, nearly a hundred miles farther
into the jungle till he heard the unforgettable baby murmur and saw
the unforgettable bubbling spring of viscous black oil of the great
seepages of Cerro Azul, and there located what was to become the
greatest oil well in the history of the world, the Cerro Azul No. 4.
Oil is the most fascinating of all the treasures of earth. No geologist
has ever approached the solution of either its source or the contours
or formations within which it lies. An oil spring such as that
wonderful bubbling pool at Cerro Azul may mean the presence of a great
reservoir of oil directly beneath or it may mean that the oil has come
a dozen or fifty or a hundred miles along a crack in the mother-rock.
Experience, faith, intuition, these determine the location of a well.
It was these factors that Doheny brought with him to Mexico, for the
fields which he finally drilled and proved had been rejected by many
geologists before he came and after.
At Ebano, a way-station on the Mexican Central a few miles inland
from Tampico this pioneer of the Mexican oil fields found his oil and
developed it, and his success brought hundreds of other prospectors to
Ebano in 1900-1902. But Ebano oil is heavy with asphalt, and it was
dangerous to handle in the crude burners of the time because its fumes
ignite at low temperatures. Thus, although it is rich in lubricating
oils, it was not the petroleum which the world wanted in that day. With
his contract with the Mexican Central abrogated, virtually without a
market excepting for asphalt paving in Mexican cities, Doheny turned
southward in search of lighter oils.
His trips into the swamps and forests of the _huasteca_ or coastal
plain led him to the great seepages at Cerro Azul, sixty miles below
Ebano. It also took him to Juan Casiano where he located his first
wells and in 1908 opened the first of the great producing pools of the
Tuxpam district. Drilling and exploration went hand in hand and not
only Doheny but the British interests of Sir Weetman Pearson (now Lord
Cowdray) and other American companies began to make this field famous.
Since that time the story of the Tampico oil fields has been the
story of the Americans and other foreigners who followed them. No
Mexican name and no Mexican interest are connected with the vast
development which has come. Yet so vast is the busy zone of production,
so tremendous and so varied the forces and elements working there,
that one feels something false in this appearance of preponderance
of individuals and of foreigners in the epochal industry of Mexico.
When, however, one glimpses the long diplomatic struggle, the legal
tangle, the endless problems which make the Mexican oil question so
complicated, one finds that in every phase there are always only
these foreigners on the one side and the predatory, scheming Mexican
revolutionary leaders on the other. Never is there a Mexican on the
production side, never a foreigner on the side of the elements which
retard production.
It was Mr. Robinson who opened up Mexican oil, and it was Doheny and
other early foreigners who first dared drill, and the foreigners alone
who in the years past have dared to put millions into pipe lines,
storage tanks and wonderful fleets of oil-carrying ships. Only they
dared or would dare to go into the sleepy villages of the Vera Cruz
plains and pay fifty cents a day to peons who had lived for generations
on less than a quarter as much. Only the foreigners dared give their
labor a decent wage, dared teach their men to be worth more and more
until to-day they pay the commonest peon the equivalent of two American
dollars a day. Only these foreigners dared believe in Mexico, dared
insist on the good faith of all her faithless governments, dared to go
on with their work when all else in Mexico stagnates and cringes before
the continuing revolutions.
And on the other hand are the Mexicans who govern the land, making it
their chief business to bait and loudly curse these same foreigners.
The name of the foreign oil men is anathema in Mexico to-day, and the
busiest game of any Mexican official is the oratorical denouncing of
the sponsors of the industry. But, we cannot forget, these Mexicans
have not and do not turn a finger to the replacing of great foreign
activity by any constructive form of Mexican enterprise.
At basis the difficulties of the oil companies and the Mexican
governments are psychological--and an understanding of those
psychological bases is the rarest flower in the intellectual nosegay
of most of those who discuss either Mexico or oil. First of all is
the companies’ belligerent insistence on the principles of vested
rights as the first and only basis for the oil discussion--naturally
distasteful to those whose single idea is to upset those rights.
Another psychological element is that the foreigners’ very respect for
law and the continuity of government and their insistence that Mexico
live up to their own ideals is in the first place quite beyond the
conception of the Mexicans in power to-day and in the second place such
an attitude is inevitably maddening to the weaker brother whom it seeks
to benefit. Because the foreigners believe in Mexico, the Mexicans will
not believe in the foreigners.
Another disturbing factor is the very success of the oil companies and
of the foreigners whom they employ. I have told, above, something of
the picture of the Tampico that was and of the Tampico that is. It
has changed in yet other ways, and most of all in the makeup of her
population.
In 1908 there were perhaps two score Americans and English in the
town, and the chief industry of the place was--tarpon fishing! To-day
there are 8,000 Americans and a thousand British and Dutch, and the
swaggering, free-money, noisy, busy atmosphere of the frontier, of
the oil fields, of the white man on his bully-ragging, destructive,
inconsequential “education” of the dark brother round the world,
permeates the place. Its influence is not academic, but somehow one
feels that Tampico is a monument to the genius and faith of the
Americans who made it great. The restless power is there, the restless
making over of the world that it may be a better place for the white
youth of the future to stamp about in, for the dark brothers to build
their new homes in.
Yet strangely enough, if you will, it is to my mind largely because
of this same energy, the achievement which this spirit indicates and
predicates, that the difficulties of the foreign oil companies in
Mexico have been the sort they are. Their persecution has sprung from
the realization of the Mexicans that these Americans, these English,
these Dutch, are doing in Mexico and for Mexico what Mexicans can
not, dare not, do. The Mexicans from generals to peons, are frantic,
baffled, rabid, at the wretched Gringoes who dare to pour their
millions out to drill wells, to build pipe lines and terminals and
ships, to take and to convert this black and liquid gold from the soil
of Mexico.
Of the hundreds of wells drilled in the Tampico-Tuxpam fields, some
of them the veriest “wildcats” on the flimsiest of chances, hundreds
of them as sure as opening a bank vault, only a half dozen, and none
a “wildcat,” have been drilled by Mexicans as individuals or in
corporations, and not a single ship, not a single storage tank, not
a mile of pipe line, is Mexican. Were the Mexican government to take
over the administration of the oil fields to-day, drilling would cease
utterly, to-morrow development would stop and when, a year hence,
it became vital to open more wells, the event would be marked by
government ceremonies and stifling graft.
Every one who knows Mexico knows that this is the truth. The Mexicans
themselves know it, and from the Tampico policeman who howls in
outraged anger when an American motorist refuses to be disturbed by
official anathemas, up to the presidential secretaries who devise
complicated and childish schemes to force the oil companies into
recognizing the dignity of Mexican sovereignty, the whole attitude
toward the oil business has been fraught with effort to maintain that
hazy halo of the weakling, delicate “sensitiveness,” national pride,
_amour propre_.
When I left New York to study Mexican problems for the present writing,
I was convinced that the full facts of the case, on both sides, were to
be found in the United States; Washington was indeed the battle ground
of lawyers and diplomats. Not until I reached Tampico, however, not
until I went out to the oil fields, did I realize that the real problem
is not the question of diplomatic controversy or commercial adjustment.
There, on the long roads, where but one _peon_ of all the thousands
whom we passed, took off his hat to the white _patrones_, as every
one would have done twelve years ago, I found the touchstone. I knew
then why reason will not prevail, why justice is non-existent, why no
white man has yet been able to feel firm ground beneath his feet in the
discussion of the oil problems. These problems have had their rights
and wrongs, as we shall see, but I think that the great difficulty we
at home have had in believing that our own people could be right has
been our inability to conceive how, being right, the Mexicans could be
so hostile to them.
This, I think, is the point of departure in our misunderstanding of the
Mexican situation, especially as it applies to oil. Mexican jealousy
and Mexican realization of the weakness of the national psychology
in great enterprise have set Mexico frantic with the success, the
triumph, the apparent imperturbability of the great foreign oil
companies. This alone has made their hostility to the American
drillers, linemen and engineers who night and day, month after month
through the years of the war, kept the lines open, the oil flowing.
Unarmed, and slaughtered by the score from ambush, grim, unkempt,
often happily drunk in town, these frontiersmen added their bit to
the fire, to be sure. But note this--it was not the white man’s rough
assertion of superiority or the companies’ “tactless insistence,” but
the Mexican’s conception of his own inferiority, personal, commercial,
political, which lit the flame and kept it burning.
The world has entered upon a new industrial era, the age of petroleum.
The commercial struggle is to-day not the war for markets, but the race
for oil lands. And of all the petroleum fields known to exist, those in
Mexico are the greatest in actual production, the greatest in potential
extent, and the most favorably situated for distribution--all vivified
by the greatest individual oil wells in the records of the world.
The story of the development of that oil field is linked with the
history of Mexico, inexorably, inevitably a part of it, influencing it,
all but dominating it.
The first oil well in Mexico was brought in in 1900; production
began on a commercial scale in 1903; about 1904 a British company
secured its first “concession” for oil drilling; in 1905 the status of
petroleum as belonging to the owner of the surface land was definitely
settled, and development began on a large scale; in 1912 the Madero
government established, over the mild protests of the producing
companies, the principle of special taxation on the oil business; in
1914 President Huerta extracted 200,000 Mexican pesos from an American
oil representative in Mexico City, and the oil company, under advice
of the Department of State, repudiated his draft and paid the money to
Carranza; in 1914 the principle of “shaking down” the oil companies
was originated by Candido Aguilar (later son-in-law of Carranza), who
made a mild $10,000 collection; in 1915 Manuel Pelaez made his first
call for tribute, some $1,500, under the exchange conditions of the
day, which the companies paid with the advice of the American State
Department and the American Ambassador, a precedent which later netted
Pelaez a regular $30,000 a month; in 1915 Carranza began to devote the
brains of his finance minister, Luis Cabrera, to devising oil taxes,
with the result that to-day the foreign oil companies pay a total of
nearly $4,000,000 a month, derived from export taxes on the product,
stamp taxes on their business, occupation taxes on their offices,
harbor taxes on their ships, customs duties on their supplies,
etc.; in 1916 Carranza issued the decree requiring foreigners who
did business in Mexico to renounce their rights of recourse to their
home government; in 1917 came the new Mexican constitution declaring
all petroleum in the subsoil the property of the nation; in 1919 the
drilling of new wells was stopped unless the companies agreed to accept
this principle of nationalization; in 1919 the second of the big oil
pools went to salt water and the need of new drilling to keep up the
supply of oil (and the Mexican taxes) became imperative; in January,
1920, temporary drilling permits were issued by Carranza; in May, 1920,
Carranza was overthrown and murdered in the revolution of Obregon, said
to have been financed by certain oil interests; in 1921 Obregon doubled
the oil taxes, bringing about a shutdown, temporary but salutary; in
1921 drilling is going on, however, and the shipment of oil continues.
While drilling is going on in small sections in spite of obstacles,
the full development of the petroleum fields of Mexico waits on the
final decision of the confiscatory provisions of Carranza, whose dead
hand still guides the policies of his successors along the road of
anti-foreignism. In 1921, then, the oil companies are still uncertain
of their status, still the objects of astonishing taxation, still
subject to government annoyance and graft, still buying, in taxes and
annoyances, the “privilege” of working their properties.
The plants of the foreign companies are probably the greatest
installation in any single oil field in the world. The investment in
pipe lines, pumping stations, storage tanks, refineries, terminals and
ships represents close on $750,000,000; the length of the 161 pipe
lines (practically all of them eight or ten inches in diameter) totals
nearly 1,000 miles, while nearly 1,500 steel tanks, with a capacity of
60,000,000 barrels, furnish enough storage to fill a thousand ships.
Through the pipe lines can pass, under high pressure, 750,000 barrels
a day, although the average production for 1920 was about half of this
amount.
In the Mexican fields in April, 1920, the latest date for which figures
are available, there were 304 wells in production, 148 located and 123
drilling. The total of commercially unproductive wells to that date
was 464, including only 35 which showed oil in too small quantities.
Three-fifths of all the wells drilled in Mexico have been dry holes,
and to-day of 1,113 wells drilled and projected, only 75 which have
actually flowed oil have run out of production. These last, however,
include some of the greatest in the history of the petroleum industry.
The vast investment and plant in the Tampico-Tuxpam fields produced
in 1920 over 140,000,000 barrels of oil, one-fourth of all that
was produced in the entire world, equaling some 40 per cent of the
production of all the fields in the United States. The 1920 production
was nearly five times that of 1913, when less than 26,000,000 barrels
were extracted from the Mexican wells, and when Mexico’s total oil
output was only one-ninth that of the United States and contributed
less than one-twelfth to the production of the world. The growth has
been steady and by tremendous strides, for when the pressure of war was
on, the men who were taking out Mexican oil built up a production which
between 1916 and 1917 brought an increase of 40 per cent and began a
development that despite superhuman difficulties gained such momentum
that between 1919 and 1920 the increase was 60 per cent.
On your map you will easily find, on the eastern shore of Mexico, the
city of Tampico, located in the center of the palm of the hand with
which Mexico grasps the great Gulf. A little to the south you will
find, with difficulty, the town of Tuxpam, midway between Tampico and
Vera Cruz. From Tampico directly south to a few miles west of Tuxpam
runs the “line” along which lies virtually all the oil yet developed
in commercial quantities in Mexico. The “line” is thirty-five miles
long; the great producing territory never extended over twenty miles;
momentarily the section which is giving the oil of the Tuxpam district
is along ten miles in the middle of the “line”--and the territory is
hardly a half mile broad at its greatest width. This section produced
in the past ten years 500,000,000 barrels of oil. In 1920 it produced
about 140,000,000 barrels, close to one-quarter of all the oil taken
from all the wells in the world.
Now trace the “line” north to Texas and Oklahoma--it is an extension
of the great mid-continent field of the United States. Now go south,
through the old Furbero field, swing a little in toward the Gulf,
and south of Vera Cruz, on the Isthmus of Tehuantepec, you will find
Minatitlan, the site of early drillings, and of the refinery of the
Mexican Eagle Oil Company. Still south, on the “line,” and you will
find, if your map is large enough, the village of Macuspana, in the
state of Tabasco. Here oil of a grade so fine that the natives burn
the crude seepage in their lamps has been oozing through the soil for
centuries, and here, long ago, the British drilled many test holes. The
“line” runs true, skirting the Gulf of Mexico.
Still more. There are oil seepages on the West Coast, an extension,
perhaps, of our California fields. Other indications have been found,
even far inland, and indeed on the Gulf side, the “line” does not by
any means cover the seepages, even of the coastal plain. All this
section, off into the interior toward the states of Puebla and
Hidalgo, has been leased for oil. But production sticks to the “line.”
The Tuxpam field, the heart of the “line,” will ultimately go to salt
water. Of this there is no question. Every pool of oil that has been
drained--now three in number--has given its 100,000,000 barrels, and
the steaming, brackish water, still under terrific pressure, has wiped
out the property, often between sunset and sunrise--a few hours between
50,000 barrels a day and nothing. Dos Bocas at the northernmost end
of the “line,” came in on July 4, 1906, hailed as the greatest well
of history, blew out her casing, caught fire and burned for months,
a torch of gas and flame 850 feet high, till (if it was oil and not
gas she burned) she had easily spent her 100,000,000 barrels. Another
great British well, Portrero del Llano No. 4, flowed eight years,
giving nearly her 100,000,000 to industry, and went to salt water over
night. The Casiano field, of the Doheny interests, paid a similar toll.
Cerro Azul No. 4 of the same company came in at a full rate of 162,000
barrels a day. She has never been allowed to flow full, for the whole
field is owned by the company, and the pool is considered safe from
drainage. Further south, the Doheny companies have, in 1921, opened
another vast field, the Chapapote Nuñez--but that, still, is “on the
line.”
During the past year the Naranjos field has been showing salt water;
the Chinampa, with a hundred wells located on a relatively few acres,
is being drained at top speed, and salt water has been cutting closer
in at its edges. To-day the Zacamixtle camp, the last of the “line,”
which was drilled like mad by scores of crews putting down wells that
cost in Mexico $100,000 each, has been narrowed to a strip of an oil
river only a few hundred yards wide.
With Chinampa and Zacamixtle gone, only the Cerro Azul, the sixty
square miles of the Chapapote field, and the adjacent Toteco pool will
remain on the “line” with no reserves save to the south, in a territory
recently proved by the “Toteco” and “Chapapote” districts, or to the
north, in the Tampico or Panuco field proper. This last is a heavy oil
section, and here, too, the largest portion of the territory is owned
by the Doheny companies.
Why, with this dwindling field, this steady reduction in reserves,
has there not been more development in Mexico? You know the basic
answer--revolution. But through revolution and graft and theft and
murder the American operators in the oil fields, working for British
and American companies, have kept on the job. Revolution is not the
only answer.
Carranza, when he became president of Mexico, cast envious eyes toward
the oil fields, and sought to make them his own, for loot and for
graft, and not for conservation, be it noted here. He “nationalized”
petroleum, by his new constitution, and tried to force the companies
to give up their properties. They did not surrender, in fact or in
principle, and for five years have fought for their rights, and for
what they believe is the hope of oil development in all the backward
lands of the globe.
In 1919 Carranza stopped the drilling of new wells, in an effort to
force the companies to submit to his decrees, and not until Tepetate
and Juan Casiano went to salt water and the tax returns of nearly
$30,000,000 a year (at that time) were direly threatened, did he give
temporary permits for drilling. He might fight for the nationalization
of the oil, but he was routed by the danger to the vast sum upon
which he ran his government and upon which his generals and favorites
fattened and grew rich.
Thus in the oil fields drilling has been resumed. But off the “line”
there is virtually no drilling, none of the “wild-catting” which is the
life of the oil industry. Until the new government, if it ever does of
its own free will, loosens the death-grip of Carranza, the oil industry
will remain paralyzed and confined to its narrow, shrinking bed between
Tampico and Tuxpam.
But why does Mexico go on? Why does she see so little of the way before
her? The situation is complicated by many factors, two of which stand
out in relief. These are the support given the Carranza ideas first by
the British companies and second by some new American companies. The
British needs in Mexico have from time to time been identical with the
American, and then the two have worked together, but the British occupy
a peculiar position, going back to the Madero revolution of 1910-11. At
that time the Mexican Eagle company (which is a Mexican corporation)
was caught with a number of the old Diaz “reactionaries” as its company
officials, and it was also the holder of the hated Diaz “concessions.”
As a result it had to walk the chalk line very carefully under both
Madero and Carranza, a condition which has always made its position
weaker than the American. The large local business of the Eagle
Company, in refined gasoline and oils, as well as in fuel oil, has also
complicated the matter. It was due to these and similar factors that
the Eagle Company placed itself under the “protection” of the Carranza
decrees when they were first issued, although with protests, both
legal and diplomatic. With a single American exception, the English
interests were the only ones which gave any comfort to those early
Carranza plans. Upon their support the former president built many of
his subsequent activities, including the ruling on drilling permits.
He gave these permits to the Eagle Company without conditions, at the
very time withholding them from the “unfriendly” Americans under a
demand for a written waiver of all protest against future petroleum
legislation.
The second form of support which the Mexican governments obtained is
more recent, and more complicated. Under the Carranza decrees oil lands
were open to “denouncement” (or filing of claims) and the taking out
of a “denouncement” even to protect one’s own property was taken as an
unqualified recognition of the right of Mexico in confiscating the oil
rights of that property. The American and British companies united in
an agreement not to denounce their own lands and not to buy or lease
denouncements upon any other lands.
In 1919, some new American interests, which had had other experience
in oil, entered the Mexican field. They spent some $500,000 in looking
up titles to the properties and leases held by the old companies. They
found many defects, for the inheritance laws, the poor records and the
negligible value of the properties as farm lands make questionable
titles the commonplace of the oil game in Mexico. Where there was an
apparently defective title, these interests acquired the outstanding
lien, and so laid claim to some of the finest producing lots.
So far the plan was a not unexpected move toward getting a hand in
the oil game, a chance to sit in with big stakes alongside the big
companies. The new elements, however, next “denounced” their new claims
before the Carranza government, thus placing themselves quite outside
the old-crowd oil camp. This “denouncing” of their properties brought
them many favors from Carranza officials, but it made negotiation with
the old companies difficult.
The Mexican oil problem, in its simplest, is three-fold. It has to
do, first, with the nationalization of the petroleum in the subsoil,
which threatens to wipe out vested property; second, with the question
of taxation, which may at any time, and indeed actually threatens to
become confiscatory; third, with the problem of concessions which are
to-day the most obvious form of political graft and to-morrow may
precipitate a Mexican war over petroleum rights.
First, the nationalization of petroleum. The Constitution of 1917,
adopted by Carranza, and continued by de la Huerta and Obregon,
definitely declares petroleum the property of the nation. In the grants
of land made by the Spanish crown (the basis of all land titles in
Mexico to-day), gold, silver and other metals were especially reserved
as the property of the king, and in colonial times and since have been
worked only by special permission or grant under “denouncement,” quite
independently of the owner of the land. Neither coal nor oil was known
to commerce in Spanish times, but in 1884, when the mining laws were
revised, the Mexican government as inheritor of the rights of the Crown
of Spain and retaining, as it did and does, the royal control over gold
and silver, specifically stated that coal and oil belonged to the owner
of the surface. This was confirmed later in the mining laws of 1892.
In 1905, after oil was discovered and certain concessions for drilling
had been issued to Sir Weetman Pearson (now Lord Cowdray), head of the
Mexican Eagle Oil Company, an effort was made to have oil declared
the property of the nation, like gold and silver, and thus subject
to concession and denouncement. This was opposed by the American
interests, which held no concessions. The issue was decided virtually
unanimously by the Academy of Jurisprudence, and in the mining laws of
1909 the title to oil was definitely and unequivocably vested in the
title to the surface soil.
Until 1917, the vast development of Mexican oil fields went on apace,
based on the old property rights and apparently safe from molestation.
Carranza switched the matter completely around by the simple expedient
of adding oil to the list of minerals which are national property and
placing the new ruling in that famous Article 27 which contains most of
the anti-foreign provisions of the new constitution.
The Mexican defenses of this action are two. The primary thesis is
that the subsoil has always belonged to the government, whether king
or republic, and that it was beyond the power of ministers or courts
or legislatures to alienate those rights. In other words, Mexico is
only “taking back her own.” The opposition to this is on the basis
of vested rights, on the long periods during which the owners of the
lands had actually enjoyed possession of the subsoil, paying taxes
on full valuations, and on the virtual obligation of contract of all
Mexican governments to support developments under the laws of their
predecessors.
The other contention, more general and yet with a stronger appeal to
modern radicals, was that such nationalization was in line with the
trend of the times, a trend later manifested in the Russian revolution.
Candido Aguilar, then Carranza’s foreign minister, gave voice to this
phase in his note of August 12, 1918, to the British Foreign Office,
where he stated that “the modern conception of property is that it is a
social function bound closely to the prosperity of the State.”
Both these contentions might in fact be worthy of consideration if
the government of Mexico were of a character to be trusted, if it were
indeed genuinely devoted to any sincere ideals of social reform, if it
were truly interested in the conservation of the nation’s resources for
the benefit of the people. But the Mexican governments have been none
of these things, truly believe none of these things. The radicalism
of Mexico, the socialism of Mexico, are means to an end, not ends in
themselves, means to power and position, for loot and for the pelf
which goes into private pockets and not even into national coffers.
Certainly if government could be depended on, the idea of paying
fixed royalties to a national treasury is financially preferable to
dickering with individuals, and obviously more businesslike. But since
oil has been known, the great organizations which handle the product
have been accustomed to dealing with private owners; it is a game they
know, a business they understand. In Mexico there is the other factor
which one can never lose sight of, and that is that government control
means graft, favoritism, chicanery, the meddling of foreigners and big
business in the very heart of the councils of government. And those
things, until now avoided, must never come into being.
In the final analysis, the proposed nationalization of petroleum has
never been a conservation measure, the only excuse (to radical or to
conservative) for its promulgation. The Mexican governments, from
Carranza to Obregon, accepted “denouncements” upon petroleum lands
already developed, granted vast concessions for drilling, on a royalty
arrangement with the government, in so-called navigable streams
and other “federal zones,” and in every way in their power carried
on a _redistribution_ of petroleum titles. This single fact of the
government acceptance of such denouncements and concessions indicates
that the intention is not to conserve, but to get a new deal with
somebody besides the Gringoes and the Indians who own the oil lands
sitting around the table.
The whole interpretation of the oil features of Article 27 seems at
variance with the ideas of genuine radicals as completely as it is at
variance with the ideas of dyed-in-the-wool conservatives who still
dare talk of “vested rights.” The effect of the enforcement of the
nationalization plan would be first to change royalty payments from
the land owners to the government and second to move the dealings for
oil leases from the open field and the negotiations of plain buying
and selling to the conferences of government officials where honor is
to-day a more commercial commodity than land, and where the proportions
of lease money to graft would be as one to ten. It would indeed, bring
on the era of concessions and favoritism with a vengeance, and the
dismal pictures of the foreigners’ corruption and exploitation of
Mexico would become a bitter reality.
At present, the chief hope of avoidance of such a condition lies in
Article 14 of the same Constitution of 1917, which declares that none
of the provisions of that instrument shall be construed as being
retroactive. The interpretation of non-retroactivity has been the
subject of much discussion. At one time Carranza’s foreign minister
told the oil companies that it should be understood to mean that the
government would not collect for the oil already extracted. At other
times it has been held that the expropriation of petroleum rights would
not affect the properties where wells were opened prior to May 1st,
1917; then not to land acquired for drilling purposes before that date.
It was this detail which was taken up by the Mexican Supreme Court in
August, 1921. But after years of fighting single incidents, and working
along the theory that American companies could demand only their own
rights, the issue has actually broadened to the whole question of
property rights of Mexicans as well as foreigners. There are millions
of acres of potential petroleum land in Mexico, not one per cent of
which is owned or leased by foreigners, and all this would be wiped
out, along with foreign properties, if the oil were declared definitely
confiscated to the nation, or even if merely the “oil” lands were
exempted.
Were non-retroactivity interpreted to nationalize only the oil and
coal in federal lands to which no title had ever been given to private
individuals, the vested rights of land owners would be protected
whether petroleum had been discovered on the property or not. Such
an idea of nationalization would approximate the control of oil in
national lands in the United States under the new leasing laws. It is
this interpretation which the oil companies and the Mexican land owners
are seeking, and which has not been touched by the Mexican Supreme
Court decisions noted above.
The second issue in the oil controversy is taxation. Until the
1921 temporary increase, export duties on oil were collected at a
theoretical rate of 15 per cent of its value. This valuation is
supposedly on the basis of sales of oil in Mexico. There are hundreds
of such sales, but their prices are not taken, and arbitrary estimates
ostensibly based on the prices for which oil is sold abroad, less
another arbitrary allowance for transportation, are the criteria. The
results of this system have been confusing to the exporters, to say the
least. Some of the lower grades of oil, for instance, were actually
paying, not 15 per cent of their value, but 40 or 50 per cent. The
valuations fluctuate also according to government caprice and the need
of tax money; the result is another difficulty in making close prices
to consumers, which in the end all must feel in the price of gasoline.
A peculiar tax difficulty of the oil companies was over an exact
doubling of the valuations and thus of the taxes, made by the Carranza
government a few days before it fell--an increased tax which the de
la Huerta and Obregon governments have sought to collect. Still more
recent is the virtual doubling of oil taxes which shut in many of the
wells during July, 1921.
The direct oil taxes are now about $2,000,000 a month, so that the
doubling is an item of no small moment. At present no immediate
solution of the tax difficulties is in sight, and the companies have
been split by favoritism into two camps. One is largely British,
which finds it profitable to accept the decrees. The other is largely
American and finds the enforcement of the new regulations oppressive.
Some plans for relief have been discussed. One of the proposed oil
bills based on Article 27 interprets it not as nationalizing petroleum,
but as nationalizing the right of taxation, taking all tax privileges
from the states and vesting them in the federal power. The idea would
be to provide a single direct tax on petroleum extracted from the soil
instead of upon that exported. Apparently this tends toward a solution
of the tax question. But here again enters the difficulty of dealing
with Mexicans, for such a direct tax would be without recourse, until
its provisions became confiscatory, while at present the companies have
at least a chance of defense in protests against arbitrary valuations.
The outstanding fact in the tax situation, as in the nationalization
question, is the bad faith of Mexican government. The much discussed
reforms are non-existent, and government in Mexico is for the benefit,
not of the governed, but of those who rule, and taxes fill not the
treasury but the pockets of officials, and appropriations are not for
schools and civic welfare, but for the army and “public works,” where
graft is so colossal that it passes the conception of citizens of
simpler lands.
The third element of the Mexican oil problem has to do with
concessions. This is a phase of nationalization, but to-day it has
taken on an importance which recently obscured other issues. The
government had issued a number of what are called “federal zone
concessions,” giving to individuals and companies the right to explore
and extract oil from the rivers, lakes, etc. The federal zones are
narrow strips along the seashore and navigable rivers on which an
easement has been reserved for the public use. The American oil
companies contend that this mere easement cannot be converted into
absolute ownership, which is the effect when the government grants to
third parties the right to drill wells there and thus to tap the pools
of oil which the companies have discovered and developed and on which
they are paying rentals to land owners.
There were a few oil concessions under Diaz, practically all to English
companies. One of the great shibboleths of the Madero revolution was
the wiping out of the system of concessions, so no more were given
until toward the end of the Carranza régime. Beginning then, becoming
almost an orgy in the brief rule of de la Huerta, and continuing
into the days of Obregon, concessions have become common, some
going indirectly to a few American companies, many to the British
corporations and more to Mexican favorites of the ruling group. The
concessions issued cover practically every river and semi-arid gully
(regarded as a “navigable stream” for the purposes of the concession)
in the whole Tampico-Tuxpam field, a stretching of the “federal zone”
idea in order to make possible the penetration of the producing fields
by concessionaires.
Other concessions are of different sort. Under de la Huerta one was
issued giving the right to explore rivers, lakes and government lands
over the entire republic, with preferential drilling rights up to a
production of 400,000,000 barrels per year, the chief consideration
being a return to the Mexican government of 40 per cent of the gross
value of the oil found. Another, to a company, also American, gives
rights to explore Lower California and other West Coast states, with
the privilege of denouncing not only government lands, but private
properties as well--the return to the government in this case is 10 per
cent of the gross.
The concession feature of the oil question, like the others which I
have described, has its rights and its wrongs, but the fact of giving
concessions, and in such blanket form, to take oil from the lands of
private property holders, is in itself proof of but one thing--the
intention of the Mexican government, not to conserve its resources
of oil for the benefit of its people and the generations yet unborn,
but to get out of the oil business as much as possible as quickly as
possible--and solely for itself and its favorites.
The final phase of the oil problem in particular and of the entire
Mexican question in general is anti-foreignism. Article 27 of the
new constitution contains a number of anti-foreign provisions other
than petroleum nationalization. One is that only Mexican citizens may
develop oil (and other properties) in the republic. Another section of
the Constitution, as I have mentioned, gives this provision force by
requiring that foreigners who sought to work such properties should
appear before a government department and waive all rights of appeal
to their home government for protection. This and other anti-foreign
provisions are summed up in the so-called “Carranza Doctrine,” one of
the interesting developments of his picturesque reign. This has been
stated as follows:
“No individual should aspire to a better situation than that of the
citizens of the country to which he goes; legislation should be
general and abstain from distinctions on account of nationality.
Neither the power of nations nor their diplomacy should serve for
the protection of particular interests or to exert pressure upon the
governments of weak peoples with the end of obtaining modifications of
laws which are disagreeable to the subjects of a powerful country.”
The world outside largely persists in taking Mexican professions at
their face value, and in solemnly accepting the beautiful Mexican laws
and the beautiful Mexican arguments as literally true. On this point
I have quoted elsewhere the words of a great Mexican publicist, who
has written: “The carpet baggers of Mexico have traditions rooted as
far back as colonial times. They combine the shrewd and subtle wit
of the Indian with the grandiose words of modern civilization, with
which they have gained the sympathy of uninformed outsiders.” Our own
State Department has answered the “Carranza Doctrine” in no uncertain
terms and once wrote that “the Department is of the opinion that ...
an attempt is being made to coerce American companies ... to admit in
advance ... the correctness of the contention of the Mexican government
in the matter of ownership of oil deposits, against which the American
government has made solemn protest as threatening confiscation of
rights legally acquired by American citizens.”
In fact, there is no reason to doubt that virtually all of the oil
decrees of Carranza, all the rulings of his ministers, all the
regulations which have been enforced with such insistence on petty
details have been, first, appeals to sentimentalism abroad and, second,
childish expedients to force recognition by the foreigners of some
sort--any sort--of superiority in the Mexicans. In the last, so well
set forth in the State Department message quoted just above, lies the
basic cause of the failure of the companies to reach an agreement with
the Mexican government. Every willingness to discuss a point, every
slackening of their demands, has been accepted, not as an approach to
a solution, but as a weak concession to Mexican “national pride” and
personal dignity.
There are two remaining reasons why the oil question remains unsettled.
They are extremely practical,--loot and incompetence. Of the former,
George Agnew Chamberlain, the novelist, recently American Consul
General in Mexico City, has written in his book, “Is Mexico Worth
Saving?” that:
“Today it is taken as a matter of course that ninety per cent of all
Mexican officials in positions of trust are openly corrupt and will
inevitably continue so until controlled by some greater power than
any single faction of their peers.... The graft of Mexico is outright
loot; its effect is to open simultaneously all the arteries of the
body politic and to pour the entire life blood of the nation into the
gullets of the group in power.”
The oil companies are the ripest prey for loot in all Mexico. Their
individual employees pay graft of certain kinds--of that I have no
doubt, although there is vigorous and official denial. The companies
themselves, however, pay a tribute, through the channels of astonishing
taxation and contributions to public works, which is no less than the
buying of the privilege of doing business. Another phase appears in the
gossip which is general that one of the English companies materially
aided the Obregon revolution--certainly every moneyed interest in
Mexico had ample opportunity to do so. The American companies were,
after Obregon’s occupation of Mexico City, “shaken down” for about
$1,000,000 which was credited against taxes--and the taxes afterwards
proportionately increased!
As a whole, the companies have resisted the temptation to ease their
way along the broader paths of high government by the voluntary use of
money--they have generally confined their expenses to the ample totals
of taxes and assessments. It is for this reason that one of the most
serious phases of the Mexican congressional discussion of petroleum
legislation is that practically every member of the Mexican congress
expects “his,” and when it is not forthcoming, will see to it that
nothing favorable to the foreign companies finds its way to the statute
books.
Lastly, incompetence. Perhaps the most appalling factor of the whole
Mexican situation is the utter and profound ignorance of the men in
control of the national affairs, men to whom the culture, the very
procedure, of modern civilization are as a closed book. I believe that
the oil problem is made serious chiefly because the Mexicans who might
otherwise be willing to solve it are so uneducated, so limited in
viewpoint and understanding, that they cannot conceive of the vast sums
of money which must be invested in pipe lines, storage tanks, pumping
stations, wharves and ships and refineries before the oil taken from
their country’s soil becomes the fabulous treasure of which they hear
so much. They seem utterly incapable of grasping the fundamentals of
their national problems; the pity of the condition almost obscures the
significance of the fact. It has not been easy for me to explain the
oil problem in its simplest phases to Americans, yet in this chapter
you who have read it have learned more than the floor leaders of the
Mexican congress will ever know.
It is through this forest of ignorance, this slime of graft, that the
foreign oil companies are making their way. They have committed many
mistakes in their handling of the situation, selfish mistakes, mistakes
of ignorance, but the struggle has been against forces whose depravity
has been literally unbelievable. Personally, I am no fire-eater, but I
have seen much of Mexico and I have seen something of the psychology
of depravity, and I believe that the last lingering hope of Mexican
adaptability to world conditions lies in Mexican recognition of the
need of grasping truth rather than theory, of facing facts with manly
faith in Mexico and in Mexican ability to solve her problems as other
nations solve theirs, by honesty and patriotism and not by graft and
personalism. This attitude the oil companies have nurtured, and in this
their policy has been a policy of weakness. Seeking here an outlet
for the day, there a hope for the morrow, they have put a premium on
Mexican dishonesty, given a prize for Mexican argumentative skill. I
know some of the problems the companies have faced, I know the need for
oil during the war, I have written here something of the magnificence
of their achievement, but for all that, I hold that they have had much
to do with the vacillation, the inefficiency, the watery, grafting
policy of the Mexican governments from Carranza to Obregon. They have
had a large part in making such a policy successful by not refusing
unjust demands firmly and directly, by not challenging Carranza to
close the oil fields, by not taking a mighty loss to save the endless
leak of graft and taxes and cynical legislation which is their heritage
to-day. Even yet their policy is one of conciliation to Obregon, the
newest president; still they are offering compromise, still giving the
subtle Mexican mind to understand that perhaps they might agree to
Article 27, perhaps they might accept a little higher taxation, perhaps
they would like a few concessions, perhaps they might be counted on to
get the hopefully predicted Mexican loan.
All this is the last phase of the complicated problem. We have said,
in days gone by, that this is the problem of the oil companies, that
theirs is the gain and theirs should be the cost. But if I have
succeeded here I have conveyed an idea of the breadth of the oil
problem. It is no longer a question of whether the American State
Department is making the proper moves to support honest and industrious
American investors and workers abroad. It is no longer the academic
problem of whether the oil companies are handling their business in an
intelligent and efficient manner. The problem is ours, yours and mine,
of you in Kansas, of me in New York, of our cousins in England and
China. It is the problem of the chap who runs a Ford and of the man who
is cutting our freight bills by renting us a truck, of the steamship
company which is carrying our goods, of the captain of the battleship
which keeps us safe from near and distant enemies.
The problem is not merely whether the white peoples of the world are
to have the right to develop the riches of the backward nations for
the benefit of the world, but of _how_ they are to do it. So far,
even in forward-looking lands, it has been impossible to eliminate
private ownership and colossal private fortunes from the wheel of
oil production; in Mexico, to-day, it would be disaster beyond
understanding to turn the right of concession and oil privileges over
to corrupt and inept government. The battle of the oil companies in
Mexico is to save, first themselves from such a fate, and second to
save all the unopened oil resources in the world from the strangling
hold of such governments and such peoples everywhere. The oil industry
can no longer carry the burden of such conditions, for the prices of
your gasoline and your ship’s fuel oil are reflections not of a world
scarcity, but of the uncertainty, the colossal artificial difficulties
of oil production in the backward lands.
Commerce has fashioned the world into one brotherhood, and the Great
War, for all its appearances, has welded us all into a mightier machine
of civilization than history has ever known. Oil is the fuel of that
machine, and oil must come to its engine, though all the power of
politicians and bandits combine to keep it in the soil. The backward
countries are swept into the forefront of commercial importance when
oil begins to flow from their soil. The process is going on all over
the world. In Mexico it is at its zenith. The oil must come, and from
Mexico before all others, for Mexico lies in the heart of the world,
her shores touched by more waters in proportion to her area than any
other continental nation. And her stores of oil are the greatest man
has yet found or dreamed of.
To-day the world’s need of oil threatens the life of Mexico. It
is eating out her body by revolutions, by bandit governments, by
colossal graft which feeds on the ever growing river of gold from
the oil fields. The world’s need for Mexico’s oil threatens her with
intervention, not because of capitalistic machinations, but because of
the crass and wicked injustices which the wealth has tempted her to
wreak upon her foreign residents, because wealth has undermined her
government and given her over to demagogues.
CHAPTER IX
THE GOLDEN GEESE
In all these devious ways Mexico has tried to kill the goose which lays
her golden eggs. Not the least onerous of her efforts in this direction
has been the seeking she has always done to make the United States
government and American business men take the responsibility for this
precious goose of commerce. And sad to tell--to the Mexican mind at
least--we have not always awakened quite promptly enough to our sudden
new responsibilities, and the goose has more than once dropped near to
dying in our arms.
That golden goose was the product of the nature of Mexico and of the
régime of Porfirio Diaz. Long before Mexico became independent, long
before the social problems which assail her now had been allowed to
gain impetus, Nature had given up vast riches from the Mexican soil.
Spain garnered them in, and gave Mexico such care as she knew how to
give, and the golden era of the three centuries of Colonial life rolled
out. Then came the first revolution, and the destruction of such wealth
as Spain had left, until Diaz organized what remained and with it began
his thirty years of peace.
In those thirty years. Mexico was changed from a land whose wealth
poured out in bonanzas returning only caprice for industry and wealth
for caprice, into one where industry, solidly invested capital,
and wise foresight gained the golden fruit. In other words, the
goose became domesticated, and produced golden eggs when she was
appropriately fed with golden capital and golden brains.
It was literally the wealth imported and created by those years
of peace and domestication which made possible the outbreak of
revolutionary activity in 1910 and drove Diaz from Mexico in 1911.
Prosperity was too much for poor Mexico.
The revolution, indeed, came at a moment of Mexico’s saturation
with prosperity. And it has continued by the continuation of that
prosperity, which has furnished and still furnishes the fuel of
banditry and revolution. It was not until after Diaz fell that the
great wealth of Mexican oil became patent. And not until Carranza began
imposing his taxes on the oil industry do we find the upsurgence of the
ideas of socialism, bolshevism and nationalization which have been the
battlecries of all the governments which have followed him. Oil, as we
have seen, has furnished the sinews of war, and continues to furnish
them, despite all that can be done to turn the tide.
In the days of the revolutions previous to Diaz the rewards of
success were governorships, sometimes presidencies, and always some
brief spell of peace. But to-day the reward is too vast, the graft
quite too colossal, to slow down the round of struggle. Wealth pours
into the national capital in amounts which would be quite hopeless of
comprehension to the revolutionists of the older day. More tax money
reaches Mexico City to-day from oil alone than Diaz had from every
source at his command--while, save for the oil fields, Mexico is to-day
a desert waste.
It is no wonder, then, that the nation can and does buy herself honors
and praise in the world outside, that she considers it criminal that
she cannot buy recognition, cannot force aid and trade and gold to flow
to her. Is she not wealthy and can she not buy pages of advertising and
the services of hundreds of propagandists of every type known to the
trade? Gold is here and more gold she expects to bring to her through
other channels than her own genuine advancement. She is back again in
the days of the bonanza mines, when wealth went to caprice and labor
and industry meant nothing.
And so she is killing the golden goose, just as she killed it long ago
under the Spaniards, by forcing it to lay and lay and lay, till at the
height of its productivity it is trembling to its death. Destructive
legislation, the bitter threat of its confiscation, the continuing
theft of vast sums in exchange for the privilege of struggling against
these laws and threats--these are striking down the golden bird. To-day
that goose is dying, and all Mexico seeks is to bring in, somehow,
another goose to feed her hungry office-holders. She is willing that
it shall be a relatively tame domestic goose, if only it will lay the
golden eggs of foreign investment, trade, commerce--she would gladly go
back to the relatively mild, but sure, wealth of the time of Diaz.
And what does she offer to induce that timid, wabbling goose across
the national fence? I can see behind her promises of privilege nothing
more substantial than outraged rights, and beside them, the panting,
half-dead corpses of two golden geese of bonanza days--the almost dead
mining industry, the sadly ill oil industry. For Mexico has limited
mining by confiscatory taxation and by revolutionary outrages which
left the mines in such a state that to-day the cost of operation is too
great for them to continue under present prices. And she has set about
the starvation of the oil industry, as we have seen, by limiting it to
the narrow field of the Tampico-Tuxpam district, when the opportunities
for oil development throughout the whole of Mexico are probably
unequaled in any similar area in the world!
It is with such pictures as these that she would tempt trade and
commerce and investment to Mexico. No, the “centennial expositions,”
the trade excursions, the special trips for special friends of the
government, even the official telegrams of thanks to American officials
who breathe a misplaced idealism with regard to Mexico--none of these,
nor all of them, can quite make a screen before the unhappy corpses of
the once lively golden geese of Mexican prosperity.
Let us resume, briefly, the list of the events which have marked the
process of the years in the Mexican revolutions which began with the
uprising of Madero--and which have been the means of killing foreign
enterprise and native faith in Mexico’s succeeding governments. The
list is long, but it cannot be forgotten.
The revolution in 1917-1918 virtually wiped out religion in Mexico,
profaned, sacked and burned churches, killed and outraged priests,
violated nuns and girls in the convents, and drove into exile thousands
of priests. The Constitution of 1917 virtually abolished religion,
and yet the Protestant churches have been allowed to continue their
work (with the result that many Protestant missionaries of Mexico were
active Carranza and Obregon propagandists in this country). While most
of the exiled Catholic clergy have now been allowed to return, they
still work under conditions which make religion a virtual monopoly of
the state, and practically eliminate religious freedom in Mexico.
Ten years of revolution have all but wiped out education in Mexico:
first, by destroying the Catholic schools, which were almost the only
educational system in the country outside the great cities, and,
second, by so curtailing the appropriations for public school expenses
as to make educational organization impossible.
The revolutionary hordes, when Mexico City was taken in 1915 by General
(now President) Obregon, sacked the city almost as thoroughly as
Attila sacked Rome, the public being invited by proclamation to join
in the looting. Beautiful houses were made barracks for the soldiers;
automobiles and horses, including those of foreign diplomats, were
taken; stores and homes were broken open and robbed, and trainloads of
rich furniture, including carloads of pianos, were shipped out, much of
the loot coming to the United States to be sold. While the population,
rich and poor, starved, no food was allowed to enter the city, and
trainloads of beans and corn, the staples of Mexican food, were shipped
out.
The revolution virtually suspended the political rights of the Mexican
people. Under Carranza’s decrees, which to this day form the chief
basis of government in Mexico, no one may hold office who ever served
under Diaz or Huerta, or who was not known to be a Carranzista
before the Huerta uprising--save by special permission, granted only
on personal appeal to the president himself. The revolutionists
continuously refused to allow any Mexicans but those of known
sympathies with themselves to participate in elections, so that only a
fraction of the eligible voters have ever taken part in any election.
The revolution exiled from Mexico, on one pretext or another, virtually
all the higher type of Mexicans, the men who throughout all Mexican
history have been the stable and stabilizing element in the government,
leaving Mexico in the hands of demagogues of the worst type, from
the highest offices to the lowest. There has been talk of political
amnesty, but none has yet been forthcoming, and the few Mexican exiles
who return do so under personal assurance of their personal safety.
Mexico is to-day taxing her people, both natives and foreign
corporations, to an extent and with a recklessness unknown even in
war-ridden Europe. Taxes on imports and exports have been doubled and
sextupled. The stamp tax has been quadrupled and broadened to cover
almost every possible human activity; direct taxation on every form of
industry and export taxes on the country’s products have become the
normal, where, before, these forms of taxation were distinctly avoided
in order to encourage enterprise. Mexico is still spending more on
her army, mostly in graft, than Diaz spent on his whole government,
including interest on foreign indebtedness (which the revolution has
never paid).
The present taxation system has been coupled with favoritism and graft
to an extent that punishes with ruin any enterprise (save those fed
from the natural resources of the soil, such as oil) which is engaged
in a business where profiteering is not possible.
Carranza, as we have seen, financed his revolution by issuing
2,000,000,000 pesos of paper money, forced into circulation at the
points of bayonets. None of this has ever been honestly redeemed.
The paper money orgy covered three years, and absolutely wiped out
all semblance of credit and all use of paper in business. In its
course, the revolution took from the banks in “loans” approximately
$28,000,000, completing the ruin of the banking system, as I have
described above.
Carranza took over the railways of the republic in 1914, and since that
date the revolutionary group has operated them for the profit of the
government and themselves. They have increased passenger, freight and
express rates to figures many times the normal, forcing the properties
to yield the national treasury $1,500,000 a month, meanwhile paying
nothing of rental to their owners, whose fixed charges are being
defaulted at the rate of $1,000,000 a month--a total theft of nearly
$400,000,000, growing at the rate of $1,000,000 a month.
The revolutionaries gained the support of the sincere Mexican
progressives and of American students on the ground of a defense of
the Mexican Constitution of 1857, but after they came to power they
promulgated the Constitution of 1917, a new instrument, although the
old Constitution was amply provided with means for its amendment.
The new document is the most radical written Constitution in effect
in the world to-day, but its provisions have been used so far only
for the aggrandizement and enrichment of those who can abuse its
privileges. The provisions for the confiscation and distribution of all
pieces of land of large area have been used only to take properties
of foreigners and Mexicans of the old régime to hand them over to
revolutionary leaders. The provisions against the operating of mines,
etc., by foreign companies have so far been used only to transfer
such properties to friendly Mexicans and Germans. The provisions
“nationalizing” oil deposits have been used only to exact towering
taxes and millions of dollars of loot from the foreign companies and
to drive the properties more and more into the hands of the British,
Dutch and Germans, and away from the Americans.
The revolution has allowed and abetted the looting and ravaging of
Mexico by every method known to brigandage. Hundreds of thousands
of cattle have been killed for their hides; thousands of acres of
standing crops have been wantonly ruined; seed grains have been stolen
or destroyed; the vast sugar industry, left stagnant by Zapata’s
depredations has, since the government regained possession, been wiped
out by the shipping away for “junk” of the machinery of the sugar
mills; graft has been levied against relief trains sent by the American
Red Cross to feed starving Mexicans and the contents of such trains
even stolen and sold for personal profit of generals.
Carranza encouraged and abetted a military oligarchy which supported
brigandage as a means for its own profit. Campaigns against the
bandits and rebels were not pressed, arms and ammunition were sold by
the federals to the bandits and rebels, in order that the military
might continue to have work to do. The officers, acting as their own
paymasters, padded the army rolls to many times their actual size,
and the balance between the expenses and pay of the actual army and
the phantom army was pocketed by the officers. The Obregon process,
a variation of the Carranza plan, paid millions of pesos in cash
and land to ex-bandits and revolutionaries, setting up Villa on a
rich hacienda, and paying out the resources of the nation to buy the
appearance of a peace.
Revolutionary favorites, as we have seen, were given the rich state of
Yucatan for loot. They foisted upon that community (the only spot in
Mexico where any wealth has ever been created through manufacturing
and industry as opposed to the sacking of the riches of the soil), a
so-called “socialistic” régime. A “modern state” was set up, and the
experiment of taking from the rich for the benefit of the poor was
set in full swing. By means of a great national monopoly of the hemp
industry, prices were so inflated that in the course of five years the
American farmer paid, in artificially-increased prices for twine for
his wheat-binding machinery, $112,000,000 to the Mexican revolution.
The state-controlled hemp trust has been forced to relinquish its
control, and the costly experiment seems passed. Here is the first
collapse of the Mexican fetish of socialistic demagogy, but it seems
safe to believe that it will not be the last.
So stands the record, incomplete, shorn of detail, but each item taken
from the history of shame which has been written in Mexico in the years
just passed. Hidden behind a curtain of fair words and lofty idealism,
the shame has been committed, but behind that same curtain to-day
disintegration is hurrying on, coming as it came to Yucatan in the
grist of inevitable retribution. That we may understand the end, it
behooves us not to close our eyes to the beginnings.
The killing of the golden geese of recent years in Mexico carries a
responsibility from which the United States cannot be entirely free.
The eight years of the Wilson régime, when American foreign policy,
as enunciated by Secretary of State Bryan, held that Americans who
ventured abroad did so at their own risk and had no right to ask the
protection of their government, was a mighty factor in the despoliation
which followed in Mexico. Carranza, seeking the excuse for the policies
to which the great wealth of the oil fields tempted him, found in this,
our official attitude, his opportunity for baiting the Americans and
with them most other foreigners in Mexico. His virtual espousal of the
German cause in the Great War gave him still further opportunities, and
the result has been written in the outrages which he committed against
the Americans. This is a list only less appalling than the list of the
outrages which were perpetrated against Mexico and the Mexicans in the
name of the revolution. Here, briefly, is the record. Although many of
its outrages were committed only during the Carranza régime, it must be
remembered that that régime is the direct ancestor of those which have
followed it, for the personalities seem the same, the shift in their
places being the only change.
The revolution has killed over 3,000 foreigners, most of them in cold
blood, probably not one per cent in fair and open battle.
The revolution has murdered over 600 Americans since 1910, and the
revolutionaries have violated scores of American women.
The revolution has ruined over $1,000,000,000 worth of American
property in Mexico through wanton destruction, cynical recklessness and
savage bravado.
The revolution has driven from their homes in Mexico more than 30,000
Americans, men, women and children, who, in carrying to Mexico the high
standards of American living, American business and American ethics,
were pioneers of our trade and influence, and potential civilizers of
Mexico.
The revolution has, as we know full well, promulgated that Constitution
of 1917 which has been the bane of American, even more than it has of
Mexican, business.
The Mexican revolution, by its baiting of the American government
through nearly a decade, has nurtured in Mexico and sought to spread
throughout Latin-America a hatred and fear of Americans and hostility
to the Monroe Doctrine. This is threatening not only our own prestige
on this continent, but the peace of the established governments of our
Latin-American sisters, through the fomenting of hostility and unrest
within their frontiers.
More than all, the revolution has made of Mexico a refuge for the
enemies of the United States, first by allowing to be set up in its
capital the central organization of the German spy and sabotage system
in the Western world, and since the war by welcoming and aiding the
bolshevists and radicals who are working openly for the overthrow of
American institutions in this country and the destruction of American
industry and trade in Mexico.
This is a bitter record, but without it, as I have had to say of many
things in this book, the picture cannot come clear to our eyes. We
cannot, in justice to our own understanding, forget that since the
death of Madero, and even before, the Mexican revolution has been
but one movement. The rulers who have succeeded each other have all
been of the same group, and those in power in 1921 are those who
were scrambling for place within the same ruling group in 1913. “The
revolution,” as one of them has said, “is the revolution.” And so it
is in more senses than one. We but deceive ourselves if in our very
genuine desire to give each new Mexican president a chance, we close
our eyes to the obvious facts of his political heritage and the human
tools he must use.
Only one word more, and the tale of the golden geese is done. The
protection which the American government has failed to give its traders
and investors who have gone abroad has had an effect which those
traders and investors must obviate before they step forth, at least
into Mexico, again. Through the years of the Great War, our government,
along with those of the Allies, put into effect in neutral countries,
a “Black List” which was designed to keep German, Austrian and Turkish
firms and their sympathizers from dealing and trading with the neutrals
or with the peoples of the allied countries.
Mexico was of course our chief field for activity, and there our Black
List had its severest test. In those months of struggle, we committed
many faults; we shut off friendly firms from trade with this country;
we encouraged, by many stupidities, the activities of smugglers and
“cloaks” who bought for the Germans in Texas jobbing towns; we created
for ourselves a phalanx of enemies of American trade who will not soon
forget. Worse than this, even, when the war was over the tremendous
machinery of the enforcement of the provisions of the Enemy Trading
Act, with its literally priceless information regarding the business
of Mexico, the capital and trade of the Germans, the Mexicans, and the
Americans in the whole country--all this was thrown away. Literally it
was cast into the waste-basket, and the information which if followed
up and kept even partially up to date would to-day be the richest mine
of information for American importers and exporters was scrapped like
worn-out machinery. I do not know how many millions of dollars were
spent in gathering this data for the War Trade Board, but I do know the
nature of that data. It is gone, and the advantage which might have
come from it is lost forever.
But the unfriendliness which was engendered by our mistakes, which was
only slowly being wiped out by the correction of those mistakes when
peace came--that unfriendliness remains. That is our only heritage of
our Mexican activity in the war; it couples up with our own mistakes of
ignorance or of carelessness during the same period.
From 1915 to 1919, literally all the foreign trade of Mexico passed
through the United States. Imports and exports, the goods from and for
England and Japan and China and Africa no less than our own domestic
trade with Mexico went through the border ports by rail. Of necessity,
the advantages of ship traffic were lost, and our manufacturers and
our buyers of Mexico’s raw materials had the greatest opportunity of
all time to capture the vast bulk of the Mexican trade. The tremendous
apparent increases in our Mexican trade during the war years were only
the record of the world’s commerce passing through our border towns.
But to-day we have retained only a little of the gains recorded then,
and we shall lose still more of what we have kept. And why? Because we
have never truly sought Mexican trade and do not seek it to-day.
Ah, yes. We want to trade with Mexico, but, I repeat, we have never
sought Mexican trade. We have wanted to sell Mexico our surplus,
to have her take our extra runs and use the goods we have made in
quantities for other countries. But we have never sought to meet the
exigencies of the Mexican market. We have never done (as a nation, I
mean, of course) what England and Germany have done; we do not follow
specifications literally and send cloth, for instance, with exactly
the number of threads per inch which the Mexican must have to get his
best customs classification. We do not rearrange our patterns to meet
a special demand of the Mexican market, carefully described to us by
our customers. It is the old story of American trade everywhere in
the world--our manufacturers have heard it in a dozen ways, and they
are justly tired of the sound of it. My only point is that during the
period of the war, when Mexican trade had of necessity to come to us
in great volume, we did not link the Mexican buyer to us, either by
meeting his demands or by helping him to understand our difficulties.
So it was that when the golden goose of Mexican business was
surreptitiously put into our arms when we were busy with a lively war
in Europe, we did not take the care of it that its parents might have
expected of us.
The result is that to-day we have little hold on the trade of Mexico,
despite the astonishing figures of our preponderance in it. For what we
ship to Mexico is largely food and what we take from Mexico is largely
oil--an exchange which is more significant than columns of figures in
showing the economic condition of the land we trade with. Again we
swing back to the one great, significant fact, the need of an activity
which transcends mere barter, which has little to do with whether we
are deceived by Mexican conditions or whether we are willing to risk
them now for the sake of the great possible gains of the future. This
is the issue of our duty to learn how we can serve in the solution of
the problem--and to devote something of our energy to that solution.
CHAPTER X
THE HIGHWAY TO SOLUTION
The solution of the problems of Mexico’s commerce and business seems to
rest in hands alien to Mexico. The destructions of the past ten years
are bringing her steadily nearer to annihilation, and Mexico herself
seems helpless to save herself. These make the appearance, and it is
vivid indeed. But it may still be only an appearance, if the forces
which are acting and must act can be brought to see that they can and
must work in Mexico herself.
The cycle of destructions insists upon showing itself as the round from
the materialism of Diaz on to the destructions of an era of profaned
utopian idealism and now to an era of materialism again. But this
time it is an era of materialism which differs from the Diaz time,
and is more potent, at the moment, for good and for ill. For to-day,
in the high places of government, controlling through their greed the
very minions of government, is an animating power which is not the
idealism nor the self-sacrifice of devoted rulers, but the worship of
wealth alone. That power is mighty for destruction, but at the very
moment that it functions thus, another form of wealth, “capitalism”
if you will, is working slowly for the saving of such of Mexico as is
being saved. For “capitalism,” in foreign guise, in such enterprises
as even the mad radicals of the day point to as the signs of their
“progress”--here capitalism is giving Mexico her only surcease from the
destructions of her rulers.
Wealth is the one power which men recognize in Mexico. It is to-day
above government, for it dominates government and destroys government
by the very temptation which it holds out to successful revolution. It
rules to-day in Yucatan, even as it ruins the individuals of Yucatan.
Yet, too, it rules in the oil fields, for it makes the vast production
of oil possible, because it alone has the power and the foresight to
develop oil’s potentialities. And there, in the oil fields, it is being
turned, ever so slightly, to the beginnings of its ultimate destiny,
which must be, I believe, the saving of Mexico.
Strange tales I have told of the oil fields, and yet it is a far
stranger tale which I have now to tell. For I would point out the vast
opportunity which awaits that wealth of oil for the saving of Mexico.
In the light of that possibility, the mighty stream of oil which in a
thousand ships pours from Mexico into the industries of the globe, is a
helpless Niagara, childishly unconscious of its own power.
The constitutions and laws and decrees of the Mexican revolutionaries
still hold the wealth of oil in their grip. There has been, in the
summer months of 1921, a mild effort to break that grip, to stay the
hand of strangulation which is at the throat of the oil industry, but
this is still self-defense. There is a yet more persistent force than
mere taxation or even than mere confiscation at work in the oil fields
of Mexico. This force savors of elements mightier than mere industry;
it seems to be taking the form of a sinister elaboration of the vital
principles of bolshevism--the bolshevism which rules in Russia and is a
battle cry in Mexico.
Among these principles of bolshevism, enunciated by Lenin himself a
year ago, was the setting of the capitalistic powers at each other’s
throats, such powers as Japan and America, that they might destroy one
another.
In Mexico we see that threat from Russia developed with the
thoroughness of a too-eager pupil. In Yucatan the cycle has brought
two vast financial interests to battle--the millions of the Equitable
and the Royal Bank of Canada, against the International Harvester with
other unlimited resources. In mightier and more daring terms, and even
more deliberately, in Tampico and in the false issues of concessions,
Mexico and the governments, radical, bolshevist indeed, of the
revolutionary era, have been setting not merely groups of financiers
but the interests of nations at each other’s throats. The issues of
concessions on the one side and open oil fields on the other seem to
have been planned and fomented and distributed with a deliberation
which is not Mexican to bring the United States and England to
grips--in Mexico. So the spoken threat of Lenin finds elaborate action
in distant Mexico.
Oil has been the victim, the tool, then, of those who would destroy
our civilization? We do not know. But this we do know--that to save
itself, to save great nations from war, to save the world’s oil for
the uses of civilization, oil must come to its own rescue. It may be
saved temporarily in other ways than by itself, but itself it must
save sooner or later. If sooner, the power will be for good; if later,
it will be for destruction, even as the powers in Yucatan are being
expended for destruction. The comparison is inadequate, perhaps unfair,
but the vision is crystal clear. It shows the last great power of the
world--wealth--diverted from its proper channels to battle within
itself. The dragon’s teeth of capitalism have raised up armies and the
stone cast by bolshevism has thrown them at each other’s throats.
And this cannot be, and must not be. Our civilization rocks. Were it
to pass on to the millennium, the rocking would be worth the price.
But we see, not the millennium, but, as in Yucatan, the coming of new
destructions, with capital, and labor, in rôles of ignominy.
For to-day oil, and the capitalism it represents, as yet does little
good for Mexico. It pours its wealth--nearly $50,000,000 a year--into
the coffers of government and there, like the golden apple, it creates
discord and wars and bloodshed. It feeds and fattens the group in power
and makes it worth the while for other groups as fast as their petty
agitations will allow, to rise up and overthrow their predecessors,
to the end of getting their share of the loot, and a new distribution
of favors. The gold which pours into the national treasury inspires,
as we have seen, all manner of radical legislation and constitutional
provisions and oppressions to make the capitalism which develops the
oil disgorge more and more of oil’s wealth, and bow more deeply beneath
the yoke of political personalism.
Thus is the gold which flows from the oil wells dynamically active--as
a poison and a weapon against those who create it. The oil companies of
themselves take no part in Mexican politics. This, I admit, is almost
unbelievable, but I am convinced that except where government--our
government or that of England--has directed them, the oil companies
have not used their power politically. The United States and England
have both taken hands in Mexican politics, and particularly was
Washington active in arbitrating the destinies of Mexico in the eight
years just closed. But that does not concern us just now. The liquid
gold from the oil fields has never used its power alone.
It has not yet used its power for its great possible good, either.
Not even for so much good as the International Harvester and the Eric
corporation have used theirs in Yucatan to the discomfiture of Alvarado
and the chastening of the henequen industry. Never, for the sake of a
principle alone, has an oily hand been lifted to say “thus far and no
farther.” Never has an oil official done more than cry aloud over the
pressure of the thumb-screws--cries which do no more than extract more
wealth to fatten the generals who, with added strength, only gave the
screw another turn.
For seven years the oil companies paid the rebel general, Manuel
Pelaez, a comfortable tribute. In that time they also paid Carranza all
he asked in “taxes.” They were helpless, and the war was the excuse,
not for strength on their part, but for submission to unwarranted
and unjust oppression, oppression which had no object save personal
aggrandizement and enrichment.
Here is the one power in Mexico which is potent, accepting the rule of
corrupt government, passing on its power of gold to those who use it
for nothing but their own ends, and for the destruction of all that
our civilization holds dear.
They buy privilege in Mexico, the privilege to do the business which
they must do, while the sinister powers to whom they pay tribute cut
them from the development of new fields upon which their ultimate
future and Mexico’s immediate future depend. The whole power of Mexican
revolution and of the groups which control the revolution lies in that
one principle which I have reiterated: they give no rights, they sell
no rights; only privilege is on the auction-block. Those who buy it
to-day and those who contemplate the buying of it as a way to enter
a promising foreign trade and investment field are the upholders of
the shameful exploitation under which Mexico herself bows. And of
these, the greater sinner, to my mind, is he who plans to enter Mexico
now. After all, we must in fairness admit that the old companies have
the potent excuse of their vast holdings and of their duty to their
stockholders.
The plan which I hold as the solution of the economic and political
chaos of Mexico would comprise a shifting of the center of control
from politics to economics, where the motive force, at least, has
ever rested. I would no longer tolerate the application of political
remedies for economic ills, but would go so far as to suggest an
economic remedy for both economic and political afflictions.
Apparently this is what our government plans, and what Mexico’s
government will not bring herself to accept.
Years of observation of the Mexican problem has led to the conviction
that the international difficulties of Mexico are between the Mexican
politicians and the American government--their interests decidedly
conflict. But there is no division of interest between Mexican business
men and American business men; the former are just as disturbed over
the confiscatory policies of the Constitution of 1917 as are the
latter. So recently as April 7, 1921, a petition was sent to President
Obregon by a group of landowners in the Mexican state of Jalisco,
protesting against the enforcement of the rulings of the “National
Agrarian Commission” which confiscated their properties in the name of
the “social revolution” under the same Article 27 which attacks foreign
property rights. Its words are worth recording as an indication that it
is not alone the American business man who feels the pinch of the rule
of privilege in Mexico.
“Such commissions,” the petition reads, “are nothing more than
partisan centers where laws, reason and justice are mocked.
“This atrocious work will be judged by public opinion as soon as the
deep and serious damage which has been done is known, and history will
in time establish the responsibility. Suffice it to say that in every
case it has been a work of destruction and never of construction....
“The local agrarian commission is inventing fantastic plans of
taxation, confiscating large and small properties, and sugar, _mezcal_
and orange plantations, which have cost their legitimate owners years
of toil and the investment of considerable capital. The federal
tribunals, deaf to all appeals, follow an invariable line of conduct
in every case against the landowners. Should the landowner invoke
in his behalf the same doctrines which have been applied to the
benefit of others, he finds out that these same doctrines are never
interpreted in his favor. The authorities only favor those they wish
to favor and to accomplish this end they do not hesitate to override
justice and reason.”
It is to this Mexican business man, still a stable factor in Mexico,
that we must look for the change in government attitude toward business
which is indispensable to the solution of the social, economic and
political chaos of Mexico to-day. In numbers these Mexican business
men are few; in grasp of world affairs they lag behind men in similar
positions in this country. Nevertheless, their interests, those of the
American companies now operating in Mexico and those of the Americans
and other foreigners who hope to share in Mexican trade, are and will
be one. It is in the way of supporting such Mexicans in their efforts
to influence the government of their own country that I speak of an
economic remedy for all the afflictions of Mexico. I would, if I
could, put them in control, would bring back to their aid the brains
and the energy of the exiles who belong, in one way or another, to
their class of producers.
It is to such an end that the foreign business man who hopes, in the
immediate or in the distant future, to share in Mexican trade should
turn his hand. He should demand, in the councils of his government, in
the congress of the country, in the powerful conventions of chambers of
commerce, that Washington insist definitely on a return to civilized
and economic rule in Mexico. This Washington seems to seek but they
and they alone have the power to compel the decision by the powers of
this world that the day of privilege in Mexico must be put aside, and
the era of equal rights shall dawn. In the hands of American business
interests the tool of pressure is very powerful. This is a moment, not
to rush in to get easy markets on the “ground floor,” but to demand
conditions which will give the opportunities and the profits to those
who can best use them--the truly Golden Rule of business the world
around.
When that day comes, all will profit. Until that day comes, none can
have aught but risk and chance, the chance of the gambler. For who
can say how the wheel of politics will turn? And only he who knows
Mexico and the Mexicans of old can assume that he can buy his way
to privilege with the next pirate crew. The solution is in the hands
of American business men because it is in the hands of the Mexican
business men whom they can support and aid. And in the group of such
Mexican business men we must include not only the true Mexicans, but
the foreign companies which have worked long in Mexico and so have made
themselves a true part of Mexico, vitally concerned in her progress and
prosperity.
Those foreign companies of Mexico are the business world of Mexico. And
they know Mexico and her needs better, in many ways, than Mexico knows
herself. They know, as every one who is honest with himself knows, that
the hope of Mexico is in truly devoted, native government. Yet we still
see them pass the power which could to-morrow restore Mexico to the
family of nations over to those who use it for their own ends and for
the utter destruction of all Mexico that is outside the influence of
the oil fields and of their civilization.
The great companies are Mexican, in essence. They have rights as
Americans and as Englishmen, to be sure, but their greater right is in
Mexico. And they have the right to use their power as they will. They
seek to be good and to be honest and just, but the ends of justice
are defeated by their very honesty. I do not advocate activity in
politics, nor even the tangible aid of oil companies to revolutionists
of any stamp. I hold only that if the oil companies would give over
their profits (as they did temporarily in the summer of 1921) long
enough to shut off the stream of gold from corrupt government, if they
would thus render revolution and loot unprofitable, the solution of
the problem of Mexico would soon come, in a return to an age of honest
work and honest government, free from the temptation of vast unearned
wealth. We need not ask how or by whom the change shall be made,
whether by a sincere Mexican government ready to cast out its evil
elements, or by a government yet to be born. That is not our concern,
for our concern is to search for our part and having found that part,
to play it well.
Is not this a solution of the Mexican problem? Should we not say to the
foreign companies:
“You are in Mexico, you are of Mexico. You represent all that is
stable in Mexico. You know those Mexicans who can solve the country’s
problems, and make Mexico again a land where white men can keep the
altar fires burning bright, where honest Mexicans, and foreigners if
they will, may help to make it all that it should and must be.”
Revolutionary radicalism has run its course in Mexico, and we are back
again at a rule of capitalism, a rule which capitalism, for right or
wrong, cannot longer avoid. The eyes of the world are on the moneyed
powers of the world. It is childish to try to deceive radicals or
conservatives with saying anything else. To-day, in Yucatan, capitalism
(because circumstances have forced it to do so) is exacting the toll of
penalty from the henequen industry and its native spokesmen. To-day in
Tampico, capitalism hesitates to move on, and waits for the ruin which
will tumble about it, forcing it, in its turn, to grind Mexico beneath
its heel. Somehow, dimly, seems to emerge the lesson which Mexico has
for us and for the world. Capitalism must in the end save the world
from the ruin of revolution. To-day in Mexico it can move quickly and
freely. To-morrow it may be clutched in the very destruction which is
upon it, and be forced, itself, to the destruction not alone of the
enemies of our civilization, but of the fabric of progress of that
civilization. The story of Yucatan is written. Is the story of Tampico
and all Mexico to follow the same plot, and is the world to go blindly
on, believing that in compromise it shall gain strength?
Truly the crimson feast is preparing for the vultures, and vultures
will our eagles of business become if they wait longer on their distant
heights for revolution to finish its bloody orgy. To-day there is
yet time. In Mexico there is yet time. Why wait for the chaos, from
which there seems but one emergence, the emergence to intervention
and blood and long foreign rule? The one stable force, the wealth
of Mexico, must choose a nobler course than that waiting, than that
cynical hoping. It can choose and it must choose. Old worlds are indeed
passed away and the paths of new stars are to-day being plotted. In
the courses of those new stars power will be used without apology,
as the revolutionary radicalism which our old civilization created
moves without apology. Our duty is to the future, not to the dead past
of compromise and convention and self-righteousness. Is capitalism
honest and sincere and bound up with the welfare of the human race? Or
is it indeed the vulture which waits to feast only upon dead bodies
amid ruins? To-day in Mexico it waits vulture-like. Its sincerity and
its true righteousness are to be determined not by slavish waiting
for the ruin which will force it to use its power, as it is using it
in Yucatan, but by its moving, to-day, to the solving of the great
problems of a great nation as it alone can solve them. Capitalism and
not revolution, the corporations and people of Mexico, and not foreign
pressure, must in the end give answer before the last Tribunal.
Transcriber’s Notes
Page 18: “southermost point” changed to “southernmost point”
Page 114: “outrage perpetated” changed to “outrage perpetuated”
Page 142: “or for propety” changed to “or for property”
Page 200: “Sante Fe Railroad” changed to “Santa Fe Railroad”
Page 236: “pyschology of depravity” changed to “psychology of depravity”
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